<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 29, 1998
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
AXIA INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
3496
3535
DELAWARE 3559 13-3205251
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
INCORPORATION OR
ORGANIZATION)
LYLE J. FEYE
100 WEST 22ND STREET, SUITE 134 100 WEST 22ND STREET, SUITE 134
LOMBARD, ILLINOIS 60148 LOMBARD, ILLINOIS 60148
(630) 629-3360 (630) 629-3360
(ADDRESS, INCLUDING ZIP CODE, AND (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
TELEPHONE NUMBER, INCLUDING AREA NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S
CODE, OF REGISTRANT'S PRINCIPAL AGENT FOR SERVICE OF PROCESS)
EXECUTIVE OFFICES)
--------------
COPY TO:
GARY W. ORLOFF
BRACEWELL & PATTERSON, L.L.P.
SOUTH TOWER PENNZOIL PLACE, SUITE 2900
711 LOUISIANA STREET
HOUSTON, TEXAS 77002-2781
PHONE: (713) 221-1306
FAX: (713) 221-1212
--------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this Registration Statement becomes
effective.
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company or there is compliance with
General Instruction G, check the following box. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF MAXIMUM AGGREGATE AMOUNT OF
SECURITIES AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT(1) PRICE(1) FEE
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<S> <C> <C> <C> <C>
10 3/4% Senior
Subordinated Notes due
2008................... $100,000,000 100% $100,000,000 $29,500
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Guarantees of 10 3/4%
Senior Discount Notes
due 2008(2)............ -- -- -- --
</TABLE>
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o).
(2) No additional consideration will be paid by the recipients of the 10 3/4%
Senior Discount Notes due 2008 for the Guarantees. Pursuant to Rule 457(n)
under the Securities Act, no separate fee is payable for the Guarantees.
--------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE SHOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED SEPTEMBER 29, 1998
AXIA INCORPORATED
OFFER TO EXCHANGE ITS
10 3/4% EXCHANGE SENIOR SUBORDINATED NOTES DUE 2008
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
FOR ANY AND ALL OUTSTANDING
10 3/4% SENIOR SUBORDINATED NOTES DUE 2008
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW
YORK CITY TIME ON , 1998, UNLESS EXTENDED
BY AXIA INCORPORATED IN ITS SOLE DISCRETION
(THE "EXPIRATION DATE"). ALTHOUGH AXIA
INCORPORATED HAS NO PRESENT INTENTION TO
CONDUCT ITS EXCHANGE OFFER LONGER THAN 30
DAYS, IT RESERVES THE RIGHT TO EXTEND
THE EXCHANGE OFFER.
AXIA Incorporated, a Delaware corporation (the "Company" or "AXIA"), hereby
offers, upon the terms and subject to the conditions set forth in the
Prospectus (the "Prospectus") and the accompanying Letter of Transmittal (the
"Letter of Transmittal" and, together with the Prospectus, the "Exchange
Offer"), to exchange $1,000 principal amount of its 10 3/4% Exchange 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 of which this Prospectus is a part, for each $1,000
principal amount of its outstanding 10 3/4% Senior Subordinated Notes due 2008
(the "Original Notes"), of which an aggregate of $100,000,000 principal amount
is outstanding.
The form and terms of the Exchange Notes are the same as the form and terms
of the Original Notes except that (i) the Exchange Notes will have been
registered under the Securities Act and, therefore, will not bear legends
restricting their transfer pursuant to the Securities Act, and (ii) holders of
the Exchange Notes generally will not be entitled to the rights of holders of
the Original Notes under the Registration Rights Agreement (as defined under
"Prospectus Summary--The Exchange Offer") following the consummation of the
Exchange Offer. See "The Exchange Offer--Registration Rights," "--Consequences
of Failure to Exchange" and "--Resale of the Exchange Notes; Plan of
Distribution." The Exchange Notes will evidence the same debt as the Original
Notes (which they replace) and will be issued under, and be entitled to the
benefits of the indenture governing the Exchange Notes.
The Company will accept for exchange any and all Original Notes validly
tendered and not withdrawn prior to the Expiration Date. Tenders of Original
Notes may be withdrawn at any time prior to the Expiration Date. The Exchange
Offer is subject to certain customary conditions. See "The Exchange Offer." The
Original Notes may be tendered only in integral multiples of $1,000 principal
amount.
(Prospectus cover continued on following page)
-----------
SEE "RISK FACTORS" BEGINNING ON PAGE 16 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH THE EXCHANGE OFFER AND AN
INVESTMENT IN THE EXCHANGE NOTES.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
-----------
The date of this Prospectus is , 1998.
<PAGE>
The Original Notes and the Exchange Notes are referred to herein
collectively as the "Notes."
Interest on the Notes is payable semiannually on January 15 and July 15 of
each year, commencing January 15, 1999. Except as described below, the Notes
are not redeemable at the option of the Company prior to July 15, 2003.
Thereafter, the Notes will be redeemable, in whole or in part, at the option
of the Company, at the redemption prices set forth herein, together with
accrued and unpaid interest, if any, to the date of redemption. Up to 35% of
the original principal amount of the Notes will be redeemable at any time and
from time to time prior to July 15, 2001, at the option of the Company, with
the proceeds of any Public Equity Offerings (as defined under "Description of
the Notes--Certain Definitions") following which there is a Public Market (as
defined under "Description of the Notes--Certain Definitions") at a redemption
price equal to 110.75% of the principal amount thereof, together with accrued
and unpaid interest, if any, to the date of redemption; provided, however,
that at least $65 million aggregate principal amount of the Notes must remain
outstanding after each such redemption. Upon a Change in Control (as defined
under "Description of the Notes--Change of Control"), each holder of Notes may
require the Company to purchase all or a portion of such holder's Notes at
101% of the principal amount thereof, together with accrued and unpaid
interest, if any, to the date of purchase. The Notes are unsecured senior
subordinated obligations of the Company and will rank subordinate in right of
payment to all existing and future Senior Indebtedness (as defined under
"Description of the Notes--Certain Definitions") of the Company. As of June
30, 1998, on a pro forma basis after giving effect to the issuance of the
Notes and the application of the proceeds therefrom, the Company would have
had approximately $39.7 million of Senior Indebtedness outstanding. For a more
complete description of the Notes, see "Description of the Notes."
Based on an interpretation by the staff of the Securities and Exchange
Commission (the "Commission" or the "SEC") set forth in no-action letters
issued to third parties, the Company believes, except as otherwise described
herein, the Exchange Notes issued pursuant to the Exchange Offer in exchange
for the Original Notes may be offered for resale, resold and otherwise
transferred by any holder thereof (other than any such holder which is an
"affiliate" of the Company within the meaning of Rule 405 of the Securities
Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such Exchange Notes are
acquired in the ordinary course of such holder's business and that such holder
does not intend to participate and there is no arrangement or understanding
with any person to participate, in the distribution of such Exchange Notes.
Each broker-dealer that receives Exchange Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. The Letter of Transmittal
states that by so acknowledging and by delivering a prospectus, a broker-
dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from to time, may be used by a broker-dealer in connection with
resales of Exchange Notes received in exchange for Notes where such Notes were
acquired by such broker-dealer as a result of market-making activities or
other trading activities. The Issuer has agreed that, for a period of 180 days
after the Expiration Date, it will make this Prospectus available to any
broker-dealer for use in connection with any such resale. See "Exchange
Offer--Resale of the Exchange Notes; Plan of Distribution."
Prior to this offering, there has been no public market for the Notes. The
Notes are not, and are not expected to be, listed on any securities exchange
or authorized for trading on NASDAQ. The Company does not expect that an
active market for the Notes will develop. The Original Notes have been
eligible for trading in the Private Offerings, Resale and Trading through
Automated Linkages (PORTAL) Market of The Nasdaq Stock Market, Inc., but the
Exchange Notes will not be so eligible. To the extent that an active market
for Notes does develop, the market value thereof will depend on many factors,
including among other things, prevailing interest rates, general economic
conditions, the Company's financial condition and results of operations, the
volatility of the market for non-investment grade debt and other factors. Such
conditions might cause the Notes, to the extent that they are traded, to trade
at a discount. See "Risk Factors--Lack of Public Market for the Notes."
2
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement (which
term shall encompass any and all amendments thereto) on Form S-4 (the
"Registration Statement") under the Securities Act, with respect to, among
other things, the Exchange Notes offered hereby. This Prospectus, which is
part of the Registration Statement, does not contain all the information set
forth in the Registration Statement and the exhibits and schedules thereto,
certain items of which are omitted in accordance with the rules and
regulations of the Commission. Statements made in this Prospectus as to the
contents of any contract, agreement or other document referred to are not
necessarily complete. With respect to each such contract, agreement or other
document filed as an exhibit to the Registration Statement, reference is
hereby made to the exhibit for a more complete description of the matter
involved, and each such statement shall be deemed qualified in its entirety by
such reference. For further information with respect to the Company and the
Notes, reference is hereby made to the Registration Statement and such
exhibits and schedules filed as a part thereof, which may be inspected,
without charge, at the Public Reference Section of the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the regional offices of the Commission located at 7 World Trade Center, Suite
1300, New York, New York 10048 and at 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of all or any portion of the Registration
Statement may be obtained from the Public Reference Section of the Commission,
upon payment of prescribed fees. The Commission maintains a Web site that
contains reports and information regarding registrants that file
electronically with the Commission at Web site (http://www.sec.gov).
Pursuant to the Indenture (as defined under "Description of the Notes"), so
long as any of the Notes are outstanding, whether or not the Company is
subject to the reporting requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Company
is obligated to send to the Commission the annual reports, quarterly reports
and other documents that the Company would have been required to file with the
Commission pursuant to Section 13(a) or 15(d) if the Company were subject to
such reporting requirements. The Company is also obligated to provide to all
holders of the Notes, and file with the Trustee (as defined under "Description
of the Notes"), copies of such annual reports, quarterly reports and other
documents and, if filing such documents by the Company with the Commission is
not permitted under the Exchange Act, promptly upon written request supply
copies of such documents to any prospective purchaser of the Notes and to
securities analysts and broker-dealers upon their request.
3
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and historical and pro forma
financial statements, including the notes thereto, appearing elsewhere in this
Prospectus. Unless otherwise indicated, industry data contained herein, other
than with respect to the Company, is derived from publicly available industry
trade journals and other publicly available industry sources, which the Company
has not independently verified, but which the Company believes to be reliable.
THE COMPANY
GENERAL
The Company is a leading designer, manufacturer, marketer and distributor of
a diverse range of products in several niche markets including productivity
enhancing construction tools, formed wire products, industrial bag closing
equipment and flexible conveyors. Management believes the Company possesses
strong market leadership positions in its primary markets. The Company believes
it is: (i) the largest U.S. supplier and distributor of automatic taping and
finishing ("ATF") tools; (ii) the largest U.S. independent manufacturer of
dishwasher racks; (iii) a leading worldwide manufacturer and marketer of bag
closing products and (iv) a leading manufacturer and marketer of flexible
conveyors and storage racks. The Company believes that its market leadership
positions, brand name recognition, established national and international
distribution networks, strong customer base and manufacturing expertise provide
significant opportunities to grow sales of new and existing products within
established markets, as well as expand into new markets. The Company also
believes that its diverse base of products and markets reduces exposure to any
particular industry, product market or geographic region. The Company operates
through three business units: Ames, Nestaway and Fischbein. For the twelve
months ended June 30, 1998, the Company had net revenues and pro forma EBITDA
of $109.3 million and $26.6 million, respectively.
Ames. Ames is the leading designer, manufacturer, marketer and distributor of
ATF tools, which are rented or sold to interior finishing contractors to finish
drywall joints prior to painting, wallpapering or other forms of final
treatment. ATF tools, invented by Ames in 1939, enable interior finishing
contractors to finish drywall joints three to four times faster than less
productive hand finishing methods. The Company is the leader in ATF tool
rentals and sales in the markets in which it serves. The primary business of
Ames is the rental and service of more than 135,000 ATF tools through its
extensive distribution network throughout the U.S. and Canada. Ames also sells
ATF tools under the TapeTech(R) and TapeMaster(R) brand names through an
established independent network of dealers in the U.S. and Canada. In addition,
Ames sells a variety of other drywall tools, finishing accessories and supplies
through its network of Company-managed stores. The Company believes it has
significant opportunities to increase Ames' revenues by expanding the use of
ATF tools in the fast growing factory-built housing market, which is
increasingly utilizing drywall rather than other materials. The Company also
believes it has a significant opportunity to expand the use of ATF tools by
converting interior finishing contractors from traditional hand finishing
methods, particularly in the eastern and midwestern U.S. where the use of ATF
tools is less prevalent than in the western U.S. For the twelve months ended
June 30, 1998, Ames had net revenues of $44.7 million.
Nestaway. Nestaway is a leading manufacturer of formed wire products which
are used for a variety of commercial and consumer product applications.
Nestaway is North America's largest independent manufacturer of coated wire
dishwasher racks and components which are sold to all the
4
<PAGE>
major U.S. dishwasher appliance manufacturers ("OEMs"). Approximately 75% of
dishwashers sold in the U.S. are replacements. In 1996, Nestaway produced an
estimated 68% of all independently manufactured dishwasher racks and an
estimated 17% of all dishwasher racks produced in the U.S. Nestaway's primary
OEM customers include Maytag, EBS-Bosch and Whirlpool/KitchenAid. Nestaway has
had relationships with all major OEMs for an average of approximately 19 years
and approximately 90% of Nestaway's 1997 revenues were generated pursuant to
contracts with terms extending through 2002. Nestaway also manufactures, on a
contract basis, other close tolerance, welded, non-coated or coated formed wire
products such as dish drainers, sink protectors, shower caddies, dryer racks,
golf cart baskets, bucket bails, medical baskets and small gauge axles. In
1994, Nestaway entered into an agreement with a major consumer products company
it has served for over 50 years to manufacture 100% of this customer's coated
formed wire dish drainers and sink protectors. In 1997, Nestaway entered into
an agreement with the same customer to manufacture 100% of its coated wire
shower caddies. The Company believes it has significant opportunities to
increase Nestaway's revenues through: (i) increasing sales to existing
customers; (ii) expanding its product offering and customer base by developing
new formed wire business; (iii) expanding production in international markets
and (iv) pursuing strategic acquisitions. For the twelve months ended June 30,
1998, Nestaway had net revenues of $37.4 million.
Fischbein. Fischbein is a leading worldwide manufacturer and marketer of
industrial bag closing and handling equipment and systems and a leading
manufacturer and marketer of flexible conveyors and storage racks. Bag closing
and handling systems products include: (i) portable and stationary industrial
sewing heads and sewing systems for paper, textile and woven polypropylene
bags; (ii) industrial heat sealing and bag handling systems for paper and
plastic bags; (iii) consumables, including thread and tape and (iv) service
parts. Service parts, which provide a recurring base of revenue, accounted for
approximately 20% of Fischbein's sales in 1997. Fischbein's bag closing
products are used across a broad range of industries for packaging chemicals,
minerals, agricultural and food products. In addition to bag closing products,
Fischbein manufactures extendible, flexible, gravity and motorized conveyors
and portable, nestable and stackable warehouse storage racks. Fischbein's
flexible conveyors are used by retailers for loading and unloading tractor
trailers at store sites and distribution centers. Storage racks are designed
for factory and warehouse storage where flexibility in racking is desired and
are sold to customers in various industries, including retail, distribution,
food, chemical, pharmaceutical and textile. The Company believes it has
significant opportunities to increase Fischbein's revenues by expanding the
product offerings that can be sold through its extensive distribution network
and by making strategic acquisitions. For the twelve months ended June 30,
1998, Fischbein had net revenues of $27.2 million.
COMPETITIVE STRENGTHS
Established Leadership Positions in Niche Markets. The Company believes that
its product quality, customer-driven product development and high levels of
customer service have allowed it to achieve strong market positions and brand
name recognition. Management believes the Company possesses strong market
leadership positions in its primary markets. The Company believes it is: (i)
the largest U.S. supplier and distributor of ATF tools; (ii) the largest U.S.
independent manufacturer of dishwasher racks; (iii) a leading worldwide
manufacturer and marketer of bag closing products and (iv) a leading
manufacturer and marketer of flexible conveyors and storage racks. Ames, which
invented the ATF tool in 1939, continues to be the leader in ATF tool rentals
and sales. Nestaway has been a leading independent supplier of dishwasher racks
to the U.S. dishwasher industry for over 50 years. Fischbein, which first
introduced a portable bag closer in 1943, is consistently recognized as a
leading global supplier of bag closing equipment. The Company believes its
leadership positions will
5
<PAGE>
allow it to: (i) broaden its product offerings to existing customers; (ii)
expand its customer base with both new and existing products and (iii)
diversify its geographic coverage to secure new customers and to meet the needs
of existing customers in additional markets.
Diverse Revenue Base. The Company's three business units provide revenue and
cash flow from a diverse base of products, customers and geographic regions.
The Company's products are sold through multiple distribution channels to
customers in over 100 countries in a wide variety of end-use markets. In 1997,
international sales accounted for approximately 15% of the Company's revenues.
This diversity of products and distribution channels provides the Company with
a broad base from which to increase sales and expand customer relationships and
reduces exposure to any particular industry, product market or geographic
region.
Manufacturing Expertise. The Company has a proven track record in product
manufacturing and development in each of its business units. The Company
utilizes this expertise in partnership with its customers both to improve
product performance and to reduce manufacturing costs. Ames invented ATF tools
and remains the leader in their design and development, and continues to make
its products easier to use, more productive and less costly to refurbish.
Nestaway frequently works directly with its OEM customers to design and
manufacture new dishwasher racks and other formed wire products in a cost-
effective manner. In addition, Nestaway develops and manufactures custom
designed tooling and other equipment used in high volume precision wire
forming, welding and coating, providing Nestaway with the ability to
manufacture quickly and efficiently both new and redesigned products. Fischbein
has successfully developed both new products and new features for existing
products that enhance customer productivity and reduce Fischbein's
manufacturing costs. The Company believes its manufacturing expertise enables
it to strengthen customer loyalty, improve the value of its products and reduce
manufacturing costs.
Established Distribution Networks. The Company has established broad
distribution networks serving both domestic and international markets. Ames'
rental ATF tools are distributed in the U.S. and Canada through over 125
separate and distinct distribution locations and Ames' sold ATF tools are
distributed in the U.S. and Canada through a network of over 250 dealers and
distributors. Fischbein's national and international distribution network
extends to over 100 countries through international and domestic distributors,
dealers and packaging machinery manufacturers. Management believes that its
distribution network provides it with an established base from which to
introduce new products, expand sales of existing product lines and achieve
operating efficiencies.
Proven and Committed Management Team. The Company has assembled a strong and
experienced management team at each of its business units. The Company's senior
operating managers have an average of over 14 years of experience in their
respective industries. Management has successfully enhanced operating margins
through the implementation of various production improvements and cost cutting
initiatives and as a result, EBITDA margins improved from 16.0% in 1993 to
23.0% in 1997.
STRATEGY
The Company's strategy is to increase revenues and cash flow in each of its
business units through both internal growth and by pursuing selective
acquisitions. Management believes the Company's market leadership positions,
brand name recognition, strong customer base, established distribution networks
and manufacturing expertise provide significant growth opportunities for the
Company.
Ames' primary business strategy is to pursue the expansion of ATF tool use in
the factory-built housing market and to continue to convert interior finishing
contractors utilizing traditional hand
6
<PAGE>
finishing drywall methods to the use of ATF tools. With regard to the continued
conversion from hand finishing to ATF tools, management believes there is a
significant opportunity to increase utilization rates in the eastern and
midwestern U.S. Ames has successfully increased its rental revenues in the
eastern and midwestern U.S. at a 15% compound annual growth rate since 1993 and
expects to continue to grow rental revenues in this market. Ames also plans to
continue to expand its presence in the fast growing factory-built housing
market which in 1996, accounted for 32% of all new single family homes and has
grown at a compound annual growth rate of 16% since 1991. Ames has established
relationships with major factory-built housing companies, including Fleetwood
Enterprises, Champion Enterprises and Oakwood Homes, and management believes
that the productivity enhancements associated with ATF tools provide Ames with
a significant opportunity to increase revenues in this market where hand
finishing is predominant.
Nestaway's primary business strategy is to increase sales to existing
dishwasher rack customers and to expand its product offerings of other formed
wire products. Management intends to continue to increase sales to existing
customers by supplying its customers as they expand production in domestic and
international markets and by further increasing its sales to OEMs that have in-
house manufacturing operations. Nestaway will continue to pursue new customer
relationships, and was recently awarded a new contract with EBS-Bosch, a
leading European manufacturer of high-end dishwashers that has recently
expanded operations in the U.S. In addition to dishwasher racks, Nestaway
continues to focus on providing new formed wire products to new and existing
customers for applications such as sporting goods, home organization, household
products, computer accessories, air conditioning, utility carts and other
formed wire products. Revenues from formed wire products other than dishwasher
racks increased from $4.5 million, or 11% of Nestaway's net revenues, in 1993
to $11.2 million, or 32% of Nestaway's net revenues, in 1997, a 26% compound
annual growth rate. Nestaway plans to pursue an acquisition strategy that
expands its current product offerings by leveraging Nestaway's core competency
of precision wire forming and coating.
Fischbein's primary business strategy is to expand its bagging product
offerings through both new product development and by acquiring companies that
manufacture complementary products in new and existing geographic markets.
Management believes that the Company has a significant opportunity to increase
sales of new products by leveraging its extensive national and international
distribution capabilities and existing customer base. Management also believes
that Fischbein has an opportunity to utilize its existing distribution network
to expand sales of its storage and flexible conveyor products in the packaging,
distribution and delivery industries.
7
<PAGE>
THE TRANSACTIONS
By agreement dated June 17, 1998, AXIA Acquisition Corp. ("Acquisition Co."),
a company organized to effect the Acquisition, entered into an Agreement and
Plan of Merger (the "Merger Agreement") with the Parent to effect the
Acquisition for a purchase price of $155,250,000 (including the repayment of
indebtedness), subject to certain post-closing adjustments. Upon completion of
the Transactions: (i) the Parent and the Company became direct and indirect
subsidiaries of AXIA Group (the parent company of Acquisition Co.) and (ii) the
Company became the primary obligor on the Original Notes and borrowings made
under the bank credit agreement (the "Bank Credit Agreement") as described in
"Description of the Bank Credit Agreement."
On the Closing Date (as defined), AXIA Group sold $28.0 million of its common
stock ("Common Stock") and contributed the proceeds thereof to Acquisition Co.
(the "Equity Investment"). Finance Co., an indirect subsidiary of AXIA Group,
borrowed approximately $39.3 million under the Bank Credit Agreement and
received approximately $100.0 million in gross proceeds from the Original
Notes. Such funds were used: (i) to effect the Acquisition pursuant to the
Merger Agreement; (ii) to fund the ESOP (as defined); (iii) to repay existing
indebtedness of the Company and (iv) to pay fees and expenses in connection
with the Transactions. The Offering, the execution of and initial borrowings
under the Bank Credit Agreement and the Equity Investment are collectively
referred to herein as the "Financings." The Financings, the Acquisition, the
establishment of the ESOP, the payment of certain fees and expenses and other
related transactions are collectively referred to herein as the "Transactions."
See "The Transactions" and "Management--Employee Stock Ownership Plan."
8
<PAGE>
The following table sets forth the sources and uses of funds used to effect
the Transactions as if the Transactions had occurred on June 30, 1998.
<TABLE>
<CAPTION>
AMOUNT
---------------------
(DOLLARS IN MILLIONS)
<S> <C>
SOURCES OF FUNDS:
Bank Credit Agreement(/1/)
Revolving Credit Facility............................. $ 3.2
Acquisition Facility.................................. --
Term Loan............................................. 35.0
ESOP Term Loan........................................ 1.5
Original Notes.......................................... 100.0
Equity Investment....................................... 28.0
------
Total Sources......................................... $167.7
======
USES OF FUNDS:
Equity purchase price................................... $131.1
Retirement of existing debt(/2/)........................ 26.6
Company ESOP Loan(/3/).................................. 1.5
Fees and expenses(/4/).................................. 8.5
------
Total Uses............................................ $167.7
======
</TABLE>
- --------
(1) The Company has available borrowings under the Revolving Credit Facility of
up to $15 million, subject to borrowing base limitations. The Company also
has available borrowings under the Acquisition Facility of $25 million,
subject to the terms thereof. See "Description of the Bank Credit
Agreement."
(2) Existing notes of the Company due 2001 were discharged on the day following
the closing of the Transactions.
(3) For a description of the Company ESOP Loan (as defined), see "Management--
Employee Stock Ownership Plan."
(4) Represents fees and expenses, including: (i) the discount paid to the
Initial Purchasers in connection with the Sale of the Original Notes; (ii)
legal, accounting and other professional fees payable in connection with
the Transactions, including fees to The Sterling Group, Inc., and (iii)
certain other expenses. See "Related Transactions."
THE INVESTORS
The equity portion of the financing for the Acquisition was provided by an
investor group (the "Investor Group") led by The Sterling Group, Inc.
("Sterling"). Sterling is a private financial organization engaged in the
acquisition and ownership of operating businesses. Since its formation in 1982,
Sterling has completed 35 acquisitions for total consideration of approximately
$6.3 billion. Sterling promotes employee ownership through the use of employee
stock ownership plans, direct equity ownership by management and key employees
as well as stock option plans. See "Related Transactions."
9
<PAGE>
THE EXCHANGE OFFER
Registration Rights
Agreement.................. To fund a portion of the Acquisition, the Company
sold $100 million in aggregate principal amount
of Original Notes to qualified institutional
buyers as defined in Rule 144A under the
Securities Act or to institutional accredited
investors within the meaning of Rule 501 under
the Securities Act, through Chase Securities,
Inc. and NationsBanc Montgomery Securities LLC,
as initial purchasers (the "Initial Purchasers").
The Company and the Initial Purchasers entered
into an Exchange and Registration Rights
Agreement dated as of July 22, 1998 (the
"Registration Rights Agreement"), which grants
the holders of the Original Notes certain
exchange and registration rights. The Exchange
Offer made hereby is intended to satisfy such
exchange rights.
The Exchange Offer.......... $1,000 principal amount of Exchange Notes in
exchange for each $1,000 principal amount of
Original Notes. As of the date hereof, $100
million aggregate principal amount of the
Original Notes are outstanding. The Company will
issue the Exchange Notes to holders on the
earliest practicable date following the
Expiration Date.
Resales of the Exchange
Notes...................... Based on an interpretation by the staff of the
Commission set forth in no-action letters issued
to third parties, the Company believes that,
except as described below, the Exchange Notes
issued pursuant to the Exchange Offer may be
offered for resale, resold and otherwise
transferred by a holder thereof (other than any
such holder that is an "affiliate" of the Company
within the meaning of Rule 405 under the
Securities Act) without compliance with the
registration and prospectus delivery provisions
of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary
course of such holder's business and that such
holder has no arrangement or understanding with
any person to participate in the distribution of
such Exchange Notes.
Each broker-dealer that receives Exchange Notes
pursuant to the Exchange Offer in exchange for
Original Notes that such broker-dealer acquired
for its own account as a result of market-making
activities or other trading activities (other
than Original Notes acquired directly from the
Company or its affiliates) must acknowledge that
it will deliver a prospectus in connection with
any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and
by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an
"underwriter" within the meaning of the
Securities Act. If the Company receives certain
notices in the Letter of Transmittal, this
Prospectus, as it may be amended or supplemented
from time to time, may be used for the period
described below by a broker-dealer in connection
with
10
<PAGE>
resales of Exchange Notes received in exchange
for Original Notes where such Original Notes were
acquired by such broker-dealer as a result of
market-making activities or other trading
activities and not acquired directly from the
Company. The Company has agreed that, if it
receives certain notices in the Letter of
Transmittal, for a period of 180 days after the
date on which the Registration Statement becomes
effective, it will make this Prospectus available
to any such broker-dealer for use in connection
with any such resale. The Letter of Transmittal
requires broker-dealers tendering Original Notes
in the Exchange Offer to indicate whether such
broker-dealer acquired such Original Notes for
its own account as a result of market-making
activities or other trading activities (other
than Original Notes acquired directly from the
Company or any of its affiliates), and if no
broker-dealer indicates that such Original Notes
were so acquired, the Company has no obligation
under the Registration Rights Agreement to
maintain the effectiveness of the Registration
Statement past the consummation of the Exchange
Offer or to allow the use of this Prospectus for
such resales. See "The Exchange Offer--Purpose
and Effect of the Exchange Offer"; "--
Registration Rights" and "--Resale of the
Exchange Notes; Plan of Distribution."
Expiration Date............. The Exchange Offer expires at 5:00 p.m., New York
City time, on , 1998, unless such Exchange
Offer is extended by the Company in its sole
discretion, in which case the term "Expiration
Date" means the latest date and time to which
such Exchange Offer is extended.
Conditions to the Exchange
Offer...................... The Exchange Offer is subject to certain
conditions, which may be waived by the Company.
See "The Exchange Offer--Conditions to the
Exchange Offer."
Procedures for Tendering
the Original Notes......... Each holder of Original Notes wishing to accept
the Exchange Offer must complete, sign and date
the accompanying Letter of Transmittal in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver such
Letter of Transmittal together with the Original
Notes and any other required documentation to the
Exchange Agent (as defined below under "Exchange
Agent") at the address set forth herein. By
executing the Letter of Transmittal, a holder
will make certain representations to the Company.
See "The Exchange Offer--Registration Rights" and
"--Procedures for Tendering Original Notes."
Special Procedures for
Beneficial Owners.......... Any beneficial owner whose original Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
and who wishes to tender should
11
<PAGE>
contact such registered holder promptly and
instruct such registered holder to tender on such
beneficial owner's behalf. See "The Exchange
Offer--Procedures for Tendering Original Notes."
Guaranteed Delivery
Procedures................. Holders of Original Notes who wish to tender
their Original Notes when those securities are
not immediately available or who cannot deliver
their Original Notes, the Letter of Transmittal
or any other documents required by such Letter of
Transmittal to the Exchange Agent prior to the
Expiration Date, must tender their Original Notes
according to the guaranteed delivery procedures
set forth in "The Exchange Offer--Procedures for
Tendering Original Notes--Guaranteed Delivery."
Withdrawal Rights........... Tenders of Original Notes pursuant to the
Exchange Offer may be withdrawn at any time prior
to the Expiration Date.
Acceptance of Original
Notes and Delivery of
Exchange Notes............. The Company will accept for exchange any and all
Original Notes that are properly tendered in the
Exchange Offer, and not withdrawn, prior to the
Expiration Date. The Exchange Notes issued
pursuant to the Exchange Offer will be issued on
the earliest practicable date following the
acceptance for exchange of Original Notes by the
Company. See "The Exchange Offer--Terms of the
Exchange Offer."
Exchange Agent.............. State Street Bank & Trust Company is serving as
exchange agent (the "Exchange Agent") in
connection with the Exchange Offer.
Federal Income Tax
Considerations............. The Company has received an opinion of counsel
advising that the exchange of Original Notes for
Exchange Notes pursuant to the Exchange Offer
will not be treated as a taxable exchange for
federal income tax purposes. See "Certain Federal
Income Tax Considerations."
12
<PAGE>
THE NOTES
Maturity Date............... July 15, 2008.
Interest Payment Dates...... January 15 and July 15 of each year, commencing
January 15, 1999.
Optional Redemption......... The Notes may be redeemed at the option of the
Company, in whole or in part, at any time on or
after July 15, 2003 at the redemption prices set
forth herein plus accrued interest on the date of
redemption. Up to an aggregate of 35% of the
principal amount of the Notes may be redeemed
from time to time prior to July 15, 2001 at the
option of the Company at the redemption price set
forth herein plus accrued interest to the date of
redemption, with the net proceeds received after
the issuance of the Notes of one or more Public
Equity Offerings following which there is a
Public Market if at least $65 million principal
amount of the Notes remains outstanding after
each such redemption. See "Description of the
Notes--Optional Redemption."
Change of Control........... Upon a Change of Control, the Company will be
required to make an offer to repurchase all
outstanding Notes at 101% of the principal amount
thereof plus accrued interest to the date of
repurchase. See "Description of the Notes--Change
of Control."
Subsidiary Guarantees....... The Notes are guaranteed (the "Guarantees"),
jointly and severally on a senior subordinated
basis, by each of the Company's existing and
future direct and indirect Subsidiaries
(excluding Unrestricted Subsidiaries and Foreign
Subsidiaries). The Guarantees are general
unsecured obligations of the Guarantors. The
Guarantors also guarantee all obligations of the
Company under the Bank Credit Agreement. The
obligations of each Guarantor under its Guaranty
is subordinated in right of payment to the prior
payment in full of all Guarantor Senior
Indebtedness (as defined), including such
subsidiary's guarantee of indebtedness under the
Bank Credit Agreement, of such Guarantor to
substantially the same extent as the Notes are
subordinated to all existing and future Senior
Indebtedness of the Company. See "Description of
the Notes--Guarantees of the Notes."
Ranking..................... The Notes are unsecured senior subordinated
obligations of the Company and, as such, are
subordinated in right of payment to all existing
and future Senior Indebtedness of the Company.
The Notes rank pari passu in right of payment
with all senior subordinated indebtedness of the
Company, if any, and rank senior to any
subordinated indebtedness of the Company. As of
June 30, 1998, after giving pro forma effect
13
<PAGE>
to the Transactions as if they had occurred on
such date, the aggregate amount of Senior
Indebtedness of the Company would have been
approximately $39.7 million. See "Description of
the Notes--Ranking."
Restrictive Covenants....... The indenture under which the Notes were issued
and the Exchange Notes will be issued (the
"Indenture") contains certain covenants that,
among other things, limit the ability of the
Company and/or its Restricted Subsidiaries (as
defined) to (i) incur additional indebtedness,
(ii) pay dividends or make certain other
restricted payments, (iii) make investments, (iv)
enter into transactions with affiliates, (v) make
certain asset dispositions, and (vi) merge or
consolidate with, or transfer substantially all
of its assets to, another person. The Indenture
also limits the ability of the Company's
Restricted Subsidiaries to issue Capital Stock
(as defined) and to create restrictions on the
ability of such Restricted Subsidiaries to pay
dividends or make any other distributions. In
addition, the Company is obligated, under certain
circumstances, to offer to repurchase Notes at a
purchase price equal to 100% of the principal
amount thereof, plus accrued and unpaid interest,
if any, to the date of repurchase, with the net
cash proceeds of certain sales or other
dispositions of assets. However, all of these
limitations and prohibitions are subject to a
number of important qualifications. See
"Description of Notes--Certain Covenants."
RISK FACTORS
Prospective purchasers of the Notes should consider carefully the information
set forth under the caption "Risk Factors" and all other information set forth
in this Prospectus before making any investment in the Notes.
----------------
The Company's principal executive offices are located at 100 West 22nd
Street, Suite 134, Lombard, Illinois 60148. The Company's telephone number is
(630) 629-3360.
14
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
The summary historical consolidated financial information presented below as
of and for each of the years ended December 31, 1995, 1996 and 1997 is derived
from the consolidated financial statements of the Company, which have been
audited by Arthur Andersen LLP, independent public accountants. The summary
historical consolidated financial information presented below for each of the
six months ended June 30, 1997 and 1998 is derived from the historical
unaudited financial statements of the Company. In the opinion of the Company's
management, the unaudited historical consolidated financial statements include
all adjustments (consisting only of normal recurring adjustments) necessary for
a fair presentation of the Company's financial position and results of
operations for such periods. The summary pro forma financial information
presented below for the twelve months ended June 30, 1998 is derived from the
unaudited pro forma financial statements of the Company included herein. The
unaudited pro forma financial information for the twelve months ended June 30,
1998 and the unaudited operating results for the six months ended June 30, 1998
are not necessarily indicative of the results that may be expected for the full
year ending December 31, 1998. The information presented below should be read
in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations," the Consolidated Financial Statements of
the Company and the related notes thereto and the Unaudited Pro Forma Financial
Information and related notes thereto included elsewhere herein.
<TABLE>
<CAPTION>
PRO FORMA
TWELVE
SIX MONTHS MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30, ENDED
---------------------------- ---------------- JUNE 30,
1995 1996 1997 1997 1998 1998
-------- -------- -------- ------- ------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net revenues
Ames net revenues...... $ 33,854 $ 38,015 $ 42,428 $20,706 $22,954 $ 44,676
Nestaway net revenues.. 42,649 39,655 35,268 17,958 20,062 37,372
Fischbein net revenues. 27,823 27,117 27,104 13,044 13,184 27,244
-------- -------- -------- ------- ------- --------
Total net revenues.... 104,326 104,787 104,800 51,708 56,200 109,292
Cost of revenues........ 64,829 61,294 60,144 29,381 31,405 62,205
Selling, general and
administrative
expenses............... 24,181 25,146 25,302 12,843 13,294 27,096
-------- -------- -------- ------- ------- --------
Income from operations.. 15,316 18,347 19,354 9,484 11,501 19,991
Interest expense........ 6,596 5,123 3,710 2,029 1,393 14,815
Interest income......... (44) (39) (367) (14) (7) (360)
Other expense (income),
net.................... 537 57 404 (395) 171 970
-------- -------- -------- ------- ------- --------
Income before income
taxes and extraordinary
item................... 8,227 13,206 15,607 7,864 9,944 4,566
Provision for income
taxes.................. 3,338 5,730 6,412 3,375 3,954 2,790
-------- -------- -------- ------- ------- --------
Income before
extraordinary item..... 4,889 7,476 9,195 4,489 5,990 1,776
Loss on early
extinguishment of debt,
net.................... -- 614 772 772 300 300
-------- -------- -------- ------- ------- --------
Net income.............. $ 4,889 $ 6,862 $ 8,423 $ 3,717 $ 5,690 $ 1,476
======== ======== ======== ======= ======= ========
OTHER FINANCIAL DATA:
EBITDA(/1/)............. $ 20,783 $ 24,375 $ 24,069 $11,729 $13,873 $ 26,638
Depreciation and
amortization(/2/)...... 5,467 6,028 4,715 2,245 2,372 6,647
Capital expenditures.... 3,853 3,862 3,475 1,699 3,011 4,787
Cash interest expense... 13,932
Ratio of EBITDA to cash
interest expense....... 1.9x
Ratio of total debt to
EBITDA................. 5.2x
BALANCE SHEET DATA (END
OF PERIOD):
Cash and cash
equivalents............ $ 45 $ 1,716 $ 1,310 $ 426 $ 490 $ 490
Working capital......... 6,750 7,362 3,824 10,864 1,237 15,733
Total assets............ 103,288 99,331 96,773 98,449 99,643 191,167
Total debt.............. 50,157 41,195 31,364 37,836 26,624 139,746
Stockholder's equity.... 25,828 32,118 40,067 35,363 45,706 26,500
</TABLE>
- --------
(1) EBITDA is defined as income from operations plus depreciation and
amortization. EBITDA is presented because it is a widely accepted financial
indicator of a company's ability to incur and service debt. EBITDA should
not be considered by an investor as an alternative to income from
operations as determined in accordance with generally accepted accounting
principles as an indicator of the operating performance of the Company or
as an alternative to cash flows as a measure of liquidity.
(2) Depreciation and amortization does not include amortization of deferred
financing costs or the discount on the 2001 Notes (as defined) which are
included in interest expense.
15
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, purchasers of the
Notes offered hereby should consider carefully the risk factors set forth
below.
SUBSTANTIAL LEVERAGE
In connection with the consummation of the Transactions, the Company
incurred a significant amount of indebtedness outstanding and will have
significant debt service requirements. As of June 30, 1998, on a pro forma
basis after giving effect to the Transactions as if the Transactions had
occurred on such date, the Company would have had outstanding indebtedness of
approximately $139.7 million, including the Notes, and stockholder's equity of
$26.5 million. See "Capitalization." In addition, the Indenture will permit
the Company to incur or guarantee additional indebtedness, including
indebtedness under the Bank Credit Agreement, subject to certain limitations.
The Company will have additional borrowing capacity on a revolving credit
basis under the Bank Credit Agreement and on a term basis to fund future
acquisitions under the Acquisition Facility of the Bank Credit Agreement. See
"Description of the Bank Credit Agreement" and "Description of the Notes."
The Company's high degree of leverage could have important consequences to
the holders of the Notes, including but not limited to the following: (i) the
Company's ability to obtain additional financing for working capital, capital
expenditures, acquisitions, debt service requirements, general corporate
purposes or other purposes may be impaired in the future; (ii) a substantial
portion of the Company's cash flow from operations will be required to be
dedicated to the payment of principal and interest on its indebtedness,
thereby reducing the funds available to the Company for other purposes,
including its operations and future business opportunities; (iii) certain of
the Company's borrowings, including certain borrowings under the Bank Credit
Agreement, may be at variable rates of interest, which will expose the Company
to the risk of increased interest rates; (iv) the indebtedness outstanding
under the Bank Credit Agreement will be secured by substantially all the
assets of the Company and will mature prior to the maturity of the Notes and
(v) the Company's leveraged position and the covenants contained in its debt
instruments could limit the Company's flexibility to adjust to changing market
conditions and ability to withstand competitive pressures, and the Company may
be more vulnerable to a downturn in general economic conditions or in its
business or be unable to carry out capital spending that is important to its
growth and productivity improvement programs. See "Description of the Bank
Credit Agreement" and "Description of the Notes."
The Company will be required to make scheduled principal payments under the
Bank Credit Agreement commencing on December 31, 1998. See "Description of the
Bank Credit Agreement." The Company's ability to make scheduled payments or to
refinance its obligations with respect to its indebtedness, including the
Notes, will depend on its financial and operating performance, which is
subject to prevailing economic and competitive conditions and to certain
financial, business and other factors beyond its control, including interest
rates, unscheduled plant shutdowns, increased operating costs, raw material
and product prices, and regulatory developments. There can be no assurance
that the Company will maintain a level of cash flow from operations sufficient
to permit it to pay the principal, premium, if any, and interest on its
indebtedness (including the Notes).
If the Company's cash flow and capital resources are insufficient to fund
its debt service obligations, the Company may be forced to reduce or delay
capital expenditures, sell assets, or seek to obtain additional equity capital
or restructure or refinance its debt (including the Notes). There can be no
assurance that such alternative measures would be successful or would permit
the Company to meet its scheduled debt service obligations. In the absence of
such operating results and resources, the Company could face substantial
liquidity problems and might be required to dispose of material assets or
operations to meet its debt service and other obligations. The Bank Credit
16
<PAGE>
Agreement and the Indenture will restrict the Company's ability to sell assets
and use the proceeds therefrom. See "Description of the Bank Credit Agreement"
and "Description of the Notes." There can be no assurance as to the ability of
the Company to consummate such sales or the proceeds which the Company could
realize therefrom or that such proceeds would be adequate to meet the
obligations then due.
RESTRICTIVE FINANCING COVENANTS; CROSS-DEFAULT RISKS
The Bank Credit Agreement and the Indenture contain a number of significant
covenants that, among other things, restrict the ability of the Company to
dispose of assets or merge, incur additional indebtedness, incur guarantee
obligations, prepay the Notes or amend the Indenture, pay dividends, create
liens on assets, enter into sale and leaseback transactions, make investments,
loans or advances, make acquisitions, engage in mergers or consolidations,
make capital expenditures or engage in certain transactions with affiliates,
and will otherwise restrict corporate activities. In addition, under the Bank
Credit Agreement, the Company is required to comply with specified financial
ratios and tests, including a limitation on capital expenditures, an EBITDA to
fixed charges ratio, a minimum net worth test, a total debt to EBITDA ratio
and a minimum interest coverage test. See "Description of the Bank Credit
Agreement" and "Description of the Notes--Certain Covenants."
The Company's ability to comply with the covenants and restrictions
contained in the Bank Credit Agreement and the Indenture may be affected by
events beyond its control, including prevailing economic, financial and
industry conditions. The breach of any such covenants or restrictions could
result in a default under the Bank Credit Agreement or the Indenture which
would permit the lenders under the Bank Credit Agreement or the holders of the
Notes, as the case may be, to declare all amounts outstanding thereunder to be
due and payable, together with accrued and unpaid interest, and the
commitments of the lenders under the Bank Credit Agreement to make further
extensions of credit could be terminated. In addition, in the event of a
default under the Bank Credit Agreement, in certain circumstances the lenders
under the Bank Credit Agreement could prevent the Company from making any
payments on the Notes. See "Description of the Notes--Ranking." If the Company
were unable to repay its indebtedness to the lenders under the Bank Credit
Agreement, such lenders could proceed against the collateral securing such
indebtedness as described under "Description of the Bank Credit Agreement."
There can be no assurance that in the event of any such default the Company
will have adequate resources to repay in full principal, premium, if any, and
interest on the Notes.
SUBORDINATION OF THE NOTES; UNSECURED STATUS OF THE NOTES
The payment of principal, premium, if any, and interest on, and any other
amounts owing in respect of, the Notes will be subordinated in right of
payment to the prior payment in full of all existing and future Senior
Indebtedness of the Company, including all amounts owing under the Bank Credit
Agreement. As of June 30, 1998, on a pro forma basis after giving effect to
the Transactions as if they had occurred on such date, the aggregate principal
amount of such Senior Indebtedness of the Company would have been
approximately $39.7 million. Additional Senior Indebtedness may be incurred by
the Company from time to time, subject to certain restrictions. See
"Description of the Bank Credit Agreement" and "Description of the Notes--
Certain Covenants--Limitation on Indebtedness." Therefore, in the event of a
bankruptcy, liquidation, dissolution, reorganization or similar proceeding
with respect to the Company, the assets of the Company will be available to
pay obligations on the Notes only after all Senior Indebtedness of the Company
has been paid in full, and there can be no assurance that there will be
sufficient assets remaining to pay amounts due on all or any of the Notes. In
addition, the Company may not pay principal of, premium, if any, or interest
on the Notes, or purchase, redeem or otherwise retire the Notes, if any
principal, premium, if any, or interest on any Designated Senior Indebtedness
(as defined) is not paid when due (whether at final
17
<PAGE>
maturity, upon scheduled redemption or installment, acceleration or otherwise)
unless such default has been cured or waived or such Indebtedness has been
repaid in full. In addition, under certain circumstances, if any nonpayment
default exists with respect to Designated Senior Indebtedness, the Company may
not make any payments on the Notes for a specified period of time, unless such
default is cured or waived or such Designated Senior Indebtedness has been
repaid in full. See "Description of the Notes--Ranking."
The indebtedness evidenced by the Guarantees of the Notes by the Guarantors
will be subordinated in right of payment to the prior payment in full of all
existing and future Guarantor Senior Indebtedness of each such Guarantor,
including all amounts owing pursuant to their guarantees of the Bank Credit
Agreement, to substantially the same extent as the Notes are subordinated to
all existing and future Senior Indebtedness of the Company. See "Description
of the Notes--Subordination of the Notes" and "--Guarantees of the Notes."
The Indenture permits the Company to incur certain secured indebtedness,
including indebtedness under the Bank Credit Agreement, which will be secured
by a lien on substantially all of the assets of the Company and a pledge of
all of the capital stock of the Company. The Notes are unsecured and therefore
do not have the benefit of such collateral. Accordingly, if an event of
default occurs under the Bank Credit Agreement, the lenders under the Bank
Credit Agreement will have a prior right to the assets of the Company, and may
foreclose upon such collateral, to the exclusion of the holders of the Notes.
In such event, such assets would first be used to repay in full amounts
outstanding under the Bank Credit Agreement, resulting in all or a portion of
the Company's assets being unavailable to satisfy the claims of the holders of
Notes and other unsecured indebtedness.
FORWARD LOOKING STATEMENTS
This Prospectus contains certain estimates and forward looking statements.
Actual results could differ materially from those projected in the estimates
and forward looking statements as a result of any number of factors, including
the risk factors set forth in this Offering Memorandum. Therefore, undue
reliance should not be placed upon such estimates and statements. No assurance
can be given that any of such estimates or statements will be realized and
actual results may differ materially from those contemplated by such forward
looking statements. Factors that may cause such differences include: (i)
increased competition; (ii) increased costs; (iii) loss or retirement of key
members of management and (iv) changes in general economic conditions in the
markets in which the Company may from time to time compete. Many of such
factors will be beyond the control of the Company and its management.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Company will be required to
offer to purchase all of the outstanding Notes at a price equal to 101% of the
principal amount thereof at the date of purchase plus accrued and unpaid
interest, if any, to the date of purchase. The occurrence of certain of the
events which would constitute a Change of Control may constitute a default
under the Bank Credit Agreement or other indebtedness of the Company that may
be incurred in the future. In addition, the Bank Credit Agreement will
prohibit the purchase of the Notes by the Company in the event of a Change of
Control, unless and until such time as the indebtedness under the Bank Credit
Agreement is repaid in full. The Company's failure to purchase the Notes upon
the occurrence of a Change of Control would result in a default under the
Indenture and the Bank Credit Agreement. In the event of a Change of Control,
there can be no assurance that the Company would have sufficient assets to
satisfy all of its obligations under the Bank Credit Agreement and the Notes.
See "Description of the Notes--Offer to Purchase Upon Change of Control" and
"Description of the Bank Credit Agreement."
18
<PAGE>
COMPETITION
Each of the business units operates within competitive industries. The
Company is not aware of any single competitor that competes with the Company
along all three business lines.
Ames products compete with alternative methods of drywall finishing and
other products of ATF tool manufacturers and distributors. Ames' most
significant competition is from traditional hand finishing by individual
professional finishers. Ames stores also operate in a highly competitive
environment with respect to the sale of drywall related merchandise which is
generally based on price and convenience. Drywall related merchandise is
available from contractor supply yards, building material retailers and other
sources.
Nestaway's primary independent competitor is Ranger Metal Products. However,
the majority of dishwasher racks are internally manufactured by OEMs. There
can be no assurance that the Company's existing customers will not increase or
establish in-house dishwasher rack manufacturing capacity in the future. In
1996 and 1994, certain dishwasher rack customers decided to produce dishwasher
racks in-house, resulting in a material decline in the Company's revenues. See
"Risk Factors--Reliance on Major Customers" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations." General Electric,
Frigidaire and Whirlpool/KitchenAid operate in-house dishwasher rack
manufacturing operations. Competition is generally based on quality,
flexibility, product design innovation, manufacturing efficiency and price.
Nestaway's other non-coated and coated formed wire products operate in a
highly competitive environment based on price, quality and delivery capability
that includes many companies, none of which compete with Nestaway across all
its product lines. There can be no assurance the Company will continue to
innovate its product offerings or continue to reduce manufacturing costs. Such
inability to continue to innovate products or pass on manufacturing cost
savings pursuant to contract terms or otherwise could lead to the loss of
certain customers or lower gross margins.
Fischbein competes with a variety of manufacturers, but does not compete
with any one company across all its product lines. In bag closing, Fischbein
competes with Newlong, Union Special and Doboy Packaging Machinery, Inc.
Competition for bag closing products is generally based on price, geographic
location, service, reliability and product innovation. With regard to flexible
conveyors, Fischbein primarily competes with Best Diversified Products, and
competition is generally based on price and functionality. In storage racks,
Fischbein competes with Jarke Corporation, Tier-Rack and Federal Prison
Industries, and competition is based primarily on price and geographic
location.
RELIANCE ON MAJOR CUSTOMERS
One of Nestaway's dishwasher rack customers accounted for 20%, 19% and 20%
of the Company's revenues for 1997, 1996 and 1995, respectively. Since the
contract with this customer requires cost reductions during its term, the
inability of the Company to continue to achieve manufacturing cost savings
could lead to lower gross margins. Another Nestaway customer which markets
dishdrainers and other products accounted for 10%, 11% and 8% of the Company's
revenues for 1997, 1996 and 1995, respectively. A loss of either or both of
these customers could have a material adverse effect on the Company.
In each of 1994 and 1996 the Company discontinued operations at certain of
its facilities, in each case as a result of a decision by certain major
dishwasher rack customers to produce dishwasher racks in-house. In each
instance the Company's revenues were adversely affected. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations." No
assurance can be given that such actions by the Company's dishwasher rack
customers will not recur.
19
<PAGE>
RISKS RELATING TO ACQUISITION STRATEGY
The Company's strategy includes making acquisitions, but there can be no
assurance that suitable acquisition candidates will continue to be available.
In addition, acquisitions that the Company may make will involve risks,
including the successful integration and management of acquired technology,
operations and personnel. The integration of acquired businesses may also lead
to the loss of key employees of the acquired companies and diversion of
management attention from on-going business concerns. There can be no
assurance that any additional acquisitions will be made, that the Company will
be able to obtain additional financing needed for such transactions and, if
any acquisitions are so made, that they will be successful. See "Business--
Strategy."
FLUCTUATIONS IN RAW MATERIALS COST AND SUPPLY
The Company purchases steel, metal castings, aluminum and other raw
materials from various suppliers. There can be no assurance that severe
shortages of such materials will not occur in the future, which could increase
the cost of or delay the shipment of the Company's products and have a
material adverse effect on the Company's operating results. Because such
materials in the aggregate constitute significant components of the Company's
cost of goods sold, fluctuations in price could have a material adverse effect
on the Company's results of operations. Historically, the Company has passed
on any increases in prices of raw materials to its customers. However, there
can be no assurance that the Company will continue to be able to do so in the
future. See "Business--Raw Materials and Suppliers."
GENERAL ECONOMIC CONDITIONS
The industries in which the Company operates are affected by changes in
general economic conditions, including national, regional and local slowdowns
in home building, remodeling, construction and other industrial activity, all
of which are outside of the Company's control. There can be no assurance that
economic slowdowns, adverse economic conditions, cyclical trends, increases in
interest rates and other factors will not have a material adverse effect on
the Company's consolidated operating results or financial condition. See
"Business."
POTENTIAL LEGACY LIABILITIES
The Company has retained or assumed certain environmental liabilities and
risks of future liabilities associated with businesses previously operated or
acquired by it, including Bliss and Laughlin Steel Company. The Company does
not believe that these retained or assumed liabilities and risks would be
expected to have a material adverse effect on the Company's financial
condition or operating results. However, changes in laws or regulations,
liabilities identified or incurred in the future, or other circumstances,
might (individually or in the aggregate) have such an effect. In addition, the
Company is currently addressing certain legacy liabilities of this nature. See
"Business--Environmental Matters."
UNIONIZED EMPLOYEE RELATIONS
The Company employs approximately 150 unionized full-time employees under
two separate union contracts at two locations out of a total work force of
approximately 1,000 employees. The Company's inability to negotiate acceptable
contracts with these unions could result in, among other things, strikes, work
stoppages or other slowdowns by the affected workers and increased operating
costs as a result of higher wages or benefits paid to union members. If the
Company's unionized workers were to engage in a strike, work stoppage or other
slowdown, or other employees were to become unionized, the Company could
experience a significant disruption of its operations and/or higher ongoing
labor costs, which could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Business--
Employees."
20
<PAGE>
FOREIGN SALES AND OPERATIONS
In 1997 approximately 15% of the Company's net revenues were derived from
foreign sales and operations and export sales. In addition, a portion of the
Company's anticipated growth is expected to come from foreign sales and
operations. Foreign sales and operations involve varying degrees of risks and
uncertainties inherent in doing business abroad. Such risks include the
possibility of unfavorable circumstances arising from host country laws or
regulations, including unexpected changes of interpretations thereof. Other
risks include partial or total expropriation; export duties and quotas;
currency exchange rate fluctuations; restrictions on repatriation of funds;
the disruption of operations from labor and political disturbances,
insurrection, or war; and the requirements of partial local ownership of
operations in certain countries. Furthermore, customer credit risks are
exacerbated in foreign sales and operations because there often is little
information available about the credit histories of customers in certain
countries.
The value of the Company's foreign sales and earnings may vary with currency
exchange rate fluctuations. To the extent that the Company does not take steps
to mitigate the effects of changes in relative values, changes in currency
exchange rates could have an adverse effect upon the Company's results of
operations, which in turn could adversely affect the ability of the Company to
meet its debt obligations, including payments on the Notes.
YEAR 2000 ISSUE
The Company faces "Year 2000" issues. Year 2000 issues exist when dates are
recorded using two digits (rather than four) and are then used for arithmetic
operations, comparisons or sorting. A two-digit recording may recognize a date
using "00" as 1900 rather than 2000, which could cause the Company's computer
systems to perform inaccurate computations. The Company has undertaken
substantial steps to eliminate Year 2000 risk, including determining which of
its systems require replacement or modification, and implementing an action
plan in response thereto, portions of which have been completed to date. The
Company's Year 2000 issues relate not only to its own systems but also to
those of its customers and suppliers. It is anticipated that systems
replacements and modifications will resolve the Year 2000 issue with respect
to the Company's internal systems. There is no guarantee, however, that such
systems replacements and modifications will be completed on time, which could
significantly impact the Company. In addition, the failure of the Company's
suppliers and customers to address the Year 2000 issue could also
significantly impact the Company. See "Management Discussion and Analysis of
Financial Condition and Results of Operations--Other Matters."
FRAUDULENT TRANSFER CONSIDERATIONS
In connection with the Transactions, the Company incurred substantial
indebtedness, including through its incurrence of indebtedness under the Bank
Credit Agreement and the Notes. If, under relevant federal and state
fraudulent transfer and conveyance statues, in a bankruptcy, reorganization or
rehabilitation case or similar preceding or a lawsuit by or on behalf of
unpaid creditors of the Company, a court were to find that, at the time the
Notes were issued by the Company, (a) the Company issued the Notes with the
intent of hindering, delaying or defrauding current or future creditors or (b)
(i) the Company received less than reasonably equivalent value or fair
consideration for issuing the Notes and (ii) the Company (A) was insolvent or
was rendered insolvent by reason of any of the Transactions, including the
incurrence of the indebtedness to fund the Transactions, (B) was engaged, or
about to engage, in a business or transaction for which its assets constituted
unreasonably small capital to carry on its business, or (C) intended to incur,
or believed or reasonably should have believed that it would incur, debts
beyond its ability to pay as such debts matured or became due (as all of the
foregoing terms are defined in or interpreted under the relevant fraudulent
transfer or conveyance statutes), such court could avoid the obligations under
the Notes or subordinate the Notes to presently existing and future
indebtedness of the Company or take other action detrimental to the holders of
the Notes, including, under certain circumstances, invalidating the
21
<PAGE>
Notes. In that event, there can be no assurance that any repayment on the
Notes would ever be recovered by holders of the Notes.
The measure of insolvency for purposes of the foregoing considerations will
vary depending upon the law of the jurisdiction that is being applied in any
such proceeding. Generally, however, the Company would be considered insolvent
if, at the time it incurs the indebtedness constituting the Notes, either (i)
the sum of its debts (including contingent liabilities) is greater than its
assets, at a fair valuation, or (ii) the present fair saleable value of its
assets is less than the amount required to pay the probable liability on its
total existing debts and liabilities (including contingent liabilities) as
they become absolute and matured. There can be no assurance as to what
standards a court would use to determine whether the Company was solvent at
the relevant time, or whether, whatever standard was used, the Notes would not
be avoided on another of the grounds set forth above.
In addition, the Guarantees may be subject to review under fraudulent
conveyance statutes in a bankruptcy, reorganization or rehabilitation case or
similar proceedings or a lawsuit on behalf of other creditors of any of the
Guarantors. In such a case, the analysis set forth above would generally
apply, except that the Guarantees could also be subject to the claim that,
since the Guarantees were incurred for the benefit of the Company (and only
indirectly for the benefit of the Guarantors), they were incurred for less
than reasonably equivalent value or fair consideration. A court could
therefore subordinate the Guarantees to the other obligations of the
Guarantors, or take other action detrimental to holders of the Notes,
including, under certain circumstances, invalidating the Guarantees. See
"Description of the Bank Credit Agreement" and "Description of the Notes."
LACK OF PUBLIC MARKET FOR THE NOTES
The Original Notes have not been registered under the Securities Act, and
may not be resold by purchasers thereof unless the Original Notes are
subsequently registered or an exemption from the registration requirements of
the Securities Act is available. While the Original Notes are at present
eligible for trading in the PORTAL market of the Nasdaq Stock Market, Inc.,
the Exchange Notes will not be so eligible, and there can be no assurance,
even following registration or exchange of the Original Notes for Exchange
Notes, that an active trading market for the Original Notes or the Exchange
Notes will exist. At the time of the private placement of the Original Notes,
the Initial Purchasers advised the Company that they intended to make a market
in the Original Notes and, if issued, the Exchange Notes. However, the Initial
Purchasers are not obligated to make a market in the Original Notes or the
Exchange Notes, and any such market-making may be discontinued at any time at
the sole discretion of the Initial Purchasers. No assurance can be given as to
the liquidity of or trading market for the Original Notes or the Exchange
Notes.
CONSEQUENCES TO NON-TENDERED HOLDERS OF ORIGINAL NOTES
Consequences of Failure to Exchange. To the extent that Original Notes are
tendered and accepted for exchange pursuant to the Exchange Offer, the trading
market for Original Notes that remain outstanding may be significantly more
limited, which might adversely affect the liquidity of the Original Notes not
tendered for exchange. The extent of the market therefor and the availability
of price quotations would depend upon a number of factors, including the
number of holders of Original Notes remaining at such time and the interest in
maintaining a market in such Original Notes on the part of securities firms.
An issue of securities with a smaller outstanding market value available for
trading (the "float") may command a lower price than would a comparable issue
of securities with a greater float. Therefore, the market price for Original
Notes that are not exchanged in the Exchange Offer may be affected adversely
to the extent that the amount of Original Notes exchanged pursuant to the
Exchange Offer reduces the float. The reduced float also may tend to make the
trading price of the Original Notes that are not exchanged more volatile.
22
<PAGE>
Consequences of Failure to Properly Tender. Issuance of the Exchange Notes
in exchange for the Original Notes pursuant to the Exchange Offer will be made
following the prior satisfaction, or waiver, of the conditions set forth in
"The Exchange Offer--Conditions to the Exchange Offer" and only after timely
receipt by the Exchange Agent of such Original Notes, a properly completed and
duly executed Letter of Transmittal and all other required documents.
Therefore, holders of Original Notes desiring to tender such Original Notes in
exchange for Exchange Notes should allow sufficient time to ensure timely
delivery of all required documentation. Neither the Exchange Agent, the
Company or any other person is under any duty to give notification of defects
or irregularities with respect to the tenders of Original Notes for exchange.
Original Notes that may be tendered in the Exchange Offer but which are not
validly tendered will, following the consummation of the Exchange Offer,
remain outstanding and will continue to be subject to the same transfer
restrictions currently applicable to such Original Notes.
23
<PAGE>
THE TRANSACTIONS
Acquisition Co. entered into the Merger Agreement with the Parent and Cortec
Capital Corp., as representative of the stockholders of the Parent, to effect
the Acquisition for a purchase price of $155,250,000 (including the repayment
of indebtedness), subject to certain post-closing adjustments. Upon completion
of the Transactions, (i) the Parent and the Company became direct and indirect
subsidiaries of AXIA Group and (ii) the Company became the primary obligor on
the Notes and borrowings made under the Bank Credit Agreement.
On the Closing Date, AXIA Group sold $28.0 million in common stock to the
Investor Group, the ESOP, certain directors and officers of AXIA Group and the
Company, and certain employees of the Company (the "Equity Investment"), which
included Common Stock issued to the Rollover Investor (as defined under
"Related Transactions") in exchange for his contribution to AXIA Group of
capital stock of the Parent representing the aggregate fair value of such
shares. AXIA Group then contributed to Acquisition Co., its indirect wholly-
owned subsidiary, the cash received from the issuance of its Common Stock and
the capital stock of the Parent contributed to AXIA Group. On the Closing
Date, Finance Co. borrowed approximately $39.3 million under the Bank Credit
Agreement and received approximately $100.0 million in gross proceeds from the
consummation of the Offering. Acquisition Co. then borrowed most of such funds
from Finance Co. pursuant to an intercompany promissory note. The Equity
Investment, the net proceeds of the Original Notes and borrowings under the
Bank Credit Agreement were used: (i) to effect the Acquisition; (ii) to fund
the ESOP; (iii) to repay certain existing indebtedness of the Company and (iv)
to pay fees and expenses in connection with the Transactions.
THE MERGER AGREEMENT
The Merger Agreement contains customary provisions for such agreements,
including representations and warranties with respect to the condition and
operations of the business being acquired, covenants with respect to the
conduct of the business prior to the closing date and various closing
conditions.
Pursuant to the Merger Agreement, the purchase price for the Acquisition is
subject to adjustment within 60 days of the closing of the Acquisition based
on changes in working capital and certain tax liabilities. The Merger
Agreement contains indemnification provisions binding on each of the parties
to the Merger Agreement. Pursuant to such provisions each of the parties has
agreed to indemnify each other for breaches of representations, warranties and
covenants. In addition, the selling stockholders have agreed to indemnify the
Company for certain working capital deficiencies, increases in tax
liabilities, and for certain environmental and litigation matters. In
connection with the indemnity provisions, $15.0 million of the purchase price
has been placed into an escrow account, including $12.0 million to cover
specified indemnification claims and $3.0 million to cover purchase price
adjustments. See "Business--Environmental Matters." The indemnity provisions
are subject to certain deductibles and minimum thresholds, and the amounts in
escrow represent the maximum indemnity available from the selling
stockholders.
24
<PAGE>
The following table sets forth the sources and uses of funds used to effect
the Transactions as if the Transactions had occurred on June 30, 1998.
<TABLE>
<CAPTION>
AMOUNT
---------------------
(DOLLARS IN MILLIONS)
<S> <C>
SOURCES OF FUNDS:
Bank Credit Agreement(/1/)
Revolving Credit Facility............................. $ 3.2
Acquisition Facility.................................. --
Term Loan............................................. 35.0
ESOP Term Loan........................................ 1.5
Original Notes.......................................... 100.0
Equity Investment....................................... 28.0
------
Total Sources......................................... $167.7
======
USES OF FUNDS:
Equity purchase price................................... $131.1
Retirement of existing debt(/2/)........................ 26.6
Company ESOP Loan(/3/).................................. 1.5
Fees and expenses(/4/).................................. 8.5
------
Total Uses............................................ $167.7
======
</TABLE>
- --------
(1) The Company has available borrowings under the Revolving Credit Facility
of up to $15 million, subject to borrowing base limitations. The Company
also has available borrowings under the Acquisition Facility of $25
million, subject to the terms thereof. See "Description of the Bank Credit
Agreement."
(2) Existing notes of the Company due 2001 were discharged on the day
following the closing of the Transactions.
(3) For a description of the Company ESOP Loan, see "Management--Employee
Stock Ownership Plan."
(4) Represents fees and expenses, including: (i) the discount paid to the
Initial Purchasers in connection with the Sale of the Original Notes; (ii)
legal, accounting and other professional fees payable in connection with
the Transactions, including fees to Sterling, and (iii) certain other
expenses. See "Related Transactions."
25
<PAGE>
THE EXCHANGE OFFER
REGISTRATION RIGHTS
At the Closing, the Company entered into the Registration Rights Agreement
with the Initial Purchasers pursuant to which the Company agreed, for the
benefit of the holders of the Original Notes, at its cost, (i) within 75 days
after the date of the original issue of the Original Notes, to file an
Exchange Offer Registration Statement with the Commission with respect to the
Exchange Offer for the Exchange Notes, and (ii) to use its reasonable efforts
to cause the Exchange Offer Registration Statement to be declared effective
under the Securities Act within 120 days after the date of original issuance
of the Original Notes. Upon the Exchange Offer Registration Statement being
declared effective, the Company agreed to offer the Exchange Notes in exchange
for surrender of the Original Notes. The Company agreed to keep the Exchange
Offer open for not less than 30 calendar days (or longer if required by
applicable law) after the date notice of the Exchange Offer is mailed to the
holders of the Original Notes. For each Original Note surrendered to the
Company pursuant to its Exchange Offer, the holder of such Original Note will
receive an Exchange Note having a principal amount equal to that of the
surrendered Note. Interest on each Exchange Note will accrue from the last
interest payment date on which interest was paid on the Original Note
surrendered in exchange therefor or, if no interest has been paid on such
Original Note, from the date of its original issue. The Registration Rights
Agreement also provides an agreement to include in the prospectus for the
Exchange Offer certain information necessary to allow a broker-dealer who
holds Original Notes that were acquired for its own account as a result of
market-making activities or other ordinary course trading activities (other
than Original Notes acquired directly from the Company or one of its
affiliates) to exchange such Original Notes pursuant to the Exchange Offer and
to satisfy the prospectus delivery requirements in connection with resales of
Exchange Notes received by such broker-dealer in the Exchange Offer, and to
maintain the effectiveness of the Registration Statement for such purposes for
90 days.
The foregoing agreement is needed because any broker-dealer who acquires
Original Notes for its own account as a result of market-making activities or
other trading activities is required to deliver a prospectus meeting the
requirements of the Securities Act. This Prospectus covers the offer and sale
of the Exchange Notes pursuant to the Exchange Offer made hereby and the
resale of Exchange Notes received in the Exchange Offer by any broker-dealer
who held Original Notes acquired for its own account as a result of market-
making activities or other trading activities (other than Original Notes
acquired directly from the Company or one of its affiliates).
Under existing interpretations of the staff of the Commission contained in
several no-action letters to third parties, the Exchange Notes would in
general be freely tradeable after the Exchange Offer without further
registration under the Securities Act. However, any purchaser of Original
Notes who is an "affiliate" of the Company or who intends to participate in
the Exchange Offer for the purpose of distributing the Exchange Notes (i) will
not be able to rely on the interpretation of the staff of the Commission, (ii)
will not be able to tender its Original Notes in the Exchange Offer and (iii)
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any sale or transfer of the Original Notes
unless such sale or transfer is made pursuant to an exemption from such
requirements.
Each holder of the Original Notes (other than certain specified holders) who
wishes to exchange Original Notes for Exchange Notes in the Exchange Offer
will be required to make certain representations, including that (i) it is not
an affiliate of the Company, (ii) any Exchange Notes to be received by it were
acquired in the ordinary course of its business and (iii) at the time of
commencement of the Exchange Offer, it has no arrangement with any person to
participate in the distribution (within the meaning of the Securities Act) of
the Exchange Notes.
26
<PAGE>
In the event that any changes in law or the applicable interpretations of
the staff of the Commission do not permit the Company to effect the Exchange
Offer, or if for any other reason the Exchange Offer is not consummated within
150 days of the date of issuance and sale of the Original Notes, or upon
request of the Initial Purchasers (under certain circumstances), the Company
will, at its cost, (i) as promptly as practicable, file a Shelf Registration
Statement (which may be an amendment of the Registration Statement of which
this Prospectus is a part) covering resales of the Original Notes, (ii) use
all reasonable efforts to cause the Shelf Registration Statement to be
declared effective under the Securities Act and (iii) use all reasonable
efforts to keep effective the Shelf Registration Statement until three years
after its effective date (or until one year after such effective date if such
Shelf Registration Statement is filed at the request of the Initial Purchasers
under certain circumstances). The Company will, in the event of the filing of
a Shelf Registration Statement, provide to each holder of the Original Notes
copies of the prospectus which is a part of the Shelf Registration Statement,
notify each such holder when the Shelf Registration Statement for the Original
Notes has become effective and take certain other actions as are required to
permit unrestricted resales of the Original Notes. A holder of Original Notes
that sells such Original Notes pursuant to the Shelf Registration Statement
generally will be required to be named as a selling security holder in the
related prospectus and to deliver a prospectus to purchasers, will be subject
to certain of the civil liability provisions under the Securities Act in
connection with such sales and will be bound by the provisions of the
Registration Rights Agreement which are applicable to such holder (including
certain indemnification obligations). In addition, each holder of the Original
Notes 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 Original Notes included in the Shelf
Registration Statement and to benefit from the provisions regarding liquidated
damages set forth in the following paragraph.
In the event either (i) the Exchange Offer Registration Statement is not
filed with the Commission on or prior to the 75th calendar day following the
date of original issue of the Original Notes, (ii) the Exchange Offer
Registration Statement or, if required in lieu thereof, the Shelf Registration
Statement, is not declared effective on or prior to the 120th calendar day
following the date of original issue of the Original Notes or (iii) once
effective, the Exchange Offer Registration Statement or the Shelf Registration
Statement ceases to be effective or the prospectus ceases to be usable (under
certain circumstances), the interest rate borne by the Original Notes shall be
increased by one-half of one percent per annum following such 75-day period in
the case of (i) above, such 120-day period in the case of clause (ii) above or
any such period in the case of (iii) above, in each case payable in cash
semiannually, in arrears, on January 15 and July 15 of each year. Upon (x) the
filing of the Exchange Offer Registration Statement in the case of clause (i)
above, (y) the effectiveness of the Exchange Offer Registration Statement or
Shelf Registration Statement in the case of clause (ii) above or (z) the
reeffectiveness of the Exchange Offer Registration Statement or a Shelf
Registration Statement in the case of clause (iii) above, and provided that
none of the conditions set forth in clauses (i), (ii) and (iii) above
continues to exist, the interest rate borne by the Original Notes from the
date of such filing, effectiveness or reeffectiveness, as the case may be,
will be reduced to the original interest rate.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified
in its entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which is filed as an exhibit to the Registration
Statement.
Except as set forth above, after consummation of the Exchange Offer, holders
of Original Notes have no registration or exchange rights under the
Registration Rights Agreement. See "--Consequences of Failure to Exchange,"
and "--Resales of Exchange Notes; Plan of Distribution."
27
<PAGE>
CONSEQUENCES OF FAILURE TO EXCHANGE
The Original Notes which are not exchanged for Exchange Notes pursuant to
the Exchange Offer and are not included in a resale prospectus which, if
required, will be filed as part of an amendment to the Registration Statement,
will remain restricted securities and subject to restrictions on transfer.
Accordingly, such Original Notes may be resold (i) to the Company (upon
redemption thereof or otherwise), (ii) so long as the Original Notes are
eligible for resale pursuant to Rule 144A, to a person whom the seller
reasonably believes is a qualified institutional buyer within the meaning of
Rule 144A under the Securities Act, purchasing for its own account or for the
account of a qualified institutional buyer to whom notice is given that the
resale, pledge or other transfer is being made in reliance on Rule 144A, (iii)
in an offshore transaction in accordance with Regulation S under the
Securities Act, (iv) pursuant to an exemption from registration in accordance
with Rule 144 (if available) under the Securities Act, (v) in reliance on
another exemption from the registration requirements of the Securities Act, or
(vi) pursuant to an effective registration statement under the Securities Act,
in each case in accordance with any applicable securities laws of any state of
the United States and subject to certain requirements of the registrar or co-
registrar being met, including receipt by the registrar or co-registrar of a
certification and (in the case of (iii), (vi) and (v)) an opinion of counsel
reasonably acceptable to the Company and the registrar.
To the extent Original Notes are tendered and accepted in the Exchange
Offer, the principal amount of outstanding Original Notes will decrease with a
resulting decrease in the liquidity in the market therefor. Accordingly, the
liquidity of the market of the Original Notes could be adversely affected. See
"Risk Factors--Consequences to Non-Tendering Holders of Original Notes."
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in the Prospectus and
in the Letter of Transmittal, a copy of which is attached to this Prospectus
as Annex A, the Company will accept any and all Original Notes validly
tendered and not withdrawn prior to the Expiration Date. The Company will
issue $1,000 principal amount of Exchange Notes in exchange for each $1,000
principal amount of Original Notes accepted in the Exchange Offer. Holders may
tender some or all of their Original Notes pursuant to the Exchange Offer.
However, Original Notes may be tendered only in integral multiples of $1,000
principal amount.
The form and terms of the Exchange Notes are the same as the form and terms
of the Original Notes, except that (i) the Exchange Notes will have been
registered under the Securities Act and hence will not bear legends
restricting their transfer pursuant to the Securities Act, and (ii) except as
otherwise described above, holders of the Exchange Notes will not be entitled
to the rights of holders of Original Notes under the Registration Rights
Agreement. The Exchange Notes will evidence the same debt as the Original
Notes (which they replace), and will be issued under, and be entitled to the
benefits of, the Indenture which governs all of the Notes.
Solely for reasons of administration (and for no other purpose) the Company
has fixed the close of business on , 1998 as the record date for the
Exchange Offer for purposes of determining the persons to whom this Prospectus
and the Letter of Transmittal will be mailed initially. Only a registered
holder of Original Notes (or such holder's legal representative or attorney-
in-fact) as reflected on the records of the trustee under the Indenture may
participate in the Exchange Offer. There will be no fixed record date for
determining registered holders of the Original Notes entitled to participate
in the Exchange Offer.
Holders of the Original Notes do not have any appraisal or dissenters'
rights under the Texas Business Corporation Act or the Indenture in connection
with the Exchange Offer. The Company
28
<PAGE>
intends to conduct the Exchange Offer in accordance with the applicable
requirements of the Exchange Act and the rules and regulations of the
Commission thereunder.
The Company shall be deemed to have accepted validly tendered Original Notes
when, as and if they have given oral or written notice thereof to the Exchange
Agent. The Exchange Agent will act as agent for the tendering holders of the
Original Notes for the purposes of receiving the Exchange Notes. The Exchange
Notes delivered pursuant to the Exchange Offer will be issued on the earliest
practicable date following the acceptance for exchange of Original Notes by
the Company.
If any tendered Original Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Original Notes will be
returned, without expense, to the tendering holder thereof as promptly as
practicable after the Expiration Date.
Holders who tender Original Notes in the Exchange Offer will not be required
to pay brokerage commissions of fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of the
Original Notes pursuant to the Exchange Offer. The Company will pay all
charges and expenses, other than certain applicable taxes, in connection with
the Exchange Offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1998, unless the Company, in its sole discretion, extends the Exchange
Offer, in which case the term "Expiration Date" shall mean the latest date and
time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral or written notice and will make a public
announcement thereof, each prior to 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Original Notes, (ii) to extend the Exchange Offer, (iii) if any
of the conditions set forth below under "--Conditions to the Exchange Offer"
shall not have been satisfied, to terminate the Exchange Offer, by giving oral
or written notice of such delay, extension or termination to the Exchange
Agent, or (iv) to amend the terms of the Exchange Offer in any manner. Except
as specified in the immediately preceding paragraph, any such delay in
acceptance, extension, termination or amendment will be followed as promptly
as practicable by a public announcement thereof. If the Exchange Offer is
amended in a manner determined by it to constitute a material change, the
Company will promptly disclose such amendment by means of a prospectus
supplement that will be distributed to the registered holders of the Original
Notes, and the Exchange Offer will be extended for a period of five to 10
business days, as required by law, depending upon the significance of the
amendment and the manner of disclosure to the registered holders, if the
Exchange Offer would otherwise expire during such five to 10 business day
period.
Without limiting the manner in which the Company may choose to make a public
announcement of any delay, extension, termination or amendment of its Exchange
Offer, the Company shall not have an obligation to publish, advertise, or
otherwise communicate any such public announcement, other than by making a
timely release thereof to the Dow Jones News Service.
PROCEDURES FOR TENDERING ORIGINAL NOTES
Tenders of Original Notes. The tender by a holder of Original Notes pursuant
to any of the procedures set forth below will constitute the tendering
holder's acceptance of the terms and
29
<PAGE>
conditions of the Exchange Offer. The Company's acceptance for exchange of
Original Notes tendered pursuant to any of the procedures described below will
constitute a binding agreement between such tendering holder and the Company
in accordance with the terms and subject to the conditions of the Exchange
Offer. Only holders are authorized to tender their Original Notes. The
procedures by which Original Notes may be tendered by beneficial owners that
are not holders will depend upon the manner in which the Original Notes are
held.
DTC has authorized DTC participants that are beneficial owners of Original
Notes through DTC to tender their Original Notes as if they were holders. To
effect a tender, DTC participants should either (i) complete and sign the
Letter of Transmittal (or a facsimile thereof), have the signature thereon
guaranteed if required by Instruction 1 of the Letter of Transmittal, and mail
or deliver the Letter of Transmittal or such facsimile pursuant to the
procedures for book-entry transfer set forth below under "--Book-Entry
Delivery Procedures," or (ii) transmit their acceptance to DTC through the DTC
Automated Tender Offer Program ("ATOP"), for which the transaction will be
eligible, and follow the procedures for book-entry transfer set forth below
under "--Book-Entry Delivery Procedures."
Tender of Original Notes Held in Physical Form. To tender effectively
Original Notes held in physical form pursuant to the Exchange Offer, a
properly completed Letter of Transmittal (or a facsimile thereof) duly
executed by the holder thereof, and any other documents required by the Letter
of Transmittal, must be received by the Exchange Agent at one of its addresses
set forth below, and tendered Original Notes must be received by the Exchange
Agent at such address (or delivery effected through the deposit of Original
Notes into the Exchange Agent's account with DTC and making book-entry
delivery as set forth below) on or prior to the Expiration Date, or the
tendering holder must comply with the guaranteed delivery procedure set forth
below. LETTERS OF TRANSMITTAL OR ORIGINAL NOTES SHOULD BE SENT ONLY TO THE
EXCHANGE AGENT AND SHOULD NOT BE SENT TO THE COMPANY.
Tender of Original Notes Held Through a Custodian. To tender effectively
Original Notes that are held of record by a custodian bank, depository,
broker, trust company or other nominee, the beneficial owner thereof must
instruct such holder to tender the Original Notes on the beneficial owner's
behalf. A Letter of Instructions from the record owner to the beneficial owner
may be included in the materials provided along with this Prospectus which may
be used by the beneficial owner in this process to instruct the registered
holder of such owner's Original Notes to effect the tender.
Tender of Original Notes Held Through DTC. To tender effectively Original
Notes that are held through DTC, DTC participants should either (i) properly
complete and duly execute the Letter of Transmittal (or a facsimile thereof),
and any other documents required by the Letter of Transmittal, and mail or
deliver the Letter of Transmittal or such facsimile pursuant to the procedures
for book-entry transfer set forth below or (ii) transmit their acceptance
through ATOP, for which the transaction will be eligible, and DTC will then
edit and verify the acceptance and send an Agent's Message to the Exchange
Agent for its acceptance. Delivery of tendering Original Notes held through
DTC must be made to the Exchange Agent pursuant to the book-entry delivery
procedures set forth below or the tendering DTC participant must comply with
the guaranteed delivery procedures set forth below.
THE METHOD OF DELIVERY OF ORIGINAL NOTES AND LETTERS OF TRANSMITTAL, ANY
REQUIRED SIGNATURE GUARANTEES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING
DELIVERY THROUGH DTC AND ANY ACCEPTANCE OR AGENT'S MESSAGE TRANSMITTED THROUGH
ATOP, IS AT THE ELECTION AND RISK OF THE PERSON TENDERING ORIGINAL NOTES AND
DELIVERING LETTERS OF TRANSMITTAL AND, EXCEPT AS OTHERWISE PROVIDED IN THE
LETTER OF TRANSMITTAL, DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY
RECEIVED BY THE EXCHANGE AGENT. IF DELIVERY IS BY MAIL, IT IS SUGGESTED THAT
THE HOLDER USE PROPERLY INSURED, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, AND THAT THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE
EXPIRATION DATE TO PERMIT DELIVERY TO THE EXCHANGE AGENT PRIOR TO SUCH DATE.
30
<PAGE>
Except as provided below, unless the Original Notes being tendered are
deposited with the Exchange Agent on or prior to the Expiration Date
(accompanied by a properly completed and duly executed Letter of Transmittal
or a properly transmitted Agent's Message), the Company may, at its option,
reject such tender. Exchange of Exchange Notes for the Original Notes will be
made only against deposit of the tendered Original Notes and delivery of all
other required documents.
Book-Entry Delivery Procedures. The Exchange Agent will establish accounts
with respect to the Original notes at DTC for purposes of the Exchange Offer
within two business days after the date of this Prospectus, and any financial
institution that is a participant in DTC may make book-entry delivery of the
Original Notes by causing DTC to transfer such Original Notes into the
Exchange Agent's account in accordance with DTC's procedures for such
transfer. However, although delivery of Original Notes may be effected through
book-entry at DTC, the Letter of Transmittal (or facsimile thereof), with any
required signature guarantees or an Agent's Message in connection with a book-
entry transfer, and any other required documents, must, in any case, be
transmitted to and received by the Exchange Agent at one or more of its
addresses set forth in this Prospectus on or prior to the Expiration Date, or
compliance must be made with the guaranteed delivery procedures described
below. Delivery of documents to DTC does not constitute delivery to the
Exchange Agent. The confirmation of a book-entry transfer into the Exchange
Agent's account at DTC as described above is referred to herein as a "Book-
Entry Confirmation."
The term "Agent's Message" means a message transmitted by DTC to, and
received by, the Exchange Agent and forming a part of the Book-Entry
Confirmation, which states that DTC has received an express acknowledgment
from each participant in DTC tendering the Original Notes and that such
participant has received the Letter of Transmittal and agrees to be bound by
the terms of the Letter of Transmittal and the Company may enforce such
agreement against such participant.
Signature Guarantees. Signatures on all Letters of Transmittal must be
guaranteed by a recognized member of the Medallion Signature Guarantee Program
or by any other "eligible guarantor institution," as such term is defined in
Rule 17Ad-15 promulgated under the Exchange Act (each of the foregoing, an
"Eligible Institution"), unless the Original Notes tendered thereby are
tendered (i) by a registered holder of Original Notes (or by a participant in
DTC whose name appears on a DTC security position listing as the owner of such
Original Notes) who has not completed either the box entitled "Special
Issuance Instructions" or "Special Delivery Instructions" on the Letter of
Transmittal, or (ii) for the account of an Eligible Institution. See
Instruction 1 of the Letter of Transmittal. If the Original Notes are
registered in the name of a person other than the signer of the Letter of
Transmittal or if Original Notes not accepted for exchange or not tendered are
to be returned to a person other than the registered holder, then the
signatures on the Letter of Transmittal accompanying the tendered Original
Notes must be guaranteed by an Eligible Institution as described above. See
Instructions 1 and 5 of the Letter of Transmittal.
Guaranteed Delivery. If a holder desires to tender Original Notes pursuant
to the Exchange Offer and time will not permit the Letter of Transmittal,
certificates representing such Original Notes and all other required documents
to reach the Exchange Agent, or the procedures for book-entry transfer cannot
be completed, on or prior to the Expiration Date, such Original Notes may
nevertheless be tendered if all the following conditions are satisfied:
(i) the tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Company herewith, or an
Agent's Message with respect to guaranteed delivery that is accepted by the
Company, is received by the Exchange Agent on or prior to the Expiration
Date, as provided below; and
31
<PAGE>
(iii) the certificates for the tendered Original Notes, in proper form
for transfer (or a Book-Entry Confirmation of the transfer of such Original
Notes into the Exchange Agent's account at DTC as described above),
together with a Letter of Transmittal (or facsimile thereof), property
completed and duly executed, with any required signature guarantees and any
other documents required by the Letter of Transmittal or a properly
transmitted Agent's Message, are received by the Exchange Agent within two
business days after the date of execution of the Notice of Guaranteed
Delivery.
The Notice of Guaranteed Delivery may be sent by hand delivery, telegram,
facsimile transmission or mail to the Exchange Agent and must include a
guarantee by an Eligible Institution in the form set forth in the Notice of
Guaranteed Delivery.
Notwithstanding any other provision hereof, delivery of Exchange Notes by
the Exchange Agent for Original Notes tendered and accepted for exchange
pursuant to the Exchange Offer will, in all cases, be made only after timely
receipt by the Exchange Agent of such Original Notes (or Book-Entry
Confirmation of the transfer of such Original Notes into the Exchange Agent's
account at DTC as described above), and a Letter of Transmittal (or facsimile
thereof) with respect to such Original Notes, properly completed and duly
executed, with any required signature guarantees and any other documents
required by the Letter of Transmittal, or a properly transmitted Agent's
Message.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt), acceptance and withdrawal of tendered
Original Notes will be determined by the Company in its sole discretion, which
determination will be final and binding. The Company reserves the absolute
right to reject any and all Original Notes not properly tendered or any
Original Notes the Company's acceptance of which would, in the opinion of
counsel for the Company, be unlawful. The Company also reserves the right to
waive any defects, irregularities or conditions of tender as to particular
Original Notes. The interpretation of the terms and conditions of its Exchange
Offer (including the instructions in the Letter of Transmittal) by the Company
will be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Original Notes must be cured
within such time as the Company shall determine. Although the Company intends
to notify holders of defects or irregularities with respect to tenders of
Original Notes, neither the Company, the Exchange Agent nor any other person
is under any duty to give such notice, nor shall they incur any liability for
failure to give such notification. Tenders of Original Notes will not be
deemed to have been made until such defects or irregularities have been cured
or waived. Any Original Notes received by the Exchange Agent that are not
validly tendered and as to which the defects or irregularities have not been
cured or waived, or if Original Notes are submitted in a principal amount
greater than the principal amount of Original Notes being tendered by such
tendering holder, such unaccepted or non-exchanged Original Notes will be
returned by the Exchange Agent to the tendering holders (or, in the case of
Original Notes tendered by book-entry transfer into the Exchange Agent's
account at the Book-Entry Transfer Facility pursuant to the book-entry
transfer procedures described below, such unaccepted or non-exchanged Original
Notes will be credited to an account maintained with such Book-Entry Transfer
Facility), unless otherwise provided in the Letter of Transmittal, as soon as
practicable following the Expiration Date.
By tendering, each registered holder will represent to the Company that,
among other things, (i) the Exchange Notes to be acquired by the holder and
any beneficial owner(s) of the Original Notes ("Beneficial Owner(s)") in
connection with the Exchange Offer are being acquired by the holder and any
Beneficial Owner(s) in the ordinary course of business of the holder and any
Beneficial Owner(s), (ii) the holder and each Beneficial Owner are not
participating, do not intend to participate, and have no arrangement or
understanding with any person to participate, in a distribution of the
Exchange Notes, (iii) the holder and each Beneficial Owner acknowledge and
agree that (x) any person participating in the Exchange Offer for the purpose
of distributing the Exchange Notes must comply
32
<PAGE>
with the registration and prospectus delivery requirements of the Securities
Act in connection with a secondary resale transaction with respect to the
Exchange Notes acquired by such person and cannot rely on the position of the
Staff of the Commission set forth in no-action letters that are discussed
herein under "--Resale of the Exchange Notes; Plan of Distribution," and (y)
any broker-dealer that receives Exchange Notes for its own account in exchange
for Original Notes pursuant to the Exchange Offer must delivery a prospectus
in connection with any resale of such Exchange Notes, but by so acknowledging,
the holder shall not be deemed to admit that, by delivering a prospectus, it
is an "underwriter" within the meaning of the Securities Act, (iv) neither the
holder nor any Beneficial Owner is an "affiliate," as defined under Rule 405
of the Securities Act, of the Company except as otherwise disclosed to the
Company in writing, and (v) the holder and each Beneficial Owner understands
that a secondary resale transaction described in clause (iii) above should be
covered by an effective registration statement containing the selling
securityholder information required by Item 507 of Regulation S-K of the
Commission.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Original Notes, where such Original Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See "--Resale of the Exchange Notes;
Plan of Distribution."
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Original Notes pursuant to
the Exchange Offer may be withdrawn, unless theretofore accepted for exchange
as provided in the Exchange Offer, at any time prior to the Expiration Date.
To be effective, a written or facsimile transmission notice of withdrawal
must be received by the Exchange Agent at its address set forth herein prior
to the Expiration Date. Any such notice of withdrawal must (i) specify the
name of the person having deposited the Original Notes to be withdrawn (the
"Depositor"), (ii) identify the Original Notes to be withdrawn, including the
certificate number or numbers of the particular certificates evidencing the
Original Notes (unless such Original Notes were tendered by book-entry
transfer), and aggregate principal amount of such Original Notes, and (iii) be
signed by the holder in the same manner as the original signature on the
Letter of Transmittal (including any required signature guarantees) or be
accompanied by documents of transfer sufficient to have the Trustee under the
Indenture register the transfer of the Original Notes into the name of the
person withdrawing such Original Notes. If Original Notes have been delivered
pursuant to the procedures for book-entry transfer set forth in "--Procedures
for Tendering Original Notes--Book-Entry Delivery Procedures," any notice of
withdrawal must specify the name and number of the account at the appropriate
book-entry transfer facility to be credited with such withdrawn Original Notes
and must otherwise comply with such book-entry transfer facility's procedures.
If the Original Notes to be withdrawn have been delivered or otherwise
identified to the Exchange Agent, a signed notice of withdrawal meeting the
requirements above is effective immediately upon written or facsimile notice
of withdrawal even if physical release is not yet effected. A withdrawal of
Original Notes can only be accomplished in accordance with the foregoing
procedures.
All questions as to the validity, form and eligibility (including time of
receipt) of such notices will be determined by the Company in its sole
discretion, which determination shall be final and binding on all parties. No
withdrawal of Original Notes will be deemed to have been properly made until
all defects or irregularities have been cured or expressly waived. Neither the
Company nor the Exchange Agent or any other person will be under any duty to
give notification of any defects or irregularities in any notice of withdrawal
or revocation, nor shall they incur any liability for failure to give any such
notification. Any Original Notes so withdrawn will be deemed not to have been
validly tendered for
33
<PAGE>
purposes of the Exchange Offer and no Exchange Notes will be issued with
respect thereto unless the Original Notes so withdrawn are retendered.
Properly withdrawn Original Notes may be retendered by following one of the
procedures described above under "--Procedures for Tendering Original Notes"
at any time prior to the Expiration Date.
Any Original Notes which have been tendered but which are not accepted for
exchange due to the rejection of the tender due to uncured defects or the
prior termination of the Exchange Offer, or which have been validly withdrawn,
will be returned to the holder thereof (unless otherwise provided in the
Letter of Transmittal), as soon as practicable following the Expiration Date
or, if so requested in the notice of withdrawal, promptly after receipt by the
Company of notice of withdrawal without cost to such holder.
CONDITIONS TO THE EXCHANGE OFFER
The Exchange Offer shall not be subject to any conditions, other than that
(i) the Commission has issued an order or orders declaring the Indenture
governing the Notes qualified under the Trust Indenture Act of 1939, (ii) the
Exchange Offer, or the making of any exchange by a holder, does not violate
applicable law or any applicable interpretation of the staff of the
Commission, (iii) no action or proceeding shall have been instituted or
threatened in any court or by or before any governmental agency with respect
to the Exchange Offer, which, in the judgment of the Company, might impair the
ability of the Company to proceed with the Exchange Offer, (iv) there shall
not have been adopted or enacted any law, statute, rule or regulation which,
in the Company's judgment, would materially impair its ability to proceed with
the Exchange Offer or (v) there shall not have occurred any material change in
the financial markets in the United States or any outbreak of hostilities or
escalation thereof or other calamity or crisis the effect of which on the
financial markets of the United States, in the Company's judgment, would
materially impair its ability to proceed with the Exchange Offer.
If the Company determines in its sole discretion that any of the conditions
to the Exchange Offer are not satisfied, it may (i) refuse to accept any
Original Notes and return all tendered Original Notes to the tendering
holders, (ii) extend its Exchange Offer and retain all Original Notes tendered
prior to the Expiration Date, subject, however, to the rights of holders to
withdraw such Original Notes (see "--Withdrawal of Tenders") or (iii) waiver
such unsatisfied conditions with respect to the Exchange Offer and accept all
validly tendered Original Notes which have not been withdrawn. If such waiver
constitutes a material change to the Exchange Offer, the Company will promptly
disclose such waiver by means of a prospectus supplement that will be
distributed to the registered holders, and will extend the Exchange Offer for
a period of five to 10 business days, depending upon the significance of the
waiver and the manner of disclosure to the registered holders, if the Exchange
Offer would otherwise expire during such five to 10 business day period.
EXCHANGE AGENT
State Street Bank & Trust Company, the Trustee under the Indenture governing
the Notes, has been appointed as Exchange Agent for the Exchange Offer.
Questions and requests for assistance, requests for additional copies of this
Prospectus or of the Letter of Transmittal and requests for Notices of
Guaranteed Delivery and other documents should be directed to the Exchange
Agent addressed as follows:
By Mail: By Facsimile: By Hand:
State Street Bank & Trust (617) 664-5395 State Street Bank & Trust
Company Company
Corporate Trust Department Corporate Trust Department
P.O. Box 778 Confirm by Telephone: Two International Place, 4th
Floor
Boston, Massachusetts 02102- (617) 664-5587 Boston, Massachusetts 02110
0078 Attention: Kellie Mullen
Attention: Kellie Mullen
34
<PAGE>
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telecopy, telephone or in person by officers and
regular employees of the Company and its affiliates.
No dealer-manager has been retained in connection with the Exchange Offer
and no payments will be made to brokers, dealers or others soliciting
acceptance of the Exchange Offer. However, reasonable and customary fees will
be paid to the Exchange Agent for its service and it will be reimbursed for
its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company and are estimated in the aggregate to be approximately
$300,000. Such expenses include fees and expenses of the Exchange Agent and
the trustee under the Indenture, accounting and legal fees and printing costs,
among others.
The Company will pay all transfer taxes, if any, applicable to the exchange
of its Original Notes pursuant to the Exchange Offer. If, however, a transfer
tax is imposed for any reason other than the exchange of its Original Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons) will be
payable by the tendering holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted with the Letter of Transmittal,
the amount of such transfer taxes will be billed directly to such tendering
holder.
ACCOUNTING TREATMENT
The carrying values of the Original Notes are not expected to be materially
different from the fair value of the Exchange Notes at the time of the
exchange. Accordingly, no gain or loss for accounting purposes will be
recognized. The expenses of the Exchange Offer will be amortized over the term
of the Exchange Notes.
RESALE OF THE EXCHANGE NOTES; PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. This Prospectus, as it may
be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of Exchange Notes received in exchange for Original
Notes where such Original Notes were acquired as a result of market-making
activities or other trading activities. The Company has agreed that, for a
period of 180 days after the Expiration Date, it will make this prospectus, as
amended or supplemented, available to any broker-dealer for use in connection
with any such resale. In addition, until , 1998, all dealers effecting
transactions in the Exchange Notes may be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of Exchange Notes by
broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from
any such broker-dealer or the purchasers of any such Exchange Notes. Any
broker-dealer that resells Exchange Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchanges Notes
35
<PAGE>
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 commission on
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that,
by acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.
For a period of 180 days after the Expiration Date the Company will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any broker-dealer that requests such documents in the
Letter of Transmittal. The Company has agreed to pay all expenses incident to
the Exchange Offer (including the expenses approved in writing of one counsel
for the holders of the Notes) other than commissions or concessions of any
brokers or dealers and will indemnify the holders of the Notes (including any
broker-dealers) required to use this Prospectus in connection with their
resale of Exchange Notes as described above against certain liabilities,
including liabilities under the Securities Act.
USE OF PROCEEDS
The Exchange Offer is intended to satisfy certain of the Company's
obligations under the Registration Rights Agreement. The Company will not
receive any cash proceeds from the issuance of the Exchange Notes offered
hereby. In consideration for issuing the Exchange Notes as contemplated in
this Prospectus, the Company will receive in exchange Original Notes in like
principal amount, the form and terms of which are the same as the form and
terms of the Exchange Notes, except as otherwise described herein under "The
Exchange Offer--Terms of the Exchange Offer." The Original Notes surrendered
in exchange for the Exchange Notes will be retired and canceled and cannot be
reissued. Accordingly, issuance of the Exchange Notes will not result in any
increase in the indebtedness of the Company.
36
<PAGE>
CAPITALIZATION
The following table sets forth as of June 30, 1998 the capitalization of the
Company and its subsidiaries on a pro forma basis after giving effect to the
Transactions as if they had occurred on June 30, 1998. See "The Transactions."
The information set forth below should be read in conjunction with the
"Unaudited Pro Forma Financial Information" and the Consolidated Financial
Statements of the Company and its subsidiaries and related notes thereto
included elsewhere herein.
<TABLE>
<CAPTION>
AMOUNT
---------------------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Bank Credit Agreement(/1/):
Revolving Credit Facility........................ $ 3.2
Term Loan........................................ 35.0
ESOP Term Loan................................... 1.5
Original Notes..................................... 100.0
------------
Total debt....................................... 139.7
Common stock held by ESOP(/2/)..................... 1.5
Less--Note receivable from ESOP.................. (1.5)
Total stockholder's equity......................... 26.5
------------
Total capitalization............................. $ 166.2
============
</TABLE>
- --------
(1) The Company has available borrowings under the Revolving Credit Facility
of up to $15 million, subject to borrowing base limitations. The Company
also has available borrowings under the Acquisition Facility of $25
million, subject to the terms thereof. See "Description of the Bank Credit
Agreement."
(2) For a description of the Company ESOP Loan, see "Management--Employee
Stock Ownership Plan."
37
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma financial information set forth below should be read
in conjunction with the historical Consolidated Financial Statements and notes
thereto of the Company and its subsidiaries included elsewhere in this
Prospectus and "Management's Discussion and Analysis of Financial Condition
and Results of Operations." The following unaudited pro forma consolidated
statements of operations for the year ended December 31, 1997, the six months
ended June 30, 1998 and the twelve month period ended June 30, 1998 give
effect to the Transactions as if they had occurred at January 1, 1997, and the
following unaudited pro forma consolidated balance sheet gives effect to the
Transactions as if they had occurred on June 30, 1998.
The pro forma adjustments are based upon available information and certain
assumptions that management believes are reasonable. Although management has
used its best judgment in estimating the fair value of the net assets, various
pending studies, analyses and operational decisions may result in significant
changes in the current estimates and corresponding changes of the goodwill
balance. The pro forma financial information is presented for informational
purposes only, and does not purport to represent what the results of
operations or financial condition would actually have been had the
Transactions in fact occurred on the dates set forth above or to project the
Company's results of operations or financial condition for any future period
or as of any date, respectively.
38
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THE COMPANY PRO FORMA THE COMPANY
HISTORICAL ADJUSTMENTS PRO FORMA
----------- ----------- -----------
<S> <C> <C> <C>
Net sales................................ $ 77,418 -- $ 77,418
Net rentals.............................. 27,382 -- 27,382
-------- -------- --------
Net revenues........................... 104,800 -- 104,800
Cost of sales............................ 50,518 163 (a) 50,681
Cost of rentals.......................... 9,626 -- 9,626
Selling, general and administrative
expenses................................ 25,302 1,769 (b) 26,646
375 (c)
(800)(d)
-------- -------- --------
Income from operations................. 19,354 (1,507) 17,847
Interest expense......................... 3,710 11,105 (e) 14,815
Interest income.......................... (367) -- (367)
Other expense (income), net.............. 404 -- 404
-------- -------- --------
Income before income taxes and
extraordinary item.................... 15,607 (12,612) 2,995
Provision for income taxes (benefit)..... 6,412 (4,012)(f) 2,400
-------- -------- --------
Income before extraordinary item....... 9,195 (8,600) 595
-------- -------- --------
Extraordinary item....................... 772 -- 772
-------- -------- --------
Net income............................. $ 8,423 $ (8,600) $ (177)
======== ======== ========
EBITDA (g)............................... $ 24,069 $ 425 $ 24,494
======== ======== ========
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Statements of Operations
39
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THE THE
COMPANY PRO FORMA COMPANY
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
Net sales................................... $41,725 -- $41,725
Net rentals................................. 14,475 -- 14,475
------- ------- -------
Net revenues.............................. 56,200 -- 56,200
Cost of sales............................... 26,259 77 (a) 26,336
Cost of rentals............................. 5,146 -- 5,146
Selling, general and administrative
expenses................................... 13,294 874 (b) 13,956
188 (c)
(400)(d)
------- ------- -------
Income from operations.................... 11,501 (739) 10,762
Interest expense............................ 1,393 6,015 (e) 7,408
Interest income............................. (7) -- (7)
Other expense (income), net................. 171 -- 171
------- ------- -------
Income before income taxes and
extraordinary item....................... 9,944 (6,754) 3,190
Provision for income taxes (benefit)........ 3,954 (2,176)(f) 1,778
------- ------- -------
Income before extraordinary item.......... $ 5,990 (4,578) 1,412
Extraordinary item.......................... 300 -- 300
------- ------- -------
Net income.................................. $ 5,690 $(4,578) $ 1,112
======= ======= =======
EBITDA (g).................................. $13,873 $ 212 $14,085
======= ======= =======
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Statements of Operations
40
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE TWELVE MONTHS ENDED JUNE 30, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THE
THE COMPANY
COMPANY PRO FORMA PRO
HISTORICAL ADJUSTMENTS FORMA
---------- ----------- --------
<S> <C> <C> <C>
Net sales................................... $ 80,667 -- $ 80,667
Net rentals................................. 28,625 -- 28,625
-------- ------- --------
Net revenues.............................. 109,292 -- 109,292
Cost of sales............................... 52,092 37 (a) 52,129
Cost of rentals............................. 10,076 -- 10,076
Selling, general and administrative
expenses................................... 25,753 1,768 (b) 27,096
375 (c)
(800)(d)
-------- ------- --------
Income from operations.................... 21,371 (1,380) 19,991
Interest expense............................ 3,074 11,741 (e) 14,815
Interest income............................. (360) -- (360)
Other expense (income), net................. 970 -- 970
-------- ------- --------
Income before income taxes and
extraordinary item....................... 17,687 (13,121) 4,566
Provision for income taxes (benefit)........ 6,991 (4,201)(f) 2,790
-------- ------- --------
Income before extraordinary item.......... 10,696 (8,920) 1,776
-------- ------- --------
Extraordinary item.......................... 300 -- 300
-------- ------- --------
Net income.................................. $ 10,396 $(8,920) $ 1,476
======== ======= ========
EBITDA (g).................................. $ 26,213 $ 425 $ 26,638
======== ======= ========
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Statements of Operations
41
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(a) Represents the change in depreciation expense resulting from the
preliminary purchase price allocation in accordance with the purchase
method of accounting. Of the $30.8 million allocated to property, plant
and equipment, $0.75 million was allocated to land, $3.75 million was
allocated to buildings (depreciated over a 30 year life) and $26.3 million
was allocated to machinery and equipment (depreciated over a 7 year life).
(b) Represents an increase in amortization resulting from the preliminary
purchase price allocation in accordance with the purchase method of
accounting. Goodwill is amortized over 40 years.
(c) Represents the estimated annual cost to maintain the ESOP.
(d) Reflects the elimination of certain management fees and an officer's
salary partially offset by the corresponding estimated costs of a new
Chairman and Board of Directors and the Sterling management fee, and the
cost savings related to the restructuring of certain insurance policies.
(e) Represents the elimination of interest expense related to the historical
debt outstanding and the incurrence of interest expense related to
borrowings under the Bank Credit Agreement and the issuance of the Notes.
<TABLE>
<CAPTION>
SIX TWELVE
MONTHS FISCAL YEAR MONTHS
ENDED ENDED ENDED
JUNE 30, DECEMBER 31, JUNE 30,
1998 1997 1998
-------- ------------ --------
<S> <C> <C> <C>
Interest expense on the Company's
historical debt.......................... $(1,393) $(3,710) $(3,074)
Interest expense on the Bank Credit
Agreement at an assumed rate of 8.0%..... 1,591 3,182 3,182
Interest expense on the Notes at a rate of
10 3/4%.................................. 5,375 10,750 10,750
Amortization of debt issuance costs....... 442 883 883
------- ------- -------
Total Company............................. $ 6,015 $11,105 $11,741
======= ======= =======
</TABLE>
Borrowings under the Bank Credit Agreement bear interest at a floating
rate based on either LIBOR or a prime rate. A 1/8% change in the interest
rate would change annual interest expense by approximately $50,000.
(f) Represents the tax effect of all adjustments, excluding the amortization
of non-deductible goodwill, using a combined statutory and federal
statutory income tax rate of approximately 37%.
(g) EBITDA is defined as income from operations plus depreciation and
amortization. EBITDA is presented because it is a widely accepted
financial indicator of a company's ability to incur and service debt.
EBITDA should not be considered by an investor as an alternative to income
from operations as determined in accordance with generally accepted
accounting principles as an indicator of the operating performance of the
Company or as an alternative to cash flows as a measure of liquidity.
42
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THE
THE COMPANY
COMPANY PRO FORMA PRO
ASSETS HISTORICAL ADJUSTMENTS FORMA
------ ---------- ----------- --------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents................ $ 490 (158,946)(a) 490
158,946 (b)
Accounts receivables, net................ 14,643 -- 14,643
Inventories, net......................... 9,714 -- 9,714
Prepaid income taxes and other current
assets.................................. 503 -- 503
Current income tax receivable............ -- 1,353 (a) 1,353
Deferred income tax benefit.............. 2,847 -- 2,847
------- --------- --------
Total current assets................... 28,197 1,353 29,550
Plant and equipment, net................... 25,165 5,631 (a) 30,796
Other assets:
Goodwill, net............................ 33,055 73,958 (a) 110,582
3,569 (c)
Intangible assets, net................... 841 -- 841
Deferred charges, net.................... 12,348 (287)(a) 19,361
7,300 (b)
Other assets............................. 37 -- 37
------- --------- --------
Total other assets..................... 46,281 84,540 130,821
------- --------- --------
Total assets............................... $99,643 $ 91,524 $191,167
======= ========= ========
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
<S> <C> <C> <C>
Current Liabilities:
Current maturities of long-term debt..... $13,757 (13,757)(a) 2,875
2,875 (b)
Accounts payable......................... 4,653 -- 4,653
Accrued liabilities...................... 6,679 (390)(a) 6,289
Accrued income taxes..................... 1,871 (1,871)(a) --
------- --------- --------
Total current liabilities.............. 26,960 (13,143) 13,817
Non-Current Liabilities:
Long-term debt, less current maturities.. 12,867 (12,867)(a) --
Revolving Credit Facility................ -- 3,246 (b) 3,246
Term Loan................................ -- 32,500 (b) 32,500
Notes offered hereby..................... -- 100,000 (b) 100,000
ESOP Term Loan........................... -- 1,125 (b) 1,125
Other non-current liabilities............ 11,006 (3,700)(a) 7,306
Deferred income taxes.................... 3,104 3,569 (c) 6,673
------- --------- --------
Total non-current liabilities.......... 26,977 123,873 150,850
Common stock held by ESOP................ -- 1,500 (b) 1,500
Less: Note receivable from ESOP.......... -- (1,500)(b) (1,500)
Stockholder's Equity:
Common stock and additional paid-in
capital................................. 16,723 (16,723)(a) 26,500
26,500 (b)
Retained earnings........................ 29,508 (29,508)(a) --
Accumulated other comprehensive income... (525) 525 (a) --
------- --------- --------
Total stockholder's equity............. 45,706 (19,206) 26,500
------- --------- --------
Total liabilities and stockholder's equity. $99,643 $ 91,524 $191,167
======= ========= ========
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Balance Sheet
43
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(a) Represents the adjustment to record the acquisition in accordance with
purchase accounting.
<TABLE>
<S> <C>
Purchase price.................................................. $155,250
Preliminary adjustment for working capital...................... 2,496
Acquisition costs............................................... 1,200
--------
Total........................................................... $158,946
========
</TABLE>
The resultant pro forma purchase price entries are as follows:
<TABLE>
<S> <C>
Fixed assets.................................................. $ 5,631
Common stock and additional paid in capital................... 16,723
Retained earnings............................................. 29,508
Accumulated other comprehensive income........................ (525)
Elimination of historical debt
Current..................................................... 13,757
Long-term................................................... 12,867
Interest payable............................................ 309
Elimination of historical environmental liability............. 3,700
Elimination of historical deferred debt issuance costs........ (287)
Elimination of litigation accrual retained by seller.......... 81
Goodwill...................................................... 73,958
Current taxes
Current income tax receivable............................... 1,353(i)
Accrued income taxes........................................ 1,871(i)
--------
$158,946
========
</TABLE>
- --------
(i) Represents the change in accrued income taxes due to additional
deductible expenses of approximately $11.6 million resulting from the
Transactions, including bonus plans, the extinguishment of debt and
the exercise of stock options. Such amounts shall reduce the proceeds
paid to the selling stockholders.
(b) In order to finance the Acquisition and related fees and expenses, the
Company used the proceeds of the issuance of the Notes, the Equity
Investment and borrowings under the Bank Credit Agreement.
<TABLE>
<S> <C>
Proceeds of Original Notes.................................... $100,000
Proceeds of Equity Investment................................. 26,500
Proceeds of Common Stock held by ESOP......................... 1,500
Proceeds from initial borrowings under the Bank Credit
Agreement
Term Loan................................................... 35,000
Revolving Credit Facility................................... 3,246
ESOP Term Loan.............................................. 1,500
Deferred financing costs...................................... (7,300)
Loan made by the Company to the ESOP.......................... (1,500)
--------
$158,946
========
</TABLE>
(c) Represents the adjustment to deferred taxes resulting from the allocation
of purchase price to the fair values of assets and liabilities acquired.
44
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
The selected historical consolidated financial information presented below
as of December 31, 1993, 1994, 1995, 1996 and 1997 and for the periods ended
December 31, 1993, March 15, 1994, December 31, 1994, 1995, 1996 and 1997 is
derived from the consolidated financial statements of the Company, which have
been audited by Arthur Andersen LLP, independent public accountants. The
Predecessor Company financial data presented in the table below represents
financial information for the Company prior to its acquisition by an investor
group led by Cortec Group on March 15, 1994. Due to the substantial change in
controlling interest in the Company, the Company reflected a complete change
in its accounting basis of its assets and liabilities from Predecessor Company
historical cost to estimated fair value as of March 15, 1994. The selected
consolidated financial information presented below as of and for each of the
six month periods ended June 30, 1997 and 1998 is derived from the unaudited
interim financial statements of the Company. In the opinion of management,
such unaudited interim financial statements include all adjustments
(consisting of only normal recurring adjustments) necessary for a fair
presentation of the Company's financial position and results of operations for
such periods. The unaudited operating results for the six months ended June
30, 1998 are not necessarily indicative of the results that may be expected
for the full year ending December 31, 1998. The information presented below
should be used in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and the consolidated financial
statements of the Company and the related notes thereto included elsewhere
herein.
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY
------------------
YEAR PERIOD PERIOD SIX MONTHS ENDED
ENDED ENDED ENDED YEAR ENDED DECEMBER 31, JUNE 30,
DEC. 31, MAR. 15, DEC. 31, ---------------------------- -----------------------
1993 1994 1994 1995 1996 1997 1997 1998
-------- -------- -------- -------- -------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net revenues............ $87,767 $18,593 $ 81,304 $104,326 $104,787 $104,800 $51,708 $56,200
Cost of revenues........ 56,594 11,869 51,662 64,829 61,294 60,144 29,381 31,405
Charges for
environmental
matter(/1/)............ 1,430 -- -- -- -- -- -- --
Selling, general &
administrative
expenses............... 20,728 4,587 17,883 24,181 25,146 25,302 12,843 13,294
------- ------- -------- -------- -------- -------- ------- -------
Income from operations.. 9,015 2,137 11,759 15,316 18,347 19,354 9,484 11,501
Interest expense........ 7,084 1,500 5,300 6,596 5,123 3,710 2,029 1,393
Interest income......... (75) (17) (61) (44) (39) (367) (14) (7)
Other expense (income),
net.................... (69) (105) (240) 537 57 404 (395) 171
------- ------- -------- -------- -------- -------- ------- -------
Income before income
taxes and extraordinary
item................... 2,075 759 6,760 8,227 13,206 15,607 $ 7,864 $ 9,944
Provision for income
taxes.................. 861 315 3,116 3,338 5,730 6,412 3,375 3,954
------- ------- -------- -------- -------- -------- ------- -------
Income before
extraordinary item..... 1,214 444 3,644 4,889 7,476 9,195 4,489 5,990
Loss on early
extinguishment of debt,
net.................... -- -- -- -- 614 772 772 300
------- ------- -------- -------- -------- -------- ------- -------
Net income.............. $ 1,214 $ 444 $ 3,644 $ 4,889 $ 6,862 $ 8,423 $ 3,717 $ 5,690
======= ======= ======== ======== ======== ======== ======= =======
OTHER FINANCIAL DATA:
EBITDA(/2/)............. $14,033 $ 3,182 $ 16,388 $ 20,783 $ 24,375 $ 24,069 $11,729 $13,873
Depreciation and
amortization(/3/)...... 5,018 1,045 4,629 5,467 6,028 4,715 2,245 2,372
Capital expenditures.... 3,532 445 2,676 3,853 3,862 3,475 1,699 3,011
Ratio of earnings to
fixed charges(/4/)..... 1.3x 1.5x 2.2x 2.1x 3.2x 4.5x 4.3x 6.5x
BALANCE SHEET DATA (END
OF PERIOD):
Cash and cash
equivalents............ $ 1,733 $ 2,227 $ 872 $ 45 $ 1,716 $ 1,310 $ 426 $ 490
Working capital......... 7,120 8,144 7,872 6,750 7,362 3,824 10,864 1,237
Total assets............ 67,963 69,165 104,397 103,288 99,331 96,773 98,449 99,643
Total debt.............. 50,109 49,368 57,063 50,157 41,195 31,364 37,836 26,624
Stockholder's
equity(/5/)............ (7,408) (7,058) 20,796 25,828 32,118 40,067 35,363 45,706
</TABLE>
See Notes to Selected Historical Financial Data
45
<PAGE>
NOTES TO SELECTED HISTORICAL FINANCIAL DATA
(1) Charges related to involvement in an environmental matter and action at a
property formerly owned by a predecessor of the Company.
(2) EBITDA is defined as income from operations plus depreciation and
amortization. EBITDA is presented because it is a widely accepted
financial indicator of a company's ability to incur and service debt.
EBITDA should not be considered by an investor as an alternative to income
from operations as determined in accordance with generally accepted
accounting principles as an indicator of the operating performance of the
Company or as an alternative to cash flows as a measure of liquidity.
(3) Depreciation and amortization does not include amortization of deferred
financing costs or the discount on the 2001 Notes which are included in
interest expense.
(4) The ratio of earnings to fixed charges is calculated as (a) income from
continuing operations before income taxes plus fixed charges, divided by
(b) fixed charges. Fixed charges include interest expense, capitalized
interest and the interest portion of rent expense. The interest portion of
rent expense is calculated as one-third of total rent expense.
(5) As part of the recapitalization of the Predecessor Company, which occurred
on December 21, 1989, the Company paid a $65,695,000 cash dividend on
common stock and recognized a $617,000 premium on the redemption of
previously outstanding shares of preferred stock, resulting in a
stockholder's deficit at the end of 1989 and the succeeding periods until
the acquisition of the Predecessor Company in 1994.
46
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The Company is a leading designer, manufacturer, marketer and distributor of
a diverse range of products in several niche markets including productivity
enhancing construction tools, formed wire products, industrial bag closing
equipment and flexible conveyors. The Company operates through three business
units: Ames, Nestaway and Fischbein. Ames is the leading designer,
manufacturer, marketer and distributor of ATF tools, which are rented or sold
to interior finishing contractors to finish drywall joints prior to painting,
wallpapering or other forms of final treatment. Nestaway is a leading
manufacturer of formed wire products which are used for a variety of
commercial and consumer product applications. Fischbein is a leading worldwide
manufacturer and marketer of industrial bag closing and handling equipment and
systems and a leading manufacturer of flexible conveyors and storage racks.
The Company distributes certain of its products through subsidiaries located
in Belgium, France, the United Kingdom, Singapore and Canada. The Company
accounts for gains and losses resulting from foreign currency transactions in
its consolidated statement of income. Income and expense items are translated
at the average exchange rate for the period. The assets and liabilities of
foreign subsidiaries are translated at the current rate of exchange at the
balance sheet date. Balance sheet translation adjustments have been excluded
from the results of operations and are reported as a separate component of
stockholder's equity. As the Company's foreign revenues accounted for
approximately 15% of the Company's net revenues, the results of the Company
may be favorably or unfavorably affected to the extent the U.S. dollar weakens
or strengthens versus the applicable corresponding foreign currency. The
Company currently does not enter into hedging programs in an attempt to
mitigate the fluctuations against the U.S. dollar.
During the periods discussed below, except as may be noted, inflation and
changing prices have not had, and are not expected to have, a material impact
on the Company's net revenues or its income from operations.
In 1997, the Company repurchased and extinguished $9.3 million in principal
of its 11% Senior Subordinated Notes due 2001 (the "2001 Notes"). The Company
recorded a charge of $1.3 million, $0.8 million net of tax, for the redemption
premium, the writeoff of unamortized capitalized financing costs associated
with the issuance of the 2001 Notes, the applicable original issue discount,
and the expenses of the transaction. In May 1998, the Company repurchased and
extinguished the remaining $5.3 million in principal of its 2001 Notes, and
similarly recorded a charge of $0.5 million, $0.3 million net of tax. As a
result of the refinancing of its bank debt in 1996, the Company recorded a
debt extinguishment charge of $1.0 million on a pretax basis, $0.6 million net
of tax, due to the writeoff of the unamortized capitalized financing costs
related to the previous bank agreement.
47
<PAGE>
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------------------- -------------------------
1995 1996 1997 1997 1998
------------ ------------ ----------- ------------ -----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues
Ames net revenues..... $ 33.9 32.5% $ 38.0 36.2% $42.4 40.4% $20.7 40.0% $23.0 40.9%
Nestaway net revenues. 42.6 40.8 39.7 37.9 35.3 33.7 18.0 34.8 20.0 35.6
Fischbein net
revenues............. 27.8 26.7 27.1 25.9 27.1 25.9 13.0 25.2 13.2 23.5
------ ----- ------ ----- ----- ----- ----- ----- ----- -----
Total net revenues... 104.3 100.0 104.8 100.0 104.8 100.0 51.7 100.0 56.2 100.0
------ ----- ------ ----- ----- ----- ----- ----- ----- -----
Cost of revenues........ 64.8 62.1 61.3 58.5 60.1 57.3 29.4 56.9 31.4 55.9
------ ----- ------ ----- ----- ----- ----- ----- ----- -----
Gross profit............ 39.5 37.9 43.5 41.5 44.7 42.7 22.3 43.1 24.8 44.1
Selling, general,
administrative
expenses............... 24.2 23.2 25.2 24.0 25.3 24.2 12.8 24.7 13.3 23.6
------ ----- ------ ----- ----- ----- ----- ----- ----- -----
Income from operations.. 15.3 14.7 18.3 17.5 19.4 18.5 9.5 18.4 11.5 20.5
Interest expense........ 6.6 6.3 5.1 4.9 3.7 3.5 2.0 3.9 1.4 2.5
Other expense (income).. 0.5 0.5 -- 0.0 0.1 0.1 (0.4) (0.8) 0.2 0.4
------ ----- ------ ----- ----- ----- ----- ----- ----- -----
Income before income
taxes and extraordinary
item................... 8.2 7.9 13.2 12.6 15.6 14.9 7.9 15.3 9.9 17.6
Provision for income
taxes.................. 3.3 3.2 5.7 5.4 6.4 6.1 3.4 6.6 3.9 6.9
------ ----- ------ ----- ----- ----- ----- ----- ----- -----
Income before
extraordinary item..... 4.9 4.7 7.5 7.2 9.2 8.8 4.5 8.7 6.0 10.7
Extraordinary item...... -- -- 0.6 0.6 0.8 0.8 0.8 1.5 0.3 0.6
------ ----- ------ ----- ----- ----- ----- ----- ----- -----
Net income.............. $ 4.9 4.7% $ 6.9 6.6% $ 8.4 8.0% $ 3.7 7.2% $ 5.7 10.1%
====== ===== ====== ===== ===== ===== ===== ===== ===== =====
</TABLE>
Six months ended June 30, 1998 compared to six months ended June 30, 1997
Net Revenues. Net revenues for the six month period ended June 30, 1998
increased 8.7% to $56.2 million from $51.7 million in the comparable period in
1997. The increase in net revenues was a result of increased rentals and sales
of ATF tools and increased sales of drywall related merchandise, dishwasher
racks, other formed wire products and bag closing equipment.
Ames' net revenues increased 11.1% to $23.0 million in the six month period
ended June 30, 1998 from $20.7 million in the comparable period in 1997. The
increase was primarily the result of an increase in both price and volume of
rented ATF tools. Factory-built housing initiatives also resulted in higher
ATF rental revenues. In addition, Ames' revenues increased due to higher
demand for drywall related merchandise and ATF tool sales.
Nestaway's net revenues increased 11.1% to $20.0 million in the six month
period ended June 30, 1998 from $18.0 million in the comparable period in
1997. The increase was primarily due to growth in formed wire products
including dishdrainers and shower caddies, and several recent product
additions, such as golf cart baskets and dryer racks. Revenues from dishwasher
racks were also improved with the addition of a new OEM customer.
Fischbein's net revenues increased 1.5% to $13.2 million in the six month
period ended June 30, 1998 from $13.0 million in the comparable period in
1997. The increase was primarily due to increased bag closing equipment sales
in the U.S. and in Europe. This increase was partially offset by reduced
revenues in Asian markets. In addition, revenues derived from sales of
Fischbein's flexible conveyors declined due to lower market demand in the U.S.
48
<PAGE>
Gross Profit. Gross profit for the six month period ended June 30, 1998
increased 11.2% to $24.8 million from $22.3 million in the comparable period
in 1997. The increase in gross profit was attributable to the net revenue
increase discussed above. Gross profit as a percentage of net revenues
improved to 44.1% from 43.1% due to a favorable mix of higher margin products.
Ames' gross profit improved with revenues. This improvement was offset by
temporary operating inefficiencies as the Bensenville, Illinois and Tucker,
Georgia rental ATF tool repair operations were consolidated into a new
facility in Stone Mountain, Georgia. Nestaway's gross profit improved due to
revenue growth, a favorable mix of higher margin products, improved operating
efficiencies and a favorable pricing adjustment. Fischbein's gross profit also
improved due to product mix.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the six month period ended June 30, 1998 increased
3.9% to $13.3 million from $12.8 million in the comparable period in 1997. As
a percentage of net revenues, selling, general and administrative expenses
declined from 24.8% to 23.7% due to improved overhead efficiency from
increased sales.
Interest Expense. Interest expense for the six month period ended June 30,
1998 decreased to $1.4 million from $2.0 million in the comparable period in
1997. The decrease was the result of both a reduction in outstanding debt and
the aforementioned repurchase of the 2001 Notes in May 1997 utilizing the
Company's lower interest revolving credit loan and the final repurchase of the
2001 Notes in May 1998. The repurchase of the 2001 Notes also reduced the
amortization of the original issue discount and capitalized financing costs.
Other Expense. Other expense was $0.2 million for the six month period ended
June 30, 1998 compared to other income of $0.4 million in 1997. The decrease
was primarily due to a $0.5 million gain from the sale of an investment during
the comparable period in 1997.
Income Taxes, Extraordinary Item and Net Income. The effective tax rate for
the six month period ended June 30, 1998 was 39.4% compared to 43.0% for the
prior year comparable period. This decrease in the effective tax rate was due
in part to a reduction in the impact of non-deductible amortization expense.
During the second quarter of 1998, the Company recorded a $0.3 million
extraordinary charge related to the loss on extinguishment of the 2001 Notes.
As a result of the above factors, net income was $5.7 million compared to $3.7
million for the prior comparable period.
Year ended December 31, 1997 compared to year ended December 31, 1996
Net Revenues. Net revenues were unchanged at $104.8 million in 1997 compared
to 1996. Excluding the loss of an OEM customer in the second quarter of 1996,
consolidated net revenues grew 4.3% over the prior year period. The loss of
the OEM customer was offset by the increase in the rental and sale of ATF
tools and drywall related merchandise sales through Company-managed stores. As
a result of targeted marketing activities, bag closing equipment revenues in
Latin America also increased. Currency changes resulted in a reduction in
revenues of $1.6 million from 1996.
Ames' net revenues increased 11.6% to $42.4 million in 1997 from $38.0
million in 1996. ATF tool rental sales increased $2.5 million primarily due to
both price and volume increases in rented ATF tools. Drywall related
merchandise sales also improved $0.9 million as product offerings were
expanded and additional marketing programs were developed to improve store
sales. ATF tool sales increased $1.0 million in part due to the addition of
new distribution locations.
Nestaway's net revenues decreased 11.1% to $35.3 million in 1997 from $39.7
million in 1996. The decrease was primarily attributable to the loss of the
aforementioned OEM customer, which resulted in a decline in revenues of $4.3
million. Offsetting this decline were increased sales to a new OEM which
accounted for $0.6 million in revenues in 1997.
49
<PAGE>
Fischbein's net revenues were unchanged at $27.1 million in 1997 compared to
1996. Fischbein recorded revenue growth in its bag closing product line in the
U.S., Latin America and Europe of $0.7 million. Revenues from Europe, however,
were negatively impacted by foreign currency translation rate changes which
reduced revenues by $1.6 million. Excluding this event, bag closing revenues
would have increased $2.3 million. Specific marketing programs directed
towards Latin American markets improved revenues by $1.1 million. Revenues
from storage racks declined $0.7 million primarily as a result of lower
demand.
Gross Profit. Gross profit increased 2.8% to $44.7 million in 1997 from
$43.5 million in 1996. The improvement was directly related to rental revenue
growth within the Ames business unit. Additionally, gross profit as a
percentage of net revenues improved to 42.7% from 41.5% as a result of a shift
towards higher margin products.
Ames' gross profit improved as a result of rental revenue increases together
with a reduction in tool refurbishment costs as a result of foreign
outsourcing of parts and programs to reduce parts consumption. Nestaway's
gross profit declined primarily due to product mix with a higher proportion of
sales in lower margin non-dishwasher rack formed wire products and the impact
of the startup of several new products including shower caddies, golf cart
baskets and dishwasher racks for a new OEM customer offset by the elimination
of certain fixed costs associated with the closure of a leased production
facility in 1996. Fischbein's profit margins continued to improve due to cost
reduction programs and improved operating efficiencies at the Statesville,
North Carolina bag closing production facility. Fischbein also implemented a
foreign parts sourcing program which resulted in lower components costs.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 0.4% to $25.3 million in 1997 from $25.2
million in 1996. This was primarily attributable to an increase in bad debt
expense accompanying increased revenue within the Ames business unit. The
Company also recorded an increase in administrative and selling compensation.
These increases were offset by lower insurance, benefits and amortization
expense. Ames also recorded lower facility rental expenses with the closure of
a training center. As a percentage of net revenues, selling, general and
administrative expenses increased slightly to 24.2% in 1997 from 24.0% in
1996.
Interest Expense. Interest expense decreased to $3.7 million in 1997 from
$5.1 million in 1996. The decrease was the result of a reduction in
outstanding debt, a reduction in the interest rate on its revolving credit
agreement as a result of a bank credit refinancing which occurred in June 1996
and the repurchase of a portion of the 2001 Notes in May 1997 utilizing a
lower cost bank line of credit.
Other Expense. Other expense was $0.1 million in 1997. In 1997, the Company
recorded a gain on the sale of an investment. This income was offset by
expenses related to efforts to sell one of the Company's divisions and the
loss incurred on disposal of fixed assets.
Income Taxes, Extraordinary Item and Net Income. The effective tax rate for
the year ended 1997 was 41.0% compared to 43.2% in 1996. The decrease was due
to a reduction in the estimate of state and foreign tax liabilities. During
1997, the Company recorded a $0.8 million extraordinary charge related to the
loss on extinguishment of a portion of the 2001 Notes. As a result of the
above factors, net income increased to $8.4 million in 1997 from $6.9 million
in 1996.
Year ended December 31, 1996 compared to year ended December 31, 1995
Net Revenues. Net revenues increased 0.5% to $104.8 million in 1996 from
$104.3 million in 1995. Revenue growth was primarily the result of increased
rental revenues of Ames' ATF tools and
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drywall related merchandise. This increase in revenues offset the loss of the
OEM customer in the second quarter of 1996 discussed above, which resulted in
a revenue decline of $3.5 million from 1995.
Ames' net revenues increased 12.1% to $38.0 million in 1996 from $33.9
million in 1995. The increase in revenues was attributable to increased ATF
tool rentals and increased sales of drywall merchandise. The increase in ATF
rentals was, in part, due to the expansion of distribution opportunities with
the addition of new franchises, a program begun in 1995. Increased rentals of
ATF tools in the eastern and midwestern U.S. also contributed to volume
increases. New product introductions and marketing programs facilitated a gain
in drywall related merchandise sales.
Nestaway's net revenues decreased 6.8% to $39.7 million in 1996 from $42.6
million in 1995. The decrease was primarily attributable to the loss of the
OEM customer discussed above. An additional OEM customer brought dishwasher
rack production in-house in the third quarter of 1996 contributing to a $1.7
million reduction in revenues. Other formed wire products contributed an
additional $2.7 million in revenues primarily from the dishdrainer product
line where Nestaway added coating capacity in 1995.
Fischbein's net revenues decreased 2.5% to $27.1 million in 1996 from $27.8
million in 1995. This decrease was due to the inclusion of an additional month
of sales in 1995 as the Company eliminated a one month financial reporting lag
(the impact on income from operations was not material), and by a $0.6 million
negative impact from translation changes. This decrease was offset by
increased revenues of bag closing equipment and flexible conveyors.
Gross Profit. Gross profit increased 10.1% to $43.5 million in 1996 from
$39.5 million in 1995. The gross profit improvement was primarily attributable
to changes in product and customer mix and cost reduction and efficiency
programs in each of the business units. The gross profit as a percentage of
net revenues improved to 41.5% in 1996 from 37.9% in 1995.
Gross profit improved at Ames due to the substantial growth in ATF rentals
and lower refurbishment costs resulting from foreign parts sourcing and parts
consumption reduction programs. Nestaway's gross profit increased due to
improved operating efficiencies, product mix and reductions in workers'
compensation premiums and real and personal property taxes. Fischbein also
recorded improved gross profit margins in part due to equipment acquisitions
which improved production capabilities and lowered production costs.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 4.1% to $25.2 million in 1996 from $24.2
million in 1995. This increase was primarily attributable to additional
marketing programs and bad debt expense incurred to support revenue growth,
particularly at Ames. Bad debt expense on a consolidated basis increased $0.4
million primarily due to revenue increases at Ames. Advertising and promotions
increased $0.1 million. As a percentage of net revenues, selling, general and
administrative expenses increased to 24.0% in 1996 from 23.2% in 1995.
Interest Expense. Interest expense decreased to $5.1 million in 1996 from
$6.6 million in 1995 due to a reduction in the interest rate on its revolving
credit agreement as a result of a refinancing which occurred in June 1996.
Other Expense. Other expense decreased from $0.5 million recorded in 1995.
The Company recorded income in 1996 of $0.2 million as a result of a
distribution relating to past claims received from the liquidation of an
insurance company. In 1995, the Company had recorded charges for the disposal
of fixed assets ($0.1 million) and the consolidation of two tool repair
centers ($0.2 million).
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Income Taxes, Extraordinary Item and Net Income. The effective tax rate in
1996 was 43.2% compared to 40.2% in 1995. This increase was due to an increase
in the estimate of state and foreign tax liabilities. During 1996, the Company
recorded a $0.6 million extraordinary charge related to the loss on
extinguishment of its bank debt. As a result of the above factors, net income
increased to $6.9 million from $4.9 million.
LIQUIDITY AND CAPITAL RESOURCES
The Company generated cash from operations of $7.3 million for the six month
period ended June 30, 1998 compared to $3.0 million for the six month period
ended June 30, 1997, and had cash on hand of $0.5 million at June 30, 1998.
Cash from operations and cash on hand were utilized to fund capital
expenditures of $3.0 million and a $5.0 million repayment of debt.
At June 30, 1998, the Company had working capital of $1.2 million compared
to working capital of $3.8 million at December 31, 1997. The decline in
working capital was due to an increase in the current maturities of long-term
debt of $2.8 million. The Company classified amounts outstanding under its
revolving credit loan as a current liability. The Company increased its
borrowings by $3.2 million as a result of the repurchase and extinguishment of
$5.3 million of the 2001 Notes. Accounts receivable grew $1.9 million and
inventories $0.6 million. The growth in accounts receivable occurred primarily
at Nestaway. Due to the closure of many of its customer's plants during the
period between Christmas and New Year's Day, Nestaway's receivables decline at
year-end and increase in the first quarter as customer production activity
resumes to normal levels. Accrued income taxes increased $1.6 million as a
result of increased earnings and lower estimate payments.
During the six month period ended June 30, 1998, the Company utilized net
cash provided by operations to fund capital expenditures of $3.0 million
primarily for revenue maintenance and growth. Nestaway invested $0.7 million
as it continued to convert the production capacity of its Clinton, North
Carolina facility to produce dishwasher racks for a new customer and purchased
equipment to manufacture new formed wire products. Ames expended $1.2 million
on new ATF tools for the rental market and for wash systems for rental to
manufactured housing customers.
Upon consummation of the Transactions, interest payments on the Notes and
under the Bank Credit Agreement and amortization of the Term Loan will
represent significant obligations of the Company. The Company's remaining
liquidity demands relate to capital expenditures and working capital needs.
For the year ended December 31, 1997, the Company spent $3.5 million on
capital projects. The Company anticipates capital expenditures totaling $5.6
million in 1998. Of this amount, $3.0 million had been spent through June 30,
1998. Exclusive of the impact of any future acquisitions, the Company does not
expect its capital expenditure requirements to increase materially in the
foreseeable future.
The Company's primary sources of liquidity will be cash flows from
operations and borrowings under the Bank Credit Agreement. The Revolving
Credit Facility will provide the Company with $15.0 million of borrowings,
subject to availability under the borrowing base. The Acquisition Facility
will provide the Company with $25.0 million of borrowings, subject to
customary conditions. "See Description of the Bank Credit Agreement". The
Company believes that, based on current and anticipated financial performance,
cash flow from operations and borrowings under the Revolving Credit Facility
will be adequate to meet anticipated requirements for capital expenditures,
working capital and scheduled interest payments. However, the Company's
capital requirements may change, particularly if the Company should complete
any material acquisitions. The ability of the Company to satisfy its capital
requirements will be dependent upon the future financial performance of the
Company, which in turn will be subject to general economic conditions and to
financial, business and other factors, including factors beyond the Company's
control.
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ACCOUNTING CHANGES
In 1997, the Financial Accounting Standards Board issued two new disclosure
standards. Results of operations and financial position will be unaffected by
implementation of these new standards.
In 1998, the Company adopted Statement of Financial Accounting Standards No.
130 ("SFAS 130"), "Reporting Comprehensive Income," which requires companies
to report all changes in equity during a period, except those resulting from
investment by owners and distribution to owners, in a financial statement for
the period in which they are recognized. The Company has chosen to disclose
comprehensive income, which encompasses net income, minimum pension liability
and foreign currency translation adjustments, in the consolidated statements
of stockholder's equity. Prior periods have been restated to conform with SFAS
130 requirements.
Statement of Financial Accounting Standards No. 131, "Disclosure about
Segments of an Enterprise and Related Information" ("SFAS No. 131"), which
supersedes SFAS No. 14, "Financial Reporting for Segments of a Business
Enterprise," establishes standards for the way that public enterprises report
information about operating segments in annual financial statements and
requires reporting of selected information about operating segments in interim
financial statements issued to the public. It also establishes standards for
disclosures regarding products and services, geographic areas, and major
customers. SFAS No. 131 defines operating segments as components of an
enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance. Due to the recent issuance of
this standard, management has been unable to fully evaluate the impact, if
any, it may have on future financial statement disclosure.
OTHER MATTERS
With the coming of the year 2000, there has been a great deal of publicity
concerning computer information reporting and equipment failure due to
hardware's and software's use of two-digit dates ("Year 2000"). Management is
responsible for identifying the Company's computer systems affected by the
Year 2000 issue and developing and executing a compliance plan. Each business
unit has prepared and is in the process of implementing plans to replace
current management information systems due to current hardware and software
language obsolescence and the need to upgrade system capacities to management
requirements. As a result, all business units expect their management
information systems to be Year 2000 compliant by the end of 1998 or in early
1999. The Company has spent approximately $0.6 million in 1997 and estimates
spending an additional $0.7 million in the aggregate in 1998 and 1999 to
upgrade its management information systems. There is no guarantee, however,
that such systems replacements and modifications will be completed on time.
The failure of the Company's suppliers and customers to address the Year 2000
issue could significantly impact the Company.
As a result of dishwasher rack sourcing decisions made by its customers in
1996, the Company shut down a leased production facility in Canal Winchester,
Ohio, and temporarily idled a second plant in Clinton, North Carolina. The
Clinton facility resumed operations in 1997 when the Company was awarded a
contract by a new dishwasher rack customer. The Beaver Dam, Kentucky plant,
shut down in 1994 due to a customer's decision to utilize an alternative
source of supply, was reopened in 1996 to produce dishwasher rack components,
lower volume dishwasher racks, and other formed and coated wire products.
During 1997 and 1996, the Company charged $0.6 million and $1.0 million,
respectively, of the costs incurred against a facility realignment reserve
established in prior periods. The Company has no further reserves for the
realignment of its production capacities as of December 31, 1997, and
management believes its current manufacturing operations are properly
positioned to service current and future customers.
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INDUSTRY
ATF TOOLS
Drywall construction was introduced in the U.S. in the 1930s as an
alternative to plaster walls and is the leading interior wall material used
today. Drywall has become the industry standard wall material due to its
desirable physical properties (e.g. durability, hardness), cost, and ease of
installation relative to plaster and is used in the vast majority of new
residential, commercial, and industrial construction projects, as well as
remodeling activity involving wall installation and replacement.
The installation of drywall requires taping and finishing at the joints of
the drywall construction. When drywall was first introduced, all taping and
finishing was done by hand. In 1939, the Ames brothers in California invented
the first ATF tools, which allowed drywall contractors to apply tape and
compound with more consistent quality and less waste. Currently, ATF finishing
techniques are generally three to four times faster than hand taping methods.
As a result of these benefits, once finishers are trained in the use of ATF
tools and have used them for a period of time, they typically do not revert
back to hand taping techniques.
Due primarily to Ames' historical focus on the western U.S., ATF tools are
more widely used in that market than in the eastern and midwestern U.S.
Management believes that ATF tools have the potential for significant
continued growth through increased sales efforts in the eastern and midwestern
U.S. markets.
In addition to the rate at which drywall professionals are converted from
hand taping methods to ATF tools, demand is also influenced by housing starts.
According to the U.S. Bureau of Census, total U.S. housing starts have grown
at a 6.4% compound annual growth rate since 1991, reaching 1.5 million in
1997. In addition, the median size of new, single family homes has increased
25% since 1985 and this trend is expected to continue, leading to further
growth in drywall shipments.
Drywall material is used in the construction of factory-built homes as well
as traditional homes. Factory-built homes represented approximately 32% of the
total number of single family homes sold in 1996 and shipments of factory-
built homes totaled approximately 363,000 units in 1996, a compound annual
growth rate of approximately 16% since 1991. Demand for factory-built homes is
increasing due to greater community acceptance, size and affordability. In
1996, management instituted a program to penetrate the factory-built housing
market and believes this market offers significant growth potential.
FORMED WIRE PRODUCTS
The formed wire products market includes a wide range of coated and non-
coated formed wire products for various consumer, commercial and industrial
applications including dishwasher racks, refrigerator racks, oven racks,
bakery racks, shelving, dishdrainers, sink protectors, shower caddies, fan
guards, dryer racks, golf cart baskets, bucket bails and medical baskets. The
Company's primary formed wire products are dishwasher racks which are used by
OEMs. The dishwasher rack is a key component for the OEMs and is an important
driver of consumer preference. Because the dishwasher rack is visible to the
consumer, it is a critical component for dishwasher manufacturers that utilize
rack design to differentiate their products from competitors and to
differentiate among their own models.
The market for dishwasher racks is expected to continue to grow as
dishwasher sales continue to increase. Dishwasher penetration among U.S.
households has increased steadily from approximately 34% in 1973 to
approximately 55% in 1996. This increased penetration has led to
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increased sales of dishwashers, which have grown at a compound annual rate of
approximately 6% since 1991 reaching 5.1 million dishwashers in 1997.
Replacements, which constitute 75% of dishwasher sales, and housing starts are
the two major factors driving the demand for dishwashers. The Company believes
it is the largest independent major supplier of dishwasher racks in North
America.
The U.S. market for formed wire products other than dishwasher racks is
extremely fragmented and is comprised of many companies manufacturing a wide
range of products. The Company believes there are no dominant manufacturers
serving the formed wire products industry, but certain suppliers have
established leading positions in certain niche markets.
BAG CLOSING EQUIPMENT
The bag closing equipment market includes equipment and consumables used in
the closing, sealing, and handling of paper, textile and plastic bags across a
wide variety of industries. 1996 U.S. manufacturers' shipments of bag opening,
filling and closing machinery (excluding heat sealing) were approximately $133
million, with bag closing and sealing machinery accounting for $61 million of
total shipments. 1996 U.S. shipments of shrink film and heat sealing machinery
were $124 million, with heat sealing equipment representing $68 million of the
total. Between 1994 and 1996, the U.S. machinery manufacturers' sales of bag
opening, filling and closing, grew at a compound annual growth rate of 6%,
while sales of shrink film and heat sealing machinery grew at a compound
annual growth rate of 10%. This growth is due to the increased productivity
provided by automated bag closing systems.
While data on the size and growth of the international markets for bag
closing equipment is not available, management believes that international
markets have exhibited higher rates of growth than the U.S. market due to the
relative underpenetration of automated bag closing systems in these markets.
Management expects global demand for bag closing and handling equipment and
systems to continue to grow.
FLEXIBLE CONVEYORS
Flexible conveyors are part of the $60 billion worldwide material handling
industry. The markets for flexible conveyors have grown at a 6.6% compound
annual growth rate since 1994, reaching an estimated $910 million in 1997.
This growth has been driven by trends towards greater efficiency and
improvements in employee safety. Flexible conveyor products constitute a small
portion of the overall conveyor equipment market, but are subject to the same
overall industry growth trends.
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BUSINESS
GENERAL
The Company is a leading designer, manufacturer, marketer and distributor of
a diverse range of products in several niche markets including productivity
enhancing construction tools, formed wire products, industrial bag closing
equipment and flexible conveyors. Management believes the Company possesses
strong market leadership positions in its primary markets. The Company
believes it is: (i) the largest U.S. supplier and distributor of ATF tools;
(ii) the largest U.S. independent manufacturer of dishwasher racks; (iii) a
leading worldwide manufacturer and marketer of bag closing products and (iv) a
leading manufacturer and marketer of flexible conveyors and warehouse storage
racks. The Company believes that its market leadership positions, brand name
recognition, established national and international distribution networks,
strong customer base and manufacturing expertise provide significant
opportunities to grow sales of new and existing products within established
markets, as well as expand into new markets. The Company also believes that
its diverse base of products and markets reduces exposure to any particular
industry, product market or geographic region. The Company operates through
three business units: Ames, Nestaway and Fischbein. For the twelve months
ended June 30, 1998, the Company had net revenues and pro forma EBITDA of
$109.3 million and $26.6 million, respectively.
Ames. Ames is the leading designer, manufacturer, marketer and distributor
of ATF tools, which are rented or sold to interior finishing contractors to
finish drywall joints prior to painting, wallpapering or other forms of final
treatment. ATF tools, invented by Ames in 1939, enable interior finishing
contractors to finish drywall joints three to four times faster than less
productive hand finishing methods. The Company is the leader in ATF tool
rentals and sales in the markets in which it serves. The primary business of
Ames is the rental and service of more than 135,000 ATF tools through its
extensive distribution network throughout the U.S. and Canada. Ames also sells
ATF tools under the TapeTech(R) and TapeMaster(R) brand names through an
established independent network of dealers in the U.S. and Canada. In
addition, Ames sells a variety of other drywall tools, finishing accessories
and supplies through its network of Company-managed stores. The Company
believes it has significant opportunities to increase Ames' revenues by
expanding the use of ATF tools in the fast growing factory-built housing
market, which is increasingly utilizing drywall rather than other materials.
The Company also believes it has a significant opportunity to expand the use
of ATF tools by converting interior finishing contractors from traditional
hand finishing methods, particularly in the eastern and midwestern U.S. where
the use of ATF tools is less prevalent than in the western U.S. For the twelve
months ended June 30, 1998, Ames had net revenues of $44.7 million.
Nestaway. Nestaway is a leading manufacturer of formed wire products which
are used for a variety of commercial and consumer product applications.
Nestaway is North America's largest independent manufacturer of coated wire
dishwasher racks and components which are sold to all the
major U.S. OEMs. Approximately 75% of dishwashers sold in the U.S. are
replacements. In 1996, Nestaway produced an estimated 68% of all independently
manufactured dishwasher racks and an estimated 17% of all dishwasher racks
produced in the U.S. Nestaway's primary OEM customers include Maytag, EBS-
Bosch and Whirlpool/KitchenAid. Nestaway has had relationships with all major
OEMs for an average of approximately 19 years and approximately 90% of
Nestaway's 1997 revenues were generated pursuant to requirements contracts
with terms extending through 2002. Nestaway also manufactures, on a contract
basis, other close tolerance, welded, non-coated or coated formed wire
products such as dish drainers, sink protectors, shower caddies, dryer racks,
golf cart baskets, bucket bails, medical baskets and small gauge axles. In
1994, Nestaway entered into an agreement with a major consumer products
company it has served for over 50 years to manufacture 100% of this customer's
coated formed wire dish drainers and sink protectors. In 1997, Nestaway
entered into an agreement with the same customer to manufacture 100% of its
coated wire shower caddies. The Company believes it has significant
opportunities to increase Nestaway's
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revenues through: (i) increasing sales to existing customers; (ii) expanding
its product offering and customer base by developing new formed wire business;
(iii) expanding production in international markets and (iv) pursuing
strategic acquisitions. For the twelve months ended June 30, 1998, Nestaway
had net revenues of $37.4 million.
Fischbein. Fischbein is a leading worldwide manufacturer and marketer of
industrial bag closing and handling equipment and systems and a leading
manufacturer and marketer of flexible conveyors and storage racks. Bag closing
and handling systems products include: (i) portable and stationary industrial
sewing heads and sewing systems for paper, textile and woven polypropylene
bags; (ii) industrial heat sealing and bag handling systems for paper and
plastic bags; (iii) consumables, including thread and tape and (iv) service
parts. Service parts, which provide a recurring base of revenue, accounted for
approximately 20% of Fischbein's sales in 1997. Fischbein's bag closing
products are used across a broad range of industries for packaging chemicals,
minerals, agricultural and food products. In addition to bag closing products,
Fischbein manufactures extendible, flexible, gravity and motorized conveyors
and portable, nestable and stackable warehouse storage racks. Fischbein's
flexible conveyors are used by retailers for loading and unloading tractor
trailers at store sites and distribution centers. Storage racks are designed
for factory and warehouse storage where flexibility in racking is desired and
are sold to customers in various industries, including retail, distribution,
food, chemical, pharmaceutical and textile. The Company believes it has
significant opportunities to increase Fischbein's revenues by expanding the
product offerings that can be sold through its extensive distribution network
and by making strategic acquisitions. For the twelve months ended June 30,
1998, Fischbein had net revenues of $27.2 million.
COMPETITIVE STRENGTHS
Established Leadership Positions in Niche Markets. The Company believes that
its product quality, customer-driven product development and high levels of
customer service have allowed it to achieve strong market positions and brand
name recognition. Management believes the Company possesses strong market
leadership positions in its primary markets. The Company believes it is: (i)
the largest U.S. supplier and distributor of ATF tools; (ii) the largest U.S.
independent manufacturer of dishwasher racks; (iii) a leading worldwide
manufacturer and marketer of bag closing products and (iv) a leading
manufacturer and marketer of flexible conveyors and storage racks. Ames, which
invented the ATF tool in 1939, continues to be the leader in ATF tool rentals
and sales. Nestaway has been a leading independent supplier of dishwasher
racks to the U.S. dishwasher industry for over 50 years. Fischbein, which
first introduced a portable bag closer in 1943, is consistently recognized as
a leading global supplier of bag closing equipment. The Company believes its
leadership positions will allow it to: (i) broaden its product offerings to
existing customers; (ii) expand its customer base with both new and existing
products and (iii) diversify its geographic coverage to secure new customers
and to meet the needs of existing customers in additional markets.
Diverse Revenue Base. The Company's three business units provide revenue and
cash flow from a diverse base of products, customers and geographic regions.
The Company's products are sold through multiple distribution channels to
customers in over 100 countries in a wide variety of end-use markets. In 1997,
international sales accounted for approximately 15% of the Company's revenues.
This diversity of products and distribution channels provides the Company with
a broad base from which to increase sales and expand customer relationships
and reduces exposure to any particular industry, product market or geographic
region.
Manufacturing Expertise. The Company has a proven track record in product
manufacturing and development in each of its business units. The Company
utilizes this expertise in partnership with its customers both to improve
product performance and to reduce manufacturing costs. Ames invented
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ATF tools and remains the leader in their design and development, and
continues to make its products easier to use, more productive and less costly
to refurbish. Nestaway frequently works directly with its OEM customers to
design and manufacture new dishwasher racks and other formed wire products in
a cost-effective manner. In addition, Nestaway develops and manufactures
custom designed tooling and other equipment used in high volume precision wire
forming, welding and coating, providing Nestaway with the ability to
manufacture quickly and efficiently both new and redesigned products.
Fischbein has successfully developed both new products and new features for
existing products that enhance customer productivity and reduce Fischbein's
manufacturing costs. The Company believes its manufacturing expertise enables
it to strengthen customer loyalty, improve the value of its products and
reduce manufacturing costs.
Established Distribution Networks. The Company has established broad
distribution networks serving both domestic and international markets. Ames'
rental ATF tools are distributed in the U.S. and Canada through over 125
separate and distinct distribution locations and Ames' sold ATF tools are
distributed in the U.S. and Canada through a network of over 250 dealers and
distributors. Fischbein's national and international distribution network
extends to over 100 countries through international and domestic distributors,
dealers and packaging machinery manufacturers. Management believes that its
distribution network provides it with an established base from which to
introduce new products, expand sales of existing product lines and achieve
operating efficiencies.
Proven and Committed Management Team. The Company has assembled a strong and
experienced management team at each of its business units. The Company's
senior operating managers have an average of over 14 years of experience in
their respective industries. Management has successfully enhanced operating
margins through the implementation of various production improvements and cost
cutting initiatives and as a result, EBITDA margins improved from 16.0% in
1993 to 23.0% in 1997.
STRATEGY
The Company's strategy is to increase revenues and cash flow in each of its
business units through both internal growth and by pursuing selective
acquisitions. Management believes the Company's market leadership positions,
brand name recognition, strong customer base, established distribution
networks and manufacturing expertise provide significant growth opportunities
for the Company.
Ames' primary business strategy is to pursue the expansion of ATF tool use
in the factory-built housing market and to continue to convert interior
finishing contractors utilizing traditional hand finishing drywall methods to
the use of ATF tools. With regard to the continued conversion from hand
finishing to ATF tools, management believes there is a significant opportunity
to increase utilization rates in the eastern and midwestern U.S. Ames has
successfully increased its rental revenues in the eastern and midwestern U.S.
at a 15% compound annual growth rate since 1993 and expects to continue to
grow rental revenues in this market. Ames also plans to continue to expand its
presence in the fast growing factory-built housing market which in 1996,
accounted for 32% of all new single family homes and has grown at a compound
annual growth rate of 16% since 1991. Ames has established relationships with
major factory-built housing companies, including Fleetwood Enterprises,
Champion Enterprises and Oakwood Homes, and management believes that the
productivity enhancements associated with ATF tools provide Ames with a
significant opportunity to increase revenues in this market where hand
finishing is predominant.
Nestaway's primary business strategy is to increase sales to existing
dishwasher rack customers and to expand its product offerings of other formed
wire products. Management intends to continue to increase sales to existing
customers by supplying its customers as they expand production in
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domestic and international markets and by further increasing its sales to OEMs
that have in-house manufacturing operations. Nestaway will continue to pursue
new customer relationships, and was recently awarded a new contract with EBS-
Bosch, a leading European manufacturer of high-end dishwashers that has
recently expanded operations in the U.S. In addition to dishwasher racks,
Nestaway continues to focus on providing new formed wire products to new and
existing customers for applications such as sporting goods, home organization,
household products, computer accessories, air conditioning, utility carts and
other formed wire products. Revenues from formed wire products other than
dishwasher racks increased from $4.5 million, or 11% of Nestaway's net
revenues, in 1993 to $11.3 million, or 32% of Nestaway's net revenues, in
1997, a 26% compound annual growth rate. Nestaway plans to pursue an
acquisition strategy that expands its current product offerings by leveraging
Nestaway's core competency of precision wire forming and coating.
Fischbein's primary business strategy is to expand its bagging product
offerings through both new product development and by acquiring companies that
manufacture complementary products in new and existing geographic markets.
Management believes that the Company has a significant opportunity to increase
sales of new products by leveraging its extensive national and international
distribution capabilities and existing customer base. Management also believes
that Fischbein has an opportunity to utilize its existing distribution network
to expand sales of its storage and flexible conveyor products in the
packaging, distribution and delivery industries.
PRODUCTS
Ames. Ames' ATF tools are used in the construction industry by professional
interior finishing contractors to finish and prepare drywall for painting or
other forms of final treatment. ATF tools simultaneously apply joint tape and
compound to all drywall joints and automatically dispense a controlled amount
of joint compound for fast, efficient operation. Ames offers three sizes of
ATF tools for rent to meet the needs of a variety of customers, including the
standard size ("Bazooka(R)"), the short size ("Minizooka(R)"), and the extra
long size ("Maxizooka(TM)"). For drywall finishers that prefer to purchase
their ATF tools, Ames markets ATF tools under the TapeTech(R) and
TapeMaster(R) brand names.
Ames also offers its customers a wide variety of other products used in
drywall finishing including corner rollers, flat finishers, corner finishers,
nail spotters, loading pumps and finisher handles. Corner rollers embed joint
tape firmly into an interior corner or ceiling angle with metal wheels,
forcing out excess compound and leaving the angle ready for finishing. Flat
finishers are used to apply a final coat of joint compound over taped joints
which does not require sanding. Corner finishers remove excess compound,
feathering both sides at once and apply the second coat of compound for inside
corners. Nail spotters apply compound to nail or screw head dimples, preparing
them for painting or other final treatment. Loading pumps are used to fill
Ames' ATF tools, nail spotters and flat finishers with joint compound.
Finisher handles are specifically designed for use with Ames' products and
allows the user to complete most of the taping and finishing work from the
floor instead of using scaffolding or stilts.
In addition, Ames' stores provide its customers with a variety of supplies
and other products including hand finishing drywall tools, drywall finishing
accessories, including spray rigs, power sanders, scaffolds and board handling
devices, and drywall supplies, including compound, paper and mesh joint tape
and corner bead.
Nestaway. Nestaway's products consist of formed, coated and non-coated wire
products used for a variety of commercial and consumer product applications.
Nestaway's primary focus is on producing dishwasher racks for OEMs. Nestaway
also manufactures, on a contract basis, other close tolerance, welded, non-
coated or coated formed wire products such as dishdrainers, sink protectors,
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<PAGE>
shower caddies, dryer racks, golf cart baskets, bucket bails, medical baskets
and small gauge axles. Nestaway's engineers frequently work with each
individual customer to design new or improved products which are tailored to
meet their customer's specific needs.
Fischbein. Fischbein manufactures a variety of bag closing equipment,
flexible conveyors and storage equipment. Fischbein's bag closing products
consist of a variety of hand-held and stationary industrial sewing and sealing
units which utilize portable sewing machines, industrial sewing heads, sewing
systems and heat sealing and handling systems. Portable sewing machines are
hand-held and lightweight for low and moderate volume applications and are
effective in closing a wide variety of bags, including paper and woven
polypropylene. Industrial sewing heads are designed for continuous use in
moderate to high volume applications and are used to close paper, textile and
woven polypropylene bags. Sewing systems consist of pedestal-mounted sewing
heads with integrated conveying capabilities. These systems can be integrated
into new or existing bagging lines and can be fully automated. Heat sealing
and handling systems are generally used for medium to high speed bag closing
and sealing applications. These systems incorporate programmable logic
controllers, pneumatics, airflow and hot melt adhesive technologies, and are
used to close polyethylene bags, paper bags, heat sealable inner liners, pinch
style bags and hot melt adhesive closures. Fischbein also provides service
parts, consumables, accessories, thread and tape used with Fischbein
equipment.
Fischbein also offers flexible conveyors and storage racks marketed under
the Nestaflex(R), Nestainer(R) and Postainer(TM) brand names. Nestaflex(R)
products include a full line of conveyors for a wide variety of material
handling applications where stationary conveyors do not provide adequate
flexibility. These products are used by major retailers for loading and
unloading tractor trailers at store sites, by distribution centers and also in
light manufacturing operations. Nestainer(R) and Postainer(TM) products
consist of large, welded steel racks designed for factory and warehouse
storage and transportation purposes where changes in stored products and
quantities make stationary racking inefficient or impractical. The stackable
and nestable features of both systems maximize vertical storage capacity and
their unique design allows for compact storage when not in use. Nestainer(R)
products are also used as containers for transporting products.
SALES AND MARKETING
The Company markets and sells its broad range of products to a wide variety
of customers through an extensive sales and marketing network which utilizes
full time sales representatives, franchisees and third party distributors.
These sales efforts are enhanced by its product development staff, who work
closely with customers to develop products which are customized to meet their
specific needs.
Ames. Ames' rental tool sales organization consists of over 100 individuals
engaged in sales and marketing activities throughout North America. Ames' ATF
rental tools reach drywall professionals in North America through over 125
distribution locations including 57 Company-managed stores and 53 franchised
operations. Ames sells ATF tools under the TapeTech(R) and Tapemaster(R) brand
names through a network of 263 dealers and distributors.
Ames utilizes franchises, rental stations, field specialists and mobile
operations to support its sales and marketing activities. Franchisees are
typically major drywall and construction material distributors who operate
multiple locations. Under its franchise arrangements, Ames trains franchisee
personnel to demonstrate the advantages of using ATF tools, supplies Ames
owned tools to the franchisee and uses the franchisees' employees to rent Ames
tools to interior drywall finishers. Rental stations are used in locations
where the usage of ATF tools cannot support stand-alone Company- managed
stores. Ames typically operates its rental stores within a drywall
distribution yard owned by a third party. Field specialists, who cover
territories in well marked Ames vans, serve as direct marketers and on-site
trainers, and operate as rental centers for job site customers. An important
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<PAGE>
component of Ames' marketing strategy is the demonstration of the advantages
and techniques of Ames' products for existing and potential customers. In
addition to training conducted by the field specialists during on-site
demonstrations, training is conducted through eight training centers located
at the Company's rental stores.
Nestaway. As a result of Nestaway's focus on large OEMs, senior executives
are directly involved in sales and marketing efforts. Nestaway's sales and
marketing efforts also include technical, engineering and manufacturing
employees who regularly communicate with their counterparts of the OEM
customer. As a result, the Company is able to customize its products to meet
the needs of the customer in a timely and efficient manner with regard to both
product development and assisting OEMs in developing more efficient
manufacturing processes. The Company believes Nestaway's sales and marketing
efforts are substantially enhanced by these inter-organizational
relationships.
Fischbein. Sales and marketing activities relating to Fischbein's bag
closing products are divided into two regions: Western Hemisphere and Eastern
Hemisphere. Western Hemisphere sales and marketing efforts are directed by the
Vice President of Sales and Marketing, a U.S. and Canadian sales manager and a
Latin American sales manager supported by three customer service specialists
and a nine person engineering department. Products are also marketed by 47
independent distributors and dealers, 20 packaging machinery manufacturers and
directly to national accounts. In the Eastern Hemisphere, Fischbein manages a
network of 67 independent distributors and dealers and 53 packaging machinery
manufacturers in Belgium, the United Kingdom, France and Singapore.
Fischbein's flexible conveyors and storage racks sales and marketing efforts
are directed by a sales manager with the assistance of four regional sales
managers and supported by three sales specialists who are focused on sales
support and customer service activities. Products are also sold through more
than 500 independent material handling dealers throughout the U.S. and to a
lesser extent in Canada and Latin America. Fischbein has sales partnership
arrangements with 18 material handling systems manufacturers and sells
directly to national end-user accounts. Fischbein supplements its sales
activity with trade advertising, training, demonstrations, application videos
and product literature and by participation in regional trade shows.
CUSTOMERS
The Company's customers are diversified across each of the Company's
business units. Ames' products are generally used by interior finishing
contractors and Ames currently has over 10,000 active customer accounts.
Nestaway's products are sold to dishwasher manufacturers and other marketers
of formed wire products, including major OEMs such as Maytag, Frigidaire, EBS-
Bosch, Whirlpool/Kitchen Aid and General Electric. The Company's most
significant OEM customer, Maytag, accounted for approximately 20% of the
Company's consolidated revenues in 1997. The Company's customers of other
formed wire products currently include the E-Z Go Division of Textron, Inc.,
Melex International, Allegiance Healthcare and a major consumer products
company. Fischbein's customers include companies in a variety of industries
including the food, chemical, agriculture and other industries.
OPERATIONS
Ames. Ames purchases proprietary ATF tool components from both domestic and
foreign suppliers and either assembles the parts into finished tools in the
Company's service centers or uses the parts to refurbish rental tools. These
tools are then rented or sold through Ames' national distribution network. In
addition, Ames cleans and refurbishes ATF tools at the end of each rental.
Nestaway. Nestaway operates four manufacturing plants which are located near
its major customers. Nestaway's manufacturing operations consist of wire
preparation and forming, welding,
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coating and assembly and packaging. These manufacturing operations are highly
automated and require high tolerance levels. The Company's processes include
the use of robotics, custom designed manufacturing processes and tooling, the
ability to weld up to 412 spots per unit and highly complex coating processes.
Fischbein. Fischbein's manufacturing processes include precision machining,
welding, final assembly and the integration of electronic controls. While most
orders are for standard products, Fischbein also designs and builds custom
systems.
RAW MATERIALS AND SUPPLIERS
The Company purchases steel, metal castings, aluminum and other raw
materials from various suppliers. While all such materials are available from
numerous independent suppliers, commodity raw materials are subject to
fluctuations in price. There can be no assurance that severe shortages of such
materials will not occur in the future, which could increase the cost of or
delay the shipment of the Company's products and have a material adverse
effect on the Company's operating results. Because such materials in the
aggregate constitute significant components of the Company's cost of goods
sold, fluctuations in price could have a material adverse effect on the
Company's results of operations. Historically, the Company has passed on any
increases in prices of raw materials to its customers. However, there can be
no assurance that the Company will continue to be able to do so in the future.
COMPETITION
Each of the business units operates within competitive industries. The
Company is not aware of any single competitor that competes with the Company
along all three business lines.
Ames products compete with alternative methods of drywall finishing and
other products of ATF tool manufacturers and distributors. Ames' most
significant competition is from traditional hand finishing by individual
professional finishers. Ames stores also operate in a highly competitive
environment with respect to the sale of drywall related merchandise which is
generally based on price and convenience. Drywall related merchandise is
available from contractor supply yards, building material retailers and other
sources.
Nestaway's primary independent competitor is Ranger Metal Products. However,
the majority of dishwasher racks are internally manufactured by OEMs. There
can be no assurance that the Company's existing customers will not increase or
establish in-house dishwasher rack manufacturing capacity in the future. In
1996 and 1994, certain dishwasher rack customers decided to produce dishwasher
racks in-house, resulting in a material decline in the Company's revenues. See
"Risk Factors--Reliance on Major Customers" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations." General Electric,
Frigidaire and Whirlpool operate in-house dishwasher rack manufacturing
operations. Competition is generally based on quality, flexibility, product
design innovation, manufacturing efficiency and price. Nestaway's other non-
coated and coated formed wire products operate in a highly competitive
environment based on price, quality and delivery capability and includes many
companies, none of which compete with Nestaway across all its product lines.
There can be no assurance the Company will continue to innovate its product
offerings or continue to reduce manufacturing costs. Such inability to
continue to innovate products or pass on manufacturing cost savings pursuant
to contract terms or otherwise could lead to the loss of certain customers or
lower gross margins.
Fischbein competes with a variety of manufacturers, but does not compete
with any one company across all its product lines. In bag closing, Fischbein
competes with Newlong, Union Special and Doboy Packaging Machinery, Inc.
Competition for bag closing products is generally based on price, geographic
location, service, reliability and product innovation. With regard to flexible
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conveyors, Fischbein primarily competes with Best Diversified Products, and
competition is generally based on price and functionality. In storage racks,
Fischbein competes with Jarke Corporation, Tier-Rack and Federal Prison
Industries, and competition is based primarily on price and geographic
location.
ENVIRONMENTAL MATTERS
The Company is subject to various federal, state, local and foreign laws and
regulations governing environmental and employee health and safety matters,
including the handling, the use, discharge and disposal of hazardous materials
and pollutants. The Company believes that the conduct of its operations is in
substantial compliance with current applicable environmental laws and
regulations. Maintaining such compliance in the conduct of its operations has
not had, and is not expected to have, a material adverse effect on the
Company's financial condition or operating results. However, changes in laws
or regulations or other circumstances might, individually or in the aggregate,
have a material adverse effect on the Company's financial condition or
operating results.
On February 25, 1991, the New York State Department of Environmental
Conservation ("NYSDEC") sent a notice letter to the Company alleging that it
had documented the release and/or threatened release of "hazardous substances"
and/or the presence of "hazardous wastes" at a property located in Buffalo,
New York, formerly owned by Bliss and Laughlin Steel Company, a predecessor of
the Company. NYSDEC determined that the Company, among others, may be a
responsible party through its past ownership of the property. The site is
currently listed on the New York State Registry of Inactive Hazardous Waste
Disposal Sites. Environmental consultants engaged by the Company have
established a range of estimated remediation costs of approximately $1.0
million to $3.0 million, plus or minus 30% of those costs. The Company
established an accrual of $3.9 million for the remediation and associated
costs.
In 1997, the Company entered into an agreement with an adjoining landowner,
who is obligated by NYSDEC to address environmental concerns at his property.
By this agreement, the adjoining landowner agreed to accept responsibility for
remediating the property formerly owned by the Company if a particular remedy
for that property is ultimately approved by NYSDEC. On the advice of its
environmental consultants, provided after reviewing available data about the
Company's former property, the Company believes it is likely that NYSDEC will
approve the remedy in question, but the Company can give no assurance that
NYSDEC will in fact offer its approval. The Company paid the $520,000 payable
under the agreement and has an exposure under the agreement of up to an
additional $120,000 if contamination is more widespread than estimated by the
Company's environmental consultants. In the event NYSDEC does not approve the
remedy envisioned in the agreement with the adjoining landowner, the Company
may terminate the agreement and demand the return of its payment with
interest. In that case, the adjoining landowner would no longer be obligated
to undertake the remediation of the property formerly owned by the Company.
Of the consideration paid pursuant to the Merger Agreement, $5 million was
set aside in a special escrow account to cover environmental costs which may
be incurred by the Company in connection with cleanup of the site and any
damages or other required environmental expenditures relating to the site. The
balance in the account, after payment of such costs, will be released to the
former stockholders upon the first to occur of the approval by NYSDEC of the
proposed remediation action or the confirmation by NYSDEC that remediation at
the site has been completed in accordance with its then applicable decision in
the matter (the "Early Release Date"). If, however, the Early Release Date
occurs before the additional $120,000 is paid under the above-described
agreement, the special escrow account will continue as to that $120,000 until
it is paid or it has become clear that no claim will be made for such funds.
In addition, if certain additional specified cleanup activities are not
completed by the Early Release Date, an additional $80,000 will be withheld in
the special escrow account until such cleanup is completed. If all of the
funds in the special escrow account have
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not been released by the third anniversary of the Closing Date, the funds
remaining in the special escrow account will be disbursed to the Company to
cover the remaining estimated costs, with the balance to be distributed to the
former stockholders of the Company, in accordance with an agreement to be
reached by the Stockholder Representative and the Company, or upon failure of
such parties to agree, through an arbitration procedure.
The Company may also make claims against the warranty fund of the escrow
fund for breach of certain representations and warranties in the Merger
Agreement regarding other environmental matters for a period of 24 months
after Closing Date, subject to a specified threshold and deductible.
The Company is aware of other formerly-owned sites at which activities
similar to the operations previously conducted on the Buffalo, New York
property have taken place. However, the Company has received no claims in
connection with those sites, and has no information that would lead it to
believe that any such claim is likely to be made. The Company is also a part-
owner and landlord at a stainless steel and aluminum facility in Commerce,
California that is leased to and operated by an unrelated company. The Company
has received no claims against it in connection with this site, but the
Company cannot rule out the possibility that it might incur some liability
should a claim actually be made against it as current owner of the property.
The Buffalo, New York property formerly owned by the Company was at one time
used to mill uranium rods for the Atomic Energy Commission. The U.S.
Department of Energy has since identified residual radioactivity in a building
at the site. In 1996, the government estimated the costs of addressing the
residual radioactivity at $965,000. Given the available data, the Company and
its environmental consultants believe that a more likely total cost is less
than $100,000. To date, no clean up costs have been assessed against the
Company.
In addition, the Company has retained or assumed certain environmental
liabilities and risks of future liabilities associated with businesses
previously operated or acquired by it, including Bliss and Laughlin Steel
Company. The Company does not believe that these retained or assumed
liabilities and risks would be expected to have a material adverse effect on
the Company's financial condition or operating results. However, changes in
laws or regulations, liabilities identified or incurred in the future, or
other circumstances, might (individually or in the aggregate) have such an
effect.
EMPLOYEES
As of June 30, 1998, the Company had approximately 1,000 employees, of which
approximately 150 were represented by two unions under two contracts which
expire in 1999. The Company believes that its relations with its employees are
satisfactory.
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PROPERTIES AND FACILITIES
The Company believes it has adequate capacity to meet the current
requirements of its customers. The major properties of the Company are listed
below. The Company also leases several offices, two service centers, a
warehouse and 64 stores. These locations are historically leased on a short-
term basis of one to five years to provide maximum flexibility. The business
conducted at these leased locations is relocatable and no individual lease or
location is material to the Company.
<TABLE>
<CAPTION>
SIZE IN
SQ.
LOCATION FEET OWNED/LEASED DESCRIPTION
-------- ------- ------------ -------------------------------
<S> <C> <C> <C>
Garfield Heights,
Cleveland, Ohio.......... 120,000 Owned Fabrication of dishdrainer
racks, wire products and
storage racks and assembly of
flexible conveyors
McKenzie, Tennessee....... 79,000 Owned Fabrication of dishwasher racks
Beaver Dam, Kentucky...... 64,000 Owned Fabrication of dishwasher
racks, dishwasher rack
components and other formed
wire products
Clinton, North Carolina... 60,000 Owned Fabrication of dishwasher racks
Commerce, California(/1/). 54,500 Owned/Leased Subleased
Statesville, North
Carolina(/2/)............ 50,000 Leased Assembly and manufacture of
industrial sewing and packaging
Livermore, machines
California(/3/).......... 27,600 Leased Office and warehouse space for
the manufacture, distribution,
repair and maintenance of ATF
Stone Mountain, tools
Georgia(/2/)............. 18,200 Leased Office and warehouse space for
the manufacture, distribution,
repair and maintenance of ATF
tools
Duluth, Georgia(/4/)...... 11,896 Leased General office
Brussels, Belgium(/5/).... 11,000 Leased Assembly and warehousing of
packaging machines
Hayward, California(/6/).. 8,000 Leased Office, warehouse and parts
distribution
Union City,
California(/6/).......... 5,800 Leased Warehousing, distribution and
assembly of sold ATF tools
Paris, France............. 5,200 Owned Assembly and distribution of
packaging machines
Lombard, Illinois(/6/).... 4,800 Leased General office
</TABLE>
- --------
(1) Property is 50% owned and 50% leased on a monthly basis
(2) Lease expires in 2003
(3) Lease expires in 2008
(4) Lease expires in 2001
(5) Lease expires in 2006
(6) Lease expires in 1999
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LEGAL PROCEEDINGS
The Company is a defendant in a number of lawsuits incidental to its
business. Including the environmental matters discussed above and taking into
account the proceeds held in escrow pursuant to the Merger Agreement, the
Company believes that none of these proceedings, individually, or in the
aggregate, will have a material adverse effect on the Company's financial
condition or operating results. See "--Environmental Matters."
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the name, age and position held by the
directors, and executive officers of AXIA Group and the Company. Each director
is elected for a one year term or until such person's successor is duly
elected and qualified.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Gary L. Rosenthal....... 48 Chairman of the Board
Lyle J. Feye............ 45 Vice President--Finance, Treasurer
and Chief Financial Officer
David H. Chesney........ 55 President and General Manager of Nestaway
Ian G. Wilkins.......... 59 President and General Manager of Fischbein
Robert G. Zdravecky..... 52 President and General Manager of Ames
Susan O. Rheney......... 39 Director
Dennis W. Sheehan....... 64 Director
</TABLE>
Gary L. Rosenthal became Chairman of the Board in July 1998. Mr. Rosenthal
is the President of Heaney Rosenthal, Inc., a private financial organization
specializing in the acquisition of businesses, a position he has held since
1994. From 1990 to 1994, he was Chairman, and in 1994 assumed the additional
titles of Chief Executive Officer and President of Wheatley TXT Corp., a
publicly-traded oilfield equipment manufacturer. From 1988 to 1990, he was a
principal of Sterling. From 1987 to 1988, he was a Senior Vice President of
Cain Chemical, Inc. Mr. Rosenthal currently serves as Chairman of the Board of
Diamond Products International, Inc. and is a director of Texas Petrochemical
Holdings, Inc. Mr. Rosenthal will continue to devote a substantial portion of
his time to Heaney Rosenthal, Inc.
Lyle J. Feye became Vice President--Finance, Treasurer and Chief Financial
Officer of the Company in March 1994. From 1988 to March 1994, Mr. Feye was
Corporate Controller and Assistant Treasurer of the Company. From 1975 to
1988, Mr. Feye served in various positions with the Continental Group Inc.
(formerly the Continental Can Company), including divisional financial and
accounting management.
David H. Chesney became President and General Manager of Nestaway in 1991.
From 1987 to 1991, Mr. Chesney served as General Manager of Lawrence
Industries, a division of Electrolux, an assembler of vacuum cleaners and
manufacturer of vacuum cleaner components, rubber and plastic hoses and
electrical cord sets and harnesses. From 1967 to 1987, Mr. Chesney worked for
General Electric Company where he held a variety of positions, the most recent
being Materials Manager & Quality Assurance Manager with the Major Appliance
Business Group.
Ian G. Wilkins became President and General Manager of Fischbein in May
1994. From 1988 to May 1994, Mr. Wilkins was Chief Operating Officer and
General Manager of HK Metalcraft Manufacturing, a manufacturer of metal
assemblies, components and other precision products primarily for the auto
industry. Mr. Wilkins' responsibilities included supervision of manufacturing,
sales and customer service. From 1984 to 1988, Mr. Wilkins had responsibility
for all operations of Scott Aviation, a Division of Figgie International, as
Vice President of Manufacturing.
Robert G. Zdravecky became President and General Manager of Ames in 1993.
Mr. Zdravecky first joined the Company in 1986 as General Manager of Sales and
Marketing for Ames. He was promoted to Vice President of the Construction Tool
Group, a position he held until 1992, when his
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employment with the Company terminated as a result of the sale of two of the
Company's divisions to The Stanley Works. He rejoined the Company in 1993 in
his current position. From 1981 to 1986, Mr. Zdravecky served as Vice
President-Marketing and Sales with Adhesive Engineering Co.
Susan O. Rheney has been a principal of Sterling since February 1992. She
worked as an independent financial consultant from December 1990 to January
1992. Prior to that time, from June 1987 to November 1990, she was an
associate at Sterling. Ms. Rheney is also a director of Texas Petrochemical
Holdings, Inc.
Dennis W. Sheehan was President and Chief Executive Officer of the Company
from 1984 to July 1998. He joined the Company in 1977 as Vice President,
General Counsel and Secretary. Mr. Sheehan is Chairman of the Board of
Directors of Allied Healthcare Products, Inc., St. Louis, Missouri, a
publicly-traded manufacturer and distributor of healthcare and related
products.
THE BOARD AND CERTAIN BOARD COMMITTEES
The Company's Board supervises the management of the Company as provided by
Delaware law.
AXIA Group's Board expects to establish the following committees:
The Executive Committee, which will possess all the powers and authority
of AXIA Group's Board with respect to the management and direction of the
business and affairs of AXIA Group, except as limited by law.
The Audit Committee, which will recommend independent public accountants
to AXIA Group's Board, review the annual audit reports of AXIA Group and
review the fees paid to AXIA Group's independent public accountants. The
Audit Committee will report its findings and recommendations to the Board
for ratification.
The Compensation Committee, which will be charged with the responsibility
for supervising AXIA Group's executive compensation policies, administering
the employee incentive plans, reviewing officers' salaries, approving
significant changes in executive employee benefits and recommending to the
Board such other forms of remuneration as it deems appropriate.
AXIA Group's Board, acting as a committee of the whole, will have the
responsibility for considering nominations for prospective AXIA Group Board
members. The Board will consider nominees recommended by other AXIA Group
directors, stockholders and management provided that nominations by
stockholders are made in accordance with AXIA Group's by-laws. AXIA Group's
Board may also establish other committees.
COMPENSATION OF DIRECTORS
Directors of AXIA Group and the Company who are not employees of the Company
receive an annual retainer of $15,000 and a fee of $500 for each meeting of
the Board or any committee thereof that they attend. Directors who are also
employees of the Company do not receive Director compensation.
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EXECUTIVE COMPENSATION
The following table sets forth the total value of compensation received by
the Chief Executive Officer and the four most highly compensated executive
officers, other than the Chief Executive Officer, who served as executive
officers of the Company as of December 31, 1997 (the "Named Executive
Officers") for services rendered in all capacities to the Company for the
years ended December 31, 1997, 1996 and 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
OTHER ANNUAL
NAME AND PRINCIPAL POSITION(/1/) YEAR SALARY BONUS(/2/) COMPENSATION(/3/)
-------------------------------- ---- -------- -------- ------------
<S> <C> <C> <C> <C>
Dennis W. Sheehan................ 1997 $336,000 $200,000 $19,837
President and Chief Executive
Officer(/4/) 1996 336,000 200,000 19,626
1995 336,000 100,000 20,243
Lyle J. Feye..................... 1997 $140,500 $ 45,000 $10,210
Vice President--Finance,
Treasurer and 1996 134,208 45,000 10,183
Chief Financial Officer 1995 127,709 28,000 10,150
Robert G. Zdravecky.............. 1997 $171,500 $ 62,640 $11,766
President and General Manager of
Ames 1996 163,333 67,500 11,664
1995 154,165 22,100 10,767
David H. Chesney................. 1997 $166,900 $ 25,000 $ 9,317
President and General Manager of
Nestaway 1996 158,875 114,000 9,202
1995 152,502 67,900 8,731
Ian G. Wilkins................... 1997 $163,083 $ 48,000 $ 8,958
President and General Manager of
Fischbein 1996 155,250 52,000 9,339
1995 145,835 22,100 9,145
</TABLE>
- --------
(1) Since 1994, these individuals have not received any restricted stock
awards or options. None of the executive officers has received
perquisites, the value of which exceeded the lesser of $50,000 or 10% of
the salary and bonus of such executive officer.
(2) The Company provides a bonus plan with bonus payments to be made in cash.
(3) Includes payments for life insurance and automobile allowance.
(4) In connection with the closing of the Transactions, Mr. Sheehan ceased to
serve as President and Chief Executive Officer.
Mr. Rosenthal will receive annual compensation of $150,000 for his services
as Chairman and will be eligible to participate in the Company's bonus plan
and the 1998 Stock Awards Plan (as defined herein).
EMPLOYEE STOCK OWNERSHIP AND 401(K) PLAN
All U.S. salaried and non-bargaining hourly employees, who have provided
service to AXIA Incorporated for one-half of a year and are at least age 21,
may participate in the AXIA Incorporated 401(k) Plan ("401(k) Plan"). The
401(k) Plan is designed to qualify under Section 401(k) of the Internal
Revenue Code of 1986, as amended (the "Code"). Each such employee has the
option to defer taxation of a portion of his or her earnings by directing AXIA
Incorporated to contribute a percentage of earnings to the 401(k) Plan
("Deferral Contributions"). A participant may defer up to 15% of eligible
earnings to the 401(k) Plan, subject to certain limitations set forth in the
401(k) Plan. A participant is always 100% vested in his or her Deferral
Contributions. A participant's Deferral Contributions become distributable
upon the termination of his or her employment for any reason.
In connection with the Transactions, the Company established an Employee
Stock Ownership Plan (the "ESOP"), covering substantially all full time
employees, including executive officers, of the Company who satisfy the
requirements described below. Following the Transactions, the 401(k) Plan
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will be merged into the ESOP, and an employee satisfying the eligibility
requirements under the 401(k) Plan will be able to make Deferral Contributions
to the ESOP as was allowed under the 401(k) Plan. The ESOP borrowed $1.5
million from Finance Co. (the "Company ESOP Loan") to purchase 15,000 shares
of Common Stock at the Closing. Finance Co. funded the Company ESOP Loan from
the ESOP Term Loan. The Company ESOP Loan matures on December 31, 2003 and
bears interest at interest rates based on the Alternative Base Rate (as
defined) or the LIBOR Rate (as defined). The outstanding principal of the
Company ESOP Loan is payable in 22 equal quarterly installments of $68,182
during the period beginning September 30, 1998. The 15,000 shares of Common
Stock purchased by the ESOP are pledged (the "ESOP Pledge") as security for
the Company ESOP Loan, and such shares will be released and allocated to ESOP
participants' accounts as the Company ESOP Loan is discharged. The Company
will make ESOP contributions in amounts sufficient to enable the ESOP to
discharge its indebtedness under the Company ESOP Loan. A percentage of the
shares released under the ESOP Pledge will be allocated to each participant
based on a percentage of such participant's Deferral Contributions ("Matching
Contributions"), and (ii) the remaining percentage of such shares released are
allocated to each participant based on such participant's compensation
relative to total compensation for all ESOP participants ("Discretionary
Contributions"). Until the Company ESOP Loan is paid in full, ESOP
Contributions will be used to pay the outstanding principal and interest on
the Company ESOP Loan. Participation begins as employees satisfy the
eligibility requirements to make Deferral Contributions.
A participant's ESOP account, which is such participant's allocation of
shares based on Matching or Discretionary Contributions, vests at the rate of
20% per year. Distributions from the participant's ESOP account are made in
cash or Common Stock upon a participant's retirement, death, disability or
termination of employment. In the event of retirement, death or disability,
the entire balance of a participant's ESOP account will become distributable
without regard to the ordinary vesting schedule. In the event of termination
of employment for any other reason, the vested portion of a participant's ESOP
account will become distributable and the remaining portion, if any, will be
forfeited. If Common Stock is distributed to a participant, the participant
may, within two 60-day periods, require the Company to purchase all or a
portion of such Common Stock at the fair market value of the Common Stock as
determined under the ESOP (the "Put Options"). The first 60-day period
commences on the date the participant receives a distribution of Common Stock
and the second 60-day period commences a year from such date. If a participant
fails to exercise either of the two Put Options, the participant may transfer
the shares of Common Stock only upon receipt of a bona fide third party offer
and only after first offering the shares to the ESOP and then to the Company.
Employees of the Company own approximately 5.4% of the outstanding Common
Stock through the ESOP.
RETIREMENT PLAN
Substantially all salaried and non-bargaining hourly employees participate
in the AXIA Incorporated Salaried Employees' Retirement Plan. Under the terms
of the Plan, each eligible employee receives a retirement benefit based on the
number of years of credited service with the Company and average total
earnings for the five consecutive years of highest earnings during the fifteen
years preceding termination of employment.
As of December 31, 1997, the number of years of credited service for the
indicated persons are: Mr. Sheehan, 19.08 years; Mr. Feye, 8.33 years; Mr.
Zdravecky, 9.08 years; Mr. Chesney, 5.83 years and Mr. Wilkins, 2.58 years.
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The amounts shown in the following table are estimated annual retirement
benefits (payable as a straight life annuity) for the respective compensation
levels and years of service, after deduction of an offset of anticipated
Social Security benefits as provided under the terms of the Plan:
<TABLE>
<CAPTION>
YEARS OF SERVICE
REMUNERATION 10 15 20 25 30
- ---------------
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$125,000 $22,568 $33,852 $45,136 $56,420 $67,704
$150,000 27,568 41,352 55,136 68,920 82,704
$175,000 32,568 48,852 65,136 81,420 97,704
$200,000 37,568 56,352 75,136 93,920 112,704
$225,000 42,568 63,852 85,136 106,420 127,704
</TABLE>
MEDICAL INSURANCE
Certain Company officers participate in a medical insurance plan covering up
to $100,000 per participant in annual medical expenses. The aggregate benefit
amount paid for such participants totaled $6,287 for 1997.
SALARY CONTINUATION
In order to attract and encourage key executives to remain with the Company,
the Company instituted a salary continuation program which provides certain
key executives with a death benefit, contingent upon employment or service as
a consultant with the Company until retirement or death. Upon the executive's
death, the Company will pay to his designated beneficiary, annually for a
period of ten years, an amount equal to 40% of the executive's current annual
salary or salary at date of retirement. The Company may terminate the death
benefit program and the agreement with any executive at any time prior to the
executive's death, disability or retirement, except that, during the three
year period following certain events involving a "change of control" of the
Company, only a portion of those benefits may be terminated. The Company has
purchased life insurance policies on the lives of the executives, naming the
Company as the sole beneficiary. The amount of such coverage is designed to
provide to the Company a source of funds to satisfy its obligations under the
program. Annual premiums paid in 1997 with respect to Mr. Sheehan, was
approximately $53,839; however, if current assumptions as to mortality
experience, policy dividends and other factors are realized, the Company will
recover, through tax deductions over the life of the program, all of its
payments to the insurance company and the executives. Mr. Sheehan was the last
active executive covered by this program.
MANAGEMENT INCENTIVE COMPENSATION PLAN
The Company has adopted an incentive plan which provides to certain
employees, including the executives listed above, an annual performance bonus.
These bonuses are calculated on the basis of the employee's base annual salary
and percentage eligibility as defined in the plan. Bonuses are paid in the
first quarter of the following year, assuming the Company meets a targeted
earnings improvement, revenues, gross margin, cash flow, and/or such other
measures as may be determined annually by the Company's directors.
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STOCK OPTIONS
The Parent has granted to certain employees stock options providing them the
option to purchase restricted shares of common stock of the Parent aggregating
approximately 4% of the common stock on a fully diluted basis. All stock
options were exercised prior to the closing of the Transactions and the new
stock awards plan described below was adopted.
1998 STOCK AWARDS PLAN
In connection with the closing of the Transactions, the Board of Directors
and the Company's stockholders approved the Company's 1998 Stock Awards Plan
(the "1998 Stock Awards Plan"). The 1998 Stock Awards Plan is intended to
provide employees, consultants and other service providers with an opportunity
to acquire a proprietary interest in AXIA Group and additional incentive and
reward opportunities based on the growth in the Common Stock price of AXIA
Group. The 1998 Stock Awards Plan provides for the granting of options (either
incentive stock options within the meaning of Code Section 422(b), or options
that do not constitute incentive stock options ("non-qualified stock
options")), restricted stock awards, stock appreciation rights, performance
awards and phantom stock awards, or any combination thereof. The number of
shares of Common Stock that may be subject to outstanding awards is 31,111
shares of Common Stock. Shares of Common Stock which are attributable to
awards which have expired, terminated or been canceled or forfeited are
available for issuance or use in connection with future awards.
Administration. The 1998 Stock Awards Plan will be administered by the
Compensation Committee of AXIA Group. The Compensation Committee will have the
power to determine which employees, consultants and other service providers
will receive an award, the time or times when such award will be made, the
type of the award and the number of shares of Common Stock to be issued under
the award or the value of the award. Only persons who at the time of the award
are employees of or service providers to AXIA Group or of any subsidiary of
AXIA Group will be eligible to receive awards under the 1998 Stock Awards
Plan. A director of AXIA Group is not eligible to receive an award under the
1998 Stock Awards Plan unless such director is an employee of AXIA Group or
any of its subsidiaries.
Options. The 1998 Stock Awards Plan provides for two types of options:
incentive stock options and non-qualified stock options. The Compensation
Committee will designate the persons to receive the options, the number of
shares subject to the options and the terms and conditions of each option
granted under the 1998 Stock Awards Plan. The term of any option granted under
the 1998 Stock Awards Plan shall be determined by the Compensation Committee;
provided, however, that an incentive stock option may only be awarded to an
employee and that the term of any incentive stock option cannot exceed ten
years from the date of the grant and any incentive stock option granted to an
employee who possesses more than 10.0% of the total combined voting power of
all classes of shares of AXIA Group or of its subsidiary within the meaning of
Section 422(b)(6) of the Code must not be exercisable after the expiration of
five years from the date of grant. The exercise price of options granted under
the 1998 Stock Awards Plan will be determined by the Compensation Committee;
provided, however, than an incentive stock option exercise price cannot be
less than the fair market value of a share of Common Stock on the date such
option is granted (subject to certain adjustments provided under the 1998
Stock Awards Plan). Further, the exercise price of any incentive stock option
granted to an employee who possesses more than 10.0% of the total combined
voting power of all classes of shares of AXIA Group or of its subsidiaries
within the meaning of Section 422(b)(6) of the Code must be at least 110% of
the fair market value of the Common Stock on the date such option is granted.
The exercise price of options granted under the 1998 Stock Awards Plan will be
paid in full in a manner prescribed by the Compensation Committee.
Restricted Stock Awards. Pursuant to a restricted stock award, Common Stock
will be granted to an eligible person at the time the award is made without
any cash payment to AXIA Group,
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except to the extent otherwise provided by the Compensation Committee or
required by law; provided, however, that such shares will be subject to
certain restrictions on the disposition thereof and certain obligations to
forfeit such shares to the Company as may be determined in the discretion of
the Compensation Committee. The restrictions on disposition may lapse based
upon (a) AXIA Group's attainment of specific performance targets established
by the Compensation Committee that are based on; (i) the fair market value of
a share of Common Stock; (ii) AXIA Group earnings per share; (iii) the
Company's revenue; (iv) the revenue of a business unit of AXIA Group
designated by the Compensation Committee; (v) the return on stockholders'
equity achieved by AXIA Group or (vi) AXIA Group's pre-tax cash flow from
operation (b) the grantee's tenure with AXIA Group, or (c) a combination of
factors. AXIA Group will retain custody of the Common Stock issued pursuant to
a restricted stock award until the disposition restrictions lapse. A grantee
may not sell, transfer, pledge, exchange, hypothecate, or otherwise dispose of
such shares until the expiration of the restriction period. However, upon the
issuance to the grantee of Common Stock pursuant to a restricted stock award,
except for the foregoing restrictions, such grantee will have all the rights
of a stockholder of the Company with respect to such shares, including the
right to vote such shares and to receive all dividends and other distributions
paid with respect to such shares.
Stock Appreciation Rights. A stock appreciation right permits the holder
thereof to receive an amount (in cash, Common Stock, or a combination thereof
(as determined by the Compensation Committee)), equal in value to the number
of stock appreciation rights exercised by the holder multiplied by the excess
of the fair market value of Common Stock on the exercise date over the stock
appreciation rights' exercise price. Stock appreciation rights may or may not
be granted in connection with the grant of an option and no stock appreciation
right may be exercised earlier than six months from the date of grant. A stock
appreciation right may be exercised in whole or in installments and at such
time as determined by the Compensation Committee.
Performance and Phantom Stock Awards. The 1998 Stock Awards Plan permits
grants of performance awards and phantom stock awards, which may be paid in
cash, Common Stock, or a combination thereof as determined by the Compensation
Committee. Performance awards granted under the 1998 Stock Awards Plan will
have a maximum value established by the Compensation Committee at the time of
the grant. A grantee's receipt of such amount will be contingent upon
satisfaction by AXIA Group, or any subsidiary, division or department thereof,
of performance conditions established by the Compensation Committee prior to
the beginning of the performance period. Future performance conditions may be
based on: (i) the price of a share of Common Stock; (ii) AXIA Group's earnings
per share; (iii) the Company's revenue; (iv) the revenue of a business unit of
AXIA Group designated by the Compensation Committee; (v) the return on
stockholder's equity achieved by AXIA Group; (vi) AXIA Group or business
unit's pre-tax cashflow from operations or (vii) a combination of such
factors. Such performance awards, however, may be subject to later revisions
as the Compensation Committee deems appropriate to reflect significant
unforeseen events or changes. A performance award will terminate if the
grantee's employment or service with the Company terminates during the
applicable performance period except as otherwise provided by the Compensation
Committee at the time of grant. Phantom stock awards granted under the 1998
Stock Awards Plan are awards of Common Stock or rights to receive amounts
equal to stock appreciation over a specific period of time. Such awards vest
over a period of time or upon the occurrence of a specific event(s)
established by the Compensation Committee, without payment of any amounts by
the holder thereof (except to the extent required by law) or satisfaction of
any performance criteria or objectives. Future performance conditions may be
based on (i) the price of a share of Common Stock; (ii) AXIA Group's earnings
per share; (iii) AXIA Group's revenue; (iv) the revenue of a business unit of
AXIA Group designated by the Compensation Committee; (v) the return on
stockholder's equity achieved by AXIA Group; (vi) AXIA Group or business
unit's pre-tax cashflow from operations or (vii) a combination of such
factors. A phantom stock award will terminate if the grantee's employment or
service with the Company terminates during the applicable vesting period or,
if applicable, the
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<PAGE>
occurrence of a specific event(s), except as otherwise provided by the
Compensation Committee at the time of grant. In determining the value of
performance awards or phantom stock awards, the Compensation Committee must
take into account a grantee's responsibility level, performance, potential,
other awards under the 1998 Stock Awards Plan and such other considerations as
it deems appropriate. Such payment may be made in a lump sum or in
installments as prescribed by the Compensation Committee. Any payment made in
Common Stock will be based upon the fair market value of the Common Stock on
the payment date.
Income Tax Considerations. Upon the exercise of a nonqualified option, the
optionee will recognize ordinary taxable income on the amount by which the
fair market value of the Common Stock purchased exceeds the price paid for
such Common Stock under the option. The Company shall be able to deduct the
same amount for federal income tax purposes. The exercise of an incentive
stock option has no tax consequence to an optionee or the Company. At the time
the restrictions lapse on a restricted stock award, the holder of such award
will recognize ordinary taxable income in an amount equal to the fair market
value of the shares of Common Stock on which the restrictions lapse. The
amount of ordinary taxable income recognized by such holder of a restricted
stock award is deductible by the Company. Upon the exercise of a stock
appreciation right, the holder of such right must include in ordinary taxable
income the amount of cash or the fair market value of the shares of Common
Stock received. The amount of ordinary taxable income recognized by such
holder of the stock appreciation right is deductible by the Company. A holder
of a performance award or a phantom stock award will include in his or her
ordinary taxable income the fair market value of the shares of Common Stock
related to such award when the holder's rights in such award first becomes
transferable or is no longer subject to a substantial risk of forfeiture. The
amount of ordinary taxable income recognized by the holder of either award is
deductible by the Company.
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RELATED TRANSACTIONS
Sterling entered into an agreement with AXIA Group and Acquisition Co.
pursuant to which Sterling is to provide consulting and advisory services with
respect to the organization of AXIA Group, Acquisition Co. and Finance Co.,
the structuring of the Transactions, employee benefit and compensation
arrangements and other matters. The agreement also provides that AXIA Group
and Acquisition Co., jointly and severally, will indemnify Sterling against
liabilities relating to its services. At the Closing, the Company paid
Sterling a one-time transaction fee of $2.5 million for these services, and
reimbursed Sterling for its expenses. From the transaction fee received at
Closing, Sterling paid Gary Rosenthal a fee of $250,000 for consulting
services rendered in connection with the Transactions, and AXIA Group and the
Company will indemnify Mr. Rosenthal against liabilities related to his
services. In addition, through 2008 AXIA Group will pay Sterling an annual
management fee of $100,000 in cash and annually grant Sterling AXIA Group
Common Stock having a value of $100,000 calculated based upon the latest ESOP
valuation price. In addition, each of AXIA Group, and Acquisition Co. has
agreed that if any one or more of them or any of their subsidiaries determines
within ten years of the date of the closing of the Acquisition to dispose of
or acquire any assets or business having a value of $1 million or more (a
"Future Corporate Transaction") or to offer its securities for sale publicly
or privately to raise any debt or equity financing (a "Future Securities
Transaction"), either AXIA Group, Acquisition Co., or the relevant subsidiary
will retain Sterling as a consultant with respect to the transaction, provided
a principal, officer or director of Sterling or any of their respective
affiliates or family members owns any equity securities of AXIA Group or any
of its successors. For any Future Corporate Transactions, Sterling is entitled
to receive a fee in the amount of 1% of the aggregate consideration paid or
received plus the aggregate amount of any liabilities assumed in connection
with an acquisition or disposition and reimbursement of any expenses or fees
incurred by Sterling in connection therewith. For any Future Securities
Transactions, Sterling is entitled to receive a fee in the amount of 0.5% of
the aggregate gross selling price of such securities and, regardless of
whether such Future Securities Transaction is consummated, Sterling is
entitled to receive reimbursements of any expenses or fees incurred by
Sterling in connection therewith. The agreement is automatically renewable for
successive one-year periods, subject to notice of termination by either
Sterling or AXIA Group.
AXIA Group, Acquisition Co. and Finance Co. were organized by Sterling for
the purpose of effecting the Acquisition. Ms. Susan Rheney, a principal of
Sterling, is a director of AXIA Group, Acquisition Co. and the Company. See
"Management." Ms. Rheney, Mr. Hevrdejs and Mr. Oehmig, all associated with
Sterling, purchased 5,000 shares, 25,000 shares and 16,500 shares,
respectively, of AXIA Group Common Stock as part of the Equity Investment.
Additionally, Messrs. Chesney, Feye, Sheehan, Wilkins, Zdravecky and Rosenthal
(or a trust for his descendants) purchased 3,750 shares, 3,000 shares, 4,000
shares, 2,500 shares, 3,500 shares and 10,000 shares, respectively, of AXIA
Group Common Stock as part of the Equity Investment. All such purchases of
Common Stock were made at a price of $100 per share, the same price at which
all shares were sold in the Equity Investment referred to above. See
"Beneficial Ownership."
Messrs. Chesney, Feye, Wilkins and Zdravecky will receive proceeds from the
sale of stock of the Parent or stock option proceeds, or both, and payments
pursuant to various employee incentive bonus programs of approximately $2.0-
$2.4 million each. Mr. Sheehan will receive proceeds from the sale of stock of
the Parent and a payment pursuant to an employee incentive bonus program of
approximately $10.8 million.
Mr. Sheehan (the "Rollover Investor") contributed to AXIA Group
approximately $400,000 of existing shares of the Parent in exchange for shares
of AXIA Group's Common Stock. The Common Stock was valued at $100 per share,
the same price at which all shares were sold in the Equity Investment referred
to above. The merger consideration described in the "The Transactions" was
proportionately reduced.
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BENEFICIAL OWNERSHIP
The following table sets forth as of August 31, 1998, the number and
percentage of the outstanding shares of AXIA Group's Common Stock beneficially
owned by the ESOP, the Named Executive Officers, each director of AXIA Group
and the Company, all directors and officers as a group and each person who is
the beneficial owner of more than 5% of the outstanding Common Stock.
<TABLE>
<CAPTION>
AMOUNT AND NATURE % OF
OF BENEFICIAL OWNERSHIP OUTSTANDING
NAME AND ADDRESS OF BENEFICIAL OWNER OF COMMON STOCK COMMON STOCK
------------------------------------ ----------------------- ------------
<S> <C> <C>
David H. Chesney...................... 3,750 1.3%
9501 Granger Rd.
Cleveland, Ohio 44125
Lyle J. Feye.......................... 3,000 1.1%
100 West 22nd Street, Suite 134
Lombard, Illinois 60148
Susan O. Rheney....................... 5,000 1.8%
Eight Greenway Plaza, Suite 702
Houston, Texas 77046
Gary L. Rosenthal..................... 7,000(1) 2.5%
Eight Greenway Plaza, Suite 714
Houston, Texas 77046
Dennis W. Sheehan..................... 4,000 1.4%
100 West 22nd Street, Suite 134
Lombard, Illinois 60148
Ian G. Wilkins........................ 2,500 0.9%
151 Walker Road
Statesville, North Carolina 28625
Robert G. Zdravecky................... 3,500 1.3%
3305 Breckinridge Blvd., Suite 122
Duluth, Georgia 30096
All directors and Named Executive
Officers
as a group (7 persons)............... 28,750 10.3%
The CIT Group/Equity Investments,
Inc.................................. 25,000 8.9%
650 CIT Drive
Livingston, New Jersey 07039
Fayez Sarofim Investment Partnership
No. 7, L.P........................... 25,000 8.9%
Two Houston Center, Suite 2907
Houston, Texas 77010
Frank J. Hevrdejs..................... 25,000 8.9%
Eight Greenway Plaza, Suite 702
Houston, Texas 77046
Paribas North America................. 25,000 8.9%
787 Seventh Avenue
New York, New York 10019
Gordon A. Cain........................ 17,500 6.3%
Eight Greenway Plaza, Suite 702
Houston, Texas 77046
William C. Oehmig..................... 16,500 5.9%
Eight Greenway Plaza, Suite 702
Houston, Texas 77046
AXIA Incorporated Employee Stock
Ownership Plan ...................... 15,000 5.4%
</TABLE>
- --------
(1) Does not include 3,000 shares held in trust for Mr. Rosenthal's
descendants. Mr. Rosenthal disclaims beneficial ownership of such shares.
Any shares of Common Stock acquired by the ESOP in the Equity Investment
will be voted by the trustee of the ESOP (the "ESOP Trustee") pursuant to the
direction of the Board of Directors or by a committee to be designated by the
Board of Directors, except that participants will be entitled to direct the
ESOP Trustee to vote the shares of Common Stock allocated to their accounts
with respect to the approval or disapproval of any corporate merger or
consolidation, recapitalization, reclassification, liquidation, dissolution,
sale of substantially all assets of a trade or business or such similar
transaction as may be prescribed in regulations under the Code.
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DESCRIPTION OF THE BANK CREDIT AGREEMENT
GENERAL
Finance Co. and the Company entered into the Bank Credit Agreement with a
syndicate of lenders (the "Lenders"), and Paribas, as Agent for such Lenders
(the "Agent"), to make the initial borrowings described below on the Closing
Date. The following description summarizes the material provisions of the Bank
Credit Agreement and does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, the provisions of the Bank Credit
Agreement. All capitalized terms in this "Description of the Bank Credit
Agreement" section not defined in this Prospectus have the meanings assigned
thereto in the Bank Credit Agreement.
The Bank Credit Agreement provides for secured facilities consisting of a
$35 million Term Loan, a $1.5 million ESOP Term Loan, a $15 million Revolving
Credit Facility and a $25 million Acquisition Facility.
The Bank Credit Agreement permits, at the option of the Company, the
issuance of letters of credit in principal amounts of up to $2.0 million.
Borrowings under the Revolving Credit Facility will be subject to a borrowing
base consisting of the sum of (i) 85% of Eligible Domestic Accounts; (ii) 70%
of Eligible Foreign Accounts; and (iii) 60% of Eligible Inventory (the
"Borrowing Base"). Finance Co. used the proceeds of borrowings under the Bank
Credit Agreement to finance a portion of the purchase price of the
Acquisition, to repay existing indebtedness of the Company, and to pay a
portion of the fees and expenses related to the Transactions. Finance Co. also
borrowed the full amount of the ESOP Term Loan and then lent such amount to
the ESOP. The ESOP then used those funds to purchase Common Stock at the
Closing.
The Revolving Credit Facility, Acquisition Facility, Term Loan and ESOP Term
Loan (collectively, the "Loans") may bear interest at an Alternate Base Rate,
based in part on a Prime Rate, or at a LIBOR Rate, in each case plus an
applicable margin, which is initially 2.25% for LIBOR Rate Advances and 1.00%
for Alternate Base Rate Advances. The applicable margin may be adjusted based
on the ratio of Total Debt to EBITDA and will range from 0% to 1.00% for
Alternate Base Rate Advances and 1.00% to 2.25% for LIBOR Rate Advances. The
default rate is the sum of the Alternate Base Rate or LIBOR Rate plus the
applicable margin plus 2.00%.
AMORTIZATION; PREPAYMENTS
All principal and interest on the Loans are due in 2004, except the ESOP
Term Loan, which is due in 2002, and are subject to certain mandatory
prepayments and scheduled payments. Accrued interest under the Loans is due
quarterly (and at the end of the relevant interest period in the case of LIBOR
Rate Advances). The Term Loan matures June 30, 2004 with quarterly
amortization payments commencing December 31, 1998. Certain amounts of
principal on notes issued under the Acquisition Facility are due on the last
day of each September, December, March and June, from September 2001 to June
2004. The Bank Credit Agreement allows prepayments with notice and
reimbursement for certain costs, and requires prepayments to the extent cash
proceeds from certain events exceed amounts determined by certain formulas.
The Acquisition Facility Loans are subject to certain conditions precedent,
including delivering certain information to the Lenders about the proposed
acquisition, the delivery of guarantees and security documents as to the
proposed acquisition and the conformance of the acquisition to certain
criteria.
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FEES, EXPENSES AND COSTS
The Bank Credit Agreement requires the Company to pay the following fees:
(i) commitment fees to be paid to the Lenders in amounts equal to 0.375% of
the average daily unused amount under the Revolving Credit Facility and
Acquisition Facility, payable quarterly in arrears until such time as such
commitments thereunder are terminated; (ii) letter of credit fees and (iii)
administration fees payable annually to the Agent. In addition, the Company
paid various underwriting and arrangement fees and closing costs on the
Closing Date in connection with the origination and syndication of the Bank
Credit Agreement and other customary fees and expenses.
COVENANTS
The Bank Credit Agreement contains restrictive covenants limiting the
ability (subject to certain exceptions) of the Company and its Subsidiaries
to, among other things: (i) incur debt or contractual contingent obligations;
(ii) pay certain subordinated debt or amend subordinated debt documents
without the prior consent of the Lenders; (iii) create or allow to exist liens
or other encumbrances; (iv) transfer assets outside the Company except for
sales and other transfers of inventory or surplus, immaterial or obsolete
assets in the ordinary course of business of the Company; (v) enter into
mergers, consolidations and asset dispositions of all or substantially all of
its properties; (vi) make Investments; (vii) sell, transfer or otherwise
dispose of any class of stock or the voting rights of any subsidiary of the
Company; (viii) enter into transactions with related parties other than in the
ordinary course of business on an arm's-length basis on terms no less
favorable to the Company than those available from third parties; (ix) amend
certain agreements, unless such amendment is not expected to have a Material
Adverse Effect; (x) make any material change in the general nature of the
business conducted by the Company; (xi) pay cash dividends or redeem shares of
capital stock; (xii) make capital expenditures and (xiii) pay dividends or
repurchase stock.
Under the Bank Credit Agreement, the Company is required to satisfy the
following financial covenants: (i) a Fixed Charge Coverage Ratio of at least
1.05 to 1; (ii) a minimum Net Worth test (a) at September 30, 1998 of at least
$24 million and (b) at each quarter thereafter of at least $24 million plus
75% of positive net income plus 75% of any equity offering; (iii) a ratio of
Total Debt to EBITDA (a) at each quarter until June 30, 2001 of 5.75 to 1 and
(b) declining annually thereafter to 5.5 to 1 and 5.25 to 1; and (iv) a
Minimum Interest Coverage Ratio (a) at December 31, 1999 of at least 1.75 to 1
and (b) increasing thereafter semiannually to 1.85 to 1 and 1.95 to 1.
SECURITY; GUARANTIES
Obligations under the Bank Credit Agreement are guaranteed by the same
Subsidiaries that guarantee the Notes, and are secured by a first priority
lien on the capital stock of the Company and its Subsidiaries and on
substantially all of the assets of such companies (other than foreign
subsidiaries).
EVENTS OF DEFAULT
Events of Default under the Bank Credit Agreement include, subject to
applicable notice, grace and cure periods, the following: (i) a default in the
payment when due of any principal, interest or fees under the Bank Credit
Agreement; (ii) a default by the Company under any debt instruments in excess
of a certain amount, or the occurrence of any event or condition that enables
the holder of such debt to accelerate the maturity thereof; (iii) any material
breach of any representation, warranty or statement in, or failure to perform
any duty or covenant under the Bank Credit Agreement or any of the other Loan
Documents; (iv) commencement of voluntary or involuntary bankruptcy,
insolvency or similar proceedings by or against AXIA Group, the Company or any
subsidiary thereof; (v) the Loans cease to be secured by substantially all of
the assets of the Company and its domestic subsidiaries; (vi) material
defaults related to employee benefits plans subject to the Employee Retirement
Income Security Act of 1974, as amended; (vii) any uninsured judgment or order
in excess of a certain amount
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remaining undischarged or unstayed for longer than certain periods; (viii) a
default by the Company in the payment when due of principal, interest or
premium, if any, on the Notes, or the failure to observe, perform or comply
with any agreement beyond any grace period with respect thereto that enables
the holder of such debt to accelerate the maturity thereof or the Company
becoming obligated to redeem, repurchase, or repay all or any portion of any
principal, interest or premium on the Notes prior to its scheduled payment and
(ix) the occurrence of any change of control.
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DESCRIPTION OF THE NOTES
The Notes will be issued under an Indenture (the "Indenture") dated as of
July 22, 1998 among the Company, Finance Co., the Guarantors and State Street
Bank and Trust Company, as trustee (the "Trustee"). The following summary of
certain provisions of the Indenture and the Registration Rights Agreement 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 "Trust
Indenture Act"), and to all of the provisions of the Indenture and the
Registration Rights Agreement, including the definitions of certain terms
therein and those terms made a part of the Indenture by reference to the Trust
Indenture Act, as in effect on the date of the Indenture. The definitions of
certain capitalized terms used in the following summary are set forth below
under "Certain Definitions."
GENERAL
The Notes will be issued only in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. See "Book Entry;
Delivery and Form." The Company has appointed the Trustee to serve as
registrar and paying agent under the Indenture at its offices in the Borough
of Manhattan, the City of New York. No service charge will be made for any
registration of transfer or exchange of the Notes, except for any tax or other
governmental charge that may be imposed in connection therewith.
RANKING
The Notes will rank junior to, and be subordinated in right of payment to,
all existing and future Senior Indebtedness of the Company, pari passu in
right of payment with all senior subordinated Indebtedness of the Company and
senior in right of payment to all Subordinated Indebtedness of the Company. At
June 30, 1998, on a pro forma basis after giving effect to the Transactions,
the Company would have had approximately $39.7 million of Senior Indebtedness
outstanding. All debt incurred under the Bank Credit Agreement will be Senior
Indebtedness of the Company, will be guaranteed by each of the Guarantors on a
senior basis and will be secured by substantially all of the assets of the
Company and the Guarantors.
MATURITY, INTEREST AND PRINCIPAL OF THE NOTES
The maximum aggregate principal amount of Notes to be issued under the
Indenture will be $150.0 million, of which an aggregate principal amount of
$100.0 million of Original Notes were issued. Additional Notes may be issued
from time to time subject to the limitations set forth under "Certain
Covenants--Limitation on Indebtedness." The Notes will mature on July 15,
2008. Cash interest on the Notes will accrue at a rate of 10 3/4% per annum
and will be payable semi-annually in arrears on each January 15 and July 15,
commencing January 15, 1999, to the Holders of record of Notes at the close of
business on the January 1 and July 1, respectively, immediately preceding such
interest payment date. Cash interest will accrue from the most recent interest
payment date to which interest has been paid or, if no interest has been paid,
from July 22, 1998. Interest will be computed on the basis of a 360-day year
of twelve 30-day months.
OPTIONAL REDEMPTION
The Notes will be redeemable at the option of the Company, in whole or in
part, at any time on or after July 15, 2003, at the redemption prices
(expressed as a percentage of principal amount) set forth below, plus accrued
and unpaid interest thereon, if any, to the redemption date (subject to the
right of Holders of record on the relevant record date to receive interest due
on the relevant interest payment date), if redeemed during the twelve-month
period beginning on July 15 of the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2003........................................................... 105.375%
2004........................................................... 103.583%
2005........................................................... 101.792%
2006 and thereafter............................................ 100.000%
</TABLE>
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In addition, at any time and from time to time on or prior to July 15, 2001,
the Company may redeem in the aggregate up to 35% aggregate principal amount
of the Notes with the net proceeds of one or more Public Equity Offerings by
the Company or AXIA Group at a redemption price (expressed as a percentage of
principal amount) equal to 110.75% of the principal amount thereof, plus
accrued and unpaid interest thereon, if any, to the date of redemption;
provided, however, that at least 65% aggregate principal amount of the Notes
must remain outstanding immediately after giving effect to each such
redemption (excluding any Notes held by the Company or any of its Affiliates);
provided, further, that if the Public Equity Offering is by AXIA Group, the
proceeds thereof to be used to redeem the Notes shall have been contributed as
common equity or as a capital contribution to the Company on or prior to the
date of redemption. Notice of any such redemption must be given within 60 days
after the date of the closing of the relevant Public Equity Offering of the
Company.
The Bank Credit Agreement prohibits the Company from making an optional
redemption of the Notes without the consent of the Lenders.
SELECTION AND NOTICE OF REDEMPTION
In the event that less than all of the Notes are to be redeemed at any time
pursuant to an optional redemption, selection of such Notes for redemption
will be made by the Trustee in compliance with the requirements of the
principal national securities exchange, if any, on which the Notes are listed
or, if the Notes are not then listed on a national securities exchange, on a
pro rata basis, by lot or by such method as the Trustee shall deem fair and
appropriate; provided, however, that no Notes of a principal amount of $1,000
or less shall be redeemed in part; provided, further, however, that if a
partial redemption is made with the net cash proceeds of a Public Equity
Offering by the Company, selection of the Notes or portions thereof for
redemption shall be made by the Trustee only on a pro rata basis or on as
nearly a pro rata basis as is practicable (subject to the procedures of The
Depository Trust Company), unless such method is otherwise prohibited. Notice
of redemption shall be mailed by first-class mail at least 30 but not more
than 60 days before the redemption date to each Holder of Notes to be redeemed
at its registered address. See "Book Entry; Delivery and Form." If any Note is
to be redeemed in part only, the notice of redemption that relates to such
Note shall state the portion of the principal amount thereof to be redeemed. A
new Note in a principal amount equal to the unredeemed portion thereof will be
issued in the name of the Holder thereof upon cancellation of the original
Note. On and after the redemption date, interest will cease to accrue on Notes
or portions thereof called for redemption as long as the Company has deposited
with the paying agent for the Notes funds in satisfaction of the applicable
redemption price pursuant to the Indenture.
SUBORDINATION OF THE NOTES
The payment of the principal of, premium, if any, and interest on the Notes
is subordinated in right of payment, to the extent and in the manner provided
in the Indenture, to the prior payment in full in cash of all Senior
Indebtedness.
Upon any payment or distribution of assets or securities of the Company of
any kind or character, whether in cash, property or securities (excluding any
payment or distribution of Permitted Junior Securities and excluding any
payment from the trust described under "Satisfaction and Discharge of
Indenture; Defeasance" (a "Defeasance Trust Payment")), upon any dissolution
or winding-up or total liquidation or reorganization of the Company, whether
voluntary or involuntary or in bankruptcy, insolvency, receivership or other
proceedings, all Senior Indebtedness shall first be paid in full in cash
before the Holders of the Notes or the Trustee on behalf of such Holders shall
be entitled to receive any payment by the Company of the principal of,
premium, if any, or interest on the Notes, or any payment by the Company to
acquire any of the Notes for cash, property or securities, or any distribution
by the Company with respect to the Notes of any cash, property or securities
(excluding
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any payment or distribution of Permitted Junior Securities and excluding any
Defeasance Trust Payment). Before any payment may be made by, or on behalf of,
the Company of the principal of, premium, if any, or interest on the Notes
upon any such dissolution or winding-up or total liquidation
or reorganization, any payment or distribution of assets or securities of the
Company of any kind or character, whether in cash, property or securities
(excluding any payment or distribution of Permitted Junior Securities and
excluding any Defeasance Trust Payment), to which the Holders of the Notes or
the Trustee on their behalf would be entitled, but for the subordination
provisions of the Indenture, shall be made by the Company or by any receiver,
trustee in bankruptcy, liquidation trustee, agent or other Person making such
payment or distribution, directly to the holders of the Senior Indebtedness
(pro rata to such holders on the basis of the respective amounts of Senior
Indebtedness held by such holders) or their representatives or to the trustee
or trustees or agent or agents under any agreement or indenture pursuant to
which any of such Senior Indebtedness may have been issued, as their
respective interests may appear, to the extent necessary to pay all such
Senior Indebtedness in full in cash after giving effect to any prior or
concurrent payment, distribution or provision therefor to or for the holders
of such Senior Indebtedness.
No direct or indirect payment (excluding any payment or distribution of
Permitted Junior Securities and excluding any Defeasance Trust Payment) by or
on behalf of the Company of principal of, premium, if any, or interest on the
Notes, whether pursuant to the terms of the Notes, upon acceleration, pursuant
to an Offer to Purchase or otherwise, will be made if, at the time of such
payment, there exists a default in the payment of all or any portion of the
obligations on any Designated Senior Indebtedness, whether at maturity, on
account of mandatory redemption or prepayment, acceleration or otherwise, and
such default shall not have been cured or waived or the benefits of this
sentence waived by or on behalf of the holders of such Designated Senior
Indebtedness. In addition, during the continuance of any non-payment event of
default with respect to any Designated Senior Indebtedness pursuant to which
the maturity thereof may be immediately accelerated, and upon receipt by the
Trustee of written notice (a "Payment Blockage Notice") from the holder or
holders of such Designated Senior Indebtedness or the trustee or agent acting
on behalf of the holders of such Designated Senior Indebtedness, then, unless
and until such event of default has been cured or waived or has ceased to
exist or such Designated Senior Indebtedness has been discharged or repaid in
full in cash or the benefits of these provisions have been waived by the
holders of such Designated Senior Indebtedness, no direct or indirect payment
(excluding any payment or distribution of Permitted Junior Securities and
excluding any Defeasance Trust Payment) will be made by or on behalf of the
Company of principal of, premium, if any, or interest on the Notes, to such
Holders, during a period (a "Payment Blockage Period") commencing on the date
of receipt of such notice by the Trustee and ending 179 days thereafter.
Notwithstanding anything in the subordination provisions of the Indenture or
the Notes to the contrary, (x) in no event will a Payment Blockage Period
extend beyond 179 days from the date the Payment Blockage Notice in respect
thereof was given, (y) there shall be a period of at least 181 consecutive
days in each 360-day period when no Payment Blockage Period is in effect and
(z) not more than one Payment Blockage Period may be commenced with respect to
the Notes during any period of 360 consecutive days. No event of default that
existed or was continuing on the date of commencement of any Payment Blockage
Period with respect to the Designated Senior Indebtedness initiating such
Payment Blockage Period (to the extent the holder of Designated Senior
Indebtedness, or trustee or agent, giving notice commencing such Payment
Blockage Period had knowledge of such existing or continuing event of default)
may be, or be made, the basis for the commencement of any other Payment
Blockage Period by the holder or holders of such Designated Senior
Indebtedness or the trustee or agent acting on behalf of such Designated
Senior Indebtedness, whether or not within a period of 360 consecutive days,
unless such event of default has been cured or waived for a period of not less
than 90 consecutive days.
The failure to make any payment or distribution for or on account of the
Notes by reason of the provisions of the Indenture described under this
"Subordination of the Notes" heading will not be
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construed as preventing the occurrence of any Event of Default in respect of
the Notes. See "Events of Default" below.
By reason of the subordination provisions described above, in the event of
insolvency of the Company, funds which would otherwise be payable to Holders
of the Notes will be paid to the holders of Senior Indebtedness to the extent
necessary to pay the Senior Indebtedness in full in cash, and the Company may
be unable to meet fully its obligations with respect to the Notes.
Subject to the restrictions set forth in the Indenture, in the future the
Company may issue additional Senior Indebtedness to refinance existing
Indebtedness or for other corporate purposes.
GUARANTEES OF THE NOTES
The Indenture provides that each of the Guarantors will unconditionally
guarantee on a joint and several basis (the "Guarantees") all of the Company's
obligations under the Notes, including its obligations to pay principal,
premium, if any, and interest with respect to the Notes. The Guarantors will
also be guaranteeing all obligations of the Company under the Bank Credit
Agreement, and each Guarantor will be granting a security interest in all or
substantially all of its assets to secure the obligations under the Bank
Credit Agreement. The obligations of each Guarantor are limited to the maximum
amount which, after giving effect to all other contingent and fixed
liabilities of such Guarantor and after giving effect to any collections from
or payments made by or on behalf of any other Guarantor in respect of the
obligations of such other Guarantor under its Guarantee or pursuant to its
contribution obligations under the Indenture, will result in the obligations
of such Guarantor under its Guarantee not constituting a fraudulent conveyance
or fraudulent transfer under Federal or state law. Each Guarantor that makes a
payment or distribution under a Guarantee shall be entitled to a contribution
from each other Guarantor in a pro rata amount based on the net assets of each
Guarantor determined in accordance with GAAP. Except as provided in "Certain
Covenants" below, the Company is not restricted from selling or otherwise
disposing of any of the Equity Interests of the Guarantors.
The Indenture provides that each of the Company's Subsidiaries (excluding
Unrestricted Subsidiaries and Foreign Subsidiaries) on the Issue Date and each
of the Company's Subsidiaries (excluding Unrestricted Subsidiaries and Foreign
Subsidiaries) formed or acquired thereafter are required to be Guarantors. The
Company shall cause each Restricted Subsidiary issuing a Guarantee after the
Issue Date to (i) execute and deliver to the Trustee a supplemental indenture
in form reasonably satisfactory to the Trustee pursuant to which such
Restricted Subsidiary shall become a party to the Indenture and thereby
unconditionally guarantee all of the Company's Obligations under the Notes and
the Indenture on the terms set forth therein and (ii) deliver to the Trustee
an opinion of counsel that such supplemental indenture has been duly
authorized, executed and delivered by such Restricted Subsidiary and
constitutes a legal, valid, binding and enforceable obligation of such
Restricted Subsidiary (which opinion may be subject to customary assumptions
and qualifications). Thereafter, such Restricted Subsidiary shall (unless
released in accordance with the terms of this Indenture) be a Guarantor for
all purposes of the Indenture.
The Indenture provides that if the Notes thereunder are defeased in
accordance with the terms of the Indenture, or if, subject to the requirements
of the first paragraph under "Certain Covenants--Merger, Sale of Assets,
Etc.," all or substantially all of the assets of any Guarantor or all of the
Equity Interests of any Guarantor are sold (including by issuance or
otherwise) by the Company in a transaction constituting an Asset Sale, and if
(x) the Net Cash Proceeds from such Asset Sale are used in accordance with the
covenant described under "Certain Covenants--Disposition of Proceeds of Asset
Sales" or (y) the Company delivers to the Trustee an Officers' Certificate
representing that the Net Cash Proceeds from such Asset Sale shall be used in
accordance with the covenant described under "Certain Covenants--Disposition
of Proceeds of Asset Sales" and within the time limits specified by such
covenant, then such Guarantor (in the event of a sale or other disposition of
all of the Equity Interests of such Guarantor) or the corporation acquiring
such assets (in the event of
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a sale or other disposition of all or substantially all of the assets of such
Guarantor) shall be automatically and unconditionally released and discharged
of its Guarantee obligations in respect of the Indenture and the Notes.
The Guarantees will be general unsecured obligations of the Guarantors. The
obligations of each Guarantor under its Guarantee will be subordinated and
junior in right of payment to the prior payment in full of all existing and
future Guarantor Senior Indebtedness of such Guarantor to substantially the
same extent as the Notes are subordinated to all existing and future Senior
Indebtedness. In particular, the Guarantee will rank subordinate to the
Guarantor's guarantee of obligations under the Bank Credit Agreement.
Any Guarantor that is designated an Unrestricted Subsidiary pursuant to and
in accordance with "Certain Covenants--Designation of Unrestricted
Subsidiaries" below shall upon such Designation be released and discharged of
its Guarantee obligations in respect of the Indenture and the Notes and any
Unrestricted Subsidiary (other than a Foreign Subsidiary) whose Designation is
revoked pursuant to "Certain Covenant--Designation of Unrestricted
Subsidiaries" below will be required to become a Guarantor in accordance with
the procedure described in the third preceding paragraph.
OFFER TO PURCHASE UPON CHANGE OF CONTROL
Following the occurrence of a Change of Control (the date of such occurrence
being the "Change of Control Date"), the Company shall notify the Holders of
the Notes of such occurrence in the manner prescribed by the Indenture and
shall, within 30 days after the Change of Control Date, make an Offer to
Purchase all Notes then outstanding, and shall purchase all Notes validly
tendered, at a purchase price in cash equal to 101% of the aggregate principal
amount thereof, plus accrued and unpaid interest thereon, if any, to the
Purchase Date (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date).
If a Change of Control occurs which also constitutes an event of default
under the Bank Credit Agreement, the lenders under the Bank Credit Agreement
will be entitled to exercise the remedies available to a secured lender under
applicable law and pursuant to the terms of the Bank Credit Agreement.
Accordingly, any claims of such lenders with respect to the assets of the
Company will be prior to any claim of the Holders of the Notes with respect to
such assets.
If an Offer to Purchase is made, there can be no assurance that the Company
will have available funds sufficient to pay for all of the Notes that might be
tendered by Holders of Notes seeking to accept the Offer to Purchase. If the
Company fails to repurchase all of the Notes tendered for purchase, such
failure will constitute an Event of Default under the Indenture. See "Events
of Default" below.
If the Company makes an Offer to Purchase, the Company will comply with all
applicable tender offer laws and regulations, including, to the extent
applicable, Section 14(e) and Rule 14e-1 under the Exchange Act, and any other
applicable Federal or state securities laws and regulations and any applicable
requirements of any securities exchange on which the Notes are listed, and any
violation of the provisions of the Indenture relating to such Offer to
Purchase occurring as a result of such compliance shall not be deemed an Event
of Default or an event that, with the passing of time or giving of notice, or
both, would constitute an Event of Default.
The use of the terms "all or substantially all" and "substantially as an
entirety" in Indenture provisions such as clause (ii) of the definition of
"Change of Control" and under "--Merger, Sale of Assets, etc." has no clearly
established meaning under New York law (which governs the Indenture) and has
been the subject of limited judicial interpretation in few jurisdictions.
Accordingly, there may
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be a degree of uncertainty in ascertaining whether a particular transaction
would involve a disposition of "all or substantially all" of the assets of a
person, or a disposition of such assets "substantially as an entirety," which
uncertainty should be considered by prospective investors in the Notes.
The Change of Control purchase feature is a result of negotiations between
the Company and the Initial Purchasers. Management has no present intention to
engage in a transaction involving a Change of Control, although it is possible
that the Company or AXIA Group would decided to do so in the future. Subject
to the limitations discussed below, the Company could, in the future, enter
into certain transactions, including acquisitions, refinancings or other
recapitalizations, that would not constitute a Change of Control under the
Indenture, but that would increase the amount of indebtedness outstanding at
such time or otherwise affect the Company's or AXIA Group's capital structure
or credit ratings. Restrictions on the ability of the Company to incur
additional Indebtedness are contained in the covenant described under "--
Limitation on Indebtedness." Such restrictions can only be waived with the
consent of the Holders of a majority in principal amount of the Notes then
outstanding. Except for the limitations contained in such covenant, however,
the Indenture will not contain any covenants or protections that may afford
Holders of the Notes protection in the event of a highly leveraged
transaction. The Indenture will not contain covenants that restrict the
ability of AXIA Group to incur Indebtedness.
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.
CERTAIN COVENANTS
Limitation on Restricted Payments. The Company shall not, and shall not
cause or permit any Restricted Subsidiary to, directly or indirectly,
(i) declare or pay any dividend or any other distribution on any Equity
Interests of the Company or any Restricted Subsidiary or make any payment
or distribution to the direct or indirect holders (in their capacities as
such) of Equity Interests of the Company or any Restricted Subsidiary
(other than any dividends, distributions and payments made to the Company
or any Restricted Subsidiary and dividends or distributions payable to any
Person solely in Qualified Equity Interests of the Company or any
Restricted Subsidiary which is a Guarantor, or in options, warrants or
other rights to purchase Qualified Equity Interests of the Company and any
Restricted Subsidiary which is a Guarantor, and other than pro rata
dividends or distributions made by a Subsidiary that is not a wholly-owned
Subsidiary to minority stockholders (or owners of an equivalent interest in
the case of a Subsidiary that in not a corporation));
(ii) purchase, redeem or otherwise acquire or retire for value any Equity
Interests of the Company or any Restricted Subsidiary (other than any such
Equity Interests owned by the Company or any Restricted Subsidiary);
(iii) purchase, redeem, defease or retire for value, or make any
principal payment on, prior to any scheduled maturity, scheduled repayment
or scheduled sinking fund payment, any Subordinated Indebtedness (other
than any Subordinated Indebtedness held by the Company or any Restricted
Subsidiary or Subordinated Indebtedness purchased in anticipation of
satisfying a sinking fund payment due within two years of such
acquisition); or
(iv) make any Investment (other than Permitted Investments) in any Person
(other than in the Company, any Restricted Subsidiary or a Person that
becomes a Restricted Subsidiary, or is merged with or into or consolidated
with the Company or a Restricted Subsidiary (provided the Company or a
Restricted Subsidiary is the survivor), as a result of or in connection
with such Investment)
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(any such payment or any other action (other than any exception thereto)
described in (i), (ii), (iii) or (iv) each, a "Restricted Payment"), unless
(a) no Default shall have occurred and be continuing at the time or
immediately after giving effect to such Restricted Payment;
(b) immediately after giving effect to such Restricted Payment, the
Company would be able to Incur $1.00 of additional Indebtedness (other
than Permitted Indebtedness) under the Consolidated Coverage Ratio of
the first paragraph of "Limitation on Indebtedness" below; and
(c) immediately after giving effect to such Restricted Payment, the
aggregate amount of all Restricted Payments declared or made on or
after the Issue Date does not exceed an amount equal to the sum of (1)
50% of cumulative Consolidated Net Income determined for the period
(taken as one period) commencing on the Issue Date and ending on the
last day of the most recent fiscal quarter immediately preceding the
date of such Restricted Payment for which consolidated financial
information of the Company is available (or if such cumulative
Consolidated Net Income shall be a loss, minus 100% of such loss), plus
(2) the aggregate net cash proceeds received by the Company either (x)
as capital contributions to the Company after the Issue Date or (y)
from the issue and sale (other than to a Restricted Subsidiary) of its
Qualified Equity Interests after the Issue Date (excluding the net
proceeds from any issuance and sale of Qualified Equity Interests
financed, directly or indirectly, using funds borrowed from the Company
or any Restricted Subsidiary until and to the extent such borrowing is
repaid), plus (3) the principal amount (or accreted amount (determined
in accordance with GAAP), if less) of any Indebtedness of the Company
or any Restricted Subsidiary Incurred after the Issue Date which has
been converted into or exchanged for Qualified Equity Interests of the
Company, plus (4) in the case of the disposition or repayment of any
Investment constituting a Restricted Payment made after the Issue Date,
an amount (to the extent not included in the computation of
Consolidated Net Income) equal to the lesser of: (x) the return of
capital with respect to such Investment and (y) the amount of such
Investment which was treated as a Restricted Payment, in either case,
less the cost of the disposition of such Investment, plus (5) so long
as the Designation thereof was treated as a Restricted Payment made
after the Issue Date, with respect to any Unrestricted Subsidiary that
has been redesignated as a Restricted Subsidiary after the Issue Date
in accordance with "Designation of Unrestricted Subsidiaries" below,
the Company's proportionate interest in an amount equal to the excess
of (x) the total assets of such Subsidiary, valued on an aggregate
basis at Fair Market Value, over (y) the total liabilities of such
Subsidiary, determined in accordance with GAAP (and provided that such
amount shall not in any case exceed the Designation Amount with respect
to such Restricted Subsidiary upon its Designation), plus (6) (to the
extent not included in the computation of Consolidated Net Income) the
amount of cash dividends or cash distributions (other than to pay
taxes) received from any Unrestricted Subsidiary since the Issue Date,
minus (7) the greater of (x) $0 and (y) the Designation Amount
(measured as of the date of Designation) with respect to any Subsidiary
of the Company which has been designated as an Unrestricted Subsidiary
after the Issue Date in accordance with "Designation of Unrestricted
Subsidiaries" below.
The foregoing provisions will not prevent (i) the payment of any dividend or
distribution on, or redemption of, Equity Interests within 60 days after the
date of declaration of such dividend or distribution or the giving of formal
notice of such redemption, if at the date of such declaration or giving of
such formal notice such payment or redemption would comply with the provisions
of the Indenture; (ii) a payment to AXIA Group to allow AXIA Group to
purchase, redeem, retire or otherwise acquire any Equity Interests of AXIA
Group or the Company in exchange for, or out of the net cash proceeds of the
substantially concurrent issue and sale (other than to a Restricted
Subsidiary) of, Qualified Equity Interests of the Company or out of the net
cash proceeds received by the Company
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as capital contributions to the Company after the Issue Date; provided,
however, that any such net cash proceeds and the value of any Qualified Equity
Interests issued in exchange for such retired Equity Interests are excluded
from clause (c)(2) of the preceding paragraph (and were not included therein
at any time); (iii) the purchase, redemption, retirement, defeasance or other
acquisition of Subordinated Indebtedness, or any other payment thereon, made
in exchange for, or out of the net cash proceeds of, a substantially
concurrent issue and sale (other than to a Restricted Subsidiary) of (x)
Qualified Equity Interests of the Company or out of the net cash proceeds
received by the Company as capital contributions to the Company after the
Issue Date; provided, however, that any such net cash proceeds and the value
of any Qualified Equity Interests issued in exchange for Subordinated
Indebtedness are excluded from clauses (c)(2) and (c)(3) of the preceding
paragraph (and were not included therein at any time) or (y) other
Subordinated Indebtedness having no stated maturity for the payment of
principal thereof prior to the final stated maturity of the Notes; (iv) any
Investment to the extent that it is funded with the net cash proceeds of the
substantially concurrent issue and sale (other than to a Restricted
Subsidiary) of Qualified Equity Interests of the Company; provided, however,
that any such net cash proceeds are excluded from clause (c)(2) of the
preceding paragraph (and were not included therein at any time); (v) payments
to AXIA Group (for purposes of AXIA Group making payments to the ESOP) or to
the ESOP on behalf of the employees of the Company or its Restricted
Subsidiaries; provided, however, that all such payments by the Company and its
Restricted Subsidiaries may not exceed, during any fiscal year, 10% of the
aggregate compensation expense during such fiscal year attributable to
employees of the Company and its Restricted Subsidiaries who are eligible to
participate in the ESOP; (vi) a payment to AXIA Group to pay its operating and
administrative expenses including, without limitation, directors fees, legal
and audit expenses, SEC compliance expenses and corporate franchise and other
taxes, in an amount not to exceed the greater of $1.0 million per fiscal year
and 1% of revenues of the Company for the proceeding fiscal year; (vii) a
payment by the Company to AXIA Group or the ESOP, or directly by the Company,
to be used to repurchase the Equity Interests distributed to participants and
beneficiaries of the ESOP as required by and in accordance with the ESOP and
Section 409(h)(i)(B) of the Code and the regulations thereunder; (viii) a
payment by the Company to AXIA Group, any Restricted Subsidiary or the ESOP,
or directly by the Company, to be used to repurchase, redeem, acquire or
retired for value any Equity Interest of the Company pursuant to any
stockholder's agreement, management equity subscription plan or agreement,
stock option plan or agreement or employee benefit plan in effect as of the
Issue Date or such employee plan or agreement or employee benefit plan as may
be adopted by the Company or the Company from time to time, provided, however,
that the aggregate price paid for all Equity Interests repurchased, redeemed,
acquired or retired by the Company or on behalf of AXIA Group or the Company
shall not exceed $1.5 million in any fiscal year plus the aggregate amount
unused for such purpose in prior fiscal years; and provided, further, however,
that such amount, to the extent related to the ESOP, shall be excluded in the
calculation of Restricted Payments; (ix) a payment to AXIA Group pursuant to
the Tax Sharing Agreement as the same may be amended from time to time in a
manner not materially adverse to the Company; (x) any payment to AXIA Group to
permit AXIA Group to make payments for advisory services owned to Sterling
pursuant to the Management Agreement and (xi) Restricted Payments not to
exceed $5.0 million in the aggregate; provided, however, that in the case of
each of clauses (iii), (viii), (x), and (xi) (except in the case of any
Restricted Payments consisting of Investments), no Default shall have occurred
and be continuing or would arise therefrom.
In determining the amount of Restricted Payments permissible under this
covenant, amounts expended pursuant to clauses (i) and (xi) of the immediately
preceding paragraph shall be included as Restricted Payments and amounts
expended pursuant to clauses (ii), (iii), (iv), (v), (vi), (vii), (viii) (to
the extent set forth in the immediately preceding paragraph), (ix) and (x)
shall be excluded. The amount of any non-cash Restricted Payment shall be
deemed to be equal to the Fair Market Value thereof at the date of the making
of such Restricted Payment.
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Limitation on Indebtedness. The Company shall not, and shall not cause or
permit any Restricted Subsidiary to, directly or indirectly, Incur any
Indebtedness (including Acquired Indebtedness) or issue any Disqualified
Equity Interests, except for Permitted Indebtedness; provided, however, that
(i) the Company and any Restricted Subsidiary may Incur Indebtedness
(including Acquired Indebtedness) and (ii) the Company may issue Disqualified
Equity Interests if, in any such case, at the time of and immediately after
giving pro forma effect to such Incurrence of Indebtedness or issuance of
Disqualified Equity Interests and the application of the proceeds therefrom,
the Company's Consolidated Coverage Ratio would be greater than (a) 1.75 to
1.0, if such Incurrence occurs on or prior to July 15, 2000, or (b) 2.0 to
1.0, if such Incurrence occurs after July 15, 2000.
The foregoing limitations will not apply to the Incurrence of any of the
following (collectively, "Permitted Indebtedness"), each of which shall be
given independent effect:
(a) Indebtedness under the Notes issued hereby on the Issue Date, the
Guarantees and the Indenture;
(b) Existing Indebtedness;
(c) Indebtedness of the Company, and its Subsidiaries pursuant to (x) the
Term Loan Facilities of the Bank Credit Agreement in an aggregate principal
amount at any one time outstanding not to exceed $62.0 million and (y) the
revolving loan facilities of the Bank Credit Agreement in an aggregate
principal amount at any one time outstanding not to exceed the greater of
(I) $15.0 million and (II) the sum of (A) 85% of the net book value of the
accounts receivable of the Company and the Restricted Subsidiaries on a
consolidated basis in accordance with GAAP and (B) 50% of the net book
value (determined on a consolidated basis in accordance with GAAP) of (i)
the inventory of the Company and the Restricted Subsidiaries and (ii) the
ATF tools owned by the Company and its Restricted Subsidiaries;
(d) Indebtedness of any Restricted Subsidiary owed to and held by the
Company or any Restricted Subsidiary and Indebtedness of the Company owed
to and held by any Restricted Subsidiary, which Indebtedness is unsecured
and subordinated in right of payment to the payment and performance of the
Company's obligations under any Senior Indebtedness, the Indenture and the
Notes; provided, however, that an Incurrence of Indebtedness that is not
permitted by this clause (d) shall be deemed to have occurred upon (i) any
sale or other disposition of any Indebtedness of the Company or any
Restricted Subsidiary referred to in this clause (d) to a Person (other
than the Company or any Restricted Subsidiary), and (ii) the designation of
a Restricted Subsidiary which holds Indebtedness of the Company or any
other Restricted Subsidiary as an Unrestricted Subsidiary;
(e) the Guarantees and guarantees by any Guarantor of Indebtedness of the
Company; provided, however, that if such guarantee is of Subordinated
Indebtedness, then the Guarantee of such Guarantor shall be senior to such
Guarantor's guarantee of Subordinated Indebtedness;
(f) Hedging Obligations of the Company and the Restricted Subsidiaries;
(g) Purchase Money Indebtedness and Capitalized Lease Obligations (and
refinancings thereof) of the Company and the Restricted Subsidiaries which
do not exceed the greater of (x) $10.0 million in the aggregate or (y) 5%
of the consolidated tangible net assets of the Company at any one time
outstanding;
(h) Guarantees of the Company of Indebtedness incurred by Restricted
Subsidiaries;
(i) Indebtedness of the Company or any Restricted Subsidiary consisting
of guarantees, indemnities or obligations in respect of purchase price
adjustments in connection with the acquisition or disposition of assets
permitted under the Indenture;
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(j) Indebtedness of the Company or a Restricted Subsidiary to the extent
representing a replacement, renewal, refinancing or extension
(collectively, a "refinancing") of outstanding Indebtedness Incurred in
compliance with the Consolidated Coverage Ratio of the first paragraph of
this covenant or clause (a) or (b) of this paragraph of this covenant;
provided, however, that (i) any such refinancing shall not exceed the sum
of the principal amount (or accreted amount (determined in accordance with
GAAP), if less) of the Indebtedness or Disqualified Equity Interests being
refinanced, plus the amount of accrued interest or dividends thereon, plus
the amount of any prepayment premium necessary to accomplish such
refinancing and such reasonable fees and expenses incurred in connection
therewith, (ii) Indebtedness representing a refinancing of Indebtedness
other than Senior Indebtedness shall have a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of
the Indebtedness being refinanced; (iii) Indebtedness that is pari passu
with the Notes may only be refinanced with Indebtedness that is made pari
passu with or subordinate in right of payment to the Notes and Subordinated
Indebtedness may only be refinanced with Subordinated Indebtedness or
Disqualified Equity Interests and Disqualified Equity Interests may only be
refinanced with other Disqualified Equity Interests; and (iv) refinancing
Indebtedness incurred by a Restricted Subsidiary which is not a Guarantor
may only be used to refinance Indebtedness of a Restricted Subsidiary which
is not a Guarantor; and
(k) in addition to the items referred to in clauses (a) through (j)
above, Indebtedness of the Company (including any Indebtedness under the
Bank Credit Agreement that utilizes this subparagraph (k)) having an
aggregate principal amount not to exceed $15.0 million at any time
outstanding.
Limitation on Layering. The Company shall not, directly or indirectly, Incur
any Indebtedness that by its terms would expressly rank senior in right of
payment to the Notes and expressly rank subordinate in right of payment to any
other Indebtedness of the Company.
The Company shall not permit any Guarantor to, and no Guarantor shall,
directly or indirectly, Incur any Indebtedness that by its terms would
expressly rank senior in right of payment to the Guarantee of such Guarantor
and expressly rank subordinate in right of payment to any Guarantor Senior
Indebtedness of such Guarantor.
Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries. The Company shall not, and shall not cause or permit any
Restricted Subsidiary to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary to (a) pay dividends or make any other
distributions to the Company or any other Restricted Subsidiary on its Equity
Interests or with respect to any other interest or participation in, or
measured by, its profits, or pay any Indebtedness owed to the Company or any
other Restricted Subsidiary, (b) make loans or advances to, or guarantee any
Indebtedness or other obligations of, the Company or any other Restricted
Subsidiary or (c) transfer any of its properties or assets to the Company or
any other Restricted Subsidiary, except for such encumbrances or restrictions
existing under or by reason of (i) the Bank Credit Agreement, or any other
agreement of the Company or the Restricted Subsidiaries outstanding on the
Issue Date, in each case as in effect on the Issue Date, and any amendments,
restatements, renewals, replacements or refinancings thereof; provided,
however, that any such amendment, restatement, renewal, replacement or
refinancing is no more restrictive in the aggregate with respect to such
encumbrances or restrictions than those contained in the agreement being
amended, restated, renewed, replaced or refinanced; (ii) applicable law; (iii)
any instrument governing Indebtedness or Equity Interests of an Acquired
Person acquired by the Company or any Restricted Subsidiary as in effect at
the time of such acquisition (except to the extent any such Indebtedness or
Equity Interests were Incurred by such Acquired Person in connection with, as
a result of or in contemplation of such acquisition); provided, however, that
such encumbrances and restrictions are not applicable to any Restricted
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Subsidiary, or the properties or assets of any Restricted Subsidiary, other
than an Acquired Person; (iv) customary non-assignment provisions in leases
entered into in the ordinary course of business; (v) Purchase Money
Indebtedness for property acquired in the ordinary course of business that
only imposes encumbrances and restrictions on the property so acquired; (vi)
any agreement for the sale or disposition of the Equity Interests or assets of
any Restricted Subsidiary; provided, however, that such encumbrances and
restrictions described in this clause (vi) are only applicable to such
Restricted Subsidiary or assets, as applicable, and any such sale or
disposition is made in compliance with "Disposition of Proceeds of Asset
Sales" below to the extent applicable thereto; (vii) refinancing Indebtedness
permitted under clause (j) of the second paragraph of "Limitation on
Indebtedness" above; provided, however, that such encumbrances and
restrictions contained in the agreements governing such Indebtedness are no
more restrictive in the aggregate than those contained in the agreements
governing the Indebtedness being refinanced immediately prior to such
refinancing; (viii) the Indenture; or (ix) contained in any other indenture
governing debt securities that are no more restrictive than those contained in
the Indenture.
Designation of Unrestricted Subsidiaries. The Company may designate after
the Issue Date any Subsidiary of the Company as an "Unrestricted Subsidiary"
under the Indenture (a "Designation") only if (a) immediately prior to such
Designation the Subsidiary to be so designated has total assets of $10,000 or
less or (b):
(i) no Default or Event of Default shall have occurred and be continuing
at the time of or after giving effect to such Designation;
(ii) at the time of and after giving effect to such Designation, the
Company could Incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) under the Consolidated Coverage Ratio of the first paragraph
of "Limitation on Indebtedness" above; and
(iii) the Company would be permitted to make an Investment (other than a
Permitted Investment) at the time of Designation (assuming the
effectiveness of such Designation) pursuant to the first paragraph of
"Limitation on Restricted Payments" above in an amount (the "Designation
Amount") equal to the Fair Market Value of the Company's aggregate
Investment in such Subsidiary on such date.
Neither the Company nor any Restricted Subsidiary shall at any time (x)
provide credit support for, subject any of its property or assets (other than
the Equity Interests of any Unrestricted Subsidiary) to the satisfaction of,
or guarantee, any Indebtedness of any Unrestricted Subsidiary (including any
undertaking, agreement or instrument evidencing such Indebtedness), (y) be
directly or indirectly liable for any Indebtedness of any Unrestricted
Subsidiary or (z) be directly or indirectly liable for any Indebtedness which
provides that the holder thereof may (upon notice, lapse of time or both)
declare a default thereon or cause the payment thereof to be accelerated or
payable prior to its final scheduled maturity upon the occurrence of a default
with respect to any Indebtedness of any Unrestricted Subsidiary, except for
any non-recourse guarantee given solely to support the pledge by the Company
or any Restricted Subsidiary of the capital stock of any Unrestricted
Subsidiary. All Subsidiaries of Unrestricted Subsidiaries shall be
automatically deemed to be Unrestricted Subsidiaries.
The Company may revoke any Designation of a Subsidiary as an Unrestricted
Subsidiary (a "Revocation") if:
(i) no Default or Event of Default shall have occurred and be continuing
at the time of and after giving effect to such Revocation; and
(ii) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if Incurred at
such time, have been permitted to be Incurred for all purposes of the
Indenture.
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All Designations and Revocations must be evidenced by resolutions of the
Board of Directors of the Company, delivered to the Trustee certifying
compliance with the foregoing provisions.
Limitation on Liens. The Company shall not, and shall not cause or permit
any Restricted Subsidiary to, directly or indirectly, Incur or suffer to exist
any Liens of any kind against or upon any of their respective properties or
assets now owned or hereafter acquired, or any proceeds therefrom or any
income or profits therefrom, to secure any Indebtedness unless
contemporaneously therewith effective provision is made, in the case of the
Company, to secure the Notes, and in the case of a Restricted Subsidiary which
is a Guarantor, to secure such Restricted Subsidiary's Guarantee of the Notes,
equally and ratably with such Indebtedness (or, in the event that such
Indebtedness is subordinated in right of payment to the Notes or such
Guarantor's Guarantee, prior to such Indebtedness) with a Lien on the same
properties and assets securing such Indebtedness for so long as such
Indebtedness is secured by such Lien, except for (i) Liens securing any Senior
Indebtedness or any guarantee of Senior Indebtedness by any Guarantor; (ii)
Liens securing any Acquired Indebtedness properly incurred under the
Indenture, provided that any such Lien securing Acquired Indebtedness only
extends to the assets that were subject to such Lien prior to the related
acquisition by the Company or its Restricted Subsidiaries and was not created,
incurred or assumed in connection with or in contemplation of such transaction
and (iii) Permitted Liens.
Disposition of Proceeds of Asset Sales. The Company shall not, and shall not
cause or permit any Restricted Subsidiary to, directly or indirectly, make any
Asset Sale, unless (i) the Company or such Restricted Subsidiary, as the case
may be, receives consideration at the time of such Asset Sale at least equal
to the Fair Market Value of the assets sold or otherwise disposed of and (ii)
at least 75% of such consideration consists of (A) cash or Cash Equivalents,
(B) properties and capital assets to be used in the business of the Company,
or (C) Equity Interests in any Person which thereby becomes a Restricted
Subsidiary. The amount of any (i) Indebtedness (other than any Subordinated
Indebtedness) of the Company or any Restricted Subsidiary that is actually
assumed by the transferee in such Asset Sale and from which the Company and
the Restricted Subsidiaries are fully released shall be deemed to be cash for
purposes of determining the percentage of cash consideration received by the
Company or the Restricted Subsidiaries and (ii) notes or other similar
obligations received by the Company or the Restricted Subsidiaries from such
transferee that are immediately converted, sold or exchanged (or are
converted, sold or exchanged within 90 days of the related Asset Sale) by the
Company or the Restricted Subsidiaries into cash shall be deemed to be cash,
in an amount equal to the net cash proceeds realized upon such conversion,
sale or exchange for purposes of determining the percentage of cash
consideration received by the Company or the Restricted Subsidiaries.
The Company or such Restricted Subsidiary, as the case may be, may (i) apply
the Net Cash Proceeds of any Asset Sale within 365 days of receipt thereof to
repay Senior Indebtedness, (ii) commit in writing within 365 days of receipt
thereof to acquire, construct or improve properties and capital assets to be
used in a Related Business (and so apply such Net Cash Proceeds within 180
days after the commitment thereof) or (iii) apply the Net Cash Proceeds of any
Asset Sale within 365 days of receipt thereof or repay Pari Passu Debt not
exceeding the Pari Passu Debt Pro Rata Share.
To the extent all or part of the Net Cash Proceeds of any Asset Sale are not
applied as described in clause (i), (ii) or (iii) of the immediately preceding
paragraph (such Net Cash Proceeds, the "Unutilized Net Cash Proceeds"), the
Company shall, within 30 days after the expiration of such period, make an
Offer to Purchase outstanding Notes up to a maximum principal amount
(expressed as a multiple of $1,000) of Notes equal to such Unutilized Net Cash
Proceeds, at a purchase price in cash equal to 100% of the principal amount
thereof, plus accrued and unpaid interest thereon, if any, to the Purchase
Date; provided, however, that the Offer to Purchase may be deferred until
there are aggregate Unutilized Net Cash Proceeds equal to or in excess of $5.0
million, at which time the entire amount of such Unutilized Net Cash Proceeds,
and not just the amount in excess of $5.0 million, shall be applied as
required pursuant to this paragraph.
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After an Offer to Purchase has been made pursuant to the requirements of the
paragraph above, the Company may defer any future Offer to Purchase required
pursuant to an Asset Sale until there are new aggregate Unutilized Net Cash
Proceeds equal to or in excess of $5.0 million, at which time the entire
amount of such Unutilized Net Cash Proceeds and not just the amount in excess
of $5.0 million, shall be applied as required pursuant the paragraph above.
With respect to any Offer to Purchase effected pursuant to this covenant, to
the extent the aggregate principal amount of Notes tendered pursuant to such
Offer to Purchase exceeds the Unutilized Net Cash Proceeds to be applied to
the repurchase thereof, such Notes shall be purchased pro rata based on the
aggregate principal amount of such Notes tendered by each Holder. To the
extent the Unutilized Net Cash Proceeds exceed the aggregate amount of Notes
tendered by the Holders of the Notes pursuant to such Offer to Purchase, the
Company may retain and utilize any portion of the Unutilized Net Cash Proceeds
not applied to repurchase the Notes for any purpose consistent with the other
terms of the Indenture.
In the event that the Company makes an Offer to Purchase the Notes, the
Company shall comply with any applicable securities laws and regulations,
including any applicable requirements of Section 14(e) of, and Rule 14e-1
under, the Exchange Act, and any violation of the provisions of the Indenture
relating to such Offer to Purchase occurring as a result of such compliance
shall not be deemed an Event of Default or an event that with the passing of
time or giving of notice, or both, would constitute an Event of Default.
Each Holder shall be entitled to tender all or any portion of the Notes
owned by such Holder pursuant to the Offer to Purchase, subject to the
requirement that any portion of a Note tendered must be tendered in an
integral multiple of $1,000 principal amount and subject to any proration
among tendering Holders as described above.
Merger, Sale of Assets, etc. The Company shall not consolidate with or merge
with or into (whether or not the Company is the Surviving Person) any other
Person and the Company shall not directly or indirectly sell, convey, assign,
transfer, lease or otherwise dispose of all or substantially all of the
Company's and the Restricted Subsidiaries' properties and assets (determined
on a consolidated basis for the Company and the Restricted Subsidiaries) to
any entity in a single transaction or series of related transactions, unless:
(i) either (x) the Company shall be the Surviving Person or (y) the Surviving
Person (if other than the Company) shall be a Person organized and validly
existing under the laws of the United States of America or any State thereof
or the District of Columbia, and shall expressly assume by a supplemental
indenture, the due and punctual payment of the principal of, premium, if any,
and interest on all the Notes and the performance and observance of every
covenant of the Indenture and the Registration Rights Agreement to be
performed or observed on the part of the Company; (ii) immediately thereafter,
no Default or Event of Default shall have occurred and be continuing; (iii)
immediately after giving effect to any such transaction including the
Incurrence by the Company or any Restricted Subsidiary, directly or
indirectly, of additional Indebtedness (and treating any Indebtedness not
previously an obligation of the Company or any Restricted Subsidiary in
connection with or as a result of such transaction as having been Incurred at
the time of such transaction), the Surviving Person could Incur, on a pro
forma basis after giving effect to such transaction, at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) under the
Consolidated Coverage Ratio of the first paragraph of "Limitation on
Indebtedness" above; (iv) immediately after giving effect to such transaction,
the Surviving Person will have a Consolidated Net Worth in an amount which is
not less than the Consolidated Net Worth of the Company immediately prior to
such transaction; and (v) the Company will have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if any)
comply with the Indenture.
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Notwithstanding the foregoing clauses (iii) and (iv) of the immediately
preceding paragraph, any Restricted Subsidiary may consolidate with, merge
into or transfer all or part of its properties and assets to the Company. In
addition, at any time, and notwithstanding the provisions of the immediately
preceding paragraph, Acquisition Co. may merge with and into the Company;
provided, that, immediately prior to such merger, neither corporation has any
Indebtedness outstanding.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all the properties and assets of one or more Restricted
Subsidiaries the Equity Interests of which constitute all or substantially all
the properties and assets of the Company shall be deemed to be the transfer of
all or substantially all the properties and assets of the Company.
In the event of any transaction (other than a lease) described in and
complying with the conditions listed in the immediately preceding paragraphs
in which the Company or a Guarantor, as the case may be, is not the Surviving
Person and the Surviving Person is to assume all the Obligations of the
Company under the Notes, the Indenture and the Exchange and Registration
Rights Agreement or of such Guarantor under its Guarantee, the Indenture and
the Exchange and Registration Rights Agreement, as the case may be, pursuant
to a supplemental indenture, such Surviving Person shall succeed to, and be
substituted for, and may exercise every right and power of, the Company or
such Guarantor, as the case may be, and the Company shall be automatically and
unconditionally released and discharged from its Obligations under the
Indenture and the Notes or such Guarantor shall be automatically and
unconditionally released and discharged from its Obligations under the
Indenture and its Guarantee.
Transactions with Affiliates. The Company shall not, and shall not cause or
permit any Restricted Subsidiary to, directly or indirectly, conduct any
business or enter into any transaction (or series of related transactions)
with or for the benefit of any of their respective Affiliates of the Company
(each an "Affiliate Transaction"), unless (i) such Affiliate Transaction is on
terms which are no less favorable to the Company or such Restricted
Subsidiary, as the case may be, than would be available in a comparable
transaction with an unaffiliated third party and (ii) if such Affiliate
Transaction or series of related Affiliate Transactions (other than any such
Affiliate Transactions between the Company or a Restricted Subsidiary and an
Unrestricted Subsidiary or an Accounts Receivable Subsidiary in the ordinary
course of business) involves aggregate payments or other consideration having
a Fair Market Value in excess of $2.5 million, such Affiliate Transaction is
in writing and a majority of the disinterested members of the Board of
Directors of the Company shall have approved such Affiliate Transaction. In
addition, any Affiliate Transaction (other than an Affiliate Transaction
between the Company or a Restricted Subsidiary and an Unrestricted Subsidiary
or an Accounts Receivable Subsidiary in the ordinary course of business)
involving aggregate payments or other consideration having a Fair Market Value
in excess of $5.0 million will also require a written opinion from an
Independent Financial Advisor stating that the terms of such Affiliate
Transaction are fair, from a financial point of view, to the Company or the
Restricted Subsidiary involved in such Affiliate Transaction, as the case may
be.
Notwithstanding the foregoing, the restrictions set forth in this covenant
shall not apply to (i) transactions with or among the Company and any
Restricted Subsidiary or between or among Restricted Subsidiaries; (ii)
customary directors' fees, indemnification and similar arrangements,
consulting fees, employee salaries, bonuses or employment agreements,
compensation or employee benefit arrangements and incentive arrangements with
any officer, director or employee of the Company or any Restricted Subsidiary
entered into in the ordinary course of business (including customary benefits
thereunder) and payments under any indemnification arrangements permitted by
applicable law; (iii) payments to AXIA Group to permit AXIA Group to make
payments to The Sterling Group for advisory services pursuant to the
Management Agreement; (iv) the issue and sale by the Company to its
stockholders of Qualified Equity Interests; (v) any Restricted Payments made
in compliance with "Limitation on Restricted Payments" above; (vii)
intercompany sales between the
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Company and any of its Restricted Subsidiaries or exclusively between or among
such Restricted Subsidiaries provided that such sales are in the ordinary
course of business and on an arm's--length
basis; (vi) the Incurrence of intercompany Indebtedness permitted pursuant to
clause (d) of the second paragraph of "Limitation on Indebtedness" above and
(viii) loans or advances to employees in the ordinary course of business.
Limitation on the Sale or Issuance of Equity Interests of Restricted
Subsidiaries. The Company shall not sell any Equity Interest of a Restricted
Subsidiary, and shall not cause or permit any Restricted Subsidiary, directly
or indirectly, to issue or sell any Equity Interests, except: (i) to the
Company or a Wholly Owned Restricted Subsidiary; (ii) if, immediately after
giving effect to such issuance or sale, such Restricted Subsidiary remains a
Restricted Subsidiary; or (iii) if all Equity Interests of such Restricted
Subsidiary are sold or otherwise disposed of. Notwithstanding the foregoing,
the Company is permitted to sell all the Equity Interests of a Restricted
Subsidiary as long as the Company is in compliance with the terms of the
covenant described under "--Disposition of Proceeds of Asset Sales" above.
Provision of Financial Information. Whether or not the Company is subject to
Section 13(a) or 15(d) of the Exchange Act, or any successor provision
thereto, the Company shall file with the SEC (if permitted by SEC practice and
applicable law and regulations) the annual reports, quarterly reports and
other documents which the Company would have been required to file with the
SEC pursuant to such Section 13(a) or 15(d) (each, an "Exchange Act Report")
or any successor provision thereto if the Company were so subject, such
documents to be filed with the SEC on or prior to the respective dates (the
"Required Filing Dates") by which the Company would have been required so to
file such documents if the Company were so subject. If, at any time prior to
the consummation of the Exchange Offer when the Company is not subject to such
Section 13(a) or 15(d), the information which would be required in an Exchange
Act Report is included in a public filing of the Company under the Securities
Act at the applicable Required Filing Date, such public filing shall fulfill
the filing requirement with the SEC with respect to the applicable Exchange
Act Report. The Company shall also in any event (a) within 15 days of each
Required Filing Date (whether or not permitted or required to be filed with
the SEC) (i) transmit (or cause to be transmitted) by mail to all Holders, as
their names and addresses appear in the Note register, without cost to such
Holders, and (ii) file with the Trustee, copies of the annual reports,
quarterly reports and other documents which the Company is required to file
with the SEC pursuant to this covenant, or, if such filing is not so permitted
(or, prior to the consummation of the Exchange Offer, when the Company is not
subject to Section 13(d) or 15(d) of the Exchange Act), information and data
of a similar nature, and (b) if, notwithstanding the preceding sentence,
filing such documents by the Company with the SEC is not permitted by SEC
practice or applicable law or regulations, promptly upon written request
supply copies of such documents to any Holder. In addition, for so long as any
Notes remain outstanding, the Company will furnish to the Holders 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
The occurrence of any of the following is defined as an "Event of Default"
under the Indenture: (a) failure to pay principal of (or premium, if any, on)
any Note when due (whether or not prohibited by the provisions of the
Indenture described under "Subordination of the Notes" above); (b) failure to
pay any interest on any Note when due, continued for 30 days or more (whether
or not prohibited by the provisions of the Indenture described under
"Subordination of the Notes" above); (c) default in the payment of principal
of or interest on any Note required to be purchased pursuant to any Offer to
Purchase required by the Indenture when due and payable or failure to pay on
the Purchase Date the Purchase Price for any Note validly tendered pursuant to
any Offer to Purchase (whether or not prohibited by the provisions of the
Indenture described under "Subordination of the Notes" above); (d) failure to
perform or comply with any of the provisions described under "Certain
Covenants--
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Merger, Sale of Assets, etc." above; (e) failure to comply for 30 days with
any covenants described under "Offer to Purchase upon Change of Control"
(other than a failure to purchase Notes), under "--Limitation on Restricted
Payments," under "--Limitation on Indebtedness," under "--Limitation on
Layering," under "--Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries," under "--Designation of Unrestricted
Subsidiaries," under "--Limitation on Liens," under "--Disposition of Proceeds
of Asset Sales," under "--Transactions with Affiliates," under "--Limitation
on the Sale or Issuance of Equity Interests of Restricted Subsidiaries," or
under "--Provision of Financial Information;" (f) failure for 60 days to
perform or comply with any other covenant or agreement of the Company under
the Indenture or in the Notes or of the Guarantors under the Indenture or in
the Guarantees; (g) default or defaults under the terms of one or more
instruments evidencing or securing Indebtedness of the Company or any of its
Significant Restricted Subsidiaries having an outstanding principal amount of
$5.0 million or more individually or in the aggregate that have resulted in
the acceleration of the payment of such Indebtedness or failure by the Company
or any of its Significant Restricted Subsidiaries to pay principal when due at
the stated maturity of any such Indebtedness; (h) the rendering of a final
judgment or judgments (not subject to appeal) against the Company or any of
its Significant Restricted Subsidiaries in an amount of $5.0 million or more
(net of any amounts covered by reputable and creditworthy insurance companies)
which remain undischarged or unstayed for a period of 60 days after the date
on which the right to appeal has expired; (i) certain events of bankruptcy,
insolvency or reorganization affecting the Company or any of its Significant
Restricted Subsidiaries; or (j) other than as provided in or pursuant to any
Guarantee or the Indenture, any Guarantee by any Significant Restricted
Subsidiary ceases to be in full force and effect or is declared null and void
and unenforceable or found to be invalid or any Guarantor denies its liability
under its Guarantee (other than by reason of termination of the Indenture or a
release of such Guarantor from its Guarantee in accordance with the terms of
the Indenture and such Guarantee). Subject to the provisions of the Indenture
relating to the duties of the Trustee, in case an Event of Default shall occur
and be continuing, the Trustee will be under no obligation to exercise any of
its rights or powers under the Indenture at the request or direction of any of
the Holders of Notes, unless such Holders shall have offered to the Trustee
reasonable indemnity. Subject to such provisions for the indemnification of
the Trustee, the Holders of a majority in aggregate principal amount of the
outstanding Notes will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on such Trustee.
If an Event of Default with respect to the Notes (other than an Event of
Default with respect to the Company described in clause (i) of the preceding
paragraph) occurs and is continuing, the Trustee or the Holders of at least
25% in aggregate principal amount of the outstanding Notes, by notice in
writing to the Company, may declare the unpaid principal of (and premium, if
any) and accrued interest to the date of acceleration on all the outstanding
Notes to be due and payable immediately and, upon any such declaration, such
principal amount (and premium, if any) and accrued interest, notwithstanding
anything contained in the Indenture or the Notes to the contrary, will become
immediately due and payable; provided, however, that so long as the Bank
Credit Agreement shall be in full force and effect, if an Event of Default
shall have occurred and be continuing (other than an Event of Default with
respect to the Company described in clause (i) of the preceding paragraph),
the Notes shall not become due and payable until the earlier to occur of (x)
five Business Days following delivery of written notice of such acceleration
of the Notes to the agent under the Bank Credit Agreement and (y) the
acceleration (ipso facto or otherwise) of any Indebtedness under the Bank
Credit Agreement. If an Event or Default specified in clause (i) of the
preceding paragraph with respect to the Company occurs under the Indenture,
the Notes will ipso facto become immediately due and payable without any
declaration or other act on the part of the Trustee or any Holder of the
Notes.
Any such declaration with respect to the Notes may be annulled by the
Holders of a majority in aggregate principal amount of the outstanding Notes
upon the conditions provided in the Indenture. For information as to waiver of
defaults, see "Modification and Waiver" below.
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The Indenture provides that the Trustee shall, within 30 days after the
occurrence of any Default or Event of Default with respect to the Notes
outstanding, give the Holders of the Notes thereof notice of all uncured
Defaults or Events of Default thereunder known to it; provided, however, that,
except in the case of a Default or an Event of Default in payment with respect
to the Notes or a Default or Event of Default in complying with "Certain
Covenants--Merger, Sale of Assets, etc." above, the Trustee shall be protected
in withholding such notice if and so long as a committee of its trust officers
in good faith determines that the withholding of such notice is in the
interest of the Holders of the Notes.
No Holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such Holder
shall have previously given to the Trustee written notice of a continuing
Event of Default thereunder and unless the Holders of at least 25% of the
aggregate principal amount of the outstanding Notes shall have made written
request, and offered reasonable indemnity, to the Trustee to institute such
proceeding, and the Trustee shall have not have received from the Holders of a
majority in aggregate principal amount of such outstanding Notes a direction
inconsistent with such request and shall have failed to institute such
proceeding within 60 days. However, such limitations do not apply to a suit
instituted by a Holder of such a Note for enforcement of payment of the
principal of and premium, if any, or interest on such Note on or after the
respective due dates expressed in such Note.
The Company is required to furnish to the Trustee annually a statement as to
the performance by it of certain of its obligations under the Indenture and as
to any default in such performance.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES, INCORPORATOR AND
STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company
or any of its Affiliates, as such, shall have any liability for any
obligations of the Company or any of its Affiliates under the Notes or the
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each holder of Notes by accepting a Note waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes.
SATISFACTION AND DISCHARGE OF INDENTURE; DEFEASANCE
The Company may terminate its and the Guarantors' substantive obligations in
respect of the Notes by delivering all outstanding Notes to the Trustee for
cancellation and paying all sums payable by it on account of principal of,
premium, if any, and interest on all Notes or otherwise. In addition to the
foregoing, the Company may, provided that no Default or Event of Default has
occurred and is continuing or would arise therefrom (or, with respect to a
Default or Event of Default specified in clause (i) of "Events of Default"
above, occurs at any time on or prior to the 91st calendar day after the date
of such deposit (it being understood that this condition shall not be deemed
satisfied until after such 91st day)) under the Indenture and provided that no
default under any Senior Indebtedness would result therefrom, terminate its
and the Guarantors' substantive obligations in respect of the Notes (except
for its obligations to pay the principal of (and premium, if any, on) and the
interest on the Notes and the Guarantors' Guarantee thereof) by (i) depositing
with the Trustee, under the terms of an irrevocable trust or escrow agreement,
money or United States Government Obligations or a combination thereof
sufficient (without reinvestment) to pay all remaining Indebtedness on such
Notes; (ii) delivering to the Trustee either an Opinion of Counsel or a ruling
of the Internal Revenue Service to the effect that the Holders of the Notes
will not recognize income, gain or loss for Federal income tax purposes as a
result of such deposit and termination of obligations; (iii) delivering to the
Trustee an Opinion of Counsel to the effect that the Company's exercise of its
option under this paragraph will not result in any of the Company, the Trustee
or the trust or escrow created by the Company's deposit of funds pursuant to
this provision becoming or being deemed to be an
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"investment company" under the Investment Company Act of 1940, as amended (the
"Investment Act"); and (iv) complying with certain other requirements set
forth in the Indenture (the foregoing being referred to as a "covenant
defeasance"). In addition, the Company may, provided that no Default or Event
of Default has occurred and is continuing or would arise therefrom (or, with
respect to a Default or Event of Default specified in clause (i) of "Events of
Default" above, occurs at any time on or prior to the 91st calendar day after
the date of such deposit (it being understood that this condition shall not be
deemed satisfied until after such 91st day)) under the Indenture and provided
that no default under any Senior Indebtedness would result therefrom,
terminate all of its and the Guarantors' substantive obligations in respect of
the Notes (including its obligations to pay the principal of (and premium, if
any, on) and interest on the Notes and the Guarantors' Guarantee thereof) by
(i) depositing with the Trustee, under the terms of an irrevocable trust
agreement, money or United States Government Obligations or a combination
thereof sufficient (without reinvestment) to pay all remaining Indebtedness on
the Notes; (ii) delivering to the Trustee either a ruling of the Internal
Revenue Service to the effect that the Holders of the Notes will not recognize
income, gain or loss for Federal income tax purposes as a result of such
deposit and termination of obligations or an Opinion of Counsel addressed to
the Trustee based upon such a ruling or based on a change in the applicable
Federal tax law since the date of the Indenture, to such effect; (iii)
delivering to the Trustee an Opinion of Counsel to the effect that the
Company's exercise of its option under this paragraph will not result in any
of the Company, the Trustee or the trust or escrow created by the Company's
deposit of funds pursuant to this provision becoming or being deemed to be an
"investment company" under the Investment Act; and (iv) complying with certain
other requirements set forth in the Indenture (the foregoing being referred to
as a "legal defeasance").
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. In the event of either
covenant defeasance or legal defeasance, payment of the Notes may not be
accelerated because of an event specified as a Default or an Event of Default.
The Company may make an irrevocable deposit pursuant to this provision only
if at such time it is not prohibited from doing so under the subordination
provisions of the Indenture or certain covenants in the Senior Indebtedness
and the Company has delivered to the Trustee and any Paying Agent an Officers'
Certificate to that effect.
GOVERNING LAW
The Indenture, the Notes and the Guarantees are governed by the laws of the
State of New York without regard to principles of conflicts of laws.
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company,
the Guarantors, and the Trustee with the consent of the Holders of a majority
in aggregate principal amount of the outstanding Notes (including consents
obtained in connection with a tender offer or exchange offer for the Notes);
provided, however, that no such modification or amendment to the Indenture
may, without the consent of the Holder of each Note affected thereby, (a)
change the maturity of the principal of or any installment of interest on any
such Note or alter the optional redemption or repurchase provisions of any
such Note or the Indenture in a manner adverse to the Holders of the Notes;
(b) reduce the principal amount of (or the premium) of any such Note; (c)
reduce the rate of or extend the time for payment of interest on any such
Note; (d) change the place or currency of payment of principal of (or premium,
if any) or interest on any such Note; (e) modify any provisions of the
Indenture relating to the waiver of past defaults (other than to add sections
of the Indenture or the Notes subject thereto) or the right of the Holders of
Notes to institute suit for the enforcement of any payment on or with respect
to any such Note or any Guarantee in respect thereof or the modification and
amendment provisions of the Indenture and the Notes (other than to add
sections
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of the Indenture or the Notes which may not be amended, supplemented or waived
without the consent of each Holder therein affected); (f) reduce the
percentage of the principal amount of outstanding Notes necessary for
amendment to or waiver of compliance with any provision of the Indenture or
the Notes or for waiver of any Default in respect thereof; (g) waive a default
in the payment of principal of, interest on, or redemption payment with
respect to, the Notes (except a rescission of acceleration of the Notes by the
Holders thereof as provided in the Indenture and a waiver of the payment
default that resulted from such acceleration); (h) modify the ranking or
priority of any Note or the Guarantee in respect thereof of any Guarantor or
modify the definition of Senior Indebtedness or Guarantor Senior Indebtedness
or amend or modify the subordination provisions of the Indenture, in any case
in any manner adverse to the Holders of the Notes; (i) modify the provisions
of any covenant (or the related definitions) in the Indenture requiring the
Company to make an Offer to Purchase following an event or circumstance which
may give rise to the requirement to make an Offer to Purchase in a manner
materially adverse to the Holders of Notes affected thereby otherwise than in
accordance with the Indenture; or (j) release any Guarantor from any of its
obligations under its Guarantee or the Indenture otherwise than in accordance
with the Indenture.
The Holders of a majority in aggregate principal amount of the outstanding
Notes, on behalf of all Holders of Notes, may waive compliance by the Company
and the Guarantors with certain restrictive provisions of the Indenture.
Subject to certain rights of the Trustee, as provided in the Indenture, the
Holders of a majority in aggregate principal amount of the Notes, on behalf of
all Holders, may waive any past default under the Indenture (including any
such waiver obtained in connection with a tender offer or exchange offer for
the Notes), except a default in the payment of principal, premium, if any, or
interest or a default arising from failure to purchase any Notes tendered
pursuant to an Offer to Purchase, or a default in respect of a provision that
under the Indenture cannot be modified or amended without the consent of the
Holder of each Note that is affected.
THE TRUSTEE
Except during the continuance of a Default, the Trustee will perform only
such duties as are specifically set forth in the Indenture. During the
existence of a Default, the Trustee will exercise such rights and powers
vested in it under the Indenture and use the same degree of care and skill in
its exercise as a prudent person would exercise under the circumstances in the
conduct of such person's own affairs.
The Indenture and provisions of the Trust Indenture Act incorporated by
reference therein contain limitations on the rights of the Trustee, should it
become a creditor of the Company, any Guarantor or any other obligor upon the
Notes, to obtain payment of claims in certain cases or to realize on certain
property received by it in respect of any such claim as security or otherwise.
The Trustee is permitted to engage in other transactions with the Company or
an Affiliate of the Company; provided, however, that if it acquires any
conflicting interest (as defined in the Indenture or in the Trust Indenture
Act), it must eliminate such conflict or resign.
The address of the Trustee is Goodwin Square, 225 Asylum Street, 23rd Floor,
Hartford, Connecticut 06103.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full definition of all such terms, as well as
any other capitalized terms used herein for which no definition is provided.
"Accounts Receivable Subsidiary" means any Subsidiary of the Company that
is, directly or indirectly, wholly owned by the Company (other than director
qualifying shares) and organized solely for the purpose of and engaged in (i)
purchasing, financing and collecting accounts receivable
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obligations of customers of the Company or its Subsidiaries, (ii) the sale or
financing of such accounts receivable or interest therein and (iii) other
activities incident thereto.
"Acquired Indebtedness" means Indebtedness of a Person (a) assumed in
connection with an Acquisition from such Person or (b) existing at the time
such Person becomes a Restricted Subsidiary or is merged or consolidated with
or into the Company or any Restricted Subsidiary.
"Acquired Person" means, with respect to any specified Person, any other
Person which merges with or into or becomes a Subsidiary of such specified
Person.
"Acquisition" means (i) any capital contribution (by means of transfers of
cash or other property to others or payments for property or services for the
account or use of others, or otherwise) by the Company or any Restricted
Subsidiary to any other Person, or any acquisition or purchase of Equity
Interests of any other Person by the Company or any Restricted Subsidiary, in
either case pursuant to which such Person shall become a Restricted Subsidiary
or shall be consolidated with or merged into the Company or any Restricted
Subsidiary or (ii) any acquisition by the Company or any Restricted Subsidiary
of the assets of any Person which constitute substantially all of an operating
unit or line of business of such Person or which is otherwise outside of the
ordinary course of business.
"Additional Interest" has the meaning provided in Section 4(a) of the
Registration Rights Agreement.
"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.
"Asset Sale" means any direct or indirect sale, conveyance, transfer, lease
(that has the effect of a disposition, including a sale leaseback transaction)
or other disposition (including, without limitation, by means of any merger or
consolidation) to any Person other than the Company or a Wholly Owned
Restricted Subsidiary, in one transaction or a series of related transactions,
of (i) any Equity Interest (other than directors' qualifying shares) of any
Restricted Subsidiary; (ii) any assets of the Company or any Restricted
Subsidiary which constitute substantially all of an operating unit or line of
business of the Company or any Restricted Subsidiary; or (iii) any other
property or asset of the Company or any Restricted Subsidiary outside of the
ordinary course of business, provided in each case that the aggregate
consideration for such sale, conveyance, transfer, lease or other disposition
is equal to $1.5 million or more. For the purposes of this definition, the
term "Asset Sale" shall not include (a) any transaction consummated in
compliance with "Certain Covenants--Merger, Sale of Assets, etc." above and
the creation of any Lien not prohibited by "Certain Covenants--Limitation on
Liens" above; provided, however, that any transaction consummated in
compliance with "Certain Covenants--Merger, Sale of Assets, etc." above
involving a sale, conveyance, assignment, transfer, lease or other disposal of
less than all of the properties or assets of the Company shall be deemed to be
an Asset Sale with respect to the properties or assets of the Company and the
Restricted Subsidiaries that are not so sold, conveyed, assigned, transferred,
leased or otherwise disposed of in such transaction; (b) sales of property or
equipment that has become worn out, obsolete or damaged or otherwise
unsuitable for use in connection with the business of the Company or any
Restricted Subsidiary; (c) any transaction consummated in compliance with
"Certain Covenants--Limitation on Restricted Payments" above; (d) sales of
accounts receivable for cash at fair market value; and (e) any sale,
conveyance or transfer of accounts receivable in the ordinary course of
business to an Accounts Receivable Subsidiary or to third parties that are not
Affiliates of the Company or any Subsidiary of the Company.
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"AXIA Group" means AXIA Group, Inc.
"Bank Credit Agreement" means the credit facility between the Company, the
Guarantors, the lenders named therein, and Paribas, as Administrative Agent,
including any deferrals, renewals, extensions, substitutions, replacements,
refinancings or refundings thereof, or amendments, modifications or
supplements thereto and any agreement providing therefor (including any
restatements thereof and any increases in the amount of commitments
thereunder), whether by or with the same or any other lender, creditor, group
of lenders or group of creditors, and including related notes, guarantee and
note agreements and other instruments and agreements executed in connection
therewith.
"Board Resolution" means, with respect to any Person, a duly adopted
resolution of the Board of Directors of such 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 so required to be capitalized on the balance sheet in
accordance with GAAP.
"Cash Equivalents" means with respect to the Company and its Restricted
Subsidiaries: (a) U.S. dollars and any other currency that is convertible into
U.S. dollars without legal restrictions; (b) securities issued or directly and
fully guaranteed or insured by the U.S. government or any agency or
instrumentality thereof; (c) certificates of deposit and time deposits with
maturities of one year or less from the date of acquisition, bankers'
acceptances with maturities not exceeding one year and overnight bank
deposits, in each case with any commercial bank having capital and surplus in
excess of $250.0 million (or the foreign currency equivalent thereof); (d)
repurchase obligations with a term of not more than 30 days for underlying
securities of the types described in clauses (b) and (c) above entered into
with any financial institution meeting the qualifications specified in clause
(c) above; (e) commercial paper rated P-1, A-1 or the equivalent thereof by
Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Corporation
("S&P"), respectively, and in each case maturing within six months after the
date of acquisition; (f) with respect to any Foreign Subsidiary organized in
Canada; commercial paper of Canadian companies rated R-1 High or the
equivalent thereof by Dominion Bond Rating Services with maturities of less
than one year; and (g) with respect to Foreign Subsidiaries not organized in
Canada, government obligations of another country whose debt securities are
rated by S&P and/or Moody's "A-1" or "P-1", or the equivalent thereof (if a
short-term debt rating is provided by either) or at least "AA" or "AA2", or
the equivalent thereof (if a long-term unsecured debt rating is provided by
either), in each case, with maturities of less than 12 months.
"Change of Control" means the occurrence of any of the following events
(whether or not approved by the Board of Directors of the Company): (i) any
Person (as such term is used in Sections 13(d) and 14(d) of the Exchange Act,
including any group acting for the purpose of acquiring, holding or disposing
of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act),
other than one or more Permitted Holders, is or becomes the "beneficial owner"
(as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a
Person shall be deemed to have "beneficial ownership" of all shares that any
such Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time, upon the happening of an event
or otherwise), directly or indirectly, of more than 50% of the total voting
power of the then outstanding Voting Equity Interests of the Company or, so
long as AXIA Group owns a majority of the Voting Equity Interests of the
Company, AXIA Group; (ii) the Company consolidates with, or merges with or
into, another Person (other than a Guarantor which is a Wholly Owned
Restricted Subsidiary or a Person that is controlled by the Permitted Holders)
or the Company directly or indirectly sells, assigns, conveys, transfers,
leases or otherwise disposes of all or substantially all of the assets of the
Company and the Restricted Subsidiaries (determined on a consolidated basis)
to any Person (other than the Company or a Guarantor which is a Wholly Owned
Restricted Subsidiary or a Person that is controlled by the
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Permitted Holders), in each case other than any such transaction where
immediately after such transaction the Person or Persons that "beneficially
owned" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except
that a Person shall be deemed to have "beneficial ownership" of all securities
that such Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time) immediately prior to such
transaction, directly or indirectly, the then outstanding Voting Equity
Interests of the Company "beneficially own" (as so determined), directly or
indirectly, a majority of the total voting power of the then outstanding
Voting Equity Interests of the surviving or transferee Person; or (iii)
following the first public offering of $20.0 million or more of Voting Equity
Interests of the Company, during any period of two consecutive years,
individuals who at the beginning of such period constituted the Board of
Directors of the Company (together with any new directors whose election by
such Board of Directors or whose nomination for election by the shareholders
of the Company was approved by a vote of a majority of the directors of the
Company then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors of the Company then in office.
"Change of Control Date" has the meaning set forth under "Offer to Purchase
upon Change of Control" above.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (i) the aggregate amount of Consolidated EBITDA for the four quarter
period of the most recent four consecutive fiscal quarters ending prior to the
date of such determination (the "Four Quarter Period") to (ii) Consolidated
Interest Expense for such Four Quarter Period; provided, however, that (1) if
the Company or any Restricted Subsidiary has Incurred any Indebtedness since
the beginning of such Four Quarter Period that remains outstanding on such
date of determination or if the transaction giving rise to the need to
calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness, or
both, Consolidated EBITDA and Consolidated Interest Expense for such Four
Quarter Period shall be calculated after giving effect on a pro forma basis to
such Indebtedness as if such Indebtedness had been Incurred on the first day
of such Four Quarter Period and the discharge of any other Indebtedness
repaid, repurchased, defeased or otherwise discharged with the proceeds of
such new Indebtedness as if such discharge had occurred on the first day of
such Four Quarter Period, (2) if since the beginning of such Four Quarter
Period the Company or any Restricted Subsidiary shall have made any Asset
Sale, the Consolidated EBITDA for such Four Quarter Period shall be reduced by
an amount equal to the Consolidated EBITDA (if positive) directly attributable
to the assets that are the subject of such Asset Sale for such Four Quarter
Period or increased by an amount equal to the Consolidated EBITDA (if
negative) directly attributable thereto for such Four Quarter Period and
Consolidated Interest Expense for such Four Quarter Period shall be reduced by
an amount equal to the Consolidated Interest Expense directly attributable to
any Indebtedness of the Company or any Restricted Subsidiary repaid,
repurchased, defeased or otherwise discharged with respect to the Company and
its continuing Restricted Subsidiaries in connection with such Asset Sale for
such Four Quarter Period (or, if the Equity Interests of any Restricted
Subsidiary are sold, the Consolidated Interest Expense for such Four Quarter
Period directly attributable to the Indebtedness of such Restricted Subsidiary
to the extent the Company and its continuing Restricted Subsidiaries are no
longer liable for such Indebtedness after such sale), (3) if since the
beginning of such Four Quarter Period the Company or any Restricted Subsidiary
(by merger or otherwise) shall have made an Investment in any Restricted
Subsidiary (or any Person that becomes a Restricted Subsidiary) or an
acquisition of assets, including any acquisition of assets occurring in
connection with a transaction causing a calculation to be made hereunder,
which constitutes all or substantially all of an operating unit of a business,
Consolidated EBITDA and Consolidated Interest Expense for such Four Quarter
Period shall be calculated after giving pro forma effect thereto (including
the Incurrence of any Indebtedness) as if such Investment or acquisition
occurred on the first day of such Four Quarter Period and (4) if since the
beginning of such Four Quarter Period any Person (that subsequently
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became a Restricted Subsidiary or was merged with or into the Company or any
Restricted Subsidiary since the beginning of such Four Quarter Period) shall
have made any Asset Sale or any Investment or acquisition of assets that would
have required an adjustment pursuant to clause (2) or (3) above if made by the
Company or a Restricted Subsidiary during such Four Quarter Period,
Consolidated EBITDA and Consolidated Interest Expense for such Four Quarter
Period shall be calculated after giving pro forma effect thereto as if such
Asset Sale, Investment or acquisition of assets occurred on, with respect to
any Investment or acquisition, the first day of such Four Quarter Period and,
with respect to any Asset Sale, the day prior to the first day of such Four
Quarter Period. For purposes of this definition, whenever pro forma effect is
to be given to an Asset Sale or Investment or other acquisition of assets
(including pursuant to the Transactions), the amount of income or earnings and
any net cost savings relating thereto and the amount of Consolidated Interest
Expense associated with any Indebtedness Incurred in connection therewith, the
pro forma calculations shall be determined in accordance with Regulation S-X
under the Securities Act. If any Indebtedness bears a floating rate of
interest and is being given pro forma effect, the interest expense on such
Indebtedness shall be calculated as if the rate in effect on the date of
determination had been the applicable rate for the entire period (taking into
account any agreement under which Hedging Obligations relating to interest are
outstanding applicable to such Indebtedness if such agreement under which such
Hedging Obligations are outstanding has a remaining term as at the date of
determination in excess of 12 months).
"Consolidated EBITDA" means, for any period, the Consolidated Net Income for
such period, plus the following to the extent deducted in calculating such
Consolidated Net Income: (i) Consolidated Income Tax Expense for such period;
(ii) Consolidated Interest Expense for such period; (iii) depreciation expense
for such period; (iv) amortization expense for such period; (v) all costs and
expenses incurred by the Company on or prior to the Issue Date related to the
Transactions (to the extent such items were incurred during the relevant Four
Quarter Period); and (vi) all other non-cash items which are not expected by
the Company to result in any cash expenditures in future periods, minus all
non-cash items having the effect of increasing Consolidated Net Income during
the period and which were not deducted in calculating Consolidated Net Income
for any prior period.
"Consolidated Income Tax Expense" means, with respect to the Company for any
period, the provision for Federal, state, local and foreign income taxes
payable by the Company and the Restricted Subsidiaries for such period as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to the Company for any
period, without duplication, the sum of (i) the interest expense of the
Company and the Restricted Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP, including, without limitation, (a)
any amortization of debt discount, (b) the net cost under Hedging Obligations
relating to interest (including any amortization of discounts), (c) all
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing and (d) all capitalized interest
and all accrued interest, (ii) the interest component of Capital Lease
Obligations paid, accrued and/or scheduled to be paid or accrued by the
Company and the Restricted Subsidiaries during such period as determined on a
consolidated basis in accordance with GAAP and (iii) dividends and
distributions in respect of Disqualified Equity Interests of the Company
during such period as determined on a consolidated basis in accordance with
GAAP.
"Consolidated Net Income" means, for any period, the consolidated net income
(loss) of the Company and its Subsidiaries determined in accordance with GAAP;
provided, however, that there shall not be included in such Consolidated Net
Income: (i) any net income (loss) of any Person if such person is not a
Restricted Subsidiary, except that (A) subject to the limitations contained in
clause (iv) below, the Company's equity in the net income of any such Person
for such period shall be included
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in such Consolidated Net Income up to the aggregate amount of cash actually
distributed by such Person during such period to the Company or a Restricted
Subsidiary as a dividend or other distribution (subject, in the case of a
dividend or other distribution to a Restricted Subsidiary, to the limitations
contained in clause (iii) below) and (B) the Company's equity in a net loss of
any such Person for such period shall be included in determining such
Consolidated Net Income to the extent of any Investment made by the Company or
any Restricted Subsidiary to such Person during such period; (ii) any net
income (loss) of any person acquired by the Company or a Restricted Subsidiary
in a pooling of interests transaction for any period prior to the date of such
acquisition; (iii) any net income (loss) of any Restricted Subsidiary if such
Restricted Subsidiary is subject to restrictions, directly or indirectly, on
the payment of dividends or the making of distributions by such Restricted
Subsidiary, directly or indirectly, to the Company except that (A) subject to
the exclusion contained in clause (iv) below, the Company's equity in the net
income of any such Restricted Subsidiary for such period shall be included in
such Consolidated Net Income up to the aggregate amount of cash that could
have been distributed by such Restricted Subsidiary during such period to the
Company or another Restricted Subsidiary as a dividend (subject, in the case
of a dividend that could have been made to another Restricted Subsidiary, to
the limitation contained in this clause) and (B) the Company's equity in a net
loss of any such Restricted Subsidiary for such period shall be included in
determining such Consolidated Net Income; (iv) any gain or loss realized upon
the sale or other disposition of any asset of the Company or the Restricted
Subsidiaries (including pursuant to any sale/leaseback transaction) that is
not sold or otherwise disposed of in the ordinary course of business and any
gain or loss realized upon the sale or other disposition of any Equity
Interests of any Person; (v) any extraordinary gain or loss; and (vi) the
cumulative effect of a change in accounting principles. Notwithstanding the
foregoing, for purposes of the covenant described under "--Certain Covenants--
Limitations on Restricted Payments" only, there shall be excluded from
Consolidated Net Income any dividends, repayments of loans or advances or
other transfers of assets from Unrestricted Subsidiaries to the Company or a
Restricted Subsidiary to the extent such dividends, repayments or transfers
increase the amount of Restricted Payments permitted under such covenant
pursuant to clause (c)(4) of the first paragraph thereof.
"Consolidated Net Worth" of the Company means the stockholders' equity of
the Company and the Restricted Subsidiaries determined on a consolidated basis
in accordance with GAAP, less amounts attributed to Disqualified Equity
Interests.
"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 Indebtedness" means (a) any Indebtedness outstanding
under the Bank Credit Agreement and (b) any other Senior Indebtedness which,
at the time of determination, has an aggregate principal amount outstanding,
together with any commitments to lend additional amounts, of at least $25.0
million, if the instrument governing such Senior Indebtedness expressly states
that such Indebtedness is "Designated Senior Indebtedness" for purposes of the
Indenture.
"Designation" has the meaning set forth under "Certain Covenants--
Designation of Unrestricted Subsidiaries" above.
"Designation Amount" has the meaning set forth under "Certain Covenants--
Designation of Unrestricted Subsidiaries" above.
"Disposition" means, with respect to any Person, any merger, consolidation
or other business combination involving such Person (whether or not such
Person is the Surviving Person) or the sale, assignment, transfer, lease,
conveyance or other disposition of all or substantially all of such Person's
assets.
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"Disqualified Equity Interest" means any Equity Interest which, by its terms
(or by the terms of any security into which it is convertible or for which it
is exchangeable at the option of the holder thereof), or upon the happening of
any event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable, at the option of the holder thereof,
in whole or in part on or prior to the Maturity Date, or exchangeable into
Indebtedness on or prior to the Maturity Date; provided, however, that any
Equity Interest that would not constitute a Disqualified Equity Interest but
for provisions thereof giving holders thereof the right to require the issuing
Person to repurchase or redeem such Equity Interest upon the occurrence of an
"asset sale" or "change of control" occurring prior to the Maturity Date shall
not constitute a Disqualified Equity Interest if (i) the "asset sale" or
"change of control" provisions applicable to such Equity Interest are not more
favorable to the holders of such Equity Interest than the comparable
provisions described under "--Certain Covenants--Disposition of Proceeds of
Asset Sales" and "--Certain Covenants--Change of Control" and (ii) the Company
shall have complied in full with all of its obligations in respect of such
covenants prior to any payment in respect of the comparable provisions of such
Equity Interest.
"Equity Interest" in any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) corporate stock or other equity
participations, including partnership interests, whether general or limited,
in such Person, including any Preferred Equity Interests.
"ESOP" means the employee stock ownership plan of the Company as in effect
on the Issue Date or any subsequent employee stock ownership plan, as defined
under ERISA, which is adopted by the Company or any Restricted Subsidiary.
"ESOP Loan" means any loan or advance by the Company or any Restricted
Subsidiary to the ESOP.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Indebtedness" means any Indebtedness (or agreements relating
thereto) of the Company and its Restricted Subsidiaries in existence on the
Issue Date.
"Expiration Date" has the meaning set forth in the definition of "Offer to
Purchase" below.
"Fair Market Value" means, with respect to any asset, the price (after
taking into account any liabilities relating to such assets) which could be
negotiated in an arm's-length free market transaction between a willing seller
and a willing buyer, neither of which is under any compulsion to complete the
transaction; provided, however, that the Fair Market Value of any such asset
or assets shall be determined conclusively by the Board of Directors of the
Company acting in good faith.
"Foreign Subsidiary" means a Restricted Subsidiary that is incorporated in a
jurisdiction other than the United States or a State thereof or the District
of Columbia.
"Four Quarter Period" has the meaning set forth in the definition of
"Consolidated Coverage Ratio" above.
"GAAP" means, at any date of determination, generally accepted accounting
principles in effect in the United States which are applicable at the date of
determination and which are consistently applied for all applicable periods.
"Guarantor" means (i) each of the Subsidiaries of the Company (excluding
Unrestricted Subsidiaries and Foreign Subsidiaries) as of the Issue Date and
their respective successors, and (ii) each other Restricted Subsidiary,
formed, created or acquired before or after the Issue Date, required to become
a Guarantor after the Issue Date pursuant to "Guarantees of the Notes" above.
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"Guarantor Senior Indebtedness" means, with respect to any Guarantor, at any
date, (a) all Obligations of such Guarantor under the Bank Credit Agreement;
(b) all Hedging Obligations of such Guarantor; (c) all Obligations of such
Guarantor under stand-by letters of credit; and (d) all other Indebtedness of
such Guarantor for borrowed money, including principal, premium, if any, and
interest (including Post-Petition Interest) on such Indebtedness unless the
instrument under which such Indebtedness of such Guarantor for money borrowed
is Incurred expressly provides that such
Indebtedness for money borrowed is not senior or superior in right of payment
to such Guarantor's Guarantee of the Notes, and all renewals, extensions,
substitutions, modifications, amendments or refinancings thereof.
Notwithstanding the foregoing, Guarantor Senior Indebtedness shall not include
(a) to the extent that it may constitute Indebtedness, any Obligation for
Federal, state, local or other taxes; (b) any Indebtedness among or between
such Guarantor and any Subsidiary of such Guarantor; (c) to the extent that it
may constitute Indebtedness, any Obligation in respect of any trade payable
Incurred for the purchase of goods or materials, or for services obtained, in
the ordinary course of business; (d) Indebtedness evidenced by such
Guarantor's Guarantee of the Notes; (e) Indebtedness of such Guarantor that is
expressly subordinate or junior in right of payment to any other Indebtedness
of such Guarantor; (f) to the extent that it may constitute Indebtedness, any
obligation owing under leases (other than Capitalized Lease Obligations) or
management agreements; and (g) any obligation that by operation of law is
subordinate to any general unsecured obligations of such Guarantor.
"guarantee" means, as applied to any obligation, (i) a guarantee (other than
by endorsement of negotiable instruments for collection in the ordinary course
of business), direct or indirect, in any manner, of any part or all of such
obligation and (ii) an agreement, direct or indirect, contingent or otherwise,
the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limiting the foregoing, the
payment of amounts drawn down by letters of credit. A guarantee shall include,
without limitation, any agreement to maintain or preserve any other Person's
financial condition or to cause any other Person to achieve certain levels of
operating results.
"Guarantee" means the guarantee of the Notes by each Guarantor under the
Indenture.
"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, (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates and (iii) foreign currency or commodity hedges, exchange or similar
protection agreements (agreements referred to in this definition being
referred to herein as "Hedging Agreements").
"Holder" means the registered holder of any Note.
"Incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (including by conversion, exchange or
otherwise), assume, guarantee or otherwise become liable in respect of such
Indebtedness or other obligation or the recording, as required pursuant to
GAAP or otherwise, of any such Indebtedness or other obligation on the balance
sheet of such Person (and "Incurrence," "Incurred" and "Incurring" shall have
meanings correlative to the foregoing). Indebtedness of any Acquired Person or
any of its Subsidiaries existing at the time such Acquired Person becomes a
Restricted Subsidiary (or is merged into or consolidated with the Company or
any Restricted Subsidiary), whether or not such Indebtedness was Incurred in
connection with, as a result of, or in contemplation of, such Acquired Person
becoming a Restricted Subsidiary (or being merged into or consolidated with
the Company or any Restricted Subsidiary), shall be deemed Incurred at the
time any such Acquired Person becomes a Restricted Subsidiary or merges into
or consolidates with the Company or any Restricted Subsidiary.
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"Indebtedness" means (without duplication), with respect to any Person,
whether recourse is to all or a portion of the assets of such Person and
whether or not contingent, (a) every obligation of such Person for the
principal amount of money borrowed; (b) every obligation of such Person
evidenced by the principal amount of bonds, debentures, notes or other similar
instruments, including obligations incurred in connection with the acquisition
of property, assets or businesses; (c) every reimbursement obligation of such
Person with respect to letters of credit, bankers' acceptances or similar
facilities issued for the account of such Person (except to the extent not
drawn on); (d) every obligation of such Person issued or assumed as the
deferred purchase price of property or services (but excluding (x) earnout or
other similar obligations until such time as the amount of such obligation is
capable of being determined, (y) trade accounts payable incurred in the
ordinary course of business, or (z) other accrued liabilities arising in the
ordinary course of business); (e) every Capital Lease Obligation of such
Person; (f) every net obligation under Hedging Agreements of such Person; (g)
every obligation of the type referred to in clauses (a) through (f) of another
Person and all dividends of another Person the payment of which, in either
case, such Person has guaranteed or is responsible or liable for, directly or
indirectly, as obligor, guarantor or otherwise; and (h) any and all deferrals,
renewals, extensions and refundings of, or amendments, modifications or
supplements to, any liability of the kind described in any of the preceding
clauses (a) through (g) above. Indebtedness (a) shall never be calculated
taking into account any cash and Cash Equivalents held by such Person; (b)
shall not include obligations of any Person (x) arising from the honoring by a
bank or other financial institution of a check, draft or similar instrument
inadvertently drawn against insufficient funds in the ordinary course of
business, provided that such obligations are extinguished within ten Business
Days of their incurrence, (y) resulting from the endorsement of negotiable
instruments for collection in the ordinary course of business and (z) under
stand-by letters of credit to the extent collateralized by cash or Cash
Equivalents; (c) which provides that an amount less than the principal amount
thereof shall be due upon any declaration of acceleration thereof shall be
deemed to be incurred or outstanding in an amount equal to the accreted value
thereof at the date of determination; (d) shall include the liquidation
preference and any mandatory redemption payment obligations in respect of any
Disqualified Equity Interests of the Company or any Restricted Subsidiary; and
(e) shall not include obligations under performance bonds, performance
guarantees, surety bonds and appeal bonds, letters of credit or similar
obligations, incurred in the ordinary course of business. For purposes of
determining compliance with any U.S. dollar- denominated restriction on the
Incurrence of Indebtedness denominated in a foreign currency, the U.S. dollar-
equivalent principal amount of such Indebtedness Incurred pursuant thereto
shall be calculated based on the relevant currency exchange rate in effect on
the date that such Indebtedness was Incurred. If such Indebtedness is Incurred
to refinance other Indebtedness denominated in a foreign currency, and such
refinancing would cause the applicable U.S. dollar-denominated restriction to
be exceeded if calculated at the relevant currency exchange rate in effect on
the date of such refinancing, such U.S. dollar-denominated restriction shall
be deemed not to have been exceeded so long as the principal amount of such
refinancing Indebtedness does not exceed the principal amount of such
Indebtedness being refinanced. The principal amount of any Indebtedness
Incurred to refinance other Indebtedness, if Incurred in a different currency
from the Indebtedness being refinanced, shall be calculated based on the
currency exchange rate applicable to the currencies in which such respective
Indebtedness is denominated that is in effect on the date of such refinancing.
"Independent Financial Advisor" means a nationally recognized accounting,
appraisal, investment banking firm or consultant that is, in the judgment of
the Company's Board of Directors, qualified to perform the task for which it
has been engaged (i) which does not, and whose directors, officers and
employees or Affiliates do not, have a direct or indirect financial interest
in the Company and (ii) which, in the judgment of the Board of Directors of
the Company, is otherwise independent and qualified to perform the task for
which it is to be engaged.
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"Insolvency or Liquidation Proceeding" means, with respect to any Person,
any liquidation, dissolution or winding up of such Person, or any bankruptcy,
reorganization, insolvency, receivership or similar proceeding with respect to
such Person, whether voluntary or involuntary.
"interest" means, with respect to the Notes, the sum of any cash interest
and any Additional Interest on the Notes.
"Investment" means, with respect to any Person, any direct or indirect loan,
advance, guarantee or other extension of credit or capital contribution to (by
means of transfers of cash or other property
or assets to others or payments for property or services for the account or
use of others, or otherwise, but other than advances to customers in the
ordinary course of business recorded as an account receivable on the books of
the Person making the advance), or purchase or acquisition of capital stock,
bonds, notes, debentures or other securities or evidences of Indebtedness
issued by, any other Person. The amount of any Investment shall be the
original cost of such Investment, plus the cost of all additions thereto, and
minus the amount of any portion of such Investment repaid to such Person in
cash as a repayment of principal or a return of capital, as the case may be,
but without any other adjustments for increases or decreases in value, or
write-ups, write-downs or write-offs with respect to such Investment. In
determining the amount of any Investment involving a transfer of any property
or asset other than cash, such property shall be valued at its fair market
value at the time of such transfer, as determined in good faith by the Board
of Directors (or comparable body) of the Person making such transfer.
"Issue Date" means the original issue date of the Notes.
"Lien" means any lien, mortgage, charge, security interest, hypothecation,
assignment for security or encumbrance of any kind (including any conditional
sale or capital lease or other title retention agreement, any lease in the
nature thereof).
"Management Agreement" means the management agreement dated June 23, 1998
between AXIA Group and Sterling.
"Maturity Date" means July 15, 2008.
"Net Cash Proceeds" means the aggregate proceeds in the form of cash or Cash
Equivalents received by the Company or any Restricted Subsidiary in respect of
any Asset Sale, including all cash or Cash Equivalents received upon any sale,
liquidation or other exchange of proceeds of Asset Sales received in a form
other than cash or Cash Equivalents, net of (a) the direct costs relating to
such Asset Sale (including, without limitation, legal, accounting and
investment banking fees and expenses, and sales commissions) and any
relocation or severance expenses incurred as a result thereof; (b) taxes paid
or payable as a result thereof (after taking into account any available tax
credits or deductions and any tax sharing arrangements); (c) amounts required
to be applied to the repayment of Indebtedness secured by a Lien on the asset
or assets that were the subject of such Asset Sale; (d) amounts deemed, in
good faith, appropriate by the Board of Directors of the Company to be
provided as a reserve, in accordance with GAAP, against any liabilities
associated with such assets which are the subject of such Asset Sale (provided
that the amount of any such reserves shall be deemed to constitute Net Cash
Proceeds at the time such reserves shall have been released or are not
otherwise required to be retained as a reserve); and (e) with respect to Asset
Sales by Restricted Subsidiaries, the portion of such cash payments
attributable to Persons holding a minority interest in such Restricted
Subsidiary.
"Obligations" means any principal, interest (including, without limitation,
Post-Petition Interest), penalties, fees, indemnifications, reimbursement
obligations, damages and other liabilities payable under the documentation
governing any Indebtedness.
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"Offer" has the meaning set forth in the definition of "Offer to Purchase"
below.
"Offer to Purchase" means a written offer (the "Offer") sent by or on behalf
of the Company by first-class mail, postage prepaid, to each holder at his
address appearing in the register for the Notes on the date of the Offer
offering to purchase up to the principal amount of Notes specified in such
Offer at the purchase price specified in such Offer (as determined pursuant to
the Indenture). Unless otherwise required by applicable law, the Offer shall
specify an expiration date (the "Expiration Date") of the Offer to Purchase,
which shall be not less than 20 Business Days nor more than 60 days after the
date of such Offer, and a settlement date (the "Purchase Date") for purchase
of Notes to occur no later than five Business Days after the Expiration Date.
The Company shall notify the Trustee at least 15 Business Days (or such
shorter period as is acceptable to the Trustee) prior to the mailing of the
Offer of the Company's obligation to make an Offer to Purchase, and the Offer
shall be mailed by the Company or, at the Company's request, by the Trustee in
the name and at the expense of the Company. The Offer shall contain all the
information required by applicable law to be included therein. The Offer shall
also contain information concerning the business of the Company and its
Subsidiaries which the Company in good faith believes will enable such Holders
to make an informed decision with respect to the Offer to Purchase (which at a
minimum will include (i) the most recent annual and quarterly financial
statements and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" contained in the documents required to be filed
with the Trustee pursuant to the Indenture (which requirements may be
satisfied by delivery of such documents together with the Offer), (ii) a
description of material developments in the Company's business subsequent to
the date of the latest of such financial statements referred to in clause (i)
(including a description of the events requiring the Company to make the Offer
to Purchase), (iii) if applicable, appropriate pro forma financial information
concerning the Offer to Purchase and the events requiring the Company to make
the Offer to Purchase and (iv) any other information required by applicable
law to be included therein). The Offer shall contain all instructions and
materials necessary to enable such Holders to tender Notes pursuant to the
Offer to Purchase. The Offer shall also state: (1) the Section of the
Indenture pursuant to which the Offer to Purchase is being made; (2) the
Expiration Date and the Purchase Date; (3) the aggregate principal amount of
the outstanding Notes offered to be purchased by the Company pursuant to the
Offer to Purchase (including, if less than 100%, the manner by which such
amount has been determined pursuant to the Section of the Indenture requiring
the Offer to Purchase) (the "Purchase Amount"); (4) the purchase price to be
paid by the Company for each $1,000 aggregate principal amount of Notes
accepted for payment (as specified pursuant to the Indenture) (the "Purchase
Price"); (5) that the Holder may tender all or any portion of the Notes
registered in the name of such Holder and that any portion of a Note tendered
must be tendered in an integral multiple of $1,000 principal amount; (6) the
place or places where Notes are to be surrendered for tender pursuant to the
Offer to Purchase; (7) that interest on any Note not tendered or tendered but
not purchased by the Company pursuant to the Offer to Purchase will continue
to accrue; (8) that on the Purchase Date the Purchase Price will become due
and payable upon each Note being accepted for payment pursuant to the Offer to
Purchase and that interest thereon shall cease to accrue on and after the
Purchase Date; (9) that each Holder electing to tender all or any portion of a
Note pursuant to the Offer to Purchase will be required to surrender such Note
at the place or places specified in the Offer prior to the close of business
on the Expiration Date (such Note being, if the Company or the Trustee so
requires, duly endorsed by, or accompanied by a written instrument of transfer
in form satisfactory to the Company and the Trustee duly executed by, the
Holder thereof or his attorney duly authorized in writing); (10) that Holders
will be entitled to withdraw all or any portion of Notes tendered if the
Company (or its Paying Agent) receives, not later than the close of business
on the fifth Business Day next preceding the Expiration Date, a telegram,
telex, facsimile transmission or letter setting forth the name of the Holder,
the principal amount of the Note the Holder tendered, the certificate number
of the Note the Holder tendered and a statement that such Holder is
withdrawing all or a portion of his tender; (11) that (a) if Notes in an
aggregate principal amount less than or equal to the Purchase Amount are duly
tendered and not withdrawn pursuant to the Offer to Purchase, the
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Company shall purchase all such Notes and (b) if Notes in an aggregate
principal amount in excess of the Purchase Amount are tendered and not
withdrawn pursuant to the Offer to Purchase, the Company shall purchase Notes
having an aggregate principal amount equal to the Purchase Amount on a pro
rata basis (with such adjustments as may be deemed appropriate so that only
Notes in denominations of $1,000 principal amount or integral multiples
thereof shall be purchased); and (12) that in the case of any Holder whose
Note is purchased only in part, the Company shall execute and the Trustee
shall authenticate and deliver to the Holder of such Note without service
charge, a new Note or Notes, of any authorized denomination as requested by
such Holder, in an aggregate principal amount equal to and in exchange for the
unpurchased portion of the Note so tendered.
An Offer to Purchase shall be governed by and effected in accordance with
the provisions above pertaining to any Offer.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company or the Trustee.
"Pari Passu Debt" means Indebtedness of the Company or any Guarantor that
neither constitutes Senior Indebtedness or Guarantor Senior Indebtedness, as
applicable, or Subordinated Indebtedness.
"Pari Passu Debt Pro Rata Share" means the amount of the applicable Net Cash
Proceeds obtained by multiplying the amount of such Net Cash Proceeds by a
fraction, (i) the numerator of which is the aggregate accreted value and/or
principal amount, as the case may be, of all Pari Passu Debt outstanding at
the time of the applicable Asset Sale with respect to which the Company is
required to use Net Cash Proceeds to repay or make an offer to purchase or
repay and (ii) the denominator of which is the sum of (a) the aggregate
principal amount of all Notes outstanding at the time of the applicable Asset
Sale and (b) the aggregate principal amount or the aggregate accreted value,
as the case may be, of all Pari Passu Debt outstanding at the time of the
applicable Offer to Purchase with respect to which the Company is required to
use the applicable Net Cash Proceeds to offer to repay or make an offer to
purchase or repay.
"Permitted Holder" means (i) the purchasers in the Equity Investment, (ii)
any Person who on the date of issuance of the Notes is an officer, director,
stockholder, employee or consultant of the Company or Sterling, (iii) any
Permitted Transferee with respect to any Person covered by the preceding
clauses (i) and (ii); (iv) the ESOP; (v) any savings or investment plan
sponsored by the Company or AXIA Group; or (vi) any entity a majority of the
outstanding Voting Equity Interests of which are owned directly or indirectly
by Permitted Holders.
"Permitted Indebtedness" has the meaning set forth in the second paragraph
of "Certain Covenants--Limitation on Indebtedness" above.
"Permitted Investments" means (a) Cash Equivalents; (b) Investments in
prepaid expenses, negotiable instruments held for collection and lease,
utility and workers' compensation, performance and other similar deposits; (c)
Hedging Obligations; (d) bonds, notes, debentures or other securities received
as a result of Asset Sales permitted under "Certain Covenants--Disposition of
Proceeds of Asset Sales" above; (e) transactions with officers, directors and
employees of the Company or any Restricted Subsidiary entered into in the
ordinary course of business (including compensation or employee benefit
arrangements with any such director or employee); (f) Investments existing as
of the Issue Date and any amendment, extension, substitution, renewal or
modification thereof to the extent that any such amendment, extension,
substitution, renewal or modification does not require the Company or any
Restricted Subsidiary to make any additional cash or non-cash payments or
provide additional services in connection therewith; (g) any Investment to the
extent that the consideration therefor consists of Qualified Equity Interests
of the Company or AXIA Group; (h) any Investment consisting of a guarantee by
a Guarantor of Senior Indebtedness or any guarantee permitted under
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clause (e) of the second paragraph of "Limitation on Indebtedness" above; (i)
Investments in an aggregate amount not to exceed the greater of (x) $15.0
million or (y) 5% of the Company's consolidated tangible net assets at any one
time outstanding; provided that the Company and/or the Restricted Subsidiaries
own at least one-third of the outstanding Voting Equity Interests of each such
Person; (j) Investments in the form of the sale (on a "true sale" non-recourse
basis) or the servicing of receivables transferred from the Company or any
Restricted Subsidiary, or transfers of cash, to an Accounts Receivable
Subsidiary as a capital contribution or in exchange for Indebtedness of such
Accounts Receivable Subsidiary or cash, in each case in the ordinary course of
business; (k) loans and advances to employees made in the ordinary course of
business; (l) payments to AXIA Group or Acquisition Co. to pay the merger
consideration due, and out-of-pocket expenses related to, the Transactions;
and (m) the ESOP Loan not to exceed $2.5 million at any one time outstanding.
"Permitted Junior Securities" means any securities of the Company or any
other Person that are (i) equity securities without special covenants or (ii)
subordinated in right of payment to all Senior Indebtedness that may at the
time be outstanding, to substantially the same extent as, or to a greater
extent than, the Notes are subordinated as provided in the Indenture, in any
event pursuant to a court order so providing and as to which (a) the rate of
interest on such securities shall not exceed the effective rate of interest on
the Notes on the date of the Indenture, (b) such securities shall not be
entitled to the benefits of covenants or defaults materially more beneficial
to the holders of such securities than those in effect with respect to the
Notes on the date of the Indenture and (c) such securities shall not provide
for amortization (including sinking fund and mandatory prepayment provisions)
commencing prior to the date six months following the final scheduled maturity
date of the Senior Indebtedness (as modified by the plan of reorganization or
readjustment pursuant to which such securities are issued).
"Permitted Liens" means (a) Liens on property of a Person existing at the
time such Person is merged into or consolidated with the Company or any
Restricted Subsidiary; provided, however, that such Liens were in existence
prior to the contemplation of such merger or consolidation and do not secure
any property or assets of the Company or any Restricted Subsidiary other than
the property or assets subject to the Liens prior to such merger or
consolidation; (b) Liens imposed by law such as carriers', warehousemen's and
mechanics' Liens and other similar Liens arising in the ordinary course of
business which secure payment of obligations not more than 60 days past due or
which are being contested in good faith and by appropriate proceedings; (c)
Liens existing on the Issue Date; (d) Liens securing only the Notes; (e) Liens
in favor of the Company or any Restricted Subsidiary; (f) 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, however, that any reserve or
other appropriate provision as shall be required in conformity with GAAP shall
have been made therefor; (g) easements, reservation of rights of way,
restrictions and other similar easements, licenses, restrictions on the use of
properties, or minor imperfections of title that in the aggregate are not
material in amount and do not in any case materially detract from the
properties subject thereto or interfere with the ordinary conduct of the
business of the Company and the Restricted Subsidiaries; (h) Liens resulting
from the deposit of cash or notes in connection with contracts, tenders or
expropriation proceedings, or to secure workers' compensation, surety or
appeal bonds, costs of litigation when required by law and public and
statutory obligations or obligations under franchise arrangements entered into
in the ordinary course of business; (i) Liens securing Indebtedness under the
Bank Credit Agreement; (j) Liens securing Indebtedness consisting of
Capitalized Lease Obligations, Purchase Money Indebtedness, mortgage
financings, industrial revenue bonds or other monetary obligations, in each
case incurred solely for the purpose of financing all or any part of the
purchase price or cost of construction or installation of assets used in the
business of the Company or the Restricted Subsidiaries, or repairs, additions
or improvements to such assets, provided, however, that (I) such Liens secure
Indebtedness in an amount not in excess of the original purchase price or the
original cost of any such assets or repair, addition or improvement thereto
(plus an amount equal to the reasonable fees and expenses in connection with
the incurrence of such Indebtedness), (II) such Liens do not extend to any
other
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assets of the Company or the Restricted Subsidiaries (and, in the case of
repair, addition or improvements to any such assets, such Lien extends only to
the assets (and improvements thereto or thereon) repaired, added to or
improved), (III) the Incurrence of such Indebtedness is permitted by "Certain
Covenants--Limitation on Indebtedness" above and (IV) such Liens attach within
90 days of such purchase, construction, installation, repair, addition or
improvement; (k) Liens to secure any refinancings, renewals, extensions,
modifications or replacements (collectively, "refinancing") (or successive
refinancings), in whole or in part, of any Indebtedness secured by Liens
referred to in the clauses above so long as such Lien does not extend to any
other property (other than improvements thereto); (l) Liens securing letters
of credit entered into in the ordinary course of business; and (m) Liens on
and pledges of the Equity Interests of any Unrestricted Subsidiary securing
any Indebtedness of such Unrestricted Subsidiary.
"Permitted Transferee" means with respect to any Person, (i) in the case of
an entity, any Affiliate of such Person, and (ii) in the case of any
individual, any person related by lineal or collateral consanguinity to such
individual or to the spouse of such individual (adopted persons shall be
considered the natural born child of their adoptive parents; lineal
consanguinity is that relationship that exists between persons of whom one is
descended (or ascended) in a direct line from the other, as between son,
father, grandfather, great-grandfather; and collateral consanguinity is that
relationship that exists between persons who have the same ancestors, but who
do not descend (or ascend) from the other, as between uncle and nephew, or
cousin and cousin), in each case to whom such Person has transferred Equity
Interests of the Company.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, limited liability company, limited liability
limited partnership, trust, unincorporated organization or government or any
agency or political subdivision thereof.
"Post-Petition Interest" means, with respect to any Indebtedness of any
Person, all interest accrued or accruing on such Indebtedness after the
commencement of any Insolvency or Liquidation Proceeding against such Person
in accordance with and at the contract rate (including, without limitation,
any rate applicable upon default) specified in the agreement or instrument
creating, evidencing or governing such Indebtedness, whether or not, pursuant
to applicable law or otherwise, the claim for such interest is allowed as a
claim in such Insolvency or Liquidation Proceeding.
"Preferred Equity Interest," in any Person, means an Equity Interest of any
class or classes (however designated) which is preferred as to the payment of
dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over
Equity Interests of any other class in such Person.
"Public Equity Offering" means a primary public offering of $20.0 million or
more of Qualified Equity Interests of the Company or AXIA Group pursuant to an
effective registration statement filed under the Securities Act of 1933, as
amended (excluding registration statements filed on Form S-8).
"Purchase Amount" has the meaning set forth in the definition of "Offer to
Purchase" above.
"Purchase Date" has the meaning set forth in the definition of "Offer to
Purchase" above.
"Purchase Money Indebtedness" means Indebtedness of the Company or any
Restricted Subsidiary Incurred for the purpose of financing all or any part of
the purchase price or the cost of construction or improvement of any property,
provided that the aggregate principal amount of such Indebtedness does not
exceed the lesser of the Fair Market Value of such property or such purchase
price or cost, including any refinancing of such Indebtedness that does not
increase the aggregate principal amount (or accreted amount, if less) thereof
as of the date of refinancing.
"Purchase Price" has the meaning set forth in the definition of "Offer to
Purchase" above.
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"Qualified Equity Interest" in any Person means any Equity Interest in such
Person other than any Disqualified Equity Interest.
"Redemption Date" has the meaning set forth in the third paragraph of
"Optional Redemption" above.
"Restricted Subsidiary" means any Subsidiary of the Company that has not
been designated by the Board of Directors of the Company, by a resolution of
the Board of Directors of the Company delivered to the Trustee, as an
Unrestricted Subsidiary pursuant to "Certain Covenants--Designation of
Unrestricted Subsidiaries" above. Any such designation may be revoked by a
resolution of the Board of Directors of the Company delivered to the Trustee,
subject to the provisions of such covenant.
"SEC" means the Securities and Exchange Commission.
"Senior Indebtedness" means, at any date, (a) all Obligations of the Company
under the Bank Credit Agreement; (b) all Hedging Obligations of the Company;
(c) all Obligations of the Company under stand-by letters of credit; and (d)
all other Indebtedness of the Company for borrowed money, including principal,
premium, if any, and interest (including Post-Petition Interest) on such
Indebtedness, unless the instrument under which such Indebtedness of the
Company for money borrowed is Incurred expressly provides that such
Indebtedness for money borrowed is not senior or superior in right of payment
to the Notes, and all renewals, extensions, modifications, amendments or
refinancings thereof. Notwithstanding the foregoing, Senior Indebtedness shall
not include (a) to the extent that it may constitute Indebtedness, any
Obligation for Federal, state, local or other taxes; (b) any Indebtedness
among or between the Company and any Subsidiary of the Company, unless and for
so long as such Indebtedness has been pledged to secure Obligations under the
Bank Credit Agreement; (c) to the extent that it may constitute Indebtedness,
any Obligation in respect of any trade payable Incurred for the purchase of
goods or materials, or for services obtained, in the ordinary course of
business; (d) Indebtedness evidenced by the Notes; (e) Indebtedness of the
Company that is expressly subordinate or junior in right of payment to any
other Indebtedness of the Company; (f) to the extent that it may constitute
Indebtedness, any obligation owing under leases (other than Capital Lease
Obligations) or management agreements; and (g) any obligation that by
operation of law is subordinate to any general unsecured obligations of the
Company.
"Significant Restricted Subsidiary" means, at any date of determination, (a)
any Restricted Subsidiary that, together with its Subsidiaries that constitute
Restricted Subsidiaries (i) for the most recent fiscal year of the Company
accounted for more than 10.0% of the consolidated revenues of the Company and
the Restricted Subsidiaries or (ii) as of the end of such fiscal year, owned
more than 10.0% of the consolidated assets of the Company and the Restricted
Subsidiaries, all as set forth on the consolidated financial statements of the
Company and the Restricted Subsidiaries for such year prepared in conformity
with GAAP, and (b) any Restricted Subsidiary which, when aggregated with all
other Restricted Subsidiaries that are not otherwise Significant Restricted
Subsidiaries and as to which any event described in clause (g), (h) or (i) of
"Events of Default" above has occurred, would constitute a Significant
Restricted Subsidiary under clause (a) of this definition.
"Stated Maturity," when used with respect to any Note or any installment of
interest thereon, means the date specified in such Note as the fixed date on
which the principal of such Note or such installment of interest is due and
payable.
"Subordinated Indebtedness" means, with respect to the Company or any
Guarantor, any Indebtedness of the Company or such Guarantor, as the case may
be, which is expressly subordinated in right of payment to the Notes or such
Guarantor's Guarantee, as the case may be.
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"Subsidiary" means, with respect to any Person, (a) any corporation of which
the outstanding Voting Equity Interests having at least a majority of the
votes entitled to be cast in the election of directors shall at the time be
owned, directly or indirectly, by such Person, or (b) any other Person of
which at least a majority of Voting Equity Interests are at the time, directly
or indirectly, owned by such first named Person.
"Surviving Person" means, with respect to any Person involved in or that
makes any Disposition, the Person formed by or surviving such Disposition or
the Person to which such Disposition is made.
"Tax Sharing Agreement" means the tax sharing agreement between the Company
and AXIA Group.
"Term Loan Facilities" means collectively the ESOP Term Loan, the
acquisition facility and the term loan facility of the Bank Credit Agreement.
"United States Government Obligations" means direct non-callable obligations
of the United States of America for the payment of which the full faith and
credit of the United States is pledged.
"Unrestricted Subsidiary" means any Subsidiary of the Company designated as
such pursuant to "Certain Covenants--Designation of Unrestricted Subsidiaries"
above. Any such designation may be revoked by a resolution of the Board of
Directors of the Company delivered to the Trustee, subject to the provisions
of such covenant.
"Unutilized Net Cash Proceeds" has the meaning set forth in the third
paragraph under "Certain Covenants--Disposition of Proceeds of Asset Sales"
above.
"Voting Equity Interests" means Equity Interests in a corporation or other
Person with voting power under ordinary circumstances entitling the holders
thereof to elect the Board of Directors or other governing body of such
corporation or Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the sum of the
products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required scheduled payment
of principal, including payment of final maturity, in respect thereof, by (ii)
the number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (b) the then outstanding
aggregate principal amount of such Indebtedness.
"Wholly Owned Subsidiary" means a Restricted Subsidiary all the Equity
Interests of which (other than directors' qualifying shares) is owned by the
Company or another Wholly Owned Subsidiary; provided, however, that a Foreign
Subsidiary shall be a Wholly Owned Subsidiary if more than 90% of the Equity
Interests and Voting Equity Interests thereof is owned by the Company or
another Wholly Owned Subsidiary.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes certain material United States federal
income tax consequences relevant to the purchase, ownership and disposition of
the Notes and reflects the opinion provided by Bracewell & Patterson, L.L.P.,
counsel to the Company, as to these matters. This discussion is for general
information only and does not address all aspects of federal income taxation
that may be relevant to particular investors in light of their personal
investment circumstances, nor does it address the federal income tax
consequences which may be relevant to certain types of investors subject to
special treatment under the federal income tax laws (for example, certain
financial institutions, insurance companies, tax-exempt entities, broker-
dealers, and taxpayers subject to the
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alternative minimum tax). In addition, this discussion does not discuss any
aspects of state, local, or foreign tax laws. This discussion assumes that
investors will hold their Notes as "capital assets" (generally, property held
for investment), within the meaning of Section 1221 of the Code, and not as
part of an integrated transaction (for example, a hedge, straddle or
conversion transaction).
No ruling from the Internal Revenue Service (the "IRS") will be requested
with respect to any of the matters discussed herein. There can be no assurance
that the IRS will not take a different position concerning the matters
discussed below and that such positions would not be sustained. BECAUSE
INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH HOLDER OF NOTES SHOULD CONSULT HIS
OR HER OWN TAX ADVISOR WITH RESPECT TO HIS OR HER PARTICULAR TAX SITUATION AND
AS TO ANY FEDERAL, FOREIGN, STATE, LOCAL OR OTHER TAX CONSIDERATIONS
(INCLUDING ANY POSSIBLE CHANGES IN TAX LAW) AFFECTING THE PURCHASE, OWNERSHIP
AND DISPOSITION OF THE NOTES.
This discussion is based on the provisions of the Code, existing and
proposed Treasury regulations promulgated thereunder (the "Regulations"),
judicial authority interpreting the Code, and current administrative rulings
and pronouncements of the IRS now in effect, all of which are subject to
change at any time by legislative, judicial or administrative action. Any such
changes may be retroactively applied in a manner that could result in federal
income tax consequences different from those discussed below and could
adversely affect a holder of Notes.
EXCHANGE OF ORIGINAL NOTES FOR EXCHANGE NOTES
The exchange of Original Notes for Exchange Notes should not constitute a
significant modification of the terms of the Original Notes, and, accordingly,
will not be treated as a taxable exchange for United States federal income tax
purposes. Consequently, no gain or loss will be recognized by holders of
Original Notes upon receipt of the Exchange Notes, and ownership of the
Exchange Notes will be considered a continuation of ownership of the Original
Notes. The Company will take this position and intends to report the
transaction in this manner for federal income tax purposes. For purposes of
determining gain or loss upon the subsequent sale or exchange of the Exchange
Notes, a holder will have the same adjusted basis in an Exchange Note as the
holder had in the Original Note exchanged therefor. In addition, a holder's
holding period for an Exchange Note will include the holding period for the
Original Note exchanged therefor.
The remaining summary of federal income considerations relates to owning and
disposing of Exchange Notes, and also applies to holders of Original Notes who
do not accept the Exchange Offer.
UNITED STATES FEDERAL INCOME TAXATION OF UNITED STATES HOLDERS
As used herein, the term "United States Holder" means a holder of a Note
that is for United States federal income tax purposes (i) an individual
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 political subdivision thereof, (iii) an estate the income of which is
subject to United States federal income taxation regardless of source, (iv) a
trust whose administration is subject to the primary supervision of a United
States court and which has one or more United States persons who have the
authority to control all substantial decisions of the trust.
Stated Interest. Stated interest on the Notes will generally be taxable to a
United States Holder as ordinary income from domestic sources at the time it
is paid or accrued in accordance with the United States Holder's method of
accounting for tax purposes.
Amortizable Bond Premium. If a United States Holder purchases a Note for an
amount that is greater than the sum of all payments payable on the Note after
the purchase date, other than qualified stated interest, such United States
Holder will be considered to have purchased such Note with
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"amortizable bond premium" equal in amount to such excess. A United States
Holder may elect to amortize such bond premium over the remaining term of such
Note (or if it results in a smaller amount of amortizable bond premium, until
an earlier call date, and in such case by reference to the amount payable on
that date).
Under new Regulations issued December 30, 1997, if bond premium is
amortized, the amount of interest on the Note included in the United States
Holder's income for each accrual period ending on an interest payment date or
on the stated maturity of the Note, as the case may be, will be reduced by a
portion of the bond premium allocable to such accrual period based on the
Note's yield to maturity (or earlier call date, if reference to such call date
produces a smaller amount of amortizable bond premium). If the amortizable
bond premium allocable to such accrual period exceeds the amount of interest
allocable to such accrual period, such excess would be allowed as a deduction
for such accrual period, but only to the extent of the United States Holder's
prior inclusion in income of interest payments on the Note. Any excess above
such prior interest inclusions is generally carried forward to the next
accrual period. A United States Holder who elects to amortize bond premium
must reduce such United States Holder's tax basis in the Notes as described
under "--Disposition of Notes." If such an election to amortize bond premium
is not made, a United States Holder must include the full amount of each
interest payment on the Note in income in accordance with its regular method
of accounting and will receive a tax benefit from the bond premium only in
computing such United States Holder's gain or loss upon disposition of the
Note.
An election to amortize bond premium will apply to all taxable debt
obligations then held or subsequently acquired by the electing United States
Holder on or after the first day of the first taxable year to which the
election applies and may not be revoked without the consent of the IRS. A
United States Holder should consult with such United States Holder's tax
advisor with respect to the general applicability of the amortizable bond
premium rules of Section 171 of the Code to such United States Holder, and
whether such United States Holder should make an election under these rules.
Market Discount. If a United States Holder purchases a Note for an amount
that is less than its stated redemption price at maturity (i.e., the sum of
all payments on the Note other than stated interest payments), the amount of
the difference will be treated as "market discount" for federal income tax
purposes, unless such difference is less than a de minimis amount as specified
by the Code. Under the market discount rules, a United States Holder will be
required to treat any principal payment on, or any gain on the sale, exchange,
retirement or other disposition of a Note as ordinary income to the extent of
the market discount which has not previously been included in income and is
treated as having accrued on such Note at the time of such payment or
disposition. In addition, the United States Holder may be required to defer,
until maturity of the Note or its earlier disposition in a taxable
transaction, the deduction of all or a portion of the interest expense on any
indebtedness incurred or maintained to purchase or carry such Note.
The Notes provide for optional redemption and (in the case of a Change in
Control) mandatory offers to purchase, in whole or in part, prior to maturity.
If the Notes were redeemed, a United States Holder generally would be required
to include in gross income as ordinary income the portion of the gain
recognized on the redemption attributable to accrued market discount, if any.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the Notes, unless the
United States Holder elects to accrue market discount on a constant interest
method. A United States Holder of a Note may elect to include market discount
in income currently as it accrues (under either a ratable or constant interest
method). This election to include currently, once made, applies to all market
discount obligations acquired in or after the first taxable year to which the
election applies and may not be revoked without the consent of the IRS. If a
United States Holder of Notes makes such an election, the foregoing rules with
respect
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to the recognition of ordinary income on sales and other dispositions of
instruments, and with respect to the deferral of interest deductions incurred
or maintained to purchase or carry such Notes, would not apply.
Disposition of Notes. Upon the sale, exchange, retirement, redemption or
other disposition of a Note, a United States Holder will recognize taxable
gain or loss equal to the difference between (i) the amount of cash and the
fair market value of property received in exchange therefor (except to the
extent such amount is attributable to accrued but unpaid interest, which
amount will generally be taxable as ordinary income) and (ii) the United
States Holder's adjusted tax basis in the Note. A United States Holder's
adjusted tax basis in a Note will generally equal the United States Holder's
purchase price for such Note, increased by any market discount previously
included in income by the United States Holder and decreased by any principal
payments received by the United States Holder, and any amortizable bond
premium deducted over the term of the Note. Any gain or loss recognized on the
sale, exchange, retirement or other disposition of a Note will generally be
capital gain or loss (except to the extent of any accrued market discount).
Under recently enacted legislation, capital gains of individuals derived in
respect of capital assets held for more than one year are eligible for reduced
rates of taxation which may vary depending upon the holding period of such
capital assets. The deduction of capital losses is subject to certain
limitations. A United States Holder should consult such United States Holder's
tax advisor regarding the treatment of capital gains or losses.
Backup Withholding. Certain non-corporate United States Holders of Notes may
be subject to backup withholding at the rate of 31% with respect to interest
payments on the Notes and cash payments received in certain circumstances upon
the disposition of such Notes. Generally, backup withholding is applied only
when the taxpayer (i) fails to furnish or certify its correct taxpayer
identification number to the payor in the manner required, (ii) is notified by
the IRS that it has failed to report payments of interest and dividends
properly, or (iii) under certain circumstances, fails to certify that it has
not been notified by the IRS that it is subject to backup withholding for
failure to report interest and dividend payments. Any amounts withheld under
the backup withholding rules will be allowed as a refund or credit against a
United States Holder's United States federal income tax liability, provided
that such United States Holder furnished the required information to the IRS.
UNITED STATES FEDERAL INCOME TAXATION OF NON-UNITED STATES HOLDERS
This section discusses certain special rules applicable to a holder of Notes
that is a Non-United States Holder. For purposes of this discussion, a "Non-
United States Holder" means a holder of Notes that is not (i) an individual
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 political subdivision thereof, (iii) an estate the income of which is
subject to United States federal income taxation regardless of source, or (iv)
a trust whose administration is subject to the primary supervision of a United
States court and which has one or more United States persons who have the
authority to control all substantial decisions of the trust.
Receipt of Stated Interest by Non-United States Holder. Subject to the
discussion of backup withholding set forth below, payments of interest
(including original issue discount) to a Non-United States Holder who is the
beneficial owner of a Note generally will not be subject to the 30% U.S.
withholding tax under the portfolio interest exemption of the Code; provided,
that (i) beneficial owner of the Note does not actually or constructively own
10% or more of the total combined voting power of all classes of stock of the
Company entitled to vote within the meaning of Section 871(h)(3) of the Code
and the Regulations thereunder; (ii) such beneficial owner is not a controlled
foreign corporation that is related to the Company through stock ownership;
(iii) such beneficial owner is not a bank whose receipt of interest on a Note
is described in Section 881(c)(3)(A) of the Code; and (iv) such beneficial
owner satisfies the certification requirement (described generally below) set
forth in Section
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871(h) (in the case of individuals) or Section 881(c) (in the case of foreign
corporations) of the Code and the Regulations thereunder.
To satisfy the certification requirement referred to in (iv) above, the
beneficial owner of a Note, or a financial institution holding the Note on
behalf of such owner, must provide, in accordance with specified procedures,
the Company or its paying agent, as the case may be, with a statement to the
effect that the beneficial owner is a Non-United States Holder. Such
requirement generally will be met if (1) the beneficial owner provides such
beneficial owner's name and address, signs under penalties of perjury, and
certifies that such beneficial owner is a Non-United States Holder (which
certification may be made on IRS Form W-8 (or substitute Form W-8)) or (2) a
securities clearing organization, a bank or other financial institution
holding the Note on behalf of the beneficial owner certifies, under penalties
of perjury, that such statement has been received by it and furnishes the
Company or its paying agent, as the case may be, with a copy thereof.
Recently issued Regulations that will be effective with respect to payments
made after December 31, 1999, will provide alternative methods for satisfying
the certification requirement described above. The Regulations also would
require, in the case of Notes held by a foreign partnership, that (i) the
certification be provided by the partners rather than by the foreign
partnership, and (ii) the partnership provide certain information, including a
United States taxpayer identification number. Non-United States Holders are
advised to consult their own tax advisors to discuss the effect of these
Regulations in light of such Non-United States Holders' situation.
If the Non-United States Holder cannot satisfy the requirements of the
"portfolio interest" exception described above, payments of premium, if any,
and interest made to Non-United States Holders with respect to the Notes will
be subject to a 30% United States withholding tax unless the beneficial owner
of a Note provides the Company or its paying agent, as the case may be, with,
and keeps current (i) a properly executed IRS Form 1001 (or successor form)
claiming an exemption from United States withholding tax under a United States
income tax treaty, or (ii) a properly executed IRS Form 4224 (or successor
form) claiming such premium and/or interest is exempt from United States
withholding tax because such premium and/or interest is effectively connected
with the conduct of a United States trade or business by the Non-United States
Holder, in which case the premium and/or interest will be subject to the
United States federal income tax on net income at the rates applicable to
United States persons generally (and with respect to corporate holders and
under certain circumstances, the 30% branch profits tax).
Gain on Disposition of Notes. A Non-United States Holder will generally not
be subject to United States federal income tax with respect to gain recognized
on disposition of the Notes unless (i) the gain is effectively connected with
a trade or business of the Non-United States Holder in the United States, (ii)
in the case of a Non-United States Holder that is an individual, such holder
is present in the United States for 183 or more days in the taxable year of
the disposition and certain other requirements are met, or (iii) the Non-
United States Holder is subject to tax pursuant to provisions of the United
States federal income tax law applicable to certain United States expatriates.
Information Reporting and Backup Withholding. In general, no United States
information reporting or backup withholding tax will be required with respect
to payments of principal or interest made by the Company to Non-United States
Holders if the certification described above in (iv) under "--Receipt of
Stated Interest by Non-United States Holder" has been received and the payor
does not have actual knowledge that the beneficial owner is a United States
person.
Payments of principal or interest to the beneficial owner of a Note by a
United States office of a custodian, nominee or agent, or the payment by a
United States office of a broker of the proceeds of a sale of the Note, is
subject to both backup withholding and information reporting unless the
beneficial owner certifies under penalties of perjury that such owner is a
Non-United States Holder or otherwise establishes an exemption.
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In general, backup withholding and information reporting will not apply if
payments on a Note are paid or collected by a foreign office of a custodian,
nominee, or other foreign agent on behalf of the beneficial owner of such
Note, or if a foreign office of a broker (as defined in applicable
Regulations) pays the proceeds of the sale of a Note to the owner thereof. If,
however, such nominee, custodian, agent or broker is, for United States
federal income tax purposes, a United States person, or a controlled foreign
corporation, or a foreign person 50% or more of whose gross income for certain
periods is derived from activities that are effectively connected with the
conduct of a trade or business in the United States, or, for taxable years
beginning after December 31, 1999, a foreign partnership, in which one or more
United States persons, in the aggregate, own more than 50% of the income or
capital interests in the partnership or which is engaged in a trade or
business in the United States, such payments will not be subject to backup
withholding, but will be subject to information reporting unless (i) such
nominee, custodian, agent or broker has documentary evidence in its records
that the beneficial owner is a Non-United States Holder and certain other
conditions are met, or (ii) the beneficial owner otherwise establishes an
exemption, provided such broker does not have actual knowledge that the payee
is a United States person. Non-United States Holders should consult their tax
advisors regarding the application of these rules to their particular
situations, the availability of an exemption therefrom and the procedure for
obtaining such an exemption, if available.
The Treasury Department has issued final Regulations regarding the backup
withholding and information reporting rules discussed above. In general, the
final Regulations, which are generally effective for payments made after
December 31, 1999, subject to certain transition rules, do not alter the
substantive withholding and information reporting requirements but instead
unify current forms and procedures.
Any amounts withheld under backup withholding will be allowed as a credit
against such Non-United States Holder's United States federal income tax
liability and may entitle such holder to a refund, provided the required
information is furnished to the IRS.
LEGAL MATTERS
Certain legal matters with respect to the issuance and sale of the Notes
offered hereby will be passed upon for the Company by Bracewell & Patterson,
L.L.P., Houston, Texas. Certain members of Bracewell & Patterson, L.L.P. own
less than 1.0% of the outstanding Common Stock of AXIA Group.
EXPERTS
The consolidated financial statements of the Company and Subsidiaries as of
December 31, 1997 and 1996, and for each of the three years in the period
ended December 31, 1997, included in this Registration Statement, have been
audited by Arthur Andersen LLP, independent public accountants, as stated in
their report appearing herein.
The balance sheet of Finance Co. as of June 19, 1998 included in this
Registration Statement has been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report appearing herein.
118
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
AXIA Incorporated and Subsidiaries--Audited Consolidated Financial
Statements as of December 31, 1997 and 1996 and for each of the three
years in the period ended December 31, 1997
Report of Independent Public Accountants............................... F-2
Consolidated Balance Sheets............................................ F-3
Consolidated Statements of Stockholder's Equity........................ F-4
Consolidated Statements of Income...................................... F-5
Consolidated Statements of Cash Flows.................................. F-6
Notes to the Consolidated Financial Statements......................... F-7
AXIA Incorporated and Subsidiaries--Unaudited Interim Consolidated
Financial Statements as of June 30, 1998 and December 31, 1997 and for
the six months ended June 30, 1998 and 1997
Consolidated Balance Sheets............................................ F-32
Consolidated Statements of Income...................................... F-33
Consolidated Statements of Stockholder's Equity........................ F-34
Consolidated Statements of Cash Flows.................................. F-35
Notes to the Unaudited Interim Consolidated Financial Statements....... F-36
AXIA Finance Corp.
Independent Auditors' Report........................................... F-46
Balance Sheet as of June 19, 1998...................................... F-47
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of
Directors of AXIA Incorporated:
We have audited the accompanying consolidated balance sheets of AXIA
INCORPORATED (a Delaware corporation) AND SUBSIDIARIES as of December 31, 1997
and 1996, and the related consolidated statements of income, stockholder's
equity and cash flows for each of the three years in the period ended December
31, 1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of AXIA INCORPORATED AND
SUBSIDIARIES as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1997, in conformity with generally accepted accounting
principles.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Chicago, Illinois
February 25, 1998
(except with respect to the matters discussed in
Note 18, as to which the date is July 22, 1998)
F-2
<PAGE>
AXIA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1997 AND DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS 1997 1996
------ ------- -------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................... $ 1,310 $ 1,716
Accounts receivable, net.................................... 12,759 10,687
Inventories................................................. 9,155 9,086
Prepaid income taxes and other current assets............... 436 1,695
Deferred income tax assets.................................. 2,593 3,027
------- -------
Total Current Assets...................................... $26,253 $26,211
------- -------
PLANT AND EQUIPMENT, AT COST:
Land........................................................ $ 508 $ 521
Buildings and improvements.................................. 6,620 6,509
Machinery and equipment..................................... 24,741 23,149
Equipment leased to others.................................. 7,139 6,040
------- -------
$39,008 $36,219
Less: Accumulated depreciation.............................. 14,938 11,346
------- -------
Net Plant and Equipment................................... $24,070 $24,873
------- -------
OTHER ASSETS:
Goodwill, net............................................... $33,505 $34,679
Intangible assets, net...................................... 703 377
Deferred charges, net....................................... 12,182 12,213
Investment in affiliate..................................... -- 900
Other assets................................................ 60 78
------- -------
Total Other Assets........................................ $46,450 $48,247
------- -------
TOTAL ASSETS.................................................. $96,773 $99,331
======= =======
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
<S> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt........................ $10,925 $ 6,647
Accounts payable............................................ 4,021 3,655
Accrued liabilities......................................... 7,219 8,547
Accrued income taxes........................................ 264 --
------- -------
Total Current Liabilities................................. $22,429 $18,849
------- -------
NON-CURRENT LIABILITIES:
Long-term debt, less current maturities..................... $20,439 $34,548
Other non-current liabilities............................... 10,883 11,050
Deferred income taxes....................................... 2,955 2,766
------- -------
Total Non-Current Liabilities............................. $34,277 $48,364
------- -------
STOCKHOLDER'S EQUITY:
Common stock, $.01 par value 100 shares issued and
outstanding................................................ $ -- $ --
Additional paid-in capital.................................. 16,723 16,723
Retained earnings........................................... 23,818 15,395
Accumulated Other Comprehensive Income...................... (474) --
------- -------
Total Stockholder's Equity................................ $40,067 $32,118
------- -------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY.................... $96,773 $99,331
======= =======
</TABLE>
The accompanying Notes to the Consolidated Financial Statements
are an integral part of these balance sheets.
F-3
<PAGE>
AXIA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE PERIODS ENDED DEC. 31, 1997, DEC. 31, 1996, AND DEC. 31, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
OTHER COMPREHENSIVE INCOME
-----------------------------------
ACCUMULATED
ADDITIONAL MINIMUM CUMULATIVE OTHER
COMMON STOCK PAID-IN RETAINED PENSION TRANSLATION COMPREHENSIVE COMPREHENSIVE
PAR CAPITAL EARNINGS LIABILITY ADJUSTMENTS INCOME INCOME
------------ ---------- -------- --------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DEC. 31, 1994.. $ -- $16,848 $ 3,644 $ -- $ 304 $ 304
======= ======= ======= ===== ===== =====
Net income............. -- -- 4,889 -- -- -- $4,889
Cumulative translation
adjustment............ -- -- -- -- 322 322 322
Other.................. -- -- -- (54) -- (54) (54)
------
Comprehensive income... $5,157
======
Stock repurchase....... -- (125) -- -- -- --
------- ------- ------- ----- ----- -----
BALANCE, DEC. 31, 1995.. $ -- $16,723 $ 8,533 $ (54) $ 626 $ 572
======= ======= ======= ===== ===== =====
Net income............. -- -- 6,862 -- -- -- $6,862
Cumulative translation
adjustment............ -- -- -- -- (302) (302) (302)
Other.................. -- -- -- (270) (270) (270)
------
Comprehensive income... $6,290
------- ------- ------- ----- ----- ----- ======
BALANCE, DEC. 31, 1996.. $ -- $16,723 $15,395 $(324) $ 324 $ --
======= ======= ======= ===== ===== =====
Net income............. -- -- 8,423 -- -- -- $8,423
Cumulative translation
adjustment............ -- -- -- -- (616) (616) (616)
Other.................. -- -- -- 142 -- 142 142
------
Comprehensive income... 7,949
------- ------- ------- ----- ----- ----- ======
BALANCE, DEC. 31, 1997.. $ -- $16,723 $23,818 $(182) $(292) $(474)
======= ======= ======= ===== ===== =====
</TABLE>
The accompanying Notes to the Consolidated Financial Statements
are an integral part of these statements.
F-4
<PAGE>
AXIA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE PERIODS ENDED DEC. 31, 1997, DEC. 31, 1996, AND DEC. 31, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Net sales............................. $ 77,418 $ 79,771 $ 81,914
Net rentals........................... 27,382 25,016 22,412
-------- -------- --------
NET REVENUES............................ $104,800 $104,787 $104,326
Cost of sales......................... 50,518 52,434 55,171
Cost of rentals....................... 9,626 8,860 9,658
Selling, general and administrative
expenses............................. 25,302 25,146 24,181
-------- -------- --------
INCOME FROM OPERATIONS.................. $ 19,354 $ 18,347 $ 15,316
Interest expense...................... 3,710 5,123 6,596
Interest income....................... (367) (39) (44)
Other expense (income), net........... 404 57 537
-------- -------- --------
INCOME BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM..................... $ 15,607 $ 13,206 $ 8,227
Provision for income taxes............ 6,412 5,730 3,338
-------- -------- --------
INCOME BEFORE EXTRAORDINARY ITEM........ $ 9,195 $ 7,476 $ 4,889
EXTRAORDINARY ITEM:
Loss on early extinguishment of debt,
net of income taxes of $479 and $410,
respectively (see Notes 5 and 7)..... 772 614 --
-------- -------- --------
NET INCOME.............................. $ 8,423 $ 6,862 $ 4,889
======== ======== ========
</TABLE>
The accompanying Notes to the Consolidated Financial Statements
are an integral part of these statements.
F-5
<PAGE>
AXIA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIODS ENDED DEC. 31, 1997, DEC. 31, 1996, AND DEC. 31, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
JAN. 1, 1997 JAN. 1, 1996 JAN. 1, 1995
TO TO TO
DEC. 31, 1997 DEC. 31, 1996 DEC. 31, 1995
------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................... $ 8,423 $ 6,862 $ 4,889
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization...... 5,099 6,716 6,380
Extraordinary item-write off of
deferred financing costs and
original issue discount........... 826 1,024 --
Deferred income tax provision
(benefit)......................... 623 398 753
Loss (gain) on disposal of fixed
assets............................ 159 14 184
Gain on sale of investment......... (559) -- --
Provision for losses on accounts
receivable........................ 2,169 1,499 1,049
Provision for obsolescence of
inventories....................... 79 592 (20)
Credit to pension expense.......... (231) (275) (166)
Changes in assets and liabilities:
Accounts receivable............... (4,557) (15) (1,291)
Inventories....................... (426) (501) (1,146)
Accounts payable.................. 442 (433) 651
Accrued liabilities............... (1,244) (437) (308)
Other current assets.............. (14) 270 (706)
Income taxes payable.............. 1,532 (151) 569
Other non-current assets.......... (642) (176) (408)
Other non-current liabilities..... 51 25 (479)
-------- ------- -------
Net Cash Provided by Operating
Activities..................... $ 11,730 $15,412 $ 9,951
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash used for capital expenditures. (3,475) (3,862) (3,853)
Proceeds from sale of fixed assets. 357 55 281
Proceeds from sale of investment... 1,459 -- --
-------- ------- -------
Net Cash (Used in) Investing
Activities..................... $ (1,659) $(3,807) $(3,572)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from other long-term debt. 944 25,411 296
Payments of other long-term debt... (15,931) (34,566) (7,374)
Net increase in Revolving Credit
Loan.............................. 4,500 -- --
Payments of deferred financing
costs............................. -- (426) --
Other equity transactions.......... 37 (301) (166)
-------- ------- -------
Net Cash (Used in) Financing
Activities..................... $(10,450) $(9,882) $(7,244)
EFFECT OF EXCHANGE RATE CHANGES ON
CASH................................ (27) (52) 38
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS.................... $ (406) $ 1,671 $ (827)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD................. 1,716 45 872
-------- ------- -------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD.............................. $ 1,310 $ 1,716 $ 45
======== ======= =======
</TABLE>
The accompanying Notes to the Consolidated Financial Statements
are an integral part of these statements.
F-6
<PAGE>
AXIA INCORPORATED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996 AND 1995
NOTE 1
Nature of Business
AXIA Incorporated, the "Company," is a diversified manufacturer and marketer
of (i) formed and coated wire products, material handling and storage
equipment, (ii) specialized packaging machinery, and (iii) tools and other
products for finishing drywall in new, manufactured, and renovated housing and
commercial construction.
On March 15, 1994, AXIA Incorporated (the "Predecessor Company") was
acquired as part of a merger with a newly-formed company, AXIA Acquisition
Corp. ("Acquisition"), a Delaware corporation, with the surviving corporation
continuing under the name AXIA Incorporated (the "Company", including
reference to the Predecessor Company where appropriate). The Company is 100%
owned by AXIA Holdings Corporation ("Holdings"). Due to the substantial change
in controlling interest in the Company, the Company reflected a complete
change in its accounting basis of its assets and liabilities from Predecessor
Company historical cost to estimated fair value as of March 15, 1994.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES
Estimates and Assumptions
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements as well as the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Principles of Consolidation
The Consolidated Financial Statements include AXIA INCORPORATED AND
SUBSIDIARIES (the "Company"). All significant intercompany items are
eliminated in consolidation.
Foreign Currency Translation
Assets and liabilities of foreign subsidiaries are translated at the current
rate of exchange at the balance sheet date. Revenues and expenses are
translated at the average exchange rate for the period. Translation
adjustments have been excluded from the results of operations and are reported
as a separate component of Stockholder's Equity. Gains and losses resulting
from foreign currency transactions, which are not material, are included in
the Consolidated Statements of Income.
Cash and Cash Equivalents
Cash equivalents are carried at cost, which approximates market. The Company
considers all highly liquid investments with a maturity of three months or
less when purchased to be cash equivalents.
Inventories
Inventories are stated at the lower of first-in, first-out (FIFO) cost or
market.
F-7
<PAGE>
AXIA INCORPORATED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Plant and Equipment
Depreciation is provided over the following useful lives:
<TABLE>
<S> <C>
Buildings and improvements..................................... 2-30 years
Machinery and equipment........................................ 3-12 years
Equipment leased to others..................................... 5-7 years
</TABLE>
Depreciation on plant and equipment is provided on the straight-line method
over the estimated useful lives of the assets for financial reporting
purposes. Accelerated methods and lives are used for income tax purposes.
Expenditures for maintenance and repairs are charged to expense when incurred.
Expenditures for renewals and betterments are capitalized and depreciated over
the estimated remaining useful lives of the assets.
The original cost and related accumulated depreciation of assets sold or
retired are removed from the applicable accounts, with any gain or loss
resulting from the transaction included in income.
Income Taxes
Income tax provisions are made for the estimated amount of income taxes on
reported earnings which are payable currently and in the future.
As required by Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("SFAS No. 109"), the deferred tax provision is
determined using the liability method. Under this method, deferred tax assets
and liabilities are recognized based on differences between the financial
statements and the tax basis of assets and liabilities as determined using
presently enacted tax laws and the appropriate tax rates.
Deferred Charges, Intangible Assets and Goodwill
Amortizable loan costs, organization costs, patents, customer lists, and
other intangible assets and deferred charges are stated in the accompanying
Consolidated Balance Sheets net of amortization and are amortized over their
estimated useful lives, which range from 2 to 16 years.
Goodwill represents the excess purchase price paid over the estimated fair
value of the net assets acquired in the March 15, 1994 merger discussed Note
1. Goodwill is stated net of amortization and is being amortized on a
straight-line basis for a period of not more than 40 years (see Note 5).
Subsequent to its acquisition, the Company continually evaluates whether later
events and circumstances have occurred that indicate the remaining estimated
useful life of goodwill may warrant revision or that the remaining balance of
goodwill may not be recoverable. When factors indicate that goodwill should be
evaluated for possible impairment, the Company uses an estimate of the related
business segment's undiscounted operating income (before goodwill
amortization) over the remaining life of the goodwill in measuring whether the
goodwill is recoverable.
New Accounting Pronouncements
In 1996, the Company adopted Statement of Financial Accounting Standards No.
121 ("SFAS 121") "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of." The adoption of SFAS 121 did not have a
material impact on the financial position or results of operations of the
Company.
F-8
<PAGE>
AXIA INCORPORATED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
In 1997, the Financial Accounting Standards Board issued two new disclosure
standards. Results of operations and financial position will be unaffected by
implementation of these new standards.
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income," ("SFAS No. 130") establishes standards for reporting
and display of comprehensive income, its components, and accumulated balances.
Comprehensive income is defined to include all changes in equity except those
resulting from investments by owners and distributions to owners. Among other
disclosures, SFAS No. 130 requires that all items that are required to be
recognized under current accounting standards as components of comprehensive
income be reported in a financial statement that is displayed with the same
prominence as other financial statements. See subsequent event discussion in
Note 18.
Statement of Financial Accounting Standards No. 131, "Disclosure about
Segments of an Enterprise and Related Information" ("SFAS No. 131"), which
supersedes SFAS No. 14, "Financial Reporting for Segments of a Business
Enterprise," establishes standards for the way that public enterprises report
information about operating segments in annual financial statements and
requires reporting of selected information about operating segments in interim
financial statements issued to the public. It also establishes standards for
disclosures regarding products and services, geographic areas, and major
customers. SFAS No. 131 defines operating segments as components of an
enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance. Due to the recent issuance of
this standard, management has been unable to fully evaluate the impact, if
any, it may have on future financial statement disclosures.
Both of these new standards are effective for financial statements for
periods beginning after December 15, 1997, and require comparative information
for earlier years to be restated.
NOTE 3--ACCOUNTS RECEIVABLE
Trade accounts receivable are stated net of allowance for doubtful accounts.
Transactions affecting the allowance for doubtful accounts are shown in the
following table (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Balance, beginning of period...... $1,491 $1,140 $ 942
Additions, charged to income...... 2,169 1,499 1,049
Deductions, write-off of
uncollectible accounts, net of
recoveries....................... (1,814) (1,148) (851)
------ ------ ------
Balance, end of period............ $1,846 $1,491 $1,140
====== ====== ======
</TABLE>
The Company is a diversified distributor, marketer and manufacturer of a
wide range of high quality products used in the construction industry and
agricultural and durable goods businesses. As such, its customers range from
individual entrepreneurs to large corporations.
F-9
<PAGE>
AXIA INCORPORATED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
NOTE 4--INVENTORIES
Inventories are stated at the lower of first-in, first-out (FIFO) cost or
market. The cost elements included in inventories are material, labor and
factory overhead.
Inventories, net of reserves of $528,000 and $546,000 as of December 31,
1997 and 1996, respectively, consist of (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Raw materials................................... $4,146 $4,653
Work in process................................. 1,058 854
Finished goods.................................. 3,951 3,579
------ ------
Total inventories........................... $9,155 $9,086
====== ======
</TABLE>
NOTE 5--GOODWILL, INTANGIBLE ASSETS AND DEFERRED CHARGES
Goodwill, intangible assets and deferred charges consist of the following
(in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Goodwill........................................ $37,072 $37,380
Less amortization............................... 3,567 2,701
------- -------
Goodwill, net................................. $33,505 $34,679
======= =======
Patents......................................... $ 496 $ 529
Customer lists.................................. 223 223
Computer software............................... 711 310
Other intangibles............................... 340 301
------- -------
Subtotal...................................... $ 1,770 $ 1,363
Less amortization............................... 1,067 986
------- -------
Intangible assets, net........................ $ 703 $ 377
======= =======
Prepaid pension costs........................... $ 8,049 $ 7,690
Life insurance deposits......................... 3,467 3,297
Deferred financing costs........................ 1,040 1,632
Other deferred charges.......................... 161 147
------- -------
Subtotal...................................... $12,717 $12,766
Less amortization............................... 535 553
------- -------
Deferred charges, net......................... $12,182 $12,213
======= =======
</TABLE>
Total amortization expense related to the above assets was $1,236,000,
$1,842,000 and $2,113,000 for the periods ended December 31, 1997, 1996, and
1995, respectively. As a result of the early extinguishment of debt as
discussed in Note 7, the Company wrote off $314,000 and $1,024,000 of
unamortized deferred financing costs in 1997 and 1996, respectively.
F-10
<PAGE>
AXIA INCORPORATED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
NOTE 6--ACCRUED LIABILITIES
Accrued liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Salaries, wages, vacations and payroll taxes... $2,588 $2,445
Insurance...................................... 1,546 1,509
Other current liabilities...................... 3,085 4,593
------ ------
Total accrued liabilities.................. $7,219 $8,547
====== ======
</TABLE>
NOTE 7--LONG-TERM DEBT
Long-term debt, inclusive of capitalized lease obligations which are not
material, is as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
11.00% Senior Subordinated Notes................ $ 9,749 $18,343
Term Loan....................................... 15,732 22,222
Revolving Credit Loan........................... 4,500 --
Other........................................... 1,383 630
------- -------
Total Debt.................................... 31,364 41,195
Less: Current maturities........................ 10,925 6,647
------- -------
Total Long-Term Debt........................ $20,439 $34,548
======= =======
</TABLE>
The Senior Subordinated Notes above are stated net of unamortized discounts
of $501,000 and $1,157,000 as of December 31, 1997 and 1996, respectively. The
carrying amount of the Term Loan approximates its fair value as the term notes
bear interest at floating rates. The fair value of the Senior Subordinated
Notes at December 31, 1997 was $10,701,000 as determined by market quotations.
Other debt consists of a revolving line of credit for the Company's European
operations and capitalized lease financing.
Bank Credit Agreement
On June 27, 1996, the Company and its domestic subsidiaries entered into a
credit agreement (the "Bank Credit Agreement") which included a term loan
("Term Loan") with an original principal amount of $25,000,000 and a non-
amortizing revolving credit loan ("Revolving Credit Loan") of up to
$15,000,000, including up to $1,000,000 of letters of credit. The Company
recorded a pre-tax charge of $1,024,000 representing the writeoff of
unamortized deferred loan costs from its previous bank financing agreement.
This charge, net of tax, is reflected as an extraordinary item in the
accompanying Consolidated Statements of Income for the period ended December
31, 1996. The Bank Credit Agreement was amended in March 1997 to increase the
Revolving Credit Loan availability to $20,000,000.
Under the Bank Credit Agreement, the loans may, at the option of the
Company, be either Base Rate borrowings, Eurodollar borrowings or a
combination thereof. Base Rate borrowings bear interest at the prime rate or
the Federal Funds rate plus 1.00%, whichever is higher, and Eurodollar
borrowings bear interest at a rate of LIBOR plus 1.50%. In certain events
defined in the agreement, the Eurodollar borrowing interest rate may be
increased to LIBOR plus 1.75%. The Company pays a
F-11
<PAGE>
AXIA INCORPORATED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
NOTE 7--LONG-TERM DEBT--(CONTINUED)
fee of .38% per annum on the unused balance of the line of credit. The Company
can repay any borrowings at any time without penalty. The weighted average
interest rates on all amounts outstanding under the Bank Credit Agreement as
of December 31, 1997 was 7.56%. Substantially all of the assets of the
Company, ATTS, and TapeTech act as collateral under the Bank Credit Agreement.
Subsequent to a scheduled mandatory Term Loan payment of $210,000 in
February 1998 due to an asset sale, the Term Loan will have scheduled
maturities of $1,294,000 quarterly, maturing with a final payment of
$1,288,000 on December 31, 2000. The Revolving Credit Loan also terminates on
December 31, 2000. Interest payments are generally due quarterly. The Company
is required to prepay portions of the Term Loan in the event of a major asset
sale, as defined in the Bank Credit Agreement.
11.00% Senior Subordinated Notes
The 11.00% Senior Subordinated Notes were issued pursuant to a trust
indenture (the "Indenture") between the Company, certain guarantors and a
trustee bank and were sold to a group of private investors. Interest on the
notes is payable semi-annually and the notes mature on March 15, 2001. The
notes may be redeemed, at the Company's option, in full or in part, at a
decreasing premium rate of 104.4% declining to 102.2% at March 15, 1998. A
change of control of the Company, as defined, would require the Company to
offer to redeem all notes at a 101% premium.
In July 1994, the Company filed a Registration Statement with the Securities
and Exchange Commission to register the Senior Subordinated Notes under the
Securities Act of 1933. The Notes are guaranteed by all of the Company's
domestic subsidiaries. See Note 17 for further information regarding these
guarantees.
In May 1997, the Company exercised its option to redeem and extinguish
$9,250,000 of its Senior Subordinated Notes. The Company recorded a pretax
charge of $1,251,000 representing the aforementioned redemption premium, the
writeoff of capitalized financing costs associated with the original issuance
of the notes, the applicable original issue discount, and legal expenses,
agent fees, and other costs of the transaction. The charge, net of tax, is
reflected as an extraordinary item in the accompanying Consolidated Statement
of Income for the period ended December 31, 1997.
Restrictive Loan Covenants
The Bank Credit Agreement and the Indenture contain certain covenants which,
among other things and all as defined in the applicable agreement, require the
Company to maintain a minimum net worth, current ratio, interest coverage
ratio, and fixed charge coverage ratio, and maximum leverage ratio of
indebtedness to net worth. In addition, the Company may not create or incur
certain types of additional debt or liens, declare dividends except as
defined, or make capital expenditures or other restricted payments, as
defined, during the term of the agreements in excess of varying amounts, as
defined. The Company was in compliance with its loan covenants as of December
31, 1997.
F-12
<PAGE>
AXIA INCORPORATED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
NOTE 7--LONG-TERM DEBT--(CONTINUED)
Scheduled Principal Payments
Scheduled payments of principal of long-term debt outstanding at December
31, 1997, including capitalized lease obligations, are (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1997
------------------------------
REVOLVING SENIOR
TERM CREDIT SUBORDINATED
LOAN LOAN NOTES OTHER
------- --------- ------------ ------
<S> <C> <C> <C> <C>
1998................................ $ 5,386 $4,500 $ -- $1,039
1999................................ 5,176 -- -- 139
2000................................ 5,170 -- -- 135
2001................................ -- -- 9,749 70
------- ------ ------ ------
Total........................... $15,732 $4,500 $9,749 $1,383
======= ====== ====== ======
</TABLE>
The scheduled maturities above include a prepayment in 1998 of $210,000
related to the sale of assets as required in the Bank Credit Agreement. The
amounts outstanding under revolving credit agreements are recorded as current
maturities in the accompanying Consolidated Balance Sheets.
The Company made the following interest payments for the periods ended
December 31, 1997, December 31, 1996, and December 31, 1995 (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Interest payments.................. $3,551 $4,399 $5,780
</TABLE>
NOTE 8--CAPITAL STOCK
Subsequent to the merger and acquisition on March 15, 1994, the Company has
100 shares of common stock, par value $.01 per share, authorized, issued and
outstanding, all of which are owned by Holdings.
F-13
<PAGE>
AXIA INCORPORATED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
NOTE 9--INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities presented in the
financial statements and the amounts used for income tax purposes. Deferred
tax assets and liabilities were composed of the following (in thousands):
<TABLE>
<CAPTION>
DEFERRED INCOME TAX ASSETS DECEMBER 31, DECEMBER 31,
CURRENT ASSETS 1997 1996
-------------------------- ------------ ------------
<S> <C> <C>
Inventory valuation................................ $ 601 $ 652
Bad debt reserves.................................. 706 570
Insurance accruals................................. 466 464
Rental tool repair................................. 203 168
Environmental accrual.............................. 6 209
Facility realignment............................... -- 239
Tax accruals....................................... 50 76
Other, net......................................... 561 649
------- -------
Total deferred tax asset........................... $ 2,593 $ 3,027
======= =======
<CAPTION>
DEFERRED INCOME TAX ASSETS (LIABILITIES) DECEMBER 31, DECEMBER 31,
NONCURRENT ASSETS (LIABILITIES) 1997 1996
---------------------------------------- ------------ ------------
<S> <C> <C>
Depreciation & amortization........................ $(3,890) $(3,666)
Pension plans...................................... (2,879) (2,661)
Insurance accruals................................. 382 420
Tax accruals....................................... 212 76
Post-retirement benefits (ex. pensions)............ 1,548 1,464
Environmental accrual.............................. 1,415 1,339
Other, net......................................... 257 262
------- -------
Total deferred tax (liability), net................ $(2,955) $(2,766)
======= =======
</TABLE>
The components of the income tax provision, excluding the amount
attributable to the extraordinary item, are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
U.S. and state taxes payable.......... $5,013 $4,700 $1,899
Foreign taxes payable................. 776 632 686
------ ------ ------
Taxes currently payable............. $5,789 $5,332 $2,585
Deferred taxes, net................... 623 398 753
------ ------ ------
Total provision................... $6,412 $5,730 $3,338
====== ====== ======
</TABLE>
F-14
<PAGE>
AXIA INCORPORATED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
NOTE 9--INCOME TAXES--(CONTINUED)
A reconciliation between the statutory and the effective income tax rates,
excluding the amount attributable to the extraordinary item, is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Statutory income tax rate............ 34.0% 34.0% 34.0%
Non-deductible amortization.......... 3.5 3.7 4.0
State income taxes, net of federal
income tax benefit.................. 2.5 3.1 2.2
Other, net........................... 1.1 2.6 .4
---- ---- ----
Effective income tax rate............ 41.1% 43.4% 40.6%
==== ==== ====
</TABLE>
The Company made the following income tax payments, net of refunds, during
the periods ended December 31, 1997, December 31, 1996, and December 31, 1995
(in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Income taxes paid (refunded).......... $3,795 $4,691 $2,561
</TABLE>
The Company does not record deferred income taxes applicable to
undistributed earnings of foreign subsidiaries. The Company considers these
earnings to be invested for an indefinite period. If such earnings were
distributed, the U.S. income taxes payable would not be material as the
resulting liability would be substantially offset by foreign tax credits.
NOTE 10--PENSION PLANS
The Company's pension plans provide benefits for substantially all
employees. A majority of plan assets are invested in cash, bonds, domestic and
international equities and real estate. Pension costs are funded by the
Company at a rate necessary to maintain the plans on an actuarially sound
basis.
The components of pension expense (credits) are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Normal cost.......................... $1,127 $ 983 $ 799
Interest on beginning of period
projected benefit obligation........ 1,726 1,679 1,680
Return on fund assets................ (3,095) (2,944) (2,581)
Net amortization and deferrals....... 11 7 (4)
Effect of curtailment................ -- -- (60)
------ ------ ------
Total credit to pension expense...... $ (231) $ (275) $ (166)
====== ====== ======
</TABLE>
In 1995, the Company recorded a gain of $60,000 on the curtailment of an
hourly pension plan as a result of the closure of a production facility.
F-15
<PAGE>
AXIA INCORPORATED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
NOTE 10--PENSION PLANS--(CONTINUED)
A summary of the benefit obligations and plan assets is shown in the table
below (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
--------------- ---------------
(A) (B) (A) (B)
------- ------ ------- ------
<S> <C> <C> <C> <C>
Actuarial present value of benefit
obligations:
Vested benefits........................... $23,071 $3,910 $19,380 $3,644
Nonvested benefits........................ 917 54 782 22
------- ------ ------- ------
Accumulated benefit obligation............ $23,988 $3,964 $20,162 $3,666
Effect of projected future compensation
levels................................... 1,227 -- 1,382 --
------- ------ ------- ------
Projected benefit obligation.............. $25,215 $3,964 $21,544 $3,666
Less: Plan assets at fair value........... (33,460) (3,536) (29,077) (3,067)
------- ------ ------- ------
Plan assets (in excess)/less than
projected benefit obligation............. $(8,245) 428 $(7,533) $ 599
Unrecognized prior service cost........... -- (32) -- (35)
Unrecognized net actuarial (loss) gain.... 288 (295) (47) (524)
Adjustment required to recognize minimum
liability................................ -- 327 -- 559
------- ------ ------- ------
Net (asset) liability..................... $(7,957) $ 428 $(7,580) $ 599
======= ====== ======= ======
</TABLE>
- --------
(A) Plans with Assets in excess of Accumulated Benefits
(B) Plans with Accumulated Benefits in excess of Assets
At December 31, 1997, the Company has recorded pension assets of $8,049,000
and liabilities of $520,000 in the Consolidated Balance Sheets. Calculations
of 1997, 1996 and 1995 pension expense under the provisions of SFAS No. 87
assumed a settlement rate of 7.00%, 7.25% and 7.25%, respectively, and a long-
term rate of return on plan assets of 10.0% for all years.
F-16
<PAGE>
AXIA INCORPORATED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
NOTE 11--POST-RETIREMENT BENEFITS OTHER THAN PENSIONS
The Company sponsors three defined benefit post-retirement plans. The
Company entered into employment agreements with executive employees which
provide for death benefits to the executive's estate upon the executive's
death. A second plan provides prescription drug benefits to nonsalaried
employees at one of its plants, and the other provides life insurance benefits
to selected salaried and nonsalaried employees. All plans are noncontributory
and unfunded. The following table sets forth the plans' combined status
reconciled with the amount shown in the Company's Consolidated Balance Sheets
as of December 31, 1997 and 1996 (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Accumulated post-retirement benefit obligation:
Retirees....................................... $(3,353) $(3,231)
Fully eligible active plan participants........ (488) (421)
Other active plan participants................. (262) (233)
------- -------
Total post-retirement benefit obligation......... $(4,103) $(3,885)
Plan assets at fair value........................ -- --
Accumulated post-retirement benefit obligation in
excess of plan assets........................... $(4,103) $(3,885)
------- -------
Accrued post-retirement benefit cost............. $(4,103) $(3,885)
======= =======
Net periodic post-retirement benefit cost
included the following components:
Service cost--benefits attributed to service
during the period............................... $ 85 $ (104)
Interest cost on accumulated post-retirement
benefit obligation.............................. 224 265
------- -------
Net periodic post-retirement benefit cost........ $ 309 $ 161
======= =======
</TABLE>
The Company entered into Salary Continuation Agreements with certain key
executive employees which provide a death benefit, contingent upon employment
or service as a consultant with the Company until retirement or death.
Pursuant to the agreement with each such executive, upon the executive's
death, the Company will pay to the respective designated beneficiary, annually
for a period of ten years, an amount equal to 40% of the executives current
salary or salary at the date of retirement. The total post-retirement benefit
obligation of this benefit program included in the table above is $3,544,000
and $3,398,000 at December 31, 1997 and 1996, respectively. The Company has
purchased life insurance policies on the lives of the executives, naming the
Company as the sole beneficiary. The amount of such coverage is designed to
provide to the Company a source of funds to satisfy its obligations under the
program.
The Company, in accordance with a union contract, provides prescription drug
benefits at one of its plants. For measurement purposes, a 7 percent annual
rate of increase in the per capita cost of covered prescription drug benefits
was assumed for 1997 and 1996 and for each year thereafter. The prescription
drug cost trend rate assumption has an effect on the amounts reported. To
illustrate, increasing the assumed health care cost trend rates by 1
percentage point in each year would increase the accumulated post-retirement
benefit obligation as of December 31, 1997 by approximately $78,000 and the
aggregate of the service and interest cost components of net periodic post-
retirement benefit cost for the year then ended by approximately $7,900. The
discount rate used in determining the accumulated post-retirement benefit
obligation was 8.5% in 1997 and 1996.
F-17
<PAGE>
AXIA INCORPORATED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
NOTE 12--LEASES
Minimum rental commitments of the Company under noncancellable operating
leases (primarily real estate) with initial terms of one year or more are as
follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
1998......................................................... $1,983
1999......................................................... 1,293
2000......................................................... 891
2001......................................................... 644
2002......................................................... 537
Subsequent years............................................. 1,185
------
Total.................................................... $6,533
======
</TABLE>
The Company incurred the following expense for operating leases for the
periods ended December 31, 1997, December 31, 1996, and December 31, 1995 (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Lease expense...................... $2,369 $2,339 $2,298
</TABLE>
NOTE 13--BUSINESS SEGMENTS
The Company is a designer, manufacturer, distributor and marketer of a
diverse range of products in several niche markets including productivity
enhancing construction tools, formed wire products and industrial bag closing
equipment and systems, and conveyor handling systems.
Ames ("Ames") is the designer, manufacturer, distributor and marketer of
automatic taping and finishing tools, which are rented or sold to interior
finishing contractors to finish drywall joints prior to painting, wallpapering
and other forms of final treatment. In addition, Ames sells a variety of other
drywall tools, finishing accessories, and supplies through its network of
Company-owned stores.
Nestaway ("Nestaway") is a manufacturer of formed wire products which are
used for a variety of commercial and consumer product applications. Nestaway
manufactures coated wire dishwasher racks and components which are sold to
dishwasher appliance manufacturers. Nestaway also manufactures, on a contract
basis, other close tolerance, formed, welded and coated formed wire products
such as dish drainers, sink protectors, shower caddies, dryer racks, golf cart
baskets, bucket bails, medical baskets and small gauge axles.
Fischbein ("Fischbein") is a worldwide manufacturer of industrial bag
closing equipment and systems, and a manufacturer of flexible conveyor
handling systems and stackable storage equipment. Bag closing equipment and
systems include: (i) portable and stationary industrial sewing heads and
sewing systems for paper, textile and woven polypropylene bags; (ii)
industrial heat sealing and bag handling systems for paper and plastic bags
and (iii) consumables, including thread, tape and service parts. Fischbein
manufacturers extendable, flexible, gravity and motorized conveyors and
portable, nestable and stackable warehouse storage racks.
One of Nestaway's dishrack customers accounted for 20%, 19% and 20% of the
Company's revenues for 1997, 1996 and 1995, respectively. Dishrack customers,
as a group, accounted for 23%, 27% and 32% of the Company's revenues for 1997,
1996 and 1995, respectively. Another customer of Nestaway who purchases
dishdrainers and other products accounted for 10%, 11% and 8% of the Company's
revenues for 1997, 1996 and 1995, respectively.
F-18
<PAGE>
AXIA INCORPORATED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
NOTE 13--BUSINESS SEGMENTS--(CONTINUED)
Nestaway competes directly with the dishwasher manufacturer's in-house
manufacturing capability. Frigidaire, General Electric and Whirlpool, major
dishwasher manufacturers, have dishrack manufacturing capability. Because
Nestaway is competing against the self-manufacture of its product by larger
companies with more extensive financial resources, Nestaway competes on
quality, flexibility and innovation. As a result of dishrack sourcing
decisions made by its customers, in 1996 Nestaway shut down a leased
production facility in Canal Winchester, Ohio, and temporarily idled a second
plant in Clinton, North Carolina. The Clinton facility resumed operations in
1997 when the Company was awarded a contract for dishracks by a new customer.
Nestaway's Beaver Dam, Kentucky plant, shut down in 1994 due to a customer's
decision to utilize an alternative source of supply, was reopened in 1996 to
produce dishrack components, lower volume dishracks, and other formed and
coated wire products. During 1997 and 1996, Nestaway charged $624,000 and
$980,000, respectively, of the costs incurred against a facility realignment
reserve established in prior periods. Nestaway has no further reserves for the
realignment of its production capacities as of December 31, 1997, and
management believes its current manufacturing operations are properly
positioned to service current and future customers.
A summary of segment data for the periods ended December 31, 1997, 1996, and
1995 is as follows (in thousands):
<TABLE>
<CAPTION>
CORPORATE
AND
NESTAWAY FISCHBEIN AMES ELIMINATIONS CONSOLIDATED
-------- --------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Period ended December 31,
1997:
Net revenues............ $35,268 $27,104 $42,428 $ -- $104,800
Income from operations.. 6,575 3,838 11,693 (2,752) 19,354
Identifiable assets..... 38,873 18,141 27,969 11,790 96,773
Depreciation and
amortization........... 2,077 746 1,860 416 5,099
Capital expenditures.... 1,340 319 1,813 3 3,475
======= ======= ======= ======= ========
Period ended December 31,
1996:
Net revenues............ $39,655 $27,117 $38,015 $ -- $104,787
Income from operations.. 8,069 3,263 10,157 (3,142) 18,347
Identifiable assets..... 38,986 18,282 26,476 15,587 99,331
Depreciation and
amortization........... 3,484 693 1,789 750 6,716
Capital expenditures.... 250 724 2,807 81 3,862
======= ======= ======= ======= ========
Period ended December 31,
1995:
Net revenues............ $42,649 $27,823 $33,854 $ -- $104,326
Income from operations.. 8,172 2,851 7,569 (3,276) 15,316
Identifiable assets..... 45,084 18,283 24,071 15,850 103,288
Depreciation and
amortization........... 3,306 542 1,484 1,048 6,380
Capital expenditures.... 2,042 513 1,297 1 3,853
======= ======= ======= ======= ========
</TABLE>
The Company has restated its segment data to reflect divisional organization
rather than similarity of product lines. As a result, the storage rack and
conveyor product lines, formerly included in the Metal Products Segment, are
now combined with the Fischbein business segment. These products represented
less than 20% of the total revenues of Fischbein in 1997 and less than 5% of
the Company's total revenues.
F-19
<PAGE>
AXIA INCORPORATED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
NOTE 14--GEOGRAPHICAL DATA
The Company conducts the majority of its business within the United States.
The Packaging Products Segment has operations in various other countries,
primarily in Europe and Singapore. The Construction Tool Segment also conducts
business in Canada. Activity in any single country or area outside of the
United States is not material. Export sales outside of the United States to
unaffiliated customers are less than 10% of sales.
A summary of geographical data for the periods ended December 31, 1997,
1996, and 1995 is as follows (in thousands):
<TABLE>
<CAPTION>
CORPORATE
AND
DOMESTIC FOREIGN ELIMINATIONS CONSOLIDATED
-------- ------- ------------ ------------
<S> <C> <C> <C> <C>
Period ended December 31, 1997:
Net revenues.................... $92,265 $12,535 $ -- $104,800
Income from operations.......... 20,387 1,719 (2,752) 19,354
Identifiable assets............. 79,327 5,656 11,790 96,773
Depreciation and amortization... 4,610 73 416 5,099
Capital expenditures............ 3,323 149 $ 3 $ 3,475
======= ======= ======= ========
Period ended December 31, 1996:
Net revenues.................... $91,307 $13,480 $ -- $104,787
Income from operations.......... 19,877 1,612 (3,142) 18,347
Identifiable assets............. 77,775 5,969 15,587 99,331
Depreciation and amortization... 5,896 70 750 6,716
Capital expenditures............ 3,697 84 81 3,862
======= ======= ======= ========
Period ended December 31, 1995:
Net revenues.................... $89,613 $14,713 $ -- $104,326
Income from operations.......... 16,458 2,134 (3,276) 15,316
Identifiable assets............. 81,053 6,385 15,850 103,288
Depreciation and amortization... 5,258 74 1,048 6,380
Capital expenditures............ 3,790 62 1 3,853
======= ======= ======= ========
</TABLE>
NOTE 15--CONTINGENCY
The Company is subject to various federal, state and local laws and
regulations governing the use, discharge and disposal of hazardous materials.
Including the item discussed below, compliance with current laws and
regulations has not had, and is not expected to have, a material adverse
effect on the Company's financial condition or operating results.
In 1991, the New York State Department of Environmental Conservation (the
"NYSDEC") sent a notice letter to the Company alleging that it had documented
the release and/or threatened release of "hazardous substances" and/or the
presence of "hazardous wastes" at a property located in Buffalo, New York,
formerly owned by Bliss and Laughlin Steel Company, a predecessor of the
Company.
A feasibility study, prepared in 1994 by environmental consultants engaged
by the Company, established a range of estimated remediation costs of $.7
million to $2.9 million, plus or minus 30% of those costs, with the most
probable method of remediation being at the high end of the range. The Company
established an accrual of $3.9 million for the costs of remediation.
F-20
<PAGE>
AXIA INCORPORATED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
NOTE 15--CONTINGENCY--(CONTINUED)
In 1997, the Company entered into an agreement with the party responsible
for an adjoining site who also have been in the process of addressing concerns
raised by NYSDEC which will transfer responsibility to remediate the formerly-
owned property to the party remediating the adjoining site. The Company paid
the $520,000 payable under the agreement and has an exposure of up to an
additional $120,000 if pond sediment contamination is higher than estimated by
the Company's environmental consultants. In the event the party responsible
for the remediation of the adjoining site is unable to consummate an agreement
with NYSDEC within one year of its agreement with the Company, the Company has
the option of the return of its contribution to the remediation of the sites
and pursuing its own remediation plan. Should NYSDEC not approve the joint
remediation plan for both sites, the agreement can be nullified and funds
returned to the Company. The Company has maintained its accruals pending
finalization of the remediation plan of the adjoining site. The Company is
pursuing contributions from directors and officers of other users of the
previously owned property. No estimate can be given as to possible recovery.
NOTE 16--RELATED PARTY TRANSACTIONS
The Company is wholly-owned by Holdings. The Company has entered into an
agreement with beneficial owners of Holdings shares as described herein. The
Company believes that the services provided are on terms at least as favorable
to the Company as it could obtain from unaffiliated third parties.
The Company has entered into a Management Agreement (the "Management
Agreement") with Cortec Capital Corporation ("CCC"), a beneficial owner of
59.1% of Holdings, for certain management and financial services. Pursuant to
the Management Agreement, CCC will provide the Company with professional and
administrative advice in areas relating to the Company's business, including
finance, budgeting, risk management, business planning, manufacturing, sales,
marketing, staffing levels and acquisitions. CCC will receive a quarterly fee
of 1% of the Company's net sales, not to exceed $125,000. The Management
Agreement continues until March 31, 2001, and thereafter for successive one
year periods unless terminated by either party. Total fees and reimbursed
expenses for these services were $500,551, $504,959 and $458,662 in 1997, 1996
and 1995, respectively, and are included in selling, general and
administrative expenses in the Consolidated Statements of Income.
NOTE 17--SUBSIDIARY GUARANTEES
The Company's payment obligations under the Subordinated Notes are fully and
unconditionally guaranteed on a joint and several basis (collectively, the
"Subsidiary Guarantees") by Ames Taping Tool Systems, Inc., and TapeTech Tool
Co., Inc., each a wholly-owned subsidiary of the Company and each a
"Guarantor." These subsidiaries, together with the operating divisions of the
Company, represent all of the operations of the Company conducted in the
United States. The remaining subsidiaries of the Company are foreign
subsidiaries.
The Company's payment obligations under the Bank Credit Agreement are fully
and unconditionally guaranteed on a joint and several basis by the Company and
each Guarantor. The obligations of each Guarantor under its Subsidiary
Guarantee are subordinated to all senior indebtedness of such Guarantor,
including the guarantee by such Guarantor of the Company's borrowings under
the Bank Credit Agreement.
F-21
<PAGE>
AXIA INCORPORATED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
NOTE 17--SUBSIDIARY GUARANTEES--(CONTINUED)
With the intent that the Subsidiary Guarantees not constitute fraudulent
transfers or conveyances under applicable state or federal law, the obligation
of each Guarantor under its Subsidiary Guarantee is also limited to the
maximum amount as will, after giving effect to such maximum amount and all
other liabilities (contingent or otherwise) of such Guarantor that are
relevant under such laws, and after giving effect to any rights to
contribution of such Guarantor pursuant to any agreement providing for an
equitable contribution among such Guarantor and other affiliates of the
Company of payments made by guarantees by such parties, result in the
obligations of such Guarantor in respect of such maximum amount not
constituting a fraudulent conveyance.
The following consolidating condensed financial data illustrates the
composition of the combined Guarantors. Management believes separate complete
financial statements of the respective Guarantors would not provide additional
material information which would be useful in assessing the financial
composition of the Guarantors. No single Guarantor has any significant legal
restrictions on the ability of investors or creditors to obtain access to its
assets in event of default on the Subsidiary Guarantee other than its
subordination to senior indebtedness described above.
Investments in subsidiaries are accounted for by the parent on the equity
method for purposes of the supplemental consolidating presentation. Earnings
of subsidiaries are therefore reflected in the parent's investment accounts
and earnings. The principal elimination entries eliminate investments in
subsidiaries and intercompany balances and transactions.
F-22
<PAGE>
AXIA INCORPORATED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PARENT NON-
AND ITS GUARANTOR GUARANTOR CONSOLIDATED
ASSETS DIVISIONS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
------ --------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash
equivalents........... $ (88) $ 925 $ 420 $ 53 $ 1,310
Accounts receivable,
net................... 5,121 5,018 3,110 (490) 12,759
Inventories............ 6,175 1,641 1,789 (450) 9,155
Prepaid income taxes
and other current
assets................ 208 144 84 -- 436
Deferred income tax
assets................ 2,593 -- -- -- 2,593
------- ------- ------ -------- -------
Total Current Assets... $14,009 $ 7,728 $5,403 $ (887) $26,253
------- ------- ------ -------- -------
PLANT AND EQUIPMENT, AT
COST:
Land................... $ 508 $ -- $ -- $ -- $ 508
Buildings and
improvements.......... 6,293 18 309 -- 6,620
Machinery and
equipment............. 23,703 571 467 -- 24,741
Equipment leased to
others................ 7,128 -- 11 -- 7,139
------- ------- ------ -------- -------
$37,632 $ 589 $ 787 $ -- $39,008
Less: Accumulated
depreciation.......... 13,994 395 549 -- 14,938
------- ------- ------ -------- -------
Net Plant and
Equipment............. $23,638 $ 194 $ 238 $ -- $24,070
------- ------- ------ -------- -------
OTHER ASSETS:
Goodwill, net.......... $30,922 $ 2,571 $ 12 $ -- $33,505
Intangible assets, net. 678 25 -- -- 703
Deferred charges, net.. 11,187 992 3 -- 12,182
Investment in wholly-
owned subsidiaries.... 16,038 -- -- (16,038) --
Investment in
affiliates............ -- -- -- -- --
Other assets........... 60 -- -- -- 60
------- ------- ------ -------- -------
Total Other Assets..... $58,885 $ 3,588 $ 15 $(16,038) $46,450
------- ------- ------ -------- -------
TOTAL ASSETS............ $96,532 $11,510 $5,656 $(16,925) $96,773
======= ======= ====== ======== =======
<CAPTION>
LIABILITIES AND
STOCKHOLDER'S EQUITY
--------------------
<S> <C> <C> <C> <C> <C>
CURRENT LIABILITIES:
Current maturities of
long-term debt........ $10,565 $ 36 $ 324 $ -- $10,925
Accounts payable....... 3,124 410 924 (437) 4,021
Accrued liabilities.... 5,920 950 349 -- 7,219
Accrued income taxes... 138 -- 126 -- 264
Advance account........ 1,726 (937) (789) -- --
------- ------- ------ -------- -------
Total Current
Liabilities........... $21,473 $ 459 $ 934 $ (437) $22,429
------- ------- ------ -------- -------
NON-CURRENT LIABILITIES:
Long-term debt, less
current maturities.... $20,414 $ 25 $ -- $ -- $20,439
Other non-current
liabilities........... 10,883 -- -- -- 10,883
Deferred income taxes.. 2,955 -- -- -- 2,955
------- ------- ------ -------- -------
Total Non-Current
Liabilities........... $34,252 $ 25 $ -- $ -- $34,277
------- ------- ------ -------- -------
STOCKHOLDER'S EQUITY
(DEFICIT):
Common stock and
additional paid-in
capital............... $16,723 $ 5,098 $1,770 $ (6,868) $16,723
Retained earnings...... 24,266 5,928 3,244 (9,620) 23,818
Accumulated other
comprehensive income.. (182) -- (292) -- (474)
------- ------- ------ -------- -------
Total Stockholder's
Equity (Deficit)...... $40,807 $11,026 $4,722 $(16,488) $40,067
------- ------- ------ -------- -------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY
(DEFICIT)............. $96,532 $11,510 $5,656 $(16,925) $96,773
======= ======= ====== ======== =======
</TABLE>
F-23
<PAGE>
AXIA INCORPORATED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
CONSOLIDATING STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PARENT NON-
AND ITS GUARANTOR GUARANTOR CONSOLIDATED
DIVISIONS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
--------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales............... $57,366 $14,837 $11,549 $ (6,334) $ 77,418
Net rentals............. 15,063 26,379 986 (15,046) 27,382
------- ------- ------- -------- --------
Net revenues............ $72,429 $41,216 $12,535 $(21,380) $104,800
Cost of sales......... $40,916 $ 8,683 $ 7,300 $ (6,381) $ 50,518
Cost of rentals....... 3,156 20,895 621 (15,046) 9,626
Selling, general and
administrative
expenses............. 14,344 8,063 2,895 -- 25,302
------- ------- ------- -------- --------
Income from operations.. $14,013 $ 3,575 $ 1,719 $ 47 $ 19,354
Interest expense...... 3,695 9 6 -- 3,710
Intercompany interest
expense (income)..... (7) 7 -- -- --
Other expense
(income), net........ (3,381) 205 391 2,822 37
------- ------- ------- -------- --------
Income before income
taxes.................. $13,706 $ 3,354 $ 1,322 $ (2,775) $ 15,607
Provision for income
taxes................ 4,558 1,295 559 -- 6,412
------- ------- ------- -------- --------
Income before
extraordinary item..... $ 9,148 $ 2,059 $ 763 $ (2,775) $ 9,195
======= ======= ======= ======== ========
</TABLE>
F-24
<PAGE>
AXIA INCORPORATED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PARENT NON-
AND ITS GUARANTOR GUARANTOR CONSOLIDATED
DIVISIONS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
--------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES.. $ 9,530 $ 1,899 $ 301 $-- $ 11,730
CASH FLOW FROM
INVESTING ACTIVITIES:
Cash used for capital
expenditures........ (3,255) (71) (149) -- (3,475)
Proceeds from sale of
investment.......... 1,459 -- -- -- 1,459
Proceeds from sale of
fixed assets........ 357 -- -- -- 357
------- ------- ----- --- --------
Net Cash Used In
Investing
Activities........ $(1,439) $ (71) $(149) $-- $ (1,659)
CASH FLOWS FROM
FINANCING ACTIVITIES:
Net increase in
Revolving Credit
Loan................ 4,500 -- -- -- 4,500
Proceeds from other
long-term debt...... 620 -- 324 -- 944
Payments of other
long-term debt...... (15,907) (24) -- -- (15,931)
Dividends received
from (paid by)
subsidiaries........ 638 -- (638) -- --
Net increase
(decrease) in
advance account..... 1,471 (1,386) (85) -- --
Other equity
transactions........ 145 -- (108) -- 37
------- ------- ----- --- --------
Net Cash Used In
Financing
Activities........ $(8,533) $(1,410) $(507) $-- $(10,450)
EFFECT OF EXCHANGE RATE
CHANGES ON CASH....... -- -- (27) -- (27)
------- ------- ----- --- --------
NET (DECREASE) INCREASE
IN CASH AND CASH
EQUIVALENTS........... $ (442) $ 418 $(382) $-- $ (406)
CASH AND CASH
EQUIVALENTS AT
BEGINNING OF YEAR..... 407 507 802 -- 1,716
------- ------- ----- --- --------
CASH AND CASH
EQUIVALENTS AT END OF
YEAR.................. $ (35) $ 925 $ 420 $-- $ 1,310
======= ======= ===== === ========
</TABLE>
F-25
<PAGE>
AXIA INCORPORATED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PARENT NON-
AND ITS GUARANTOR GUARANTOR CONSOLIDATED
ASSETS DIVISIONS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
------ --------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash
equivalents........... $ 407 $ 507 $ 802 $ -- $ 1,716
Accounts receivable,
net................... 3,681 4,673 2,472 (139) 10,687
Inventories............ 5,892 1,422 2,268 (496) 9,086
Prepaid income taxes
and other current
assets................ 1,513 127 55 -- 1,695
Deferred income tax
assets................ 3,027 -- -- -- 3,027
------- ------- ------ -------- -------
Total Current Assets. $14,520 $ 6,729 $5,597 $ (635) $26,211
------- ------- ------ -------- -------
PLANT AND EQUIPMENT, AT
COST:
Land................... $ 521 $ -- $ -- $ -- $ 521
Buildings and
improvements.......... 6,200 18 291 -- 6,509
Machinery and
equipment............. 22,419 500 230 -- 23,149
Equipment leased to
others................ 6,026 -- 14 -- 6,040
------- ------- ------ -------- -------
$35,166 $ 518 $ 535 $ -- $36,219
Less: Accumulated
depreciation.......... 10,860 305 181 -- 11,346
------- ------- ------ -------- -------
Net Plant and
Equipment............. $24,306 $ 213 $ 354 $ -- $24,873
------- ------- ------ -------- -------
OTHER ASSETS:
Goodwill, net.......... $32,037 $ 2,642 $ -- $ -- $34,679
Intangible assets,
net................... 330 47 -- -- 377
Deferred charges, net.. 11,271 924 18 -- 12,213
Investment in wholly-
owned subsidiaries.... 13,829 -- -- (13,829) --
Investment in
affiliates............ 900 -- -- -- 900
Other assets........... 78 -- -- -- 78
------- ------- ------ -------- -------
Total Other Assets... $58,445 $ 3,613 $ 18 $(13,829) $48,247
------- ------- ------ -------- -------
TOTAL ASSETS............ $97,271 $10,555 $5,969 $(14,464) $99,331
======= ======= ====== ======== =======
<CAPTION>
LIABILITIES AND
STOCKHOLDER'S EQUITY
--------------------
<S> <C> <C> <C> <C> <C>
CURRENT LIABILITIES:
Current maturities of
long-term debt........ $ 6,606 $ 41 $ -- $ -- $ 6,647
Accounts payable....... 2,610 466 718 (139) 3,655
Accrued liabilities.... 7,250 588 709 -- 8,547
Accrued income taxes... (30) -- 30 -- --
Advance account........ 255 449 (704) -- --
------- ------- ------ -------- -------
Total Current
Liabilities......... $16,691 $ 1,544 $ 753 $ (139) $18,849
------- ------- ------ -------- -------
NON-CURRENT LIABILITIES:
Long-term debt, less
current maturities.... $34,504 $ 44 $ -- $ -- $34,548
Other non-current
liabilities........... 11,050 -- -- -- 11,050
Deferred income taxes.. 2,766 -- -- -- 2,766
------- ------- ------ -------- -------
Total Non-Current
Liabilities......... $48,320 $ 44 $ -- $ -- $48,364
------- ------- ------ -------- -------
STOCKHOLDER'S EQUITY
(DEFICIT):
Common stock and
additional paid-in
capital............... $16,723 $ 5,098 $2,000 $ (7,098) $16,723
Retained earnings...... 15,861 3,869 2,892 (7,227) 15,395
Accumulated other
comprehensive income.. (324) -- 324 -- --
------- ------- ------ -------- -------
Total Stockholder's
Equity (Deficit).... $32,260 $ 8,967 $5,216 $(14,325) $32,118
------- ------- ------ -------- -------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY
(DEFICIT).............. $97,271 $10,555 $5,969 $(14,464) $99,331
======= ======= ====== ======== =======
</TABLE>
F-26
<PAGE>
AXIA INCORPORATED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
CONSOLIDATING STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PARENT NON-
AND ITS GUARANTOR GUARANTOR CONSOLIDATED
DIVISIONS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
--------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales............... $61,031 $12,995 $12,523 $ (6,778) $ 79,771
Net rentals............. 13,768 24,037 957 (13,746) 25,016
------- ------- ------- -------- --------
Net revenues............ $74,799 $37,032 $13,480 $(20,524) $104,787
Cost of sales......... $43,560 $ 7,860 $ 7,729 $ (6,715) $ 52,434
Cost of rentals....... 2,589 19,404 613 (13,746) 8,860
Selling, general and
administrative
expenses............. 14,602 7,018 3,526 -- 25,146
------- ------- ------- -------- --------
Income from operations.. $14,048 $ 2,750 $ 1,612 $ (63) $ 18,347
Interest expense...... 5,100 9 14 -- 5,123
Intercompany interest
expense (income)..... (80) 80 -- -- --
Other expense
(income), net........ (2,598) 41 224 2,351 18
------- ------- ------- -------- --------
Income before income
taxes.................. $11,626 $ 2,620 $ 1,374 $ (2,414) $ 13,206
Provision for income
taxes................ 3,955 1,210 565 -- 5,730
------- ------- ------- -------- --------
Income before
extraordinary item..... $ 7,671 $ 1,410 $ 809 $ (2,414) $ 7,476
======= ======= ======= ======== ========
</TABLE>
F-27
<PAGE>
AXIA INCORPORATED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PARENT NON-
AND ITS GUARANTOR GUARANTOR CONSOLIDATED
DIVISIONS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
--------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES.. $14,036 $1,034 $ 342 $-- $15,412
CASH FLOW FROM
INVESTING ACTIVITIES:
Cash used for capital
expenditures........ (3,675) (103) (84) -- (3,862)
Proceeds from sale of
fixed assets........ 55 -- -- -- 55
------- ------ ----- --- -------
Net Cash Used In
Investing
Activities........ $(3,620) $ (103) $ (84) $-- $(3,807)
CASH FLOWS FROM
FINANCING ACTIVITIES:
Net decrease in
Revolving Credit
Loan................ -- -- -- -- --
Proceeds from other
long-term debt...... 25,375 36 -- -- 25,411
Payments of other
long-term debt...... (34,532) (34) -- -- (34,566)
Dividends received
from (paid by)
subsidiaries........ 191 -- (191) -- --
Payments of deferred
financing costs..... (426) -- -- -- (426)
Net increase
(decrease) in
advance account..... 673 (680) 7 -- --
Other equity
transactions........ (300) -- (1) -- (301)
------- ------ ----- --- -------
Net Cash Used In
Financing
Activities........ $(9,019) $ (678) $(185) $-- $(9,882)
EFFECT OF EXCHANGE RATE
CHANGES ON CASH....... -- -- (52) -- (52)
------- ------ ----- --- -------
NET (DECREASE) INCREASE
IN CASH AND CASH
EQUIVALENTS........... $ 1,397 $ 253 $ 21 $-- $ 1,671
CASH AND CASH
EQUIVALENTS AT
BEGINNING OF YEAR..... (990) 254 781 -- 45
------- ------ ----- --- -------
CASH AND CASH
EQUIVALENTS AT END OF
YEAR.................. $ 407 $ 507 $ 802 $-- $ 1,716
======= ====== ===== === =======
</TABLE>
F-28
<PAGE>
AXIA INCORPORATED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
CONSOLIDATING STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PARENT NON-
AND ITS GUARANTOR GUARANTOR CONSOLIDATED
DIVISIONS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
--------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales............... $62,211 $11,840 $13,736 $ (5,873) $ 81,914
Net rentals............. 12,179 21,394 977 (12,138) 22,412
------- ------- ------- -------- --------
Net revenues............ $74,390 $33,234 $14,713 $(18,011) $104,326
Cost of sales......... $45,780 $ 6,985 $ 8,395 $ (5,989) $ 55,171
Cost of rentals....... 3,488 17,843 465 (12,138) 9,658
Selling, general and
administrative
expenses............. 14,410 6,052 3,719 -- 24,181
------- ------- ------- -------- --------
Income from operations.. $10,712 $ 2,354 $ 2,134 $ 116 $ 15,316
Interest expense...... 6,556 9 31 -- 6,596
Intercompany interest
expense (income)..... (145) 145 -- -- --
Other expense
(income), net........ (2,149) 182 394 2,066 493
------- ------- ------- -------- --------
Income before income
taxes.................. $ 6,450 $ 2,018 $ 1,709 $ (1,950) $ 8,227
Provision for income
taxes................ 1,677 975 686 -- 3,338
------- ------- ------- -------- --------
Net income.............. $ 4,773 $ 1,043 $ 1,023 $ (1,950) $ 4,889
======= ======= ======= ======== ========
</TABLE>
F-29
<PAGE>
AXIA INCORPORATED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PARENT NON-
AND ITS GUARANTOR GUARANTOR CONSOLIDATED
DIVISIONS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
--------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES... $ 7,741 $ 546 $ 1,664 $-- $ 9,951
CASH FLOW FROM INVESTING
ACTIVITIES:
Cash used for capital
expenditures......... (3,560) (234) (59) -- (3,853)
Proceeds from sale of
fixed assets......... 243 38 -- -- 281
------- ------ ------- --- -------
Net Cash Used In
Investing Activities. $(3,317) $ (196) $ (59) $-- $(3,572)
CASH FLOWS FROM
FINANCING ACTIVITIES:
Net decrease in
Revolving Credit
Loan................. -- -- -- -- --
Proceeds from other
long-term debt....... 213 83 -- -- 296
Payments of other
long-term debt....... (7,374) -- -- -- (7,374)
Dividends received
from (paid by)
subsidiaries......... 4,195 (3,171) (1,024) -- --
Net increase
(decrease) in advance
account.............. (2,316) 2,488 (172) -- --
Other equity
transactions......... (201) 23 12 -- (166)
------- ------ ------- --- -------
Net Cash Used In
Financing Activities. $(5,483) $ (577) $(1,184) $-- $(7,244)
EFFECT OF EXCHANGE RATE
CHANGES ON CASH........ -- -- 38 -- 38
------- ------ ------- --- -------
NET (DECREASE) INCREASE
IN CASH AND CASH
EQUIVALENTS............ $(1,059) $ (227) $ 459 $-- $ (827)
CASH AND CASH
EQUIVALENTS AT
BEGINNING OF YEAR...... 69 481 322 -- 872
------- ------ ------- --- -------
CASH AND CASH
EQUIVALENTS AT END OF
YEAR................... $ (990) $ 254 $ 781 $-- $ 45
======= ====== ======= === =======
</TABLE>
F-30
<PAGE>
AXIA INCORPORATED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
NOTE 18--SUBSEQUENT EVENTS
On June 17, 1998, Holdings entered into an Agreement and Plan of Merger with
AXIA Acquisition Corp. ("Acquisition Co."), a newly formed company and a
wholly owned subsidiary of AXIA Group, Inc. ("AXIA Group"), to be acquired for
a purchase price of $155,250,000, plus adjustments, including the repayment of
indebtedness. Pursuant to the Merger Agreement, Holdings and the Company will
become direct and indirect subsidiaries of AXIA Group. These transactions were
consummated on July 22, 1998.
In 1998, the Company adopted Statement of Financial Accounting Standards No.
130 ("SFAS No. 130"), "Reporting Comprehensive Income," which requires
companies to report all changes in equity during a period, except those
resulting from investment by owners and distribution to owners, in a financial
statement for the period in which they are recognized. The Company has chosen
to disclose Comprehensive Income, which encompasses net income, minimum
pension liability and foreign currency translation adjustments, in the
Consolidated Statements of Stockholder's Equity. Prior periods have been
restated to conform with SFAS No. 130 requirements.
F-31
<PAGE>
AXIA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1998 AND DECEMBER 31, 1997
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
---------- ------------
ASSETS (UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents........................... $ 490 $ 1,310
Accounts receivable, net............................ 14,643 12,759
Inventories, net.................................... 9,714 9,155
Prepaid income taxes and other current assets....... 503 436
Deferred income tax benefits........................ 2,847 2,593
------- -------
Total Current Assets............................... $28,197 $26,253
------- -------
PLANT AND EQUIPMENT, AT COST:
Land................................................ $ 508 $ 508
Buildings and improvements.......................... 6,674 6,620
Machinery and equipment............................. 26,316 24,741
Equipment leased to others.......................... 8,221 7,139
------- -------
$41,719 $39,008
Less: Accumulated depreciation...................... 16,554 14,938
------- -------
Net Plant and Equipment............................ $25,165 $24,070
------- -------
OTHER ASSETS:
Goodwill, net....................................... $33,055 $33,505
Intangible assets, net.............................. 841 703
Deferred charges, net............................... 12,348 12,182
Other assets........................................ 37 60
------- -------
Total Other Assets................................. $46,281 $46,450
------- -------
TOTAL ASSETS.......................................... $99,643 $96,773
======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt................ $13,757 $10,925
Accounts payable.................................... 4,653 4,021
Accrued liabilities................................. 6,679 7,219
Accrued income taxes................................ 1,871 264
------- -------
Total Current Liabilities.......................... $26,960 $22,429
------- -------
NON-CURRENT LIABILITIES:
Long-term debt, less current maturities............. $12,867 $20,439
Other non-current liabilities....................... 11,006 10,883
Deferred income taxes............................... 3,104 2,955
------- -------
Total Non-Current Liabilities...................... $26,977 $34,277
------- -------
STOCKHOLDER'S EQUITY:
Common stock ($.01 par value; 100 shares authorized,
issued and outstanding)............................ $ -- $ --
Additional paid-in capital.......................... 16,723 16,723
Retained earnings................................... 29,508 23,818
Accumulated other comprehensive income.............. (525) (474)
------- -------
Total Stockholder's Equity......................... $45,706 $40,067
------- -------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY............ $99,643 $96,773
======= =======
</TABLE>
The accompanying Notes to the Unaudited Interim Consolidated Financial
Statements are an integral part of these balance sheets.
F-32
<PAGE>
AXIA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
JANUARY 1, 1998 JANUARY 1, 1997
TO JUNE TO JUNE
30, 1998 30, 1997
--------------- ---------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Net sales...................................... $41,725 $38,476
Net rentals.................................... 14,475 13,232
------- -------
NET REVENUES................................... 56,200 $51,708
Cost of sales................................ 26,259 24,685
Cost of rentals.............................. 5,146 4,696
Selling, general and administrative expenses. 13,294 12,843
------- -------
INCOME FROM OPERATIONS......................... $11,501 $ 9,484
Interest expense............................. 1,393 2,029
Interest income.............................. (7) (14)
Other expense (income), net.................. 171 (395)
------- -------
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY
ITEM.......................................... $ 9,944 $ 7,864
Provision for income taxes................... 3,954 3,375
------- -------
INCOME BEFORE EXTRAORDINARY ITEM............... $ 5,990 $ 4,489
======= =======
Extraordinary item............................. 300 772
------- -------
Net Income..................................... $ 5,690 $ 3,717
======= =======
</TABLE>
The accompanying Notes to the Unaudited Interim Consolidated Financial
Statements are an integral part of these statements.
F-33
<PAGE>
AXIA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
OTHER COMPREHENSIVE INCOME
-----------------------------------
ACCUMULATED
COMMON ADDITIONAL MINIMUM CUMULATIVE OTHER
STOCK PAID-IN RETAINED PENSION TRANSLATION COMPREHENSIVE COMPREHENSIVE
PAR VALUE CAPITAL EARNINGS LIABILITY ADJUSTMENTS INCOME INCOME
--------- ---------- -------- --------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE,
DECEMBER 31, 1996...... $ -- $16,723 $15,395 $(324) $ 324 $ -- $ --
Net income............. -- -- 3,717 -- -- -- 3,717
Cumulative translation
adjustment............ -- -- -- -- (472) (472) (472)
----- ------- ------- ----- ----- ----- ------
BALANCE,
JUNE 30, 1997
(unaudited)............ $ -- $16,723 $19,112 $(324) $(148) $(472) $3,245
===== ======= ======= ===== ===== ===== ======
BALANCE,
DECEMBER 31, 1997...... $ -- $16,723 $23,818 $(182) $(292) $(474) $ --
Net income............. -- -- 5,690 -- -- -- 5,690
Cumulative translation
adjustment............ -- -- -- -- (51) (51) (51)
----- ------- ------- ----- ----- ----- ------
BALANCE,
JUNE 30, 1998
(unaudited)............ $ -- $16,723 $29,508 $(182) $(343) $(525) $5,639
===== ======= ======= ===== ===== ===== ======
</TABLE>
The accompanying Notes to the Unaudited Interim Consolidated Financial
Statements are an integral part of these statements.
F-34
<PAGE>
AXIA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
JANUARY 1, 1998 JANUARY 1, 1997
TO TO
JUNE 30, 1998 JUNE 30, 1997
--------------- ---------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................... $ 5,690 $ 3,717
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization................ 2,523 2,486
Extraordinary item--writeoff of capitalized
financing costs............................. 361 826
Deferred income tax provision (benefit)...... (105) 36
Loss (gain) on disposal of fixed assets...... 54 79
Gain on sale of investment................... -- (500)
Provision for losses on accounts receivable.. 898 1,187
Provision for obsolescence of inventories.... (176) (85)
Credit to pension expense.................... (169) 20
Changes in assets and liabilities:
Accounts receivable......................... (2,789) (2,499)
Inventories................................. (385) (128)
Accounts payable............................ 634 330
Accrued liabilities......................... (540) (1,789)
Other current assets........................ (67) (96)
Income taxes payable........................ 1,608 (690)
Other non-current assets.................... (353) (279)
Other non-current liabilities............... 86 423
------- --------
Net Cash Provided by Operating Activities. $ 7,270 $ 3,038
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash used for capital expenditures........... $(3,011) $ (1,699)
Proceeds from sale of fixed assets........... -- 8
Proceeds from sale of investment............. -- 1,400
------- --------
Net Cash Provided by (Used in) Investing
Activities............................... $(3,011) $ (291)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in Revolving Credit
Loan........................................ $ 3,200 $ 9,200
Payments of other long-term debt............. (8,232) (13,165)
Other equity transactions.................... (34) (16)
------- --------
Net Cash (Used in) Financing Activities... $(5,066) $ (3,981)
EFFECT OF EXCHANGE RATE CHANGES ON CASH........ $ (13) $ (56)
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS................................... $ (820) $ (1,290)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD........................................ 1,310 1,716
------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD..... $ 490 $ 426
======= ========
</TABLE>
The accompanying Notes to the Unaudited Interim Consolidated Financial
Statements are an integral part of these statements.
F-35
<PAGE>
AXIA INCORPORATED AND SUBSIDIARIES
NOTES TO THE UNAUDITED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
JUNE 30, 1998
NOTE 1--FINANCIAL STATEMENTS
The condensed financial statements included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented not misleading.
These financial statements should be read in conjunction with the financial
statements and notes thereto included elsewhere herein for the year ended
December 31, 1997. In the opinion of management, these statements contain all
adjustments, consisting of only normal recurring adjustments, necessary to
present fairly the financial position as of June 30, 1998 and December 31,
1997, results of operations for the six month periods ended June 30, 1998 and
June 30, 1997, and cash flows for the six month periods ended June 30, 1998
and June 30, 1997. The 1998 interim results reported herein may not
necessarily be indicative of the results of operations for the full year 1998.
In 1998, the Company adopted Statement of Financial Accounting Standards No.
130 ("SFAS 130"), "Reporting Comprehensive Income," which requires companies
to report all changes in equity during a period, except those resulting from
investment by owners and distribution to owners, in a financial statement for
the period in which they are recognized. The Company has chosen to disclose
Comprehensive Income, which encompasses net income, minimum pension liability
and foreign currency translation adjustments, in the Consolidated Statements
of Stockholder's Equity. The prior period has been restated to conform with
SFAS 130 requirements.
NOTE 2--INVENTORIES
Inventories are stated at the lower of first-in, first-out (FIFO) cost or
market. The cost elements included in inventories are material, labor and
factory overhead.
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
-------- ------------
<S> <C> <C>
Raw materials....................................... $4,094 $4,146
Work in process..................................... 1,147 1,058
Finished goods...................................... 4,473 3,951
------ ------
Total inventories................................... $9,714 $9,155
====== ======
</TABLE>
F-36
<PAGE>
AXIA INCORPORATED AND SUBSIDIARIES
NOTES TO THE UNAUDITED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS--(CONTINUED)
JUNE 30, 1998
NOTE 3--LONG-TERM DEBT
Long-term debt, inclusive of capital lease obligations which are not
material, consists of the following (in thousands):
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
-------- ------------
<S> <C> <C>
11.00% Senior Subordinated Notes................... $ 4,791 $ 9,749
Term Loan.......................................... 12,934 15,732
Revolving Credit Loan.............................. 7,700 4,500
Other.............................................. 1,199 1,383
------- -------
Total Debt....................................... $26,624 $31,364
Less Current Maturities............................ (13,757) (10,925)
------- -------
Total Long-Term Debt........................... $12,867 $20,439
======= =======
</TABLE>
The Senior Subordinated Notes above are stated net of unamortized discounts
of $209,000 and $501,000 at June 30, 1998, and December 31, 1997,
respectively.
Current maturities of long-term debt as of June 30, 1998 consisted of the
following (in thousands):
<TABLE>
<CAPTION>
SCHEDULED PAYMENT
DATE AMOUNT
------------------ -------
<S> <C> <C>
Term Loan..................................... June 30, 1998 $ 1,294
Term Loan..................................... September 30, 1998 1,294
Term Loan..................................... December 31, 1998 1,294
Term Loan..................................... March 31, 1999 1,294
Revolving Credit Loan......................... 7,700
Other......................................... Various 881
-------
Total Current Maturities.................. $13,757
=======
</TABLE>
Bank Credit Agreement
On June 27, 1996, the Company and its domestic subsidiaries entered into a
credit agreement (the "Bank Credit Agreement") which included a term loan
("Term Loan") with an original principal amount of $25,000,000 and a non-
amortizing revolving credit loan ("Revolving Credit Loan") of up to
$15,000,000, including up to $1,000,000 of letters of credit. The Bank Credit
Agreement was amended in March 1997 to increase the Revolving Credit Loan
availability to $20,000,000.
Under the Bank Credit Agreement, the loans may, at the option of the
Company, be either Base Rate borrowings, Eurodollar borrowings or a
combination thereof. Base Rate borrowings bear interest at the prime rate or
the Federal Funds rate plus 1.00%, whichever is higher, and Eurodollar
borrowings bear interest at a rate of LIBOR plus 1.50%. Upon certain events
defined in the agreement, the Eurodollar borrowing interest rate may be
increased to LIBOR plus 1.75%. The Company pays a fee of .38% per annum on the
unused balance of the line of credit. The Company can repay any borrowings at
any time without penalty. The weighted average interest rates on all amounts
outstanding under the Bank Credit Agreement as of June 30, 1998 was 7.27%.
Substantially all of the assets of the Company and its domestic subsidiaries,
Ames Taping Tool Systems, Inc. and TapeTech Tool Co., Inc., act as collateral
under the Bank Credit Agreement.
F-37
<PAGE>
AXIA INCORPORATED AND SUBSIDIARIES
NOTES TO THE UNAUDITED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS--(CONTINUED)
JUNE 30, 1998
NOTE 3--LONG-TERM DEBT--(CONTINUED)
The Term Loan has scheduled maturities, subject to adjustment for any
prepayments, of $1,294,000 quarterly, maturing with a final payment of
$1,288,000 on December 31, 2000. The Revolving Credit Loan also terminates on
December 31, 2000. The amount outstanding on the Revolving Credit Loan is
classified within current maturities in the accompanying Consolidated Balance
Sheets. Interest payments are generally due quarterly. The Company is required
to prepay portions of the Term Loan in the event of a major asset sale as
defined in the Bank Credit Agreement.
11.00% Senior Subordinated Notes
The 11.00% Senior Subordinated Notes were issued pursuant to a trust
indenture (the "Indenture") between the Company, certain guarantors and a
trustee bank and were sold to a group of private investors. Interest on the
notes is payable semi-annually and the notes mature on March 15, 2001. The
notes may be redeemed, at the Company's option, in full or in part, at a
decreasing premium rate of 102.2% at March 15, 1998. A change of control of
the Company, as defined, would require the Company to offer to redeem all
notes at a 101% premium.
In July 1994, the Company filed a Registration Statement with the Securities
and Exchange Commission to register the Senior Subordinated Notes under the
Securities Act of 1933. The Notes are guaranteed by all of the Company's
domestic subsidiaries. See Note 5 for further information regarding these
guarantees.
In May 1998, the Company exercised its option to redeem and extinguish
$5,250,000 of its Senior Subordinated Notes. The Company recorded an
extraordinary charge for the early extinguishment of debt of $300,000, net of
income taxes, as shown on the accompanying Consolidated Statements of Income
for the six month period ended June 30, 1998. The charge included the
aforementioned redemption premium, the writeoff of capitalized financing costs
associated with the original issuance of the notes, the applicable original
issue discount, and legal expenses, agent fees, and other costs of the
transaction.
Restrictive Loan Covenants
The Bank Credit Agreement and the Indenture contain certain covenants which,
among other things and all as defined in the applicable agreement, require the
Company to maintain a minimum net worth, current ratio, interest coverage
ratio, and fixed charge coverage ratio, and maximum leverage ratio of
indebtedness to net worth. In addition, the Company may not create or incur
certain types of additional debt or liens, declare dividends except as
defined, or make capital expenditures or other restricted payments, as
defined, during the term of the agreements in excess of varying amounts, as
defined. The Company was in compliance with its loan covenants as of June 30,
1998.
NOTE 4--STOCKHOLDER'S EQUITY
The Company has 100 shares of common stock, par value $.01 per share,
authorized, issued and outstanding, all of which are owned by Holdings.
F-38
<PAGE>
AXIA INCORPORATED AND SUBSIDIARIES
NOTES TO THE UNAUDITED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS--(CONTINUED)
JUNE 30, 1998
NOTE 5--SUBSIDIARY GUARANTEES
The Company's payment obligations under the Subordinated Notes are fully and
unconditionally guaranteed on a joint and several basis (collectively, the
"Subsidiary Guarantees") by Ames Taping Tool Systems, Inc., and TapeTech Tool
Co., Inc., each a wholly-owned subsidiary of the Company and each a
"Guarantor." These subsidiaries, together with the operating divisions of the
Company, represent all of the operations of the Company conducted in the
United States. The remaining subsidiaries of the Company are foreign
subsidiaries.
The Company's payment obligations under the Bank Credit Agreement are fully
and unconditionally guaranteed on a joint and several basis by the Company and
each Guarantor. The obligations of each Guarantor under its Subsidiary
Guarantee are subordinated to all senior indebtedness of such Guarantor,
including the guarantee by such Guarantor of the Company's borrowings under
the Bank Credit Agreement.
With the intent that the Subsidiary Guarantees not constitute fraudulent
transfers or conveyances under applicable state or federal law, the obligation
of each Guarantor under its Subsidiary Guarantee is also limited to the
maximum amount as will, after giving effect to such maximum amount and all
other liabilities (contingent or otherwise) of such Guarantor that are
relevant under such laws, and after giving effect to any rights to
contribution of such Guarantor pursuant to any agreement providing for an
equitable contribution amount such Guarantor and other affiliates of the
Company of payments made by guarantees by such parties, result in the
obligations of such Guarantor in respect of such maximum amount not
constituting a fraudulent conveyance.
The following consolidating condensed financial data illustrates the
composition of the combined Guarantors. Management believes separate complete
financial statements of the respective Guarantors would not provide additional
material information which would be useful in assessing the financial
composition of the Guarantors. No single Guarantor has any significant legal
restrictions on the ability of investors or creditors to obtain access to its
assets in event of default on the Subsidiary Guarantee other than its
subordination to senior indebtedness described above.
Investments in subsidiaries are accounted for by the parent on the equity
method for purposes of the supplemental consolidating presentation. Earnings
of subsidiaries are therefore reflected in the parent's investment accounts
and earnings. The principal elimination entries eliminate investments in
subsidiaries and intercompany balances and transactions.
F-39
<PAGE>
CONSOLIDATING BALANCE SHEET
AS OF JUNE 30, 1998
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
PARENT NON-
AND ITS GUARANTOR GUARANTOR CONSOLIDATED
ASSETS DIVISIONS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
------ --------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash
equivalents.......... $ (619) $ 728 $ 381 $ -- $ 490
Accounts receivable,
net.................. 7,260 5,539 3,161 (1,317) 14,643
Inventories, net...... 6,173 1,943 2,057 (459) 9,714
Prepaid income taxes
and other current
assets............... 243 132 128 -- 503
Deferred income tax
benefits............. 2,847 -- -- -- 2,847
-------- ------- ------ -------- -------
Total Current Assets. $ 15,904 $ 8,342 $5,727 $ (1,776) $28,197
PLANT AND EQUIPMENT, AT
COST:
Land.................. $ 508 $ -- $ -- $ -- $ 508
Buildings and
improvements......... 6,342 20 312 -- 6,674
Machinery and
equipment............ 25,163 685 468 -- 26,316
Equipment leased to
others............... 8,210 -- 11 -- 8,221
-------- ------- ------ -------- -------
$ 40,223 $ 705 $ 791 $ -- $41,719
Less: Accumulated
depreciation......... 15,554 445 555 -- 16,554
-------- ------- ------ -------- -------
Net Plant and
Equipment........... $ 24,669 $ 260 $ 236 $ -- $25,165
-------- ------- ------ -------- -------
OTHER ASSETS:
Goodwill, net......... $ 30,508 $ 2,535 $ 12 $ -- $33,055
Intangible assets,
net.................. 827 14 -- -- 841
Deferred charges, net. 11,310 1,037 1 -- 12,348
Investment in wholly-
owned subsidiaries... 16,925 -- -- (16,925) --
Other assets.......... 37 -- -- -- 37
-------- ------- ------ -------- -------
Total Other Assets... $ 59,607 $ 3,586 $ 13 $(16,925) $46,281
-------- ------- ------ -------- -------
TOTAL ASSETS............ $100,180 $12,188 $5,976 $(18,701) $99,643
======== ======= ====== ======== =======
<CAPTION>
LIABILITIES AND
STOCKHOLDER'S EQUITY
--------------------
<S> <C> <C> <C> <C> <C>
CURRENT LIABILITIES:
Current maturities of
long-term debt....... $ 13,728 $ 29 $ -- $ -- $13,757
Accounts payable...... 3,362 768 1,840 (1,317) 4,653
Accrued liabilities... 5,414 766 667 (168) 6,679
Accrued income taxes.. 1,733 -- 138 -- 1,871
Advance account....... 2,487 (1,627) (860) -- --
-------- ------- ------ -------- -------
Total Current
Liabilities......... $ 26,724 $ (64) $1,785 $ (1,485) $26,960
-------- ------- ------ -------- -------
NON-CURRENT LIABILITIES:
Long-term debt, less
current maturities... $ 12,839 $ 28 $ -- $ -- $12,867
Other non-current
liabilities.......... 11,006 -- -- -- 11,006
Deferred income taxes. 3,104 -- -- -- 3,104
-------- ------- ------ -------- -------
Total Non-Current
Liabilities......... $ 26,949 $ 28 $ -- $ -- $26,977
-------- ------- ------ -------- -------
STOCKHOLDER'S EQUITY:
Common stock and
additional paid-in
capital.............. $ 16,723 $ 5,098 $1,770 $ (6,868) $16,723
Retained earnings..... 29,966 7,126 2,764 (10,348) 29,508
Accumulated other
comprehensive income. (182) -- (343) -- (525)
-------- ------- ------ -------- -------
Total Stockholder's
Equity.............. $ 46,507 $12,224 $4,191 $(17,216) $45,706
-------- ------- ------ -------- -------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY... $100,180 $12,188 $5,976 $(18,701) $99,643
======== ======= ====== ======== =======
</TABLE>
F-40
<PAGE>
CONSOLIDATING STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
PARENT NON-
AND ITS GUARANTOR GUARANTOR CONSOLIDATED
DIVISIONS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
--------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales............... $ 31,576 $ 8,433 $5,561 $ (3,845) $41,725
Net rentals............. 7,963 14,013 458 (7,959) 14,475
-------- ------- ------ -------- -------
Net revenues............ $ 39,539 $22,446 $6,019 $(11,804) $56,200
Cost of sales......... $ 21,348 $ 4,999 $3,747 $ (3,835) $26,259
Cost of rentals....... 1,636 11,188 281 (7,959) 5,146
Selling, general and
administrative
expenses............. 7,503 4,327 1,464 -- $13,294
-------- ------- ------ -------- -------
Income from operations.. $ 9,052 $ 1,932 $ 527 $ (10) $11,501
Interest expense...... $ 1,386 $ 4 $ 3 $ -- $ 1,393
Intercompany interest
expense (income)..... 48 (48) -- -- --
Other expense
(income), net........ (1,421) 26 172 1,387 164
-------- ------- ------ -------- -------
Income before income
taxes and extraordinary
item................... $ 9,039 $ 1,950 $ 352 $ (1,397) $ 9,944
Provision for income
taxes................ 3,039 752 163 -- 3,954
-------- ------- ------ -------- -------
Income before
extraordinary item..... $ 6,000 $ 1,198 $ 189 $ (1,397) $ 5,990
======== ======= ====== ======== =======
</TABLE>
F-41
<PAGE>
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
PARENT NON-
AND ITS GUARANTOR GUARANTOR CONSOLIDATED
DIVISIONS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
--------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES... $ 5,622 $ 546 $ 1,102 $-- $ 7,270
CASH FLOW FROM INVESTING
ACTIVITIES:
Cash used for capital
expenditures......... (2,932) (49) (30) -- (3,011)
Proceeds from sale of
fixed assets......... -- -- -- -- --
------- ----- ------- --- -------
Net Cash Provided by
(Used In) Investing
Activities......... $(2,932) $ (49) $ (30) $-- $(3,011)
CASH FLOWS FROM
FINANCING ACTIVITIES:
Net increase
(decrease) in
Revolving Credit
Loan................. $ 3,200 $ -- $ -- $-- $ 3,200
Payments of other
long-term debt....... (7,904) (4) (324) -- (8,232)
Net increase
(decrease) in advance
account.............. 761 (690) (71) -- --
Intercompany
dividends............ 669 -- (669) -- --
Other equity
transactions......... -- -- (34) -- (34)
------- ----- ------- --- -------
Net Cash Provided by
(Used In) Financing
Activities......... $(3,274) $(694) $(1,098) $-- $(5,066)
EFFECT OF EXCHANGE RATE
CHANGES ON CASH........ $ -- $ -- $ (13) $-- $ (13)
------- ----- ------- --- -------
NET INCREASE (DECREASE)
IN CASH AND CASH
EQUIVALENTS............ (584) (197) (39) -- (820)
CASH AND CASH
EQUIVALENTS AT
BEGINNING OF PERIOD.... (35) 925 420 -- 1,310
------- ----- ------- --- -------
CASH AND CASH
EQUIVALENTS AT END OF
PERIOD................. $ (619) $ 728 $ 381 $-- $ 490
======= ===== ======= === =======
</TABLE>
F-42
<PAGE>
CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PARENT NON-
AND ITS GUARANTOR GUARANTOR CONSOLIDATED
ASSETS DIVISIONS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
------ --------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash
equivalents........... $ (88) $ 925 $ 420 $ 53 $ 1,310
Accounts receivable,
net................... 5,121 5,018 3,110 (490) 12,759
Inventories............ 6,175 1,641 1,789 (450) 9,155
Prepaid income taxes
and other current
assets................ 208 144 84 -- 436
Deferred income tax
assets................ 2,593 -- -- -- 2,593
------- ------- ------ -------- -------
Total Current Assets. $14,009 $ 7,728 $5,403 $ (887) $26,253
------- ------- ------ -------- -------
PLANT AND EQUIPMENT, AT
COST:
Land................... $ 508 $ -- $ -- $ -- $ 508
Buildings and
improvements.......... 6,293 18 309 -- 6,620
Machinery and
equipment............. 23,703 571 467 -- 24,741
Equipment leased to
others................ 7,128 -- 11 -- 7,139
------- ------- ------ -------- -------
$37,632 $ 589 $ 787 $ -- $39,008
Less: Accumulated
depreciation.......... 13,994 395 549 -- 14,938
------- ------- ------ -------- -------
Net Plant and
Equipment........... $23,638 $ 194 $ 238 $ -- $24,070
------- ------- ------ -------- -------
OTHER ASSETS:
Goodwill, net.......... $30,922 $ 2,571 $ 12 $ -- $33,505
Intangible assets,
net................... 678 25 -- -- 703
Deferred charges, net.. 11,187 992 3 -- 12,182
Investment in wholly-
owned subsidiaries.... 16,038 -- -- (16,038) --
Investment in
affiliates............ -- -- -- -- --
Other assets........... 60 -- -- -- 60
------- ------- ------ -------- -------
Total Other Assets... $58,885 $ 3,588 $ 15 $(16,038) $46,450
------- ------- ------ -------- -------
TOTAL ASSETS............ $96,532 $11,510 $5,656 $(16,925) $96,773
======= ======= ====== ======== =======
<CAPTION>
LIABILITIES AND
STOCKHOLDER'S EQUITY
--------------------
<S> <C> <C> <C> <C> <C>
CURRENT LIABILITIES:
Current maturities of
long-term debt........ $10,565 $ 36 $ 324 $ -- $10,925
Accounts payable....... 3,124 410 924 (437) 4,021
Accrued liabilities.... 5,920 950 349 -- 7,219
Accrued income taxes... 138 -- 126 -- 264
Advance account........ 1,726 (937) (789) -- --
------- ------- ------ -------- -------
Total Current
Liabilities......... $21,473 $ 459 $ 934 $ (437) $22,429
------- ------- ------ -------- -------
NON-CURRENT LIABILITIES:
Long-term debt, less
current maturities.... $20,414 $ 25 $ -- $ -- $20,439
Other non-current
liabilities........... 10,883 -- -- -- 10,883
Deferred income taxes.. 2,955 -- -- -- 2,955
------- ------- ------ -------- -------
Total Non-Current
Liabilities......... $34,252 $ 25 $ -- $ -- $34,277
------- ------- ------ -------- -------
STOCKHOLDER'S EQUITY
(DEFICIT):
Common stock and
additional paid-in
capital............... $16,723 $ 5,098 $1,770 $ (6,868) $16,723
Retained earnings...... 24,266 5,928 3,244 (9,620) 23,818
Accumulated other
comprehensive income.. (182) -- (292) -- (474)
------- ------- ------ -------- -------
Total Stockholder's
Equity (Deficit).... $40,807 $11,026 $4,722 $(16,488) $40,067
------- ------- ------ -------- -------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY
(DEFICIT).............. $96,532 $11,510 $5,656 $(16,925) $96,773
======= ======= ====== ======== =======
</TABLE>
F-43
<PAGE>
CONSOLIDATING STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
PARENT NON-
AND ITS GUARANTOR GUARANTOR CONSOLIDATED
DIVISIONS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
--------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales............... $28,534 $ 7,453 $5,571 $ (3,082) $38,476
Net rentals............. 7,283 12,747 472 (7,270) 13,232
------- ------- ------ -------- -------
Net revenues............ $35,817 $20,200 $6,043 $(10,352) $51,708
Cost of sales......... $19,943 $ 4,475 $3,421 $ (3,154) $24,685
Cost of rentals....... 1,478 10,187 301 (7,270) 4,696
Selling, general and
administrative
expenses............. 7,373 4,021 1,449 -- 12,843
------- ------- ------ -------- -------
Income from operations.. $ 7,023 $ 1,517 $ 872 $ 72 $ 9,484
Interest expense...... $ 2,018 $ 5 $ 6 $ -- $ 2,029
Intercompany interest
expense (income)..... (26) 26 -- -- --
Other expense
(income), net........ (1,748) 24 102 1,213 (409)
------- ------- ------ -------- -------
Income before income
taxes and extraordinary
item................... $ 6,779 $ 1,462 $ 764 $ (1,141) $ 7,864
Provision for income
taxes................ 2,362 651 362 -- 3,375
------- ------- ------ -------- -------
Income before
extraordinary item..... $ 4,417 $ 811 $ 402 $ (1,141) $ 4,489
======= ======= ====== ======== =======
</TABLE>
F-44
<PAGE>
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
PARENT NON-
AND ITS GUARANTOR GUARANTOR CONSOLIDATED
DIVISIONS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
--------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES... $ 2,094 $ 791 $ 153 $-- $ 3,038
CASH FLOW FROM INVESTING
ACTIVITIES:
Cash used for capital
expenditures......... (1,640) (29) (30) -- (1,699)
Proceeds from sale of
fixed assets......... 8 -- -- -- 8
Proceeds from sale of
investment........... 1,400 -- -- -- 1,400
------- ----- ----- --- -------
Net Cash Provided by
(Used In) Investing
Activities......... $ (232) $ (29) $ (30) $-- $ (291)
CASH FLOWS FROM
FINANCING ACTIVITIES:
Net increase
(decrease) in
Revolving Credit
Loan................. $ 9,200 $ -- $ -- $-- $ 9,200
Payments of other
long-term debt....... (13,162) (3) -- -- (13,165)
Net increase
(decrease) in advance
account.............. 700 (628) (72) -- --
Intercompany
dividends............ 477 -- (477) -- --
Other equity
transactions......... -- -- (16) -- (16)
------- ----- ----- --- -------
Net Cash Provided by
(Used In) Financing
Activities......... $(2,785) $(631) $(565) $-- $(3,981)
EFFECT OF EXCHANGE RATE
CHANGES ON CASH........ -- -- (56) -- (56)
------- ----- ----- --- -------
NET INCREASE (DECREASE)
IN CASH AND CASH
EQUIVALENTS............ $ (923) $ 131 $(498) $-- $(1,290)
CASH AND CASH
EQUIVALENTS AT
BEGINNING OF PERIOD.... 407 507 802 -- 1,716
------- ----- ----- --- -------
CASH AND CASH
EQUIVALENTS AT END OF
PERIOD................. $ (516) $ 638 $ 304 $-- $ 426
======= ===== ===== === =======
</TABLE>
NOTE 6--SUBSEQUENT EVENT
On June 17, 1998, Holdings entered into an Agreement and Plan of Merger with
AXIA Acquisition Corp. ("Acquisition Co."), a newly formed company and a
wholly owned subsidiary of AXIA Group, Inc. ("AXIA Group"), to be acquired for
a purchase price of $155,250,000, plus adjustments, including the repayment of
indebtedness. Pursuant to the Merger Agreement, Holdings and the Company will
become direct and indirect subsidiaries of AXIA Group. These transactions were
consummated on July 22, 1998.
F-45
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholder
AXIA Finance Corp.
We have audited the accompanying balance sheet of AXIA Finance Corp. (a
wholly owned subsidiary of AXIA Acquisition Corp.) as of June 19, 1998. This
balance sheet is the responsibility of the company's management. Our
responsibility is to express an opinion on the balance sheet based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the balance sheet is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the balance sheet. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit of the balance sheet provides a
reasonable basis for our opinion.
In our opinion, such balance sheet presents fairly, in all material
respects, the financial position of AXIA Finance Corp. as of June 19, 1998 in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Houston, Texas
June 23, 1998
F-46
<PAGE>
AXIA FINANCE CORP.
(A WHOLLY OWNED SUBSIDIARY OF AXIA ACQUISITION CORP.)
BALANCE SHEET
JUNE 19, 1998
<TABLE>
<S> <C>
Assets--Cash............................................................ $1,000
======
Stockholder's Equity
Common stock, $.01 par value; 1,000 shares authorized, issued and
outstanding.......................................................... $ 10
Additional paid-in capital............................................ 990
------
Total Stockholder's Equity.............................................. $1,000
======
</TABLE>
NOTE:
AXIA Finance Corp. ("Finance"), incorporated in Delaware in June 1998, is a
wholly owned subsidiary of AXIA Acquisition Corp. ("AXIA Acquisition"). AXIA
Acquisition was formed to effect the merger of AXIA Acquisition with and into
AXIA Holding Corp. (the "Company"). Concurrently with the merger, Finance will
become a wholly owned subsidiary of the Company and all operating assets and
related liabilities of the Company will be conveyed to and assumed by Finance.
F-47
<PAGE>
ANNEX A
AXIA INCORPORATED
LETTER OF TRANSMITTAL
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
10 3/4% SENIOR SUBORDINATED NOTES DUE 2008
OF
AXIA INCORPORATED
PURSUANT TO THE PROSPECTUS DATED , 1998
THIS OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1998,
UNLESS EXTENDED BY THE COMPANY IN ITS SOLE DISCRETION (THE "EXPIRATION
DATE"). TENDERS OF NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE
EXPIRATION DATE.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
STATE STREET BANK & TRUST COMPANY
<TABLE>
<CAPTION>
By Mail: By Facsimile: By Hand:
<S> <C> <C>
State Street Bank & Trust Company (617) 664-5395 State Street Bank & Trust Company
Corporate Trust Department Corporate Trust Department
P.O. Box 778 Confirm by Telephone: Two International Place, 4th Floor
Boston, Massachusetts 02102-0078 Boston, Massachusetts 02110
Attention: Kellie Mullen (617) 664-5587 Attention: Kellie Mullen
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TO A NUMBER OTHER THAN AS
LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE EXCHANGE NOTES PURSUANT TO THE
EXCHANGE OFFER MUST VALIDLY TENDER (AND NOT WITHDRAW) THEIR ORIGINAL NOTES TO
THE EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE.
This Letter of Transmittal is to be used by holders ("Holders") of 10 3/4%
Senior Subordinated Notes due 2008 (the "Original Notes") of AXIA Incorporated
(the "Company") if: (i) certificates representing Original Notes are to be
physically delivered to the Exchange Agent herewith by such Holders; (ii)
tender of Original Notes is to be made by book-entry transfer to the Exchange
Agent's account at The Depository Trust Company ("DTC") pursuant to the
procedures set forth under the caption "The Exchange Offer--Procedures for
Tendering Original Notes--Book-Entry Delivery Procedures" in the Prospectus
dated , 1998 (the "Prospectus"); or (iii) tender of Original Notes is to
be made according to the guaranteed delivery procedures set forth under the
caption "The Exchange Offer--Procedures for Tendering Original Notes--
Guaranteed Delivery" in the Prospectus, and, in each case, instructions are
not being transmitted through the DTC Automated Tender Offer Program ("ATOP").
The undersigned hereby acknowledges receipt of the Prospectus. All capitalized
terms used herein and not defined shall have the meanings ascribed to them in
the Prospectus.
Holders of Original Notes that are tendering by book-entry transfer to the
Exchange Agent's account at DTC can execute the tender through ATOP, for which
the transaction will be eligible. DTC participants that are accepting the
exchange offer as set forth in the Prospectus and this Letter of Transmittal
(together, the "Exchange Offer") must transmit their acceptance to DTC which
will edit and verify the acceptance and execute a book-entry delivery to the
Exchange Agent's account at DTC. DTC will then send an Agent's Message to the
Exchange Agent for its acceptance. Delivery of
A-1
<PAGE>
the Agent's Message by DTC will satisfy the terms of the Offer as to execution
and delivery of a Letter of Transmittal by the participant identified in the
Agent's Message. DTC participants may also accept the Exchange Offer by
submitting a notice of guaranteed delivery through ATOP.
DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE
AGENT.
If a Holder desires to tender Original Notes pursuant to the Exchange Offer
and time will not permit this Letter of Transmittal, certificates representing
such Original Notes and all other required documents to reach the Exchange
Agent, or the procedures for book-entry transfer cannot be completed, on or
prior to the Expiration Date, then such Holder must tender such Original Notes
according to the guaranteed delivery procedures set forth under the caption
"The Exchange Offer--Procedures for Tendering Original Notes--Guaranteed
Delivery" in the Prospectus. See Instruction 2.
The undersigned should complete, execute and deliver this Letter of
Transmittal to indicate the action the undersigned desires to take with
respect to the Exchange Offer.
TENDER OF ORIGINAL NOTES
- -------------------------------------------------------------------------------
[_] CHECK HERE IF TENDERED ORIGINAL NOTES ARE ENCLOSED HEREWITH.
[_] CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution:_______________________________________________
Account Number:______________________________________________________________
Transaction Code Number:_____________________________________________________
[_] CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s):_____________________________________________
Window Ticket Number (if any):_______________________________________________
Date of Execution of Notice of Guaranteed Delivery:__________________________
Name of Eligible Institution that Guaranteed Delivery:_______________________
A-2
<PAGE>
List below the Original Notes to which this Letter of Transmittal relates.
The name(s) and address(es) of the registered Holder(s) should be printed, if
not already printed below, exactly as they appear on the Original Notes
tendered hereby. The Original Notes and the principal amount of Original Notes
that the undersigned wishes to tender would be indicated in the appropriate
boxes. If the space provided is inadequate, list the certificate number(s) and
principal amount(s) on a separately executed schedule and affix the schedule
to this Letter of Transmittal.
DESCRIPTION OF ORIGINAL NOTES
<TABLE>
- ------------------------------------------------------
<CAPTION>
NAME(S) AND
ADDRESS(ES)
OF
REGISTERED
HOLDER(S)
(PLEASE
FILL IN IF AGGREGATE
BLANK) SEE PRINCIPAL PRINCIPAL
INSTRUCTION CERTIFICATE AMOUNT AMOUNT
3. NUMBER(S)* REPRESENTED** TENDERED**
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
<S> <C> <C> <C>
TOTAL
PRINCIPAL
AMOUNT OF
ORIGINAL
NOTES
- ------------------------------------------------------
</TABLE>
* Need not be completed by Holders tendering by book-entry transfer.
** Unless otherwise specified, the entire aggregate principal amount
represented by the Original Notes described above will be deemed to be
tendered. See Instruction 4.
A-3
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
Ladies and Gentlemen:
The undersigned hereby tenders to AXIA Incorporated (the "Company"), upon
the terms and subject to the conditions set forth in its Prospectus dated
, 1998 (the "Prospectus"), receipt of which is hereby acknowledged, and
in accordance with this Letter of Transmittal (which together constitute the
"Exchange Offer"), the principal amount of Original Notes indicated in the
foregoing table entitled "Description of Original Notes" under the column
heading "Principal Amount Tendered." The undersigned represents that it is
duly authorized to tender all of the Original Notes tendered hereby which it
holds for the account of beneficial owners of such Original Notes ("Beneficial
Owner(s)") and to make the representations and statements set forth herein on
behalf of such Beneficial Owner(s).
Subject to, and effective upon, the acceptance for purchase of the principal
amount of Original Notes tendered herewith in accordance with the terms and
subject to the conditions of the Exchange Offer, the undersigned hereby sells,
assigns and transfers to, or upon the order of, the Company, all right, title
and interest in and to all of the Original Notes tendered hereby. The
undersigned hereby irrevocably constitutes and appoints the Exchange Agent the
true and lawful agent and attorney-in-fact of the undersigned (with full
knowledge that the Exchange Agent also acts as the agent of the Company) with
respect to such Original Notes, with full powers of substitution and
revocation (such power of attorney being deemed to be an irrevocable power
coupled with an interest) to (i) present such Original Notes and all evidences
of transfer and authenticity to, or transfer ownership of, such Original Notes
on the account books maintained by DTC to, or upon the order of, the Company,
(ii) present such Original Notes for transfer of ownership on the books of the
Company, and (iii) receive all benefits and otherwise exercise all rights of
beneficial ownership of such Original Notes, all in accordance with the terms
and conditions of the Exchange Offer as described in the Prospectus.
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 indicated below,
neither the undersigned nor any Beneficial Owner is an "affiliate," as defined
in Rule 405 under the Securities Act of 1933, as amended (together with the
rules and regulations promulgated thereunder, the "Securities Act"), of the
Company and (iv) the undersigned and each Beneficial Owner acknowledge and
agree that (x) 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 in connection with a secondary resale of the Exchange Notes acquired by
such person with a registration statement containing the selling
securityholder information required by Item 507 of Regulation S-K of the
Securities and Exchange Commission (the "Commission") and cannot rely on the
interpretation of the Staff of the Commission set forth in the no-action
letters that are noted in the section of the Prospectus entitled "The Exchange
Offer--Registration Rights" and (y) any broker-dealer that pursuant to the
Exchange Offer receives Exchange Notes for its own account in exchange for
Original Notes which it acquired for its own account as a result of market-
making activities or other trading activities must deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale
of such Exchange Notes. If the undersigned is a broker-dealer that will
receive Exchange Notes for its own account in exchange for Original Notes that
were acquired as the result of market-making activities or other trading
activities, it acknowledges that it will deliver a prospectus in connection
with any
A-4
<PAGE>
resale of such Exchange Notes. By so acknowledging and by delivering a
prospectus, a broker-dealer shall not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
The undersigned understands that tenders of Original Notes may be withdrawn
by written notice of withdrawal received by the Exchange Agent at any time
prior to the Expiration Date in accordance with the Prospectus. In the event
of a termination of the Exchange Offer, the Original Notes tendered pursuant
to the Exchange Offer will be returned to the tendering Holders promptly (or,
in the case of Original Notes tendered by book-entry transfer, such Original
Notes will be credited to the account maintained at DTC from which such
Original Notes were delivered). If the Company makes a material change in the
terms of the Exchange Offer or the information concerning the Exchange Offer
or waives a material condition of such Exchange Offer, the Company will
disseminate additional Exchange Offer materials and extend such Exchange
Offer, if and to the extent required by law.
The undersigned understands that the tender of Original notes pursuant to
any of the procedures set forth in the Prospectus and in the instructions
hereto will constitute the undersigned's acceptance of the terms and
conditions of the Exchange Offer. The Company's acceptance for exchange of
Original Notes tendered pursuant to any of the procedures described in the
Prospectus will constitute a binding agreement between the undersigned and the
Company in accordance with the terms and subject to the conditions of the
Exchange Offer. For purposes of the Exchange Offer, the undersigned
understands that validly tendered Original Notes (or defectively tendered
Original Notes with respect to which the Company has, or has caused to be,
waived such defect) will be deemed to have been accepted by the Company if, as
and when the Company gives oral or written notice thereof to the Exchange
Agent.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Original Notes
tendered hereby, and that when such tendered Original Notes are accepted for
purchase by the Company, the Company will acquire good title thereto, free and
clear of all liens, restrictions, charges and encumbrances and not subject to
any adverse claim or right. The undersigned and each Beneficial Owner will,
upon request, execute and deliver any additional documents deemed by the
Exchange Agent or by the Company to be necessary or desirable to complete the
sale, assignment and transfer of the Original Notes tendered hereby.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall not be affected by, and shall survive the death or
incapacity of the undersigned and any Beneficial Owner(s), and any obligation
of the undersigned or any Beneficial Owner(s) hereunder shall be binding upon
the heirs, executors, administrators, trustees in bankruptcy, personal and
legal representatives, successors and assigns of the undersigned and such
Beneficial Owner(s).
The undersigned understands that the delivery and surrender of any Original
Notes is not effective, and the risk of loss of the Original Notes does not
pass to the Exchange Agent, until receipt by the Exchange Agent of this Letter
of Transmittal, or a manually signed facsimile hereof, properly completed and
duly executed, together with all accompanying evidences of authority and any
other required documents in form satisfactory to the Company. All questions as
to form of all documents and the validity (including time of receipt) and
acceptance of tenders and withdrawals of Original Notes will be determined by
the Company, in its sole discretion, which determination shall be full and
binding.
Unless otherwise indicated herein under "Special Issuance Instructions," the
undersigned hereby requests that any Original Notes representing principal
amounts not tendered or not accepted for exchange be issued in the name(s) of
the undersigned (and in the case of Original Notes tendered by book-entry
transfer, by credit to the account of DTC), and Exchange Notes issued in
exchange for Original Notes pursuant to the Exchange Offer be issued to the
undersigned. Similarly, unless
A-5
<PAGE>
otherwise indicated herein under "Special Delivery Instructions," the
undersigned hereby requests that any Original Notes representing principal
amounts not tendered or not accepted for exchange and Exchange Notes issued in
exchange for Original Notes pursuant to the Exchange Offer be delivered to the
undersigned at the address shown below the undersigned's signature(s). In the
event that the "Special Issuance Instructions" box or the "Special Delivery
Instructions" box is, or both are, completed, the undersigned hereby requests
that any Original Notes representing principal amounts not tendered or not
accepted for purchase be issued in the name(s) of, certificates for such
Original Notes be delivered to, and Exchange Notes issued in exchange for
Original Notes pursuant to the Exchange Offer be issued in the name(s) of, and
be delivered to, the person(s) at the address(es) so indicated, as applicable.
The undersigned recognizes that the Company has no obligation pursuant to the
"Special Issuance Instructions" box or "Special Delivery Instructions" box to
transfer any Original Notes from the name of the registered Holder(s) thereof
if the Company does not accept for exchange any of the principal amount of
such Original Notes so tendered.
[_] CHECK HERE IF YOU OR ANY BENEFICIAL OWNER FOR WHOM YOU HOLD ORIGINAL NOTES
IS AN AFFILIATE OF THE COMPANY.
[_] CHECK HERE IF YOU OR ANY BENEFICIAL OWNER FOR WHOM YOU HOLD ORIGINAL NOTES
TENDERED HEREBY IS A BROKER-DEALER WHO ACQUIRED SUCH NOTES DIRECTLY FROM THE
COMPANY OR AN AFFILIATE OF THE COMPANY.
[_] CHECK HERE AND COMPLETE THE LINES BELOW IF YOU OR ANY BENEFICIAL OWNER FOR
WHOM YOU HOLD ORIGINAL NOTES TENDERED HEREBY IS A BROKER-DEALER WHO ACQUIRED
SUCH NOTES IN MARKET-MAKING OR OTHER TRADING ACTIVITIES. IF THIS BOX IS
CHECKED, THE COMPANY WILL SEND 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10
COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO TO YOU OR SUCH BENEFICIAL
OWNER AT THE ADDRESS SPECIFIED IN THE FOLLOWING LINES.
Name: ______________________________________________________________________
Address: ______________________________________________________________________
______________________________________________________________________
A-6
<PAGE>
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if Original
Notes in a principal amount not
tendered or not accepted for
exchange are to be issued in the
name of, or Exchange Notes are to
be issued in the name of, someone
other than the person(s) whose
signature(s) appear(s) within this
Letter of Transmittal or issued to
an address different from that
shown in the box entitled
"Description of Original Notes"
within this Letter of Transmittal.
Issue:[_] Original Notes
[_] Exchange Notes
(check as applicable)
Name_______________________________
(PLEASE PRINT)
Address____________________________
(PLEASE PRINT)
-----------------------------------
(ZIP CODE)
-----------------------------------
(TAX IDENTIFICATION OR SOCIAL
SECURITY NUMBER)
(SEE SUBSTITUTE FORM W-9 HEREIN)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if Original
Notes in a principal amount not
tendered or not accepted for
exchange or Exchange Notes are to
be sent to someone other than the
person(s) whose signature(s)
appear(s) within this Letter of
Transmittal or to an address
different from that shown in the
box entitled "Description of
Original Notes" within this Letter
of Transmittal.
Issue:[_] Original Notes
[_] Exchange Notes
(check as applicable)
Name_______________________________
(PLEASE PRINT)
Address____________________________
(PLEASE PRINT)
-----------------------------------
(ZIP CODE)
-----------------------------------
(TAX IDENTIFICATION OR SOCIAL
SECURITY NUMBER)
(SEE SUBSTITUTE FORM W-9 HEREIN)
A-7
<PAGE>
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS OF ORIGINAL NOTES
REGARDLESS OF WHETHER ORIGINAL NOTES ARE BEING PHYSICALLY DELIVERED HEREWITH)
This Letter of Transmittal must be signed by the registered Holder(s)
exactly as name(s) appear(s) on certificate(s) for Original Notes or, if
tendered by a participant in DTC exactly as such participant's name appears
on a security position listing as owner of Original Notes, or by the
person(s) authorized to become registered Holder(s) by endorsements and
documents transmitted herewith. If signature is by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or
others acting in a fiduciary or representative capacity, please set forth
full title and see Instruction 5.
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Signature(s) of Registered Holder(s) or Authorized Signatory
(See guarantee requirement below)
Dated: ________________________________________________________________, 1998
Name(s):_____________________________________________________________________
-----------------------------------------------------------------------------
(Please Print)
Capacity (Full Title)________________________________________________________
Address:_____________________________________________________________________
-----------------------------------------------------------------------------
(Including Zip Code)
Area Code and Telephone Number:______________________________________________
Tax Identification or Social Security Number:________________________________
(Complete Accompanying Substitute Form W-9)
SIGNATURE GUARANTEE
(IF REQUIRED--SEE INSTRUCTIONS 1 AND 5)
Authorized Signature_________________________________________________________
Name of Firm_________________________________________________________________
[PLACE SEAL HERE]
A-8
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. Signature Guarantees. Signatures of this Letter of Transmittal must be
guaranteed by a recognized member of the Medallion Signature Guarantee Program
or by any other "eligible guarantor institution," as such term is defined in
Rule 17Ad-15 promulgated under the Exchange Act (each of the foregoing, an
"Eligible Institution"), unless the Original Notes tendered hereby are
tendered (i) by a registered Holder of Original Notes (or by a participant in
DTC whose name appears on a security position listing as the owner of such
Original Notes) that has not completed either the box entitled "Special
Issuance Instructions" or the box entitled "Special Delivery Instructions" on
this Letter of Transmittal, or (ii) for the account of an Eligible
Institution. If the Original Notes are registered in the name of a person
other than the signer of this Letter of Transmittal, if Original Notes not
accepted for exchange or not tendered are to be returned to a person other
than the registered Holder or if Exchange Notes are to be issued in the name
of or sent to a person other than the registered Holder, then the signatures
on this Letter of Transmittal accompanying the tendered Original Notes must be
guaranteed by an Eligible Institution as described above. See Instruction 5.
2. Delivery of Letter of Transmittal and Original Notes. This Letter of
Transmittal is to be completed by Holders if (i) certificates representing
Original Notes are to be physically delivered to the Exchange Agent herewith
by such Holders; (ii) tender of Original Notes is to be made by book-entry
transfer to the Exchange Agent's account at DTC pursuant to the procedures set
forth under the caption "The Exchange Offer--Procedures for Tendering Original
Notes--Book-Entry Delivery Procedures" in the Prospectus; or (iii) tender of
Original Notes is to be made according to the guaranteed delivery procedures
set forth under the caption "The Exchange Offer--Procedures for Tendering
Original Notes--Guaranteed Delivery" in the Prospectus. All physically
delivered Original Notes, or a confirmation of a book-entry transfer into the
Exchange Agent's account at DTC of all Original Notes delivered
electronically, as well as a properly completed and duly executed Letter of
Transmittal (or manually signed facsimile thereof), any required signature
guarantees and any other documents required by this Letter of Transmittal,
must be received by the Exchange Agent at one of its addresses set forth on
the cover page hereto on or prior to the Expiration Date, or the tendering
Holder must comply with the guaranteed delivery procedures set forth below.
DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE
AGENT.
If a Holder desires to tender Original Notes pursuant to the Exchange Offer
and time will not permit this Letter of Transmittal, certificates representing
such Original Notes and all other required documents to reach the Exchange
Agent, or the procedures for book-entry transfer cannot be completed, on or
prior to the Expiration Date, such Holder must tender such Original Notes
pursuant to the guaranteed delivery procedures set forth under the caption
"The Exchange Offer--Procedures for Tendering Original Notes--Guaranteed
Delivery" in the Prospectus. Pursuant to such procedures, (i) such tender must
be made by or through an Eligible Institution; (ii) a properly completed and
duly executed Notice of Guaranteed Delivery, substantially in the form
provided by the Company, or an Agent's Message with respect to guaranteed
delivery that is accepted by the Company, must be received by the Exchange
Agent, either by hand delivery, mail, telegram, or facsimile transmission, on
or prior to the Expiration Date; and (iii) the certificates for all tendered
Original Notes, in proper form for transfer (or confirmation of a book-entry
transfer or all Original Notes delivered electronically into the Exchange
Agent's account at DTC pursuant to the procedures for such transfer set forth
in the Prospectus), together with a properly completed and duly executed
Letter of Transmittal (or manually signed facsimile thereof) and any other
documents required by this Letter of Transmittal, or in the case of a book-
entry transfer, a properly transmitted Agent's Message, must be received by
the Exchange Agent within two business days after the date of the execution of
the Notice of Guaranteed Delivery.
A-9
<PAGE>
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE ORIGINAL NOTES AND
ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH DTC AND ANY
ACCEPTANCE OR AGENT'S MESSAGE DELIVERED THROUGH ATOP, IS AT THE ELECTION AND
RISK OF THE TENDERING HOLDER AND, EXCEPT AS OTHERWISE PROVIDED IN THIS
INSTRUCTION 2, DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
EXCHANGE AGENT. IF DELIVERY IS BY MAIL, IT IS SUGGESTED THAT THE HOLDER USE
PROPERLY INSURED, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, AND THAT THE
MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE TO PERMIT
DELIVERY TO THE EXCHANGE AGENT PRIOR TO SUCH DATE.
No alternative, conditional or contingent tenders will be accepted. All
tendering Holders, by execution of this Letter of Transmittal (or a facsimile
thereof), waive any right to receive any notice of the acceptance of their
Original Notes for exchange.
3. Inadequate Space. If the spare provided herein is inadequate, the
certificate numbers and/or the principal amount represented by Original Notes
should be listed on a separate signed schedule attached hereto.
4. Partial Tenders. (Not applicable to Holders who tender by book-entry
transfer). If Holders wish to tender less than the entire principal amount
evidenced by any Original Note submitted, such Holders must fill in the
principal amount that is to be tendered in the column entitled "Principal
Amount Tendered." The minimum permitted tender is $1,000 in principal amount
of Original Notes. All other tenders must be in integral multiples of $1,000
in principal amount. In the case of a partial tender of Original Notes, as
soon as practicable after the Expiration Date, new certificates for the
remainder of the Original Notes that were evidenced by such Holder's old
certificates will be sent to such Holder, unless otherwise provided in the
appropriate box on this Letter of Transmittal. The entire principal amount
that is represented by Original Notes delivered to the Exchange Agent will be
deemed to have been tendered, unless otherwise indicated.
5. Signatures on Letter of Transmittal, Instruments of Transfer and
Endorsements. If this Letter of Transmittal is signed by the registered
Holder(s) of the Original Notes tendered hereby, the signatures must
correspond with the name(s) as written on the face of the certificate(s)
without alteration, enlargement or any change whatsoever. If this Letter of
Transmittal is signed by a participant in DTC whose name is shown as the owner
of the Original Notes tendered hereby, the signature must correspond with the
name shown on the security position listing as the owner of the Original
Notes.
If any of the Original Notes tendered hereby are registered in the name of
two or more Holders, all such Holders must sign this Letter of Transmittal. If
any of the Original Notes tendered hereby are registered in different names on
several certificates, it will be necessary to complete, sign and submit as
many separate Letters of Transmittal as there are different registrations of
certificates.
If this Letter of Transmittal or any Original Note or instrument of transfer
is signed by a trustee, executor, administrator, guardian, attorney-in-fact,
agent, officer of a corporation or other person acting in a fiduciary or
representative capacity, such person should so indicate when signing, and
proper evidence satisfactory to the Company of such person's authority to so
act must be submitted.
When this Letter of Transmittal is signed by the registered Holder(s) of the
Original Notes listed herein and transmitted hereby, no endorsements of
Original Notes or separate instruments of transfer are required unless
Exchange Notes are to be issued, or Original Notes not tendered or exchanged
are to be issued, to a person other than the registered Holder(s), in which
case signatures on such Original Notes or instruments of transfer must be
guaranteed by an Eligible Institution.
IF THIS LETTER OF TRANSMITTAL IS SIGNED OTHER THAN BY THE REGISTERED
HOLDER(S) OF THE ORIGINAL NOTES LISTED HEREIN, THE ORIGINAL NOTES MUST BE
ENDORSED OR ACCOMPANIED BY APPROPRIATE INSTRUMENTS OF TRANSFER, IN EITHER CASE
SIGNED EXACTLY AS THE NAME(S) OF THE REGISTERED HOLDER(S)
A-10
<PAGE>
APPEAR ON THE ORIGINAL NOTES AND SIGNATURES ON SUCH ORIGINAL NOTES OR
INSTRUMENTS OF TRANSFER ARE REQUIRED AND MUST BE GUARANTEED BY AN ELIGIBLE
INSTITUTION, UNLESS THE SIGNATURE IS THAT OF AN ELIGIBLE INSTITUTION.
6. Special Issuance and Delivery Instructions. If certificates for Exchange
Notes or unexchanged or untendered Original Notes are to be issued in the name
of a person other than the signer of this Letter of Transmittal, or if
Exchange Notes or such Original Notes are to be sent to someone other than the
signer of this Letter of Transmittal or to an address other than that shown
herein, the appropriate boxes on this Letter of Transmittal should be
completed. All Original Notes tendered by book-entry transfer and not accepted
for payment will be returned by crediting the account at DTC designated herein
as the account for which such Original Notes were delivered.
7. Transfer Taxes. Except as set forth in this Instruction 7, the Company
will pay or cause to be paid any transfer taxes with respect to the transfer
and sale of Original Notes to it, or to its order, pursuant to the Exchange
Offer. If Exchange Notes, or Original Notes not tendered or exchanged are to
be registered in the name of any persons other than the registered owners, of
if tendered Original Notes are registered in the name of any persons other
than the persons signing this Letter of Transmittal, the amount of any
transfer taxes (whether imposed on the registered Holder or such other person)
payable on account of the transfer to such other person must be paid to the
Company or the Exchange Agent (unless satisfactory evidence of the payment of
such taxes or exemption therefrom is submitted) before the Exchange Notes will
be issued.
8. Waiver of Conditions. The conditions of the Exchange Offer may be amended
or waived by the Company, in whole or in part, at any time and from time to
time in the Company's sole discretion, in the case of any Original Notes
tendered.
9. Substitute Form W-9. Each tendering owner of a Note (or other payee) is
required to provide the Exchange Agent with a correct taxpayer identification
number ("TIN"), generally the owner's social security or federal employer
identification number, and with certain other information, on Substitute Form
W-9, which is provided hereafter under "Important Tax Information," and to
certify that the owner (or other payee) is not subject to backup withholding.
Failure to provide the information on the Substitute Form W-9 may subject the
tendering owner (or other payee) to a $50 penalty imposed by the Internal
Revenue Service and 31% federal income tax withholding on the payment of the
Purchase Price. The box in Part 3 of the Substitute Form W-9 may be checked if
the tendering owner (or other payee) has not been issued a TIN and has applied
for a TIN or intends to apply for a TIN in the near future. If the box in Part
3 is checked and the Exchange Agent is not provided with a TIN by the time of
payment, the Exchange Agent will withhold 31% on all such payments of the
Purchase Price until a TIN is provided to the Exchange Agent.
10. Broker-dealers Participating in the Exchange Offer. If no broker-dealer
checks the last box on page 7 of this Letter of Transmittal, the Company has
no obligation under the Registration Rights Agreement to allow the use of the
Prospectus for resales of the Exchange Notes by broker-dealers or to maintain
the effectiveness of the Registration Statement of which the Prospectus is a
part after the consummation of the Exchange Offer.
11. Requests for Assistance or Additional Copies. Any questions or requests
for assistance or additional copies of the Prospectus, this Letter of
Transmittal or the Notice of Guaranteed Delivery may be directed to the
Exchange Agent at the telephone numbers and location listed above. A Holder or
owner may also contact such Holder's or owner's broker, dealer, commercial
bank or trust company or nominee for assistance concerning the Exchange Offer.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE HEREOF), TOGETHER WITH
CERTIFICATES REPRESENTING THE ORIGINAL NOTES AND ALL OTHER REQUIRED DOCUMENTS
OR THE NOTICE OF GUARANTEED DELIVERY, MUST BE RECEIVED BY THE EXCHANGE AGENT
ON OR PRIOR TO THE EXPIRATION DATE.
A-11
<PAGE>
IMPORTANT TAX INFORMATION
Under federal income tax law, an owner of Original Notes whose tendered
Original Notes are accepted for exchange is required to provide the Exchange
Agent with such owner's current TIN on Substitute Form W-9 below. If such
owner is an individual, the TIN is his or her social security number. If the
Exchange Agent is not provided with the correct TIN, the owner or other
recipient of Exchange Notes may be subject to a $50 penalty imposed by the
Internal Revenue Service. In addition, any interest on Exchange Notes paid to
such owner or other recipient may be subject to 31% backup withholding tax.
Certain owners of Notes (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. In order for a foreign individual to qualify as an
exempt recipient, that owner must submit to the Exchange Agent a properly
completed Internal Revenue Service Form W-8 (a "Form W-8"), signed under
penalties of perjury, attesting to that individual's exempt status. A Form W-8
can be obtained from the Exchange Agent. See the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional instructions.
Backup withholding is not an additional tax. Rather, the federal income tax
liability of persons subject to backup withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained from the Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding, the owner is required to notify the Exchange
Agent of the owner's current TIN (or the TIN of any other payee) by completing
the following form, certifying that the TIN provided on Substitute Form W-9 is
correct (or that such owner is awaiting a TIN), and that (i) the owner has not
been notified by the Internal Revenue Service that the owner 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 owner that the owner is
no longer subject to backup withholding.
WHAT NUMBER TO GIVE THE EXCHANGE AGENT
The Holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the owner of the
Original Notes. If the Original Notes are registered in more than one name or
are not registered in the name of the actual owner, consult the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9," for additional guidance on which number to report.
A-12
<PAGE>
PAYER'S NAME:
- --------------------------------------------------------------------------------
PART 1--PLEASE PROVIDE YOUR Social security number(s)
TIN IN THE BOX AT RIGHT AND or Employer
CERTIFY BY SIGNING AND Identification Number(s)
DATING BELOW.
SUBSTITUTE ----------------------
--------------------------------------------------------
FORM W-9 PART 2--Certifications--Under penalties of perjury, I
certify that:
DEPARTMENT OF THE
TREASURY (1) The number shown on this form is my correct
INTERNAL REVENUE taxpayer identification number (or I am waiting
SERVICE for a number to be issued to me), and
PAYOR'S REQUEST FOR (2) I am not subject to backup withholding because:
TAXPAYER (a) I am exempt from backup withholding, or (b)
IDENTIFICATION I have not been notified by the Internal Revenue
NUMBER ("TIN") Service (IRS) that I am subject to backup
withholding as a result of a failure to report
all interest or dividends, or (c) the IRS has
notified me that I am no longer subject to
backup withholding.
CERTIFICATION INSTRUCTIONS--You must cross out
item (2) above if you have been notified by the
IRS that you are currently subject to backup
withholding because of under reporting interest
or dividends on your tax return.
--------------------------------------------------------
PART 3--
SIGNATURE
-------------------------
DATE Awaiting TIN [_]
------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN A $50 PENALTY
IMPOSED BY THE INTERNAL REVENUE SERVICE AND BACKUP WITHHOLDING OF 31%.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN
PART 3 OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(2) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number by the
time of payment, 31% of all reportable cash payments made to me will be
withheld until I provide a taxpayer identification number.
Signature Date
---------------------------------------------- -----------------
A-13
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFOR-
MATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR AXIA GROUP. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UN-
LAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AF-
FAIRS OF THE COMPANY OR AXIA GROUP SINCE SUCH DATE.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................................................... 3
Prospectus Summary........................................................ 4
Risk Factors.............................................................. 16
The Transactions.......................................................... 24
The Exchange Offer........................................................ 26
Use of Proceeds........................................................... 36
Capitalization............................................................ 37
Unaudited Pro Forma Financial Information................................. 38
Selected Historical Financial Data........................................ 45
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 47
Industry.................................................................. 54
Business.................................................................. 56
Management................................................................ 67
Related Transactions...................................................... 75
Beneficial Ownership...................................................... 76
Description of the Bank Credit Agreement.................................. 77
Description of the Notes.................................................. 80
Certain Federal Income Tax Considerations................................. 113
Legal Matters............................................................. 118
Experts................................................................... 118
Index to Combined Financial Statements.................................... F-1
Annex A--AXIA Incorporated Letter of Transmittal.......................... A-1
</TABLE>
Until , 1999 (90 days after the date of this Prospectus), all dealers
effecting transactions in the registered securities, whether or not partici-
pating in this distribution, may be required to deliver a Prospectus. This re-
quirement is in addition to the obligation of dealers to deliver a Prospectus
when acting as underwriters and with respect to their unsold allotments or
subscriptions.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
AXIA INCORPORATED
PROSPECTUS
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
The Company's Certificate of Incorporation, as amended, provides that the
directors and officers of the Company shall be indemnified to the full extent
permitted by the provisions of the Delaware General Corporation Law ("DGCL").
The DGCL provides for indemnification of directors and officers of a
corporation against expenses, judgments, fines, settlements and other amounts
actually and reasonably incurred in connection with any proceeding arising by
reason of the fact that such person is or was an officer or director of the
corporation or is or was serving at the request of the corporation as a
director, officer or employee of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise.
Section 145 of the DGCL provides generally that a person sued as a director,
officer, employee or agent of a corporation may be indemnified by the
corporation for reasonable expenses, including attorneys' fees, if in the case
of other than derivative suits such person has acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the corporation (and, in the case of a criminal proceeding, had
no reasonable cause to believe that such person's conduct was unlawful). In
the case of a derivative suit, an officer, employee or agent of the
corporation which is not protected by the Certificate of Incorporation may be
indemnified by the corporation for reasonable expenses, including attorneys'
fees, if such person has acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification shall be made in the case of a
derivative suit in respect of any claim as to which an officer, employee or
agent has been adjudged to be liable to the corporation unless that person is
fairly and reasonable entitled to indemnity for proper expenses.
Indemnification is mandatory in the case of a director, officer, employee, or
agent who is successful on the merits in defense of a suit against such
person.
The Company has entered into Indemnity Agreements with its directors and
certain key officers pursuant to which the Company generally is obligated to
indemnify its directors and such officers to the full extent permitted by the
DGCL as described above.
The Company has purchased liability insurance policies covering directors
and officers in certain circumstances.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<C> <C> <S>
3.1 -- Certificate of Incorporation of the Company, as amended
3.2 -- Bylaws of the Company
4.1 -- Indenture, as supplemented, dated as of July 22, 1998 by and
between the Company and State Street Bank & Trust Company
National Bank, as Trustee, with respect to the 10 3/4% Senior
Subordinated Notes due 2008, including the form of the Note
4.2 -- Registration Rights Agreement by and between the Company,
Chase Securities Inc. and NationsBanc Montgomery Securities
LLC, effective as of July 22, 1998
5* -- Opinion of Bracewell & Patterson, L.L.P. as to the validity
of the Exchange Notes being offered
8* -- Opinion of Bracewell & Patterson, L.L.P. as to certain
federal income tax matters
10.1 -- Axia Group, Inc. 1998 Stock Awards Plan
10.2 -- Axia Finance Corp. Employee Stock Ownership Plan and 401(k)
Plan to be renamed Axia Incorporated Employee Stock Ownership
and 401(k) Plan
10.3 -- Axia Finance Corp. Employee Stock Ownership and 401(k) Plan
Trust Agreement to be renamed Axia Incorporated Employee
Stock Ownership and 401(k) Plan Trust Agreement
10.8 -- Credit Agreement dated as of July 22, 1998 among Axia Finance
Corp., Axia Incorporated, Ames Taping Tool Systems, Inc.,
Tape Tech Tool Co., Inc. and Paribas
10.9 -- Security Agreement dated as of July 22, 1998 by and between
Axia Finance Corp., Axia Incorporated, Paribas and the
Lenders named therein
10.10 -- Pledge Agreement dated as of July 22, 1998 by and between
Axia Incorporated, Paribas and the Lenders named therein
10.11 -- Letter Agreement dated June 23, 1998, by and among The
Sterling Group, Inc., Axia Group, Inc., Axia Acquisition
Corp. and each of their subsidiaries
10.12 -- Form of Indemnity Agreement between Axia Incorporated and
each of its officers and directors
10.13 -- Form of Tax Sharing Agreement among Axia Group Inc., Axia
Holdings Corp., Axia Incorporated, Ames Taping Tool Systems,
Inc. and Tape Tech Tool Co., Inc.
12 -- Statement re Computation of Ratio of Earnings to Fixed
Charges
21 -- Subsidiaries of the Registrant
23.1 -- Consent of Arthur Andersen LLP
23.2 -- Consent of Deloitte & Touche LLP
23.3* -- Consents of Bracewell & Patterson, L.L.P. (included in their
opinions filed as Exhibits 5 and 8 hereto)
24 -- Powers of Attorney
25 -- Statement of Eligibility and Qualification on Form T-1 of
State Street Bank & Trust Company as Trustee under the
Indenture
</TABLE>
- --------
* To be filed by amendment
(b) Financial Statement Schedules
None.
II-2
<PAGE>
ITEM 22. UNDERTAKINGS.
(a) The undersigned Company hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than 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 of controlling person in connection with
the securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
(c) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of 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.
(d) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AXIA
INCORPORATED HAS DULY CAUSED THIS REGISTRATION STATEMENT OR AMENDMENT THERETO
TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN
THE CITY OF HOUSTON, STATE OF TEXAS, ON SEPTEMBER 29, 1998.
AXIA INCORPORATED
/s/ GARY L. ROSENTHAL
By:__________________________________
Gary L. Rosenthal
Chairman of the Board
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT OR AMENDMENT THERETO HAS BEEN SIGNED BELOW BY THE
FOLLOWING PERSONS IN THE INDICATED CAPACITIES ON SEPTEMBER 29, 1998.
<TABLE>
<S> <C>
</TABLE>
SIGNATURE TITLE
/s/ GARY L. ROSENTHAL Chairman of the Board
- ----------------------------------- (principal executive officer)
Gary L. Rosenthal
/s/ LYLE J. FEYE Chief Financial Officer
- ----------------------------------- (principal financial and
Lyle J. Feye accounting officer)
/s/ SUSAN O. RHENEY* Director
- -----------------------------------
Susan O. Rheney
/s/ DENNIS W. SHEEHAN* Director
- -----------------------------------
Dennis W. Sheehan
*By: /s/ GARY L. ROSENTHAL
--------------------------------
Gary L. Rosenthal
(Attorney-in-fact for persons
indicated)
II-4
<PAGE>
EXHIBIT 3.1
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
INCORPORATION OF "NEW ABLE HOLDING CORPORATION", FILED IN THIS OFFICE ON THE
FIFTEENTH DAY OF FEBRUARY, A.D. 1984, AT 10 O'CLOCK A.M.
/s/ EDWARD J. FREEL
------------------------------------
Edward J. Freel, Secretary of State
2028380 8100 AUTHENTICATION: 9203859
981277567 DATE: 07-17-98
<PAGE>
CERTIFICATION OF INCORPORATION
OF
NEW ABLE HOLDING CORPORATION
FIRST. The name of the corporation is New Able Holding Corporation.
SECOND. The address of the corporation's registered office in the State of
Delaware is No. 100 West Tenth Street in the City of Wilmington, County of New
Castle. The name of its registered agent at such address is The Corporation
Trust Company.
THIRD. The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH. The total number of shares which the corporation shall have
authority to issue is 1,000 shares of Common Stock, and the par value of each of
such shares is $.10.
FIFTH. The name and mailing address of the incorporator is Richard C.
Morrissey, 125 Broad Street, New York, New York 10004.
SIXTH. The board of directors of the corporation is expressly authorized to
adopt, amend or repeal by-laws of the corporation.
<PAGE>
SEVENTH. Elections of directors need not be by written ballot except and to
the extent provided in the by-laws of the corporation.
IN WITNESS WHEREOF, I have signed this certificate of incorporation this
13th day of February, 1984.
/s/ RICHARD C. MORRISSEY
------------------------------
Richard C. Morrissey
2
<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE RESTATED CERTIFICATE OF
"NEW ABLE HOLDING CORPORATION", FILED IN THIS OFFICE ON THE TWENTY-NINTH DAY OF
OCTOBER, A.D. 1984, AT 1 O'CLOCK P.M.
/s/ EDWARD J. FREEL
------------------------------------
Edward J. Freel, Secretary of State
2028380 8100 AUTHENTICATION: 9203860
981277567 DATE: 07-17-98
<PAGE>
RESTATED
CERTIFICATE OF INCORPORATION
OF
NEW ABLE HOLDING CORPORATION
(A Delaware Corporation)
New Able Holding Corporation, a corporation organized and existing under
the laws of the State of Delaware, hereby certifies as follows:
1. The name of the Corporation is: New Able Holding Corporation. The date
of filing of its original Certificate of Incorporation with the
Secretary of State was February 15, 1984.
2. This Restated Certificate of Incorporation amends, restates and
integrates the provisions of the Certificate of Incorporation of the
Corporation and has been duly adopted pursuant to Sections 242 and 245
of the Delaware General Corporation Law.
3. The text of the Certificate of Incorporation is hereby amended and
restated to read herein as set forth in full:
FIRST: Name. The name of the Corporation is: New Able Holding Corporation.
SECOND: Delaware Office and Registered Agent. The address of the
Corporation's registered office in the State of Delaware is Corporation Trust
Center, 1209 Orange Street in the City of Wilmington, County of New Castle. The
name of its registered agent at such address is The Corporation Trust Company.
THIRD: Purpose. The purpose of the Corporation is to engage in any lawful
act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: Capitalization. The total number of shares of all classes of stock
which the Corporation shall have authority to issue is 205,296 shares, consist-
Restated Certificate of Incorporation
<PAGE>
ing of (a) 110,000 shares of $6.00 Cumulative Preferred Stock, par value $.01
per share (the "Preferred Stock"), and (b) 95,296 shares of Common Stock, par
value $.10 per share (the "Common Stock"), of which 75,000 shares shall be Class
A Common Stock (the "Class A Common Stock") and 20,296 shares shall be Class B
Common Stock (the "Class B Common Stock"). All cross references in each Part of
this Article FOURTH refer to other paragraphs in such Part unless otherwise
indicated, and terms defined in any Part of this Article FOURTH shall have the
meaning therein given only when used within such Part or when used together with
specific reference to such meaning.
Notwithstanding anything to the contrary herein, any holder of stock of the
Corporation may waive, in writing, any condition, requirement, or covenant
contained in this Article FOURTH insofar as it relates to such holder or the
stock of such holder. The foregoing sentence shall not modify or impair the
ability of the Corporation to amend this Restated Certificate of Incorporation
in accordance with applicable law and this Restated Certificate of
Incorporation.
The following is a statement of the powers, designations, preferences and
rights, and the qualifications, limitations and restrictions thereof, of each
class of stock of the Corporation:
PART I
Preferred Stock
1. Dividends.
1A. General. Subject to paragraphs 3A(2) and 3D, the holders of the
Preferred Stock shall be entitled to receive, and the Board of Directors shall
declare and pay out of funds legally available for such purposes, cash dividends
at the rate of $6.00 per share per annum (computed on the basis of a 360-day
year, 30-day month), declared quarterly on or before the first day of January,
April, July and October of each year and payable on January 15, 1985 and
quarterly on the 15th day of each April, July, October and January thereafter.
Such dividends shall be cumulative and shall accrue, whether or not earned or
declared and whether or not there are funds of the Corporation legally available
for the payment of
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dividends on the Preferred Stock, from and after the date of original issue of
the Preferred Stock.
1B. Distribution of Partial Dividend Payments. If at any time the
Corporation pays less than the total amount of dividends then accrued with
respect to the Preferred Stock, such payment shall be distributed ratably among
the holders of the Preferred Stock based upon the aggregate accrued and unpaid
dividends on the shares held by each such holder.
1C. Restrictions on Dividends, Distributions, Redemptions. So long as any
Preferred Stock shall remain outstanding, the Corporation shall not pay or
declare any dividend (whether payable in cash, in property or in securities of
the Corporation) or make any other distribution (whether payable in cash, in
property or in securities of the Corporation), directly or indirectly, on any
class of stock of the Corporation other than the Preferred Stock, or make, or
permit any of its subsidiaries or affiliates to make, any redemption, purchase
or other acquisition, directly or indirectly, of any shares of any class of
stock of the Corporation other than the Preferred Stock, or make or permit any
of its subsidiaries or affiliates to make optional prepayments on any
subordinated debt of the Corporation or any of its subsidiaries other than the
Notes if there shall then be either (a) any accrued dividends on any shares of
Preferred Stock accrued to the date of such action that have not been declared
and paid or set apart for payment or (b) any mandatory redemption of any shares
of Preferred Stock pursuant to paragraph 3A that has not been made.
1D. Payment of Dividends in Arrears. Dividends in arrears may be paid at
any time, without reference to any regular dividend payment date.
2. Liquidation.
2A. In General. Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of the Preferred
Stock shall be entitled, before any distribution or payment is made upon any
shares of any other class of stock of the Corporation, to be paid an amount per
share equal to the Liquidation Amount of each share of Preferred Stock on the
date of payment plus an amount equal to all accrued
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and unpaid dividends thereon to such date, and the holders of the Preferred
Stock shall not be entitled to any further distribution or payment. "Liquidation
Amount" shall mean the sum of $50.00 per share or such amount as shall remain
after a reduction pursuant to paragraph 3(A)(2)(c).
2B. Pro Rata Distribution; Notice. If upon any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the assets of
the Corporation to be distributed among the holders of the capital stock of the
Corporation shall be insufficient to permit payment to the holders of the
Preferred Stock of the Liquidation Amount thereof, plus an amount equal to all
accrued and unpaid dividends thereon, then the entire assets of the Corporation
to be distributed to the holders of the capital stock of the Corporation shall
be distributed ratably among the holders of the Preferred Stock, in proportion
to the amount due under this paragraph 2 to each such holder. Written notice of
such liquidation, dissolution or winding up, stating a payment date, the amount
and the place where the amounts distributable shall be payable, shall be given
by first class mail, postage prepaid, not less than 60 days prior to the payment
date stated therein, to the holders of record of the Preferred Stock, such
notice to be addressed to each such holder at the address thereof as shown by
the stock register of the Corporation. Neither the consolidation nor merger of
the Corporation into or with any other corporation or corporations, nor the sale
or transfer by the Corporation of all or any part of its assets, nor the
reduction of the capital stock of the Corporation, shall be deemed to be a
liquidation, dissolution or winding up of the Corporation within the meaning of
any of the provisions of this paragraph 2.
3. Redemption.
3A. Mandatory Redemption. (1) Mandatory Redemption Obligations. On October
15, 1996, the Corporation shall purchase and redeem, out of funds legally
available for such purpose, all of the shares at the time outstanding
represented by each certificate for Preferred Stock then held of record, at a
redemption price (the "Redemption Price") per share in cash equal to the
Liquidation Amount thereof on the date of redemption plus an amount equal to all
accrued and unpaid dividends thereon
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to such date (the Corporation's obligation to make such redemption, including
any obligation of the Corporation to make a payment pursuant to paragraph 3A(2),
being herein called a "Mandatory Redemption Obligation" and such October 15 and,
until all such shares are redeemed in full, each succeeding January 15, April
15, July 15 and October 15 being herein called a "Redemption Date").
3A(2). Payments When Full Redemption Prohibited. If applicable law would
prohibit the payment in full of the Redemption Price for all shares of Preferred
Stock to be redeemed pursuant to any Mandatory Redemption Obligation on the
Redemption Date therefor (the "Applicable Redemption Date"), then
(a) no such shares shall be purchased or redeemed on the Applicable
Redemption Date,
(b) the Corporation shall nevertheless (to the extent permitted by
applicable law) pay to the holders of shares of Preferred Stock, ratably in
accordance with the aggregate Liquidation Amount of such shares held by
each such holder, on the Applicable Redemption Date an amount per share
equal to the lesser of (x) the Liquidation Amount of each such share minus
$1 or (y) such amount as shall be permitted to be paid on each such share
by applicable law,
(c) the Redemption Price and the Liquidation Amount of each such share
shall thereupon be reduced by the amount so paid with respect to such
share, provided, that the amount of the accrued and unpaid dividends on
each such share shall not be reduced by any such payment and the amount of
the Redemption Price of each such share that represents accrued and unpaid
dividends shall continue to constitute accrued and unpaid dividends on such
share,
(d) on the next following Redemption Date (i) the Corporation shall
purchase and redeem all such shares if it is no longer prohibited by law
from paying in full the Redemption Price for such shares, or (ii) if the
Corporation is so prohibited, the Corporation shall comply with the
foregoing subdivisions (a), (b) and (c) on such next following Redemption
Date and shall comply with this subdivision (d) on the next such Redemption
Date, and
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(e) the obligation of the Corporation to pay dividends under paragraph
1 shall continue until all outstanding shares of Preferred Stock held of
record by each holder thereof are redeemed in accordance with this
paragraph 3, except that quarterly dividends accruing with respect to any
outstanding shares of Preferred Stock after a payment with respect to such
shares pursuant to the foregoing subdivision (b) shall be reduced in the
same proportion as the Liquidation Amount of such shares shall have been
reduced by such payment.
3A(3). Mandatory Redemption Obligations Not Relieved. No optional
redemptions pursuant to paragraph 3B, and no acquisition of shares of Preferred
Stock by the Corporation, shall relieve the Corporation of its Mandatory
Redemption Obligations.
3B. Optional Redemption. (1) Optional Redemption Provisions. On or after
October 15, 1989, the Corporation may purchase and redeem, out of funds legally
available for such purpose, on any dividend payment date all or from time to
time on any dividend payment date part (but not less than 30,000 shares) of the
shares of Preferred Stock at the time outstanding, at a redemption price per
share in cash equal to the Liquidation Amount thereof on the date of redemption
plus (a) an amount equal to all accrued and unpaid dividends thereon to such
date, and (b) the premium (a percentage of such Liquidation Amount) applicable
in accordance with the following table, depending on the twelve-month period in
which the date fixed for such optional redemption occurs:
12-Month Period
Commencing October 15 Premium
--------------------- -------
1989 12.00%
1990 10.29
1991 8.57
1992 6.86
1993 5.14
1994 3.43
1995 1.71
Notwithstanding the foregoing, the Corporation shall not purchase and
redeem shares of Preferred Stock pursuant to this paragraph 3A at any time when
any Bank
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Notes (as such term is defined in the Purchase Agreements) are outstanding.
3B(2). Allocation of Partial Optional Redemptions. In case of any proposed
optional redemption of less than all of the outstanding shares of Preferred
Stock, redemption of such shares pursuant to this paragraph 3B shall be made
ratably among the holders of the Preferred Stock based upon the number of shares
of Preferred Stock held by each such holder.
3C. Notice of Redemption and Other Payments. Notice of each redemption of
and other payment on the Preferred Stock pursuant to paragraph 3A or 3B,
specifying (a) the date and place of redemption or payment (which shall be in
the Borough of Manhattan, City and State of New York), (b) the number of shares,
and certificate numbers thereof, which are to be redeemed or in respect of which
payments are to be made, and (c) the amount of any such payments, shall be
mailed to each holder of record of shares to be redeemed or in respect of which
payments are to be made at the address of such holder as shown by the stock
register of the Corporation not more than 60 nor less than 30 days prior to the
specified date of redemption.
3D. Dividends After Redemption Date; New Certificate. If notice of
redemption of shares of Preferred Stock has been mailed and provision for
payment of the applicable Redemption Price for such shares on the specified date
of redemption has been made by the Corporation, then, unless default be made in
the payment of the redemption price for such shares when and as due, (a) the
shares of Preferred Stock designated for redemption in such notice shall not be
entitled to any dividends accruing after such date, (b) all rights of the
respective holders of such shares, as stockholders of the Corporation by reason
of the ownership of such shares, except the right to receive the applicable
Redemption Price of such shares upon presentation and surrender of the
respective certificates representing such shares, shall cease on such date, and
(c) such shares shall not be deemed to be outstanding after such date. In case
less than all the shares represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares, without cost to
the holder thereof, within three business days after surrender of such
certificate.
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3E. Past Dividends Must be Paid. Except pursuant to paragraph 3A(2) hereof
or section 26 of the Purchase Agreements, the Corporation shall not make, or
permit any of its subsidiaries or affiliates to make, any redemption, purchase
or other acquisition, directly or indirectly, of any shares of Preferred Stock
unless all dividends accrued and unpaid to the date of redemption on all shares
of Preferred Stock at the time outstanding shall have been declared and paid or
a sum sufficient for the payment thereof set apart.
3F. Other Redemptions or Acquisitions. The Corporation shall not, and shall
not permit any of its subsidiaries or affiliates to, directly or indirectly,
redeem or otherwise acquire any Preferred Stock (a) at any time when any of the
Bank Notes (as such term is defined in the Purchase Agreements) are outstanding,
and (b) except as expressly authorized herein, in section 26 of the Purchase
Agreements or pursuant to a purchase offer made ratably among all holders of the
Preferred Stock based upon the number of shares of Preferred Stock held by each
such holder.
4. Redeemed or Otherwise Acquired Shares to be Retired. Any shares of
Preferred Stock redeemed or purchased pursuant to paragraph 3 by the Corporation
or otherwise acquired by the Corporation in any manner whatsoever shall be
retired promptly on the acquisition thereof and shall not be reissued; and the
Corporation shall from time to time take such appropriate action as may be
necessary to reduce the authorized number of shares of Preferred Stock
accordingly.
5. Voting Rights.
5A. No General Voting Rights. Except as otherwise provided by law and this
Restated Certificate of Incorporation, the holders of the Preferred Stock shall
have no right to vote on any matter to be voted on by the stockholders of the
Corporation.
5B. Special Voting Rights for Directors. If and whenever any of the
following events (herein called "Preferred Stock Defaults") shall occur for any
reason whatsoever: (i) payment of dividends on any share of Preferred Stock at
the time outstanding shall be in ar-
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rears and shall not have been declared and set apart for payment, whether or not
such payment is legally permissible, or (ii) the Corporation shall fail to
redeem the Preferred Stock in full pursuant to paragraph 3 on any date on which
such redemption is required to be made or shall fail to make an optional
redemption after notice of such redemption has been mailed to holders of
Preferred Stock pursuant to paragraph 3C, whether or not such redemption is
legally permissible, or (iii) the Corporation shall take or purport to take any
action specified in paragraph 5C without obtaining the prior consent of the
holders of the Preferred Stock required therein, or (iv) an Event of Default
shall occur and be continuing, then, and in any such event, if the holders of at
least 75% of the outstanding shares of Preferred Stock deliver a written request
therefor to the Corporation, the number of directors constituting the Board of
Directors of the Corporation shall be increased by two, and the holders of the
Preferred Stock shall have the exclusive right, voting together as one class, to
elect two directors to fill such newly-created directorships. This right shall
remain vested until no Preferred Stock Default exists and is continuing, at
which time (x) the right shall terminate (subject to revesting in the case of
any subsequent Preferred Stock Default), (y) the term of the directors then in
office elected by the holders of all outstanding Preferred Stock as a class
shall terminate, and (z) the number of directors constituting the Board of
Directors of the Corporation shall be reduced by two.
Whenever such right shall vest, it may be exercised initially at a special
meeting of holders of the Preferred Stock, at any annual stockholders' meeting
or by the written consent of the holders of record of at least 75% of the
outstanding shares of Preferred Stock in lieu of a meeting, but thereafter it
shall be exercised only at annual stockholders' meetings. Any director who shall
have been elected by the holders of the Preferred Stock as a class pursuant to
this paragraph 5B shall hold office for a term expiring (subject to the earlier
termination of all Preferred Stock Defaults) at the next annual meeting of
stockholders, and during such term may be removed at any time, either for or
without cause, by, and only by, the affirmative votes or written consent of the
holders of record of a majority of the outstanding shares of the Preferred Stock
given at a special meeting of such stockholders called for such purposes, and
any vacancy created by such removal may also be filled at such meet-
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ing. Any vacancy caused by the death or resignation of a director who shall have
been elected by the holders of the Preferred Stock as a class pursuant to this
paragraph 5B may be filled only by the holders of the Preferred Stock at a
special meeting called for such purpose by the sole remaining director elected
by the holders of the Preferred Stock or by the written consent of the holders
of record of a majority of the outstanding shares of Preferred Stock in lieu of
a meeting.
Whenever a special meeting of the holders of the Preferred Stock is
permitted or required to be held pursuant to this paragraph 5B, such meeting
shall be held at the earliest practicable date, and, in any event, within 60
days after it is called, and the Secretary of the Corporation shall call such
meeting, providing written notice to all holders of record of the Preferred
Stock in accordance with law, within 10 days following receipt by such Secretary
of the written request of the holders of at least 75% of the outstanding shares
of Preferred Stock requesting that the Board of Directors of the Corporation be
increased by two in accordance with this paragraph 5B.
In the event that such meeting shall not be called by the proper corporate
officer within 10 days after the receipt of such request by the Secretary of the
Corporation, or within 25 days after the mailing of the same within the United
States of America by registered mail addressed to the Secretary of the
Corporation at its principal office, then any holder or holders of record of
shares of Preferred Stock then outstanding may call such a meeting at the
expense of the Corporation. Any holder of the Preferred Stock who calls such
meeting shall have access to the stock register of the Corporation for the
purpose of calling the same.
Any provision of this paragraph 5B to the contrary notwithstanding, no
special meeting of the holders of shares of Preferred Stock shall be held during
the 90 day period next preceding the date fixed for the annual meeting of
stockholders of the Corporation or shall be required to be called or held in
violation of any law or any regulation, rule or other requirement of any
governmental authority.
Any special meeting of the holders of the Preferred Stock shall be held at
the place at which the last
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annual meeting of stockholders of the Corporation was held, if possible. At any
meeting of the holders of the Preferred Stock, the presence in person or by
proxy of the holders of a majority of all outstanding shares of Preferred Stock
shall be necessary and sufficient to constitute a quorum and, a quorum being
present, the director or directors to be elected by such holders shall be
elected by a plurality of the votes cast in such election; in the absence of a
quorum, a majority of the holders present in person or by proxy shall have the
power to adjourn the meeting from time to time without notice, other than
announcement at the meeting, until a quorum shall be present.
5C. Special Voting Rights on Certain Corporate Actions. The Corporation
shall not, without the prior consent (in addition to any other vote or consent
required by law, contract or otherwise) of the holders of 100% of the
outstanding shares of Preferred Stock, voting as a class in person or by proxy
in writing or at a special meeting called for the purpose: (i) create or
authorize any additional stock of any class unless the same ranks junior to the
Preferred Stock as to dividends, as to redemptions and as to the distribution of
assets on dissolution, liquidation or winding up, whether voluntary or
involuntary, or create or authorize any obligation or security convertible into
shares of stock of any class unless the same ranks junior to the Preferred Stock
as to dividends, as to redemptions and as to the distribution of assets on
dissolution, liquidation or winding up, whether voluntary or involuntary,
whether any such creation or authorization shall be by means of amendment of
this Certificate of Incorporation, merger, consolidation or otherwise; or (ii)
amend, alter or repeal this Certificate of Incorporation or By-Laws, or file any
directors' resolutions pursuant to the General Corporation Law of the State of
Delaware, containing, in either case, any provision which affects the respective
powers, designations, preferences or rights, or the qualifications, limitations
or restrictions thereof, of the Preferred Stock or Common Stock or which in any
manner adversely affects the Preferred Stock or the holders thereof.
5D. One Vote Per Share. On all matters to be voted on by the holders of the
Preferred Stock, such holders shall be entitled to one vote for each share
(including any share with respect to which the Redemption Price, Liquidation
Amount and amount of dividends payable
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have been reduced pursuant to subdivisions (c) and (f) of paragraph 3A(2)
thereof held of record.
6. Definitions. As used in this Part I, the following terms shall have the
following respective meanings:
"Applicable Redemption Date" shall have the meaning given in paragraph
3A(2).
"Event of Default" shall mean an Event of Default under the Purchase
Agreements.
"Liquidation Amount" shall have the meaning given in paragraph 2A.
"Mandatory Redemption Obligation" shall have the meaning given in paragraph
3A(1).
"Purchase Agreements" shall mean the separate Note and Stock Purchase
Agreements, dated as of September 20, 1984, among the Corporation, Transitory
String Corporation and the respective purchasers named therein, at the time in
effect.
"Preferred Stock Defaults" shall have the meaning given in paragraph 5B.
"Redemption Date" shall have the meaning given in paragraph 3A(1).
"Redemption Price" shall have the meaning given in paragraph 3A(1).
PART II
Common Stock
1. Identical Rights. Except as otherwise provided in this Part II of
Article FOURTH, all shares of Common Stock shall be identical and shall entitle
the holders thereof to the same rights and privileges.
2. Dividends. When and as dividends are declared on the Common Stock,
whether payable in cash, in
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property or in securities of the Corporation, the holders of the Common Stock
shall be entitled to share equally, share for share, in such dividends, except
that if dividends are declared which are payable in shares of Common Stock,
dividends shall be declared which are payable at the same rate on both classes
of stock, but such dividends shall be payable only in shares of Class A Common
Stock to holders of Class A Common Stock and shall be payable only in shares of
Class B Common Stock to holders of Class B Common Stock.
3. Liquidation. Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, after the payment in full of all
amounts to which the holders of the Preferred Stock shall be entitled, the
remaining assets of the Corporation to be distributed to the holders of the
capital stock of the Corporation shall be distributed ratably among the holders
of the shares of Common Stock.
4. Subdivision and Combination. If the Corporation shall in any manner
subdivide (by stock split, stock dividend or otherwise) or combine (by reverse
stock split or otherwise) the outstanding shares of one class of the Common
Stock, the outstanding shares of the other class of the Common Stock shall be
proportionately subdivided or combined.
5. Conversion.
5A. Voluntary. Subject to and upon compliance with the provisions of this
paragraph 5, each holder of record of the Class B Common Stock shall be entitled
at any time and from time to time to convert any or all of the shares of Class B
Common Stock held by such holder into the same number of shares of Class A
Common Stock.
5B. Voluntary Conversion Procedures. Each conversion of shares of Class B
Common Stock into shares of Class A Common Stock shall be effected by (and the
Corporation shall be obligated to issue such shares of Class A Common Stock
upon) the surrender of the certificate or certificates representing such shares
of Class B Common Stock to be converted at any time during normal business hours
at the principal office of the Corporation
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or at such other office or agency in Chicago, Illinois or New York, New York as
the Corporation shall have designated by notice in writing to each holder of
Class B Common Stock, together with written notice by the holder of such Class B
Common Stock stating that such holder desires to convert the shares, or a stated
number of the shares, of Class B Common Stock represented by such certificate or
certificates into shares of Class A Common Stock. Such notice shall also state
the name or names (with addresses) and denominations in which the certificate or
certificates for shares of Class A Common Stock are to be issued and shall
include instructions for delivery thereof, provided that, if any shares of Class
A Common Stock are to be registered in a name other than the name of the
registered owner of the shares of Class B Common Stock being surrendered, the
issuance of such shares of Class A Common Stock must be effected in compliance
with the provisions of Section 17 of the Purchase Agreements (as defined in
paragraph 6 of Part I of Article Fourth hereof). Promptly after such surrender
and the receipt of such written notice, the Corporation shall issue and deliver
in accordance with such instructions the certificate or certificates for the
Class A Common Stock issuable upon such conversion, and the Corporation shall
deliver to the converting holder a certificate representing any shares of Class
B Common Stock which were represented by the certificate or certificates
surrendered to the Corporation in connection with such conversion but which were
not converted. Such conversion, to the extent permitted by law, shall be deemed
to have been effected as of the close of business on the date on which such
certificate or certificates have been surrendered and such notice has been
received, and at such time the rights of the holder of such Class B Common Stock
(or specified portion thereof) as such holder shall cease and the person or
persons in whose name or names the certificate or certificates for shares of
Class A Common Stock are to be issued upon conversion shall be deemed to have
become the holder or holders of record of the shares of Class A Common Stock
represented thereby.
5C. Mandatory Conversion. On the date the Corporation registers any of its
equity securities under Section 5 of the Securities Act of 1933 (the "Mandatory
Conversion Date"), each share of Class B Common Stock then outstanding shall be
converted into a share of Class A Common Stock.
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5D. Procedures for Mandatory Conversion. As soon as possible after the
Corporation determines the Mandatory Conversion Date, the board of directors of
the Corporation shall cause notice to be given to each holder of shares of Class
B Common Stock then outstanding, such notice to state that each share of Class B
Common Stock held by such holder shall be converted into a share of Class A
Common Stock on the Mandatory Conversion Date. At any time after such notice is
given, each holder of shares of Class B Common Stock may surrender at any time
during normal business hours at the principal office of the Corporation, or at
such other office or agency in Chicago, Illinois or New York, New York as the
Corporation shall have designated by notice in writing to each holder of Class B
Common Stock, the certificate or certificates for the shares of Class B Common
Stock held by such holder, together with written notice stating the name or
names (with addresses) and denominations in which the certificate or
certificates representing the shares of Class A Common Stock issuable upon
conversion shall be issued and including instructions for delivery thereof,
provided that, if any shares of Class A Common Stock are to be registered in a
name other than the registered owner of the shares of Class B Common Stock being
surrendered, the issuance of such shares of Class A Common Stock must be
effected in compliance with the provisions of Section 17 of the Purchase
Agreements (as defined in paragraph 6 of Part I of Article Fourth hereof). Upon
receipt of such certificates and written notice, the Corporation shall be
obligated to and shall issue and deliver in accordance with such notice the
certificate or certificates representing the shares of Class A Common Stock
issuable upon such conversion. If any certificate or certificates representing
shares of Class B Common Stock are not so surrendered on or prior to the
Mandatory Conversion Date, such shares of Class B Common Stock shall
nevertheless be converted into an equal number of shares of Class A Common Stock
on the Mandatory Conversion Date, and as of the close of business on the
Mandatory Conversion Date each such certificate shall be deemed to represent an
equal number of shares of Class A Common Stock. As of the close of business on
the earlier of (a) the date on which a holder of shares of Class B Common Stock
surrenders the certificate or certificates representing such shares to the
Corporation pursuant to this section 5D or(b) the Mandatory Conversion Date, the
rights of the holder of such certificate as a holder of Class B Common Stock
shall cease and (i) such holder
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<PAGE>
shall have the rights of a holder of an equal number of shares of Class A Common
Stock or (ii) the person or persons in whose name or names the certificate or
certificates for shares of Class A Common Stock are to be issued upon such
conversion shall have the rights of a holder or holders of the shares of Class A
Common Stock represented by such certificate or certificates, as the case may
be.
5E. Reservation of Shares, Validity, etc. The Corporation shall at all
times reserve and keep available out of its authorized but unissued shares of
Class A Common Stock, solely for the purpose of issue upon the conversion of the
Class B Common Stock as provided in this paragraph 5, such number of shares of
Class A Common Stock as are then issuable upon the conversion of all outstanding
shares of Class B Common Stock. The Corporation covenants that all shares of
Class A Common Stock which are issuable upon conversion shall, when issued, be
duly and validly issued, fully paid and nonassessable and free from all liens
and charges. The Corporation shall take all such action as may be necessary to
assure that all such shares of Class A Common Stock may be so issued without
violation of any law or any regulation, rule or other requirement of any
governmental authority applicable to the Corporation or any requirement of any
domestic securities exchange upon which shares of Class A Common Stock may be
listed. The Corporation shall not take any action which would affect the number
of shares of Class A Common Stock outstanding or issuable for any purposes
unless immediately following such action the Corporation would have authorized
but unissued shares of Class A Common Stock, not then reserved or required to be
reserved for any purpose other than the purpose of issue upon conversion of the
Class B Common Stock, sufficient to meet the reservation requirements of the
first sentence of this paragraph 5C.
5F. Registration and Listing. If any shares of Class A Common Stock
required to be so reserved for purposes of conversion hereunder require, before
such shares may be issued upon conversion, registration with or approval of any
governmental authority under any federal or state law (other than any
registration under the Securities Act of 1933, as then in effect, or any similar
federal statute then in force, or any state securities law, required by reason
of any transfer involved in such conversion), or listing on any domestic
securities exchange,
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the Corporation shall, at its expense and as promptly as possible, use its best
efforts to cause such shares to be duly registered or approved or listed, as the
case may be.
5G. Charges. The issue of certificates for shares of Class A Common Stock
upon conversion of shares of Class B Common Stock shall be made without charge
to the holders of such shares of Class B Common Stock for any issue tax in
respect thereof or other cost incurred by the Corporation in connection with
such conversion and the related issue of shares of Class A Common Stock,
provided that the Corporation shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issue and delivery of any
certificate in a name other than that of the holder of the Class B Common Stock
converted.
5H. Converted or Otherwise Acquired Shares To Be Retired. Any shares of
Class B Common Stock which are converted into shares of Class A Common Stock
pursuant to this paragraph 5 or otherwise acquired by the Company in any manner
whatsoever shall be permanently retired promptly on the acquisition thereof and
shall not under any circumstances be reissued, and the Corporation shall from
time to time take such appropriate action as may be necessary to reduce the
authorized number of shares of Class B Common Stock accordingly.
6. Voting Rights.
6A. General. Except as otherwise provided by law or this Article FOURTH,
the holders of the shares of Class A Common Stock shall be entitled to vote on
the election or removal of the directors of the Corporation and on all other
matters to be voted on by the stockholders of the Corporation. The holders of
the shares of Class B Common Stock shall have the right to vote on all matters
to be voted on by the stockholders of the Corporation, except the election or
removal of directors of the Corporation, and the shares of Class B Common Stock
shall not be included in determining the number of shares voting or entitled to
vote on the election or removal of such directors.
6B. Special Voting Rights. The holders of the shares of Class B Common
Stock shall be entitled to vote
17
Restated Certificate of Incorporation
<PAGE>
on, as a separate class (in addition to any other vote required by law or this
Article FOURTH), any amendments to this Certificate of Incorporation to change
the relative powers, designations, preferences and rights, qualifications,
limitations or restrictions of the shares of Class B Common Stock.
6C. Meeting Procedures. At every meeting of the holders of the Class A
Common Stock, such holders shall vote together as a class. At every meeting of
the holders of the Common Stock at which the holders of the Class B Common Stock
are entitled to vote on any matter, the holders of the Class B Common Stock and
the holders of the Class A Common Stock shall vote thereon together as a single
class, provided that the holders of the Class B Common Stock shall be entitled
to vote separately as a class on the matters specified in paragraph 6B.
6D. One Vote Per Share. On all matters to be voted on by the holders of
either class of the Common Stock, the holders of such class shall be entitled to
one vote for each share thereof held of record.
FIFTH: Management of the Affairs of the Corporation. Except as otherwise
provided by this Certificate of Incorporation or as may otherwise be provided in
the By-Laws of the Corporation, the Board of Directors of the Corporation is
expressly authorized to adopt, amend or repeal By-Laws of the Corporation.
SIXTH: Election of Directors. Election of directors of the Corporation need
not be by written ballot except and to the extent provided in the By-Laws of the
corporation.
SEVENTH: Meetings of the Board. The Board of Directors shall have the power
to hold its meetings within or outside the State of Delaware, at such place as
from time to time may be designated by the By-Laws or by resolution of the
Board.
EIGHTH: Indemnification. The Corporation shall indemnify its officers and
directors to the fullest extent permitted by law.
4. In lieu of a vote of stockholders, written consent to this Restated
Certificate of Incorporation was given by the holders of all of the
outstanding shares of
18
Restated Certificate of Incorporation
<PAGE>
stock entitled to vote thereon in accordance with the provisions of
sections 228 and 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, the said NEW ABLE HOLDING CORPORATION has caused this
certificate to be signed by Rupinder S. Sidhu, its Vice President, under its
corporate seal attested by Robert E. Weeden, its Secretary, this 30th day of
October, 1984.
NEW ABLE HOLDING CORPORATION
By /s/ RUPINDER S. SIDHU
-----------------------------------
Name: Rupinder S. Sidhu
Title: Vice President
Attest:
/s/ Robert E. Weeden
- ------------------------------
Name: Robert E. Weeden
Secretary
19
Restated Certificate of Incorporation
<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "NEW ABLE HOLDING CORPORATION", CHANGING ITS NAME FROM "NEW ABLE HOLDING
CORPORATION" TO "NEW AXIA HOLDING CORPORATION", FILED IN THIS OFFICE ON THE
THIRTEENTH DAY OF NOVEMBER, A.D. 1984, AT 8:30 O'CLOCK A.M.
/s/ EDWARD J. FREEL
------------------------------------
Edward J. Freel, Secretary of State
2028380 8100 AUTHENTICATION: 9203861
981277567 DATE: 07-17-98
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
New Able Holding Corporation
New Able Holding Corporation, a Delaware corporation, hereby certifies as
follows:
FIRST: The Board of Directors of said corporation duly adopted a resolution
setting forth and declaring advisable the amendment of Article First of the
certificate of incorporation of said corporation so that, as amended, said
Article shall read as follows:
"FIRST. The name of this corporation is New AXIA Holding Corporation."
SECOND. In lieu of a vote of stockholders, written consent to the foregoing
amendment has been given by the holders of all of the outstanding stock entitled
to vote thereon in accordance with the provisions of section 228 of the General
Corporation Law of the State of Delaware, and such amendment has been duly
adopted in accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, New Able Holding Corporation has caused this
certificate to be signed by Raymond J. Kulla, its Vice President and Secretary,
and by H. John Vogt, its Vice President, on the 5th day of November, 1984.
By: /s/ RAYMOND J. KULLA
--------------------------------
Raymond J. Kulla, Secretary
Attest:
New Able Holding Corporation
By: /s/ H. JOHN VOGT
---------------------------------
H. John Vogt, Vice President
<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT OF "NEW AXIA HOLDING CORPORATION", FILED IN THIS OFFICE ON THE
THIRTIENTH DAY OF JANUARY, A.D. 1987, AT 10 O'CLOCK A.M.
[SEAL APPEARS HERE] /s/ EDWARD J. FREEL
------------------------------------
Edward J. Freel, Secretary of State
2028380 8100 AUTHENTICATION: 9203862
981277567 DATE: 07-17-98
<PAGE>
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF NEW AXIA HOLDING CORPORATION
-------------------------------------
NEW AXIA HOLDING CORPORATION, a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of said
corporation, resolutions were duly adopted proposing and declaring advisable
the following proposed amendments to the Restated Certificate of Incorporation
of said corporation:
RESOLVED, that the Board of Directors hereby recommends to the
Stockholders of this Corporation, that the Restated Certificate of
Incorporation of this Corporation be amended to increase the number of
authorized shares of Class A Common Stock to 80,000 shares and that the
first paragraph of Article FOURTH of the Restated Certificate of
Incorporation of this Corporation be and hereby is amended to read as
follows:
"FOURTH: Capitalization. The total number of shares of all classes of
stock which the Corporation shall have authority to issue is 210,296
shares, consisting of (a) 110,000 shares of $6.00 Cumulative Preferred
Stock, par value $.01 per share (the "Preferred Stock") and (b)
100,296 shares of Common Stock, par value $.10 per share (the "Common
Stock"), of which 80,000 shares shall be Class A Common Stock (the
"Class A Common Stock") and 20,296 shares shall be Class B Common
Stock"). All cross references in each Part of this Article FOURTH
refer to other paragraphs in such Part unless otherwise indicated, and
terms defined in any Part of this Article FOURTH shall have the
meaning therein given only when used within such Part or when used
together with specific reference to such meaning."
* * *
RESOLVED, that the Board of Directors hereby recommends to the
stockholders of this Corporation, that the Restated Certificate of
Incorporation of this Corporation be amended to reflect the provisions of
Section 102(b)(7) of the Delaware General Corporation Law, limiting the
personal liability of a director to the Corporation or its
<PAGE>
stockholders for monetary damages for breach of fiduciary duty by the
addition of a new Article NINTH, to read as follows:
"NINTH: Directors' Liability. To the fullest extent permitted by the
Delaware General Corporation Law as the same exists or may hereafter
be amended, a director of this corporation shall not be liable to the
corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director."
SECOND: That in lieu of a meeting and vote of stockholders, the
stockholders of said corporation have given unanimous written consent to said
amendments in accordance with the provisions of Section 228 of the General
Corporation Law of the State of Delaware.
THIRD: That said amendments were duly adopted in accordance with the
provisions of Sections 228 and 242 of the General Corporation Law of the State
of Delaware.
IN WITNESS WHEREOF, said New AXIA Holding Corporation has caused this
certificate to be signed by Raymond J. Kulla, its Vice President, and attested
to by LaRue Carlson, its Assistant Secretary, this 27th day of January, 1987.
NEW AXIA HOLDING CORPORATION
By: /s/ Raymond J. Kulla
-----------------------
Its Vice President
-----------------------
ATTEST:
By: /s/ LaRue Carlson
-------------------------
Assistant Secretary
[SEAL APPEARS HERE]
<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE PAGE 1
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "NEW AXIA HOLDING CORPORATION", FILED IN THIS OFFICE ON THE TWENTY-FIRST DAY
OF DECEMBER, A.D. 1989, AT 1:10 O'CLOCK P.M.
[SEAL APPEARS HERE] /s/ EDWARD J. FREEL
------------------------------------
Edward J. Freel, Secretary of State
2028380 8100 AUTHENTICATION: 9203863
981277567 DATE: 07-17-98
<PAGE>
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
NEW AXIA HOLDING CORPORATION
New AXIA Holding Corporation, a Delaware corporation, (the
"Corporation"), hereby certifies as follows:
FIRST. The Board of Directors of the Corporation duly adopted a
resolution setting forth and declaring advisable the amendment of Article FOURTH
of the Restated Certificate of Incorporation of the Corporation to increase the
total number of shares of all classes of stock which the Corporation shall have
authority to issue from 210,296 shares, consisting of (a) 110,000 shares of
$6.00 Cumulative Preferred Stock, par value $.01 per share, and (b) 100,296
shares of Common Stock, par value $.10 per share, of which 80,000 shares are
Class A Common Stock and 20,296 shares are Class B Common Stock, to 17,110,000
shares, consisting of (a) 110,000 shares of $6.00 Cumulative Preferred Stock,
par value $.01 per share, and (b) 17,000,000 shares of Common Stock, par value
$.10 per share, of which 8,500,000 shares shall be Class A Common Stock and
8,500,000 shares shall be Class B Common Stock, so that, as amended, the first
sentence of said Article shall read in its entirety as follows:
<PAGE>
FOURTH: Capitalization. The total number of shares of all
classes of stock which the Corporation shall have authority to issue is
17,110,000 shares, consisting of (a) 110,000 shares of $6.00 Cumulative
Preferred Stock, par value $.01 per share (the "Preferred Stock"), and
(b) 17,000,000 shares of Common Stock, par value $.10 per share (the
"Common Stock"), of which 8,500,000 shares shall be Class A Common
Stock (the "Class A Common Stock") and 8,500,000 shares shall be Class
B Common Stock (the "Class B Common Stock"). All cross references in
each Part of this Article FOURTH refer to other paragraphs in such
Part unless otherwise indicated, and terms defined in any part of this
Article FOURTH shall have the meaning therein given only when used
within such Part or when used together with specific reference to such
meeting.
SECOND. The Board of Directors of the Corporation duly adopted a
resolution setting forth and declaring advisable the amendment of Paragraph 5 of
Part II of Article FOURTH of the Restated Certificate of Incorporation of the
Corporation to amend the terms of conversion of the Class B Common Stock into
the Class A Common Stock, and of the Class A Common Stock into the Class B
Common Stock, and certain other matters, so that, as amended, paragraph 5 of
Part II of said Article shall read in its entirety as follows:
5. Conversion.
5A. Mandatory Conversion of Class B Common Stock Upon Certain
Transfers. Immediately upon the transfer of any shares of Class B Common
Stock to any person other than an Affiliate of the holder of such
shares, such shares shall, without any action on the part of the holder
thereof, be converted into the same number of shares of
-2-
<PAGE>
Class A Common Stock. Upon the surrender of any certificates which prior
to the transfer thereof represented shares of Class B Common Stock for
registraton of transfer, (a) the Corporation shall issue one or more new
certificates, in such denomination or denominations as may be requested,
for the same aggregate number of shares of Class A Common Stock
represented by the certificates so surrendered and registered as the
holder thereof may request and (b) the rights of the holder of such
shares of Class B Common Stock shall cease with respect to the number of
shares so transferred and the person or persons in whose name or names
the certificates for shares of Class A Common Stock are to be issued
upon such transfer shall be deemed to have become the holder or holders
of record of the shares of Class A Common Stock represented thereby.
Notwithstanding the foregoing, any holder of Class B Common Stock may
waive, in a writing delivered to the Corporation at the time of any
transfer of shares to any Person other than an Affiliate of such
holder, the requirement that such shares of Class B Common Stock be
converted into shares of Class A Common Stock pursuant to this
subdivision 5A. For purposes of this subdivision 5A, a transfer of
shares of Class B Common Stock shall not be deemed to occur until the
transfer is registered on the stock transfer books of the Corporation.
5B. Mandatory Conversion of Class B Common Stock Upon
Registration and Sale of Securities. Upon the sale of shares of Common
Stock pursuant to an effective registration statement filed under
section 5 of the Securities Act, each share of Class B Common Stock sold
pursuant to such registration statement shall, without any action on the
part of the holder thereof, be converted into a share of Class A Common
Stock. Upon the surrender of any certificate or certificates which prior
to the registered sale thereof represented shares of Class B Common
Stock, (a) the Corporation shall issue one or more new certificates, in
such denominations as may be requested, for the same aggregate number of
shares of Class A
-3-
<PAGE>
Common Stock represented by the certificate or certificates so
surrendered and registered as the purchaser of such shares may request
and (b) the rights of the holder of such shares of Class B Common Stock
shall cease with respect to the number of shares so sold and the person
or persons in whose name or names the certificates for shares of Class A
Common Stock are to be issued upon such sale shall be deemed to have
become the holder or holders of record of the shares of Class A Common
Stock represented thereby.
5C. Optional Conversion of Class A Common Stock. Any holder of
Class A Common Stock shall be entitled at any time and from time to time
to convert any shares of Class A Common Stock into an equal number of
shares of Class B Common Stock upon the surrender of the certificate or
certificates representing the shares of Class A Common Stock to be
converted at the principal office of the Corporation, together with
written notice by the holder of such shares of Class A Common Stock
stating that such holder desires to convert the shares of Class A
Common Stock represented by such certificate or certificates into shares
of Class B Common Stock. Promptly after such surrender and receipt of
such written notice, the Corporation will issue and deliver in
accordance with such instructions the certificate or certificates for
the shares of Class B Common Stock issuable upon such conversion. In
case less than all the shares represented by and any such certificate
are to be converted, a new certificate shall be issued to the holder of
the shares of Class A Common Stock representing the shares not to be
converted, without cost to the holder thereof. Upon such surrender, the
rights of the holder of such Class A Common Stock shall cease with
respect to the number of shares so converted and the person or persons
in whose name or names the certificates for shares of Class B Common
Stock are to be issued shall be deemed to have become the holder or
holders of record of the shares of Class B Common Stock represented
thereby. The right of a holder of shares of Class A Common Stock to
convert such shares into shares of Class B Common
-4-
<PAGE>
Stock pursuant to this subdivision 5C shall terminate on the date such
shares of Class A Common Stock shall have been registered pursuant to an
effective registration statement filed under section 5 of the Securities
Act. Notwithstanding anything to the contrary in this subdivision 5C, no
shares of Class A Common Stock shall be converted into shares of Class B
Common Stock if, after giving effect to such conversion, there would be
no shares of Class A Common Stock outstanding.
5D. Reservation of Shares, Validity, etc. The Corporation shall
at all times reserve and keep available out of its authorized but
unissued shares of Class A Common Stock, or its treasury shares, solely
for the purpose of issue upon the conversion of the Class B Common Stock
as provided in this subdivision 5, such number of shares of Class A
Common Stock as are then issuable upon the conversion of all outstanding
shares of Class B Common Stock. The Corporation shall at all times
reserve and keep available out of its authorized but unissued shares of
Class B Common Stock, or its treasury shares, solely for the purpose of
issue upon the conversion of the Class A Common Stock as provided in
this subdivision 5, such number of shares of Class B Common Stock as are
then issuable upon the conversion of all outstanding shares of Class A
Common Stock. The Corporation covenants that all shares of Class A
Common Stock and Class B Common Stock which are issuable upon conversion
shall, when issued, be duly and validly issued, fully paid and
nonassessable and free from all liens and charges. The Corporation shall
take all such action as may be necessary to assure that all such shares
of Class A Common Stock and Class B Common Stock may be so issued
without violation of any law or any regulation, rule or other
requirement of any governmental authority applicable to the Corporation
or any requirement of any domestic securities exchange upon which shares
of Class A Common Stock or Class B Common Stock may be listed. The
Corporation shall not take any action which would affect the number of
shares of Class A Common Stock or Class B Common Stock outstanding or
-5-
<PAGE>
issuable for any purposes unless immediately following such action the
Corporation would have authorized but unissued shares of Class A Common
Stock and Class B Common Stock, and/or treasury shares, not then
reserved or required to be reserved for any purpose other than the
purpose of issue upon conversion of Class B Common Stock or Class A
Common Stock, as the case may be, sufficient to meet the reservation
requirements of the first two sentences of this subdivision 5D.
5E. Registration and Listing. If any shares of Class A Common
Stock or Class B Common Stock required to be reserved for purposes of
conversion hereunder require, before such shares may be issued upon
conversion, registration with or approval of any governmental authority
under any federal or state law (other than any registration under the
Securities Act or any state securities law required by reason of any
transfer involved in such conversion), or listing on any domestic
securities exchange, the Corporation shall, at its expense and as
promptly as possible, use its best efforts to cause such shares to be
duly registered or approved or listed, as the case may be.
5F. Charges. The issue of certificates for shares of Class A
Common Stock upon conversion of shares of Class B Common Stock and
certificates for shares of Class B Common Stock upon conversion of
shares of Class A Common Stock shall be made without charge to the
holders of such shares for any issue tax in respect thereof or other
costs incurred by the Corporation in connection with such conversion and
the related issue of shares of Class A Common Stock or Class B Common
Stock, as the case may be; provided that the Corporation shall not be
required to pay any tax which may be payable in respect of any transfer
involved in the issue and delivery of any certificate in a name other
than that of the holder of the Class B Common Stock converted or the
holder of the Class A Common Stock converted, as the case may be.
-6-
<PAGE>
THIRD. In lieu of a vote of stockholders, written consent to the
foregoing amendment has been given by the holders of a majority of each class
of outstanding Common Stock, and of all outstanding shares of Preferred Stock,
entitled to vote thereon in accordance with the provisions of Section 228 of the
General Corporation Law of the State of Delaware; and such amendment has been
duly adopted in accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, AXIA Incorporated has caused this Certificate of
Amendment to be signed by H. John Vogt, its Vice President - Finance and
Treasurer, and attested by Raymond J. Kulla, its Secretary, on the 21st day of
December, 1989.
AXIA Incorporated
By /s/ H. John Vogt
--------------------------------
H. John Vogt
Vice President - Finance
and Treasurer
Attest:
By /s/ Raymond J. Kulla
-----------------------
Raymond J. Kulla
Secretary
-7-
<PAGE>
State of Delaware
Office of the Secretary of State Page 1
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
OWNERSHIP, WHICH MERGES:
"AXIA INCORPORATED", A DELAWARE CORPORATION,
WITH AND INTO "NEW AXIA HOLDING CORPORATED" UNDER THE NAME OF "AXIA
INCORPORATED", A CORPORATION ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE
OF DELAWARE, AS RECEIVED AND FILED IN THIS OFFICE THE TWENTY-FIRST DAY OF
DECEMBER, A.D. 1989, AT 1:11 O'CLOCK P.M.
[SEAL
APPEARS /s/ EDWARD J. FREEL
HERE] -----------------------------------
Edward J. Freel, Secretary of State
2028380 8100M AUTHENTICATION: 9203864
981277567 DATE: 07-17-98
<PAGE>
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
AXIA INCORPORATED
INTO
NEW AXIA HOLDING CORPORATION
UNDER SECTION 253 OF THE GENERAL CORPORATION
LAW OF THE STATE OF DELAWARE
NEW AXIA HOLDING CORPORATION, a corporation organized and existing under
the laws of the State of Delaware (the "Corporation"),
DOES HEREBY CERTIFY:
FIRST: That the Corporation was incorporated on the fifteenth (15th) day
of February 1984 pursuant to the General Corporation Law of the State of
Delaware (the "DGCL"), the provisions of which permit the merger of a subsidiary
corporation into a parent corporation organized and existing under the laws of
said State.
SECOND: That the Corporation owns all of the 1,000 outstanding shares of
common stock, par value $.10 per share, of AXIA Incorporated ("AXIA"), a
corporation incorporated pursuant to the DGCL, and AXIA has no class of capital
stock outstanding other than said common stock.
THIRD: That the Corporation, pursuant to the following resolutions of
its Board of Directors unanimously adopted on December 20, 1989 at a duly
constituted meeting thereof, has determined to merge AXIA with and into itself
and change its name to "AXIA Incorporated":
<PAGE>
"RESOLVED, that effective upon the filing with the Secretary of State of
the State of Delaware of an appropriate Certificate of Ownership and Merger,
AXIA shall be merged with and into the Corporation, the separate existence of
AXIA shall cease (except as it may be continued by operation of law), the
Corporation shall continue as the surviving corporation and Article FIRST of the
Corporation's Restated Certificate of Incorporation shall be amended to read
follows: 'FIRST. The name of this Corporation is AXIA Incorporated.'
RESOLVED, that the Merger shall have the effects specified in Section
259(a) of the DGCL.
RESOLVED, that the Chairman and President or any Vice President of the
Corporation be and each herby is authorized to make and sign, and the Secretary
or any Assistant Secretary of the Corporation be and each hereby is authorized
to attest, an appropriate Certificate of Ownership and Merger setting forth a
copy of these resolutions providing for the Merger and the date of adoption
hereof and to cause the same to be filed with the Secretary of State of the
State of Delaware and a certified copy to be recorded by the office of the
Recorder of Deeds of the County of New Castle, Delaware, and to do all acts and
things, whatsoever, whether or without the State of Delaware, which may
-2-
<PAGE>
be in any way necessary or appropriate to effect the Merger."
IN WITNESS WHEREOF, NEW AXIA HOLDING CORPORATION has caused this
Certificate to be signed by H. John Vogt, its Vice President - Finance and
Treasurer, and attested by Raymond J. Kulla, its Secretary, this 21st day of
December, 1989.
NEW AXIA HOLDING CORPORATION
By: /s/ H. JOHN VOGT
--------------------------
H. John Vogt
Vice President - Finance
and Treasurer
ATTEST:
By: /s/ RAYMOND J. KULLA
---------------------------
Raymond J. Kulla
Secretary
-3-
<PAGE>
State of Delaware
Office of the Secretary of State Page 1
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
MERGER, WHICH MERGES:
"AXIA ACQUISITION CORP.", A DELAWARE CORPORATION,
WITH AND INTO "AXIA INCORPORATED" UNDER THE NAME OF "AXIA INCORPORATED",
A CORPORATION ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF DELAWARE, AS
RECEIVED AND FILED IN THIS OFFICE THE FIFTEENTH DAY OF MARCH, A.D. 1994, AT 9
O'CLOCK A.M.
[SEAL
APPEARS /s/ EDWARD J. FREEL
HERE] -----------------------------------
Edward J. Freel, Secretary of State
2028380 8100M AUTHENTICATION: 9203865
981277567 DATE: 07-17-98
<PAGE>
CERTIFICATE OF MERGER
OF
AXIA ACQUISITION CORP.,
a Delaware corporation
INTO
AXIA INCORPORATED,
a Delaware corporation
Pursuant to Section 251(c) of the General Corporation Law of the State
of Delaware, AXIA Incorporated, a Delaware corporation, DOES HEREBY CERTIFY to
the following information concerning the merger of Axia Acquisition Corp. with
and into AXIA Incorporated:
1. The name and state of incorporation of each of the constituent
corporations are as follows:
Name State of Incorporation
---- ----------------------
Axia Acquisition Corp. Delaware
AXIA Incorporated Delaware
2. An Agreement and Plan of Merger, dated as of January 31, 1994 (the
"Agreement and Plan of Merger"), between Axia Acquisition Corp., a Delaware
corporation, and AXIA Incorporated, has been adopted by the holder of all of the
outstanding shares of capital stock of Acquisition in accordance with Section
228 of the General Corporation Law of the State of Delaware; in lieu of a vote
of stockholders, written consent to the Agreement and Plan of Merger has been
given by the holders of a majority of the outstanding shares of each class of
capital stock of AXIA Incorporated entitled to vote thereon in accordance with
Section 228 of the General Corporation Law of the State of Delaware; and the
Agreement and Plan of Merger has been approved, adopted, certified, executed and
acknowledged by each of the constituent corporations in accordance with Section
251(c) of the General Corporation Law of the State of Delaware.
3. The name of the surviving corporation is AXIA Incorporated.
4. The Restated Certificate of Incorporation of the surviving
corporation as amended hereby shall be as set forth in Exhibit A attached
hereto.
5. The executed Agreement and Plan of Merger is on file at the principal
place of business of AXIA Incorporated, the surviving corporation, 2001 Spring
Road, Suite 300, Oak Brook, Illinois 60521. A copy of the Agreement and Plan
<PAGE>
of Merger will be furnished by AXIA Incorporated, the surviving corporation, on
request and without cost, to any stockholder of Acquisition or AXIA
Incorporated.
IN WITNESS WHEREOF, AXIA Incorporated has caused this Certificate to be
signed by Dennis Sheehan, its President, and attested by Lyle Feye, its Asst.
Secretary, this 15th day of March, 1994.
AXIA INCORPORATED
By: /s/ DENNIS SHEEHAN
----------------------------
Name: Dennis Sheehan
Title: President
ATTEST:
By: /s/ LYLE FEYE
------------------------
Name: Lyle Feye
Title: Asst. Secretary
<PAGE>
EXHIBIT A
<PAGE>
RESTATED
CERTIFICATE OF INCORPORATION
OF
AXIA INCORPORATED
1. The name of the corporation is AXIA Incorporated.
2. The address of the corporation's registered office in Delaware is 15
East North Street, Dover (Kent County), Delaware 19901. United Corporate
Services, Inc. is the corporation's registered agent at that address.
3. The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the Delaware General
Corporation Law.
4. The corporation shall have authority to issue a total of 100 shares
of common stock of the par value of $0.01 per share.
5. The Board of Directors shall have the power to make, alter or repeal
the by-laws of the corporation.
6. The election of the Board of Directors need not be by written
ballot.
7. The corporation shall indemnify to the fullest extent permitted by
Section 145 of the General Corporation Law of Delaware as amended from time to
time each person that such Section grants the corporation the power to
indemnify.
8. No director shall be personally liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director for
any act or omission occurring subsequent to the date when this provision becomes
effective, except that he may be liable (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (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 an improper
personal benefit.
9. The corporation elects not to be governed by Section 203 of the
Delaware General Corporation Law.
<PAGE>
State of Delaware
Office of the Secretary of State Page 1
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
CHANGE OF REGISTERED AGENT OF "AXIA INCORPORATED", FILED IN THIS OFFICE ON
THE SIXTH DAY OF FEBRUARY, A.D. 1995, AT 10 O'CLOCK A.M.
[SEAL
APPEARS /s/ EDWARD J. FREEL
HERE] -----------------------------------
Edward J. Freel, Secretary of State
2028380 8100 AUTHENTICATION: 9203866
981277567 DATE: 07-17-98
<PAGE>
CERTIFICATE OF CHANGE OF REGISTERED AGENT
AND
REGISTERED OFFICE
*****
AXIA Incorporated, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
The present registered agent of the corporation is United Corporate
Services, Inc. and the present registered office of the corporation is in the
county of Kent.
The Board of Directors of AXIA Incorporated adopted the following
resolution on the 1st day of February, 1995.
Resolved, that the registered office of AXIA Incorporated in the state
of Delaware be and it hereby is changed to Corporation Trust Center, 1209 Orange
Street, in the City of Wilmington, County of New Castle, and the authorization
of the present registered agent of this corporation be and the same is hereby
withdrawn, the THE CORPORATION TRUST COMPANY, shall be and is hereby constituted
and appointed the registered agent of this corporation at the address of its
registered office.
IN WITNESS WHEREOF, AXIA Incorporated has caused this statement to be
signed by Lyle J. Feye, its __________________*, this 1st day of February, 1995.
/s/ LYLE J. FEYE
-----------------------------------
Vice President
-----------------------------------
(Title)
*Any authorized officer or the chairman or Vice-Chairman of the Board of
Directors may execute this certificate.
(DEL. - 264 - 6/15/94)
<PAGE>
EXHIBIT 3.2
As Amended September 30, 1986 November 13, 1984
(Sec. 6.4 Indemnification) (Name change).
BY-LAWS Annex A
OF
NEW AXIA HOLDING CORPORATION
ARTICLE I
Stockholders
------------
Section 1.1. Annual Meetings. An annual meeting of stockholders shall be
held for the election of directors at such date, time and place either within or
without the State of Delaware as may be designated by the Board of Directors
from time to time. Any other proper business may be transacted at the annual
meeting.
Section 1.2. Special Meetings. Special meetings of stockholders may be
called at any time by the Chairman of the Board, if any, the Vice Chairman of
the Board, if any, the President or the Board of Directors, to be held at such
date, time and place either within or without the State of Delaware as may be
stated in the notice of the meeting. A special meeting of stockholders shall be
called by the Secretary upon the written request, stating the purpose of the
meeting, of stockholders who together own of record a majority of the
outstanding shares of each class of stock entitled to vote at such meeting.
Section 1.3. Notice of Meetings. Whenever stockholders are required or
permitted to take any action at a meeting, a written notice of the meeting shall
be given which shall state the place, date and hour of the meeting, and, in the
case of a special meeting, the purpose or purposes for which the meeting is
called. Unless otherwise provided by law, the written notice of any meeting
shall be given not less than ten nor more than sixty days before the date of the
meeting to each stockholder entitled to vote at such meeting. If mailed, such
notice shall be deemed to be given when deposited in the United States mail,
postage prepaid, directed to the stockholder at such stockholder's address as
it appears on the records of the Corporation.
Section 1.4. Adjournments. Any meeting of stockholders, annual or
special, may adjourn from time to time to reconvene at the same or some other
place, and notice need not be given of any such adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the Corporation may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than thirty days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of
<PAGE>
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 1.5. Quorum. At each meeting of stockholders, except where
otherwise provided by law or the certificate of incorporation or these by-laws,
the holders of a majority of the outstanding shares of each class of stock
entitled to vote at the meeting, present in person or represented by proxy,
shall constitute a quorum. For purposes of the foregoing, two or more classes or
series of stock shall be considered a single class if the holders thereof are
entitled to vote together as a single class at the meeting. In the absence of a
quorum the stockholders so present may, by majority vote, adjourn the meeting
from time to time in the manner provided by Section 1.4 of these by-laws until a
quorum shall attend. Shares of its own capital stock belonging on the record
date for the meeting to the Corporation or to another corporation, if a majority
of the shares entitled to vote in the election of directors of such other
corporation is held, directly or indirectly, by the Corporation, shall neither
be entitled to vote nor be counted for quorum purposes; provided, however, that
the foregoing shall not limit the right of the Corporation to vote stock,
including but not limited to its own stock, held by it in a fiduciary capacity.
Section 1.6. Organization. Meetings of stockholders shall be presided
over by the Chairman of the Board, if any, or in the absence of the Chairman of
the Board by the Vice Chairman of the Board, if any, or in the absence of the
Vice Chairman of the Board by the President, or in the absence of the President
by a Vice President, or in the absence of the foregoing persons by a chairman
designated by the Board of Directors, or in the absence of such designation by a
chairman chosen at the meeting. The Secretary, or in the absence of the
Secretary an Assistant Secretary, but in the absence of the Secretary and any
Assistant Secretary the chairman of the meeting may appoint any person to act as
secretary of the meeting.
Section 1.7. Voting; Proxies. Unless otherwise provided in the certificate
of incorporation, each stockholder entitled to vote at any meeting of
stockholders shall be entitled to one vote for each share of stock held by such
stockholder which has voting power upon the matter in question. Each stockholder
entitled to vote at a meeting of stockholders or to express consent or dissent
to corporate action in writing without a meeting may authorize another person or
persons to act for such stockholder by proxy, but
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<PAGE>
no such proxy shall be voted or acted upon after three years from its date,
unless the proxy provides for a longer period. A duly executed proxy shall be
irrevocable if it states that it is irrevocable and if, and only as long as, it
is coupled with an interest sufficient in law to support an irrevocable power. A
stockholder may revoke any proxy which is not irrevocable by attending the
meeting and voting in person or by filing an instrument in writing revoking the
proxy or another duly executed proxy bearing a later date with the Secretary of
the Corporation. Voting at meetings of stockholders need not be by written
ballot and need not be conducted by inspectors unless the holders of a majority
of the outstanding shares of all classes of stock entitled to vote thereon
present in person or by proxy at such meeting shall so determine. At all
meetings of stockholders for the election of directors a plurality of the votes
cast shall be sufficient to elect. With respect to other matters, unless
otherwise provided by law or by the certificate of incorporation or these
by-laws, the affirmative vote of the holders of a majority of the shares of all
classes of stock present in person or represented by proxy at the meeting and
entitled to vote on the subject matter shall be the act of the stockholders
provided that (except as otherwise required by law or by the certificate of
incorporation) the Board of Directors may require a larger vote upon any such
matter. Where a separate vote by class is required, the affirmative vote of the
holders of a majority of the shares of each class present in person or
represented by proxy at the meeting shall be the act of such class, except as
otherwise provided by law or by the certificate of incorporation or these
by-laws.
Section 1.8. Fixing Date for Determination of Stockholders of Record. In
order that the Corporation may determine the stockholders entitled to notice of
or to vote at any meeting of stockholders or any adjournment thereof, or to
express consent to corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion
or exchange of stock or for the purpose of any other lawful action, the Board of
Directors may fix, in advance, a record date, which shall not be more than sixty
nor less than ten days before the date of such meeting, nor more than sixty
days prior to any other action. If no record date is fixed: (1) the record date
for determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held; (2) the record date
for determining
-3-
<PAGE>
stockholders entitled to express consent to corporate action in writing without
a meeting, when no prior action by the Board is necessary, shall be the day on
which the first written consent is expressed; and (3) the record date for
determining stockholders for any other purpose shall be at the close of business
on the day on which the Board adopts the resolution relating thereto. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board may fix a new record date for the adjourned meeting.
Section 1.9. List of Stockholders Entitled to Vote. The Secretary shall
prepare and make, at least ten days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged
in alphabetical order, and showing the address of each stockholder and the
number of shares registered in the name of each stockholder. Such list shall be
open to the examination of any stockholder, for any purpose germane to the
meeting, during ordinary business hours, for a period of at least ten days prior
to the meeting, either at a place within the city where the meeting is to be
held, which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof and may be inspected by any stockholder who is present.
Section 1.10. Consent of Stockholders in Lieu of Meeting. Unless otherwise
provided in the certificate of incorporation, any action required by law to be
taken at any annual or special meeting of stockholders of the Corporation, or
any action which may be taken at any annual or special meeting of such
stockholders, may be taken without a meeting, without prior notice and without a
vote, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to those stockholders who have not
consented in writing.
ARTICLE II
Board of Directors
------------------
Section 2.1. Powers; Number; Qualifications. The business and affairs of
the Corporation shall be managed by
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<PAGE>
or under the direction of the Board of Directors, except as may be otherwise
provided by law or in the certificate of incorporation. The Board shall consist
of one or more members, the number thereof to be determined from time to time by
the Board. Directors need not be stockholders.
Section 2.2 Election; Term of Office; Resignation; Removal; Vacancies.
Each director shall hold office until the annual meeting of stockholders next
succeeding his or her election and until his or her successor is elected and
qualified or until his or her earlier resignation or removal. Any director may
resign at any time upon written notice to the Board of Directors or to the
President or the Secretary of the Corporation. Such resignation shall take
effect at the time specified therein, and unless otherwise specified therein no
acceptance of such resignation shall be necessary to make it effective. Any
director or the entire Board of Directors may be removed, with or without cause,
by the holders of a majority of the shares then entitled to vote at an election
of directors. Unless otherwise provided in the certificate of incorporation or
these by-laws, vacancies and newly created directorships resulting from any
increase in the authorized number of directors or from any other cause may be
filled by a majority of the directors then in office, although less than a
quorum, or by the sole remaining director.
Section 2.3. Regular Meetings. Regular meetings of the Board of Directors
may be held at such places within or without the State of Delaware and at such
times as the Board may from time to time determine, and if so determined notice
thereof need not be given.
Section 2.4. Special Meetings. Special meetings of the Board of Directors
may be held at any time or place within or without the State of Delaware
whenever called by the Chairman of the Board, if any, by the Vice Chairman of
the Board, if any, by the President or by any two directors. Reasonable notice
thereof shall be given by the person or persons calling the meeting.
Section 2.5. Participation in Meetings by Conference Telephone Permitted.
Unless otherwise restricted by the certificate of incorporation or these
by-laws, members of the Board of Directors, or any committee designated by the
Board, may participate in a meeting of the Board or of such committee, as the
case may be, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this by-law shall
constitute presence in person at such meeting.
-5-
<PAGE>
Section 2.6. Quorum; Vote Required for Action. At all meetings of the
Board of Directors one-third of the entire Board shall constitute a quorum for
the transaction of business. The vote of a majority of the directors present at
a meeting at which a quorum is present shall be the act of the Board unless the
certificate of incorporation or these by-laws shall require a vote of a greater
number. In case at any meeting of the Board a quorum shall not be present, the
members of the Board present may adjourn the meeting from time to time until a
quorum shall attend.
Section 2.7. Organization. Meetings of the Board of Directors shall be
presided over by the Chairman of the Board, if any, or in the absence of the
Chairman of the Board by the Vice Chairman of the Board, if any, or in the
absence of the Vice Chairman of the Board, if any, or in the absence of the Vice
Chairman of the Board by the President, or in their absence by a chairman
chosen at the meeting. The Secretary, or in the absence of the Secretary an
Assistant Secretary, shall act as secretary of the meeting, but in the absence
of the Secretary and any Assistant Secretary the chairman of the meeting may
appoint any person to act as secretary of the meeting.
Section 2.8. Action by Directors Without a Meeting. Unless otherwise
restricted by the certificate of incorporation or these by-laws, any action
required or permitted to be taken at any meeting of the Board of Directors, or
of any committee thereof, may be taken without a meeting if all members of the
Board or of such committee, as the case may be, consent thereto in writing, and
the writing or writings are filed with the minutes of proceedings of the Board
of committee.
Section 2.9. Compensation of Directors. The Board of Directors shall have
the authority to fix the compensation of directors.
ARTICLE III
Committees
----------
Section 3.1. Committees. The Board of Directors may, by resolution passed
by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more of the directors of the Corporation. The
Board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. In the absence or disqualification of a member of a committee, the
member or
-6-
<PAGE>
members thereof present at any meeting and not disqualified from voting, whether
or not such member or members constitute a quorum, may unanimously appoint
another member of the Board to act at the meeting in place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the Board, shall have and may exercise all the powers and
authority of the Board in the management of the 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 no such committee shall have power or authority
in reference to amending the certificate of incorporation, adopting an agreement
of merger or consolidation, recommending to the stockholders the sale, lease or
exchange of all or substantially all of the Corporation's property and assets,
recommending to the stockholders a dissolution of the Corporation or a
revocation of dissolution, removing or indemnifying directors or amending these
by-laws; and, unless the resolution expressly so provides, no such committee
shall have the power or authority to declare a dividend or to authorize the
issuance of stock.
Section 3.2. Committee Rules. Unless the Board of Directors otherwise
provides, each committee designated by the Board may adopt, amend and repeal
rules for the conduct of its business. In the absence of a provision by the
Board or a provision in the rules of such committee to the contrary, a majority
of the entire authorized number of members of such committee shall constitute a
quorum for the transaction of business, the vote of a majority of the members
present at a meeting at the time of such vote if a quorum is then present shall
be the act of such committee, and in other respects each committee shall
conduct its business in the same manner as the Board conducts its business
pursuant to Article II of these by-laws.
ARTICLE IV
OFFICERS
----------
Section 4.1. Officers; Election. As soon as practicable after the annual
meeting of stockholders in each year, the Board of Directors shall elect a
President and a Secretary, and it may, if it so determines, elect from among its
members a Chairman of the Board and a Vice Chairman of the Board. The Board
may also elect one or more Vice Presidents, one or more Assistant Vice
Presidents, one or more Assistant Secretaries, a Treasurer and one or more
Assistant Treasurers and such other officers as the Board may deem desirable or
appropriate and may give any of them
-7-
<PAGE>
such further designations or alternate titles as it considers desirable. Any
number of offices may be held by the same person.
Section 4.2. Term of Office; Resignation; Removal; Vacancies. Except as
otherwise provided in the resolution of the Board of Directors electing any
officer, each officer shall hold office until the first meeting of the Board
after the annual meeting of stockholders next succeeding his or her election,
and until his or her successor is elected and qualified or until his or her
earlier resignation or removal. Any officer may resign at any time upon written
notice to the Board or to the President or the Secretary of the Corporation.
Such resignation shall take effect at the time specified therein, and unless
otherwise specified therein no acceptance of such resignation shall be necessary
to make it effective. The Board may remove any officer with or without cause at
any time. Any such removal shall be without prejudice to the contractual rights
of such officer, if any, with the Corporation, but the election of an officer
shall not of itself create contractual rights. Any vacancy occurring in any
office of the Corporation by death, resignation, removal or otherwise may be
filled for the unexpired portion of the term by the Board at any regular or
special meeting.
Section 4.3. Powers and Duties. The officers of the Corporation shall
have such powers and duties in the management of the Corporation as shall be
stated in these by-laws or in a resolution of the Board of Directors which is
not inconsistent with these by-laws and, to the extent not so stated, as
generally pertain to their respective offices, subject to the control of the
Board. The Secretary shall have the duty to record the proceedings of the
meetings of the stockholders, the Board of Directors and any committees in a
book to be kept for that purpose. The Board may require any officer, agent or
employee to give security for the faithful performance of his or her duties.
ARTICLE V
Stock
Section 5.1. Certificates. Every holder of stock in the Corporation
shall be entitled to have a certificate signed by or in the name of the
Corporation by the Chairman or Vice Chairman of the Board of Directors, if any,
or the President or a Vice President, and by the Treasurer or an
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<PAGE>
Assistant Treasurer, or the Secretary or an Assistant Secretary, of the
Corporation, certifying the number of shares owned by such holder in the
Corporation. If such certificate is manually signed by one officer or manually
countersigned by a transfer agent or by a registrar, any other signature on the
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if such person were such officer, transfer agent or registrar at the date of
issue.
Section 5.2. Lost, Stolen or Destroyed Stock Certificates; Issuance of
New Certificates. The Corporation may issue a new certificate of stock in the
place of any certificate theretofore issued by it, alleged to have been lost,
stolen or destroyed, and the Corporation may require the owner of the lost,
stolen or destroyed certificate, or such owner's legal representative, to give
the Corporation a bond sufficient to indemnify it against any claim that may be
made against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
ARTICLE VI
MISCELLANEOUS
Section 6.1. Fiscal Year. The fiscal year of the Corporation shall be
determined by the Board of Directors.
Section 6.2. Seal. The Corporation may have a corporate seal which shall
have the name of the Corporation inscribed thereon and shall be in such form as
may be approved from time to time by the Board of Directors. The corporate seal
may be used by causing it or a facsimile thereof to be impressed or affixed or
in any other manner reproduced.
Section 6.3. Waiver of Notice of Meetings of Stockholders, Directors,
and Committees. Whenever notice is required to be given by law or under any
provision of the certificate of incorporation or these by-laws, a written waiver
thereof, signed by the person entitled to notice, whether before or after the
time stated therein, shall be deemed equivalent to notice. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends a meeting for the express purpose of objecting,
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<PAGE>
at the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the
stockholders, directors, or members of a committee of directors need be
specified in any written waiver of notice unless so required by the certificate
of incorporation or these by-laws.
Section 6.4 Indemnification of Directors, Officers and Employees. The
Corporation shall indemnify to the fullest extent permitted by law any person
made or threatened to be made a party to any action, suit or proceeding, whether
criminal, civil, administrative or investigative, including any action
instituted by or on behalf of the Corporation, by reason of the fact that such
person or such person's testator or intestate is or was a director or officer of
the Corporation or serves or served at the request of the Corporation any other
enterprise as a director or officer. Expenses incurred by any such person in
defending any such action, suit or proceeding shall be paid or reimbursed by the
Corporation promptly upon receipt by it of an undertaking of such person to
repay such expenses if it shall ultimately be determined that such person is not
entitled to be indemnified by the Corporation. The rights provided to any person
by this by-law shall be enforceable against the Corporation by such person who
shall be presumed to have relied upon it in serving or continuing to serve as a
director or officer as provided above. No amendment of this by-law shall impair
the rights of any person arising at any time with respect to events occurring
prior to such amendment. To the extent permitted by Delaware law, the Board may
cause the Corporation to indemnify and reimburse other employees of the
Corporation as it deems appropriate. For purposes of this by-law, the term
"Corporation" shall include any predecessor of the Corporation and any
constituent corporation (including any constituent of a constituent) absorbed by
the Corporation in a consolidation or merger; the term "other enterprise" shall
include any corporation, partnership, joint venture, trust or employee benefit
plan; service "at the request of the Corporation" shall include service as a
director or officer of the Corporation, which imposes duties on, or involves
services by, such director or officer with respect to any other enterprise or
any employee benefit plan, its participants or beneficiaries; any excise taxes
assessed on a person with respect to an employee benefit plan, shall be deemed
to be indemnifiable expenses; and action by a person with respect to any
employee benefit plan which such person reasonably believes to be in the
interest of the participants and beneficiaries of such plan shall be deemed to
be action not opposed to the best interests of the Corporation.
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<PAGE>
Section 6.5. Interested Directors; Quorum. No contract or transaction
between the Corporation and one or more of its directors or officers, or between
the Corporation and any other corporation, partnership, association or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely because his or her or their
votes are counted for such purpose, if: (1) the material facts as to his or her
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board or the committee, and the Board or committee in good
faith authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested directors
be less than a quorum; or (2) the material facts as to his or her relationship
or interest and as to the contract or transaction are disclosed or are known to
the stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or (3) the
contract or transaction is fair as to the Corporation as of the time it is
authorized, approved or ratified, by the Board, a committee thereof or the
stockholders. Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board or of a committee which
authorizes the contract or transaction.
Section 6.6. Form of Records. Any records maintained by the Corporation
in the regular course of its business, including its stock ledger, books of
account and minute books, may be kept on, or be in the form of, punch cards,
magnetic tape, photographs, microphotographs or any other information storage
device, provided that the records so kept can be converted into clearly legible
form within a reasonable time. The Corporation shall so convert any records so
kept upon the request of any person entitled to inspect the same.
Section 6.7. Amendment of By-Laws. These by-laws may be amended or
repealed, and new by-laws adopted, by the Board of Directors, but the
stockholders entitled to vote may adopt additional by-laws and may amend or
repeal any by-law whether or not adopted by them.
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<PAGE>
EXHIBIT 4.1
================================================================================
INDENTURE
DATED AS OF JULY 22, 1998
AMONG
AXIA FINANCE CORP,
AXIA INCORPORATED,
THE GUARANTORS NAMED HEREIN
AND
STATE STREET BANK AND TRUST COMPANY, AS TRUSTEE
__________________
UP TO $150,000,000
10 3/4% SENIOR SUBORDINATED NOTES DUE 2008, SERIES A
10 3/4% SENIOR SUBORDINATED NOTES DUE 2008, SERIES B
================================================================================
<PAGE>
CROSS-REFERENCE TABLE
TRUST INDENTURE INDENTURE
ACT SECTION SECTION
- --------------- ---------
(S) 310(a)(1)................................................ 7.10
(a)(2)................................................ 7.10
(a)(3)................................................ N.A.
(a)(4)................................................ N.A.
(a)(5)................................................ 7.08, 7.10.
(b)................................................... 7.08; 7.10; 13.02
(c)................................................... N.A.
(S) 311(a)................................................... 7.11
(b)................................................... 7.11
(c)................................................... N.A.
(S) 312(a)................................................... 2.05
(b)................................................... 13.03
(c)................................................... 13.03
(S) 313(a)................................................... 7.06
(b)(1)................................................ 7.06
(b)(2)................................................ 7.06
(c)................................................... 7.06; 13.02
(d)................................................... 7.06
(S) 314(a)................................................... 4.12; 13.02
(b)................................................... N.A.
(c)(1)................................................ 13.04
(c)(2)................................................ 13.04
(c)(3)................................................ N.A.
(d)................................................... N.A.
(e)................................................... 13.05
(f)................................................... N.A.
(S) 315(a)................................................... 7.01(b)
(b)................................................... 7.05; 13.02
(c)................................................... 7.01(a)
(d)................................................... 7.01(c)
(e)................................................... 6.11
(S) 316(a)(last sentence).................................... 2.09
(a)(1)(A)............................................. 6.05
(a)(1)(B)............................................. 6.04
(a)(2)................................................ N.A.
(b)................................................... 6.07
(c)................................................... 10.04
(S) 317(a)(1)................................................ 6.08
(a)(2)................................................ 6.09
(b)................................................... 2.04
(S) 318(a)................................................... 13.01
________________
N.A. means Not Applicable.
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of the Indenture.
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<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01 Definitions.................................................. 1
SECTION 1.02 Incorporation by Reference of Trust Indenture Act............ 19
SECTION 1.03 Rules of Construction........................................ 19
ARTICLE TWO
THE SECURITIES
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 Assets in Trust......................... 21
SECTION 2.05. Holder Lists................................................. 22
SECTION 2.06. Transfer and Exchange........................................ 22
SECTION 2.07. Replacement Securities....................................... 23
SECTION 2.08. Outstanding Securities....................................... 23
SECTION 2.09. Treasury Securities.......................................... 23
SECTION 2.10. Temporary Securities......................................... 23
SECTION 2.11. Cancellation................................................. 24
SECTION 2.12. Defaulted Interest........................................... 24
SECTION 2.13. CUSIP Number................................................. 24
SECTION 2.14. Deposit of Moneys............................................ 24
SECTION 2.15. Book-Entry Provisions for Global Securities.................. 25
SECTION 2.16. Registration of Transfers and Exchanges...................... 26
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee........................................... 29
SECTION 3.02. Selection of Securities To Be Redeemed....................... 29
SECTION 3.03. Notice of Redemption......................................... 30
SECTION 3.04. Effect of Notice of Redemption............................... 30
SECTION 3.05. Deposit of Redemption Price.................................. 31
SECTION 3.06. Securities Redeemed in Part.................................. 31
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities........................................ 31
SECTION 4.02. Maintenance of Office or Agency.............................. 31
SECTION 4.03. Transactions with Affiliates................................. 32
SECTION 4.04. Limitation on Indebtedness................................... 32
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SECTION 4.05. Disposition of Proceeds of Asset Sales....................... 34
SECTION 4.06. Limitation on Restricted Payments............................ 35
SECTION 4.07. Corporate Existence.......................................... 38
SECTION 4.08. [Intentionally Omitted]...................................... 38
SECTION 4.09. Notice of Defaults........................................... 38
SECTION 4.10. [Intentionally Omitted]...................................... 38
SECTION 4.11. Compliance Certificate....................................... 38
SECTION 4.12. Provision of Financial Information........................... 39
SECTION 4.13. [Intentionally Omitted]...................................... 39
SECTION 4.14. Change of Control............................................ 39
SECTION 4.15. [Intentionally Omitted]...................................... 40
SECTION 4.16. Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries............................ 40
SECTION 4.17. Designation of Unrestricted Subsidiaries..................... 40
SECTION 4.18. Limitation on Liens.......................................... 41
SECTION 4.19. Guarantee of Securities by Restricted Subsidiaries........... 41
SECTION 4.20. Limitation on the Sale or Issuance of Equity Interests
of Restricted Subsidiaries................................... 42
SECTION 4.21. Limitation on Layering....................................... 42
ARTICLE FIVE
MERGERS; SUCCESSOR CORPORATION
SECTION 5.01. Mergers, Sale of Assets, etc................................. 42
SECTION 5.02. Successor Corporation Substituted............................ 43
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default............................................ 43
SECTION 6.02. Acceleration................................................. 45
SECTION 6.04. Waiver of Past Default....................................... 46
SECTION 6.05. Control by Majority.......................................... 46
SECTION 6.07. Rights of Holders To Receive Payment......................... 47
SECTION 6.08. Collection Suit by Trustee................................... 47
SECTION 6.09. Trustee May File Proofs of Claim............................. 47
SECTION 6.10. Priorities................................................... 47
SECTION 6.11. Undertaking for Costs........................................ 48
ARTICLE SEVEN
TRUSTEE
SECTION 7.01 Duties of Trustee............................................ 48
SECTION 7.02. Rights of Trustee............................................ 49
SECTION 7.03. Individual Rights of Trustee................................. 50
SECTION 7.04. Trustee's Disclaimer......................................... 50
SECTION 7.05. Notice of Defaults........................................... 50
SECTION 7.06. Reports by Trustee to Holders................................ 51
SECTION 7.07. Compensation and Indemnity................................... 51
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SECTION 7.08. Replacement of Trustee....................................... 52
SECTION 7.09. Successor Trustee by Merger, etc............................. 52
SECTION 7.10. Eligibility; Disqualification................................ 53
SECTION 7.11. Preferential Collection of Claims Against Company............ 53
ARTICLE EIGHT
SUBORDINATION OF SECURITIES
SECTION 8.01. Securities Subordinated to Senior Indebtedness............... 53
SECTION 8.02. No Payment on Securities in Certain Circumstances............ 53
SECTION 8.03. Payment Over of Proceeds upon Dissolution, etc............... 54
SECTION 8.04. Subrogation.................................................. 55
SECTION 8.05. Obligations of Company Unconditional......................... 56
SECTION 8.06. Notice to Trustee............................................ 56
SECTION 8.07. Reliance on Judicial Order or Certificate of
Liquidating Agent............................................ 57
SECTION 8.08. Trustee's Relation to Senior Indebtedness.................... 57
SECTION 8.09. Subordination Rights Not Impaired by Acts or Omissions
of the Company or Holders of Senior Indebtedness............. 57
SECTION 8.10. Holders Authorize Trustee To Effectuate Subordination
of Securities................................................ 57
SECTION 8.11. This Article Not To Prevent Events of Default................ 58
SECTION 8.12. Trustee's Compensation Not Prejudiced........................ 58
SECTION 8.13. No Waiver of Subordination Provisions........................ 58
SECTION 8.14. Subordination Provisions Not Applicable to Money Held in Trust
for Holders; Payments May Be Paid Prior to Dissolution....... 58
SECTION 8.15. Acceleration of Securities................................... 58
ARTICLE NINE
DISCHARGE OF INDENTURE
SECTION 9.01. Termination of Company's Obligations......................... 59
SECTION 9.02. Application of Trust Money................................... 60
SECTION 9.03. Repayment to Company......................................... 60
SECTION 9.04. Reinstatement................................................ 60
ARTICLE TEN
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 10.01. Without Consent of Holders................................... 61
SECTION 10.02. With Consent of Holders...................................... 61
SECTION 10.03. Compliance with Trust Indenture Act.......................... 63
SECTION 10.04. Record Date for Consents and Effect of Consents.............. 63
SECTION 10.05. Notation on or Exchange of Securities........................ 63
SECTION 10.06. Trustee To Sign Amendments, etc.............................. 63
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ARTICLE ELEVEN
GUARANTEE
SECTION 11.01. Unconditional Guarantee...................................... 64
SECTION 11.02. Severability................................................. 64
SECTION 11.03. Release of a Guarantor....................................... 64
SECTION 11.04. Limitation of Guarantor's Liability.......................... 65
SECTION 11.05. Contribution................................................. 65
SECTION 11.06. Execution of Security Guarantee.............................. 65
SECTION 11.07. Subordination of Subrogation and Other Rights................ 66
ARTICLE TWELVE
SUBORDINATION OF GUARANTEE
SECTION 12.01. Guarantee Obligations Subordinated to Guarantor
Senior Indebtedness.......................................... 66
SECTION 12.02. No Payment on Guarantees in Certain Circumstances............ 66
SECTION 12.03. Payment Over of Proceeds upon Dissolution, etc............... 67
SECTION 12.04. Subrogation.................................................. 68
SECTION 12.05. Obligations of Guarantors Unconditional...................... 68
SECTION 12.06. Notice to Trustee............................................ 69
SECTION 12.07. Reliance on Judicial Order or Certificate of
Liquidating Agent............................................ 69
SECTION 12.08. Trustee's Relation to Guarantor Senior Indebtedness.......... 70
SECTION 12.09. Subordination Rights Not Impaired by Acts or Omissions of the
Guarantors or Holders of Guarantor Senior Indebtedness....... 70
SECTION 12.10. Holders Authorize Trustee To Effectuate Subordination
of Guarantee................................................. 70
SECTION 12.11. This Article Not To Prevent Events of Default................ 70
SECTION 12.12. Trustee's Compensation Not Prejudiced........................ 71
SECTION 12.13. No Waiver of Guarantee Subordination Provisions.............. 71
SECTION 12.14. Payments May Be Paid Prior to Dissolution.................... 71
ARTICLE THIRTEEN
MISCELLANEOUS
SECTION 13.01. Trust Indenture Act Controls................................. 71
SECTION 13.02. Notices...................................................... 72
SECTION 13.03. Communications by Holders with Other Holders................. 73
SECTION 13.04. Certificate and Opinion as to Conditions Precedent........... 73
SECTION 13.05. Statements Required in Certificate and Opinion of Counsel.... 73
SECTION 13.06. Rules by Trustee, Paying Agent, Registrar.................... 73
SECTION 13.07. Governing Law................................................ 74
SECTION 13.08. No Recourse Against Others................................... 74
SECTION 13.09. Successors................................................... 74
SECTION 13.10. Counterpart Originals........................................ 74
SECTION 13.11. Severability................................................. 74
SECTION 13.12. No Adverse Interpretation of Other Agreements................ 74
SECTION 13.13. Legal Holidays............................................... 74
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SIGNATURES.................................................................. S-1
EXHIBIT A Form of Series A Security........................................ A-1
EXHIBIT B Form of Series B Security........................................ B-1
EXHIBIT C Form of Legend for Global Securities............................. C-1
EXHIBIT D Form of Transfer Certificate..................................... D-1
EXHIBIT E Form of Transfer Certificate for Institutional Accredited
Investors........................................................ E-1
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NOTE: This Table of Contents shall not, for any purpose, be deemed to be a part
of the Indenture.
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<PAGE>
INDENTURE dated as of July 22, 1998, among AXIA FINANCE CORP., a
Delaware corporation ("Finance Co."), AXIA INCORPORATED, a Delaware corporation
(the "Company"), the GUARANTORS named herein and STATE STREET BANK AND TRUST
COMPANY, as trustee (the "Trustee").
The Initial Securities (as defined herein) are being issued on the
date hereof by Finance Co. Simultaneously with the issuance of the Initial
Securities, Finance Co. will merge with and into the Company. Upon consummation
of such merger, on the date hereof, the obligations of Finance Co. under this
Indenture will become the obligations of the Company.
Each party hereto agrees as follows for the benefit of each other
party and for the equal and ratable benefit of the Holders of the Securities:
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01 Definitions.
"Accounts Receivable Subsidiary" means any Subsidiary of the Company
that is, directly or indirectly, wholly owned by the Company (other than
directors' qualifying shares) and organized solely for the purpose of and
engaged in (i) purchasing, financing and collecting accounts receivable
obligations of customers of the Company or its Subsidiaries, (ii) the sale or
financing of such accounts receivable or interests therein and (iii) other
activities incident thereto.
"Acquired Indebtedness" means Indebtedness of a Person (a) assumed in
connection with an Acquisition from such Person or (b) existing at the time such
Person becomes a Restricted Subsidiary or is merged or consolidated with or into
the Company or any Restricted Subsidiary.
"Acquired Person" means, with respect to any specified Person, any
other Person which merges with or into or becomes a Subsidiary of such specified
Person.
"Acquisition" means (i) any capital contribution (by means of
transfers of cash or other property to others or payments for property or
services for the account or use of others, or otherwise) by the Company or any
Restricted Subsidiary to any other Person, or any acquisition or purchase of
Equity Interests of any other Person by the Company or any Restricted
Subsidiary, in either case pursuant to which such Person shall become a
Restricted Subsidiary or shall be consolidated with or merged into the Company
or any Restricted Subsidiary or (ii) any acquisition by the Company or any
Restricted Subsidiary of the assets of any Person which constitute substantially
all of an operating unit or line of business of such Person or which is
otherwise outside of the ordinary course of business.
"Additional Interest" has the meaning provided in Section 4(a) of the
Exchange and Registration Rights Agreement.
"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.
"Affiliate Transaction" has the meaning provided in Section 4.03.
"Agent" means any Registrar, Paying Agent or co-Registrar.
<PAGE>
"Asset Sale" means any direct or indirect sale, conveyance, transfer,
lease (that has the effect of a disposition, including a sale/leaseback
transaction) or other disposition (including, without limitation, by means of
any merger or consolidation) to any Person other than the Company or a Wholly
Owned Restricted Subsidiary, in one transaction or a series of related
transactions, of (i) any Equity Interest (other than directors' qualifying
shares) of any Restricted Subsidiary; (ii any assets of the Company or any
Restricted Subsidiary which constitute substantially all of an operating unit or
line of business of the Company or any Restricted Subsidiary; or (iii) any other
property or asset of the Company or any Restricted Subsidiary outside of the
ordinary course of business, provided in each case that the aggregate
consideration for such sale, conveyance, transfer, lease or other disposition is
equal to $1.5 million or more. For the purposes of this definition, the term
"Asset Sale" shall not include (a) any transaction consummated in compliance
with Section 5.01 and the creation of any Lien not prohibited by Section 4.18;
provided, however, that any transaction consummated in compliance with Section
5.01 involving a sale, conveyance, assignment, transfer, lease or other
disposition of less than all of the properties or assets of the Company shall be
deemed to be an Asset Sale with respect to the properties or assets of the
Company and the Restricted Subsidiaries that are not so sold, conveyed,
assigned, transferred, leased or otherwise disposed of in such transaction; (b)
sales of property or equipment that has become worn out, obsolete or damaged or
otherwise unsuitable for use in connection with the business of the Company or
any Restricted Subsidiary; (c) any transaction consummated in compliance with
Section 4.06; (d) sales of accounts receivable for cash at fair market value;
and (e) any sale, conveyance or transfer of accounts receivable in the ordinary
course of business to an Accounts Receivable Subsidiary or to third parties that
are not Affiliates of the Company or any Subsidiary of the Company.
"AXIA Group" means AXIA Group, Inc.
"Bank Credit Agreement" means the credit facility between the Finance
Co., the Company, the lenders named therein, and Paribas, as Agent, including
any deferrals, renewals, extensions, substitutions, replacements, refinancings
or refundings thereof, or amendments, modifications or supplements thereto and
any agreement providing therefor (including any restatements thereof and any
increases in the amount of commitments thereunder), whether by or with the same
or any other lender, creditor, group of lenders or group of creditors, and
including related notes, guarantee and note agreements and other instruments and
agreements executed in connection therewith.
"Bankruptcy Law" has the meaning provided in Section 6.01.
"Board of Directors" means the Board of Directors of the Company or
any Guarantor, as the case may be, or any authorized committee of such Board of
Directors.
"Board Resolution" means, with respect to any Person, a duly adopted
resolution of the Board of Directors of such 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 so required to be capitalized on the balance sheet in
accordance with GAAP.
"Cash Equivalents" means with respect to the Company and its
Restricted Subsidiaries: (a) U.S. dollars and any other currency that is
convertible into U.S. dollars without legal restrictions; (b) securities issued
or directly and fully guaranteed or insured by the U.S. government or any agency
or instrumentality thereof; (c) certificates of deposit and time deposits with
maturities of one year or less from the date of acquisition, bankers'
acceptances with maturities not exceeding one year and overnight bank deposits,
in each case with any commercial bank having capital and surplus in excess of
$250.0 million (or the foreign currency equivalent thereof); (d) repurchase
obligations with a term of not more than 30 days for underlying securities of
the types described in clauses (b) and (c) above entered into
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with any financial institution meeting the qualifications specified in clause
(c) above; (e) commercial paper rated P-1, A-1 or the equivalent thereof by
Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Corporation
("S&P"), respectively, and in each case maturing within six months after the
date of acquisition; (f) with respect to any Foreign Subsidiary organized in
Canada, commercial paper of Canadian companies rated R-1 High or the equivalent
thereof by Dominion Bond Rating Services with maturities of less than one year;
and (g) with respect to Foreign Subsidiaries not organized in Canada, government
obligations of another country whose debt securities are rated by S&P and/or
Moody's "A-1" or "P-1" or the equivalent thereof (if a short-term debt rating is
provided by either) or at least "AA" or "AA2" or the equivalent thereof (if a
long-term unsecured debt rating is provided by either), in each case, with
maturities of less than 12 months.
"Change of Control" means the occurrence of any of the following
events (whether or not approved by the Board of Directors of the Company): (i)
any Person (as such term is used in Sections 13(d) and 14(d) of the Exchange
Act, including any group acting for the purpose of acquiring, holding or
disposing of securities within the meaning of Rule 13d-5(b)(1) under the
Exchange Act), other than one or more Permitted Holders, is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
except that a Person shall be deemed to have "beneficial ownership" of all
shares that any such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time, upon the happening of
an event or otherwise), directly or indirectly, of more than 50% of the total
voting power of the then outstanding Voting Equity Interests of the Company or,
so long as AXIA Group owns a majority of the Voting Equity Interests of the
Company, AXIA Group; (ii) the Company consolidates with, or merges with or into,
another Person (other than a Guarantor that is a Wholly Owned Restricted
Subsidiary or a Person that is controlled by the Permitted Holders) or the
Company directly or indirectly sells, assigns, conveys, transfers, leases or
otherwise disposes of all or substantially all of the assets of the Company and
the Restricted Subsidiaries (determined on a consolidated basis) to any Person
(other than the Company or a Guarantor that is a Wholly Owned Restricted
Subsidiary or a Person that is controlled by the Permitted Holders), in each
case other than any such transaction where immediately after such transaction
the Person or Persons that "beneficially owned" (as defined in Rules 13d-3 and
13d-5 under the Exchange Act, except that a Person shall be deemed to have
"beneficial ownership" of all securities that such Person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time) immediately prior to such transaction, directly or indirectly, the then
outstanding Voting Equity Interests of the Company "beneficially own" (as so
determined), directly or indirectly, a majority of the total voting power of the
then outstanding Voting Equity Interests of the surviving or transferee Person;
or (iii) following the first public offering of $20.0 million or more of Voting
Equity Interests of the Company, during any period of two consecutive years,
individuals who at the beginning of such period constituted the Board of
Directors of the Company (together with any new directors whose election by such
Board of Directors or whose nomination for election by the shareholders of the
Company was approved by a vote of a majority of the directors of the Company
then still in office either who were directors at the beginning of such period
or whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority of the Board of Directors of the Company
then in office.
"Change of Control Date" has the meaning provided in Section 4.14.
"Company" means the Person named as the "Company" in the first
paragraph of this Indenture until a successor shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, its Vice
Chairman of the Board, its President, a Vice President or its Treasurer, and by
an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered
to the Trustee.
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"Consolidated Coverage Ratio" as of any date of determination means
the ratio of (i) the aggregate amount of Consolidated EBITDA for the four
quarter period of the most recent four consecutive fiscal quarters ending prior
to the date of such determination (the "Four Quarter Period") to (ii)
Consolidated Interest Expense for such Four Quarter Period; provided, however,
that (1) if the Company or any Restricted Subsidiary has Incurred any
Indebtedness since the beginning of such Four Quarter Period that remains
outstanding on such date of determination or if the transaction giving rise to
the need to calculate the Consolidated Coverage Ratio is an Incurrence of
Indebtedness, or both, Consolidated EBITDA and Consolidated Interest Expense for
such Four Quarter Period shall be calculated after giving effect on a pro forma
basis to such Indebtedness as if such Indebtedness had been Incurred on the
first day of such Four Quarter Period and the discharge of any other
Indebtedness repaid, repurchased, defeased or otherwise discharged with the
proceeds of such new Indebtedness as if such discharge had occurred on the first
day of such Four Quarter Period, (2) if since the beginning of such Four Quarter
Period the Company or any Restricted Subsidiary shall have made any Asset Sale,
the Consolidated EBITDA for such Four Quarter Period shall be reduced by an
amount equal to the Consolidated EBITDA (if positive) directly attributable to
the assets that are the subject of such Asset Sale for such Four Quarter Period
or increased by an amount equal to the Consolidated EBITDA (if negative)
directly attributable thereto for such Four Quarter Period and Consolidated
Interest Expense for such Four Quarter Period shall be reduced by an amount
equal to the Consolidated Interest Expense directly attributable to any
Indebtedness of the Company or any Restricted Subsidiary repaid, repurchased,
defeased or otherwise discharged with respect to the Company and its continuing
Restricted Subsidiaries in connection with such Asset Sale for such Four Quarter
Period (or, if the Equity Interests of any Restricted Subsidiary are sold, the
Consolidated Interest Expense for such Four Quarter Period directly attributable
to the Indebtedness of such Restricted Subsidiary to the extent the Company and
its continuing Restricted Subsidiaries are no longer liable for such
Indebtedness after such sale), (3) if since the beginning of such Four Quarter
Period the Company or any Restricted Subsidiary (by merger or otherwise) shall
have made an Investment in any Restricted Subsidiary (or any Person that becomes
a Restricted Subsidiary) or an acquisition of assets, including any acquisition
of assets occurring in connection with a transaction causing a calculation to be
made hereunder, which constitutes all or substantially all of an operating unit
of a business, Consolidated EBITDA and Consolidated Interest Expense for such
Four Quarter Period shall be calculated after giving pro forma effect thereto
(including the Incurrence of any Indebtedness) as if such Investment or
acquisition occurred on the first day of such Four Quarter Period and (4) if
since the beginning of such Four Quarter Period any Person (that subsequently
became a Restricted Subsidiary or was merged with or into the Company or any
Restricted Subsidiary since the beginning of such Four Quarter Period) shall
have made any Asset Sale or any Investment or acquisition of assets that would
have required an adjustment pursuant to clause (2) or (3) above if made by the
Company or a Restricted Subsidiary during such Four Quarter Period, Consolidated
EBITDA and Consolidated Interest Expense for such Four Quarter Period shall be
calculated after giving pro forma effect thereto as if such Asset Sale,
Investment or acquisition of assets occurred on, with respect to any Investment
or acquisition, the first day of such Four Quarter Period and, with respect to
any Asset Sale, the day prior to the first day of such Four Quarter Period. For
purposes of this definition, whenever pro forma effect is to be given to an
Asset Sale or Investment or other acquisition of assets (including pursuant to
the Transactions), the amount of income or earnings and any net cost savings
relating thereto and the amount of Consolidated Interest Expense associated with
any Indebtedness Incurred in connection therewith, the pro forma calculations
shall be determined in accordance with Regulation S-X under the Securities Act.
If any Indebtedness bears a floating rate of interest and is being given pro
forma effect, the interest expense on such Indebtedness shall be calculated as
if the rate in effect on the date of determination had been the applicable rate
for the entire period (taking into account any agreement under which Hedging
Obligations relating to interest are outstanding applicable to such Indebtedness
if such agreement under which such Hedging Obligations are outstanding has a
remaining term as at the date of determination in excess of 12 months).
"Consolidated EBITDA" means, for any period, the Consolidated Net
Income for such period, plus the following to the extent deducted in calculating
such Consolidated Net Income: (i) Consolidated Income Tax Expense for such
period; (ii) Consolidated Interest Expense for such period; (iii) depreciation
expense for such period; (iv)
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<PAGE>
amortization expense for such period; (v) all costs and expenses incurred by the
Company on or prior to the Issue Date related to the Transactions (to the extent
such items were incurred during the relevant Four Quarter Period); and (vi) all
other non-cash items which are not expected by the Company to result in any cash
expenditures in future periods, minus all non-cash items having the effect of
increasing Consolidated Net Income during the period and which were not deducted
in calculating Consolidated Net Income for any prior period.
"Consolidated Income Tax Expense" means, with respect to the Company
for any period, the provision for Federal, state, local and foreign income taxes
payable by the Company and the Restricted Subsidiaries for such period as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to the Company for
any period, without duplication, the sum of (i) the interest expense of the
Company and the Restricted Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP, including, without limitation, (a)
any amortization of debt discount, (b) the net cost under Hedging Obligations
relating to interest (including any amortization of discounts), (c) all
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing and (d) all capitalized interest and
all accrued interest, (ii) the interest component of Capital Lease Obligations
paid, accrued and/or scheduled to be paid or accrued by the Company and the
Restricted Subsidiaries during such period as determined on a consolidated basis
in accordance with GAAP and (iii) dividends and distributions in respect of
Disqualified Equity Interests of the Company during such period as determined on
a consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, for any period, the consolidated net
income (loss) of the Company and its Subsidiaries determined in accordance with
GAAP; provided, however, that there shall not be included in such Consolidated
Net Income: (i) any net income (loss) of any Person if such Person is not a
Restricted Subsidiary, except that (A) subject to the limitations contained in
clause (iv) below, the Company's equity in the net income of any such Person for
such period shall be included in such Consolidated Net Income up to the
aggregate amount of cash actually distributed by such Person during such period
to the Company or a Restricted Subsidiary as a dividend or other distribution
(subject, in the case of a dividend or other distribution to a Restricted
Subsidiary, to the limitations contained in clause (iii) below) and (B) the
Company's equity in a net loss of any such Person for such period shall be
included in determining such Consolidated Net Income to the extent of any
Investment made by the Company or any Restricted Subsidiary in such Person
during such period; (ii) any net income (loss) of any Person acquired by the
Company or a Restricted Subsidiary in a pooling of interests transaction for any
period prior to the date of such acquisition; (iii) any net income (loss) of any
Restricted Subsidiary if such Restricted Subsidiary is subject to restrictions,
directly or indirectly, on the payment of dividends or the making of
distributions by such Restricted Subsidiary, directly or indirectly, to the
Company except that (A) subject to the exclusion contained in clause (iv) below,
the Company's equity in the net income of any such Restricted Subsidiary for
such period shall be included in such Consolidated Net Income up to the
aggregate amount of cash that could have been distributed by such Restricted
Subsidiary during such period to the Company or another Restricted Subsidiary as
a dividend (subject, in the case of a dividend that could have been made to
another Restricted Subsidiary, to the limitation contained in this clause) and
(B) the Company's equity in a net loss of any such Restricted Subsidiary for
such period shall be included in determining such Consolidated Net Income; (iv)
any gain or loss realized upon the sale or other disposition of any asset of the
Company or the Restricted Subsidiaries (including pursuant to any sale/leaseback
transaction) that is not sold or otherwise disposed of in the ordinary course of
business and any gain or loss realized upon the sale or other disposition of any
Equity Interests of any Person; (v) any extraordinary gain or loss; and (vi) the
cumulative effect of a change in accounting principles. Notwithstanding the
foregoing, for purposes of the covenant described under Section 4.06 only, there
shall be excluded from Consolidated Net Income any dividends, repayments of
loans or advances or other transfers of assets from Unrestricted Subsidiaries to
the Company or a Restricted Subsidiary to the extent such dividends, repayments
or
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transfers increase the amount of Restricted Payments permitted under such
covenant pursuant to clause (c)(4) of the first paragraph thereof.
"Consolidated Net Worth" of the Company means the stockholders' equity
of the Company and the Restricted Subsidiaries determined on a consolidated
basis in accordance with GAAP, less amounts attributed to Disqualified Equity
Interests.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 13.02 or such other address as the Trustee may give
notice to the Company.
"Custodian" has the meaning provided in Section 6.01.
"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.
"Defeasance Trust Payment" has the meaning provided in Section 8.02.
"Depository" means, with respect to the Securities issued in the form
of one or more Global Securities, The Depository Trust Company or another Person
designated as Depository by the Company, which must be a clearing agency
registered under the Exchange Act.
"Designated Senior Indebtedness" means (a) any Indebtedness
outstanding under the Bank Credit Agreement and (b) any other Senior
Indebtedness which, at the time of determination, has an aggregate principal
amount outstanding, together with any commitments to lend additional amounts, of
at least $25.0 million, if the instrument governing such Senior Indebtedness
expressly states that such Indebtedness is "Designated Senior Indebtedness" for
purposes of this Indenture.
"Designation" has the meaning provided in Section 4.17.
"Designation Amount" see Section 4.17.
"Disposition" means, with respect to any Person, any merger,
consolidation or other business combination involving such Person (whether or
not such Person is the Surviving Person) or the sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of such
Person's assets.
"Disqualified Equity Interest" means any Equity Interest which, by its
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable at the option of the holder thereof), or upon the happening
of any event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable, at the option of the holder thereof, in
whole or in part on or prior to the Maturity Date, or exchangeable into
Indebtedness on or prior to the Maturity Date; provided, however, that any
Equity Interest that would not constitute a Disqualified Equity Interest but for
provisions thereof giving holders thereof the right to require the issuing
Person to repurchase or redeem such Equity Interest upon the occurrence of an
"asset sale" or "change of control" occurring prior to the Maturity Date shall
not constitute a Disqualified Equity Interest if (i) the "asset sale" or "change
of control" provisions applicable to such Equity Interest are not more favorable
to the holders of such Equity Interest than the comparable provisions described
under Section 4.05 and Section 4.14 and (ii) the Company shall have complied in
full with all of its obligations in respect of such covenants prior to any
payment in respect of the comparable provisions of such Equity Interest.
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"Equity Interest" in any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) corporate stock or other equity
participations, including partnership interests, whether general or limited, in
such Person, including any Preferred Equity Interests.
"ESOP" means the employee stock ownership plan of the Company as in
effect on the Issue Date or any subsequent employee stock ownership plan, as
defined under ERISA, which is adopted by the Company or any Restricted
Subsidiary.
"ESOP Loan" means any loan or advance by the Company or any Restricted
Subsidiary to the ESOP.
"Event of Default" see Section 6.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange and Registration Rights Agreement" means the Registration
Rights Agreement dated as of July , 1998 by and among the Company, the
Guarantors and the Initial Purchasers.
"Exchange Securities" means the 10 3/4% Senior Subordinated Notes due
2008, Series B, to be issued in exchange for the Initial Securities pursuant to
the Exchange and Registration Rights Agreement.
"Expiration Date" has the meaning set forth in the definition of
"Offer to Purchase" below.
"Existing Indebtedness" means any Indebtedness (or agreements relating
thereto) of the Company and its Restricted Subsidiaries in existence on the
Issue Date.
"Fair Market Value" means, with respect to any asset, the price (after
taking into account any liabilities relating to such asset) which could be
negotiated in an arm's-length free market transaction between a willing seller
and a willing and able buyer, neither of which is under any compulsion to
complete the transaction; provided, however, that the Fair Market Value of any
such asset or assets shall be determined conclusively by the Board of Directors
of the Company acting in good faith.
"Final Maturity Date" means July 15, 2008.
"Foreign Subsidiary" means a Restricted Subsidiary that is
incorporated in a jurisdiction other than the United States or a State thereof
or the District of Columbia.
"Four Quarter Period" has the meaning set forth in the definition of
"Consolidated Coverage Ratio" above.
"Funding Guarantor" has the meaning provided in Section 11.05.
"GAAP" means, at any date of determination, generally accepted
accounting principles in effect in the United States which are applicable at the
date of determination and which are consistently applied for all applicable
periods.
"Global Securities" means one or more 144A Global Securities,
Regulation S Global Securities or IAI Global Securities.
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"guarantee" means, as applied to any obligation, (i) a guarantee
(other than by endorsement of negotiable instruments for collection in the
ordinary course of business), direct or indirect, in any manner, of any part or
all of such obligation and (ii) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limiting the foregoing, the
payment of amounts drawn down by letters of credit. A guarantee shall include,
without limitation, any agreement to maintain or preserve any other Person's
financial condition or to cause any other Person to achieve certain levels of
operating results.
"Guarantee" has the meaning provided in Section 11.01.
"Guarantor" means (i) each of the Subsidiaries of the Company
(excluding Unrestricted Subsidiaries and Foreign Subsidiaries) as of the Issue
Date and their respective successors, and (ii) each other Restricted Subsidiary,
formed, created or acquired before or after the Issue Date, required to become a
Guarantor after the Issue Date pursuant to Section 4.19.
"Guarantor Blockage Period" has the meaning provided in
Section 12.02(a).
"Guarantor Payment Blockage Notice" has the meaning provided in
Section 12.02(a).
"Guarantor Senior Indebtedness" means, with respect to any Guarantor,
at any date, (a) all Obligations of such Guarantor which guarantee Obligations
of the Bank Credit Agreement; (b) all Hedging Obligations of such Guarantor; (c)
all Obligations of such Guarantor under standby letters of credit; and (d) all
other Indebtedness of such Guarantor for borrowed money, including principal,
premium, if any, and interest (including Post-Petition Interest) on such
Indebtedness unless the instrument under which such Indebtedness of such
Guarantor for money borrowed is Incurred expressly provides that such
Indebtedness for money borrowed is not senior or superior in right of payment to
such Guarantor's Guarantee of the Securities, and all renewals, extensions,
substitutions, modifications, amendments or refinancings thereof.
Notwithstanding the foregoing, "Guarantor Senior Indebtedness" shall not include
(a) to the extent that it may constitute Indebtedness, any Obligation for
Federal, state, local or other taxes; (b) any Indebtedness among or between such
Guarantor and any Subsidiary of such Guarantor; (c) to the extent that it may
constitute Indebtedness, any Obligation in respect of any trade payable Incurred
for the purchase of goods or materials, or for services obtained, in the
ordinary course of business; (d) Indebtedness evidenced by such Guarantor's
Guarantee of the Securities; (e) Indebtedness of such Guarantor that is
expressly subordinate or junior in right of payment to any other Indebtedness of
such Guarantor; (f) to the extent that it may constitute Indebtedness, any
obligation owing under leases (other than Capital Lease Obligations) or
management agreements; and (g) any obligation that by operation of law is
subordinate to any general unsecured obligations of such Guarantor.
"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, (ii) other agreements
or arrangements designed to protect such Person against fluctuations in interest
rates and (iii) foreign currency or commodity hedges, exchange or similar
protection agreements (agreements referred to in this definition being referred
to herein as "Hedging Agreements")
"Holder" means the registered holder of any Security.
"IAI Global Security" means a permanent global security in registered
form representing the aggregate principal amount of Securities transferred after
the Issue Date to Institutional Accredited Investors.
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"Incur" means, with respect to any Indebtedness or other obligation of
any Person, to create, issue, incur (including by conversion, exchange or
otherwise), assume, guarantee or otherwise become liable in respect of such
Indebtedness or other obligation or the recording, as required pursuant to GAAP
or otherwise, of any such Indebtedness or other obligation on the balance sheet
of such Person (and "Incurrence," "Incurred" and "Incurring" shall have meanings
correlative to the foregoing). Indebtedness of any Acquired Person or any of its
Subsidiaries existing at the time such Acquired Person becomes a Restricted
Subsidiary (or is merged into or consolidated with the Company or any Restricted
Subsidiary), whether or not such Indebtedness was Incurred in connection with,
as a result of, or in contemplation of, such Acquired Person becoming a
Restricted Subsidiary (or being merged into or consolidated with the Company or
any Restricted Subsidiary), shall be deemed Incurred at the time any such
Acquired Person becomes a Restricted Subsidiary or merges into or consolidates
with the Company or any Restricted Subsidiary.
"Indebtedness" means (without duplication), with respect to any
Person, whether recourse is to all or a portion of the assets of such Person and
whether or not contingent, (a) every obligation of such Person for the principal
amount of money borrowed; (b) every obligation of such Person evidenced by the
principal amount of bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (c) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such Person (except to the extent not drawn on); (d) every
obligation of such Person issued or assumed as the deferred purchase price of
property or services (but excluding (x) earnout or other similar obligations
until such time as the amount of such obligation is capable of being determined,
(y) trade accounts payable incurred in the ordinary course of business, or (z)
other accrued liabilities arising in the ordinary course of business); (e) every
Capital Lease Obligation of such Person; (f) every net obligation under Hedging
Agreements of such Person; (g) every obligation of the type referred to in
clauses (a) through (f) of another Person and all dividends of another Person
the payment of which, in either case, such Person has guaranteed or is
responsible or liable for, directly or indirectly, as obligor, guarantor or
otherwise; and (h) any and all deferrals, renewals, extensions and refundings
of, or amendments, modifications or supplements to, any liability of the kind
described in any of the preceding clauses (a) through (g) above. Indebtedness
(a) shall never be calculated taking into account any cash and Cash Equivalents
held by such Person; (b) shall not include obligations of any Person (x) arising
from the honoring by a bank or other financial institution of a check, draft or
similar instrument inadvertently drawn against insufficient funds in the
ordinary course of business, provided that such obligations are extinguished
within ten Business Days of their incurrence, (y) resulting from the endorsement
of negotiable instruments for collection in the ordinary course of business and
(z) under standby letters of credit to the extent collateralized by cash or Cash
Equivalents; (c) which provides that an amount less than the principal amount
thereof shall be due upon any declaration of acceleration thereof shall be
deemed to be incurred or outstanding in an amount equal to the accreted value
thereof at the date of determination; (d) shall include the liquidation
preference and any mandatory redemption payment obligations in respect of any
Disqualified Equity Interests of the Company or any Restricted Subsidiary; and
(e) shall not include obligations under performance bonds, performance
guarantees, surety bonds and appeal bonds, letters of credit or similar
obligations, incurred in the ordinary course of business. For purposes of
determining compliance with any U.S. dollar-denominated restriction on the
Incurrence of Indebtedness denominated in a foreign currency, the U.S. dollar-
equivalent principal amount of such Indebtedness Incurred pursuant thereto shall
be calculated based on the relevant currency exchange rate in effect on the date
that such Indebtedness was Incurred. If such Indebtedness is Incurred to
refinance other Indebtedness denominated in a foreign currency, and such
refinancing would cause the applicable U.S. dollar-denominated restriction to be
exceeded if calculated at the relevant currency exchange rate in effect on the
date of such refinancing, such U.S. dollar-denominated restriction shall be
deemed not to have been exceeded so long as the principal amount of such
refinancing Indebtedness does not exceed the principal amount of such
Indebtedness being refinanced. The principal amount of any Indebtedness Incurred
to refinance other Indebtedness, if Incurred in a different currency from the
Indebtedness being refinanced, shall be calculated based on the currency
exchange rate applicable to the currencies in which such respective Indebtedness
is denominated that is in effect on the date of such refinancing.
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<PAGE>
"Indenture" means this Indenture, as amended or supplemented from time
to time.
"Independent Financial Advisor" means a nationally recognized
accounting, appraisal, investment banking firm or consultant that is, in the
judgment of the Company's Board of Directors, qualified to perform the task for
which it has been engaged and (i) that does not, and whose directors, officers
and employees or Affiliates do not, have a direct or indirect financial interest
in the Company and (ii) that, in the judgment of the Board of Directors of the
Company, is otherwise independent and qualified to perform the task for which it
is to be engaged.
"Initial Securities" means the 10 3/4% Senior Subordinated Notes due
2008, Series A, of the Company.
"Initial Purchasers" means Chase Securities Inc. and NationsBanc
Montgomery Securities LLC.
"Insolvency or Liquidation Proceeding" means, with respect to any
Person, any liquidation, dissolution or winding up of such Person, or any
bankruptcy, reorganization, insolvency, receivership or similar proceeding with
respect to such Person, whether voluntary or involuntary.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.
"interest" means, with respect to the Securities, the sum of any cash
interest and any Additional Interest on the Securities.
"Interest Payment Date" means each semiannual interest payment date on
January 15 and July 15 of each year, commencing January 15, 1999.
"Interest Record Date" for the interest payable on any Interest
Payment Date (except a date for payment of defaulted interest) means the January
1 or July 1 (whether or not a Business Day), as the case may be, immediately
preceding such Interest Payment Date.
"Investment" means, with respect to any Person, any direct or indirect
loan, advance, guarantee or other extension of credit or capital contribution to
(by means of transfers of cash or other property or assets to others or payments
for property or services for the account or use of others, or otherwise, but
other than advances to customers in the ordinary course of business recorded as
an account receivable on the books of the Person making the advance), or
purchase or acquisition of capital stock, bonds, notes, debentures or other
securities or evidences of Indebtedness issued by, any other Person. The amount
of any Investment shall be the original cost of such Investment, plus the cost
of all additions thereto, and minus the amount of any portion of such Investment
repaid to such Person in cash as a repayment of principal or a return of
capital, as the case may be, but without any other adjustments for increases or
decreases in value, or write-ups, write-downs or write-offs with respect to such
Investment. In determining the amount of any Investment involving a transfer of
any property or asset other than cash, such property shall be valued at its fair
market value at the time of such transfer, as determined in good faith by the
Board of Directors (or comparable body) of the Person making such transfer.
"Issue Date" means the original issue date of the Securities.
"Lien" means any lien, mortgage, charge, security interest,
hypothecation, assignment for security or encumbrance of any kind (including any
conditional sale or capital lease or other title retention agreement or any
lease in the nature thereof).
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<PAGE>
"Management Agreement" means the management agreement dated June 23,
1998 between AXIA Group and Sterling.
"Maturity Date" means July 15, 2008.
"Net Cash Proceeds" means the aggregate proceeds in the form of cash
or Cash Equivalents received by the Company or any Restricted Subsidiary in
respect of any Asset Sale, including all cash or Cash Equivalents received upon
any sale, liquidation or other exchange of proceeds of Asset Sales received in a
form other than cash or Cash Equivalents, net of (a) the direct costs relating
to such Asset Sale (including, without limitation, legal, accounting and
investment banking fees and expenses, and sales commissions) and any relocation
or severance expenses incurred as a result thereof; (b) taxes paid or payable as
a result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements); (c) amounts required to be applied
to the repayment of Indebtedness secured by a Lien on the asset or assets that
were the subject of such Asset Sale; (d) amounts deemed, in good faith,
appropriate by the Board of Directors of the Company to be provided as a
reserve, in accordance with GAAP, against any liabilities associated with such
assets which are the subject of such Asset Sale (provided that the amount of any
such reserves shall be deemed to constitute Net Cash Proceeds at the time such
reserves shall have been released or are not otherwise required to be retained
as a reserve); and (e) with respect to Asset Sales by Restricted Subsidiaries,
the portion of such cash payments attributable to Persons holding a minority
interest in such Restricted Subsidiary.
"Obligations" means any principal, interest (including, without
limitation, Post-Petition Interest), penalties, fees, indemnifications,
reimbursement obligations, damages and other liabilities payable under the
documentation governing any Indebtedness.
"Offer" has the meaning set forth in the definition of "Offer to
Purchase" below.
"Offer to Purchase" means a written offer (the "Offer") sent by or on
behalf of the Company by first-class mail, postage prepaid, to each Holder at
his address appearing in the register for the Securities on the date of the
Offer offering to purchase up to the principal amount of Securities specified in
such Offer at the purchase price specified in such Offer (as determined pursuant
to this Indenture). Unless otherwise required by applicable law, the Offer shall
specify an expiration date (the "Expiration Date") of the Offer to Purchase,
which shall be not less than 20 Business Days nor more than 60 days after the
date of such Offer, and a settlement date (the "Purchase Date") for purchase of
Securities to occur no later than five Business Days after the Expiration Date.
The Company shall notify the Trustee at least 15 Business Days (or such shorter
period as is acceptable to the Trustee) prior to the mailing of the Offer of the
Company's obligation to make an Offer to Purchase, and the Offer shall be mailed
by the Company or, at the Company's request, by the Trustee in the name and at
the expense of the Company. The Offer shall contain all the information required
by applicable law to be included therein. The Offer shall also contain
information concerning the business of the Company and its Subsidiaries which
the Company in good faith believes will enable such Holders to make an informed
decision with respect to the Offer to Purchase (which at a minimum will include
(i) the most recent annual and quarterly financial statements and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
contained in the documents required to be filed with the Trustee pursuant to
this Indenture (which requirements may be satisfied by delivery of such
documents together with the Offer), (ii) a description of material developments
in the Company's business subsequent to the date of the latest of such financial
statements referred to in clause (i) (including a description of the events
requiring the Company to make the Offer to Purchase), (iii) if applicable,
appropriate pro forma financial information concerning the Offer to Purchase and
the events requiring the Company to make the Offer to Purchase and (iv) any
other information required by applicable law to be included therein). The Offer
shall contain all instructions and materials necessary to enable such Holders to
tender Securities pursuant to the Offer to Purchase. The Offer shall also state:
(1) the Section of this Indenture pursuant to which the Offer to Purchase is
being made; (2) the Expiration Date and the Purchase Date; (3) the aggregate
principal amount of the outstanding
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Securities offered to be purchased by the Company pursuant to the Offer to
Purchase (including, if less than 100%, the manner by which such amount has been
determined pursuant to the Section of this Indenture requiring the Offer to
Purchase) (the "Purchase Amount"); (4) the purchase price to be paid by the
Company for each $1,000 aggregate principal amount of Securities accepted for
payment (as specified pursuant to this Indenture) (the "Purchase Price"); (5)
that the Holder may tender all or any portion of the Securities registered in
the name of such Holder and that any portion of a Security tendered must be
tendered in an integral multiple of $1,000 principal amount; (6) the place or
places where Securities are to be surrendered for tender pursuant to the Offer
to Purchase; (7) that interest on any Security not tendered or tendered but not
purchased by the Company pursuant to the Offer to Purchase will continue to
accrue; (8) that on the Purchase Date the Purchase Price will become due and
payable upon each Security being accepted for payment pursuant to the Offer to
Purchase and that interest thereon shall cease to accrue on and after the
Purchase Date; (9) that each Holder electing to tender all or any portion of a
Security pursuant to the Offer to Purchase will be required to surrender such
Security at the place or places specified in the Offer prior to the close of
business on the Expiration Date (such Security being, if the Company or the
Trustee so requires, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Trustee duly executed by,
the Holder thereof or his attorney duly authorized in writing); (10) that
Holders will be entitled to withdraw all or any portion of Securities tendered
if the Company (or its Paying Agent) receives, not later than the close of
business on the fifth Business Day next preceding the Expiration Date, a
telegram, telex, facsimile transmission or letter setting forth the name of the
Holder, the principal amount of the Security the Holder tendered, the
certificate number of the Security the Holder tendered and a statement that such
Holder is withdrawing all or a portion of his tender; (11) that (a) if
Securities in an aggregate principal amount less than or equal to the Purchase
Amount are duly tendered and not withdrawn pursuant to the Offer to Purchase,
the Company shall purchase all such Securities and (b) if Securities in an
aggregate principal amount in excess of the Purchase Amount are tendered and not
withdrawn pursuant to the Offer to Purchase, the Company shall purchase
Securities having an aggregate principal amount equal to the Purchase Amount on
a pro rata basis (with such adjustments as may be deemed appropriate so that
only Securities in denominations of $1,000 principal amount or integral
multiples thereof shall be purchased); and (12) that in the case of any Holder
whose Security is purchased only in part, the Company shall execute and the
Trustee shall authenticate and deliver to the Holder of such Security without
service charge, a new Security or Securities, of any authorized denomination as
requested by such Holder, in an aggregate principal amount equal to and in
exchange for the unpurchased portion of the Security so tendered.
An Offer to Purchase shall be governed by and effected in accordance
with the provisions above pertaining to any Offer.
"Officer" means the Chairman, any Vice Chairman, the President, any
Vice President, the Chief Financial Officer, the Treasurer, or the Secretary of
the Company.
"Officers' Certificate" means a certificate signed by two Officers or
by an Officer and an Assistant Treasurer or Assistant Secretary of the Company
complying with Sections 13.04 and 13.05.
"144A Global Security" means a permanent global security in registered
form representing the aggregate principal amount of Securities sold in reliance
on Rule 144A.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company or the Trustee.
"Pari Passu Debt" means Indebtedness of the Company or any Guarantor
that constitutes neither Senior Indebtedness or Guarantor Senior Indebtedness,
as applicable, nor Subordinated Indebtedness.
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"Pari Passu Debt Pro Rata Share" means the amount of the applicable
Net Cash Proceeds obtained by multiplying the amount of such Net Cash Proceeds
by a fraction (i) the numerator of which is the aggregate accreted value and/or
principal amount, as the case may be, of all Pari Passu Debt outstanding at the
time of the applicable Asset Sale with respect to which the Company is required
to use Net Cash Proceeds to repay or make an offer to purchase or repay and (ii)
the denominator of which is the sum of (a) the aggregate principal amount of all
Securities outstanding at the time of the applicable Asset Sale and (b) the
aggregate principal amount or the aggregate accreted value, as the case may be,
of all Pari Passu Debt outstanding at the time of the applicable Offer to
Purchase with respect to which the Company is required to use the applicable Net
Cash Proceeds to offer to repay or make an offer to purchase or repay.
"Participant" has the meaning provided in Section 2.15.
"Paying Agent" has the meaning provided in Section 2.03.
"Payment Blockage Notice" has the meaning provided in Section 8.02(a).
"Payment Blockage Period" has the meaning provided in Section 8.02(a).
"Permitted Holder" means (i) the purchasers of the $28.0 million of
common stock of Axia Group to be sold on the Issue Date; (ii) any Person who on
the date of issuance of the Securities is an officer, director, stockholder,
employee or consultant of the Company or Sterling; (iii) any Permitted
Transferee with respect to any Person covered by the preceding clauses (i) and
(ii); (iv) the ESOP; (v) any savings or investment plan sponsored by the Company
or AXIA Group; or (vi) any entity a majority of the outstanding Voting Equity
Interests of which are owned directly or indirectly by Permitted Holders.
"Permitted Indebtedness" has the meaning set forth in Section 4.04.
"Permitted Investments" means (a) Cash Equivalents; (b) Investments in
prepaid expenses, negotiable instruments held for collection and lease, utility
and workers' compensation, performance and other similar deposits; (c) Hedging
Obligations; (d) bonds, notes, debentures or other securities received as a
result of Asset Sales permitted under Section 4.05; (e) transactions with
officers, directors and employees of the Company or any Restricted Subsidiary
entered into in the ordinary course of business (including compensation or
employee benefit arrangements with any such director or employee); (f)
Investments existing as of the Issue Date and any amendment, extension,
substitution, renewal or modification thereof to the extent that any such
amendment, extension, substitution, renewal or modification does not require the
Company or any Restricted Subsidiary to make any additional cash or non-cash
payments or provide additional services in connection therewith; (g) any
Investment to the extent that the consideration therefor consists of Qualified
Equity Interests of the Company or AXIA Group; (h) any Investment consisting of
a guarantee by a Guarantor of Senior Indebtedness or any guarantee permitted
under clause (e) of Section 4.04; (i) Investments in an aggregate amount not to
exceed the greater of (x) $15.0 million or (y) 5% of the Company's consolidated
tangible net assets at any one time outstanding; provided that the Company
and/or the Restricted Subsidiaries own at least one-third of the outstanding
Voting Equity Interests of each such Person; (j) Investments in the form of the
sale (on a "true sale" non-recourse basis) or the servicing of receivables
transferred from the Company or any Restricted Subsidiary, or transfers of cash,
to an Accounts Receivable Subsidiary as a capital contribution or in exchange
for Indebtedness of such Accounts Receivable Subsidiary or cash, in each case in
the ordinary course of business; (k) loans and advances to employees made in the
ordinary course of business; (l) payments to AXIA Group or Acquisition Co. to
pay the merger consideration due, and out-of-pocket expenses related to, the
Transactions; and (m) the ESOP Loan not to exceed $2.5 million at any one time
outstanding.
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"Permitted Junior Securities" means any securities of the Company or
any other Person that are (i) equity securities without special covenants or
(ii) subordinated in right of payment to all Senior Indebtedness that may at the
time be outstanding, to substantially the same extent as, or to a greater extent
than, the Securities are subordinated as provided in this Indenture, in any
event pursuant to a court order so providing and as to which (a) the rate of
interest on such securities shall not exceed the effective rate of interest on
the Securities on the date of this Indenture, (b) such securities shall not be
entitled to the benefits of covenants or defaults materially more beneficial to
the holders of such securities than those in effect with respect to the
Securities on the date of this Indenture and (c) such securities shall not
provide for amortization (including sinking fund and mandatory prepayment
provisions) commencing prior to the date six months following the final
scheduled maturity date of the Senior Indebtedness (as modified by the plan of
reorganization or readjustment pursuant to which such securities are issued).
"Permitted Liens" means (a) Liens on property of a Person existing at
the time such Person is merged into or consolidated with the Company or any
Restricted Subsidiary; provided, however, that such Liens were in existence
prior to the contemplation of such merger or consolidation and do not secure any
property or assets of the Company or any Restricted Subsidiary other than the
property or assets subject to the Liens prior to such merger or consolidation;
(b) Liens imposed by law such as carriers', warehousemen's and mechanics' Liens
and other similar Liens arising in the ordinary course of business which secure
payment of obligations not more than 60 days past due or which are being
contested in good faith and by appropriate proceedings; (c) Liens existing on
the Issue Date; (d) Liens securing only the Securities; (e) Liens in favor of
the Company or any Restricted Subsidiary; (f) 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, however, that any reserve or other appropriate
provision as shall be required in conformity with GAAP shall have been made
therefor; (g) easements, reservation of rights of way, restrictions and other
similar easements, licenses, restrictions on the use of properties, or minor
imperfections of title that in the aggregate are not material in amount and do
not in any case materially detract from the properties subject thereto or
interfere with the ordinary conduct of the business of the Company and the
Restricted Subsidiaries; (h) Liens resulting from the deposit of cash or notes
in connection with contracts, tenders or expropriation proceedings, or to secure
workers' compensation, surety or appeal bonds, costs of litigation when required
by law and public and statutory obligations or obligations under franchise
arrangements entered into in the ordinary course of business; (i) Liens securing
Obligations under the Bank Credit Agreement; (j) Liens securing Indebtedness
consisting of Capital Lease Obligations, Purchase Money Indebtedness, mortgage
financings, industrial revenue bonds or other monetary obligations, in each case
incurred solely for the purpose of financing all or any part of the purchase
price or cost of construction or installation of assets used in the business of
the Company or the Restricted Subsidiaries, or repairs, additions or
improvements to such assets, provided, however, that (I) such Liens secure
Indebtedness in an amount not in excess of the original purchase price or the
original cost of any such assets or repair, addition or improvement thereto
(plus an amount equal to the reasonable fees and expenses in connection with the
incurrence of such Indebtedness), (II) such Liens do not extend to any other
assets of the Company or the Restricted Subsidiaries (and, in the case of
repair, addition or improvements to any such assets, such Lien extends only to
the assets (and improvements thereto or thereon) repaired, added to or
improved), (III) the Incurrence of such Indebtedness is permitted by Section
4.04 and (IV) such Liens attach within 90 days of such purchase, construction,
installation, repair, addition or improvement; (k) Liens to secure any
refinancings, renewals, extensions, modifications or replacements (collectively,
"refinancing") (or successive refinancings), in whole or in part, of any
Indebtedness secured by Liens referred to in the clauses above so long as such
Lien does not extend to any other property (other than improvements thereto);
(l) Liens securing letters of credit entered into in the ordinary course of
business; and (m) Liens on and pledges of the Equity Interests of any
Unrestricted Subsidiary securing any Indebtedness of such Unrestricted
Subsidiary.
"Permitted Transferee" means with respect to any Person, (i) in the
case of an entity, any Affiliate of such Person, and (ii) in the case of any
individual, any person related by lineal or collateral consanguinity to such
individual or to the spouse of such individual (adopted persons shall be
considered the natural born children of their
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adoptive parents; lineal consanguinity is that relationship that exists between
persons of whom one is descended (or ascended) in a direct line from the other,
as between son, father, grandfather, great-grandfather; and collateral
consanguinity is that relationship that exists between persons who have the same
ancestors, but who do not descend (or ascend) from the other, as between uncle
and nephew, or cousin and cousin), in each case to whom such Person has
transferred Equity Interests of the Company.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, limited liability company, limited
liability limited partnership, trust, unincorporated organization or government
or any agency or political subdivision thereof.
"Physical Securities" means one or more certificated Securities in
registered form.
"Post-Petition Interest" means, with respect to any Indebtedness of
any Person, all interest accrued or accruing on such Indebtedness after the
commencement of any Insolvency or Liquidation Proceeding against such Person in
accordance with and at the contract rate (including, without limitation, any
rate applicable upon default) specified in the agreement or instrument creating,
evidencing or governing such Indebtedness, whether or not, pursuant to
applicable law or otherwise, the claim for such interest is allowed as a claim
in such Insolvency or Liquidation Proceeding.
"Preferred Equity Interest" in any Person, means an Equity Interest of
any class or classes (however designated) which is preferred as to the payment
of dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over Equity
Interests of any other class in such Person.
"principal" of a debt security means the principal of the security
plus, when appropriate, the premium, if any, on the security.
"Private Exchange Securities" have the meaning provided in
Section 2(b) of the Exchange and Registration Rights Agreement.
"Private Placement Legend" means the legend initially set forth on the
Initial Securities in the form set forth on Exhibit A hereto.
"Public Equity Offering" means a primary public offering of $20.0
million or more of Qualified Equity Interests of the Company or AXIA Group
pursuant to an effective registration statement filed under the Securities Act
of 1933, as amended (excluding registration statements filed on Form S-8).
"Purchase Agreement" means the Purchase Agreement dated as of July 22,
1998 by and among Finance Co., and the Initial Purchasers as assumed by the
Company and the Guarantors.
"Purchase Amount" has the meaning set forth in the definition of
"Offer to Purchase" above.
"Purchase Date" has the meaning set forth in the definition of "Offer
to Purchase" above.
"Purchase Money Indebtedness" means Indebtedness of the Company or any
Restricted Subsidiary Incurred for the purpose of financing all or any part of
the purchase price or the cost of construction or improvement of any property,
provided that the aggregate principal amount of such Indebtedness does not
exceed the lesser of the
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Fair Market Value of such property or such purchase price or cost, including any
refinancing of such Indebtedness that does not increase the aggregate principal
amount (or accreted amount, if less) thereof as of the date of refinancing.
"Purchase Price" has the meaning set forth in the definition of "Offer
to Purchase" above.
"Qualified Equity Interest" in any Person means any Equity Interest in
such Person other than any Disqualified Equity Interest.
"Qualified Institutional Buyer" or "QIB" means a "qualified
institutional buyer" as that term is defined in Rule 144A under the Securities
Act.
"Redemption Date," when used with respect to any Security to be
redeemed, means the date fixed for such redemption pursuant to this Indenture.
"redemption price," when used with respect to any Security to be
redeemed, means the price fixed for such redemption pursuant to this Indenture
as set forth in the form of Security annexed hereto as Exhibit A.
"Registrar" has the meaning provided in Section 2.03.
"Registration" means a registered exchange offer for the Securities by
the Company or other registration of the Securities under the Securities Act
pursuant to and in accordance with the terms of the Exchange and Registration
Rights Agreement.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Global Security" means a permanent global security in
registered form representing the aggregate principal amount of Securities sold
in reliance on Regulation S under the Securities Act.
"Required Filing Dates" has the meaning provided in Section 4.12.
"Restricted Payments" has the meaning provided in Section 4.06.
"Restricted Security" has the meaning set forth in Rule 144(a)(3)
under the Securities Act; provided, however, that the Trustee shall be entitled
to request and conclusively rely upon an Opinion of Counsel with respect to
whether any Security is a Restricted Security.
"Restricted Subsidiary" means any Subsidiary of the Company that has
not been designated by the Board of Directors of the Company, by a resolution of
the Board of Directors of the Company delivered to the Trustee, as an
Unrestricted Subsidiary pursuant to Section 4.17. Any such designation may be
revoked by a resolution of the Board of Directors of the Company delivered to
the Trustee, subject to the provisions of Section 4.17.
"Revocation" has the meaning provided in Section 4.17.
"Rule 144A" means Rule 144A under the Securities Act.
"SEC" or "Commission" means the Securities and Exchange Commission.
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"Securities" means, collectively, the Initial Securities, the Private
Exchange Securities and the Unrestricted Securities treated as a single class of
securities, as amended or supplemented from time to time in accordance with the
terms of this Indenture.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated by the SEC thereunder.
"Securities Amount" has the meaning provided in Section 4.05.
"Security Guarantee" means the Form of Security Guarantee of each
Guarantor to be endorsed on each of the Securities substantially in the form of
Exhibit A (in the case of an Initial Security) or Exhibit B (in the case of an
Exchange Security) hereto.
"Senior Indebtedness" means, at any date, (a) all Obligations of the
Company under the Bank Credit Agreement; (b) all Hedging Obligations of the
Company; (c) all Obligations of the Company under standby letters of credit; and
(d) all other Indebtedness of the Company for borrowed money, including
principal, premium, if any, and interest (including Post-Petition Interest) on
such Indebtedness, unless the instrument under which such Indebtedness of the
Company for money borrowed is Incurred expressly provides that such Indebtedness
for money borrowed is not senior or superior in right of payment to the
Securities, and all renewals, extensions, modifications, amendments or
refinancings thereof. Notwithstanding the foregoing, "Senior Indebtedness" shall
not include (a) to the extent that it may constitute Indebtedness, any
Obligation for Federal, state, local or other taxes; (b) any Indebtedness among
or between the Company and any Subsidiary of the Company, unless and for so long
as such Indebtedness has been pledged to secure Obligations under the Bank
Credit Agreement; (c) to the extent that it may constitute Indebtedness, any
Obligation in respect of any trade payable Incurred for the purchase of goods or
materials, or for services obtained, in the ordinary course of business; (d)
Indebtedness evidenced by the Securities; (e) Indebtedness of the Company that
is expressly subordinate or junior in right of payment to any other Indebtedness
of the Company; (f) to the extent that it may constitute Indebtedness, any
obligation owing under leases (other than Capital Lease Obligations) or
management agreements; and (g) any obligation that by operation of law is
subordinate to any general unsecured obligations of the Company.
"Significant Restricted Subsidiary" means, at any date of
determination, (a) any Restricted Subsidiary that, together with its
Subsidiaries that constitute Restricted Subsidiaries, (i) for the most recent
fiscal year of the Company accounted for more than 10.0% of the consolidated
revenues of the Company and the Restricted Subsidiaries or (ii) as of the end of
such fiscal year, owned more than 10.0% of the consolidated assets of the
Company and the Restricted Subsidiaries, all as set forth on the consolidated
financial statements of the Company and the Restricted Subsidiaries for such
year prepared in conformity with GAAP, and (b) any Restricted Subsidiary which,
when aggregated with all other Restricted Subsidiaries that are not otherwise
Significant Restricted Subsidiaries and as to which any event described in
clause (g), (h), (i) or (j) of Section 6.01 has occurred, would constitute a
Significant Restricted Subsidiary under clause (a) of this definition.
"Stated Maturity," when used with respect to any Security or any
installment of interest thereon, means the date specified in such Security as
the fixed date on which the principal of such Security or such installment of
interest is due and payable.
"Sterling" means The Sterling Group, Inc.
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"Subordinated Indebtedness" means, with respect to the Company or any
Guarantor, any Indebtedness of the Company or such Guarantor, as the case may
be, which is expressly subordinated in right of payment to the Securities or
such Guarantor's Guarantee, as the case may be.
"Subsidiary" means, with respect to any Person, (a) any corporation of
which the outstanding Voting Equity Interests having at least a majority of the
votes entitled to be cast in the election of directors shall at the time be
owned, directly or indirectly, by such Person, or (b) any other Person of which
at least a majority of Voting Equity Interests are at the time, directly or
indirectly, owned by such first named Person.
"Surviving Person" means, with respect to any Person involved in or
that makes any Disposition, the Person formed by or surviving such Disposition
or the Person to which such Disposition is made.
"Tax Sharing Agreement" means the tax sharing agreement between the
Company and AXIA Group.
"Term Loan Facilities" means collectively the ESOP term loan, the
acquisition facility and the term loan facility of the Bank Credit Agreement.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code (S)(S)
77aaa-77bbbb), as amended, as in effect on the date of this Indenture (except as
provided in Section 10.03) until such time as this Indenture is qualified under
the TIA, and thereafter as in effect on the date on which the Indenture is
qualified under the TIA.
"Trustee" means the party named as such in the first paragraph of this
Indenture until a successor replaces it in accordance with the provisions of
this Indenture and thereafter means such successor.
"Trust Officer" means any officer within the corporate trust
department (or any successor group of the Trustee) including any vice president,
assistant vice president, assistant secretary or any other officer or assistant
officer of the Trustee customarily performing functions similar to those
performed by the persons who at that time shall be such officers, and also
means, with respect to a particular corporate trust matter, any other officer to
whom such trust matter is referred because of his knowledge of and familiarity
with the particular subject.
"United States Government Obligations" means direct non-callable
obligations of the United States of America for the payment of which the full
faith and credit of the United States is pledged.
"Unrestricted Securities" means one or more Securities that do not and
are not required to bear the Private Placement Legend in the form set forth in
Exhibit A hereto, including, without limitation, the Exchange Securities and any
Securities registered under the Securities Act pursuant to and in accordance
with the Registration Rights Agreement.
"Unrestricted Subsidiary" means any Subsidiary of the Company
designated as such pursuant to Section 4.17. Any such designation may be
revoked by a resolution of the Board of Directors of the Company delivered to
the Trustee, subject to the provisions of Section 4.17.
"Unutilized Net Cash Proceeds" has the meaning set forth in
Section 4.05.
"Voting Equity Interests" means Equity Interests in a corporation or
other Person with voting power under ordinary circumstances entitling the
holders thereof to elect the Board of Directors or other governing body of such
corporation or Person.
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"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the sum
of the products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required scheduled payment
of principal, including payment of final maturity, in respect thereof, by (ii)
the number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (b) the then outstanding
aggregate principal amount of such Indebtedness.
"Wholly Owned Subsidiary" means a Restricted Subsidiary all the Equity
Interests of which (other than directors' qualifying shares) are owned by the
Company or another Wholly Owned Subsidiary; provided, however, that a Foreign
Subsidiary shall be a Wholly Owned Subsidiary if more than 90% of the Equity
Interests and Voting Equity Interests thereof are owned by the Company or
another Wholly Owned Subsidiary.
SECTION 1.02 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:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Holder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company or any other
obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them therein.
SECTION 1.03 Rules of Construction.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning assigned
to it in accordance with generally accepted accounting principles in effect
from time to time, and any other reference in this Indenture to "generally
accepted accounting principles" refers to GAAP;
(c) "or" is not exclusive;
(d) words in the singular include the plural, and words in the plural
include the singular;
(e) provisions apply to successive events and transactions; and
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(f) "herein," "hereof" and other words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
subdivision.
ARTICLE TWO
THE SECURITIES
SECTION 2.01 Form and Dating.
The Initial Securities and the Trustee's certificate of authentication
thereof shall be substantially in the form of Exhibit A hereto, which is hereby
incorporated in and expressly made a part of this Indenture. The Exchange
Securities and the Trustee's certificate of authentication thereof shall be
substantially in the form of Exhibit B hereto, which is hereby incorporated in
and expressly made a part of this Indenture. The Securities may have notations,
legends or endorsements (including the Security Guarantee) required by law,
stock exchange rule or usage. The Company and the Trustee shall approve the
form of the Securities and any notation, legend or endorsement (including the
Security Guarantee) on them. Each Security shall be dated the date of its
issuance and shall show the date of its authentication.
Securities offered and sold in reliance on Rule 144A and Securities
offered and sold in reliance on Regulation S shall be issued initially in the
form of one or more Global Securities, substantially in the form set forth in
Exhibit A hereto, deposited with the Trustee, as custodian for the Depository,
duly executed by the Company and authenticated by the Trustee as hereinafter
provided with the Guarantees of the Guarantors endorsed thereon and shall bear
the legend set forth in Exhibit C hereto. The aggregate principal amount of the
Global Securities may from time to time be increased or decreased by adjustments
made on the records of the Trustee, as custodian for the Depository, as
hereinafter provided. Securities issued in exchange for interests in a Global
Security pursuant to Section 2.16 may be issued in the form of Physical
Securities in substantially the form set forth in Exhibit A.
SECTION 2.02. Execution and Authentication.
Two Officers, or an Officer and an Assistant Secretary, shall sign, or
one Officer shall sign and one Officer or an Assistant Secretary (each of whom
shall, in each case, have been duly authorized by all requisite corporate
actions) shall attest to, the Securities for the Company by manual or facsimile
signature.
If an Officer or an Assistant Secretary whose signature is on a
Security was an Officer or an Assistant Secretary, as the case may be, at the
time of such execution but no longer holds that office at the time the Trustee
authenticates the Security, the Security shall be valid nevertheless.
A Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Security. The
signature shall be conclusive evidence that the Security has been authenticated
under this Indenture.
The Trustee shall authenticate (i) Initial Securities for original
issue in an aggregate principal amount not to exceed $100,000,000, (ii) Private
Exchange Securities from time to time only in exchange for a like principal
amount of Initial Securities, (iii) Unrestricted Securities from time to time
only in exchange for (A) a like principal amount of Initial Securities or (B) a
like principal amount of Private Exchange Securities, and (iv) subject to the
limitations set forth in Section 4.04, one or more series of 10 3/4% Senior
Subordinated Notes due 2008 (such Securities
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to be substantially in the form of Exhibit A or Exhibit B, as the case may be)
in an aggregate principal amount not to exceed $50,000,000 (and if in the form
of Exhibit A the same principal amount of Securities in exchange therefor upon
consummation of a registered exchange offer) for original issue after the Issue
Date, in each case upon a written order of the Company in the form of an
Officers' Certificate. Each such written order shall specify the amount of
Securities to be authenticated and the date on which the Securities are to be
authenticated, whether the Securities are to be Initial Securities, Private
Exchange Securities or Unrestricted Securities and whether the Securities are to
be issued as Physical Securities or Global Securities and such other information
as the Trustee may reasonably request. After the Issue Date and in accordance
with (iv) above, additional Securities may be issued from time to time subject
to the limitations set forth in Section 4.04. The aggregate principal amount of
Securities outstanding at any time may not exceed $150,000,000, except as
provided in Sections 2.07 and 2.08.
Notwithstanding the foregoing, all Securities issued under this
Indenture shall vote and consent together on all matters (as to which any of
such Securities may vote or consent) as one class and no series of Securities
will have the right to vote or consent as a separate class on any matter.
The Trustee may appoint an authenticating agent reasonably acceptable
to the Company to authenticate Securities. Unless otherwise provided in the
appointment, an authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent shall
have the same rights as an Agent to deal with the Company and Affiliates of the
Company.
The Securities shall be issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof.
SECTION 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency, which may be in the
Borough of Manhattan, The City of New York, where (a) Securities may be
presented or surrendered for registration of transfer or for exchange (the
"Registrar"), (b) Securities may be presented or surrendered for payment (the
"Paying Agent") and (c) notices and demands in respect of the Securities and
this Indenture may be served. The Registrar shall keep a register of the
Securities and of their transfer and exchange. The Company, upon notice to the
Trustee, may appoint one or more co-Registrars and one or more additional Paying
Agents. The term "Paying Agent" includes any additional Paying Agent. Except as
provided herein, the Company or any Guarantor may act as Paying Agent, Registrar
or co-Registrar.
The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture, which shall incorporate the provisions of
the TIA. The agreement shall implement the provisions of this Indenture that
relate to such Agent. The Company shall notify the Trustee of the name and
address of any such Agent. If the Company fails to maintain a Registrar or
Paying Agent, or fails to give the foregoing notice, the Trustee shall act as
such and shall be entitled to appropriate compensation in accordance with
Section 7.07.
The Company initially appoints the Trustee, as Registrar and Paying
Agent until such time as the Trustee has resigned or a successor has been
appointed.
SECTION 2.04. Paying Agent To Hold Assets in Trust.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that each Paying Agent shall hold in trust for the benefit of
Holders or the Trustee all assets held by the Paying Agent for the payment of
principal of, or interest on, the Securities, and shall notify the Trustee of
any Default by the Company in
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making any such payment. The Company at any time may require a Paying Agent to
distribute all assets held by it to the Trustee and account for any assets
disbursed and the Trustee may at any time during the continuance of any payment
Default, upon written request to a Paying Agent, require such Paying Agent to
distribute all assets held by it to the Trustee and to account for any assets
distributed. Upon distribution to the Trustee of all assets that shall have been
delivered by the Company to the Paying Agent (if other than the Company), the
Paying Agent shall have no further liability for such assets. If the Company,
any Guarantor or any of their respective Affiliates acts as Paying Agent, it
shall, on or before each due date of the principal of or interest on the
Securities, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal or interest so becoming due until
such sums shall be paid to such Persons or otherwise disposed of as herein
provided and will promptly notify the Trustee of its action or failure so to
act.
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
Holders. If the Trustee is not the Registrar, the Company shall furnish to the
Trustee before each Interest Record Date and at such other times as the Trustee
may request in writing a list as of such date and in such form as the Trustee
may reasonably require of the names and addresses of Holders, which list may be
conclusively relied upon by the Trustee.
SECTION 2.06. Transfer and Exchange.
Subject to the provisions of Sections 2.15 and 2.16, when Securities
are presented to the Registrar or a co-Registrar with a request to register the
transfer of such Securities or to exchange such Securities for an equal
principal amount of Securities of other authorized denominations of the same
series, the Registrar or co-Registrar shall register the transfer or make the
exchange as requested if its requirements for such transaction are met;
provided, however, that the Securities surrendered for transfer or exchange
shall be duly endorsed or accompanied by a written instrument of transfer in
form satisfactory to the Company and the Registrar or co-Registrar, duly
executed by the Holder thereof or his attorney duly authorized in writing. To
permit registrations of transfers and exchanges, the Company shall execute and
the Trustee shall authenticate Securities at the Registrar's or co-Registrar's
written request. No service charge shall be made for any registration of
transfer or exchange, but the 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 other governmental charge
payable upon exchanges or transfers pursuant to Section 2.02, 2.10, 3.06, 4.05,
4.14, or 10.05). The Registrar or co-Registrar shall not be required to
register the transfer or exchange of any Security (i) during a period beginning
at the opening of business 15 days before the mailing of a notice of redemption
of Securities and ending at the close of business on the day of such mailing and
(ii) selected for redemption in whole or in part pursuant to Article Three
hereof, except the unredeemed portion of any Security being redeemed in part.
Prior to the registration of any transfer by a Holder as provided
herein, the Company, the Trustee and any Agent of the Company shall treat the
person in whose name the Security is registered as the owner thereof for all
purposes whether or not the Security shall be overdue, and neither the Company,
the Trustee nor any such Agent shall be affected by notice to the contrary. Any
Holder of a beneficial interest in a Global Security shall, by acceptance of
such beneficial interest in a Global Security, agree that transfers of
beneficial interests in such Global Security may be effected only through a
book-entry system maintained by the Depository (or its agent), and that
ownership of a beneficial interest in a Global Security shall be required to be
reflected in a book entry.
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SECTION 2.07. Replacement Securities.
If a mutilated Security is surrendered to the Trustee or if the Holder
of a Security claims that the Security has been lost, destroyed or wrongfully
taken, the Company shall issue and the Trustee shall authenticate a replacement
Security if the Trustee's requirements for replacement of Securities are met.
If required by the Company or the Trustee, such Holder must provide an indemnity
bond or other indemnity, sufficient in the judgment of both the Company and the
Trustee, to protect the Company, the Trustee and any Agent from any loss which
any of them may suffer if a Security is replaced The Company may charge such
Holder for its reasonable out-of-pocket expenses in replacing a Security,
including reasonable fees and expenses of counsel.
Every replacement Security is an additional obligation of the Company.
SECTION 2.08. Outstanding Securities.
Securities outstanding at any time are all the Securities that have
been authenticated by the Trustee except those canceled by it, those delivered
to it for cancellation and those described in this Section 2.08 as not
outstanding. Subject to Section 2.09, a Security does not cease to be
outstanding because the Company or any of its Affiliates holds the Security.
If a Security is replaced pursuant to Section 2.07 (other than a
mutilated Security surrendered for replacement), it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Security
is held by a bona fide purchaser. A mutilated Security ceases to be outstanding
upon surrender of such Security and replacement thereof pursuant to
Section 2.07.
If on a Redemption Date, Purchase Date or the Final Maturity Date the
Paying Agent holds money sufficient to pay all of the principal and interest due
on the Securities payable on that date, and is not prohibited from paying such
money to the Holders pursuant to the terms of this Indenture, then on and after
that date such Securities cease to be outstanding and interest on them ceases to
accrue.
SECTION 2.09. Treasury Securities.
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, waiver or consent, Securities owned
by the Company, the Guarantors or any of their respective Affiliates shall be
disregarded, except that, for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Securities that a Trust Officer of the Trustee actually knows are so owned shall
be disregarded.
The Company shall notify the Trustee, in writing, when it, any
Guarantor or any of its Affiliates repurchases or otherwise acquires Securities,
of the aggregate principal amount of such Securities so repurchased or otherwise
acquired.
SECTION 2.10. Temporary Securities.
Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities upon receipt of
a written order of the Company in the form of an Officers' Certificate. The
Officers' Certificate shall specify the amount of temporary Securities to be
authenticated and the date on which the temporary Securities are to be
authenticated.
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Temporary Securities shall be substantially in the form of definitive
Securities but may have variations that the Company considers appropriate for
temporary Securities. Without unreasonable delay, the Company shall prepare and
the Trustee shall authenticate upon receipt of a written order of the Company
pursuant to Section 2.02 definitive Securities in exchange for temporary
Securities.
SECTION 2.11. Cancellation.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Securities surrendered to them for transfer, exchange or payment. The
Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent,
and no one else, shall cancel, and at the written direction of the Company,
dispose of and deliver evidence of such disposal of all Securities surrendered
for transfer, exchange, payment or cancellation. Subject to Section 2.07, the
Company may not issue new Securities to replace Securities that it has paid or
delivered to the Trustee for cancellation. If the Company or any Guarantor
shall acquire any of the Securities, such acquisition shall not operate as a
redemption or satisfaction of the Indebtedness represented by such Securities
unless and until the same are surrendered to the Trustee for cancellation
pursuant to this Section 2.11.
SECTION 2.12. Defaulted Interest.
The Company shall pay interest on overdue principal from time to time
on demand at the rate of interest then borne by the Securities. The Company
shall, to the extent lawful, pay interest on overdue installments of interest
(without regard to any applicable grace periods) from time to time on demand at
the rate of interest then borne by the Securities.
If the Company defaults in a payment of interest on the Securities, it
shall pay the defaulted interest, plus (to the extent lawful) any interest
payable on the defaulted interest to the Persons who are Holders on a subsequent
special record date, which date shall be the fifteenth day preceding the date
fixed by the Company for the payment of defaulted interest or the next
succeeding Business Day if such date is not a Business Day. At least 15 days
before the subsequent special record date, the Company shall mail to each
Holder, with a copy to the Trustee, a notice that states the subsequent special
record date, the payment date and the amount of defaulted interest, and interest
payable on such defaulted interest, if any, to be paid.
Notwithstanding the foregoing, any interest which is paid prior to the
expiration of the 30-day period set forth in Section 6.01(b) shall be paid to
Holders as of the Interest Record Date for the Interest Payment Date for which
interest has not been paid.
SECTION 2.13. CUSIP Number.
The Company in issuing the Securities will use a "CUSIP" number and
the Trustee shall use the CUSIP number in notices of redemption or exchange as a
convenience to Holders; provided , however, that any such notice may state that
no representation is made as to the correctness or accuracy of the CUSIP number
printed in the notice or on the Securities, and that reliance may be placed only
on the other identification numbers printed on the Securities. The Company
shall promptly notify the Trustee of any changes in CUSIP numbers.
SECTION 2.14. Deposit of Moneys.
Prior to 12:00 noon New York City time on each Interest Payment Date,
Redemption Date, Purchase Date and the Final Maturity Date, the Company shall
deposit with the Paying Agent in immediately available funds
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money sufficient to make cash payments, if any, due on such Interest Payment
Date, Redemption Date, Purchase Date or Final Maturity Date, as the case may be,
in a timely manner which permits the Paying Agent to remit payment to the
Holders on such Interest Payment Date, Redemption Date, Purchase Date or Final
Maturity Date, as the case may be.
SECTION 2.15. Book-Entry Provisions for Global Securities.
(a) The Global Securities initially shall (i) be registered in the
name of the Depository or the nominee of such Depository, (ii) be delivered to
the Trustee as custodian for such Depository and (iii) bear legends as set forth
in Exhibit C.
Members of, or participants in, the Depository ("Participants") shall
have no rights under this Indenture with respect to any Global Security held on
their behalf by the Depository, or the Trustee as its custodian, or under the
Global Security, and the Depository may be treated by the Company, the Trustee
and any agent of the Company or the Trustee as the absolute owner of the Global
Security for all purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall prevent the Company, the Trustee or any agent of the Company or the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depository or impair, as between the Depository
and Participants, the operation of customary practices governing the exercise of
the rights of a Holder of any Security.
(b) Transfers of Global Securities shall be limited to transfers in
whole, but not in part, to the Depository, its successors or their respective
nominees. Interests of beneficial owners in the Global Securities may be
transferred or exchanged for Physical Securities in accordance with the rules
and procedures of the Depository and the provisions of Section 2.16; provided,
however, that Physical Securities shall be transferred to all beneficial owners
in exchange for their beneficial interests in Global Securities if (i) the
Depository notifies the Company that it is unwilling or unable to continue as
Depository for any Global Security and a successor Depository is not appointed
by the Company within 90 days of such notice or (ii) an Event of Default has
occurred and is continuing and the Registrar has received a request from the
Depository to issue Physical Securities.
(c) In connection with any transfer or exchange of a portion of the
beneficial interest in a Global Security to beneficial owners pursuant to
paragraph (b), the Registrar shall (if one or more Physical Securities are to be
issued) reflect on its books and records the date and a decrease in the
principal amount of such Global Security in an amount equal to the principal
amount of the beneficial interest in the Global Security to be transferred, and
the Company shall execute, and the Trustee shall authenticate and deliver, one
or more Physical Securities of like tenor and amount.
(d) In connection with the transfer of Global Securities as an
entirety to beneficial owners pursuant to paragraph (b) of this Section 2.15,
the Global Securities shall be deemed to be surrendered to the Trustee for
cancellation, and the Company shall execute, and the Trustee shall upon written
instructions from the Company authenticate and deliver, to each beneficial owner
identified by the Depository in exchange for its beneficial interest in the
Global Securities, an equal aggregate principal amount of Physical Securities of
authorized denominations.
(e) Any Physical Security constituting a Restricted Security delivered
in exchange for an interest in a Global Security pursuant to paragraph (c) of
this Section 2.15 shall, except as otherwise provided by Section 2.16, bear the
Private Placement Legend.
(f) The Holder of any Global Security may grant proxies and otherwise
authorize any Person, including Participants and Persons that may hold interests
through Participants, to take any action which a Holder is
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entitled to take under this Indenture or the Securities and the Trustee is
entitled to rely upon any electronic instructions from beneficial owners to the
Holder of any Global Security.
SECTION 2.16. Registration of Transfers and Exchanges.
(a) Transfer and Exchange of Physical Securities. When Physical
Securities are presented to the Registrar or co-Registrar with a request:
(i) to register the transfer of the Physical Securities; or
(ii) to exchange such Physical Securities for an equal principal
amount of Physical Securities of other authorized denominations,
the Registrar or co-Registrar shall register the transfer or make the exchange
as requested if the requirements under this Indenture as set forth in this
Section 2.16 for such transactions are met; provided, however, that the Physical
Securities presented or surrendered for registration of transfer or exchange:
(i) shall be duly endorsed or accompanied by a written
instrument of transfer in form satisfactory to the Registrar or co-
Registrar, duly executed by the Holder thereof or his attorney duly
authorized in writing; and
(ii) in the case of Physical Securities the offer and sale of
which have not been registered under the Securities Act, such Physical
Securities shall be accompanied, in the sole discretion of the
Company, by the following additional information and documents, as
applicable:
(A) if such Physical Security is being delivered to the
Registrar or co-Registrar by a Holder for registration
in the name of such Holder, without transfer, a
certification from such Holder to that effect
(substantially in the form of Exhibit D hereto); or
(B) if such Physical Security is being transferred to a QIB
in accordance with Rule 144A, a certification to that
effect (substantially in the form of Exhibit D hereto);
or
(C) if such Physical Security is being transferred to an
Institutional Accredited Investor, delivery of a
certification to that effect (substantially in the form
of Exhibit D hereto) and a transferee letter of
representation (substantially in the form of Exhibit E)
hereto and, at the option of the Company, an Opinion of
Counsel reasonably satisfactory to the Company to the
effect that such transfer is in compliance with the
Securities Act; or
(D) if such Physical Security is being transferred in
reliance on Regulation S, delivery of a certification
to that effect (substantially in the form of Exhibit D
hereto) and, at the option of the Company, an Opinion
of Counsel reasonably satisfactory to the Company to
the effect that such transfer is in compliance with the
Securities Act; or
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(E) if such Physical Security is being transferred in
reliance on Rule 144 under the Securities Act, delivery
of a certification to that effect (substantially in the
form of Exhibit D hereto) and, at the option of the
Company, an Opinion of Counsel reasonably satisfactory
to the Company to the effect that such transfer is in
compliance with the Securities Act; or
(F) if such Physical Security is being transferred in
reliance on another exemption from the registration
requirements of the Securities Act, a certification to
that effect (substantially in the form of Exhibit D
hereto) and, at the option of the Company, an Opinion
of Counsel reasonably acceptable to the Company to the
effect that such transfer is in compliance with the
Securities Act.
(b) Restrictions on Transfer of a Physical Security for a Beneficial
Interest in a Global Security. A Physical Security the offer and sale of which
has not been registered under the Securities Act may not be exchanged for a
beneficial interest in a Global Security except upon satisfaction of the
requirements set forth below. Upon receipt by the Registrar or co-Registrar of
a Physical Security, duly endorsed or accompanied by appropriate instruments of
transfer, in form satisfactory to the Registrar or co-Registrar, together with:
(i) certification, substantially in the form of Exhibit D
hereto, that such Physical Security is being transferred (I) to a QIB,
(II) to an Accredited Investor or (III) in an offshore transaction in
reliance on Regulation S and, with respect to (II) or (III), at the
option of the Company, an Opinion of Counsel reasonably acceptable to
the Company to the effect that such transfer is in compliance with the
Securities Act; and
(ii) written instructions directing the Registrar or co-Registrar
to make, or to direct the Depository to make, an endorsement on the
applicable Global Security to reflect an increase in the aggregate
amount of the Securities represented by the Global Security,
then the Registrar or co-Registrar shall cancel such Physical Security and
cause, or direct the Depository to cause, in accordance with the standing
instructions and procedures existing between the Depository and the Registrar or
co-Registrar, the principal amount of Securities represented by the applicable
Global Security to be increased accordingly. If no 144A Global Security, IAI
Global Security or Regulation S Global Security, as the case may be, is then
outstanding, the Company shall, unless either of the events in the proviso to
Section 2.15(b) have occurred and are continuing, issue and the Trustee shall,
upon written instructions from the Company in accordance with Section 2.02,
authenticate such a Global Security in the appropriate principal amount.
(c) Transfer and Exchange of Global Securities. The transfer and
exchange of Global Securities or beneficial interests therein shall be effected
through the Depository in accordance with this Indenture (including the
restrictions on transfer set forth herein) and the procedures of the Depository
therefor. Upon receipt by the Registrar or Co-Registrar of written
instructions, or such other instruction as is customary for the Depository, from
the Depository or its nominee, requesting the registration of transfer of an
interest in a 144A Global Security, an IAI Global Security or Regulation S
Global Security, as the case may be, to another type of Global Security,
together with the applicable Global Securities (or, if the applicable type of
Global Security required to represent the interest as requested to be obtained
is not then outstanding, only the Global Security representing the interest
being transferred), the Registrar or Co-Registrar shall reflect on its books and
records (and the applicable Global Security) the applicable increase and
decrease of the principal amount of Securities represented by such types of
Global Securities, giving effect to such transfer. If the applicable type of
Global Security required to represent the interest as requested to be obtained
is not
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outstanding at the time of such request, the Company shall issue and the Trustee
shall, upon written instructions from the Company in accordance with Section
2.02, authenticate a new Global Security of such type in principal amount equal
to the principal amount of the interest requested to be transferred.
(d) Transfer of a Beneficial Interest in a Global Security for a
Physical Security.
(i) Any Person having a beneficial interest in a Global Security
may upon request exchange such beneficial interest for a Physical Security;
provided, however, that prior to the Registration, a transferee that is a
QIB or Institutional Accredited Investor may not exchange a beneficial
interest in a Global Security for a Physical Security. Upon receipt by the
Registrar or co-Registrar of written instructions, or such other form of
instructions as is customary for the Depository, from the Depository or its
nominee on behalf of any Person (subject to the previous sentence) having a
beneficial interest in a Global Security and upon receipt by the Trustee of
a written order or such other form of instructions as is customary for the
Depository or the Person designated by the Depository as having such a
beneficial interest containing registration instructions and, in the case
of any such transfer or exchange of a beneficial interest in Securities the
offer and sale of which have not been registered under the Securities Act,
the following additional information and documents:
(A) if such beneficial interest is being transferred in
reliance on Rule 144 under the Securities Act, delivery of a
certification to that effect (substantially in the form of
Exhibit D hereto) and, at the option of the Company, an Opinion
of Counsel reasonably satisfactory to the Company to the effect
that such transfer is in compliance with the Securities Act; or
(B) if such beneficial interest is being transferred in
reliance on another exemption from the registration requirements
of the Securities Act, a certification to that effect
(substantially in the form of Exhibit D hereto) and, at the
option of the Company, an Opinion of Counsel reasonably
satisfactory to the Company to the effect that such transfer is
in compliance with the Securities Act,
then the Registrar or co-Registrar will cause, in accordance with the
standing instructions and procedures existing between the Depository and
the Registrar or co-Registrar, the aggregate principal amount of the
applicable Global Security to be reduced and, following such reduction, the
Company will execute and, upon receipt of an authentication order in the
form of an Officers' Certificate in accordance with Section 2.02, the
Trustee will authenticate and deliver to the transferee a Physical Security
in the appropriate principal amount.
(ii) Securities issued in exchange for a beneficial interest in a
Global Security pursuant to this Section 2.16(d) shall be registered in
such names and in such authorized denominations as the Depository, pursuant
to instructions from its direct or indirect participants or otherwise,
shall instruct the Registrar or co-Registrar in writing. The Registrar or
co-Registrar shall deliver such Physical Securities to the Persons in
whose names such Physical Securities are so registered.
(e) Restrictions on Transfer and Exchange of Global Securities.
Notwithstanding any other provisions of this Indenture, a Global Security may
not be transferred as a whole except by the Depository to a nominee of the
Depository or by a nominee of the Depository to the Depository or another
nominee of the Depository or by the Depository or any such nominee to a
successor Depository or a nominee of such successor Depository.
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(f) Private Placement Legend. Upon the transfer, exchange or
replacement of Securities not bearing the Private Placement Legend, the
Registrar or co-Registrar shall deliver Securities that do not bear the Private
Placement Legend. Upon the transfer, exchange or replacement of Securities
bearing the Private Placement Legend, the Registrar or co-Registrar shall
deliver only Securities that bear the Private Placement Legend unless, and the
Trustee is hereby authorized to deliver Securities without the Private Placement
Legend if, (i) there is delivered to the Trustee an Opinion of Counsel
reasonably satisfactory to the Company and the Trustee to the effect that
neither such legend nor the related restrictions on transfer are required in
order to maintain compliance with the provisions of the Securities Act; (ii)
such Security has been sold pursuant to an effective registration statement
under the Securities Act (including pursuant to a Registration); or (iii) the
date of such transfer, exchange or replacement is two years after the later of
(x) the Issue Date and (y) the last date that the Company or any affiliate (as
defined in Rule 144 under the Securities Act) of the Company was the owner of
such Securities (or any predecessor thereto).
(g) General. By its acceptance of any Security bearing the Private
Placement Legend, each Holder of such a Security acknowledges the restrictions
on transfer of such Security set forth in this Indenture and in the Private
Placement Legend and agrees that it will transfer such Security only as provided
in this Indenture.
The Trustee shall have no obligation or duty to monitor, determine or
inquire as to compliance with any restrictions on transfer imposed under this
Indenture or under applicable law with respect to any transfer of any interest
in any Security (including any transfers between or among Participants or
beneficial owners of interest in any Global Security) other than to require
delivery of such certificates and other documentation or evidence as are
expressly required by, and to do so if and when expressly required by the terms
of, this Indenture, and to examine the same to determine substantial compliance
as to form with the express requirements hereof.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.15 or this Section 2.16.
The Company shall have the right to inspect and make copies of all such letters,
notices or other written communications at any reasonable time upon the giving
of reasonable written notice to the Registrar.
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.
If the Company wants to redeem Securities pursuant to paragraph 5 or 6
of the Securities at the applicable redemption price set forth thereon, it shall
notify the Trustee in writing of the Redemption Date and the principal amount of
Securities to be redeemed. The Company shall give such notice to the Trustee at
least 30 days but not more than 60 days before the Redemption Date (unless a
shorter notice shall be agreed to by the Trustee in writing), together with an
Officers' Certificate stating that such redemption will comply with the
conditions contained herein.
SECTION 3.02. Selection of Securities To Be Redeemed.
If less than all of the Securities are to be redeemed pursuant to
paragraph 5 of the Securities, the Trustee shall select the Securities to be
redeemed in compliance with the requirements of the national securities
exchange, if any, on which the Securities are listed or, if the Securities are
not then listed on a national securities exchange, on a pro rata basis, by lot
or in such other manner as the Trustee shall deem fair and appropriate.
Selection
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of the Securities to be redeemed pursuant to paragraph 6 of the Securities shall
be made by the Trustee only on a pro rata basis or on as nearly a pro rata basis
as is practicable (subject to the procedures of the Depository) based on the
aggregate principal amount of Securities held by each Holder. The Trustee shall
make the selection from the Securities then outstanding, subject to redemption
and not previously called for redemption.
The Trustee may select for redemption pursuant to paragraph 5 or 6 of
the Securities portions of the principal amount of Securities that have
denominations equal to or larger than $1,000 principal amount. Securities and
portions of them the Trustee so selects shall be in amounts of $1,000 principal
amount or integral multiples thereof. Provisions of this Indenture that apply to
Securities called for redemption also apply to portions of Securities called for
redemption.
SECTION 3.03. Notice of Redemption.
At least 30 days but not more than 60 days before a Redemption Date,
the Company shall mail a notice of redemption by first-class mail to each Holder
whose Securities are to be redeemed at such Holder's registered address;
provided, however, that notice of a redemption pursuant to paragraph 6 of the
Securities shall be mailed to each Holder whose Securities are to be redeemed no
later than 60 days after the date of the Closing of the relevant Public Equity
Offering of the Company.
Each notice of redemption shall identify the Securities to be redeemed
(including the CUSIP number thereon) and shall state:
(1) the Redemption Date;
(2) the redemption price;
(3) the name and address of the Paying Agent to which the Securities
are to be surrendered for redemption;
(4) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(5) that, unless the Company defaults in making the redemption
payment, interest on Securities called for redemption ceases to accrue on
and after the Redemption Date and the only remaining right of the Holders
is to receive payment of the redemption price upon surrender to the Paying
Agent; and
(6) in the case of any redemption pursuant to paragraph 5 or 6 of the
Securities, if any Security is being redeemed in part, the portion of the
principal amount of such Security to be redeemed and that, after the
Redemption Date, upon surrender of such Security, a new Security or
Securities in principal amount equal to the unredeemed portion thereof will
be issued.
At the Company's request, the Trustee shall give the notice of
redemption on behalf of the Company, in the Company's name and at the Company's
expense.
SECTION 3.04. Effect of Notice of Redemption.
Once a notice of redemption is mailed, Securities called for
redemption become due and payable on the Redemption Date and at the redemption
price. Upon surrender to the Paying Agent, such Securities shall be paid
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at the redemption price, plus accrued interest thereon, if any, to the
Redemption Date, but interest installments whose maturity is on or prior to such
Redemption Date shall be payable to the Holders of record at the close of
business on the relevant Interest Record Date.
SECTION 3.05. Deposit of Redemption Price.
At least one Business Day before the Redemption Date, the Company
shall deposit with the Paying Agent (or if the Company is its own Paying Agent,
shall, on or before the Redemption Date, segregate and hold in trust) money
sufficient to pay the redemption price of and accrued interest, if any, on all
Securities to be redeemed on that date other than Securities or portions thereof
called for redemption on that date which have been delivered by the Company to
the Trustee for cancellation.
If any Security surrendered for redemption in the manner provided in
the Securities shall not be so paid on the Redemption Date due to the failure of
the Company to deposit with the Paying Agent money sufficient to pay the
redemption price thereof, the principal and accrued and unpaid interest, if any,
thereon shall, until paid or duly provided for, bear interest as provided in
Sections 2.12 and 4.01 with respect to any payment default.
SECTION 3.06. Securities Redeemed in Part.
Upon surrender of a Security that is redeemed in part, the Trustee
shall authenticate for the Holder a new Security equal in principal amount to
the unredeemed portion of the Security surrendered.
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities.
The Company shall pay the principal of and interest on the Securities
in the manner provided in the Securities and the Exchange and Registration
Rights Agreement. An installment of principal or interest shall be considered
paid on the date due if the Trustee or Paying Agent (other than the Company, a
Guarantor or any of their respective Affiliates) holds on that date money
designated for and sufficient to pay the installment in full and is not
prohibited from paying such money to the Holders of the Securities pursuant to
the terms of this Indenture.
The Company shall pay cash interest on overdue principal at the same
rate per annum borne by the Securities. The Company shall pay cash interest on
overdue installments of interest at the same rate per annum borne by the
Securities, to the extent lawful, as provided in Section 2.12.
SECTION 4.02. Maintenance of Office or Agency.
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 address of the
Trustee set forth in Article Thirteen. The Company hereby initially designates
the Trustee at its address set forth in Section 13.02 as its office or agency in
The Borough of Manhattan, The City of New York, for such purposes.
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SECTION 4.03. Transactions with Affiliates.
The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, directly or indirectly, conduct any business or enter into any
transaction (or series of related transactions) with or for the benefit of any
of their respective Affiliates of the Company (each an "Affiliate Transaction"),
unless (i) such Affiliate Transaction is on terms which are no less favorable to
the Company or such Restricted Subsidiary, as the case may be, than would be
available in a comparable transaction with an unaffiliated third party and (ii)
if such Affiliate Transaction or series of related Affiliate Transactions (other
than any such Affiliate Transactions between the Company or a Restricted
Subsidiary and an Unrestricted Subsidiary or an Accounts Receivable Subsidiary
in the ordinary course of business) involves aggregate payments or other
consideration having a Fair Market Value in excess of $2.5 million, such
Affiliate Transaction is in writing and a majority of the disinterested members
of the Board of Directors of the Company shall have approved such Affiliate
Transaction. In addition, any Affiliate Transaction (other than an Affiliate
Transaction between the Company or a Restricted Subsidiary and an Unrestricted
Subsidiary or an Accounts Receivable Subsidiary in the ordinary course of
business) involving aggregate payments or other consideration having a Fair
Market Value in excess of $5.0 million will also require a written opinion from
an Independent Financial Advisor stating that the terms of such Affiliate
Transaction are fair, from a financial point of view, to the Company or the
Restricted Subsidiary involved in such Affiliate Transaction, as the case may
be.
Notwithstanding the foregoing, the restrictions set forth in this
covenant shall not apply to (i) transactions with or among the Company and any
Restricted Subsidiary or between or among Restricted Subsidiaries; (ii)
customary directors' fees, indemnification and similar arrangements, consulting
fees, employee salaries, bonuses or employment agreements, compensation or
employee benefit arrangements and incentive arrangements with any officer,
director or employee of the Company or any Restricted Subsidiary entered into in
the ordinary course of business (including customary benefits thereunder) and
payments under any indemnification arrangements permitted by applicable law;
(iii) payments to AXIA Group to permit AXIA Group to make payments to The
Sterling Group for advisory services pursuant to the Management Agreement; (iv)
the issue and sale by the Company to its stockholders of Qualified Equity
Interests; (v) any Restricted Payments made in compliance with Section 4.06;
(vii) intercompany sales between the Company and any of its Restricted
Subsidiaries or exclusively between or among such Restricted Subsidiaries
provided that such sales are in the ordinary course of business and on an arm's-
length basis; (vi) the Incurrence of intercompany Indebtedness permitted
pursuant to clause (d) of Section 4.04; and (viii) loans or advances to
employees in the ordinary course of business.
SECTION 4.04. Limitation on Indebtedness.
The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, directly or indirectly, Incur any Indebtedness (including
Acquired Indebtedness) or issue any Disqualified Equity Interests, except for
Permitted Indebtedness; provided, however, that (i) the Company and any
Restricted Subsidiary may Incur Indebtedness (including Acquired Indebtedness)
and (ii) the Company may issue Disqualified Equity Interests if, in any such
case, at the time of and immediately after giving pro forma effect to such
Incurrence of Indebtedness or issuance of Disqualified Equity Interests and the
application of the proceeds therefrom, the Company's Consolidated Coverage Ratio
would be greater than (a) 1.75 to 1.0, if such Incurrence occurs on or prior to
July 15, 2000, or (b) 2.0 to 1.0, if such Incurrence occurs after July 15, 2000.
The foregoing limitations will not apply to the Incurrence of any of
the following (collectively, "Permitted Indebtedness"), each of which shall be
given independent effect:
(A) Indebtedness under the Securities issued hereby on the Issue
Date, the Guarantees and this Indenture;
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(B) Existing Indebtedness;
(C) Indebtedness of the Company, and its Subsidiaries pursuant to (x)
the Term Loan Facilities of the Bank Credit Agreement in an aggregate
principal amount at any one time outstanding not to exceed $62 million and
(y) the revolving loan facilities of the Bank Credit Agreement in an
aggregate principal amount at any one time outstanding not to exceed the
greater of (I) $15.0 million and (II) the sum of (A) 85% of the net book
value of the accounts receivable of the Company and the Restricted
Subsidiaries on a consolidated basis in accordance with GAAP and (B) 50% of
the net book value (determined on a consolidated basis in accordance with
GAAP) of (i) the inventory of the Company and the Restricted Subsidiaries
and (ii) the ATF tools owned by the Company and its Restricted
Subsidiaries;
(D) Indebtedness of any Restricted Subsidiary owed to and held by the
Company or any Restricted Subsidiary and Indebtedness of the Company owed
to and held by any Restricted Subsidiary, which Indebtedness is unsecured
and subordinated in right of payment to the payment and performance of the
Company's obligations under any Senior Indebtedness, this Indenture and the
Securities; provided, however, that an Incurrence of Indebtedness that is
not permitted by this clause (d) shall be deemed to have occurred upon (i)
any sale or other disposition of any Indebtedness of the Company or any
Restricted Subsidiary referred to in this clause (d) to a Person (other
than the Company or any Restricted Subsidiary), and (ii) the designation of
a Restricted Subsidiary which holds Indebtedness of the Company or any
other Restricted Subsidiary as an Unrestricted Subsidiary;
(E) the Guarantees and guarantees by any Guarantor of Indebtedness of
the Company; provided, however, that if such guarantee is of Subordinated
Indebtedness, then the Guarantee of such Guarantor shall be senior to such
Guarantor's guarantee of Subordinated Indebtedness;
(F) Hedging Obligations of the Company and the Restricted
Subsidiaries;
(G) Purchase Money Indebtedness and Capitalized Lease Obligations
(and refinancings thereof) of the Company and the Restricted Subsidiaries
which do not exceed the greater of (x) $10.0 million in the aggregate or
(y) 5% of the consolidated tangible net assets of the Company at any one
time outstanding;
(H) Guarantees of the Company of Indebtedness incurred by Restricted
Subsidiaries;
(I) Indebtedness of the Company or any Restricted Subsidiary
consisting of guarantees, indemnities or obligations in respect of purchase
price adjustments in connection with the acquisition or disposition of
assets permitted under this Indenture;
(J) Indebtedness of the Company or a Restricted Subsidiary to the
extent representing a replacement, renewal, refinancing or extension
(collectively, a "refinancing") of outstanding Indebtedness Incurred in
compliance with the Consolidated Coverage Ratio of the first paragraph of
this covenant or clause (a) or (b) of this paragraph of this covenant;
provided, however, that (i) any such refinancing shall not exceed the sum
of the principal amount (or accreted amount (determined in accordance with
GAAP), if less) of the Indebtedness or Disqualified Equity Interests being
refinanced, plus the amount of accrued interest or dividends thereon, plus
the amount of any prepayment premium necessary to accomplish such
refinancing and such reasonable fees and expenses incurred in connection
therewith; (ii) Indebtedness representing a refinancing of Indebtedness
other than Senior Indebtedness shall have a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of
the Indebtedness being refinanced; (iii) Indebtedness that is pari passu
with the Securities may only be refinanced with Indebtedness that is made
pari passu with
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or subordinate in right of payment to the Securities and Subordinated
Indebtedness may only be refinanced with Subordinated Indebtedness or
Disqualified Equity Interests and Disqualified Equity Interests may only be
refinanced with other Disqualified Equity Interests; and (iv) refinancing
Indebtedness incurred by a Restricted Subsidiary which is not a Guarantor
may only be used to refinance Indebtedness of a Restricted Subsidiary which
is not a Guarantor; and
(K) in addition to the items referred to in clauses (a) through (j)
above, Indebtedness of the Company (including any Indebtedness under the
Bank Credit Agreement that utilizes this subparagraph (k)) having an
aggregate principal amount not to exceed $15.0 million at any time
outstanding.
SECTION 4.05. Disposition of Proceeds of Asset Sales.
The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, directly or indirectly, make any Asset Sale, unless (i) the
Company or such Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the Fair Market
Value of the assets sold or otherwise disposed of and (ii) at least 75% of such
consideration consists of (A) cash or Cash Equivalents, (B) properties and
capital assets to be used in the business of the Company, or (C) Equity
Interests in any Person which thereby becomes a Restricted Subsidiary. The
amount of any (i) Indebtedness (other than any Subordinated Indebtedness) of the
Company or any Restricted Subsidiary that is actually assumed by the transferee
in such Asset Sale and from which the Company and the Restricted Subsidiaries
are fully released shall be deemed to be cash for purposes of determining the
percentage of cash consideration received by the Company or the Restricted
Subsidiaries and (ii) notes or other similar obligations received by the Company
or the Restricted Subsidiaries from such transferee that are immediately
converted, sold or exchanged (or are converted, sold or exchanged within 90 days
of the related Asset Sale) by the Company or the Restricted Subsidiaries into
cash shall be deemed to be cash, in an amount equal to the net cash proceeds
realized upon such conversion, sale or exchange for purposes of determining the
percentage of cash consideration received by the Company or the Restricted
Subsidiaries.
The Company or such Restricted Subsidiary, as the case may be, may (i)
apply the Net Cash Proceeds of any Asset Sale within 365 days of receipt thereof
to repay Senior Indebtedness, (ii) commit in writing within 365 days of receipt
thereof to acquire, construct or improve properties and capital assets to be
used in a Related Business (and so apply such Net Cash Proceeds within 180 days
after the commitment thereof) or (iii) apply the Net Cash Proceeds of any Asset
Sale within 365 days of receipt thereof or repay Pari Passu Debt not exceeding
the Pari Passu Debt Pro Rata Share.
To the extent all or part of the Net Cash Proceeds of any Asset Sale
are not applied as described in clause (i), (ii) or (iii) of the immediately
preceding paragraph (such Net Cash Proceeds, the "Unutilized Net Cash
Proceeds"), the Company shall, within 30 days after the expiration of such
period, make an Offer to Purchase outstanding Securities up to a maximum
principal amount (expressed as a multiple of $1,000) of Securities equal to such
Unutilized Net Cash Proceeds, at a purchase price in cash equal to 100% of the
principal amount thereof, plus accrued and unpaid interest thereon, if any, to
the Purchase Date; provided, however, that the Offer to Purchase may be deferred
until there are aggregate Unutilized Net Cash Proceeds equal to or in excess of
$5.0 million, at which time the entire amount of such Unutilized Net Cash
Proceeds, and not just the amount in excess of $5.0 million, shall be applied as
required pursuant to this paragraph.
After an Offer to Purchase has been made pursuant to the requirements
of the paragraph above, the Company may defer any future Offer to Purchase
required pursuant to an Asset Sale until there are new aggregate Unutilized Net
Cash Proceeds equal to or in excess of $5.0 million, at which time the entire
amount of such Unutilized
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Net Cash Proceeds and not just the amount in excess of $5.0 million, shall be
applied as required pursuant the paragraph above.
With respect to any Offer to Purchase effected pursuant to this
covenant, to the extent the aggregate principal amount of Securities tendered
pursuant to such Offer to Purchase exceeds the Unutilized Net Cash Proceeds to
be applied to the repurchase thereof, such Securities shall be purchased pro
rata based on the aggregate principal amount of such Securities tendered by each
Holder. To the extent the Unutilized Net Cash Proceeds exceed the aggregate
amount of Securities tendered by the Holders of the Securities pursuant to such
Offer to Purchase, the Company may retain and utilize any portion of the
Unutilized Net Cash Proceeds not applied to repurchase the Securities for any
purpose consistent with the other terms of this Indenture.
In the event that the Company makes an Offer to Purchase the
Securities, the Company shall comply with any applicable securities laws and
regulations, including any applicable requirements of Section 14(e) of, and Rule
14e-1 under, the Exchange Act, and any violation of the provisions of this
Indenture relating to such Offer to Purchase occurring as a result of such
compliance shall not be deemed an Event of Default or an event that with the
passing of time or giving of notice, or both, would constitute an Event of
Default.
Each Holder shall be entitled to tender all or any portion of the
Securities owned by such Holder pursuant to the Offer to Purchase, subject to
the requirement that any portion of a Security tendered must be tendered in an
integral multiple of $1,000 principal amount and subject to any proration among
tendering Holders as described above.
SECTION 4.06. Limitation on Restricted Payments.
The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, directly or indirectly,
(i) declare or pay any dividend or any other distribution on any
Equity Interests of the Company or any Restricted Subsidiary or make any
payment or distribution to the direct or indirect holders (in their
capacities as such) of Equity Interests of the Company or any Restricted
Subsidiary (other than any dividends, distributions and payments made to
the Company or any Restricted Subsidiary and dividends or distributions
payable to any Person solely in Qualified Equity Interests of the Company
or any Restricted Subsidiary which is a Guarantor, or in options, warrants
or other rights to purchase Qualified Equity Interests of the Company and
any Restricted Subsidiary which is a Guarantor, and other than pro rata
dividends or distributions made by a Subsidiary that is not a wholly-owned
Subsidiary to minority stockholders (or owners of an equivalent interest in
the case of a Subsidiary that in not a corporation));
(ii) purchase, redeem or otherwise acquire or retire for value any
Equity Interests of the Company or any Restricted Subsidiary (other than
any such Equity Interests owned by the Company or any Restricted
Subsidiary);
(iii) purchase, redeem, defease or retire for value, or make any
principal payment on, prior to any scheduled maturity, scheduled repayment
or scheduled sinking fund payment, any Subordinated Indebtedness (other
than any Subordinated Indebtedness held by the Company or any Restricted
Subsidiary or Subordinated Indebtedness purchased in anticipation of
satisfying a sinking fund payment due within two years of such
acquisition); or
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(iv) make any Investment (other than Permitted Investments) in any
Person (other than in the Company, any Restricted Subsidiary or a Person
that becomes a Restricted Subsidiary, or is merged with or into or
consolidated with the Company or a Restricted Subsidiary (provided the
Company or a Restricted Subsidiary is the survivor), as a result of or in
connection with such Investment)
(any such payment or any other action (other than any exception thereto)
described in (i), (ii), (iii) or (iv) each, a "Restricted Payment"), unless
(A) no Default shall have occurred and be continuing at the time
or immediately after giving effect to such Restricted Payment;
(B) immediately after giving effect to such Restricted Payment,
the Company would be able to Incur $1.00 of additional Indebtedness
(other than Permitted Indebtedness) under the Consolidated Coverage
Ratio of the first paragraph of Section 4.04; and
(C) immediately after giving effect to such Restricted Payment,
the aggregate amount of all Restricted Payments declared or made on or
after the Issue Date does not exceed an amount equal to the sum of (1)
50% of cumulative Consolidated Net Income determined for the period
(taken as one period) commencing on the Issue Date and ending on the
last day of the most recent fiscal quarter immediately preceding the
date of such Restricted Payment for which consolidated financial
information of the Company is available (or if such cumulative
Consolidated Net Income shall be a loss, minus 100% of such loss),
plus (2) the aggregate net cash proceeds received by the Company
either (x) as capital contributions to the Company after the Issue
Date or (y) from the issue and sale (other than to a Restricted
Subsidiary) of its Qualified Equity Interests after the Issue Date
(excluding the net proceeds from any issuance and sale of Qualified
Equity Interests financed, directly or indirectly, using funds
borrowed from the Company or any Restricted Subsidiary until and to
the extent such borrowing is repaid), plus (3) the principal amount
(or accreted amount (determined in accordance with GAAP), if less) of
any Indebtedness of the Company or any Restricted Subsidiary Incurred
after the Issue Date which has been converted into or exchanged for
Qualified Equity Interests of the Company, plus (4) in the case of the
disposition or repayment of any Investment constituting a Restricted
Payment made after the Issue Date, an amount (to the extent not
included in the computation of Consolidated Net Income) equal to the
lesser of: (x) the return of capital with respect to such Investment
and (y) the amount of such Investment which was treated as a
Restricted Payment, in either case, less the cost of the disposition
of such Investment, plus (5) so long as the Designation thereof was
treated as a Restricted Payment made after the Issue Date, with
respect to any Unrestricted Subsidiary that has been redesignated as a
Restricted Subsidiary after the Issue Date in accordance with Section
4.17 below, the Company's proportionate interest in an amount equal to
the excess of (x) the total assets of such Subsidiary, valued on an
aggregate basis at Fair Market Value, over (y) the total liabilities
of such Subsidiary, determined in accordance with GAAP (and provided
that such amount shall not in any case exceed the Designation Amount
with respect to such Restricted Subsidiary upon its Designation), plus
(6) (to the extent not included in the computation of Consolidated Net
Income) the amount of cash dividends or cash distributions (other than
to pay taxes) received from any Unrestricted Subsidiary since the
Issue Date, minus (7) the greater of (x) $0 and (y) the Designation
Amount (measured as of the date of Designation) with respect to any
Subsidiary of the Company which has been designated as an Unrestricted
Subsidiary after the Issue Date in accordance with Section 4.17.
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The foregoing provisions will not prevent (i) the payment of any
dividend or distribution on, or redemption of, Equity Interests within 60 days
after the date of declaration of such dividend or distribution or the giving of
formal notice of such redemption, if at the date of such declaration or giving
of such formal notice such payment or redemption would comply with the
provisions of this Indenture; (ii) a payment to AXIA Group to allow AXIA Group
to purchase, redeem, retire or otherwise acquire any Equity Interests of AXIA
Group or the Company in exchange for, or out of the net cash proceeds of the
substantially concurrent issue and sale (other than to a Restricted Subsidiary)
of, Qualified Equity Interests of the Company or out of the net cash proceeds
received by the Company as capital contributions to the Company after the Issue
Date; provided, however, that any such net cash proceeds and the value of any
Qualified Equity Interests issued in exchange for such retired Equity Interests
are excluded from clause (c)(2) of the preceding paragraph (and were not
included therein at any time); (iii) the purchase, redemption, retirement,
defeasance or other acquisition of Subordinated Indebtedness, or any other
payment thereon, made in exchange for, or out of the net cash proceeds of, a
substantially concurrent issue and sale (other than to a Restricted Subsidiary)
of (x) Qualified Equity Interests of the Company or out of the net cash proceeds
received by the Company as capital contributions to the Company after the Issue
Date; provided, however, that any such net cash proceeds and the value of any
Qualified Equity Interests issued in exchange for Subordinated Indebtedness are
excluded from clauses (c)(2) and (c)(3) of the preceding paragraph (and were not
included therein at any time) or (y) other Subordinated Indebtedness having no
stated maturity for the payment of principal thereof prior to the final stated
maturity of the Securities; (iv) any Investment to the extent that it is funded
with the net cash proceeds of the substantially concurrent issue and sale (other
than to a Restricted Subsidiary) of Qualified Equity Interests of the Company;
provided, however, that any such net cash proceeds are excluded from clause
(c)(2) of the preceding paragraph (and were not included therein at any time);
(v) payments to AXIA Group (for purposes of AXIA Group making payments to the
ESOP) or to the ESOP on behalf of the employees of the Company or its Restricted
Subsidiaries; provided, however, that all such payments by the Company and its
Restricted Subsidiaries may not exceed, during any fiscal year, 10% of the
aggregate compensation expense during such fiscal year attributable to employees
of the Company and its Restricted Subsidiaries who are eligible to participate
in the ESOP; (vi) a payment to AXIA Group to pay its operating and
administrative expenses including, without limitation, directors fees, legal and
audit expenses, SEC compliance expenses and corporate franchise and other taxes,
in an amount not to exceed the greater of $1.0 million per fiscal year and 1% of
revenues of the Company for the preceding fiscal year; (vii) a payment by the
Company to AXIA Group or the ESOP, or directly by the Company, to be used to
repurchase the Equity Interests distributed to participants and beneficiaries of
the ESOP as required by and in accordance with the ESOP and Section 409(h)(i)(B)
of the Code and the regulations thereunder; (viii) a payment by the Company to
AXIA Group, any Restricted Subsidiary or the ESOP, or directly by the Company,
to be used to repurchase, redeem, acquire or retired for value any Equity
Interest of the Company pursuant to any stockholder's agreement, management
equity subscription plan or agreement, stock option plan or agreement or
employee benefit plan in effect as of the Issue Date or such employee plan or
agreement or employee benefit plan as may be adopted by the Company or the
Company from time to time, provided, however, that the aggregate price paid for
all Equity Interests repurchased, redeemed, acquired or retired by the Company
or on behalf of AXIA Group or the Company shall not exceed $1.5 million in any
fiscal year plus the aggregate amount unused for such purpose in prior fiscal
years; and provided, further, however, that such amount, to the extent related
to the ESOP, shall be excluded in the calculation of Restricted Payments; (ix) a
payment to AXIA Group pursuant to the Tax Sharing Agreement as the same may be
amended from time to time in a manner not materially adverse to the Company; (x)
any payment to AXIA Group to permit AXIA Group to make payments for advisory
services owned to Sterling pursuant to the Management Agreement; and (xi)
Restricted Payments not to exceed $5.0 million in the aggregate; provided,
however, that in the case of each of clauses (iii), (viii), (x), and (xi)
(except in the case of any Restricted Payments consisting of Investments), no
Default shall have occurred and be continuing or would arise therefrom.
In determining the amount of Restricted Payments permissible under
this covenant, amounts expended pursuant to clauses (i) and (xi) of the
immediately preceding paragraph shall be included as Restricted Payments and
amounts expended pursuant to clauses (ii), (iii), (iv), (v), (vi), (vii), (viii)
(to the extent set forth in the immediately
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preceding paragraph), (ix) and (x) shall be excluded. The amount of any non-cash
Restricted Payment shall be deemed to be equal to the Fair Market Value thereof
at the date of the making of such Restricted Payment.
SECTION 4.07. Corporate Existence.
Subject to Article Five, the Company shall do or shall cause to be
done all things necessary to preserve and keep in full force and effect its
corporate existence and the corporate, partnership or other existence of each
Restricted Subsidiary in accordance with the respective organizational documents
of each such Restricted Subsidiary and the rights (charter and statutory) and
material franchises of the Company and the Restricted Subsidiaries; provided,
however, that the Company shall not be required to preserve any such right or
franchise, or the corporate existence of any Restricted Subsidiary, if the Board
of Directors of the Company shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company and the
Restricted Subsidiaries, taken as a whole; provided, further, however, that a
determination of the Board of Directors of the Company shall not be required in
the event of a merger of one or more Wholly Owned Restricted Subsidiaries of the
Company with or into another Wholly Owned Restricted Subsidiary of the Company
or another Person, if the surviving Person is a Wholly Owned Restricted
Subsidiary of the Company organized under the laws of the United States or a
State thereof or of the District of Columbia or, in the case of a Foreign
Subsidiary, the jurisdiction of incorporation or organization of such Foreign
Subsidiary. This Section 4.07 shall not prohibit the Company from taking any
other action otherwise permitted by, and made in accordance with, the provisions
of this Indenture.
SECTION 4.08. [Intentionally Omitted]
SECTION 4.09. Notice of Defaults.
(A) In the event that any Indebtedness of the Company or any of its
Subsidiaries is declared due and payable before its maturity because of the
occurrence of any default (or any event which, with notice or lapse of time, or
both, would constitute such a default) under such Indebtedness, the Company
shall promptly give written notice to the Trustee of such declaration, the
status of such default or event and what action the Company is taking or
proposes to take with respect thereto.
(B) Upon becoming aware of any Default or Event of Default, the
Company shall promptly deliver an Officers' Certificate to the Trustee
specifying the Default or Event of Default.
SECTION 4.10. [Intentionally Omitted].
SECTION 4.11. Compliance Certificate.
The Company shall deliver to the Trustee within 120 days after the
close of each fiscal year a certificate signed by the principal executive
officer, principal financial officer or principal accounting officer stating
that a review of the activities of the Company has been made under the
supervision of the signing officers with a view to determining whether a Default
or Event of Default has occurred and whether or not the signers know of any
Default or Event of Default by the Company that occurred during such fiscal
year. If they do know of such a Default or Event of Default, the certificate
shall describe all such Defaults or Events of Default, their status and the
action the Company is taking or proposes to take with respect thereto. The first
certificate to be delivered by the Company pursuant to this Section 4.11 shall
be for the fiscal year ending December 26, 1998.
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SECTION 4.12. Provision of Financial Information.
Whether or not the Company is subject to Section 13(a) or 15(d) of the
Exchange Act, or any successor provision thereto, the Company shall file with
the SEC (if permitted by SEC practice and applicable law and regulations) the
annual reports, quarterly reports and other documents which the Company would
have been required to file with the SEC pursuant to such Section 13(a) or 15(d)
(each, an "Exchange Act Report") or any successor provision thereto if the
Company were so subject, such documents to be filed with the SEC on or prior to
the respective dates (the "Required Filing Dates") by which the Company would
have been required so to file such documents if the Company were so subject. If,
at any time prior to the consummation of the Exchange Offer when the Company is
not subject to such Section 13(a) or 15(d), the information which would be
required in an Exchange Act Report is included in a public filing of the Company
under the Securities Act at the applicable Required Filing Date, such public
filing shall fulfill the filing requirement with the SEC with respect to the
applicable Exchange Act Report. The Company shall also in any event (a) within
15 days of each Required Filing Date (whether or not permitted or required to be
filed with the SEC) (i) transmit (or cause to be transmitted) by mail to all
Holders, as their names and addresses appear in the Security register, without
cost to such Holders, and (ii) file with the Trustee, copies of the annual
reports, quarterly reports and other documents which the Company is required to
file with the SEC pursuant to this covenant, or, if such filing is not so
permitted (or, prior to the consummation of the Exchange Offer, when the Company
is not subject to Section 13(d) or 15(d) of the Exchange Act), information and
data of a similar nature, and (b) if, notwithstanding the preceding sentence,
filing such documents by the Company with the SEC is not permitted by SEC
practice or applicable law or regulations, promptly upon written request supply
copies of such documents to any Holder. In addition, for so long as any
Securities remain outstanding, the Company will furnish to the Holders and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
SECTION 4.13. [Intentionally Omitted].
SECTION 4.14. Change of Control.
Following the occurrence of a Change of Control (the date of such
occurrence being the "Change of Control Date"), the Company shall notify the
Holders of the Securities of such occurrence in the manner prescribed by this
Indenture and shall, within 30 days after the Change of Control Date, make an
Offer to Purchase all Securities then outstanding, and shall purchase all
Securities validly tendered, at a purchase price in cash equal to 101% of the
aggregate principal amount thereof, plus accrued and unpaid interest thereon, if
any, to the Purchase Date (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant interest payment
date).
If a Change of Control occurs which also constitutes an event of
default under the Bank Credit Agreement, the lenders under the Bank Credit
Agreement will be entitled to exercise the remedies available to a secured
lender under applicable law and pursuant to the terms of the Bank Credit
Agreement. Accordingly, any claims of such lenders with respect to the assets of
the Company will be prior to any claim of the Holders of the Securities with
respect to such assets.
If the Company makes an Offer to Purchase, the Company will comply
with all applicable tender offer laws and regulations, including, to the extent
applicable, Section 14(e) and Rule 14e-1 under the Exchange Act, and any other
applicable Federal or state securities laws and regulations and any applicable
requirements of any securities exchange on which the Securities are listed, and
any violation of the provisions of this Indenture relating to such Offer to
Purchase occurring as a result of such compliance shall not be deemed an Event
of Default or an event that, with the passing of time or giving of notice, or
both, would constitute an Event of Default.
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SECTION 4.15. [Intentionally Omitted].
SECTION 4.16. Limitation on Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries.
The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (a) pay dividends or make any other distributions to
the Company or any other Restricted Subsidiary on its Equity Interests or with
respect to any other interest or participation in, or measured by, its profits,
or pay any Indebtedness owed to the Company or any other Restricted Subsidiary,
(b) make loans or advances to, or guarantee any Indebtedness or other
obligations of, the Company or any other Restricted Subsidiary or (c) transfer
any of its properties or assets to the Company or any other Restricted
Subsidiary, except for such encumbrances or restrictions existing under or by
reason of (i) the Bank Credit Agreement, or any other agreement of the Company
or the Restricted Subsidiaries outstanding on the Issue Date, in each case as in
effect on the Issue Date, and any amendments, restatements, renewals,
replacements or refinancings thereof; provided, however, that any such
amendment, restatement, renewal, replacement or refinancing is no more
restrictive in the aggregate with respect to such encumbrances or restrictions
than those contained in the agreement being amended, restated, renewed, replaced
or refinanced; (ii) applicable law; (iii) any instrument governing Indebtedness
or Equity Interests of an Acquired Person acquired by the Company or any
Restricted Subsidiary as in effect at the time of such acquisition (except to
the extent any such Indebtedness or Equity Interests were Incurred by such
Acquired Person in connection with, as a result of or in contemplation of such
acquisition); provided, however, that such encumbrances and restrictions are not
applicable to any Restricted Subsidiary, or the properties or assets of any
Restricted Subsidiary, other than an Acquired Person; (iv) customary non-
assignment provisions in leases entered into in the ordinary course of business;
(v) Purchase Money Indebtedness for property acquired in the ordinary course of
business that only imposes encumbrances and restrictions on the property so
acquired; (vi) any agreement for the sale or disposition of the Equity Interests
or assets of any Restricted Subsidiary; provided, however, that such
encumbrances and restrictions described in this clause (vi) are only applicable
to such Restricted Subsidiary or assets, as applicable, and any such sale or
disposition is made in compliance with Section 4.05 to the extent applicable
thereto; (vii) refinancing Indebtedness permitted under clause (j) of Section
4.04; provided, however, that such encumbrances and restrictions contained in
the agreements governing such Indebtedness are no more restrictive in the
aggregate than those contained in the agreements governing the Indebtedness
being refinanced immediately prior to such refinancing; (viii) this Indenture;
or (ix) contained in any other indenture governing debt securities that are no
more restrictive than those contained in this Indenture.
SECTION 4.17. Designation of Unrestricted Subsidiaries.
The Company may designate after the Issue Date any Subsidiary of the
Company as an "Unrestricted Subsidiary" under this Indenture (a "Designation")
only if (a) immediately prior to such Designation the Subsidiary to be so
designated has total assets of $10,000 or less or (b):
(i) no Default or Event of Default shall have occurred and be
continuing at the time of or after giving effect to such Designation;
(ii) at the time of and after giving effect to such Designation, the
Company could Incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) under the Consolidated Coverage Ratio of the first paragraph
of Section 4.04; and
(iii) the Company would be permitted to make an Investment (other than
a Permitted Investment) at the time of Designation (assuming the
effectiveness of such Designation) pursuant to the first paragraph of
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Section 4.06 in an amount (the "Designation Amount") equal to the Fair
Market Value of the Company's aggregate Investment in such Subsidiary on
such date.
Neither the Company nor any Restricted Subsidiary shall at any time
(x) provide credit support for, subject any of its property or assets (other
than the Equity Interests of any Unrestricted Subsidiary) to the satisfaction
of, or guarantee, any Indebtedness of any Unrestricted Subsidiary (including any
undertaking, agreement or instrument evidencing such Indebtedness), (y) be
directly or indirectly liable for any Indebtedness of any Unrestricted
Subsidiary or (z) be directly or indirectly liable for any Indebtedness which
provides that the holder thereof may (upon notice, lapse of time or both)
declare a default thereon or cause the payment thereof to be accelerated or
payable prior to its final scheduled maturity upon the occurrence of a default
with respect to any Indebtedness of any Unrestricted Subsidiary, except for any
non-recourse guarantee given solely to support the pledge by the Company or any
Restricted Subsidiary of the capital stock of any Unrestricted Subsidiary. All
Subsidiaries of Unrestricted Subsidiaries shall be automatically deemed to be
Unrestricted Subsidiaries.
The Company may revoke any Designation of a Subsidiary as an
Unrestricted Subsidiary (a "Revocation") if:
(i) no Default or Event of Default shall have occurred and be
continuing at the time of and after giving effect to such Revocation; and
(ii) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if Incurred at
such time, have been permitted to be Incurred for all purposes of this
Indenture.
All Designations and Revocations must be evidenced by resolutions of
the Board of Directors of the Company, delivered to the Trustee certifying
compliance with the foregoing provisions.
SECTION 4.18. Limitation on Liens.
The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, directly or indirectly, Incur or suffer to exist any Liens of any
kind against or upon any of their respective properties or assets now owned or
hereafter acquired, or any proceeds therefrom or any income or profits
therefrom, to secure any Indebtedness unless contemporaneously therewith
effective provision is made, in the case of the Company, to secure the
Securities, and in the case of a Restricted Subsidiary which is a Guarantor, to
secure such Restricted Subsidiary's Guarantee of the Securities, equally and
ratably with such Indebtedness (or, in the event that such Indebtedness is
subordinated in right of payment to the Securities or such Guarantor's
Guarantee, prior to such Indebtedness) with a Lien on the same properties and
assets securing such Indebtedness for so long as such Indebtedness is secured by
such Lien, except for (i) Liens securing any Senior Indebtedness or any
guarantee of Senior Indebtedness by any Guarantor; (ii) Liens securing any
Acquired Indebtedness properly incurred under this Indenture, provided that any
such Lien securing Acquired Indebtedness only extends to the assets that were
subject to such Lien prior to the related acquisition by the Company or its
Restricted Subsidiaries and was not created, incurred or assumed in connection
with or in contemplation of such transaction; and (iii) Permitted Liens.
SECTION 4.19. Guarantee of Securities by Restricted Subsidiaries.
In the event the Company (i) organizes or acquires any Restricted
Subsidiary after the Issue Date that is not a Guarantor or (ii) causes or
permits any Foreign Subsidiary that is not a Guarantor to, directly or
indirectly, guarantee the payment of any Indebtedness of the Company or any
Restricted Subsidiary ("Other Indebtedness") then,
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in each case the Company shall cause such Restricted Subsidiary to
simultaneously execute and deliver a supplemental indenture to this Indenture
pursuant to which it will become a Guarantor under this Indenture; provided,
however, that in the event a Restricted Subsidiary is acquired in a transaction
in which a merger agreement is entered into, such Restricted Subsidiary shall
not be required to execute and deliver such supplemental indenture until the
consummation of the merger contemplated by any such merger agreement; provided,
further, that if such Other Indebtedness is (i) Indebtedness that is ranked pari
passu in right of payment with the Securities or the Guarantee of such
Restricted Subsidiary, as the case may be, the Guarantee of such Subsidiary
shall be pari passu in right of payment with the guarantee of the Other
Indebtedness; or (ii) Subordinated Indebtedness, the Guarantee of such
Subsidiary shall be senior in right of payment to the guarantee of the Other
Indebtedness (which guarantee of such Subordinated Indebtedness shall provide
that such guarantee is subordinated to the Guarantees of such Subsidiary to the
same extent and in the same manner as the Other Indebtedness is subordinated to
the Securities or the Guarantee of such Restricted Subsidiary, as the case may
be).
SECTION 4.20. Limitation on the Sale or Issuance of Equity Interests of
Restricted Subsidiaries.
The Company shall not sell any Equity Interest of a Restricted
Subsidiary, and shall not cause or permit any Restricted Subsidiary, directly or
indirectly, to issue or sell any Equity Interests, except: (i) to the Company or
a Wholly Owned Restricted Subsidiary; (ii) if, immediately after giving effect
to such issuance or sale, such Restricted Subsidiary remains a Restricted
Subsidiary; or (iii) if all Equity Interests of such Restricted Subsidiary are
sold or otherwise disposed of. Notwithstanding the foregoing, the Company is
permitted to sell all the Equity Interests of a Restricted Subsidiary as long as
the Company is in compliance with the terms of the covenant described in Section
4.05.
SECTION 4.21. Limitation on Layering.
The Company shall not, directly or indirectly, Incur any Indebtedness
that by its terms would expressly rank senior in right of payment to the
Securities and expressly rank subordinate in right of payment to any other
Indebtedness of the Company.
The Company shall not permit any Guarantor to, and no Guarantor shall,
directly or indirectly, Incur any Indebtedness that by its terms would expressly
rank senior in right of payment to the Guarantee of such Guarantor and expressly
rank subordinate in right of payment to any Guarantor Senior Indebtedness of
such Guarantor.
ARTICLE FIVE
MERGERS; SUCCESSOR CORPORATION
SECTION 5.01. Mergers, Sale of Assets, etc.
The Company shall not consolidate with or merge with or into (whether
or not the Company is the Surviving Person) any other Person and the Company
shall not directly or indirectly sell, convey, assign, transfer, lease or
otherwise dispose of all or substantially all of the Company's and the
Restricted Subsidiaries' properties and assets (determined on a consolidated
basis for the Company and the Restricted Subsidiaries) to any entity in a single
transaction or series of related transactions, unless: (i) either (x) the
Company shall be the Surviving Person or (y) the Surviving Person (if other than
the Company) shall be a Person organized and validly existing under the laws of
the United States of America or any State thereof or the District of Columbia,
and shall expressly assume by a supplemental
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indenture, the due and punctual payment of the principal of, premium, if any,
and interest on all the Securities and the performance and observance of every
covenant of the Indenture and the Exchange Registration Rights Agreement to be
performed or observed on the part of the Company; (ii) immediately thereafter,
no Default or Event of Default shall have occurred and be continuing; (iii)
immediately after giving effect to any such transaction including the Incurrence
by the Company or any Restricted Subsidiary, directly or indirectly, of
additional Indebtedness (and treating any Indebtedness not previously an
obligation of the Company or any Restricted Subsidiary in connection with or as
a result of such transaction as having been Incurred at the time of such
transaction), the Surviving Person could Incur, on a pro forma basis after
giving effect to such transaction, at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) under the Consolidated Coverage Ratio of
Section 4.04; (iv) immediately after giving effect to such transaction, the
Surviving Person will have a Consolidated Net Worth in an amount which is not
less than the Consolidated Net Worth of the Company immediately prior to such
transaction; and (v) the Company will have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger or transfer and such supplemental indenture (if any) comply with this
Indenture.
Notwithstanding the foregoing clauses (iii) and (iv) of the
immediately preceding paragraph, any Restricted Subsidiary may consolidate with,
merge into or transfer all or part of its properties and assets to the Company.
In addition, at any time, and notwithstanding the provisions of the immediately
preceding paragraph, Acquisition Co. may merge with and into the Company;
provided, that, immediately prior to such merger, neither corporation has any
Indebtedness outstanding.
For purposes of the foregoing, the transfer (by lease, assignment,
sale or otherwise, in a single transaction or series of transactions) of all or
substantially all the properties and assets of one or more Restricted
Subsidiaries the Equity Interests of which constitute all or substantially all
the properties and assets of the Company shall be deemed to be the transfer of
all or substantially all the properties and assets of the Company.
SECTION 5.02. Successor Corporation Substituted.
In the event of any transaction (other than a lease) described in and
complying with the conditions listed in Section 5.01 in which the Company or a
Guarantor, as the case may be, is not the Surviving Person and the Surviving
Person is to assume all the Obligations of the Company under the Securities,
this Indenture and the Exchange and Registration Rights Agreement or of such
Guarantor under its Guarantee, this Indenture and the Exchange and Registration
Rights Agreement, as the case may be, pursuant to a supplemental indenture, such
Surviving Person shall succeed to, and be substituted for, and may exercise
every right and power of, the Company or such Guarantor, as the case may be, and
the Company shall be automatically and unconditionally released and discharged
from its Obligations under this Indenture and the Securities or such Guarantor
shall be automatically and unconditionally released and discharged from its
Obligations under this Indenture and its Guarantee, as the case may be.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default.
Each of the following shall be an "Event of Default" for purposes of
this Indenture:
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(a) failure to pay principal of (or premium, if any, on) any Security
when due (whether or not prohibited by the provisions of Article Eight,
herein);
(b) failure to pay any interest on any Security when due, continued
for 30 days or more (whether or not prohibited by the provisions of Article
Eight, herein);
(c) default in the payment of principal of or interest on any Security
required to be purchased pursuant to any Offer to Purchase required by this
Indenture when due and payable or failure to pay on the Purchase Date the
Purchase Price for any Security validly tendered pursuant to any Offer to
Purchase (whether or not prohibited by the provisions of Article Eight
herein);
(d) failure to perform or comply with any of the provisions described
in Section 5.01;
(e) failure to comply for 30 days with any covenants described in
Sections 4.03, 4.04, 4.05, 4.06, 4.12, 4.14 (other than a failure to
purchase Securities), 4.16, 4.17, 4.18, 4.20 or 4.21;
(f) failure for 60 days to perform or comply with any other covenant
or agreement of the Company under this Indenture or in the Securities or of
the Guarantors under this Indenture or in the Guarantees;
(g) default or defaults under the terms of one or more instruments
evidencing or securing Indebtedness of the Company or any of its
Significant Restricted Subsidiaries having an outstanding principal amount
of $5.0 million or more individually or in the aggregate that have resulted
in the acceleration of the payment of such Indebtedness or failure by the
Company or any of its Significant Restricted Subsidiaries to pay principal
when due at the stated maturity of any such Indebtedness;
(h) the rendering of a final judgment or judgments (not subject to
appeal) against the Company or any of its Significant Restricted
Subsidiaries in an amount of $5.0 million or more (net of any amounts
covered by reputable and creditworthy insurance companies) which remain
undischarged or unstayed for a period of 60 days after the date on which
the right to appeal has expired;
(i) the Company or any of its Significant Restricted Subsidiaries
pursuant to or within the meaning of any Bankruptcy Law: (i) admits in
writing its inability to pay its debts generally as they become due; (ii)
commences a voluntary case or proceeding; (iii) consents to the entry of an
order for relief against it in an involuntary case or proceeding; (iv)
consents or acquiesces in the institution of a bankruptcy or insolvency
proceeding against it; (v) consents to the appointment of a Custodian of it
or for all or substantially all of its property; or (vi) makes a general
assignment for the benefit of its creditors, or any of them takes any
action to authorize or effect any of the foregoing;
(j) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that: (i) is for relief against the Company or any
Significant Restricted Subsidiary in an involuntary case or proceeding;
(ii) appoints a Custodian of the Company or any Significant Restricted
Subsidiary for all or substantially all of its property; or (iii) orders
the liquidation of the Company or any Significant Restricted Subsidiary;
and in each case the order or decree remains unstayed and in effect for 60
days; provided, however, that if the entry of such order or decree is
appealed and dismissed on appeal, then the Event of Default hereunder by
reason of the entry of such order or decree shall be deemed to have been
cured;
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(k) other than as provided in or pursuant to any Guarantee or the
Indenture, the Guarantee by any Significant Restricted Subsidiary ceases to
be in full force and effect or is declared null and void and unenforceable
or found to be invalid or any Guarantor denies its liability under its
Guarantee (other than by reason of termination of this Indenture or a
release of such Guarantor from its Guarantee in accordance with the terms
of this Indenture and such Guarantee).
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
Federal, state or foreign law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator, sequestrator or similar
official under any Bankruptcy Law.
SECTION 6.02. Acceleration.
If an Event of Default with respect to the Securities (other than an
Event of Default specified in clause (i) or (j) of Section 6.01 with respect to
the Company) occurs and is continuing, the Trustee or the Holders of at least
25% in aggregate principal amount of the outstanding Securities, by notice in
writing to the Company, may declare the unpaid principal of (and premium, if
any) and accrued interest to the date of acceleration on all the outstanding
Securities to be due and payable immediately and, upon any such declaration,
such principal amount (and premium, if any) and accrued interest,
notwithstanding anything contained in this Indenture or the Securities to the
contrary, will become immediately due and payable; provided, however, that so
long as the Bank Credit Agreement shall be in full force and effect, if an Event
of Default shall have occurred and be continuing (other than an Event of Default
with respect to the Company described in clause (i) of Section 6.01), the
Securities shall not become due and payable until the earlier to occur of (x)
five Business Days following delivery of written notice of such acceleration of
the Securities to the agent under the Bank Credit Agreement and (y) the
acceleration (ipso facto or otherwise) of any Indebtedness under the Bank Credit
Agreement. If an Event or Default specified in clause (i) of section 6.01 with
respect to the Company occurs under this Indenture, the Securities will ipso
facto become immediately due and payable without any declaration or other act on
the part of the Trustee or any Holder of the Securities.
If an Event of Default specified in clause (i) or (j) of Section 6.01
with respect to the Company occurs, all unpaid principal of and accrued interest
on all outstanding Securities shall ipso facto become immediately due and
payable without any declaration or other act on the part of the Trustee or any
Holder.
After a declaration of acceleration, but before a judgment or decree
of the money due in respect of the Securities has been obtained, the Holders of
not less than a majority in aggregate principal amount of the Securities then
outstanding by written notice to the Trustee may rescind an acceleration and its
consequences if all existing Events of Default (other than the nonpayment of
principal of and interest on the Securities which has become due solely by
virtue of such acceleration) have been cured or waived and if the rescission
would not conflict with any judgment or decree. No such rescission shall affect
any subsequent Default or impair any right consequent thereto.
SECTION 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of or interest on the Securities or to enforce the
performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder in exercising any right or remedy maturing
upon an Event of Default shall not impair the right or remedy or constitute a
waiver of or acquiescence
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in the Event of Default. No remedy is exclusive of any other remedy. All
available remedies are cumulative to the extent permitted by law.
SECTION 6.04. Waiver of Past Default.
Subject to Sections 2.09, 6.07 and 10.02, prior to the declaration of
acceleration of the Securities, the Holders of not less than a majority in
aggregate principal amount of the outstanding Securities by written notice to
the Trustee may waive an existing Default or Event of Default and its
consequences, except a Default in the payment of principal of or interest on any
Security as specified in clauses (a), (b) and (c) of Section 6.01 or a Default
in respect of any term or provision of this Indenture that may not be amended or
modified without the consent of each Holder affected as provided in Section
10.02. 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 Securities, respectively. This paragraph of this Section
6.04 shall be in lieu of (S) 316(a)(1)(B) of the TIA and such (S) 316(a)(1)(B)
of the TIA is hereby expressly excluded from this Indenture and the Securities,
as permitted by the TIA.
Upon any such waiver, such Default shall cease to exist and be deemed
to have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured and not to have occurred for every
purpose of this Indenture and the Securities, but no such waiver shall extend to
any subsequent or other Default or Event of Default or impair any right
consequent thereon.
SECTION 6.05. Control by Majority.
Subject to Section 2.09, the Holders of a majority in principal amount
of the outstanding Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the 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 another Holder, it being
understood that the Trustee shall have no duty (subject to Section 7.01) to
ascertain whether or not such actions or forebearances are unduly prejudicial to
such holders, or that may involve the Trustee in personal liability; provided,
however, 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 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 (S) 316(a)(1)(A) of the TIA,
and such (S) 316(a)(1)(A) of the TIA is hereby expressly excluded from this
Indenture and the Securities, as permitted by the TIA.
SECTION 6.06. Limitation on Suits.
A Holder may not pursue any remedy with respect to this Indenture or
the Securities unless:
(i) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(ii) the Holders of at least 25% in aggregate principal amount of the
outstanding Securities make a written request to the Trustee to pursue a
remedy;
(iii) such Holder or Holders offer and, if requested, provide to the
Trustee indemnity satisfactory to the Trustee against any loss, liability
or expense;
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(iv) 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
(v) during such 60-day period the Holders of a majority in principal
amount of the outstanding Securities do not give the Trustee a direction
which, in the opinion of the Trustee, is inconsistent with the request.
A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over such other Holder.
SECTION 6.07. Rights of Holders To Receive Payment.
Notwithstanding any other provision of this Indenture, but subject in
any event to the provisions of Articles Eight and Twelve, the right of any
Holder to receive payment of principal of or interest on a Security, on or after
the respective due dates expressed in the Security, or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of the Holder.
SECTION 6.08. Collection Suit by Trustee.
If an Event of Default in payment of principal or interest specified
in Section 6.01(a), (b) or (c) occurs and is continuing, the Trustee may recover
judgment in its own name and as trustee of an express trust against the Company
or any other obligor on the Securities for the whole amount of principal and
accrued interest remaining unpaid, together with interest overdue on principal
and to the extent that payment of such interest is lawful, interest on overdue
installments of interest, in each case at the rate per annum borne by the
Securities and such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.09. Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders allowed in any judicial proceedings relative to the Company (or any
other obligor upon the Securities), its creditors or its property and shall be
entitled and empowered to collect and receive any monies or other property
payable or deliverable on any such claims and to distribute the same, and any
Custodian in any such judicial proceedings is hereby authorized by each 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 agent and counsel, and any other
amounts due the Trustee under Section 7.07. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Holder in any such
proceeding; provided, however, that the Trustee may, on behalf of the Holders,
vote for the election of a trustee in bankruptcy or similar official and may be
a member of the creditors' committee.
SECTION 6.10. Priorities.
If the Trustee collects any money or property pursuant to this Article
Six, it shall pay out the money or property in the following order:
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First: to the Trustee for amounts due under Section 7.07;
Second: to Holders for amounts due and unpaid on the Securities for
principal and interest, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Securities for
principal and interest, respectively; and
Third: to the Company.
The Trustee, upon prior written notice to the Company, may fix a
record date and payment date for any payment to the Holders pursuant to this
Section 6.10.
SECTION 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees and expenses, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section 6.11 shall not apply to a suit by the Trustee, a suit by
a Holder or group of Holders of more than 10% in aggregate principal amount of
the outstanding Securities, or to any suit instituted by any Holder for the
enforcement or the payment of the principal or interest on any Securities on or
after the respective due dates expressed in the Security.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.
(a) If a 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 their 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 a Default:
(i) The Trustee shall not be liable except for the performance
of such duties as are specifically set forth herein; 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 conforming to
the requirements of this Indenture; however, in the case of any such
certificates or opinions which by any provision hereof are specifically
required to be furnished to the Trustee, the Trustee shall examine such
certificates and opinions to determine whether or not they conform to the
requirements of this Indenture.
(c) The Trustee shall not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
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(i) This paragraph does not limit the effect of paragraph (b)
of this Section 7.01;
(ii) The Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer, unless it is proved that the Trustee
was negligent in ascertaining the pertinent facts; and
(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.
(d) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or to take or omit to take any action
under this Indenture or take any action at the request or direction of Holders
if it shall have reasonable grounds for believing that repayment of such funds
is not assured to it or it does not receive from such Holders an indemnity
satisfactory to it in its sole discretion against such risk, liability, loss,
fee or expense which might be incurred by it in compliance with such request or
direction.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.01.
(f) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
SECTION 7.02. Rights of Trustee.
Subject to Section 7.01:
(a) The Trustee may rely on any document believed by it to be genuine
and to have been signed or presented by the proper person. The Trustee need not
investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate and/or an Opinion of Counsel, which shall conform to the
provisions of Section 13.05. The Trustee shall not be liable for any action it
takes or omits to take in good faith in reliance on such certificate or opinion.
(c) The Trustee may act through attorneys and agents of its selection
and shall not be responsible for the misconduct or negligence of any agent or
attorney (other than an agent who is an employee of the Trustee) appointed with
due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it reasonably believes to be authorized or within
its rights or powers.
(e) Before the Trustee acts or refrains from acting, it may consult
with counsel and the advice or opinion of such counsel as to matters of law
shall be full and complete authorization and protection from liability in
respect of any action taken, omitted or suffered by it hereunder in good faith
and in accordance with the advice or opinion of such counsel.
(f) Any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any resolution
of the Board of Directors may be sufficiently evidenced by a Board Resolution.
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(g) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders pursuant to this Indenture, unless such Holders shall have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in compliance with such
request or direction.
(h) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document, but the
Trustee, in its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit, and, if the Trustee shall determine to
make such further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or attorney.
(i) The Trustee shall not be deemed to have notice of any Event of
Default unless a Trust Officer of the Trustee has actual knowledge thereof or
unless the Trustee shall have received written notice thereof at the Corporate
Trust Office of the Trustee, and such notice references the Securities and this
Indenture. As used herein, the term "actual knowledge" means the actual fact or
statement of knowing, without any duty to make any investigation with regard
thereto.
(j) The Trustee shall not be required to give any bond or surety in
respect of the performance of its powers and duties hereunder.
(k) The permissive rights of the Trustee to do things enumerated in
this Indenture shall not be construed as a duty and the Trustee shall not be
answerable for other than its negligence or willful misconduct.
SECTION 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company or its
Affiliates with the same rights it would have if it were not Trustee, subject to
Section 7.10 hereof. Any Agent may do the same with like rights. However, the
Trustee is subject to Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Securities, it shall not
be accountable for the Company's use of the proceeds from the Securities, and it
shall not be responsible for any statement of the Company in this Indenture or
any document issued in connection with the sale of Securities or any statement
in the Securities other than the Trustee's certificate of authentication.
SECTION 7.05. Notice of Defaults.
If a Default or an Event of Default occurs and is continuing and the
Trustee has actual knowledge of such Defaults or Events of Default, the Trustee
shall mail to each Holder notice of the Default or Event of Default within 30
days after the occurrence thereof. Except in the case of a Default or an Event
of Default in payment of principal of or interest on any Security or a Default
or Event of Default in complying with Section 5.01, the Trustee may withhold the
notice if and so long as a committee of its Trust Officers in good faith
determines that withholding the notice is in the interest of Holders. This
Section 7.05 shall be in lieu of the proviso to (S) 315(b) of the TIA and such
proviso to (S) 315(b) of the TIA is hereby expressly excluded from this
Indenture and the Securities, as permitted by the TIA.
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SECTION 7.06. Reports by Trustee to Holders.
If required by TIA (S) 313(a), within 60 days after each May 15
beginning with the May 15 following the date of this Indenture, the Trustee
shall mail to each Holder a report dated as of such May 15 that complies with
TIA (S) 313(a). The Trustee also shall comply with TIA (S) 313(b), (c) and (d).
A copy of each such report at the time of its mailing to Holders shall
be filed with the SEC and each stock exchange, if any, on which the Securities
are listed.
The Company shall promptly notify the Trustee in writing if the
Securities become listed on any stock exchange or of any delisting thereof.
SECTION 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time, and the
Trustee shall be entitled to, such compensation as the Company and the Trustee
shall from time to time agree in writing for its services. The Trustee's
compensation shall not be limited by any law on compensation of a trustee of an
express trust. The Company shall reimburse the Trustee upon request for all
reasonable disbursements, expenses and advances, including all costs and
expenses of collection (including reasonable fees, disbursements and expenses of
its agents and outside counsel) incurred or made by it in addition to the
compensation for its services except any such disbursements, expenses and
advances as may be attributable to the Trustee's negligence or willful
misconduct. Such expenses shall include the reasonable compensation,
disbursements and expenses of the Trustee's agents, accountants, experts and
outside counsel and any taxes or other expenses incurred by a trust created
pursuant to Section 9.01 hereof.
The Company shall indemnify the Trustee for, and hold it harmless
against any and all loss, damage, claims, liability or expense, including taxes
(other than franchise taxes imposed on the Trustee and taxes based upon,
measured by or determined by the income of the Trustee), arising out of or in
connection with the acceptance or administration of the trust or trusts
hereunder, including the costs and expenses of defending itself against or
investigating any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder, except to the extent that
such loss, damage, claim, liability or expense is due to its own negligence or
willful misconduct. The Trustee shall notify the Company promptly of any claim
asserted against the Trustee for which it may seek indemnity. However, the
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 (and may employ its own counsel) at the Company's
expense; provided, however, that the Company's reimbursement obligation with
respect to counsel employed by the Trustee will be limited to the reasonable
fees and expenses of such counsel.
The Company need not pay for any settlement made without its written
consent, which consent shall not be unreasonably withheld. The Company need not
reimburse any expense or indemnify against any loss or liability incurred by the
Trustee as a result of its own negligence or willful misconduct.
To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a Lien prior to the Securities against all money or property
held or collected by the Trustee, in its capacity as Trustee, except money or
property held in trust to pay principal of or interest on particular Securities
or the Purchase Price or redemption price of any Securities to be purchased
pursuant to an Offer to Purchase or redeemed.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(h) or (i) occurs, the expenses (including the
reasonable fees and expenses of its agents and counsel) and the compensation for
the services shall be preferred over the status of the Holders in a proceeding
under any Bankruptcy
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Law and are intended to constitute expenses of administration under any
Bankruptcy Law. The Company's obligations under this Section 7.07 and any claim
arising hereunder shall survive the resignation or removal of any Trustee, the
discharge of the Company's obligations pursuant to Article Nine and any
rejection or termination under any Bankruptcy Law.
SECTION 7.08. Replacement of Trustee.
The Trustee may resign at any time by so notifying the Company in
writing. The Holders of a majority in principal amount of the outstanding
Securities may remove the Trustee by so notifying the Trustee and the Company in
writing and may appoint a successor Trustee with the Company's consent. The
Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10;
(b) the Trustee is adjudged a bankrupt or an insolvent under any
Bankruptcy Law;
(c) a custodian or other 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 Trustee in such event being referred to
herein as the retiring Trustee), 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 Securities may appoint a successor
Trustee to replace the successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. As promptly as
practicable after that, the retiring Trustee shall transfer, after payment of
all sums then owing to the Trustee pursuant to Section 7.07, all property held
by it as Trustee to the successor Trustee, subject to the Lien provided in
Section 7.07, the resignation or removal of the retiring Trustee shall become
effective, and the successor Trustee shall have the rights, powers and duties of
the Trustee under this Indenture. A successor Trustee shall mail notice of its
succession to each Holder.
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 at least 10% in principal amount of the outstanding Securities may
petition, at the expense of the Company, any court of competent jurisdiction for
the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's obligations under Section 7.07 shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation or banking corporation, the resulting, surviving or transferee
corporation or banking corporation without any further act shall be the
successor Trustee.
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SECTION 7.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee which shall be eligible to
act as Trustee under TIA (S)(S) 310(a)(1) and 310(a)(2). The Trustee shall have
a combined capital and surplus of at least $50,000,000 as set forth in its most
recent published annual report of condition. If the Trustee has or shall acquire
any "conflicting interest" within the meaning of TIA (S) 310(b), the Trustee and
the Company shall comply with the provisions of TIA (S) 310(b); provided,
however, that there shall be excluded from the operation of TIA (S) 310(b)(1)
any indenture or indentures under which other securities or certificates of
interest or participation in other securities of the Company are outstanding if
the requirements for such exclusion set forth in TIA (S) 310(b)(1) are met. If
at any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section 7.10, the Trustee shall resign immediately in the
manner and with the effect hereinbefore specified in this Article Seven.
SECTION 7.11. Preferential Collection of Claims Against Company.
The Trustee shall comply with TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated therein.
ARTICLE EIGHT
SUBORDINATION OF SECURITIES
SECTION 8.01. Securities Subordinated to Senior Indebtedness.
The Company covenants and agrees, and the Trustee and each Holder of
the Securities by his acceptance thereof likewise covenant and agree, that all
Securities shall be issued subject to the provisions of this Article Eight; and
each person holding any Security, whether upon original issue or upon transfer,
assignment or exchange thereof, accepts and agrees that all payments of the
principal of and interest on the Securities by the Company shall, to the extent
and in the manner set forth in this Article Eight, be subordinated and junior in
right of payment to the prior payment in full in cash of all amounts payable
under Senior Indebtedness.
SECTION 8.02. No Payment on Securities in Certain Circumstances.
(a) No direct or indirect payment (excluding any payment or
distribution of Permitted Junior Securities and excluding any payment from funds
held in trust for the benefit of Holders pursuant to Article Nine (a "Defeasance
Trust Payment")) by or on behalf of the Company of principal of or interest on
the Securities, whether pursuant to the terms of the Securities, upon
acceleration, pursuant to an Offer to Purchase or otherwise, shall be made if,
at the time of such payment, there exists a default in the payment of all or any
portion of the obligations on any Designated Senior Indebtedness, whether at
maturity, on account of mandatory redemption or prepayment, acceleration or
otherwise, and such default shall not have been cured or waived or the benefits
of this sentence waived by or on behalf of the holders of such Designated Senior
Indebtedness. In addition, during the continuance of any non-payment event of
default with respect to any Designated Senior Indebtedness pursuant to which the
maturity thereof may be immediately accelerated, and upon receipt by the Trustee
of written notice (a "Payment Blockage Notice" ) from the holder or holders of
such Designated Senior Indebtedness or the trustee or agent acting on behalf of
such Designated Senior Indebtedness, then, unless and until such non-payment
event of default has been cured or waived or has ceased to exist or such
Designated Senior Indebtedness has been discharged or repaid in full in cash or
the benefits of these provisions have been waived by the holders of such
Designated Senior Indebtedness, no direct or indirect payment
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(excluding any payment or distribution of Permitted Junior Securities and
excluding any Defeasance Trust Payment) shall be made by or on behalf of the
Company of principal of or interest on the Securities, to such Holders, during a
period (a "Payment Blockage Period") commencing on the date of receipt of such
notice by the Trustee and ending 179 days thereafter.
Notwithstanding anything herein or in the Securities to the contrary,
(x) in no event shall a Payment Blockage Period extend beyond 179 days from the
date the Payment Blockage Notice in respect thereof was given, (y) there shall
be a period of at least 181 consecutive days in each 360-day period when no
Payment Blockage Period is in effect and (z) not more than one Payment Blockage
Period may be commenced with respect to the Securities during any period of 360
consecutive days. No non-payment event of default that existed or was
continuing on the date of commencement of any Payment Blockage Period with
respect to the Designated Senior Indebtedness initiating such Payment Blockage
Period (to the extent the holder of Designated Senior Indebtedness, or trustee
or agent, giving notice commencing such Payment Blockage Period had knowledge of
such existing or continuing event of default) may be, or be made, the basis for
the commencement of any other Payment Blockage Period by the holder or holders
of such Designated Senior Indebtedness or the trustee or agent acting on behalf
of such Designated Senior Indebtedness, whether or not within a period of 360
consecutive days, unless such non-payment event of default has been cured or
waived for a period of not less than 90 consecutive days.
(b) In the event that, notwithstanding the foregoing, the Company
shall have made payment to the Trustee or any Holder when such payment is
prohibited by Section 8.02(a), such payment shall be held in trust for the
benefit of, and shall be paid over or delivered by the Trustee (if the Notice
required by Section 8.06 has been received by the Trustee) or the Holder to, the
holders of Designated Senior Indebtedness or their respective representatives,
or to the trustee or trustees under any indenture pursuant to which any of such
Designated Senior Indebtedness may have been issued, as their respective
interests may appear, but only to the extent that, upon notice from the Trustee
to the holders of Designated Senior Indebtedness that such prohibited payment
has been made, the holders of the Designated Senior Indebtedness (or their
representative or representatives or a trustee or trustees) notify the Trustee
in writing of the amounts then due and owing on the Designated Senior
Indebtedness, if any, and only the amounts specified in such notice to the
Trustee shall be paid to the holders of Designated Senior Indebtedness.
SECTION 8.03. Payment Over of Proceeds upon Dissolution, etc.
(a) Upon any payment or distribution of assets or securities of the
Company of any kind or character, whether in cash, property or securities
(excluding any payment or distribution of Permitted Junior Securities and
excluding any Defeasance Trust Payment), upon any dissolution or winding-up or
total liquidation or reorganization of the Company, whether voluntary or
involuntary or in bankruptcy, insolvency, receivership or other proceedings, all
Senior Indebtedness shall first be paid in full in cash before the Holders of
the Securities or the Trustee on behalf of such Holders shall be entitled to
receive any payment by the Company of the principal of or interest on the
Securities, or any payment by the Company to acquire any of the Securities for
cash, property or securities, or any distribution with respect to the Securities
of any cash, property or securities (excluding any payment or distribution of
Permitted Junior Securities and excluding any Defeasance Trust Payment). Before
any payment may be made by, or on behalf of, the Company of the principal of or
interest on the Securities upon any such dissolution or winding-up or total
liquidation or reorganization, any payment or distribution of assets or
securities of the Company of any kind or character, whether in cash, property or
securities (excluding any payment or distribution of Permitted Junior Securities
and excluding any Defeasance Trust Payment), to which the Holders of the
Securities or the Trustee on their behalf would be entitled, but for the
subordination provisions of this Indenture, shall be made by the Company or by
any receiver, trustee in bankruptcy, liquidation trustee, agent or other Person
making such payment or distribution, directly to the holders of the Senior
Indebtedness (pro rata to such holders on the basis of the respective amounts of
Senior Indebtedness held by such holders) or their representatives or to the
trustee or trustees or agent or agents under any agreement or indenture
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pursuant to which any of such Senior Indebtedness may have been issued, as their
respective interests may appear, to the extent necessary to pay all such Senior
Indebtedness in full in cash after giving effect to any prior or concurrent
payment, distribution or provision therefor to or for the holders of such Senior
Indebtedness.
(b) In the event that, notwithstanding the foregoing provision
prohibiting such payment or distribution, any payment or distribution of assets
or securities of the Company of any kind or character, whether in cash, property
or securities (excluding any payment or distribution of Permitted Junior
Securities and excluding any Defeasance Trust Payment), shall be paid by the
Company to the Trustee or any Holder of Securities at a time when such payment
or distribution is prohibited by Section 8.03(a) and before all obligations in
respect of Senior Indebtedness are paid in full in cash, such payment or
distribution shall be received and held in trust for the benefit of, and shall
be paid over or delivered by the Trustee (if the Notice required by Section 8.06
has been received by the Trustee) or the Holder to, the holders of Senior
Indebtedness (pro rata to such holders on the basis of the respective amounts of
Senior Indebtedness held by such holders) or their respective representatives,
or to the trustee or trustees or agent or agents under any indenture pursuant to
which any of such Senior Indebtedness may have been issued, as their respective
interests may appear, for application to the payment of Senior Indebtedness
remaining unpaid until all such Senior Indebtedness has been paid in full in
cash after giving effect to any prior or concurrent payment, distribution or
provision therefor to or for the holders of such Senior Indebtedness.
The consolidation of the Company with, or the merger of the Company
with or into, another corporation or the liquidation or dissolution of the
Company following the conveyance or transfer of its property as an entirety, or
substantially as an entirety, to another corporation upon the terms and
conditions provided in Article Five shall not be deemed a dissolution, winding-
up, liquidation or reorganization for the purposes of this Section 8.03 if such
other corporation shall, as a part of such consolidation, merger, conveyance or
transfer, comply with the conditions stated in Article Five.
SECTION 8.04. Subrogation.
Upon the payment in full in cash of all Senior Indebtedness, or
provision for payment, the Holders of the Securities shall be subrogated to the
rights of the holders of Senior Indebtedness to receive payments or
distributions of cash, property or securities of the Company made on such Senior
Indebtedness until the principal of and interest on the Securities shall be paid
in full in cash; and, for the purposes of such subrogation, no payments or
distributions to the holders of the Senior Indebtedness of any cash, property or
securities to which the Holders of the Securities or the Trustee on their behalf
would be entitled except for the provisions of this Article Eight, and no
payment over pursuant to the provisions of this Article Eight to the holders of
Senior Indebtedness by Holders of the Securities or the Trustee on their behalf
shall, as between the Company, its creditors other than holders of Senior
Indebtedness, and the Holders of the Securities, be deemed to be a payment by
the Company to or on account of the Senior Indebtedness. It is understood that
the provisions of this Article Eight are and are intended solely for the purpose
of defining the relative rights of the Holders of the Securities, on the one
hand, and the holders of the Senior Indebtedness, on the other hand.
If any payment or distribution to which the Holders of the Securities
would otherwise have been entitled but for the provisions of this Article Eight
shall have been applied, pursuant to the provisions of this Article Eight, to
the payment of all amounts payable under Senior Indebtedness, then and in such
case, the Holders of the Securities shall be entitled to receive from the
holders of such Senior Indebtedness any payments or distributions received by
such holders of Senior Indebtedness in excess of the amount required to make
payment in full in cash of such Senior Indebtedness.
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SECTION 8.05. Obligations of Company Unconditional.
Nothing contained in this Article Eight or elsewhere in this Indenture
or in the Securities is intended to or shall impair, as among the Company and
the Holders of the Securities, the obligation of the Company, which is absolute
and unconditional, to pay to the Holders of the Securities the principal of and
interest on the Securities as and when the same shall become due and payable in
accordance with their terms, or is intended to or shall affect the relative
rights of the Holders of the Securities and creditors of the Company other than
the holders of the Senior Indebtedness, nor shall anything herein or therein
prevent the Holder of any Security or the Trustee on their behalf from
exercising all remedies otherwise permitted by applicable law upon default under
this Indenture, subject to the rights, if any, under this Article Eight of the
holders of the Senior Indebtedness in respect of cash, property or securities of
the Company received upon the exercise of any such remedy.
Without limiting the generality of the foregoing, nothing contained in
this Article Eight shall restrict the right of the Trustee or the Holders of
Securities to take any action to declare the Securities to be due and payable
prior to their stated maturity pursuant to Section 6.01 or to pursue any rights
or remedies hereunder; provided, however, that all Senior Indebtedness then due
and payable shall first be paid in full in cash before the Holders of the
Securities or the Trustee are entitled to receive any direct or indirect payment
from the Company of principal of or interest on the Securities.
SECTION 8.06. Notice to Trustee.
The Company shall give prompt written notice to the Trustee of any
fact known to the Company which would prohibit the making of any payment to or
by the Trustee in respect of the Securities pursuant to the provisions of this
Article Eight. The Trustee shall not be charged with knowledge of the existence
of any event of default with respect to any Senior Indebtedness or of any other
facts which would prohibit the making of any payment to or by the Trustee unless
and until the Trustee shall have received notice in writing at its Corporate
Trust Office to that effect signed by an Officer of the Company, or by a holder
of Senior Indebtedness or trustee or agent therefor; and prior to the receipt of
any such written notice, the Trustee shall, subject to Article Seven, be
entitled to assume that no such facts exist; provided, however, that if the
Trustee shall not have received the notice provided for in this Section 8.06 at
least two Business Days prior to the date upon which by the terms of this
Indenture any moneys shall become payable for any purpose (including, without
limitation, the payment of the principal of or interest on any Security), then,
regardless of anything herein to the contrary, the Trustee shall have full power
and authority to receive any moneys from the Company and to apply the same to
the purpose for which they were received, and shall not be affected by any
notice to the contrary which may be received by it on or after such prior date.
Nothing contained in this Section 8.06 shall limit the right of the holders of
Senior Indebtedness to recover payments as contemplated by Section 8.03. The
Trustee shall be entitled to rely on the delivery to it of a written notice by a
Person representing himself or itself to be a holder of any Senior Indebtedness
(or a trustee on behalf of, or other representative of, such holder) to
establish that such notice has been given by a holder of such Senior
Indebtedness or a trustee or representative on behalf of any such holder.
In the event that the Trustee determines in good faith that any
evidence is required with respect to the right of any Person as a holder of
Senior Indebtedness to participate in any payment or distribution pursuant to
this Article Eight, the Trustee may request such Person to furnish evidence to
the reasonable satisfaction of the Trustee as to the amount of Senior
Indebtedness held by such Person, the extent to which such Person is entitled to
participate in such payment or distribution and any other facts pertinent to the
rights of such Person under this Article Eight, and if such evidence is not
furnished, the Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment.
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SECTION 8.07. Reliance on Judicial Order or Certificate of Liquidating Agent.
Upon any payment or distribution of assets or securities referred to
in this Article Eight, the Trustee and the Holders of the Securities shall be
entitled to rely upon any order or decree made by any court of competent
jurisdiction in which bankruptcy, dissolution, winding-up, liquidation or
reorganization proceedings are pending, or upon a certificate of the receiver,
trustee in bankruptcy, liquidating trustee, agent or other person making such
payment or distribution, delivered to the Trustee or to the Holders of the
Securities for the purpose of ascertaining the persons entitled to participate
in such distribution, the holders of the Senior Indebtedness and other
indebtedness of the Company, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto or
to this Article Eight.
SECTION 8.08. Trustee's Relation to Senior Indebtedness.
The Trustee and any Paying Agent shall be entitled to all the rights
set forth in this Article Eight with respect to any Senior Indebtedness which
may at any time be held by it in its individual or any other capacity to the
same extent as any other holder of Senior Indebtedness, and nothing in this
Indenture shall deprive the Trustee or any Paying Agent of any of its rights as
such holder.
With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article Eight, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness 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 Indebtedness (except as provided in
Section 8.03(b)). The Trustee shall not be liable to any such holders if the
Trustee shall in good faith mistakenly pay over or distribute to Holders of
Securities or to the Company or to any other person cash, property or securities
to which any holders of Senior Indebtedness shall be entitled by virtue of this
Article Eight or otherwise.
SECTION 8.09. Subordination Rights Not Impaired by Acts or Omissions of the
Company or Holders of Senior Indebtedness.
No right of any present or future holders of any Senior Indebtedness
to enforce subordination as provided herein shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms of this Indenture, regardless of any
knowledge thereof which any such holder may have or otherwise be charged with.
The provisions of this Article Eight are intended to be for the benefit of, and
shall be enforceable directly by, the holders of Senior Indebtedness.
SECTION 8.10. Holders Authorize Trustee To Effectuate Subordination of
Securities.
Each Holder of Securities by his acceptance of such Securities
authorizes and expressly directs the Trustee on his behalf to take such action
as may be necessary or appropriate to effectuate the subordination provided in
this Article Eight, and appoints the Trustee his attorney-in-fact for such
purposes, including, in the event of any dissolution, winding-up, total
liquidation or reorganization of the Company (whether in bankruptcy, insolvency,
receivership, reorganization or similar proceedings or upon an assignment for
the benefit of creditors or otherwise) tending towards liquidation of the
business and assets of the Company, the filing of a claim for the unpaid balance
of its or his Securities in the form required in those proceedings.
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SECTION 8.11. This Article Not To Prevent Events of Default.
The failure to make a payment on account of principal of or interest
on the Securities by reason of any provision of this Article Eight shall not be
construed as preventing the occurrence of an Event of Default specified in
clauses (a), (b) or (c) of Section 6.01.
SECTION 8.12. Trustee's Compensation Not Prejudiced.
Nothing in this Article Eight shall apply to amounts due to the
Trustee pursuant to other sections in this Indenture.
SECTION 8.13. No Waiver of Subordination Provisions.
Without in any way limiting the generality of Section 8.09, the
holders of Senior Indebtedness may, at any time and from time to time, without
the consent of or notice to the Trustee or the Holders of the Securities,
without incurring responsibility to the Holders of the Securities and without
impairing or releasing the subordination provided in this Article Eight or the
obligations hereunder of the Holders of the Securities to the holders of Senior
Indebtedness, do any one or more of the following: (a) change the manner, place
or terms of payment or extend the time of payment of, or renew or alter, Senior
Indebtedness or any instrument evidencing the same or any agreement under which
Senior Indebtedness is outstanding or secured; (b) sell, exchange, release or
otherwise deal with any property pledged, mortgaged or otherwise securing Senior
Indebtedness; (c) release any Person liable in any manner for the collection of
Senior Indebtedness; and (d) exercise or refrain from exercising any rights
against the Company and any other Person.
SECTION 8.14. Subordination Provisions Not Applicable to Money Held in Trust
for Holders; Payments May Be Paid Prior to Dissolution.
All money and United States Government Obligations deposited in trust
with the Trustee pursuant to and in accordance with Article Nine shall be for
the sole benefit of the Holders and shall not be subject to this Article Eight.
Nothing contained in this Article Eight or elsewhere in this Indenture
shall prevent (i) the Company, except under the conditions described in Section
8.02, from making payments of principal of and interest on the Securities or
from depositing with the Trustee any moneys for such payments or from effecting
a termination of the Company's and the Guarantors' obligations under the
Securities and this Indenture as provided in Article Nine, or (ii) the
application by the Trustee of any moneys deposited with it for the purpose of
making such payments of principal of and interest on the Securities, to the
holders entitled thereto unless at least two Business Days prior to the date
upon which such payment becomes due and payable, the Trustee shall have received
the written notice provided for in Section 8.02(b) or in Section 8.06. The
Company shall give prompt written notice to the Trustee of any dissolution,
winding-up, liquidation or reorganization of the Company.
SECTION 8.15. Acceleration of Securities.
If payment of the Securities is accelerated because of an Event of
Default, the Company shall promptly notify holders of the Senior Indebtedness of
the acceleration.
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ARTICLE NINE
DISCHARGE OF INDENTURE
SECTION 9.01. Termination of Company's Obligations.
Subject to the provisions of Article Eight, the Company may terminate
its and the Guarantors' substantive obligations in respect of the Securities by
delivering all outstanding Securities to the Trustee for cancellation and paying
all sums payable by it on account of principal of and interest on all Securities
or otherwise. In addition to the foregoing, subject to the provisions of Article
Eight with respect to the creation of the defeasance trust provided for in the
following clause (i), the Company may, provided that no Default or Event of
Default has occurred and is continuing or would arise therefrom (or, with
respect to a Default or Event of Default specified in Section 6.01(i) or (j),
occurs at any time on or prior to the 91st calendar day after the date of such
deposit (it being understood that this condition shall not be deemed satisfied
until after such 91st day)) and provided that no default under any Senior
Indebtedness would result therefrom, terminate its and the Guarantors'
substantive obligations in respect of Article Four (other than Sections 4.01,
4.02, 4.07, 4.11 and 4.12) and Article Five hereof and any Event of Default
specified in Section 6.01 (d) or (e) by (i) depositing with the Trustee, under
the terms of an irrevocable trust or escrow agreement, money or United States
Government Obligations or a combination thereof sufficient (without
reinvestment) to pay all remaining Indebtedness on the Securities, (ii)
delivering to the Trustee either an Opinion of Counsel or a ruling of the
Internal Revenue Service to the effect that the Holders will not recognize
income, gain or loss for federal income tax purposes as a result of such deposit
and termination of obligations, (iii) delivering to the Trustee an Opinion of
Counsel to the effect that the Company's exercise of its option under this
Section 9.01 will not result in any of the Company, the Trustee or the trust or
escrow created by the Company's deposit of funds pursuant to this provision
becoming or being deemed to be an "investment company" under the Investment
Company Act of 1940, as amended (the "Investment Company Act"), and (iv)
delivering to the Trustee an Officers' Certificate and an Opinion of Counsel
each stating compliance with all conditions precedent provided for herein (the
foregoing being referred to as "covenant defeasance"). In addition, subject to
the provisions of Article Eight with respect to the creation of the defeasance
trust provided for in the following clause (i), the Company may, provided that
no Default or Event of Default has occurred and is continuing or would arise
therefrom (or, with respect to a Default or Event of Default specified in
Section 6.01(i) or (j), occurs at any time on or prior to the 91st calendar day
after the date of such deposit (it being understood that this condition shall
not be deemed satisfied until after such 91st day)) and provided that no default
under any Senior Indebtedness would arise therefrom, terminate all of its and
the Guarantors' substantive obligations in respect of the Securities (including
its obligations to pay the principal of and interest on the Securities and the
Guarantors' Guarantee thereof) by (i) depositing with the Trustee, under the
terms of an irrevocable trust agreement, money or United States Government
Obligations or a combination thereof sufficient (without reinvestment) to pay
all remaining Indebtedness on the Securities, (ii) delivering to the Trustee
either a ruling of the Internal Revenue Service to the effect that the Holders
of the Securities will not recognize income, gain or loss for federal income tax
purposes as a result of such deposit and termination of obligations or an
Opinion of Counsel addressed to the Trustee based upon such a ruling or based
on a change in the applicable Federal tax law since the date of this Indenture
to such effect, (iii) delivering to the Trustee an Opinion of Counsel to the
effect that the Company's exercise of its option under this Section 9.01 will
not result in any of the Company, the Trustee or the trust or escrow created by
the Company's deposit of funds pursuant to this provision becoming or being
deemed to be an "investment company" under the Investment Company Act and (iv)
delivering to the Trustee an Officers' Certificate and an Opinion of Counsel
each stating compliance with all conditions precedent provided for herein (the
foregoing being referred to as "legal defeasance").
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The Company may exercise its legal defeasance option notwithstanding
its prior exercise of its covenant defeasance option. In the event of either
covenant defeasance or legal defeasance, payment of the Notes may not be
accelerated because of an event specified as a Default or an Event of Default.
Notwithstanding the foregoing paragraph, the Company's obligations in
Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.07, 2.10, 2.13 and 4.01 (but not with
respect to termination of substantive obligations pursuant to the third sentence
of the foregoing paragraph), 4.02, 7.07, 7.08, 9.03 and 9.04 shall survive until
the Securities are no longer outstanding. Thereafter the Company's obligations
in Sections 7.07, 9.03 and 9.04 shall survive.
After such delivery or irrevocable deposit and delivery of an
Officers' Certificate and Opinion of Counsel, the Trustee upon request shall
acknowledge in writing the discharge of the Company's and the Guarantors'
obligations under the Securities and this Indenture except for those surviving
obligations specified above.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the United States Government
Obligations deposited pursuant to this Section 9.01 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 outstanding Securities.
SECTION 9.02. Application of Trust Money.
The Trustee shall hold in trust money or United States Government
Obligations deposited with it pursuant to Section 9.01, and shall apply the
deposited money and the money from United States Government Obligations in
accordance with this Indenture solely to the payment of principal of and
interest on the Securities.
SECTION 9.03. Repayment to Company.
Subject to Sections 7.07 and 9.01, the Trustee shall promptly pay to
the Company upon written request any excess money held by it at any time. The
Trustee shall pay to the Company upon written request any money held by it for
the payment of principal or interest that remains unclaimed for two years;
provided, however, that the Trustee before being required to make any payment
may at the expense of the Company cause to be published once in a newspaper of
general circulation in The City of New York or mail to each Holder entitled to
such money notice that such money remains unclaimed and that, after a date
specified therein which shall be at least 30 days from the date of such
publication or mailing, any unclaimed balance of such money then remaining shall
be repaid to the Company. After payment to the Company, Holders entitled to
money must look solely to the Company for payment as general creditors unless an
applicable abandoned property law designates another person and all liability of
the Trustee or Paying Agent with respect to such money shall thereupon cease.
SECTION 9.04. Reinstatement.
If the Trustee is unable to apply any money or United States
Government Obligations in accordance with Section 9.01 by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, the
Company's and the Guarantors' obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to Section 9.01 until such time as the Trustee is permitted to apply
all such money or United States Government Obligations in accordance with
Section 9.01; provided, however, that if the Company has made any payment of
interest on or principal of any Securities because of the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Securities to receive such payment from the money or United States
Government Obligations held by the Trustee.
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ARTICLE TEN
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 10.01. Without Consent of Holders.
The Company and the Guarantors, when authorized by a resolution of
their respective Boards of Directors, and the Trustee may amend or supplement
this Indenture or the Securities without notice to or consent of any Holder:
(a) to cure any ambiguity, defect or inconsistency; provided, however,
that such amendment or supplement does not adversely affect the rights of
any Holder;
(b) to effect the assumption by a successor Person of all obligations
of the Company under the Securities and his Indenture in connection with
any transaction complying with Article Five of this Indenture;
(c) to provide for uncertificated Securities in addition to or in
place of certificated Securities;
(d) to comply with any requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA;
(e) to make any change that would provide any additional benefit or
rights to the Holders;
(f) to make any other change that does not adversely affect the rights
of any Holder under this Indenture;
(g) to evidence the succession of another Person to any Guarantor and
the assumption by any such successor of the covenants of such Guarantor
herein and in the Guarantee in connection with any transaction complying
with Article Five of this Indenture;
(h) to add to the covenants of the Company or the Guarantors for the
benefit of the Holders, or to surrender any right or power herein conferred
upon the Company or any Guarantor;
(i) to secure the Securities pursuant to the requirements of Section
4.18 or otherwise; or
(j) to reflect the release of a Guarantor from its obligations with
respect to its Guarantee in accordance with the provisions of Section 11.03
and to add a Guarantor pursuant to the requirements of Section 4.19;
provided, however, that the Company has delivered to the Trustee an Opinion of
Counsel stating that such amendment or supplement complies with the provisions
of this Section 10.01.
SECTION 10.02. With Consent of Holders.
Subject to Section 6.07, the Company and the Guarantors, when
authorized by a resolution of their respective Boards of Directors, and the
Trustee may amend or supplement this Indenture or the Securities with the
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written consent of the Holders of at least a majority in principal amount of the
outstanding Securities. Subject to Section 6.07, the Holders of a majority in
principal amount of the outstanding Securities may waive compliance by the
Company or any Guarantor with any provision of this Indenture or the Securities.
However, without the consent of each Holder affected, an amendment, supplement
or waiver, including a waiver pursuant to Section 6.04, may not:
(a) change the Stated Maturity of the principal of or any installment
of interest on such Security or alter the optional redemption or repurchase
provisions of any Security or this Indenture in a manner adverse to the
Holders of the Securities;
(b) reduce the principal amount of (or the premium) of any Security;
(c) reduce the rate of or extend the time for payment of interest on
any Security;
(d) change the place or currency of payment of principal of (or
premium) or interest on any Security;
(e) modify any provisions of Section 6.04 (other than to add sections
of this Indenture or the Securities subject thereto) or 6.07 or this
Section 10.02 (other than to add sections of this Indenture or the
Securities which may not be amended, supplemented or waived without the
consent of each Holder affected);
(f) reduce the percentage of the principal amount of outstanding
Securities necessary for amendment to or waiver of compliance with any
provision of this Indenture or the Securities or for waiver of any Default
in respect thereof;
(g) waive a Default in the payment of principal of, interest on, or
redemption payment with respect to, the Securities (except a rescission of
acceleration of the Securities by the Holders thereof as provided in
Section 6.02 and a waiver of the payment default that resulted from such
acceleration);
(h) modify the ranking or priority of any Security or the Guarantee in
respect thereof of any Guarantor or modify the definition of Senior
Indebtedness or Guarantor Senior Indebtedness or amend or modify any of the
provisions of Article Eight or Article Twelve in any manner adverse to the
Holders of the Securities;
(i) release any Significant Restricted Subsidiary that is a Guarantor
from any of its obligations under its Guarantee or this Indenture otherwise
than in accordance with this Indenture; or
(j) modify the provisions of Section 4.14, the definitions of any of
the terms used therein or the provisions relating to any Offer to Purchase
required pursuant to Section 4.14 in a manner materially adverse to the
Holders of Securities affected thereby otherwise than in accordance with
this Indenture.
An amendment under this Section 10.02 may not make any change under
Article Eight or Article Twelve hereof that adversely affects in any material
respect the rights of any holder of Senior Indebtedness or Guarantor Senior
Indebtedness, as the case may be, then outstanding unless the holders of such
Senior Indebtedness or Guarantor Senior Indebtedness, as the case may be, (or
any representative thereof authorized to give a consent) shall have consented to
such change.
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It shall not be necessary for the consent of the Holders under this
Section 10.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section 10.02
becomes effective, the Company shall mail to the Holders 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 amendment, supplement or
waiver.
SECTION 10.03. Compliance with Trust Indenture Act.
Every amendment to or supplement of this Indenture or the Securities
shall comply with the TIA as then in effect.
SECTION 10.04. Record Date for Consents and Effect of Consents.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders of Securities entitled to consent to any
amendment, supplement or waiver. If a record date is fixed, then those persons
who were Holders of Securities at such record date (or their duly designated
proxies), and only those persons, shall be entitled to consent to such
amendment, supplement or waiver or to revoke any consent previously given,
whether or not such persons continue to be Holders of such Securities after such
record date. No such consent shall be valid or effective for more than 90 days
after such record date. The Trustee is entitled to rely upon any electronic
instruction from beneficial owners to the Holders of any Global Security.
After an amendment, supplement or waiver becomes effective, it shall
bind every Holder, unless it makes a change described in any of clauses (a)
through (j) of Section 10.02. In that case the amendment, supplement or waiver
shall bind each Holder of a Security who has consented to it and every
subsequent Holder of a Security or portion of a Security that evidences the same
debt as the consenting Holder's Security.
SECTION 10.05. Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the terms of a Security,
the Trustee may require the Holder of the Security to deliver it to the Trustee.
The Trustee may place an appropriate notation on the Security about the changed
terms and return it to the Holder. Alternatively, if the Company or the Trustee
so determines, the Company in exchange for the Security shall issue and the
Trustee shall authenticate a new Security that reflects the changed terms.
Failure to make the appropriate notation or issue a new Security shall not
affect the validity and effect of such amendment, supplement or waiver.
SECTION 10.06. Trustee To Sign Amendments, etc.
The Trustee shall be entitled to receive, and shall be fully protected
in relying upon, an Opinion of Counsel stating that the execution of any
amendment, supplement or waiver authorized pursuant to this Article Ten is
authorized or permitted by this Indenture and that such amendment, supplement or
waiver constitutes the legal, valid and binding obligation of the Company and
the Guarantors, enforceable in accordance with its terms (subject to customary
exceptions). The Trustee may, but shall not be obligated to, execute any such
amendment, supplement or waiver which affects the Trustee's own rights, duties
or immunities under this Indenture or otherwise. In signing any amendment,
supplement or waiver, the Trustee shall be entitled to receive an indemnity
reasonably satisfactory to it.
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ARTICLE ELEVEN
GUARANTEE
SECTION 11.01. Unconditional Guarantee.
Each Guarantor hereby unconditionally, jointly and severally,
guarantees (each, a "Guarantee") to each Holder of a Security authenticated by
the Trustee and to the Trustee and its successors and assigns that: the
principal of and interest on the Securities will be promptly paid in full when
due, subject to any applicable grace period, whether at maturity, by
acceleration or otherwise, and interest on the overdue principal and interest on
any overdue interest on the Securities, to the extent lawful, and all other
obligations of the Company to the Holders or the Trustee hereunder or under the
Securities will be promptly paid in full or performed, all in accordance with
the terms hereof and thereof; subject, however, to the limitations set forth in
Section 11.04. Each Guarantor hereby agrees that its obligations hereunder shall
be unconditional, irrespective of the validity, regularity or enforceability of
the Securities or this Indenture, the absence of any action to enforce the same,
any waiver or consent by any Holder of the Securities with respect to any
provisions hereof or thereof, 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. Each
Guarantor hereby waives 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 and covenants that the Guarantee will not be discharged
except by complete performance of the obligations contained in the Securities,
this Indenture, and this Guarantee. If any Holder or the Trustee is required by
any court or otherwise to return to the Company, any Guarantor, or any
custodian, trustee, liquidator or other similar official acting in relation to
the Company or any Guarantor, any amount paid by the Company or any Guarantor to
the Trustee or such Holder, this Guarantee, to the extent theretofore
discharged, shall be reinstated in full force and effect. Each Guarantor further
agrees that, as between each Guarantor, on the one hand, and the Holders and the
Trustee, on the other hand, (x) the maturity of the obligations guaranteed
hereby may be accelerated as provided in Article Six for the purpose of this
Guarantee, notwithstanding any stay, injunction or other prohibition preventing
such acceleration in respect of the obligations guaranteed hereby, and (y) in
the event of any acceleration of such obligations as provided in Article Six,
such obligations (whether or not due and payable) shall forth become due and
payable by each Guarantor for the purpose of this Guarantee.
SECTION 11.02. Severability.
In case any provision of this Guarantee shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
SECTION 11.03. Release of a Guarantor.
If the Securities are defeased in accordance with the terms of this
Indenture, or if Section 5.01(b) is complied with, or if, subject to the
requirements of Section 5.01(a), all or substantially all of the assets of any
Guarantor or all of the Equity Interests of any Guarantor are sold (including by
issuance or otherwise) by the Company in a transaction constituting an Asset
Sale and (x) the Net Cash Proceeds from such Asset Sale are used in accordance
with Section 4.05 or (y) the Company delivers to the Trustee an Officers'
Certificate to the effect that the Net Cash Proceeds from such Asset Sale shall
be used in accordance with Section 4.05 and within the time limits specified by
Section 4.05, then each Guarantor (in the case of defeasance) or such Guarantor
(in the case of compliance with Section 5.01(b) or in the event of a sale or
other disposition of all of the Equity Interests of such Guarantor) or the
corporation acquiring such assets (in the event of a sale or other disposition
of all or substantially all of the assets of such Guarantor) shall be
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automatically and unconditionally released and discharged from all obligations
under this Article Eleven without any further action required on the part of the
Trustee or any Holder. The Trustee shall, at the sole cost and expense of the
Company and upon receipt at the reasonable request of the Trustee of an Opinion
of Counsel that the provisions of this Section 11.03 have been complied with,
deliver an appropriate instrument evidencing such release upon receipt of a
request by the Company accompanied by an Officers' Certificate certifying as to
the compliance with this Section 11.03. Any Guarantor not so released remains
liable for the full amount of principal of and interest on the Securities and
the other obligations of the Company hereunder as provided in this Article
Eleven.
SECTION 11.04. Limitation of Guarantor's Liability.
Each Guarantor, and by its acceptance hereof each Holder and the
Trustee, hereby confirms that it is the intention of all such parties that the
guarantee by such Guarantor pursuant to its Guarantee not constitute a
fraudulent transfer or conveyance for purposes of title 11 of the United States
Code, as amended, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent
Transfer Act or any similar U.S. Federal or state or other applicable law. To
effectuate the foregoing intention, the Holders and each Guarantor hereby
irrevocably agree that the obligations of each Guarantor under its Guarantee
shall be limited to the maximum amount as will, after giving effect to all other
contingent and fixed liabilities of such Guarantor (including any Senior
Indebtedness Incurred after the Issue Date) and after giving effect to any
collections from or payments made by or on behalf of any other Guarantor in
respect of the obligations of such other Guarantor under its Guarantee or
pursuant to Section 11.05, result in the obligations of such Guarantor under its
Guarantee not constituting such a fraudulent transfer or conveyance under
Federal or State law.
SECTION 11.05. Contribution.
In order to provide for just and equitable contribution among the
Guarantors, the Guarantors agree, inter se, that in the event any payment or
distribution is made by any Guarantor (a "Funding Guarantor") under the
Guarantee, such Funding Guarantor shall be entitled to a contribution from all
other Guarantors in a pro rata amount, based on the net assets of each Guarantor
(including the Funding Guarantor), determined in accordance with GAAP, subject
to Section 11.04, for all payments, damages and expenses incurred by such
Funding Guarantor in discharging the Company's obligations with respect to the
Securities or any other Guarantor's obligations with respect to the Guarantee.
SECTION 11.06. Execution of Security Guarantee.
To further evidence their Guarantee to the Holders, each of the
Guarantors hereby agree to execute a Security Guarantee to be endorsed on each
Security ordered to be authenticated and delivered by the Trustee. Each
Guarantor hereby agrees that its Guarantee set forth in Section 11.01 shall
remain in full force and effect notwithstanding any failure to endorse on each
Security a Security Guarantee. Each such Security Guarantee shall be signed on
behalf of each Guarantor by its Chairman of the Board, its President or one of
its Vice Presidents prior to the authentication of the Security on which it is
endorsed, and the delivery of such Security by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of such Security
Guarantee on behalf of such Guarantor. Such signature upon the Security
Guarantee may be manual or facsimile signature of such officer and may be
imprinted or otherwise reproduced on the Security Guarantee, and in case such
officer who shall have signed the Security Guarantee shall cease to be such
officer before the Security on which such Security Guarantee is endorsed shall
have been authenticated and delivered by the Trustee or disposed of by the
Company, such Security nevertheless may be authenticated and delivered or
disposed of as though the Person who signed the Security Guarantee had not
ceased to be such officer of such Guarantor.
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SECTION 11.07. Subordination of Subrogation and Other Rights.
Each Guarantor hereby agrees that any claim against the Company that
arises from the payment, performance or enforcement of such Guarantor's
obligations under its Guarantee or this Indenture, including, without
limitation, any right of subrogation, shall be subject and subordinate to, and
no payment with respect to any such claim of such Guarantor shall be made
before, the payment in full in cash of all outstanding Securities in accordance
with the provisions provided therefor in this Indenture.
ARTICLE TWELVE
SUBORDINATION OF GUARANTEE
SECTION 12.01. Guarantee Obligations Subordinated to Guarantor Senior
Indebtedness.
Each Guarantor covenants and agrees, and the Trustee and each Holder
of the Securities by his acceptance thereof likewise covenant and agree, that
the Guarantee of such Guarantor shall be issued subject to the provisions of
this Article Twelve; and each person holding any Security, whether upon original
issue or upon transfer, assignment or exchange thereof, accepts and agrees that
all payments of the principal of and interest on the Securities pursuant to the
Guarantee made by or on behalf of any Guarantor shall, to the extent and in the
manner set forth in this Article Twelve, be subordinated and junior in right of
payment to the prior payment in full in cash of all amounts payable under
Guarantor Senior Indebtedness of such Guarantor.
SECTION 12.02. No Payment on Guarantees in Certain Circumstances.
(a) No direct or indirect payment (excluding any payment or
distribution of Permitted Junior Securities) by or on behalf of any Guarantor of
principal of or interest on the Securities pursuant to such Guarantor's
Guarantee, whether pursuant to the terms of the Securities, upon acceleration or
otherwise, shall be made if, at the time of such payment, there exists a default
in the payment of all or any portion of the obligations on any Guarantor Senior
Indebtedness of such Guarantor, whether at maturity, on account of mandatory
redemption or prepayment, acceleration or otherwise, and such default shall not
have been cured or waived or the benefits of this sentence waived by or on
behalf of the holders of such Guarantor Senior Indebtedness. In addition,
during the continuance of any non-payment event of default with respect to any
Guarantor Senior Indebtedness pursuant to which the maturity thereof may be
immediately accelerated, and upon receipt by the Trustee of written notice (the
"Guarantor Payment Blockage Notice") from the holder or holders of such
Guarantor Senior Indebtedness or the trustee or agent acting on behalf of such
Guarantor Senior Indebtedness, then, unless and until such non-payment event of
default has been cured or waived or has ceased to exist or such Guarantor Senior
Indebtedness has been discharged or paid in full in cash or the benefits of
these provisions have been waived by the holders of such Guarantor Senior
Indebtedness, no direct or indirect payment (excluding any payment or
distribution of Permitted Junior Securities) shall be made by or on behalf of
such Guarantor of principal or interest on the Securities during a period (a
"Guarantor Blockage Period") commencing on the date of receipt of such notice by
the Trustee and ending 179 days thereafter.
Notwithstanding anything herein or in the Securities to the contrary,
(x) in no event shall a Guarantor Blockage Period extend beyond 179 days from
the date the Guarantor Payment Blockage Notice in respect thereof was given, (y)
there shall be a period of at least 181 consecutive days in each 360-day period
when no Guarantor Blockage Period is in effect and (z) not more than one
Guarantor Blockage Period may be commenced with respect to any Guarantor during
any period of 360 consecutive days. No non-payment event of default that
existed or was
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continuing on the date of commencement of any Guarantor Blockage Period with
respect to the Guarantor Senior Indebtedness initiating such Guarantor Blockage
Period (to the extent the holder of Guarantor Senior Indebtedness, or trustee or
agent, giving notice commencing such Guarantor Blockage Period had knowledge of
such existing or continuing event of default) may be, or be made, the basis for
the commencement of any other Guarantor Blockage Period by the holder or holders
of such Guarantor Senior Indebtedness or the trustee or agent acting on behalf
of such Guarantor Senior Indebtedness, whether or not within a period of 360
consecutive days, unless such non-payment event of default has been cured or
waived for a period of not less than 90 consecutive days.
(b) In the event that, notwithstanding the foregoing, any payment
shall be made directly to the Trustee or any Holder when such payment is
prohibited by Section 12.02(a), such payment shall be held in trust for the
benefit of, and shall be paid over or delivered by the Trustee (if the Notice
required by Section 12.06 has been received by the Trustee) or the Holder to,
the holders of such Guarantor Senior Indebtedness or their respective
representatives, or to the trustee or trustees under any indenture pursuant to
which any of such Guarantor Senior Indebtedness may have been issued, as their
respective interests may appear, but only to the extent that, upon notice from
the Trustee to the holders of such Guarantor Senior Indebtedness that such
prohibited payment has been made, the holders of such Guarantor Senior
Indebtedness (or their representative or representatives or a trustee or
trustees) notify the Trustee in writing of the amounts then due and owing on
such Guarantor Senior Indebtedness, if any, and only the amounts specified in
such notice to the Trustee shall be paid to the holders of such Guarantor Senior
Indebtedness.
SECTION 12.03. Payment Over of Proceeds upon Dissolution, etc.
(a) Upon any payment or distribution of assets or securities of any
Guarantor of any kind or character, whether in cash, property or securities
(excluding any payment or distribution of Permitted Junior Securities), upon any
dissolution or winding-up or total liquidation or reorganization of such
Guarantor, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all Guarantor Senior Indebtedness of such
Guarantor shall first be paid in full in cash before the Holders of the
Securities or the Trustee on behalf of such Holders shall be entitled to receive
any payment by such Guarantor of the principal of or interest on the Securities
pursuant to such Guarantor's Guarantee, or any payment to acquire any of the
Securities for cash, property or securities, or any distribution with respect to
the Securities of any cash, property or securities (excluding any payment or
distribution of Permitted Junior Securities). Before any payment may be made
by, or on behalf of, any Guarantor of the principal of or interest on the
Securities upon any such dissolution or winding-up or total liquidation or
reorganization, any payment or distribution of assets or securities of such
Guarantor of any kind or character, whether in cash, property or securities
(excluding any payment or distribution of Permitted Junior Securities), to which
the Holders of the Securities or the Trustee on their behalf would be entitled,
but for the subordination provisions of this Indenture, shall be made by such
Guarantor or by any receiver, trustee in bankruptcy, liquidating trustee, agent
or other Person making such payment or distribution, directly to the holders of
the Guarantor Senior Indebtedness of such Guarantor (pro rata to such holders on
the basis of the respective amounts of such Guarantor Senior Indebtedness held
by such holders) or their representatives or to the trustee or trustees or agent
or agents under any agreement or indenture pursuant to which any of such
Guarantor Senior Indebtedness may have been issued, as their respective
interests may appear, to the extent necessary to pay all such Guarantor Senior
Indebtedness in full in cash after giving effect to any prior or concurrent
payment, distribution or provision therefor to or for the holders of such
Guarantor Senior Indebtedness.
(b) In the event that, notwithstanding the foregoing provision
prohibiting such payment or distribution, any payment or distribution of assets
or securities of any Guarantor of any kind or character, whether in cash,
property or securities (excluding any payment or distribution of Permitted
Junior Securities), shall be made directly to the Trustee or any Holder of
Securities at a time when such payment or distribution is prohibited by Section
12.03(a) and before all obligations in respect of the Guarantor Senior
Indebtedness of such Guarantor are paid in full in cash, such payment or
distribution shall be received and held in trust for the benefit of, and shall
be paid over or delivered by the
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Trustee (if the Notice required by Section 12.06 has been received by the
Trustee) or the Holder to, the holders of such Guarantor Senior Indebtedness
(pro rata to such holders on the basis of the respective amounts of such
Guarantor Senior Indebtedness held by such holders) or their respective
representatives, or to the trustee or trustees or agent or agents under any
indenture pursuant to which any of such Guarantor Senior Indebtedness may have
been issued, as their respective interests may appear, for application to the
payment of such Guarantor Senior Indebtedness remaining unpaid until all such
Guarantor Senior Indebtedness has been paid in full in cash after giving effect
to any prior or concurrent payment, distribution or provision therefor to or for
the holders of such Guarantor Senior Indebtedness.
The consolidation of any Guarantor with, or the merger of any
Guarantor with or into, another corporation or the liquidation or dissolution of
any Guarantor following the conveyance or transfer of its property as an
entirety, or substantially as an entirety, to another corporation upon the terms
and conditions provided in Article Five shall not be deemed a dissolution,
winding-up, liquidation or reorganization for the purposes of this Section 12.03
if such other corporation shall, as a part of such consolidation, merger,
conveyance or transfer, comply with the conditions stated in Article Five.
SECTION 12.04. Subrogation.
Upon the payment in full in cash of all Guarantor Senior Indebtedness
of a Guarantor, or provision for payment, the Holders of the Securities shall be
subrogated to the rights of the holders of such Guarantor Senior Indebtedness to
receive payments or distributions of cash, property or securities of such
Guarantor made on such Guarantor Senior Indebtedness until the principal of and
interest on the Securities shall be paid in full in cash; and, for the purposes
of such subrogation, no payments or distributions to the holders of such
Guarantor Senior Indebtedness of any cash, property or securities to which the
Holders of the Securities or the Trustee on their behalf would be entitled
except for the provisions of this Article Twelve, and no payment over pursuant
to the provisions of this Article Twelve to the holders of such Guarantor Senior
Indebtedness by Holders of the Securities or the Trustee on their behalf shall,
as between such Guarantor, its creditors other than holders of such Guarantor
Senior Indebtedness, and the Holders of the Securities, be deemed to be a
payment by such Guarantor to or on account of such Guarantor Senior
Indebtedness. It is understood that the provisions of this Article Twelve are
and are intended solely for the purpose of defining the relative rights of the
Holders of the Securities, on the one hand, and the holders of Guarantor Senior
Indebtedness of each Guarantor, on the other hand.
If any payment or distribution to which the Holders of the Securities
would otherwise have been entitled but for the provisions of this Article Twelve
shall have been applied, pursuant to the provisions of this Article Twelve, to
the payment of all amounts payable under Guarantor Senior Indebtedness, then and
in such case, the Holders of the Securities shall be entitled to receive from
the holders of such Guarantor Senior Indebtedness any payments or distributions
received by such holders of Guarantor Senior Indebtedness in excess of the
amount required to make payment in full in cash of such Guarantor Senior
Indebtedness.
SECTION 12.05. Obligations of Guarantors Unconditional.
Nothing contained in this Article Twelve or elsewhere in this
Indenture or in the Securities or the Guarantees is intended to or shall impair,
as among each of the Guarantors and the Holders of the Securities, the
obligation of each Guarantor, which is absolute and unconditional, to pay to the
Holders of the Securities the principal of and interest on the Securities as and
when the same shall become due and payable in accordance with the terms of the
Guarantee of such Guarantor, or is intended to or shall affect the relative
rights of the Holders of the Securities and creditors of any Guarantor other
than the holders of Guarantor Senior Indebtedness of such Guarantor, nor shall
anything herein or therein prevent the Holder of any Security or the Trustee on
their behalf from exercising all remedies otherwise permitted by applicable law
upon default under this Indenture, subject to the rights, if any, under this
Article Twelve
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of the holders of Guarantor Senior Indebtedness in respect of cash, property or
securities of any Guarantor received upon the exercise of any such remedy.
Without limiting the generality of the foregoing, nothing contained in
this Article Twelve shall restrict the right of the Trustee or the Holders of
Securities to take any action to declare the Securities to be due and payable
prior to their stated maturity pursuant to Section 6.01 or to pursue any rights
or remedies hereunder; provided, however, that all Guarantor Senior Indebtedness
of any Guarantor then due and payable shall first be paid in full before the
Holders of the Securities or the Trustee are entitled to receive any direct or
indirect payment from such Guarantor of principal of or interest on the
Securities pursuant to such Guarantor's Guarantee.
SECTION 12.06. Notice to Trustee.
The Company and each Guarantor shall give prompt written notice to the
Trustee of any fact known to the Company or such Guarantor which would prohibit
the making of any payment to or by the Trustee in respect of the Securities
pursuant to the provisions of this Article Twelve. The Trustee shall not be
charged with knowledge of the existence of any event of default with respect to
any Guarantor Senior Indebtedness or of any other facts which would prohibit the
making of any payment to or by the Trustee unless and until the Trustee shall
have received notice in writing at its Corporate Trust Office to that effect
signed by an Officer of the Company or such Guarantor, or by a holder of
Guarantor Senior Indebtedness or trustee or agent therefor; and prior to the
receipt of any such written notice, the Trustee shall, subject to Article Seven,
be entitled to assume that no such facts exist; provided, however, that if the
Trustee shall not have received the notice provided for in this Section 12.06 at
least two Business Days prior to the date upon which by the terms of this
Indenture any moneys shall become payable for any purpose (including, without
limitation, the payment of the principal of or interest on any Security), then,
regardless of anything herein to the contrary, the Trustee shall have full power
and authority to receive any moneys from any Guarantor and to apply the same to
the purpose for which they were received, and shall not be affected by any
notice to the contrary which may be received by it on or after such prior date.
Nothing contained in this Section 12.06 shall limit the right of the holders of
Guarantor Senior Indebtedness to recover payments as contemplated by Section
12.03. The Trustee shall be entitled to rely on the delivery to it of a written
notice by a Person representing himself or itself to be a holder of any
Guarantor Senior Indebtedness (or a trustee on behalf of, or other
representative of, such holder) to establish that such notice has been given by
a holder of such Guarantor Senior Indebtedness or a trustee or representative on
behalf of any such holder.
In the event that the Trustee determines in good faith that any
evidence is required with respect to the right of any Person as a holder of
Guarantor Senior Indebtedness to participate in any payment or distribution
pursuant to this Article Twelve, the Trustee may request such Person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of
Guarantor Senior Indebtedness held by such Person, the extent to which such
Person is entitled to participate in such payment or distribution and any other
facts pertinent to the rights of such Person under this Article Twelve, and if
such evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment.
SECTION 12.07. Reliance on Judicial Order or Certificate of Liquidating Agent.
Upon any payment or distribution of assets or securities of a
Guarantor referred to in this Article Twelve, the Trustee and the Holders of the
Securities shall be entitled to rely upon any order or decree made by any court
of competent jurisdiction in which bankruptcy, dissolution, winding-up,
liquidation or reorganization proceedings are pending, or upon a certificate of
the receiver, trustee in bankruptcy, liquidating trustee, agent or other person
making such payment or distribution, delivered to the Trustee or to the Holders
of the Securities for the purpose of ascertaining the persons entitled to
participate in such distribution, the holders of Guarantor Senior Indebtedness
of such Guarantor
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and other indebtedness of such Guarantor, the amount thereof or payable thereon,
the amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article Twelve.
SECTION 12.08. Trustee's Relation to Guarantor Senior Indebtedness.
The Trustee and any Paying Agent shall be entitled to all the rights
set forth in this Article Twelve with respect to any Guarantor Senior
Indebtedness which may at any time be held by it in its individual or any other
capacity to the same extent as any other holder of Guarantor Senior
Indebtedness, and nothing in this Indenture shall deprive the Trustee or any
Paying Agent of any of its rights as such holder.
With respect to the holders of Guarantor Senior Indebtedness, the
Trustee undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Article Twelve, and no implied
covenants or obligations with respect to the holders of Guarantor Senior
Indebtedness shall be read into this Indenture against the Trustee. The Trustee
shall not be deemed to owe any fiduciary duty to the holders of Guarantor Senior
Indebtedness (except as provided in Section 12.03(b)). The Trustee shall not be
liable to any such holders if the Trustee shall in good faith mistakenly pay
over or distribute to Holders of Securities or to the Company or to any other
person cash, property or securities to which any holders of Guarantor Senior
Indebtedness shall be entitled by virtue of this Article Twelve or otherwise.
SECTION 12.09. Subordination Rights Not Impaired by Acts or Omissions of the
Guarantors or Holders of Guarantor Senior Indebtedness.
No right of any present or future holders of any Guarantor Senior
Indebtedness to enforce subordination as provided herein shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
any Guarantor or by any act or failure to act, in good faith, by any such
holder, or by any noncompliance by any Guarantor with the terms of this
Indenture, regardless of any knowledge thereof which any such holder may have or
otherwise be charged with. The provisions of this Article Twelve are intended to
be for the benefit of, and shall be enforceable directly by, the holders of
Guarantor Senior Indebtedness.
SECTION 12.10. Holders Authorize Trustee To Effectuate Subordination of
Guarantee.
Each Holder of Securities by his acceptance of such Securities
authorizes and expressly directs the Trustee on his behalf to take such action
as may be necessary or appropriate to effectuate the subordination provided in
this Article Twelve, and appoints the Trustee his attorney-in-fact for such
purposes, including, in the event of any dissolution, winding-up, total
liquidation or reorganization of any Guarantor (whether in bankruptcy,
insolvency, receivership, reorganization or similar proceedings or upon an
assignment for the benefit of creditors or otherwise) tending towards
liquidation of the business and assets of such Guarantor, the filing of a claim
for the unpaid balance of its or his Securities in the form required in those
proceedings.
SECTION 12.11. This Article Not To Prevent Events of Default.
The failure to make a payment on account of principal of or interest
on the Securities by reason of any provision of this Article Twelve shall not be
construed as preventing the occurrence of an Event of Default specified in
clauses (a), (b) or (c) of Section 6.01.
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SECTION 12.12. Trustee's Compensation Not Prejudiced.
Nothing in this Article Twelve shall apply to amounts due to the
Trustee pursuant to other sections in this Indenture.
SECTION 12.13. No Waiver of Guarantee Subordination Provisions.
Without in any way limiting the generality of Section 12.09, the
holders of Guarantor Senior Indebtedness may, at any time and from time to time,
without the consent of or notice to the Trustee or the Holders of the
Securities, without incurring responsibility to the Holders of the Securities
and without impairing or releasing the subordination provided in this Article
Twelve or the obligations hereunder of the Holders of the Securities to the
holders of Guarantor Senior Indebtedness, do any one or more of the following:
(a) change the manner, place or terms of payment or extend the time of payment
of, or renew or alter, Guarantor Senior Indebtedness or any instrument
evidencing the same or any agreement under which Guarantor Senior Indebtedness
is outstanding or secured; (b) sell, exchange, release or otherwise deal with
any property pledged, mortgaged or otherwise securing Guarantor Senior
Indebtedness; (c) release any Person liable in any manner for the collection of
Guarantor Senior Indebtedness; and (d) exercise or refrain from exercising any
rights against any Guarantor and any other Person.
SECTION 12.14. Payments May Be Paid Prior to Dissolution.
Nothing contained in this Article Twelve or elsewhere in this
Indenture shall prevent (i) a Guarantor, except under the conditions described
in Section 12.02, from making payments of principal of and interest on the
Securities, or from depositing with the Trustee any moneys for such payments, or
(ii) the application by the Trustee of any moneys deposited with it for the
purpose of making such payments of principal of and interest on the Securities,
to the holders entitled thereto unless at least two Business Days prior to the
date upon which such payment becomes due and payable, the Trustee shall have
received the written notice provided for in Section 12.02(b) or in Section
12.06. The Guarantors shall give prompt written notice to the Trustee of any
dissolution, winding-up, liquidation or reorganization of such Guarantor.
ARTICLE THIRTEEN
MISCELLANEOUS
SECTION 13.01. 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 (S)(S) 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.
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SECTION 13.02. Notices.
Any notice or communication shall be sufficiently given if in writing
and delivered in person, by facsimile and confirmed by overnight courier, or
mailed by first-class mail addressed as follows:
if to Finance Co., the Company or to the Guarantors:
Axia Incorporated
100 West 22nd Street
Lombard, Illinois 60148
Attention: Chief Financial Officer
Facsimile: (630) 629-3361
Telephone: (630) 629-3360
with a copy, which shall not constitute notice, to:
Bracewell & Patterson, LLP
711 Louisiana, Suite 2900
Pennzoil Place, South Tower
Houston, Texas 77002
Attention: Gary Orloff, Esq.
Facsimile: (713) 221-1212
Telephone: (713) 221-1306
if to the Trustee:
State Street Bank and Trust Company
Goodwin Square
225 Asylum Street, 23rd Floor
Hartford, Connecticut 06103
Attention: Corporate Trust Administration
Facsimile: (860) 244-1889
Telephone: (860) 244-1820
The Company or the Trustee by notice to the other may designate additional
or different addresses for subsequent notices or communications.
Any notice or communication mailed, first-class, postage prepaid, to a
Holder including any notice delivered in connection with TIA (S) 310(b), TIA (S)
313(c), TIA (S) 314(a) and TIA (S) 315(b), shall be mailed to him at his address
as set forth on the Security Register and shall be sufficiently given to him if
so mailed within the time prescribed. To the extent required by the TIA, any
notice or communication shall also be mailed to any Person described in TIA
(S) 313(c).
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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. Except for a
notice to the Trustee, which is deemed given only when received, if a notice or
communication is mailed in the manner provided above, it is duly given, whether
or not the addressee receives it.
SECTION 13.03. Communications by Holders with Other Holders.
Holders may communicate pursuant to TIA (S) 312(b) with other Holders
with respect to their rights under this Indenture or the Securities. The
Company, the Trustee, the Registrar and any other person shall have the
protection of TIA (S) 312(c).
SECTION 13.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take
or refrain from taking any action under this Indenture, the Company shall
furnish to the Trustee at the request of the Trustee:
(1) an Officers' Certificate in form and substance satisfactory to the
Trustee stating that, in the opinion of the signers, all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with; and
(2) an Opinion of Counsel in form and substance satisfactory to the
Trustee stating that, in the opinion of such counsel, all such conditions
precedent have been complied with; provided, however, that with respect to
matters of fact an Opinion of Counsel may rely on an Officers' Certificate
or certificates of public officials.
SECTION 13.05. Statements Required in Certificate and Opinion of Counsel.
Each certificate and Opinion of Counsel with respect to compliance
with a condition or covenant provided for in this Indenture shall include:
(1) a statement that the person making such certificate has read such
covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements contained in such certificate are
based;
(3) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether or not, in the opinion of such person,
such condition or covenant has been complied with.
SECTION 13.06. Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Paying Agent or Registrar may make reasonable rules for its
functions.
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SECTION 13.07. Governing Law.
The laws of the State of New York shall govern this Indenture, the
Securities and the Security Guarantees without regard to principles of conflicts
of law.
SECTION 13.08. No Recourse Against Others.
A director, officer, employee or stockholder, as such, of the Company
or any of its Affiliates shall not have any liability for any obligations of the
Company or any of its Affiliates under the Securities, the Guarantee of such
Guarantor or this Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder by accepting a
Security waives and releases all such liability. The waiver and release are
part of the consideration for the issuance of the Securities and the Guarantees.
SECTION 13.09. Successors.
All agreements of the Company in this Indenture and the Securities
shall bind its successor. All agreements of each Guarantor in this Indenture and
such Guarantor's Guarantee shall bind its successor. All agreements of the
Trustee in this Indenture shall bind its successor.
SECTION 13.10. 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 13.11. Severability.
In case any provision in this Indenture, in the Securities or in the
Guarantee shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby, and a Holder shall have no claim therefor against any party
hereto.
SECTION 13.12. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or a Subsidiary. Any such indenture, loan or debt
agreement may not be used to interpret this Indenture.
SECTION 13.13. Legal Holidays.
If a payment date is a not a Business Day at a place of payment,
payment may be made at that place on the next succeeding Business Day, and no
interest shall accrue for the intervening period.
[Signature Pages Follow]
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S-1
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the date first written above.
AXIA FINANCE CORP.
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
AXIA INCORPORATED
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
AMES TAPING TOOL SYSTEMS, INC.,
as Guarantor
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
TAPETECH TOOL CO., INC.,
as Guarantor
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
<PAGE>
EXHIBIT A
---------
[FORM OF SERIES A SECURITY]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR
OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER,
SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUER OR ANY
AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF
SUCH SECURITY), ONLY (A) TO THE ISSUER, (B) PURSUANT TO A REGISTRATION STATEMENT
THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS
THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT
OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR
OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT, (E) TO AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS ACQUIRING THE
SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE
SECURITIES OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR
OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES
ACT OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE ISSUER'S AND THE TRUSTEE'S
RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (D), (E) OR
(F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM, AND IN THE CASE OF THE FOREGOING
CLAUSE (E), A CERTIFICATE OF TRANSFER (A FORM OF WHICH MAY BE OBTAINED FROM THE
ISSUER OR THE TRUSTEE) COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE ISSUER
AND THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER
AFTER THE RESALE RESTRICTION TERMINATION DATE.
A-1
<PAGE>
AXIA INCORPORATED
10 3/4% Senior Subordinated Note
due July 15, 2008, Series A
CUSIP No.:[ ]
No. [ ] $[ ]
AXIA INCORPORATED., a Delaware corporation (the "Company," which term
includes any successor corporation), for value received promises to pay to CEDE
& CO. or registered assigns, the principal sum of [ ] Dollars, on
[ ], 2008.
Interest Payment Dates: January 15 and July 15, commencing on January
15, 1999.
Interest Record Dates: January 1 and July 1.
Reference is made to the further provisions of this Security contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officer.
AXIA INCORPORATED
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
Dated: July 22, 1998
A-2
<PAGE>
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the 10 3/4% Senior Subordinated Notes due July 15,
2008, Series A, described in the within-mentioned Indenture.
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
Dated: July 22, 1998
A-3
<PAGE>
(REVERSE OF SECURITY)
AXIA INCORPORATED
10 3/4% Senior Subordinated Note
due July 15, 2008, Series A
1. Interest.
AXIA INCORPORATED, a Delaware corporation (the "Company"), promises to
pay interest on the principal amount of this Security at the rate per annum
shown above. Cash interest on the Securities will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from July
22, 1998. The Company will pay interest semi-annually in arrears on each
Interest Payment Date, commencing January 15, 1999. Interest will be computed
on the basis of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal from time to time
on demand and on overdue installments of interest (without regard to any
applicable grace periods) to the extent lawful from time to time on demand, in
each case at the rate borne by the Securities.
2. Method of Payment.
The Company shall pay interest on the Securities (except defaulted
interest) to the persons who are the registered Holders at the close of business
on the Interest Record Date immediately preceding the Interest Payment Date even
if the Securities are canceled on registration of transfer or registration of
exchange after such Interest Record Date. Holders must surrender Securities to
a Paying Agent to collect principal payments. The Company shall pay principal
and interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts ("U.S. Legal Tender"). However,
the Company may pay principal and interest by wire transfer of Federal funds
(provided that the Paying Agent shall have received wire instructions on or
prior to the relevant Interest Record Date), or interest by check payable in
such U.S. Legal Tender. The Company may deliver any such interest payment to
the Paying Agent or to a Holder at the Holder's registered address.
3. Paying Agent and Registrar.
Initially, State Street Bank and Trust Company (the "Trustee") will
act as Paying Agent and Registrar. The Company may change any Paying Agent or
Registrar without notice to the Holders. The Company or any of its Subsidiaries
may, subject to certain exceptions, act as Registrar.
4. Indenture and Guarantees.
The Company issued the Securities under an Indenture, dated as of July
22, 1998 (the "Indenture"), by and among Finance Co., the Company, the
Guarantors and the Trustee. Capitalized terms herein are used as defined in the
Indenture unless otherwise defined herein. This Security is one of a duly
authorized issue of Securities of the Company designated as its 10 3/4% Senior
Subordinated Notes due 2008, Series A (the "Initial Securities"), limited
(except as otherwise provided in the Indenture) in aggregate principal amount to
$150,000,000, which may be issued under the Indenture, subject to the
limitations set forth in Section 4.04 of the Indenture. The Securities include
the Initial Securities, the Private Exchange Securities (as defined in the
Indenture) and the Unrestricted Securities (as defined below) issued in exchange
for the Initial Securities pursuant to the Exchange and Registration Rights
Agreement. The Initial Securities and the Unrestricted Securities are treated
as a single class of securities under the Indenture. The terms of the
Securities include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. (S)(S)
77aaa-77bbbb) (the "TIA"), as in effect on the date of the Indenture (except as
otherwise indicated in the Indenture) until such time as the Indenture is
qualified under the TIA, and thereafter as in
A-4
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effect on the date on which the Indenture is qualified under the TIA.
Notwithstanding anything to the contrary herein, the Securities are subject to
all such terms, and holders of Securities are referred to the Indenture and the
TIA for a statement of them. The Securities are general unsecured obligations of
the Company limited to $150,000,000 in aggregate principal amount, of which
$100,000,000 in aggregate principal amount of Initial Securities will be issued
on the Issue Date. After the Issue Date, additional Securities may be issued
from time to time subject to the limitations set forth in Section 4.04 of the
Indenture. The Securities are subordinated in right of payment to all Senior
Indebtedness of Finance Co. to the extent and in the manner provided in the
Indenture. Each Holder of a Security, by accepting a Security, agrees to such
subordination, authorizes the Trustee to give effect to such subordination and
appoints the Trustee as attorney-in-fact for such purpose.
Payment on the Securities is guaranteed (each, a "Guarantee"), on a
senior subordinated basis, jointly and severally, by each Restricted Subsidiary
of the Company existing on the Issue Date (each, a "Guarantor") pursuant to
Article Eleven and Article Twelve of the Indenture. In addition, in certain
circumstances subject to certain exceptions, the Indenture requires the Company
to cause each Restricted Subsidiary formed, created or acquired after the Issue
Date to become a party to the Indenture as a Guarantor and guarantee payment on
the Securities pursuant to Article Eleven and Article Twelve of the Indenture.
In certain circumstances, the Guarantees may be released.
5. Optional Redemption.
The Securities will be redeemable at the option of the Company, in
whole or in part, at any time on or after July 15, 2003, at the redemption
prices (expressed as a percentage of principal amount) set forth below, plus
accrued and unpaid interest thereon, if any, to the Redemption Date (subject to
the right of holders of record on the relevant Interest Record Date to receive
interest due on the relevant Interest Payment Date) if redeemed during the 12-
month period commencing on July of the years indicated below:
Year Percentage
---- ----------
2003 105.375%
2004 103.583%
2005 101.792%
2006 and thereafter 100.000%
6. Optional Redemption upon Public Equity Offerings.
In addition, at any time and from time to time on or prior to July 15,
2001, the Company may redeem in the aggregate up to 35% aggregate principal
amount of the Securities with the net cash proceeds of one or more Public Equity
Offerings by the Company or Axia Group at a redemption price (expressed as a
percentage of principal amount) equal to 110.750% of the principal amount
thereof, plus accrued and unpaid interest thereon, if any, to the date of
redemption; provided, however, that at least 65% aggregate principal amount of
the Securities must remain outstanding immediately after giving effect to each
such redemption (excluding any Securities held by the Company or any of its
Affiliates); provided, further, that if the Public Equity Offering is by Axia
Group, the proceeds thereof to be used to redeem the Securities shall have been
contributed as common equity or as a capital contribution to the Company on or
prior to the date of redemption. Notice of any such redemption must be given
within 60 days after the date of the closing of the relevant Public Equity
Offering of the Company.
7. Notice of Redemption.
Notice of redemption will be mailed by first-class mail at least 30
days but not more than 60 days before the Redemption Date to each Holder of
Securities to be redeemed at its registered address. The Trustee may select for
redemption portions of the principal amount of Securities that have
denominations equal to or larger than $1,000 principal amount. Securities and
portions of them the Trustee so selects shall be in amounts of $1,000 principal
amount or integral multiples thereof.
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<PAGE>
If any Security is to be redeemed in part only, the notice of
redemption that relates to such Security shall state the portion of the
principal amount thereof to be redeemed. A new Security in a principal amount
equal to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Security. On and after the Redemption
Date, interest will cease to accrue on Securities or portions thereof called for
redemption so long as the Company has deposited with the Paying Agent for the
Securities funds in satisfaction of the redemption price pursuant to the
Indenture and the Paying Agent is not prohibited from paying such funds to the
Holders pursuant to the terms of the Indenture.
8. Change of Control Offer.
Following the occurrence of a Change of Control (the date of such
occurrence being the "Change of Control Date"), the Company shall, within 30
days after the Change of Control Date, make an Offer to Purchase all Securities
then outstanding at a purchase price in cash equal to 101% of the aggregate
principal amount thereof, plus accrued and unpaid interest thereon, if any, to
the Purchase Date (subject to the right of Holders of record on the relevant
Interest Record Date to receive interest due on the relevant Interest Payment
Date).
9. Limitation on Disposition of Assets.
The Company is, subject to certain conditions and certain exceptions,
obligated to make an Offer to Purchase Securities at a purchase price equal to
100% of the principal amount thereof, plus accrued and unpaid interest thereon,
if any, to the Purchase Date (subject to the right of Holders of record on the
Interest Relevant Record Date to receive interest due on the relevant Interest
Payment Date) with the proceeds of certain asset dispositions.
10. Denominations; Transfer; Exchange.
The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay certain transfer
taxes or similar governmental charges payable in connection therewith as
permitted by the Indenture. The Registrar need not register the transfer of or
exchange any Securities or portions thereof selected for redemption, except the
unredeemed portion of any security being redeemed in part.
11. Persons Deemed Owners.
The registered Holder of a Security shall be treated as the owner of
it for all purposes.
12. Unclaimed Funds.
If funds for the payment of principal or interest remain unclaimed for
two years, the Trustee and the Paying Agent will repay the funds to the Company
at its written request. After that, all liability of the Trustee and such
Paying Agent with respect to such funds shall cease.
13. Legal Defeasance and Covenant Defeasance.
The Company and the Guarantors may be discharged from their
obligations under the Indenture, the Securities and the Guarantees, except for
certain provisions thereof, and may be discharged from obligations to comply
with certain covenants contained in the Indenture, the Securities and the
Guarantees, in each case upon satisfaction of certain conditions specified in
the Indenture.
A-6
<PAGE>
14. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture, the Securities and the
Guarantees may be amended or supplemented with the written consent of the
Holders of at least a majority in aggregate principal amount of the Securities
then outstanding, and any existing Default or Event of Default or compliance
with any provision may be waived with the consent of the Holders of a majority
in aggregate principal amount of the Securities then outstanding. Without notice
to or consent of any Holder, the parties thereto may amend or supplement the
Indenture, the Securities and the Guarantees to, among other things, cure any
ambiguity, defect or inconsistency, provide for uncertificated Securities in
addition to or in place of certificated Securities or comply with any
requirements of the SEC in connection with the qualification of the Indenture
under the TIA, or make any other change that does not materially adversely
affect the rights of any Holder of a Security.
15. Restrictive Covenants.
The Indenture contains certain covenants that, among other things,
limit the ability of the Company and the Restricted Subsidiaries to make
restricted payments, to incur indebtedness, to create liens, to sell assets, to
permit restrictions on dividends and other payments by Restricted Subsidiaries
to the Company, to consolidate, merge or sell all or substantially all of its
assets, to engage in transactions with affiliates or certain other related
persons. The limitations are subject to a number of important qualifications
and exceptions. The Company must report annually to the Trustee on compliance
with such limitations.
16. Defaults and Remedies.
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in aggregate principal amount of Securities then
outstanding may declare all the Securities to be due and payable immediately in
the manner and with the effect provided in the Indenture. Holders of Securities
may not enforce the Indenture, the Securities or the Guarantees except as
provided in the Indenture. The Trustee is not obligated to enforce the
Indenture, the Securities or the Guarantees unless it has received indemnity
satisfactory to it. The Indenture permits, subject to certain limitations
therein provided, Holders of a majority in aggregate principal amount of the
Securities then outstanding to direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Holders of Securities notice of certain
continuing Defaults or Events of Default if it determines that withholding
notice is in their interest.
17. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may otherwise deal
with the Company, its Subsidiaries or their respective Affiliates as if it were
not the Trustee.
18. No Recourse Against Others.
No director, officer, employee or stockholder, as such, of the Company
or any of its Affiliates shall have any liability for any obligation of the
Company or any of its Affiliates under the Securities, the Guarantee of such
Guarantor or the Indenture or for any claim based on, in respect of or by reason
of, such obligations or their creation. Each Holder by accepting a Security
waives and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Securities and the Guarantees.
19. Authentication.
This Security shall not be valid until the Trustee or authenticating
agent signs the certificate of authentication on this Security.
A-7
<PAGE>
20. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of a
Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
21. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Securities as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
22. Registration Rights.
Pursuant to the Exchange and Registration Rights Agreement, the
Company will be obligated upon the occurrence of certain events to consummate an
exchange offer pursuant to which the Holder of this Security shall have the
right to exchange this Security for a 10 3/4% Senior Subordinated Note due 2008,
Series B, of the Company (an "Unrestricted Security") which have been registered
under the Securities Act, in like principal amount and having terms identical in
all material respects to the Initial Securities. The Holders shall be entitled
to receive certain additional interest payments in the event such exchange offer
is not consummated and upon certain other conditions, all pursuant to and in
accordance with the terms of the Exchange and Registration Rights Agreement.
23. Governing Law.
The laws of the State of New York shall govern the Indenture, this
Security and any Guarantee thereof without regard to principles of conflicts of
laws.
A-8
<PAGE>
[FORM OF SECURITY GUARANTEE]
SENIOR SUBORDINATED GUARANTEE
The Guarantor (as defined in the Indenture referred to in the Security
upon which this notation is endorsed) hereby unconditionally guarantees on a
senior subordinated basis (such Guarantee by the Guarantor being referred to
herein as the "Guarantee") the due and punctual payment of the principal of,
premium, if any, and interest on the Securities, whether at maturity, by
acceleration or otherwise, the due and punctual payment of interest on the
overdue principal, premium and interest on the Securities, and the due and
punctual performance of all other obligations of the Company to the Holders or
the Trustee, all in accordance with the terms set forth in Article Eleven of the
Indenture.
The obligations of the Guarantor to the Holders of Securities and to
the Trustee pursuant to the Guarantee and the Indenture are expressly set forth,
and are expressly subordinated and subject in right of payment to the prior
payment in full of all Guarantor Senior Indebtedness (as defined in the
Indenture) of such Guarantor, to the extent and in the manner provided in
Article Eleven and Article Twelve of the Indenture, and reference is hereby made
to such Indenture for the precise terms of the Guarantee therein made.
This Security Guarantee shall not be valid or obligatory for any
purpose until the certificate of authentication on the Securities upon which
this Security Guarantee is noted shall have been executed by the Trustee under
the Indenture by the manual signature of one of its authorized officers.
This Security Guarantee shall be governed by and construed in
accordance with the laws of the State of New York without regard to principles
of conflicts of law.
This Security Guarantee is subject to release upon the terms set forth
in the Indenture.
AMES TAPING TOOL SYSTEMS, INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
TAPETECH TOOL CO., INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
A-9
<PAGE>
ASSIGNMENT FORM
I or we assign and transfer this Security to
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee or transferee)
- --------------------------------------------------------------------------------
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint_________________________________________________________
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Dated: Signed:
----------------- ------------------------------------
(Signed exactly as name appears on
the other side of this Security)
Signature Guarantee:
-----------------------------------------------
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor
program reasonably acceptable to the Trustee)
A-10
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.05 or Section 4.14 of the Indenture, check the appropriate
box:
Section 4.05 [_]
Section 4.14 [_]
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.05 or Section 4.14 of the Indenture, state the
amount: $________________
Dated: Your Signature:
------------------ ------------------------
(Signed exactly as name appears on the
other side of this Security)
Signature Guarantee:
-----------------------------------------------
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor
program reasonably acceptable to the Trustee)
A-11
<PAGE>
EXHIBIT B
---------
[FORM OF SERIES B SECURITY]
AXIA INCORPORATED
10 3/4% Senior Subordinated Note
due July 15, 2008, Series B
CUSIP No.:[ ]
No. [ ] $[ ]
AXIA INCORPORATED, a Delaware corporation (the "Company," which term
includes any successor corporation), for value received promises to pay to
[ ] or registered assigns, the principal sum of [ ]
Dollars, on July 15, 2008.
Interest Payment Dates: January 15 and July 15, commencing on
January 15, 1999.
Interest Record Dates: January 1 and July 1.
Reference is made to the further provisions of this Security contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officer.
AXIA INCORPORATED
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
Dated: July 22, 1998
B-1
<PAGE>
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the 10 3/4% Senior Subordinated Notes due July 15,
2008, Series B, described in the within-mentioned Indenture.
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
Dated: July 22, 1998
B-2
<PAGE>
(REVERSE OF SECURITY)
AXIA INCORPORATED
10 3/4% Senior Subordinated Note
due July 15, 2008, Series B
1. Interest.
AXIA INCORPORATED, a Delaware corporation (the "Company"), promises to
pay interest on the principal amount of this Security at the rate per annum
shown above. Cash interest on the Securities will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from July
22, 1998. The Company will pay interest semi-annually in arrears on each
Interest Payment Date, commencing January 15, 1999. Interest will be computed
on the basis of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal from time to time
on demand and on overdue installments of interest (without regard to any
applicable grace periods) to the extent lawful from time to time on demand, in
each case at the rate borne by the Securities.
2. Method of Payment.
The Company shall pay interest on the Securities (except defaulted
interest) to the persons who are the registered Holders at the close of business
on the Interest Record Date immediately preceding the Interest Payment Date even
if the Securities are canceled on registration of transfer or registration of
exchange after such Interest Record Date. Holders must surrender Securities to
a Paying Agent to collect principal payments. The Company shall pay principal
and interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts ("U.S. Legal Tender"). However,
the Company may pay principal and interest by wire transfer of Federal funds
(provided that the Paying Agent shall have received wire instructions on or
prior to the relevant Interest Record Date), or interest by check payable in
such U.S. Legal Tender. The Company may deliver any such interest payment to
the Paying Agent or to a Holder at the Holder's registered address.
3. Paying Agent and Registrar.
Initially, State Street Bank and Trust Company (the "Trustee") will
act as Paying Agent and Registrar. The Company may change any Paying Agent or
Registrar without notice to the Holders. The Company or any of its Subsidiaries
may, subject to certain exceptions, act as Registrar.
4. Indenture and Guarantees.
The Company issued the Securities under an Indenture, dated as of
March 1, 1998 (the "Indenture"), by and among the Finance Co., Company, the
Guarantors and the Trustee. Capitalized terms herein are used as defined in the
Indenture unless otherwise defined herein. This Security is one of a duly
authorized issue of Securities of the Company designated as its 10 3/4% Senior
Subordinated Notes due 2008, Series B (the "Unrestricted Securities"), limited
(except as otherwise provided in the Indenture) in aggregate principal amount to
$150,000,000, which may be issued under the Indenture. The Securities include
the 10 3/4% Senior Subordinated Notes due 2008, Series A (the "Initial
Securities"), the Private Exchange Securities (as defined in the Indenture) and
the Unrestricted Securities. The Initial Securities, the Private Exchange
Securities and the Unrestricted Securities are treated as a single class of
securities under the Indenture. The terms of the Securities include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-77bbbb) (the "TIA"), as in
effect on the date of the Indenture (except as otherwise indicated in the
Indenture) until such time as the Indenture is qualified under
B-3
<PAGE>
the TIA, and thereafter as in effect on the date on which the Indenture is
qualified under the TIA. Notwithstanding anything to the contrary herein, the
Securities are subject to all such terms, and holders of Securities are referred
to the Indenture and the TIA for a statement of them. The Securities are general
unsecured obligations of the Company limited to $150,000,000 in aggregate
principal amount, of which $100,000,000 in aggregate principal amount of Initial
Securities will be issued on the Issue Date. After the Issue Date, additional
Securities may be issued from time to time subject to the limitations set forth
in Section 4.04 of the Indenture. The Securities are subordinated in right of
payment to all Senior Indebtedness of Finance Co. to the extent and in the
manner provided in the Indenture. Each Holder of a Security, by accepting a
Security, agrees to such subordination, authorizes the Trustee to give effect to
such subordination and appoints the Trustee as attorney-in-fact for such
purpose.
Payment on the Securities is guaranteed (each, a "Guarantee"), on a
senior subordinated basis, jointly and severally, by each Restricted Subsidiary
of the Company existing on the Issue Date (each, a "Guarantor") pursuant to
Article Eleven and Article Twelve of the Indenture. In addition, in certain
circumstances subject to certain exceptions, the Indenture requires the Company
to cause each Restricted Subsidiary formed, created or acquired after the Issue
Date to become a party to the Indenture as a Guarantor and guarantee payment on
the Securities pursuant to Article Eleven and Article Twelve of the Indenture.
In certain circumstances, the Guarantees may be released.
5. Optional Redemption.
The Securities will be redeemable at the option of the Company, in
whole or in part, at any time on or after July 15, 2003, at the redemption
prices (expressed as a percentage of principal amount) set forth below, plus
accrued and unpaid interest thereon, if any, to the Redemption Date (subject to
the right of holders of record on the relevant Interest Record Date to receive
interest due on the relevant Interest Payment Date) if redeemed during the 12-
month period commencing on July ___________ of the years indicated below:
Year Percentage
---- ----------
2003 105.375%
2004 103.583%
2005 101.792%
2006 and thereafter 100.000%
6. Optional Redemption upon Public Equity Offerings.
In addition, at any time and from time to time on or prior to July 15,
2001, the Company may redeem in the aggregate up to 35% aggregate principal
amount of the Securities with the net cash proceeds of one or more Public Equity
Offerings by the Company or Axia Group at a redemption price (expressed as a
percentage of principal amount) equal to 110.750% of the principal amount
thereof, plus accrued and unpaid interest thereon, if any, to the date of
redemption; provided, however, that at least 65% aggregate principal amount of
the Securities must remain outstanding immediately after giving effect to each
such redemption (excluding any Securities held by the Company or any of its
Affiliates); provided, further, that if the Public Equity Offering is by Axia
Group, the proceeds thereof to be used to redeem the Securities shall have been
contributed as common equity or as a capital contribution to the Company on or
prior to the date of redemption. Notice of any such redemption must be given
within 60 days after the date of the closing of the relevant Public Equity
Offering of the Company.
7. Notice of Redemption.
Notice of redemption will be mailed by first-class mail at least 30
days but not more than 60 days before the Redemption Date to each Holder of
Securities to be redeemed at its registered address. The Trustee may select for
redemption portions of the principal amount of Securities that have
denominations equal to or larger than $1,000 principal amount. Securities and
portions of them the Trustee so selects shall be in amounts of $1,000 principal
amount or integral multiples thereof.
B-4
<PAGE>
If any Security is to be redeemed in part only, the notice of
redemption that relates to such Security shall state the portion of the
principal amount thereof to be redeemed. A new Security in a principal amount
equal to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Security. On and after the Redemption
Date, interest will cease to accrue on Securities or portions thereof called for
redemption so long as the Company has deposited with the Paying Agent for the
Securities funds in satisfaction of the redemption price pursuant to the
Indenture and the Paying Agent is not prohibited from paying such funds to the
Holders pursuant to the terms of the Indenture.
8. Change of Control Offer.
Following the occurrence of a Change of Control (the date of such
occurrence being the "Change of Control Date"), the Company shall within 30 days
after the Change of Control Date, make an Offer to Purchase all Securities then
outstanding at a purchase price in cash equal to 101% of the aggregate principal
amount thereof, plus accrued and unpaid interest thereon, if any, to the
Purchase Date (subject to the right of Holders of record on the relevant
Interest Record Date to receive interest due on the relevant Interest Payment
Date).
9. Limitation on Disposition of Assets.
The Company is, subject to certain conditions and certain exceptions,
obligated to make an Offer to Purchase Securities at a purchase price equal to
100% of the principal amount thereof, plus accrued and unpaid interest thereon,
if any, to the Purchase Date (subject to the right of Holders of record on the
Interest Relevant Record Date to receive interest due on the relevant Interest
Payment Date) with the proceeds of certain asset dispositions.
10. Denominations; Transfer; Exchange.
The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay certain transfer
taxes or similar governmental charges payable in connection therewith as
permitted by the Indenture. The Registrar need not register the transfer of or
exchange any Securities or portions thereof selected for redemption, except the
unredeemed portion of any security being redeemed in part.
11. Persons Deemed Owners.
The registered Holder of a Security shall be treated as the owner of
it for all purposes.
12. Unclaimed Funds.
If funds for the payment of principal or interest remain unclaimed for
two years, the Trustee and the Paying Agent will repay the funds to the Company
at its written request. After that, all liability of the Trustee and such
Paying Agent with respect to such funds shall cease.
13. Legal Defeasance and Covenant Defeasance.
The Company and the Guarantors may be discharged from their
obligations under the Indenture, the Securities and the Guarantees, except for
certain provisions thereof, and may be discharged from obligations to comply
with certain covenants contained in the Indenture, the Securities and the
Guarantees, in each case upon satisfaction of certain conditions specified in
the Indenture.
B-5
<PAGE>
14. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture, the Securities and the
Guarantees may be amended or supplemented with the written consent of the
Holders of at least a majority in aggregate principal amount of the Securities
then outstanding, and any existing Default or Event of Default or compliance
with any provision may be waived with the consent of the Holders of a majority
in aggregate principal amount of the Securities then outstanding. Without notice
to or consent of any Holder, the parties thereto may amend or supplement the
Indenture, the Securities and the Guarantees to, among other things, cure any
ambiguity, defect or inconsistency, provide for uncertificated Securities in
addition to or in place of certificated Securities or comply with any
requirements of the SEC in connection with the qualification of the Indenture
under the TIA, or make any other change that does not materially adversely
affect the rights of any Holder of a Security.
15. Restrictive Covenants.
The Indenture contains certain covenants that, among other things,
limit the ability of the Company and the Restricted Subsidiaries to make
restricted payments, to incur indebtedness, to create liens, to sell assets, to
permit restrictions on dividends and other payments by Restricted Subsidiaries
to the Company, to consolidate, merge or sell all or substantially all of its
assets, to engage in transactions with affiliates or certain other related
persons. The limitations are subject to a number of important qualifications
and exceptions. The Company must report annually to the Trustee on compliance
with such limitations.
16. Defaults and Remedies.
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in aggregate principal amount of Securities then
outstanding may declare all the Securities to be due and payable immediately in
the manner and with the effect provided in the Indenture. Holders of Securities
may not enforce the Indenture, the Securities or the Guarantees except as
provided in the Indenture. The Trustee is not obligated to enforce the
Indenture, the Securities or the Guarantees unless it has received indemnity
satisfactory to it. The Indenture permits, subject to certain limitations
therein provided, Holders of a majority in aggregate principal amount of the
Securities then outstanding to direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Holders of Securities notice of certain
continuing Defaults or Events of Default if it determines that withholding
notice is in their interest.
17. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may otherwise deal
with the Company, its Subsidiaries or their respective Affiliates as if it were
not the Trustee.
18. No Recourse Against Others.
No, director, officer, employee or stockholder, as such, of the
Company or any of its Affiliates shall have any liability for any obligation of
the Company or any of its Affiliates under the Securities, the Guarantee of such
Guarantor or the Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder by accepting a
Security waives and releases all such liability. The waiver and release are
part of the consideration for the issuance of the Securities and the Guarantees.
19. Authentication.
This Security shall not be valid until the Trustee or authenticating
agent signs the certificate of authentication on this Security.
B-6
<PAGE>
20. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of a
Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
21. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Securities as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
22. Governing Law.
The laws of the State of New York shall govern the Indenture, this
Security and any Guarantee thereof without regard to principles of conflicts of
laws.
B-7
<PAGE>
[FORM OF SECURITY GUARANTEE]
SENIOR SUBORDINATED GUARANTEE
The Guarantor (as defined in the Indenture referred to in the Security
upon which this notation is endorsed) hereby unconditionally guarantees on a
senior subordinated basis (such Guarantee by the Guarantor being referred to
herein as the "Guarantee") the due and punctual payment of the principal of,
premium, if any, and interest on the Securities, whether at maturity, by
acceleration or otherwise, the due and punctual payment of interest on the
overdue principal, premium and interest on the Securities, and the due and
punctual performance of all other obligations of the Company to the Holders or
the Trustee, all in accordance with the terms set forth in Article Eleven of the
Indenture.
The obligations of the Guarantor to the Holders of Securities and to
the Trustee pursuant to the Guarantee and the Indenture are expressly set forth,
and are expressly subordinated and subject in right of payment to the prior
payment in full of all Guarantor Senior Indebtedness (as defined in the
Indenture) of such Guarantor, to the extent and in the manner provided in
Article Eleven and Article Twelve of the Indenture, and reference is hereby made
to such Indenture for the precise terms of the Guarantee therein made.
This Security Guarantee shall not be valid or obligatory for any
purpose until the certificate of authentication on the Securities upon which
this Security Guarantee is noted shall have been executed by the Trustee under
the Indenture by the manual signature of one of its authorized officers.
This Security Guarantee shall be governed by and construed in
accordance with the laws of the State of New York without regard to principles
of conflicts of law.
This Security Guarantee is subject to release upon the terms set forth
in the Indenture.
AMES TAPING TOOL SYSTEMS, INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
TAPETECH TOOL CO., INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
B-8
<PAGE>
ASSIGNMENT FORM
I or we assign and transfer this Security to
- --------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee or transferee)
- --------------------------------------------------------------------------------
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint
---------------------------------------------------------
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Dated: Signed:
------------------ --------------------------------------
(Signed exactly as name appears on
the other side of this Security)
Signature Guarantee:
-----------------------------------------------
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor
program reasonably acceptable to the Trustee)
B-9
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.05 or Section 4.14 of the Indenture, check the appropriate
box:
Section 4.05 [_]
Section 4.14 [_]
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.05 or Section 4.14 of the Indenture, state the
amount: $___________________
Dated: Signed:
------------------ ------------------------------------------
(Signed exactly as name appears on the
other side of this Security)
Signature Guarantee:
-----------------------------------------------
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor
program reasonably acceptable to the Trustee)
B-10
<PAGE>
EXHIBIT C
---------
FORM OF LEGEND FOR GLOBAL SECURITIES
Any Global Security authenticated and delivered hereunder shall bear a
legend (which would be in addition to any other legends required in the case of
a Restricted Security) in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A
NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS SECURITY IS NOT
EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE
DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS
SECURITY AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A
NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE
DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN
THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH
IN SECTION 2.16 OF THE INDENTURE.
C-1
<PAGE>
EXHIBIT D
---------
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF SECURITIES
Re: 10 3/4% Senior Subordinated Notes due 2008 (the "Securities") of Axia
Incorporated
This Certificate relates to $____________ principal amount of
Securities held in the form of *[____] a beneficial interest in a Global
Security or *[__] Physical Securities by_________________ (the "Transferor").
The Transferor:
*[__] has requested by written order that the Registrar deliver in exchange
for its beneficial interest in the Global Security held by the Depositary a
Physical Security or Physical Securities in definitive, registered form of
authorized denominations and an aggregate number equal to its beneficial
interest in such Global Security (or the portion thereof indicated above); or
*[__] has requested that the Registrar by written order to exchange or
register the transfer of a Physical Security or Physical Securities.
In connection with such request and in respect of each such Security,
the Transferor does hereby certify that the Transferor is familiar with the
Indenture relating to the above captioned Securities and the restrictions on
transfers thereof as provided in Section 2.16 of such Indenture, and that the
transfer of the Securities does not require registration under the Securities
Act of 1933, as amended (the "Act"), because:
*[__] Such Security is being acquired for the Transferor's own account,
without transfer (in satisfaction of Section 2.16 of the Indenture).
*[__] Such Security is being transferred to a "qualified institutional
buyer" (as defined in Rule 144A under the Act), in reliance on Rule 144A.
*[__] Such Security is being transferred to an institutional "accredited
investor" (within the meaning of subparagraph (a)(1), (2), (3) or (7) of Rule
501 under the Act) which delivers a certificate to the Trustee in the form of
Exhibit E to the Indenture.
*[__] Such Security is being transferred in reliance on Rule 144 under the
Act.
*[__] Such Security is being transferred in reliance on and in compliance
with an exemption from the registration requirements of the Act other than Rule
144A or Rule 144 under the Act to a person other than an institutional
"accredited investor." An Opinion of Counsel to the effect that such transfer
does not require registration under the Securities Act accompanies this
certification.
---------------------------------------
[INSERT NAME OF TRANSFEROR]
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Date:
------------------
* - Check applicable box.
D-1
<PAGE>
EXHIBIT E
---------
Form of Transferee Letter of Representation
-------------------------------------------
Axia Incorporated
c/o State Street Bank and Trust Company
Corporate Trust
Goodwin Square
225 Asylum Street, 23rd Floor
Hartford, Connecticut 06103
Ladies and Gentlemen:
This certificate is delivered to request a transfer of $_____________
principal amount of the 10 3/4% Senior Subordinated Notes due 2008 (the
"Notes") of Axia Incorporated (the "Company").
Upon transfer, the Notes would be registered in the name of the new
beneficial owner as follows:
Name:
___________________________________
Address:
--------------------------------
--------------------------------
Taxpayer ID Number:
_____________________
The undersigned represents and warrants to you that:
1. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933 (the "Securities
Act")) purchasing for our own account or for the account of such an
institutional "accredited investor" at least $250,000 principal amount of the
Notes, and we are acquiring the Notes not with a view to, or for offer or sale
in connection with, any distribution in violation of the Securities Act. We
have such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risk of our investment in the Notes and we
invest in or purchase securities similar to the Notes in the normal course of
our business. We and any accounts for which we are acting are each able to bear
the economic risk of our or its investment.
2. We understand that the Notes have not been registered under the
Securities Act and, unless so registered, may not be sold except as permitted in
the following sentence. We agree on our own behalf and on behalf of any
investor account for which we are purchasing Notes to offer, sell or otherwise
transfer such Notes prior to the date which is two years after the later of the
date of original issue and the last date on which the Company or any affiliate
of the Company was the owner of such Notes (or any predecessor thereto) (the
"Resale Restriction Termination Date") only (a) to the Company, (b) pursuant to
a registration statement which has been declared effective under the Securities
Act, (c) in a transaction complying with the requirements of Rule 144A under the
Securities Act, to a person we reasonably believe is a qualified institutional
buyer under Rule 144A (a "QIB") who purchases for its own account or for the
account of a QIB and to whom notice is given that the transfer is being made in
reliance on Rule 144A, (d) pursuant to offers and sales that occur outside the
United States within the meaning of Regulation S under the Securities Act, (e)
to an institutional "accredited investor" within the meaning of Rule 501(a)(1),
(2), (3) or (7) under the Securities Act that is purchasing for its own account
or for the account of such an institutional "accredited investor," in each case
in a minimum principal amount of Notes of $250,000 or (f) pursuant to any other
available exemption from the registration requirements of the Securities Act,
subject in each of the foregoing cases to any requirement of law that the
disposition of our property or the property of such investor account or accounts
be at all times within our or their control and in compliance with any
applicable state securities laws. The foregoing restrictions on resale will not
apply subsequent to the Resale Restriction Termination Date. If any resale or
other transfer of the Notes is proposed to be made pursuant to clause (e) above
prior to the Resale Restriction Termination Date, the transferor shall deliver a
letter from the transferee substantially in the form of this letter to the
Company and the Trustee, which shall provide, among
E-1
<PAGE>
other things, that the transferee is an institutional "accredited investor"
within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act
and that it is acquiring such Notes for investment purposes and not for
distribution in violation of the Securities Act. Each purchaser acknowledges
that the Company and the Trustee reserve the right prior to any offer, sale or
other transfer prior to the Resale Restriction Termination Date of the Notes
pursuant to clause (d), (e) or (f) above to require the delivery of an opinion
of counsel, certificates and/or other information satisfactory to the Company
and the Trustee.
--------------------------------------
[INSERT NAME OF TRANSFEREE]
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
Dated:__________________
<PAGE>
EXHIBIT 4.2
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
among
AXIA INCORPORATED,
and
CHASE SECURITIES INC. and NATIONSBANC
MONTGOMERY SECURITIES LLC.
Dated July 22, 1998
<PAGE>
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
This Exchange and Registration Rights Agreement (this "Agreement")
is dated as of July 22, 1998, by and among AXIA INCORPORATED, a Delaware
corporation (the "Company"), and CHASE SECURITIES INC. and NATIONSBANC
MONTGOMERY SECURITIES LLC. (the "Initial Purchasers").
This Agreement is entered into in connection with the Purchase
Agreement, dated as of July 17, 1998, by and among Axia Finance Corp. ("Finance
Co.") and the Initial Purchasers (the "Purchase Agreement") relating to the sale
by Finance Co. to the Initial Purchasers of $ 100,000,000 aggregate principal
amount of 10 3/4% Senior Subordinated Notes due 2008 (the "Notes"). Pursuant to
an Assumption Agreement dated the date hereof, the Company has assumed Finance
Co.'s obligations and liabilities under the Purchase Agreement. The Notes have
been guaranteed (the "Guarantees") on a senior subordinated basis by each of the
Guarantors (as defined herein). In order to induce the Initial Purchasers to
enter into the Purchase Agreement, the Company has agreed to provide the
registration rights set forth in this Agreement for the benefit of the Initial
Purchasers and its direct and indirect transferees. The execution and delivery
of this Agreement is a condition to the Initial Purchasers' obligation to
purchase the Notes under the Purchase Agreement.
The parties hereby agree as follows:
1. DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
Additional Interest: See Section4(a).
Advice: See the last paragraph of Section 5.
Applicable Period: See Section 2(b).
Closing Date: The Closing Date as defined in the Purchase Agreement.
Company: See the introductory paragraph to this Agreement.
Effectiveness Date: The 120th day after the Issue Date; provided,
however, that, with respect to the Initial Shelf Registration Statement, (i) if
the Filing Date in respect thereof is fewer than 75 days prior to the 120th day
after the Issue Date, then the Effectiveness Date in respect thereof shall be
the 75th day after such Filing Date and (ii) if the Filing Date is after the
filing of the Exchange Offer Registration Statement with the SEC, then the
Effectiveness Date in respect thereof shall be the 75th day after such Filing
Date.
Effectiveness Period: See Section 3.
Event Date: See Section 4.
Exchange Act: The Securities Exchange Act of 1934, as amended, and the
rules and regulations of the SEC promulgated thereunder.
Exchange Offer: See Section 2(a).
<PAGE>
-2-
Exchange Offer Registration Statement: See Section2(a).
Exchange Securities: See Section 2(a).
Expiration Date: See Section 2(a).
Filing Date: The 75th day after the Issue Date; provided, however,
that, with respect to the Initial Shelf Registration Statement, (i) if a Shelf
Registration Event shall have occurred fewer than 30 days prior to the 75th day
after the Closing Date, then the Filing Date in respect thereof shall be the
30th day after such Shelf Registration Event and (ii) if a Shelf Registration
Event shall have occurred after the filing of the Exchange Offer Registration
Statement with the SEC, then the Filing Date in respect thereof shall be the
30th day after such Shelf Registration Event.
Guarantees: See the second introductory paragraph to this Agreement.
Guarantors: means Ames Taping Tool Systems, Inc. and TapeTech Tool
Co., Inc..
Holder: Any record holder of Registrable Securities.
Indemnified Person: See the third paragraph of Section 7.
Indemnifying Person: See the third paragraph of Section 7.
Indenture: The Indenture, dated as of July 22 1998, among the Company,
Axia Finance Co, the Guarantors and State Street Bank and Trust Company, as
trustee, pursuant to which the Notes are being issued, as amended or
supplemented from time to time in accordance with the terms thereof.
Initial Purchasers: See the introductory paragraph to this Agreement.
Initial Shelf Registration Statement: See Section3(a).
Inspectors: See Section 5(o).
Issue Date: The date of original issuance of the Notes.
NASD: See Section 5(t).
Notes: See the second introductory paragraph to this Agreement.
Participant: See the first paragraph of Section 7.
Participating Broker-Dealer. See Section 2(b).
Person: An individual, corporation, limited or general partnership,
limited liability company, joint venture, association, joint stock company,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
Private Exchange: See Section 2(b).
<PAGE>
-3-
Private Exchange Securities: See Section 2(b).
Prospectus: The prospectus included in any Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by such
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.
Purchase Agreement: See the second introductory paragraph to this
Agreement.
Records: See Section 5(o).
Registrable Securities: The Notes upon original issuance thereof and
at all times subsequent thereto, each Exchange Security as to which Section
2(c)(v) hereof is applicable upon original issuance and at all times subsequent
thereto and, if issued, the Private Exchange Securities, until in the case of
any such Notes, Exchange Securities or Private Exchange Securities, as the case
may be, (i) a Registration Statement (other than, with respect to any Exchange
Security as to which Section 2(c)(v) hereof is applicable, the Exchange Offer
Registration Statement) covering such Notes, Exchange Securities or Private
Exchange Securities has been declared effective by the SEC and such Notes,
Exchange Securities or Private Exchange Securities, as the case may be, have
been disposed of in accordance with such effective Registration Statement, (ii)
such Notes, Exchange Securities or Private Exchange Securities, as the case may
be, are sold in compliance with Rule 144, (iii) such Note has been exchanged for
an Exchange Security pursuant to the Exchange Offer and Section 2(c)(v) is not
applicable thereto, or (iv) such Notes, Exchange Securities or Private Exchange
Securities, as the case may be, cease to be outstanding.
Registration Statement: Any registration statement of the Company,
including, but not limited to, the Exchange Offer Registration Statement, that
covers any of the Registrable Securities pursuant to the provisions of this
Agreement, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits, and
all material incorporated by reference or deemed to be incorporated by reference
in such registration statement.
Rule 144: Rule 144 promulgated under the Securities Act, as such Rule
may be amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by the SEC providing for offers and sales of
securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
Rule 144A: Rule 144A promulgated under the Securities Act, as such
Rule may be amended from time to time, or any similar rule (other than Rule 144)
or regulation hereafter adopted by the SEC.
Rule 415: Rule 415 promulgated under the Securities Act, as such Rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC.
SEC: The Securities and Exchange Commission.
<PAGE>
-4-
Securities Act: The Securities Act of 1933, as amended, and the rules
and regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2(c).
Shelf Registration Statement: See Section 3(b).
Shelf Registration Event: See Section 2(c).
Subsequent Shelf Registration Statement: See Section 3(b).
TIA: The Trust Indenture Act of 1939, as amended.
Trustee: The trustee under the Indenture and, if applicable, the
trustee under any indenture governing the Exchange Securities and Private
Exchange Securities (if any).
Underwritten registration or underwritten offering: A registration in
which securities of the Company are sold to an underwriter or through an agent
for reoffering to the public.
2. EXCHANGE OFFER
(a) The Company agrees to file and agrees to cause the Guarantors to
file with the SEC, on or before the Filing Date, an offer to exchange (the
"Exchange Offer") any and all of the Registrable Securities for a like aggregate
principal amount of senior subordinated debt securities of the Company which are
identical to the Notes and are guaranteed, jointly and severally, by each of the
Guarantors with terms identical to the Guarantees (the "Exchange Securities")
(and which are entitled to the benefits of a trust indenture that is
substantially identical to the Indenture (other than such changes as are
necessary to comply with any requirements of the SEC to effect or maintain the
qualification of such trust indenture under the TIA) and which has been
qualified under the TIA), except that the Exchange Securities shall have been
registered pursuant to an effective Registration Statement under the Securities
Act and shall contain no restrictive legend thereon. The Exchange Offer will be
registered under the Securities Act on the appropriate form (the "Exchange Offer
Registration Statement") and will comply with all applicable tender offer rules
and regulations under the Exchange Act. The Company agrees to use all reasonable
efforts (i) to cause the Exchange Offer Registration Statement to become
effective and to commence the Exchange Offer on or prior to the Effectiveness
Date, (ii) to keep the Exchange Offer open for 30 days (or longer if required by
applicable law) (the last day of such period, the "Expiration Date") and (iii)
to exchange Exchange Securities for all Notes validly tendered and not withdrawn
pursuant to the Exchange Offer on or prior to the fifth day following the
Expiration Date.
Each Holder who participates in the Exchange Offer will be deemed to
represent that any Exchange Securities received by it will be acquired in the
ordinary course of its business, that at the time of the consummation of the
Exchange Offer such Holder will have no arrangement with any Person to
participate in the distribution of the Exchange Securities in violation of the
provisions of the Securities Act and that such Holder is not an affiliate of the
Company within the meaning of the Securities Act.
Upon consummation of the Exchange Offer in accordance with this
Section 2, the provisions of this Agreement shall continue to apply, mutatis
mutandis, solely with respect to Registrable Securities that are Private
Exchange Securities, Exchange Securities to which Section 2(c)(v) is applicable
and Exchange Securities held by Participating Broker-Dealers, and the Company
shall have no further obligation to register Registrable
<PAGE>
-5-
Securities (other than Private Exchange Securities and other than Exchange
Securities as to which Section 2(c)(v) hereof applies) pursuant to Section 3 of
this Agreement. No securities other than the Exchange Securities shall be
included in the Exchange Offer Registration Statement.
(b) The Company shall include within the Prospectus contained in the
Exchange Offer Registration Statement a section entitled "Plan of Distribution,"
reasonably acceptable to the Initial Purchasers, which shall contain a summary
statement of the positions taken or policies made by the Staff of the SEC (and
publicly disseminated) with respect to the potential "underwriter" status of any
broker-dealer that is the beneficial owner (as defined in Rule l3d-3 under the
Exchange Act) of Exchange Securities received by such broker-dealer in the
Exchange Offer (a "Participating Broker-Dealer"). Such "Plan of Distribution"
section shall also allow the use of the prospectus by all Persons subject to the
prospectus delivery requirements of the Securities Act, including all
Participating Broker-Dealers, and include a statement describing the means by
which Participating Broker-Dealers may resell the Exchange Securities.
The Company shall use all reasonable efforts to keep the Exchange
Offer Registration Statement effective and to amend and supplement the
Prospectus contained therein in order to permit such Prospectus to be lawfully
delivered by all Persons subject to the prospectus delivery requirements of the
Securities Act for the lesser of 180 days following the first bona fide offering
of securities under such Registration Statement or such shorter time as such
Persons must comply with such requirements in order to resell the Exchange
Securities (the "Applicable Period").
If, prior to consummation of the Exchange Offer, the Initial
Purchasers hold any Notes acquired by them and having the status of an unsold
allotment in the initial distribution, the Company upon the request of the
Initial Purchasers shall, simultaneously with the delivery of the Exchange
Securities in the Exchange Offer, issue and deliver to the Initial Purchasers,
in exchange (the "Private Exchange") for the Notes held by the Initial
Purchasers, a like principal amount of debt securities of the Company that are
identical to the Exchange Securities and are guaranteed, jointly and severally,
by each of the Guarantors with terms identical to the Guarantees (the "Private
Exchange Securities") (and which are issued pursuant to the same indenture as
the Exchange Securities) (except for the placement of a restrictive legend on
such Private Exchange Securities). The Private Exchange Securities shall bear
the same CUSIP number as the Exchange Securities. Interest on the Exchange
Securities and Private Exchange Securities will accrue from the last interest
payment date on which interest was paid on the Notes surrendered in exchange
therefor or, if no interest has been paid on the Notes, from the Issue Date.
Any indenture under which the Exchange Securities or the Private
Exchange Securities will be issued shall provide that the holders of any of the
Exchange Securities and the Private Exchange Securities will vote and consent
together on all matters to which such holders are entitled to vote or consent as
one class and that none of the holders of the Exchange Securities and the
Private Exchange Securities will have the right to vote or consent as a separate
class on any matter.
(c) If, (i) because of any change in law or in currently prevailing
interpretations of the Staff of the SEC, the Company reasonably determines in
good faith, after consultation with counsel, that it is not permitted to effect
the Exchange Offer, (ii) the Exchange Offer is not commenced on or prior to the
Effectiveness Date, (iii) the Exchange Offer is, for any reason, not consummated
on or prior to the Expiration Date, (iv) any Holder of Private Exchange
Securities so requests, or (v) in the case of any Holder that participates in
the Exchange Offer, such Holder does not receive Exchange Securities on the date
of the exchange that may be sold without restriction under federal securities
laws (other than due solely to the status of such Holder or an affiliate of the
Company within the meaning of the Securities Act) (the occurrence of any such
event, a "Shelf Registra-
<PAGE>
-6-
tion Event"), then, in the case of each of clauses (i) through (v) of this
sentence, the Company shall promptly deliver to the Holders and the Trustee
notice thereof (the "Shelf Notice") and thereafter the Company shall file an
Initial Shelf Registration Statement pursuant to Section 3.
3. SHELF REGISTRATION
If a Shelf Registration Event has occurred (and whether or not an
Exchange Offer Registration Statement has been filed with the SEC or has become
effective or the Exchange Offer has been consummated), then:
(a) Initial Shelf Registration Statement. The Company shall promptly
prepare and file and shall cause the Guarantors to promptly prepare and
file with the SEC a Registration Statement for an offering to be made on a
continuous basis pursuant to Rule 415 covering all of the Registrable
Securities (the "Initial Shelf Registration Statement"). The Company shall
file with the SEC the Initial Shelf Registration Statement on or prior to
the Filing Date. The Initial Shelf Registration Statement shall be on
Form S-1 or another appropriate form, if available, permitting registration
of such Registrable Securities for resale by such holders in the manner
designated by them (including, without limitation, in one or more
underwritten offerings). The Company shall not permit any securities other
than the Registrable Securities to be included in the Initial Shelf
Registration Statement or any Subsequent Shelf Registration Statement (as
defined below). The Company shall use all reasonable efforts to cause the
Initial Shelf Registration Statement to be declared effective under the
Securities Act on or prior to the Effectiveness Date, and to keep the
Initial Shelf Registration Statement continuously effective under the
Securities Act until the date which is 24 months from the Issue Date, or
such shorter period ending when (i) all Registrable Securities covered by
the Initial Shelf Registration Statement have been sold in the manner set
forth and as contemplated in the Initial Shelf Registration Statement or
(ii) a Subsequent Shelf Registration Statement covering all of the
Registrable Securities has been declared effective under the Securities Act
(such 24 months or shorter period, the "Effectiveness Period"); provided,
however, that if a Shelf Registration Statement or Subsequent Shelf
Registration Statement ceased to be effective as a result of (i) the filing
of a post-effective amendment to such Shelf Registration Statement or
Subsequent Shelf Registration Statement or (ii) other material events, with
respect to the Company that would need to be described in such Shelf
Registration Statement, Subsequent Shelf Registration Statement or a
related prospectus (such period of time when the Shelf Registration
Statement or Subsequent Shelf Registration Statement ceases to be
effective, the "Non-Effectiveness Period") the Effectiveness Period shall
be increased by the Non-Effectiveness Period.
(b) Subsequent Shelf Registration Statements. If the Initial Shelf
Registration Statement or any Subsequent Shelf Registration Statement ceases
to be effective for any reason at any time during the Effectiveness Period
(other than because of the sale of all of the securities registered
thereunder), the Company shall use all reasonable efforts to obtain the
prompt withdrawal of any order suspending the effectiveness thereof, and in
any event the Company shall within 15 days of such cessation of
effectiveness amend the Shelf Registration Statement in a manner reasonably
expected to obtain the withdrawal of the order suspending the effectiveness
thereof, or file and cause the Guarantors to file an additional "shelf"
Registration Statement pursuant to Rule 415 covering all of the Registrable
Securities (a "Subsequent Shelf Registration Statement"). If a Subsequent
Shelf Registration Statement is filed, the Company shall use all reasonable
efforts to cause the Subsequent Shelf Registration Statement to be declared
effective as soon as reasonably practicable after such filing and to keep
such Registration Statement continuously effective until the end of the
Effectiveness Period. As used herein the term "Shelf
<PAGE>
-7-
Registration Statement" means the Initial Shelf Registration Statement and
any Subsequent Shelf Registration Statement.
(c) Supplements and Amendments. The Company shall promptly supplement
and amend the Shelf Registration Statement if required by the rules,
regulations or instructions applicable to the registration form used for
such Shelf Registration Statement, if required by the Securities Act, or if
reasonably requested by the Holders of a majority in aggregate principal
amount of the Registrable Securities covered by such Registration Statement
or by any underwriter of such Registrable Securities.
4. ADDITIONAL INTEREST
(a) The Company and the Initial Purchasers agree that the Holders of
Notes will suffer damages if the Company fails to fulfill its obligations under
Section 2 or Section 3 hereof and that it would not be feasible to ascertain the
extent of such damages with precision. Accordingly, the Company agrees to pay,
as liquidated damages, additional interest on the Notes ("Additional Interest")
under the circumstances and to the extent set forth below (each of which shall
be given independent effect and shall not be duplicative):
(i) if either the Exchange Offer Registration Statement or the Initial
Shelf Registration Statement has not been filed on or prior to the Filing
Date (unless, with respect to the Exchange Offer Registration Statement, a
Shelf Event described in clause (i) of Section 2(c) shall have occurred
prior to the Filing Date), Additional Interest shall accrue on the Notes
over and above the stated interest in an amount equal to $0.192 per week
(or any part thereof) per $ 1,000 principal amount of the Notes;
(ii) if either the Exchange Offer Registration Statement or the Initial
Shelf Registration Statement is not declared effective by the SEC on or
prior to the Effectiveness Date (unless, with respect to the Exchange Offer
Registration Statement, a Shelf Event described in clause (i) of Section
2(c) shall have occurred), Additional Interest shall accrue on the Notes
over and above the stated interest in an amount equal to $0.192 per week
(or any part thereof) per $ 1,000 principal amount of the Notes; and
(iii) if (A) the Company has not exchanged Exchange Securities for all
Notes validly tendered and not withdrawn in accordance with the terms of
the Exchange Offer on or prior to the fifth day after the Expiration Date,
or (B) the Exchange Offer Registration Statement ceases to be effective at
any time prior to the Expiration Date, or (C) if applicable, any Shelf
Registration Statement has been declared effective and such Shelf
Registration Statement ceases to be effective at any time during the
Effectiveness Period, then Additional Interest shall accrue on the Notes
over and above the stated interest in an amount equal to $0.192 per week
(or any part thereof) per $1,000 principal amount of the Notes for the
first 90 days commencing on (x) the sixth day after the Expiration Date, in
the case of (A) above, or (y) the day the Exchange Offer Registration
Statement ceases to be effective in the case of (B) above, or (z) the day
such Shelf Registration Statement ceases to be effective in the case of (C)
above;
provided, however, that (1) upon the filing of the Exchange Offer Registration
Statement or a Shelf Registration Statement as required hereunder (in the case
of clause (i) of this Section 4(a)), (2) upon the effectiveness of the Exchange
Offer Registration Statement or the Shelf Registration Statement as required
hereunder (in the case of clause (ii) of this Section 4(a)) or (3) upon the
exchange of Exchange Securities for all Notes validly tendered and not withdrawn
(in the case of clause (iii)(A) of this Section 4(a)), or upon the effectiveness
of the Exchange Offer Registration Statement which had ceased to remain
effective (in the case of clause (iii)(B) of this Section 4(a)), or upon the
effectiveness of the Shelf Registration Statement which had ceased to remain
effective (in the
<PAGE>
-8-
case of clause (iii)(C) of this Section 4(a)), or upon the effectiveness of a
Subsequent Shelf Registration Statement (in the case of clause (iii)(C) of this
Section 4(a)), Additional Interest on the Notes as a result of such clause (or
the relevant subclause thereof), as the case may be, shall cease to accrue (but
any accrued amount shall be payable).
(b) Notwithstanding section 4(a) above, Additional Interest shall not
be payable if effectiveness of a Shelf Registration Statement or Subsequent
Shelf Registration Statement ceased solely as a result of (i) the filing of a
post-effective amendment to such Shelf Registration Statement or Subsequent
Shelf Registration Statement to incorporate audited financial information with
respect to the Company required pursuant to rules or regulations promulgated by
the Commission where such post-effective amendment is not yet effective and
needs to be declared effective to permit Holders to use the related prospectus
or (ii) other material events, with respect to the Company that would need to be
described in such Shelf Registration Statement, Subsequent Shelf Registration
Statement or a related prospectus and the Company and the Guarantors are
proceeding promptly and in good faith to amend or supplement such Shelf
Registration Statement, Subsequent Shelf Registration Statement or a related
prospectus to describe such events; provided, that in any case if such a Shelf
Registration Statement or Subsequent Shelf Registration Statement is not
declared effective on the thirtieth day after effectiveness ceased, Additional
Interest shall be payable in accordance with paragraph 6(a) from the day
following such 30 day period until the date on which such Shelf Registration
Statement or Subsequent Shelf Registration Statement is declared effective.
(c) The Company shall notify the Trustee within one business day after
each and every date on which an event occurs in respect of which Additional
Interest is required to be paid (an "Event Date"). The Company shall pay the
Additional Interest due on the Registrable Securities by depositing with the
Trustee, in trust, for the benefit of the Holders thereof, on or before the
applicable semi-annual interest payment date, immediately available funds in
sums sufficient to pay the Additional Interest then due to Holders of
Registrable Securities. Each obligation to pay Additional Interest shall be
deemed to accrue immediately following the occurrence of the applicable Event
Date. Any accrued Additional Interest amount shall be due and payable on each
interest payment date immediately after the applicable Event Date to the record
Holder of Registrable Securities entitled to receive the interest payment to be
made on such date as set forth in the Indenture. The parties hereto agree that
the Additional Interest provided for in this Section 4 constitutes a reasonable
estimate of the damages that may be incurred by Holders of Registrable
Securities by reason of the failure of a Shelf Registration Statement or
Exchange Offer Registration Statement to be filed or declared effective, or a
Shelf Registration Statement or an Exchange Offer Registration Statement to
remain effective, as the case may be, in accordance with this Section 4.
(d) Each of the Guarantors, jointly and severally, guarantee the
payment of the Additional Interest to the same extent and in the same manner as
the guarantee provisions set forth in the Indenture, which provisions are
incorporated herein by reference mutatis mutandis.
5. REGISTRATION PROCEDURES
In connection with the registration of any Registrable Securities
pursuant to Sections 2 or 3 hereof, the Company shall use all reasonable efforts
to effect such registrations to permit the sale of such Registrable Securities
in accordance with the intended method or methods of disposition thereof, and
pursuant thereto the Company shall:
(a) prepare and file with the SEC on or before the Filing Date, a
Registration Statement or Registration Statements as prescribed by
Section 2 or 3, and to use all reasonable efforts to cause each
<PAGE>
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such Registration Statement to become effective and remain effective as provided
herein, provided that, if (1) such filing is pursuant to Section 3, or (2) a
Prospectus contained in an Exchange Offer Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, before filing any Registration Statement or Prospectus or any
amendments or supplements thereto, the Company shall furnish to and afford the
Holders of the Registrable Securities and each such Participating Broker-Dealer,
as the case may be, covered by such Registration Statement, their counsel and
the managing underwriters, if any, a reasonable opportunity to review copies of
all such documents (including copies of any documents to be incorporated by
reference therein and all exhibits thereto) proposed to be filed (at least five
days prior to such filing); the Company shall not file any Registration
Statement or Prospectus or any amendments or supplements thereto in respect of
which the Holders must be afforded a reasonable opportunity to review prior to
the filing of such document, if the Holders of a majority in aggregate principal
amount of the Registrable Securities covered by such Registration Statement, or
each such Participating Broker-Dealer, as the case may be, their counsel, or the
managing underwriters, if any, shall reasonably object;
(b) prepare and file with the SEC such amendments and post-effective
amendments to each Shelf Registration Statement or Exchange Offer Registration
Statement, as the case may be, as may be necessary to keep such Registration
Statement effective, except during the time between the filing of a post-
effective amendment and its effectiveness for the Effectiveness Period, in the
case of a Shelf Registration Statement, or until the later of the Expiration
Date and the Applicable Period, in the case of the Exchange Offer Registration
Statement; cause the related Prospectus to be supplemented by any required
Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424
(or any similar provisions then in force) under the Securities Act; and comply
with the provisions of the Securities Act, the Exchange Act and the rules and
regulations of the SEC promulgated thereunder applicable to it with respect to
the disposition of all securities covered by such Registration Statement as so
amended or in such Prospectus as so supplemented and with respect to the
subsequent resale of any securities being sold by a Participating Broker-Dealer
covered by any such Prospectus;
(c) if (1) a Shelf Registration Statement is filed pursuant to Section 3,
or (2) a Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act by
any Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, notify the selling Holders of Registrable Securities, or each
such Participating Broker-Dealer, as the case may be, their counsel and the
managing underwriters, if any, promptly (but in any event within five business
days), and confirm such notice in writing, (i) when a Prospectus or any
prospectus supplement or post-effective amendment has been filed, and, with
respect to a Registration Statement or any post-effective amendment, when the
same has become effective (including in such notice a written statement that any
Holder may, upon request, obtain, without charge, one conformed copy of such
Registration Statement or post-effective amendment including financial
statements and schedules, documents incorporated or deemed to be incorporated by
reference and exhibits); (ii) of the issuance by the SEC of any stop order
suspending the effectiveness of a Registration Statement or of any order
preventing or suspending the use of any preliminary prospectus or the initiation
of any proceedings for that purpose; (iii) if at any time when a prospectus is
required by the Securities Act to be delivered in connection with sales of the
Registrable Securities the representations and warranties of the Company
contained in any agreement (including any underwriting agreement) contemplated
by Section 5(n) below cease to be true and correct; (iv) of the receipt by the
Company of any notification with respect to the suspension of the qualification
or exemption from qualification of a Registration Statement or any of the
Registrable Securities or the Exchange Securities to be sold by any
<PAGE>
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Participating Broker-Dealer for offer or sale in any jurisdiction, or the
initiation or threatening of any proceeding for such purpose; (v) of the
happening of any event or any information becoming known that requires the
making of any changes in such Registration Statement, Prospectus or documents so
that, in the case of the Registration Statement, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
that in the case of the Prospectus, it 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; provided, however, that such
notification need not specifically identify such event if notification of the
occurrence thereof would, in the Company's reasonable judgment, involve the
disclosure of confidential non-public information; and (vi) of the Company's
reasonable determination that a post-effective amendment to the Registration
Statement would be appropriate;
(d) if (1) a Shelf Registration Statement is filed pursuant to Section 3,
or (2) a Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act by
any Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, use all reasonable efforts to prevent the issuance of any
order suspending the effectiveness of a Registration Statement or of any order
preventing or suspending the use of a Prospectus or suspending the qualification
(or exemption from qualification) of any of the Registrable Securities or the
Exchange Securities to be sold by any Participating Broker-Dealer for sale in
any jurisdiction, and, if any such order is issued, to use all reasonable
efforts to obtain the withdrawal of any such order at the earliest possible
moment;
(e) if a Shelf Registration Statement is filed pursuant to Section 3 and if
requested by the managing underwriters, if any, or the Holders of a majority in
aggregate principal amount of the Registrable Securities being sold in
connection with an underwritten offering or any Participating Broker-Dealer, (i)
promptly incorporate in a prospectus supplement or post-effective amendment such
information about the Company, the underwriters, if any, and the holders as the
managing underwriters, if any, such Holders, any Participating Broker-Dealer or
their respective counsel reasonably request to be included therein; (ii) make
all required filings of such prospectus supplement or such post-effective
amendment as soon as reasonably practicable after the Company has received
notification of the matters to be incorporated in such prospectus supplement or
post-effective amendment and (iii) supplement or make amendments to such
Registration Statement;
(f) if (1) a Shelf Registration Statement is filed pursuant to Section 3,
or (2) a Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act by
any Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, furnish to each selling Holder of Registrable Securities and
to each such Participating Broker-Dealer who so requests and upon request to
their respective counsel and each managing underwriter, if any, without charge,
one conformed copy of the Registration Statement or Registration Statements and
each post-effective amendment thereto, including financial statements and
schedules, and, if requested, all documents incorporated or deemed to be
incorporated therein by reference and all exhibits;
(g) if (1) a Shelf Registration Statement is filed pursuant to Section 3,
or (2) a Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act by
any Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, deliver to each selling Holder of Registrable Securities, or
each such
<PAGE>
-11-
Participating Broker-Dealer, as the case may be, their counsel, and the
underwriters, if any, without charge, as many copies of the Prospectus or
Prospectuses (including each form of preliminary prospectus) and each amendment
or supplement thereto and any documents incorporated by reference therein as
such Persons may reasonably request; and, subject to the last paragraph of this
Section 5, the Company hereby consents to the use of such Prospectus and each
amendment or supplement thereto by each of the selling Holders of Registrable
Securities or each such Participating Broker-Dealer, as the case may be, and the
underwriters or agents, if any, and dealers (if any), in connection with the
offering and sale of the Registrable Securities covered by or the sale by
Participating Broker-Dealers of the Exchange Securities pursuant to such
Prospectus and any amendment or supplement thereto;
(h) prior to any public offering of Registrable Securities or any delivery
of a Prospectus contained in the Exchange Offer Registration Statement by any
Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, use all reasonable efforts to register or qualify, and to
cooperate with the selling Holders of Registrable Securities or each such
Participating Broker-Dealer, as the case may be, the underwriters, if any, and
their respective counsel in connection with the registration or qualification
(or exemption from such registration or qualification) of such Registrable
Securities or Exchange Securities, as the case may be, for offer and sale under
the securities or Blue Sky laws of such jurisdictions within the United States
as any selling Holder, Participating Broker-Dealer, or the managing underwriters
reasonably request in writing, provided, however, that where Exchange Securities
held by Participating Broker-Dealers or Registrable Securities are offered other
than through an underwritten offering, the Company shall cause its counsel to
(i) perform Blue Sky investigations and file registrations and qualifications
required to be filed pursuant to this Section 5(h); (ii) use all reasonable
efforts to keep each such registration or qualification (or exemption therefrom)
effective during the period such Registration Statement is required to be kept
effective hereunder; and (iii) do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdictions of the Exchange
Securities held by Participating Broker-Dealers or the Registrable Securities
covered by the applicable Registration Statement, provided, further, however,
that the Company shall not in any case be required to (A) qualify generally to
do business in any jurisdiction where it is not then so qualified, (B) take any
action that would subject it to general service of process in any such
jurisdiction where it is not then so subject, (C) subject itself to taxation in
excess of a nominal dollar amount in any such jurisdiction, (D) qualify for
sales in all 50 states or (E) qualify as a broker-dealer;
(i) if a Shelf Registration Statement is filed pursuant to Section 3,
cooperate with the selling Holders of Registrable Securities and the managing
underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold, which certificates
shall not bear any restrictive legends and shall be in a form eligible for
deposit with The Depository Trust Company; and enable such Registrable
Securities to be in such denominations and registered in such names as the
managing underwriter or underwriters, if any, or Holders may reasonably request;
(j) if (1) a Shelf Registration Statement is filed pursuant to Section 3,
or (2) a Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act by
any Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, upon the occurrence of any event contemplated by paragraph
5(c)(v) or 5(c)(vi) above, as promptly as practicable prepare and (subject to
Section 5(a) above) file with the SEC, solely at the expense of the Company, a
supplement or post-effective amendment to the Registration Statement or a
supplement to the related Prospectus or any document incorporated or deemed to
be incorporated therein by reference, or file any other required document so
that, as thereafter delivered to the purchasers of the Registrable Securities
being sold thereunder or to the purchasers of the Exchange
<PAGE>
-12-
Securities to whom such Prospectus will be delivered by a Participating Broker-
Dealer, any such Prospectus will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading; provided, however, that the Company shall not be
required to amend or supplement a Registration Statement, any related Prospectus
or any document incorporated therein by reference, in the event that, and for a
period not to exceed an aggregate of 45 days in any calendar year if, (i) an
event occurs and is continuing as a result of which a Shelf Registration
Statement would, in the Company's good faith judgment, contain an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, and (ii) (a) the Company determines in its good
faith judgment that the disclosure of such event at such time would have a
material adverse effect on the business, operations or prospects of the Company
or (b) the disclosure otherwise relates to a pending material business
transaction that has not been publicly disclosed;
(k) prior to the effective date of the first Registration Statement
relating to the Registrable Securities, (i) provide the Trustee with printed
certificates for the Registrable Securities in a form eligible for deposit with
The Depository Trust Company; and (ii) provide a CUSIP number for the
Registrable Securities;
(1) in connection with an underwritten offering of Registrable Securities
pursuant to a Shelf Registration Statement, enter into an underwriting agreement
as is customary in underwritten offerings and take all such other actions as are
reasonably requested by the managing underwriters in order to expedite or
facilitate the registration or the disposition of such Registrable Securities,
and in such connection, (i) make such representations and warranties to and
covenants with, the underwriters, with respect to the business of the Company
and its subsidiaries and the Registration Statement, Prospectus and documents,
if any, incorporated or deemed to be incorporated by reference therein, in each
case, as are customarily made by issuers to underwriters in underwritten
offerings, and confirm the same if and when reasonably requested; (ii) obtain
the written opinions of counsel to the Company and updates thereof in form and
substance reasonably satisfactory to the managing underwriters, addressed to the
underwriters covering the matters customarily covered in opinions requested in
underwritten offerings and substantially in the form of the opinion delivered in
connection with the sale of the Securities to the Initial Purchasers pursuant to
the Purchase Agreement; (iii) use all reasonable efforts to obtain "cold
comfort" letters and updates thereof in form and substance reasonably
satisfactory to the managing underwriters from the independent certified public
accountants of the Company (and, if necessary, any other independent certified
public accountants of any subsidiary of the Company or of any business acquired
by the Company or any of its subsidiaries for which financial statements and
financial data are, or are required to be, included in the Registration
Statement), addressed to each of the underwriters, such letters to be in
customary form and substantially in the form of the letters delivered to the
Initial Purchasers in connection with the sale of the Securities pursuant to the
Purchase Agreement; and (iv) if an underwriting agreement is entered into, the
same shall contain indemnification provisions and procedures comparable to those
set forth in Section 7 hereof with respect to all parties to be indemnified
pursuant to said Section, all of which shall be done at each closing under such
underwriting agreement, or as and to the extent required thereunder;
(m) if (1) a Shelf Registration Statement is filed pursuant to Section 3,
or (2) a Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act by
any Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, subject to the prior receipt by the Company of undertakings
to use all
<PAGE>
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reasonable efforts to preserve the confidentiality of any information disclosed
by the Company pursuant hereto in form and substance reasonably satisfactory to
the Company, make available for inspection by one representative of the selling
Holders of such Registrable Securities being sold, or each such Participating
Broker-Dealer, as the case may be, any underwriter participating in any such
disposition of Registrable Securities, if any, and any attorney, accountant or
other agent retained by any such selling Holder or each such Participating
Broker-Dealer, as the case may be, or underwriter (collectively, the
"Inspectors"), at the offices where normally kept, during reasonable business
hours, all relevant financial and other records, pertinent corporate documents
and properties of the Company and its subsidiaries (collectively, the "Records")
to the extent necessary to enable them to exercise any applicable due diligence
responsibilities, and cause the officers, directors and employees of the Company
and its subsidiaries to supply all information in each case requested by any
such Inspector in connection with such Registration Statement; provided,
however, that records which the Company determines, in good faith, to be
confidential and any Records which the Company notifies the Inspectors are
confidential shall not be disclosed by the Inspectors unless (i) the disclosure
of such Records is necessary to avoid or correct a misstatement or omission in
such Registration Statement; (ii) the release of such Records is ordered
pursuant to a subpoena or other order from a court of competent jurisdiction;
(iii) the information in such Records has been made generally available to the
public; or (iv) release thereof is necessary or advisable in connection with any
action, suit or proceeding involving any Holder or other Inspector; provided,
further, however, that prior notice shall be provided as soon as practicable to
the Company of the potential disclosure of any information by such Inspector
pursuant to clauses (i), (ii), (iii) or (iv) of this sentence to permit the
Company to obtain a protective order (or waive the provisions of this paragraph
(m)) and that such Inspector shall take such actions as are reasonably
necessary to protect the confidentiality of such information (if practicable);
each selling Holder of such Registrable Securities and each such Participating
Broker-Dealer will be required to agree that information obtained by it as a
result of such inspections shall be deemed confidential and shall not be used by
it as the basis for any market transactions in the securities of the Company
unless and until such information is generally available to the public; each
selling Holder of such Registrable Securities and each such Participating
Broker-Dealer will be required to further agree that it will, upon learning that
disclosure of such Records is sought in a court of competent jurisdiction, give
notice to the Company and allow the Company to undertake appropriate action to
prevent disclosure of the Records deemed confidential at the Company's sole
expense;
(n) provide for an indenture trustee for the Registrable Securities or the
Exchange Securities, as the case may be, and cause the Indenture or the trust
indenture provided for in Section 2(a), as the case may be, to be qualified
under the TIA not later than the effective date of the Exchange Offer or the
first Registration Statement relating to the Registrable Securities; and in
connection therewith, cooperate with the trustee under any such indenture and
the holders of the Registrable Securities to effect such changes to such
indenture as may be required for such indenture to be so qualified in accordance
with the terms of the TIA; and execute, and use all reasonable efforts to cause
such trustee to execute, all documents as may be required to effect such
changes, and all other forms and documents required to be filed with the SEC to
enable such indenture to be so qualified in a timely manner;
(o) comply with all applicable rules and regulations of the SEC to the
extent and so long as they are applicable to the Exchange Offer Registration
Statement or the Shelf Registration Statement and make generally available to
their securityholders earning statements satisfying the provisions of Section
11(a) of the Securities Act and Rule 158 thereunder (or any similar rule
promulgated under the Securities Act) no later than 45 days after the end of any
12-month period (or 90 days after the end of any 12-month period if such period
is a fiscal year) (i) commencing at the end of any fiscal quarter in
<PAGE>
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which Registrable Securities are sold to underwriters in a firm commitment
or best efforts underwritten offering; and (ii) if not sold to underwriters
in such an offering, commencing on the first day of the first fiscal
quarter of the Company after the effective date of a Registration
Statement, which statements shall cover said 12-month periods;
(p) upon consummation of an Exchange Offer or a Private Exchange, upon
the request of any Holder, obtain an opinion of counsel to the Company in
customary form, relating to the Exchange Securities or the Private Exchange
Securities, as the case may be, addressed to the Trustee for the benefit of
all Holders of Registrable Securities participating in the Exchange Offer
or the Private Exchange, as the case may be, and which includes an opinion
that (i) the Company has duly authorized, executed and delivered the
Exchange Securities and Private Exchange Securities, the Guarantees to be
endorsed thereon and the related indenture; and (ii) each of the Exchange
Securities or the Private Exchange Securities, as the case may be, the
Guarantees endorsed thereon and the related indenture and guarantees
thereunder constitute legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms
(with customary exceptions);
(q) if an Exchange Offer or a Private Exchange is to be consummated,
upon delivery of the Registrable Securities by Holders to the Company (or
to such other Person as directed by the Company) in exchange for the
Exchange Securities or the Private Exchange Securities, as the case may be,
mark, or caused to be marked, on such Registrable Securities that such
Registrable Securities are being cancelled in exchange for the Exchange
Securities or the Private Exchange Securities, as the case may be; in no
event shall such Registrable Securities be marked as paid or otherwise
satisfied; and
(r) cooperate with each seller of Registrable Securities covered by
any Registration Statement and each underwriter, if any, participating in
the disposition of such Registrable Securities and their respective counsel
in connection with any filings required to be made with the National
Association of Securities Dealers, Inc. (the "NASD").
The Company may require each seller of Registrable Securities or
Participating Broker-Dealer as to which any registration is being effected to
furnish to the Company such information regarding such seller or Participating
Broker-Dealer and the distribution of such Registrable Securities or Exchange
Securities to be sold by such Participating Broker-Dealer, as the case may be,
as the Company may, from time to time, reasonably request. The Company may
exclude from such registration the Registrable Securities or Exchange Securities
of any selling Holder or Participating Broker-Dealer, as the case may be, who
unreasonably fails to furnish such information within a reasonable time after
receiving such request.
Each Holder of Registrable Securities and each Participating Broker-
Dealer agrees by acquisition of such Registrable Securities or Exchange
Securities to be sold by such Participating Broker-Dealer, as the case may be,
that, upon receipt of any notice from the Company of the happening of any event
of the kind described in Section 5(c)(ii), 5(c)(iv), 5(c)(v) or 5(c)(vi), such
Holder will forthwith discontinue disposition of such Registrable Securities
covered by such Registration Statement or Prospectus or Exchange Securities to
be sold by such Participating Broker-Dealer, as the case may be, until such
holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 5(j), or until it is advised in writing (the "Advice")
by the Company that the use of the applicable Prospectus may be resumed, and has
received copies of any amendments or supplements thereto. In the event that the
Company shall give any such notice, each of the Effectiveness Period and the
Applicable Period shall be extended by the number of days during such periods
from and including the date of the giving of such notice to and including the
date when each seller of Registrable Securities covered by such Registration
Statement or Exchange Securities to be sold by such Participating Broker-
<PAGE>
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Dealer, as the case may be, shall have received (x) the copies of the
supplemented or amended Prospectus contemplated by Section 5(j) hereof or (y)
the Advice.
6. REGISTRATION EXPENSES
(a) All fees and expenses incident to the performance of or compliance
with this Agreement by the Company shall be borne by the Company whether or not
the Exchange Offer Registration Statement or a Shelf Registration Statement is
filed or becomes effective, including, without limitation, (i) all registration
and filing fees (including, without limitation, (A) fees with respect to filings
required to be made with the NASD in connection with an underwritten offering
and (B) fees and expenses of compliance with state securities or Blue Sky laws
(including, without limitation, reasonable fees and disbursements of counsel) in
such jurisdictions (x) where the holders of Registrable Securities are located,
in the case of the Exchange Securities, or (y) as provided in Section 5(h), in
the case of Registrable Securities to be sold in a public offering or Exchange
Securities to be sold by a Participating Broker-Dealer during the Applicable
Period)); (ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities or Exchange Securities in a
form eligible for deposit with The Depository Trust Company and of printing
prospectuses if the printing of prospectuses is requested by the managing
underwriters, if any, or, in respect of Registrable Securities or Exchange
Securities to be sold by any Participating Broker-Dealer during the Applicable
Period; (iii) messenger, telephone and delivery expenses incurred by the
Company; (iv) fees and disbursements of counsel for the Company; (v) fees and
disbursements of all independent certified public accountants referred to in
Section 5(l)(iii) (including, without limitation, the expenses of any special
audit and "cold comfort" letters required by or incident to such performance);
(vi) rating agency fees; (vii) Securities Act liability insurance, if the
Company desires such insurance; (ix) fees and expenses of all other Persons
retained by the Company; (x) internal expenses of the Company (including,
without limitation, all salaries and expenses of officers and employees of the
Company performing legal or accounting duties); (xi) the expense of any annual
audit of the Company; (xii) the fees and expenses incurred by the Company in
connection with the listing of the Registrable Securities on any securities
exchange, if the Company decides to so list the Registrable Securities; and
(xiii) the expenses relating to printing, word processing and distributing all
Registration Statements.
7. INDEMNIFICATION
The Company agrees to indemnify and hold harmless each Holder of
Registrable Securities and each Participating Broker-Dealer selling Exchange
Securities during the Applicable Period, the officers and directors of each such
Person, and each Person, if any, who controls any such Person within the meaning
of either Section 15 of the Securities Act or Section 20 of the Exchange Act
(each, a "Participant"), from and against any and all losses, claims, damages,
liabilities or any action in respect thereof (including, without limitation, the
reasonable legal fees and other expenses actually incurred in connection with
any suit, action or proceeding or any claim asserted) to which such Participant
may become subject, whether commenced or threatened, under the Securities Act,
the Exchange Act, any other Federal or state statutory law or regulation, at
common law or otherwise, insofar as such loss, claim, damage, liability or
action arises out of, or is based upon, any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement (or any
amendment thereto) or Prospectus (as amended or supplemented if the Company
shall have furnished any amendments or supplements thereto) or any preliminary
prospectus, or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, except insofar as such losses, claims, damages or liabilities are
caused by any untrue statement or omission or alleged untrue statement or
omission made in reliance upon and in conformity with information relating to
such Holder of Registrable Securities or Participating Broker-Dealer, as the
case may be, furnished to the Company in writing by such Holder of Registrable
Securities
<PAGE>
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or Participating Broker-Dealer, as the case may be, expressly for use therein;
provided, however, that the foregoing indemnity with respect to any preliminary
prospectus shall not inure to the benefit of any Holder of Registrable
Securities or Participating Broker-Dealer, as the case may be (or to the benefit
of any officer or director of, or of any Person controlling, such Holder of
Registrable Securities or Participating Broker-Dealer) from whom the Person
asserting any such losses, claims, damages or liabilities purchased Registrable
Securities or Exchange Securities, as the case may be, to the extent that such
untrue statement or omission or alleged untrue statement or omission made in
such preliminary prospectus is eliminated or remedied in the related Prospectus
(as amended or supplemented if the Company shall have furnished any amendments
or supplements thereto) and, to the extent required by applicable law, a copy of
the related Prospectus (as so amended or supplemented) shall not have been
furnished to such Person at or prior to the sale of such Registrable Securities
or Exchange Securities, as the case may be, to such Person, unless such failure
to furnish was a result of non-compliance by the Company with Section 5(g).
Each Holder of Registrable Securities and each Participating Broker-
Dealer selling Exchange Securities during the Applicable Period will be required
to agree, severally and not jointly, to indemnify and hold harmless the Company,
its directors, its officers who sign the Registration Statement and each Person
who controls the Company within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act from and against any and all losses, claims,
damages, liabilities or any action in respect thereof (including, without
limitation, the reasonable legal fees and other expenses actually incurred in
connection with any suit, action or proceeding or any claim asserted) to which
such Person may become subject, whether commenced or threatened, under the
Securities Act, the Exchange Act, and other Federal or state statutory law or
regulation, at common law or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement (or any amendment thereto) or Prospectus (as amended or supplemented
if the Company shall have furnished any amendments or supplements thereto) or
any preliminary prospectus, or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, but only with reference to information relating to such
Holder of Registrable Securities or Participating Broker-Dealer, as the case may
be, furnished to the Company in writing by such Holder of Registrable Securities
or Participating Broker-Dealer, as the case may be, expressly for use in any
Registration Statement or Prospectus, any amendment or supplement thereto, or
any preliminary prospectus. The liability of any such Holder of Registrable
Securities or Participating Broker-Dealer, as the case may be, under this
paragraph shall in no event exceed the proceeds received by such Holder of
Registrable Securities or Participating Broker-Dealer, as the case may be, from
sales of Registrable Securities or Exchange Securities, as the case may be,
giving rise to such obligations.
If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any Person in respect of which indemnity may be sought pursuant to either of the
two preceding paragraphs, such Person (the "Indemnified Person") shall promptly
notify the Person against whom such indemnity may be sought (the "Indemnifying
Person") in writing, and the Indemnifying Person, upon request of the
Indemnified Person, shall retain counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Person may designate in such proceeding and shall pay the
reasonable fees and expenses incurred by such counsel related to such
proceeding; provided, however, that the failure to so notify the Indemnifying
Person shall not relieve it of any obligation or liability which it may have
hereunder or otherwise (unless and only to the extent that the Indemnifying
Person was otherwise unaware that such suit, action, proceeding, claim, or
demand shall have been brought or asserted and such failure actually materially
prejudices the Indemnifying Person (through the forfeiture of substantive rights
or defenses)). In any such proceeding, any Indemnified Person shall have the
right to retain its own counsel, but, other than in circumstances involving a
conflict among Indemnified Persons, the fees and expenses of
<PAGE>
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such counsel shall be at the expense of such Indemnified Person unless (i) the
Indemnifying Person and the Indemnified Person shall have agreed to the
contrary; (ii) the Indemnifying Person has failed within a reasonable time to
retain counsel reasonably satisfactory to the Indemnified Person; or (iii) the
named parties in any such proceeding (including any impleaded parties) include
both the Indemnifying Person and the Indemnified Person and representation of
both parties by the same counsel would be inappropriate due to an actual or
potential conflict of interest. It is understood that, other than in
circumstances involving a conflict among Indemnified Persons, the Indemnifying
Person shall not, in connection with any proceeding or related proceeding in the
same jurisdiction, be liable for the fees and expenses of more than one separate
firm (in addition to any local counsel) for all Indemnified Persons, and that
all such fees and expenses shall be reimbursed as they are incurred. Any such
separate firm for the Participants shall be designated in writing by the Holders
of Registrable Securities or Participating Broker-Dealers selling Exchange
Securities during the Applicable Period, as the case may be, who sold a majority
in interest of Registrable Securities or Exchange Securities, as the case may
be, sold by all such Holders of Registrable Securities or Participating Broker-
Dealers, as the case may be. Any such separate firm for the Company, its
directors, its officers and such control Persons of the Company shall be
designated in writing by the Company. The Indemnifying Person shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the Indemnifying Person agrees to indemnify any Indemnified
Person from and against any loss or liability by reason of such settlement or
judgment. Notwithstanding the foregoing sentence, if at any time an Indemnified
Person shall have requested an Indemnifying Person to reimburse the Indemnified
Person for reasonable fees and expenses incurred by counsel as contemplated by
the third sentence of this paragraph, the Indemnifying Person agrees that it
shall be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 30 days after
receipt by such Indemnifying Person of the aforesaid request and (ii) such
Indemnifying Person shall not have reimbursed the Indemnified Person in
accordance with such request prior to the date of such settlement; provided,
however, that the Indemnifying Person shall not be liable for any settlement
effected without its consent pursuant to this sentence if the Indemnifying Party
is contesting such request for reimbursement. No Indemnifying Person shall,
without the prior written consent of the Indemnified Person, (which consent
shall not be unreasonably withheld) effect any settlement of any pending or
threatened proceeding in respect of which any Indemnified Person is or could
have been a party, and indemnity could have been sought hereunder by such
indemnified party and indemnity could have been sought hereunder by such
indemnified party unless such settlement includes an unconditional written
release of such Indemnified Person in form and substance satisfactory to the
Indemnified Persons from all liability on claims that are the subject matter of
such proceeding.
If the indemnification provided for in the first and second paragraphs
of this Section 7 is for any reason unavailable to, or insufficient to hold
harmless, an Indemnified Person in respect of any losses, claims, damages or
liabilities referred to therein, then each Indemnifying Person under such
paragraphs, in lieu of indemnifying such Indemnified Person thereunder and in
order to provide for just and equitable contribution, shall contribute to the
amount paid or payable by such Indemnified Person as a result of such losses,
claims, damages or liabilities in such proportion as is appropriate to reflect
(i) the relative benefits received by the Indemnifying Person or Persons on the
one hand and the Indemnified Person or Persons on the other from the initial
offering of the Notes or (ii) if the allocation provided by the foregoing clause
(i) is not permitted by applicable law or if the indemnified party failed to
give notice as required in the next succeeding previous paragraph, not only such
relative benefits but also the relative fault of the Indemnifying Person or
Persons on the one hand and the Indemnified Person or Persons on the other in
connection with the statements or omissions or alleged statements or omissions
that resulted in such losses, claims, damages or liabilities (or actions in
respect thereof) as well as any other relevant equitable considerations. The
relative fault of the parties shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company, on the one
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hand, or such Holder of Registrable Securities or Participating Broker-Dealer,
as the case may be, on the other, the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission, and any other equitable considerations appropriate in the
circumstances.
The parties shall agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata allocation
(even if the Participants were treated as one entity for such purpose) or by any
other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an Indemnified Person as a result of the losses, claims,
damages and liabilities referred to in the immediately preceding paragraph
shall be deemed to include, subject to the limitations set forth above, any
reasonable legal or other expenses actually incurred by such Indemnified Person
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, in no event shall a Holder of
Registrable Securities or Participating Broker-Dealer be required to contribute
any amount in excess of the amount by which proceeds received by such Holder of
Registrable Securities or Participating Broker-Dealer, as the case may be, from
sales of Registrable Securities or Exchange Securities, as the case may be,
exceeds the amount of any damages that such Holder of Registrable Securities or
Participating Broker-Dealer, as the case may be, 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 Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section 7
will be in addition to any liability which the Indemnifying Persons may
otherwise have to the Indemnified Persons referred to above.
8. RULE 144 AND RULE 144A
The Company covenants that it will file the reports required to be
filed by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the SEC thereunder in a timely manner and, if at any time
the Company is not required to file such reports, it will, upon the request of
any Holder of Registrable Securities, provide other information so long as
necessary to permit sales pursuant to Rule 144 and Rule 144A under the
Securities Act. The Company further covenants that it will take such further
reasonable action as any Holder of Registrable Securities may reasonably
request, to the extent required from time to time to enable such Holder to sell
Registrable Securities without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144 and Rule 144A under the
Securities Act.
9. UNDERWRITTEN REGISTRATIONS
If any of the Registrable Securities covered by any Shelf Registration
Statement are to be sold in an underwritten offering, the investment banker or
investment bankers and manager or managers that will manage the offering will be
selected by the Holders of a majority in aggregate principal amount of such
Registrable Securities included in such offering and reasonably acceptable to
the Company.
No Holder of Registrable Securities may participate in any
underwritten registration hereunder unless such Holder (a) agrees to sell such
Holder's Registrable Securities on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve such
arrangements (however the terms applicable to each Holder shall be identical in
all respects) and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements applicable to all Holders.
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10. MISCELLANEOUS
(a) Remedies. In the event of a breach by the Company of any of its
obligations under this Agreement, each Holder of Registrable Securities, in
addition to being entitled to exercise all rights provided herein, in the
Indenture or, in the case of the Initial Purchasers, in the Purchase Agreement
or granted by law, including recovery of damages, will be entitled to specific
performance of its rights under this Agreement; provided, however, that any such
right to specific performance shall be subject to principles of customary
commercial reasonableness. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of any
of the provisions of this Agreement and hereby further agrees that, in the event
of any action for specific performance in respect of such breach, it shall waive
the defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company has not, as of the date
hereof, entered into and shall not, after the date of this Agreement, enter into
any agreement with respect to any of its securities that is inconsistent with
the rights granted to the Holders of Registrable Securities in this Agreement or
otherwise conflicts with the provisions hereof.
(c) Adjustments Affecting Registrable Securities. The Company shall
not, directly or indirectly, take any action with respect to the Registrable
Securities as a class that would adversely affect the ability of the Holders of
Registrable Securities to include such Registrable Securities in a registration
undertaken pursuant to this Agreement.
(d) Amendments and Waivers. Except as provided in paragraph (d) above,
the provisions of this Agreement may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given, otherwise than with the prior written consent of (A) the Holders of not
less than a majority in aggregate principal amount of the then outstanding
Registrable Securities and (B) in circumstances that would adversely affect the
Participating Broker-Dealers, the Participating Broker-Dealers holding not less
than a majority in aggregate principal amount of the Exchange Securities held by
all Participating Broker-Dealers; provided, however, that Section 7 and this
Section 10(e) may not be amended, modified or supplemented without the prior
written consent of each Holder and each Participating Broker-Dealer (including
any Person who was a Holder or Participating Broker-Dealer of Registrable
Securities or Exchange Securities, as the case may be, disposed of pursuant to
any Registration Statement) affected by any such amendment, modification or
supplement. Notwithstanding the foregoing, a waiver or consent to depart from
the provisions hereof with respect to a matter that relates exclusively to the
rights of Holders of Registrable Securities whose securities are being sold
pursuant to a Registration Statement and that does not directly or indirectly
materially affect or impair the rights of other Holders of Registrable
Securities may be given by Holders of at least a majority in aggregate principal
amount of the Registrable Securities being sold by such Holders pursuant to such
Registration Statement.
(e) Notices. All notices and other communications (including without
limitation any notices or other communications to the Trustee) provided for or
permitted hereunder shall be made in writing by hand-delivery, registered first-
class mail, next-day air courier or telecopier:
(i) if to a Holder of Registrable Securities, at the most current
address given by the Trustee to the Company; and
(ii) if to the Company, at Axia Incorporated, 100 West 22nd Street,
Suite 134, Lombard, Illinois 60148, Attention: Chief Financial Officer.
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All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days after
being deposited in the mail, postage prepaid, if mailed; one business day after
being timely delivered to a next-day air courier, and when receipt is
acknowledged by the addressee, if telecopied.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the trustee under the
Indenture at the address specified in such 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 of Registrable Securities.
(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, AS APPLIED TO CONTRACTS
MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW.
(j) Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use all reasonable efforts to find and employ an alternative means
to achieve the same or substantially the same result as that contemplated by
such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.
(k) Entire Agreement. This Agreement, together with the Purchase
Agreement, is intended by the parties as a final expression of their agreement,
and is intended to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter contained
herein and therein.
(1) Securities Held by the Company or Its Affiliates. Whenever the
consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
its affiliates (as such term is defined in Rule 405 under the Securities Act)
shall not be deemed to be not outstanding for purposes of determining whether
such consent or approval was given by the Holders of such required percentage.
[Signature Pages Follow)
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Exchange and
Registration Rights Agreement as of the date first written above.
AXIA INCORPORATED
By: /s/ SUSAN O. RHENEY
--------------------------------
Name: Susan O. Rheney
Title: Vice President
CHASE SECURITIES INC.
By: /s/ DANIEL TREDWELL
----------------------------------
Name: Daniel Tredwell
Title: Managing Director
NATIONSBANC MONTGOMERY SECURITIES LLC.
By: /s/ STUART B. GLEICHENHAUS
----------------------------------
Name: Stuart B. Gleichenhaus
Title: Managing Director
<PAGE>
EXHIBIT 10.1
AXIA GROUP, INC.
1998 STOCK AWARDS PLAN
I. PURPOSE
The purpose of the AXIA GROUP, INC. 1998 STOCK AWARDS PLAN (the "Plan") is
to provide a means through which Axia Group, Inc., a Delaware corporation (the
"Company"), and its subsidiaries, may attract able persons to enter the employ
of the Company or to provide services to the Company and to provide a means
whereby those persons upon whom the responsibilities of the successful
administration and management of the Company rest, and whose present and
potential contributions to the welfare of the Company are of importance, can
acquire and maintain stock ownership, thereby strengthening their concern for
the welfare of the Company and their desire to remain in its employ or in its
service. A further purpose of the Plan is to provide such employees or service
providers with additional incentive and reward opportunities designed to enhance
the profitable growth of the Company. Accordingly, the Plan provides for
granting Incentive Stock Options, options which do not constitute Incentive
Stock Options, Stock Appreciation Rights, Restricted Stock Awards, Performance
Awards, Phantom Stock Awards, or any combination of the foregoing, as is best
suited to the circumstances of the particular employee as provided herein.
II. DEFINITIONS
The following definitions shall be applicable throughout the Plan unless
specifically modified by any paragraph:
(a) "Affiliates" means any "parent corporation" of the Company and any
"subsidiary" of the Company within the meaning of Code Sections 424(e) and (f),
respectively.
(b) "Award" means, individually or collectively, any Option, Restricted
Stock Award, Phantom Stock Award, Performance Award or Stock Appreciation Right.
(c) "Board" means the Board of Directors of the Company.
(d) "Change of Control" means the occurrence of any of the following
events: (i) the Company shall not be the surviving entity in any merger,
consolidation or other reorganization (or survives only as a subsidiary of an
entity other than a previously wholly-owned subsidiary of the Company), (ii) the
Company sells, leases or exchanges all or substantially all of its assets to any
<PAGE>
other person or entity (other than a wholly-owned subsidiary of the Company),
(iii) the Company is to be dissolved and liquidated, (iv) any person or entity,
including a "group" as contemplated by Section 13(d)(3) of the 1934 Act,
acquires or gains ownership or control (including, without limitation, power to
vote) of more than 50% of the outstanding shares of the Company's voting stock
(based upon voting power), or (v) as a result of or in connection with a
contested election of directors, the persons who were directors of the Company
before such election shall cease to constitute a majority of the Board.
(e) "Change of Control Value" shall mean (i) the per share price offered to
stockholders of the Company in any such merger, consolidation, reorganization,
sale of assets or dissolution transaction, (ii) the price per share offered to
stockholders of the Company in any tender offer or exchange offer whereby a
Change of Control takes place, or (iii) if such Change of Control occurs other
than pursuant to a tender or exchange offer, the Fair Market Value per share of
the shares into which Awards are exercisable, as determined by the Committee,
whichever is applicable. In the event that the consideration offered to
stockholders of the Company consists of anything other than cash, the Committee
shall determine the fair cash equivalent of the portion of the consideration
offered which is other than cash.
(f) "Code" means the Internal Revenue Code of 1986, as amended. Reference
in the Plan to any section of the Code shall be deemed to include any amendments
or successor provisions to any section and any regulations under such section.
(g) "Committee" means the Compensation Committee of the Board which shall
be (i) constituted so as to permit the Plan to comply with Rule 16b-3 and (ii)
constituted solely of "outside directors," within the meaning of section 162(m)
of the Code and applicable interpretive authority thereunder.
(h) "Company" means Axia Group, Inc. and any of its Affiliates.
(i) "Director" means an individual elected to the Board by the stockholders
of the Company or by the Board under applicable corporate law who is serving on
the Board on the date the Plan is adopted by the Board or is elected to the
Board after such date.
(j) An "employee" means any person (including an officer or a Director) in
an employment relationship with the Company or any parent or subsidiary
corporation (as defined in section 424 of the Code).
(k) "1934 Act" means the Securities Exchange Act of 1934, as amended.
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(l) "Fair Market Value" means, as of any specified date, the mean of the
high and low sales prices of the Stock (i) reported by any interdealer quotation
system on which the Stock is quoted on that date or (ii) if the Stock is listed
on a national stock exchange, reported on the stock exchange composite tape on
that date; or, in either case, if no prices are reported on that date, on the
last preceding date on which such prices of the Stock are so reported. If the
Stock is traded over the counter at the time a determination of its fair market
value is required to be made hereunder, its fair market value shall be deemed to
be equal to the average between the reported high and low or closing bid and
asked prices of Stock on the most recent date on which Stock was publicly
traded. In the event Stock is not publicly traded at the time a determination of
its value is required to be made hereunder, the determination of its fair market
value shall be made by the Committee in such manner as it deems appropriate.
(m) "Holder" means an employee or service provider to the Company who has
been granted an Award.
(n) "Incentive Stock Option" means an incentive stock option within the
meaning of section 422(b) of the Code.
(o) "Nonqualified Stock Option" means an option granted under Paragraph VII
of the Plan to purchase Stock which does not constitute an Incentive Stock
Option.
(p) "Option" means an Award granted under Paragraph VII of the Plan and
includes both Incentive Stock Options to purchase Stock and Nonqualified Stock
Options to purchase Stock.
(q) "Option Agreement" means a written agreement between the Company and a
Holder with respect to an Option.
(r) "Performance Award" means an Award granted under Paragraph X of the
Plan.
(s) "Performance Award Agreement" means a written agreement between the
Company and a Holder with respect to a Performance Award.
(t) "Phantom Stock Award" means an Award granted under Paragraph XI of the
Plan.
(u) "Phantom Stock Award Agreement" means a written agreement between the
Company and a Holder with respect to a Phantom Stock Award.
(v) "Plan" means the Axia Group, Inc. 1998 Stock Awards Plan, as amended
from time to time.
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(w) "Restricted Stock Agreement" means a written agreement between the
Company and a Holder with respect to a Restricted Stock Award.
(x) "Restricted Stock Award" means an Award granted under Paragraph IX of
the Plan.
(y) "Rule 16b-3" means SEC Rule 16b-3 promulgated under the 1934 Act, as
such may be amended from time to time, and any successor rule, regulation or
statute fulfilling the same or a similar function.
(z) "Spread" means, in the case of a Stock Appreciation Right, an amount
equal to the excess, if any, of the Fair Market Value of a share of Stock on the
date such right is exercised over the exercise price of such Stock Appreciation
Right.
(aa) "Stock" means the common stock, $0.01 par value of the Company.
(bb) "Stock Appreciation Right" means an Award granted under Paragraph
VIII of the Plan.
(cc) "Stock Appreciation Rights Agreement" means a written agreement
between the Company and a Holder with respect to an Award of Stock Appreciation
Rights.
III. EFFECTIVE DATE AND DURATION OF THE PLAN
The Plan shall be effective upon the date of its adoption by the Board,
provided that the Plan is approved by the stockholders of the Company within
twelve months thereafter. No further Awards may be granted under the Plan after
the expiration of ten years from the date of its adoption by the Board. The
Plan shall remain in effect until all Awards granted under the Plan have been
satisfied or expired.
IV. ADMINISTRATION
(a) Committee. The Plan shall be administered by the Committee.
(b) Powers. Subject to the provisions of the Plan, the Committee shall
have sole authority, in its discretion, to determine which employees shall
receive an Award, the time or times when such Award shall be made, whether an
Incentive Stock Option, Nonqualified Stock Option or Stock Appreciation Right
shall be granted, the number of shares of Stock which may be issued under each
Option, Stock Appreciation Right or Restricted Stock Award, and the value of
each Performance Award and Phantom Stock Award. In making such determinations,
the Committee
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may take into account the nature of the services rendered by the respective
employees, their present and potential contributions to the Company's success
and such other factors as the Committee in its discretion shall deem relevant.
(c) Additional Powers. The Committee shall have such additional powers as
are delegated to it by the other provisions of the Plan. Subject to the express
provisions of the Plan, the Committee is authorized to construe the Plan and the
respective agreements executed thereunder, to prescribe such rules and
regulations relating to the Plan as it may deem advisable to carry out the Plan,
and to determine the terms, restrictions and provisions of each Award, including
such terms, restrictions and provisions as shall be requisite in the judgment of
the Committee to cause designated Options to qualify as Incentive Stock Options,
and to make all other determinations necessary or advisable for administering
the Plan. The Committee may correct any defect or supply any omission or
reconcile any inconsistency in any agreement relating to an Award in the manner
and to the extent it shall deem expedient to carry it into effect. The
determinations of the Committee on the matters referred to in this Article IV
shall be conclusive.
V. GRANT OF OPTIONS, STOCK APPRECIATION RIGHTS,
RESTRICTED STOCK AWARDS, PERFORMANCE AWARDS
AND PHANTOM STOCK AWARDS; SHARES SUBJECT TO THE PLAN
(a) Stock Grant and Award Limits. The Committee may from time to time
grant Awards to one or more employees or to one or more service providers to the
Company determined by it to be eligible for participation in the Plan in
accordance with the provisions of Paragraph VI. Subject to Paragraph XII, the
aggregate number of shares of Stock that may be issued under the Plan shall not
exceed 31,111 shares. Shares of Stock shall be deemed to have been issued under
the Plan only to the extent actually issued and delivered pursuant to an Award.
To the extent that an Award lapses or the rights of its Holder terminate or the
Award is paid in cash, any shares of Stock subject to such Award shall again be
available for the grant of an Award. Separate stock certificates shall be issued
by the Company for those shares acquired pursuant the exercise of an Incentive
Stock Option and for those shares acquired pursuant to the exercise of a
Nonqualified Stock Option.
(b) Stock Offered. The stock to be offered pursuant to the grant of an
Award may be authorized but unissued Stock or Stock previously issued and
outstanding and reacquired by the Company.
VI. ELIGIBILITY
Awards may be granted only to persons who, at the time of grant, are
employees of or individuals providing services to the Company or any of its
Affiliates. Awards may not be granted
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to any Director who is not an employee. An Award may be granted on more than one
occasion to the same person, and, subject to the limitations set forth in the
Plan, such Award may include an Incentive Stock Option or a Nonqualified Stock
Option, a Stock Appreciation Right, a Restricted Stock Award, a Performance
Award, a Phantom Stock Award or any combination thereof.
VII. STOCK OPTIONS
(a) Option Period. The term of each Option shall be as specified by the
Committee at the date of grant.
(b) Limitations on Exercise of Option. An Option shall be exercisable in
whole or in such installments and at such times as determined by the Committee.
(c) Special Limitations on Incentive Stock Options. To the extent that the
aggregate Fair Market Value (determined at the time the respective Incentive
Stock Option is granted) of Stock with respect to which Incentive Stock Options
are exercisable for the first time by an individual during any calendar year
under all incentive stock option plans of the Company and its parent and
subsidiary corporations exceeds $100,000, such Incentive Stock Options shall be
treated as Nonqualified Stock Options as determined by the Committee. The
Committee shall determine, in accordance with applicable provisions of the Code,
Treasury Regulations and other administrative pronouncements, which of an
optionee's Incentive Stock Options will not constitute Incentive Stock Options
because of such limitation and shall notify the optionee of such determination
as soon as practicable after such determination. No Incentive Stock Option
shall be granted to an individual if, at the time the Option is granted, such
individual owns stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company or of its parent or subsidiary
corporation, within the meaning of section 422(b)(6) of the Code, unless (i) at
the time such Option is granted the option price is at least 110% of the Fair
Market Value of the Stock subject to the Option and (ii) such Option by its
terms is not exercisable after the expiration of five years from the date of
grant.
(d) Option Agreement. Each Option shall be evidenced by an Option
Agreement in such form and containing such provisions not inconsistent with the
provisions of the Plan as the Committee from time to time shall approve,
including, without limitation, provisions to qualify an Incentive Stock Option
under section 422 of the Code. An Option Agreement may provide for the payment
of the option price, in whole or in part, by the delivery of a number of shares
of Stock (plus cash if necessary) having a Fair Market Value equal to such
option price. Each Option Agreement shall provide that the Option may not be
exercised earlier than six months from the date of grant and shall specify the
effect of termination of employment on the exercisability of the Option.
Moreover, an Option Agreement may provide for a "cashless exercise" of the
Option by establishing procedures
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whereby the Holder, by a properly-executed written notice, directs (i) an
immediate market sale or margin loan respecting all or a part of the shares of
Stock to which he is entitled upon exercise pursuant to an extension of credit
by the Company to the Holder of the option price, (ii) the delivery of the
shares of Stock from the Company directly to a brokerage firm and (iii) the
delivery of the option price from the sale or margin loan proceeds from the
brokerage firm directly to the Company. Such Option Agreement may also include,
without limitation, provisions relating to (i) vesting of Options, subject to
the provisions hereof accelerating such vesting on a Change of Control, (ii) tax
matters (including provisions (y) permitting the delivery of additional shares
of Stock or the withholding of shares of Stock from those acquired upon exercise
to satisfy federal or state income tax withholding requirements and (z) dealing
with any other applicable employee wage withholding requirements), and (iii) any
other matters not inconsistent with the terms and provisions of this Plan that
the Committee shall in its sole discretion determine. The terms and conditions
of the respective Option Agreements need not be identical.
(e) Option Price and Payment. The price at which a share of Stock may be
purchased upon exercise of an Option shall be determined by the Committee, but
(i) such purchase price shall not be less than the Fair Market Value of Stock
subject to an Incentive Stock Option on the date the Incentive Stock Option is
granted and (ii) such purchase price shall be subject to adjustment as provided
in Paragraph XII. The Option or portion thereof may be exercised by delivery of
an irrevocable notice of exercise to the Company. The purchase price of the
Option or portion thereof shall be paid in full in the manner prescribed by the
Committee.
(f) Stockholder Rights and Privileges. The Holder shall be entitled to all
the privileges and rights of a stockholder only with respect to such shares of
Stock as have been purchased under the Option and for which certificates of
stock have been registered in the Holder's name.
(g) Options and Rights in Substitution for Stock Options Granted by Other
Corporations. Options and Stock Appreciation Rights may be granted under the
Plan from time to time in substitution for stock options held by individuals
employed by corporations who become employees as a result of a merger or
consolidation of the employing corporation with the Company or any subsidiary,
or the acquisition by the Company or a subsidiary of the assets of the employing
corporation, or the acquisition by the Company or a subsidiary of stock of the
employing corporation with the result that such employing corporation becomes a
subsidiary.
VIII. STOCK APPRECIATION RIGHTS
(a) Stock Appreciation Rights. A Stock Appreciation Right is the right to
receive an amount equal to the Spread with respect to a share of Stock upon the
exercise of such Stock Appreciation Right. Stock Appreciation Rights may be
granted in connection with the grant of an
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Option, in which case the Option Agreement will provide that exercise of Stock
Appreciation Rights will result in the surrender of the right to purchase the
shares under the Option as to which the Stock Appreciation Rights were
exercised. Alternatively, Stock Appreciation Rights may be granted independently
of Options in which case each Award of Stock Appreciation Rights shall be
evidenced by a Stock Appreciation Rights Agreement which shall contain such
terms and conditions as may be approved by the Committee. The Spread with
respect to a Stock Appreciation Right may be payable either in cash, shares of
Stock with a Fair Market Value equal to the Spread or in a combination of cash
and shares of Stock. With respect to Stock Appreciation Rights that are subject
to Section 16 of the 1934 Act, however, the Committee shall, except as provided
in Paragraph XII(c), retain sole discretion (i) to determine the form in which
payment of the Stock Appreciation Right will be made (i.e., cash, securities or
any combination thereof) or (ii) to approve an election by a Holder to receive
cash in full or partial settlement of Stock Appreciation Rights. Each Stock
Appreciation Rights Agreement shall provide that the Stock Appreciation Rights
may not be exercised earlier than six months from the date of grant and shall
specify the effect of termination of employment on the exercisability of the
Stock Appreciation Rights.
(b) Other Terms and Conditions. At the time of such Award, the Committee
may, in its sole discretion, prescribe additional terms, conditions or
restrictions relating to Stock Appreciation Rights, including, but not limited
to rules pertaining to termination of employment (by retirement, disability,
death or otherwise) of a Holder prior to the expiration of such Stock
Appreciation Rights. Such additional terms, conditions or restrictions shall be
set forth in the Stock Appreciation Rights Agreement made in conjunction with
the Award. Such Stock Appreciation Rights Agreements may also include, without
limitation, provisions relating to (i) vesting of Awards, subject to the
provisions hereof accelerating vesting on a Change of Control, (ii) tax matters
(including provisions covering applicable wage withholding requirements), and
(iii) any other matters not inconsistent with the terms and provisions of this
Plan, that the Committee shall in its sole discretion determine. The terms and
conditions of the respective Stock Appreciation Rights Agreements need not be
identical.
(c) Exercise Price. The exercise price of each Stock Appreciation Right
shall be determined by the Committee, but such exercise price (i) shall not be
less than the Fair Market Value of a share of Stock on the date the Stock
Appreciation Right is granted (or such greater exercise price as may be required
if such Stock Appreciation Right is granted in connection with an Incentive
Stock Option that must have an exercise price equal to 110% of the Fair Market
Value of the Stock on the date of grant pursuant to Paragraph VII(c)), and (ii)
shall be subject to adjustment as provided in Paragraph XII.
(d) Exercise Period. The term of each Stock Appreciation Right shall be as
specified by the Committee at the date of grant.
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(e) Limitations on Exercise of Stock Appreciation Right. A Stock
Appreciation Right shall be exercisable in whole or in such installments and at
such times as determined by the Committee.
IX. RESTRICTED STOCK AWARDS
(a) Forfeiture Restrictions to be Established by the Committee. Shares of
Stock that are the subject of a Restricted Stock Award shall be subject to
restrictions on disposition by the Holder and an obligation of the Holder to
forfeit and surrender the shares to the Company under certain circumstances (the
"Forfeiture Restrictions"). The Forfeiture Restrictions shall be determined by
the Committee in its sole discretion, and the Committee may provide that the
Forfeiture Restrictions shall lapse upon (i) the attainment of targets
established by the Committee that are based on (1) the price of a share of
Stock, (2) the Company's earnings per share, (3) the Company's revenue, (4) the
revenue of a business unit of the Company designated by the Committee, (5) the
return on stockholders' equity achieved by the Company, or (6) the Company's
pre-tax cash flow from operations, (ii) the Holder's continued employment with
the Company for a specified period of time, or (iii) a combination of any two or
more of the factors listed in clauses (i) and (ii) of this sentence. Each
Restricted Stock Award may have different Forfeiture Restrictions, in the
discretion of the Committee. The Forfeiture Restrictions applicable to a
particular Restricted Stock Award shall not be changed except as permitted by
Paragraph IX(b) or Paragraph XII.
(b) Other Terms and Conditions. Stock awarded pursuant to a Restricted
Stock Award shall be represented by a stock certificate registered in the name
of the Holder of such Restricted Stock Award. The Holder shall have the right
to receive dividends with respect to Stock subject to a Restricted Stock Award,
to vote Stock subject thereto and to enjoy all other stockholder rights, except
that (i) the Holder shall not be entitled to delivery of the stock certificate
until the Forfeiture Restrictions shall have expired, (ii) the Company shall
retain custody of the Stock until the Forfeiture Restrictions shall have
expired, (iii) the Holder may not sell, transfer, pledge, exchange, hypothecate
or otherwise dispose of the Stock until the Forfeiture Restrictions shall have
expired, and (iv) a breach of the terms and conditions established by the
Committee pursuant to the Restricted Stock Agreement, shall cause a forfeiture
of the Restricted Stock Award. At the time of such Award, the Committee may, in
its sole discretion, prescribe additional terms, conditions or restrictions
relating to Restricted Stock Awards, including, but not limited to, rules
pertaining to the termination of employment (by retirement, disability, death or
otherwise) of a Holder prior to expiration of the Forfeiture Restrictions. Such
additional terms, conditions or restrictions shall be set forth in a Restricted
Stock Agreement made in conjunction with the Award. Such Restricted Stock
Agreement may also include, without limitation, provisions relating to (i)
vesting of Awards, (ii) tax matters (including provisions (y) covering any
applicable employee wage withholding requirements and (z) prohibiting an
election by the Holder under section 83(b) of the Code), and (iii) any other
matters
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not inconsistent with the terms and provisions of this Plan that the Committee
shall in its sole discretion determine. The terms and conditions of the
respective Restricted Stock Agreements need not be identical.
(c) Payment for Restricted Stock. The Committee shall determine the amount
and form of any payment for Stock received pursuant to a Restricted Stock Award,
provided that in the absence of such a determination, a Holder shall not be
required to make any payment for Stock received pursuant to a Restricted Stock
Award, except to the extent otherwise required by law.
(d) Agreements. At the time any Award is made under this Paragraph IX, the
Company and the Holder shall enter into a Restricted Stock Agreement setting
forth each of the matters as the Committee may determine to be appropriate. The
terms and provisions of the respective Restricted Stock Agreements need not be
identical.
X. PERFORMANCE AWARDS
(a) Performance Period. The Committee shall establish, with respect to and
at the time of each Performance Award, a performance period over which the
performance of the Holder shall be measured.
(b) Performance Awards. Each Performance Award shall have a maximum value
established by the Committee at the time of such Award.
(c) Performance Measures. A Performance Award shall be awarded to an
individual contingent upon future performance of the individual, the Company or
any subsidiary, division or department thereof by or in which is he employed or
providing services to during the performance period. The Committee shall
establish the performance measures applicable to such performance prior to the
beginning of the performance period but subject to such later revisions as the
Committee shall deem appropriate to reflect significant, unforeseen events or
changes. The performance measures established by the Committee may be based on
(i) the price of a share of Stock, (ii) the Company's earnings per share, (iii)
the Company's revenue, (iv) the revenue of a business unit of the Company
designated by the Committee, (v) the return on stockholder's equity achieved by
the Company, (vi) the Company or business unit's pre-tax cashflow from
operations, or (vii) a combination of such factors.
(d) Awards Criteria. In determining the value of Performance Awards, the
Committee shall take into account an individual's responsibility level,
performance, potential, other Awards and such other considerations as it deems
appropriate.
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(e) Payment. Following the end of the performance period, the Holder of a
Performance Award shall be entitled to receive payment of an amount, not
exceeding the maximum value of the Performance Award, based on the achievement
of the performance measures for such performance period, as determined by the
Committee. Payment of a Performance Award may be made in cash, Stock or a
combination thereof, as determined by the Committee. Payment shall be made in a
lump sum or in installments as prescribed by the Committee. Any payment to be
made in Stock shall be based on the Fair Market Value of the Stock on the
payment date. If a payment of cash is to be made on a deferred basis, the
Committee shall establish whether interest shall be credited, the rate thereof
and any other terms and conditions applicable thereto.
(f) Termination of Employment. A Performance Award shall terminate if the
Holder does not remain continuously in the employ or service of the Company at
all times during the applicable performance period, except as may be determined
by the Committee or as may otherwise be provided in the Award at the time
granted.
(g) Agreements. At the time any Award is made under this Paragraph X, the
Company and the Holder shall enter into a Performance Award Agreement setting
forth each of the matters contemplated hereby, and, in addition such matters as
are set forth in Paragraph IX(b) as the Committee may determine to be
appropriate. The terms and provisions of the respective agreements need not be
identical.
XI. PHANTOM STOCK AWARDS
(a) Phantom Stock Awards. Phantom Stock Awards are rights to receive
shares of Stock (or cash in an amount equal to the Fair Market Value thereof),
or rights to receive an amount equal to any appreciation in the Fair Market
Value of Stock (or portion thereof) over a specified period of time, which vest
over a period of time or upon the occurrence of an event as established by the
Committee, without payment of any amounts by the Holder thereof (except to the
extent otherwise required by law) or satisfaction of any performance criteria or
objectives. Each Phantom Stock Award shall have a maximum value established by
the Committee at the time of such Award.
(b) Award Period. The Committee shall establish, with respect to and at
the time of each Phantom Stock Award, a period over which or the event upon
which the Award shall vest with respect to the Holder.
(c) Awards Criteria. In determining the value of Phantom Stock Awards, the
Committee shall take into account an individual's responsibility level,
performance, potential, other Awards and such other considerations as it deems
appropriate.
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(d) Payment. Following the end of the vesting period for a Phantom Stock
Award, the Holder of a Phantom Stock Award shall be entitled to receive payment
of an amount, not exceeding the maximum value of the Phantom Stock Award, based
on the then vested value of the Award. Payment of a Phantom Stock Award may be
made in cash, Stock or a combination thereof as determine by the Committee.
Payment shall be made in a lump sum or in installments as prescribed by the
Committee in its sole discretion. Any payment to be made in Stock shall be
based on the Fair Market Value of the Stock on the payment date. Cash dividend
equivalents may be paid during or after the vesting period with respect to a
Phantom Stock Award, as determined by the Committee. If a payment of cash is to
be made on a deferred basis, the Committee shall establish whether interest
shall be credited, the rate thereof and any other terms and conditions
applicable thereto.
(e) Performance Measures. A Phantom Stock Award shall be awarded to an
individual contingent upon future performance of the individual, the Company or
any subsidiary, division or department thereof by or in which is he employed or
providing services to during the performance period. The Committee shall
establish the performance measures applicable to such performance prior to the
beginning of the performance period but subject to such later revisions as the
Committee shall deem appropriate to reflect significant, unforeseen events or
changes. The performance measures established by the Committee may be based on
(i) the price of a share of Stock, (ii) the Company's earnings per share, (iii)
the Company's revenue, (iv) the revenue of a business unit of the Company
designated by the Committee, (v) the return on stockholder's equity achieved by
the Company, (vi) the Company or business unit's pre-tax cashflow from
operations, or (vii) a combination of such factors.
(f) Termination of Employment. A Phantom Stock Award shall terminate if
the Holder does not remain continuously in the employ or service of the Company
at all times during the applicable vesting period, except as may be otherwise
determined by the Committee or as set forth in the Award at the time of grant.
(g) Agreements. At the time any Award is made under this Paragraph XI, the
Company and the Holder shall enter into a Phantom Stock Award Agreement setting
forth each of the matters contemplated hereby and, in addition such matters as
are set forth in Paragraph IX(b) as the Committee may determine to be
appropriate. The terms and provisions of the respective agreements need not be
identical.
XII. RECAPITALIZATION OR REORGANIZATION
(a) The shares with respect to which Awards may be granted are shares of
Stock as presently constituted, but if, and whenever, prior to the expiration of
an Award theretofore granted, the Company shall effect a subdivision or
consolidation by the Company, the number of shares of
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Stock with respect to which such Award may thereafter be exercised or satisfied,
as applicable, (i) in the event of an increase in the number of outstanding
shares shall be proportionately increased, and the purchase price per share
shall be proportionately reduced, and (ii) in the event of a reduction in the
number of outstanding shares shall be proportionately reduced, and the purchase
price per share shall be proportionately increased.
(b) If the Company recapitalizes or otherwise changes its capital
structure, thereafter upon any exercise or satisfaction, as applicable, of an
Award theretofore granted the Holder shall be entitled to (or entitled to
purchase, if applicable) under such Award, in lieu of the number of shares of
Stock then covered by such Award, the number and class of shares of stock and
securities to which the Holder would have been entitled pursuant to the terms of
the recapitalization if, immediately prior to such recapitalization, the Holder
had been the holder of record of the number of shares of Stock then covered by
such Award.
(c) In the event of a Change of Control, the Committee, in its sole
discretion, shall determine if any or all outstanding Awards shall immediately
vest and become exercisable or satisfiable, as applicable. The Committee, in
its discretion, may determine that upon the occurrence of a Change of Control,
each Award other than an Option outstanding hereunder shall terminate within a
specified number of days after notice to the Holder, and such Holder shall
receive, with respect to each share of Stock subject to such Award, cash in an
amount equal to the excess, if any, of the Change of Control Value. Further, in
the event of a Change of Control, the Committee, in its discretion shall act to
effect one or more of the following alternatives with respect to outstanding
Options, which may vary among individual Holders and which may vary among
Options held by any individual Holder: (1) determine a limited period of time
on or before a specified date (before or after such Change of Control) after
which specified date all unexercised Options and all rights of Holders
thereunder shall terminate, (2) require the mandatory surrender to the Company
by selected Holders of some or all of the outstanding Options held by such
Holders (irrespective of whether such Options are then exercisable under the
provisions of the Plan) as of a date, before or after such Change of Control,
specified by the Committee, in which event the Committee shall thereupon cancel
such Options and the Company shall pay to each Holder an amount of cash per
share equal to the excess, if any, of the Change of Control Value of the shares
subject to such Option over the exercise price(s) under such Options for such
shares, (3) make such adjustments to Options then outstanding as the Committee
deems appropriate to reflect such Change of Control (provided, however, that the
Committee may determine in its sole discretion that no adjustment is necessary
to Options then outstanding) or (4) provide that thereafter upon any exercise of
an Option theretofore granted the Holder shall be entitled to purchase under
such Option, in lieu of the number of shares of Stock then covered by such
Option the number and class of shares of stock or other securities or property
(including, without limitation, cash) to which the Holder would have been
entitled pursuant to the terms of the agreement of merger, consolidation or sale
of assets and dissolution if,
13
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immediately prior to such merger, consolidation or sale of assets and
dissolution the Holder has been the holder of record of the number of shares of
Stock then covered by such Option. The provisions contained in this paragraph
shall be inapplicable to an Award granted within six (6) months before the
occurrence of a Change of Control if the Holder of such Award is subject to the
reporting requirements of Section 16(a) of the 1934 Act. The provisions
contained in this paragraph shall not terminate any rights of the Holder to
further payments pursuant to any other agreement with the Company following a
Change of Control.
(d) In the event of changes in the outstanding Stock by reason of
recapitalization, reorganizations, mergers, consolidations, combinations,
exchanges or other relevant changes in capitalization occurring after the date
of the grant of any Award and not otherwise provided for by this Paragraph XII,
any outstanding Awards and any agreements evidencing such Awards shall be
subject to adjustment by the Committee at its discretion as to the number and
price of shares of Stock or other consideration subject to such Awards. In the
event of any such change in the outstanding Stock, the aggregate number of
shares available under the Plan may be appropriately adjusted by the Committee,
whose determination shall be conclusive.
(e) The existence of the Plan and the Awards granted hereunder shall not
affect in any way the right or power of the Board or the stockholders of the
Company to make or authorize any adjustment, recapitalization, reorganization or
other change in the Company's capital structure or its business, any merger or
consolidation of the Company, any issue of debt or equity securities ahead of or
affecting Stock or the rights thereof, the dissolution or liquidation of the
Company or any sale, lease, exchange or other disposition of all or any part of
its assets or business or any other corporate act or proceeding.
(f) Any adjustment provided for in Subparagraphs (a), (b), (c) or (d) above
shall be subject to any required stockholder action.
(g) Except as hereinbefore expressly provided, the issuance by the Company
of shares of stock of any class or securities convertible into shares of stock
of any class, for cash, property, labor or services, upon direct sale, upon the
exercise of rights or warrants to subscribe therefor, or upon conversion of
shares of obligations of the Company convertible into such shares or other
securities, and in any case whether or not for fair value, shall not affect, and
no adjustment by reason thereof shall be made with respect to, the number of
shares of Stock subject to Awards theretofore granted or the purchase price per
share, if applicable.
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XIII. AMENDMENT AND TERMINATION OF THE PLAN
The Board in its discretion may terminate the Plan at any time with respect
to any shares for which Awards have not theretofore been granted. The Board
shall have the right to alter or amend the Plan or any part thereof from time to
time; provided that no change in any Award theretofore granted may be made which
would impair the rights of the Holder without the consent of the Holder (unless
such change is required in order to cause the benefits under the Plan to qualify
as performance-based compensation within the meaning of section 162(m) of the
Code and applicable interpretive authority thereunder), and provided, further,
that the Board may not, without approval of the stockholders, amend the Plan:
(a) to increase the maximum number of shares which may be issued on
exercise or surrender of an Award, except as provided in Paragraph XII;
(b) to change the Option price;
(c) to change the class of employees eligible to receive Awards or
materially increase the benefits accruing to employees under the Plan;
(d) to extend the maximum period during which Awards may be granted under
the Plan;
(e) to modify materially the requirements as to eligibility for
participation in the Plan; or
(f) to decrease any authority granted to the Committee hereunder in
contravention of Rule 16b-3.
XIV. MISCELLANEOUS
(a) No Right to An Award. Neither the adoption of the Plan by the Company
nor any action of the Board or the Committee shall be deemed to give an employee
any right to be granted an Award to purchase Stock, a right to a Stock
Appreciation Right, a Restricted Stock Award, a Performance Award or a Phantom
Stock Award or any of the rights hereunder except as may be evidenced by an
Award or by an Option Agreement, Stock Appreciation Rights Agreement, Restricted
Stock Agreement, Performance Award Agreement or Phantom Stock Award Agreement on
behalf of the Company, and then only to the extent and on the terms and
conditions expressly set forth therein. The Plan shall be unfunded. The
Company shall not be required to establish any special or separate fund or to
make any other segregation of funds or assets to assure the payment of any
Award.
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(b) No Employment Rights Conferred. Nothing contained in the Plan shall
(i) confer upon any employee any right with respect to continuation of
employment with the Company or any subsidiary or (ii) interfere in any way with
the right of the Company or any subsidiary to terminate his or her employment at
any time.
(c) Other Laws; Withholding. The Company shall not be obligated to issue
any Stock pursuant to any Award granted under the Plan at any time when the
shares covered by such Award have not been registered under the Securities Act
of 1933 and such other state and federal laws, rules or regulations as the
Company or the Committee deems applicable and, in the opinion of legal counsel
for the Company, there is no exemption from the registration requirements of
such laws, rules or regulations available for the issuance and sale of such
shares. No fractional shares of Stock shall be delivered, nor shall any cash in
lieu of fractional shares be paid. The Company shall have the right to deduct
in connection with all Awards any taxes required by law to be withheld and to
require any payments required to enable it to satisfy its withholding
obligations.
(d) No Restriction on Corporate Action. Nothing contained in the Plan
shall be construed to prevent the Company or any subsidiary from taking any
corporate action which is deemed by the Company or such subsidiary to be
appropriate or in its best interest, whether or not such action would have an
adverse effect on the Plan or any Award made under the Plan. No employee,
beneficiary or other person shall have any claim against the Company or any
subsidiary as a result of any such action.
(e) Restrictions on Transfer. An Award shall not be transferable otherwise
than by will or the laws of descent and distribution or pursuant to a "qualified
domestic relations order" as defined by the Code or Title I of the Employee
Retirement Income Security Act of 1974, as amended, or the rules thereunder, and
shall be exercisable during the Holder's lifetime only by such Holder or the
Holder's guardian or legal representative.
(f) Rule 16b-3. It is intended that the Plan and any grant of an Award
made to a person subject to Section 16 of the 1934 Act meet all of the
requirements of Rule 16b-3. If any provision of the Plan or any such Award
would disqualify the Plan or such Award under, or would otherwise not comply
with, Rule 16b-3, such provision or Award shall be construed or deemed amended
to conform to Rule 16b-3.
(g) Section 162(m). If the plan is subject to 162(m) of the Code, it is
intended that the Plan comply fully with and meet all the requirements of
Section 162(m) of the Code so that Options and Stock Appreciation Rights granted
hereunder and, if determined by the Committee, Restricted
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Stock Awards, shall constitute "performance-based" compensation within the
meaning of such section. If any provision of the Plan would disqualify the Plan
or would not otherwise permit the Plan to comply with Section 162(m) as so
intended, such provision shall be construed or deemed amended to conform to the
requirements or provisions of Section 162(m); provided that no such construction
or amendment shall have an adverse effect on the economic value to a Holder of
any Award previously granted hereunder.
(h) Governing Law. This Plan shall be construed in accordance with the
laws of the State of Delaware.
AXIA GROUP, INC.
Date: July 21, 1998 By: /s/ Susan O. Rheney
------------------------------ --------------------------------
Name: Susan O. Rheney
-------------------------------
Title: President
------------------------------
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EXHIBIT 10.2
AXIA FINANCE CORP.
EMPLOYEE STOCK OWNERSHIP AND 401(K) PLAN
TO BE RENAMED
AXIA INCORPORATED
EMPLOYEE STOCK OWNERSHIP AND 401(k) PLAN
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1
DEFINITIONS..................................3
ARTICLE 2
ADMINISTRATION................................18
2.1 Assignment and Designation of Administrative Authority.................18
2.2 Allocation and Delegation of Responsibilities..........................19
2.3 Powers and Duties of the Administrator.................................19
2.4 Records and Reports....................................................21
2.5 Audit..................................................................21
2.6 Appointment of Advisors................................................22
2.7 Information from Employer..............................................22
2.8 Payment of Expenses....................................................22
2.9 Actions by Administrator...............................................23
2.10 Claims Procedure.......................................................23
2.11 Claims Review Procedure................................................23
ARTICLE 3
ELIGIBILITY.................................25
3.1 Conditions of Eligibility..............................................25
3.2 Effect of Participation upon the Acceptance of Any Benefits under this
Plan.................................................................25
3.3 Determination of Eligibility...........................................25
3.4 Termination of Eligibility.............................................25
3.5 Omission of Eligible Employee..........................................26
3.6 Inclusion of Ineligible Employee.......................................26
3.7 Military Service.......................................................26
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ARTICLE 4
CONTRIBUTION AND ALLOCATION.........................27
4.1 Employer Contribution..................................................27
4.2 Participant's Salary Reduction Election................................28
4.3 Amount of Employer's Contribution......................................31
4.4 Time of Payment of Employer's Contribution.............................31
4.5 Allocation of Contributions, Earnings and Forfeitures..................31
4.6 Actual Deferral Percentage Tests.......................................36
4.8 Actual Contribution Percentage Tests...................................41
4.9 Adjustment to Actual Contribution Percentage Tests.....................43
4.10 Maximum Annual Additions...............................................46
4.11 Adjustment for Excessive Annual Additions..............................50
4.12 Transfers and Rollovers from Other Qualified Plans.....................51
4.13 Directed Investment Account............................................53
4.14 Suspense Account.......................................................54
ARTICLE 5
FUNDING AND INVESTMENT POLICY........................55
5.1 Application of Cash....................................................55
5.2 Investment Policy......................................................55
5.3 Transactions Involving Company Stock...................................56
5.4 Loans to the Trust.....................................................56
5.5 Company Stock - 1042 Transactions......................................58
ARTICLE 6
VALUATIONS..................................60
ARTICLE 7
DETERMINATION AND DISTRIBUTION OF BENEFITS..................61
7.1 Determination of Benefits upon Retirement..............................61
7.2 Determination of Benefits upon Death...................................61
7.3 Determination of Benefits in Event of Disability.......................62
7.4 Determination of Benefits upon Termination.............................62
7.5 Distribution of Benefits...............................................65
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7.6 How Plan Benefit will be Distributed...................................69
7.7 Distribution for Minor Beneficiary.....................................71
7.8 Location of Participant or Beneficiary Unknown.........................72
7.9 Right of First Refusals................................................72
7.10 Stock Certificate Legend...............................................73
7.11 Put Option.............................................................74
7.12 Nonterminable Protections and Rights...................................76
7.13 Participant Loans......................................................76
7.14 Qualified Domestic Relations Order Distribution........................78
7.15 Payment of Distribution Directly to Eligible Retirement Plan...........78
ARTICLE 8
TRUSTEE...................................80
ARTICLE 9
AMENDMENT, TERMINATION, AND MERGERS.....................83
9.1 Amendment..............................................................83
9.2 Termination............................................................83
9.3 Merger or Consolidation................................................84
ARTICLE 10
MISCELLANEOUS................................85
10.1 Participant's Rights...................................................85
10.2 Alienation.............................................................85
10.3 Construction of Plan...................................................86
10.4 Gender and Number......................................................86
10.5 Legal Action...........................................................86
10.6 Prohibition Against Diversion of Funds.................................86
10.7 Return of Funds........................................................87
10.8 Bonding................................................................87
10.9 Receipt and Release for Payments.......................................88
10.10 Action by the Employer.................................................88
10.11 Named Fiduciaries and Allocation of Responsibility.....................88
10.12 Headings...............................................................89
10.13 Uniformity.............................................................89
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10.14 Securities and Exchange Commission Approval............................89
10.15 Indemnification........................................................89
10.16 Controlling Law........................................................90
ARTICLE 11
PARTICIPATING EMPLOYERS............................91
11.1 Adoption by Other Employers............................................91
11.2 Requirements of Participating Employers................................91
11.3 Designation of Agent...................................................92
11.4 Employee Transfers.....................................................92
11.5 Participating Employer's Contribution..................................92
11.6 Amendment..............................................................92
11.7 Discontinuance of Participation........................................92
11.8 Administrator's Authority..............................................93
11.9 Participating Employer Contribution for Affiliate......................93
ARTICLE 12
TOP-HEAVY STATUS...............................94
12.1 Article Controls.......................................................94
12.2 Definitions............................................................94
12.3 Top-Heavy Status.......................................................96
12.5 Effect of Article......................................................97
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AXIA FINANCE CORP.
EMPLOYEE STOCK OWNERSHIP AND 401(K) PLAN
TO BE RENAMED
AXIA INCORPORATED
EMPLOYEE STOCK OWNERSHIP AND 401(K) PLAN
W I T N E S S E T H:
WHEREAS, AXIA Finance Corp. (the "Employer") desires to establish an
Employee Stock Ownership and 401(k) Plan so as to enable its eligible employees
to acquire a proprietary interest in capital stock of the Employer (or a
corporation which is a member of the same controlled group); and
WHEREAS, the Employer desires to recognize the contributions employees will
make to its successful operation and to reward such contribution by means of an
ESOP (as defined herein) for those employees who shall qualify as Participants
hereunder; and
WHEREAS, certain types of contributions to the Plan will be made by the
Employer and such types of contributions made to the trust will be invested
primarily in the capital stock of the Employer (or a corporation which is a
member of the same controlled group); and
WHEREAS, effective July 21, 1998 (hereinafter called the "Effective Date"),
the Employer establishes this Employee Stock Ownership and 401(k) Plan (which
plan is hereinafter called the "Plan") for the exclusive benefit of the
Participants and their Beneficiaries, which is intended to qualify as an ESOP;
and
WHEREAS, it is anticipated that soon after the Effective Date, AXIA Group,
Inc., the company which is the sole owner of all the stock outstanding of the
Employer, will purchase all outstanding capital stock of AXIA Holdings Corp. and
its subsidiaries, including AXIA Incorporated (the "Acquisition"), and that
concurrently with the consummation of the closing of the Acquisition, the
Employer will merge with AXIA Incorporated (the "Merger") and the surviving
entity will be named AXIA Incorporated; and
WHEREAS, upon the completion of the Merger, the Plan shall be renamed the
AXIA Incorporated Employee Stock Ownership and 401(k) Plan; and
<PAGE>
WHEREAS, AXIA Incorporated is the plan sponsor of and currently maintains
the AXIA Incorporated 401(k) Plan ("AXIA 401(k) Plan") which shall be merged
into the Plan as soon as administratively possible after the Merger; and
WHEREAS, until a certain date in the future which shall be determined by
the Employer or its delegatee which shall be not later than the date of the
merger of the AXIA 401(k) Plan into the Plan (the "Plan Merger Date"), all
deferrals under Section 401(k) of the Code by eligible employees of the Employer
shall be under and contributed to the AXIA 401(k) Plan, and thereafter, all such
deferrals made by eligible employees shall be under and contributed to this
Plan.
NOW THEREFORE, as of the Effective Date, the Employer hereby establishes
this Plan for the exclusive benefit of its participants and their beneficiaries
under the following terms:
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ARTICLE 1
DEFINITIONS
1.1 "Account" means, with respect to each Participant, the value of all
accounts maintained on behalf of a Participant.
1.2 "Act" means the Employee Retirement Income Security Act of 1974, as it
may be amended from time to time.
1.3 "Acquisition Date" means the date on which AXIA Group, Inc. acquires
all of the outstanding capital stock of AXIA Holdings Corp. and its
subsidiaries, including AXIA Incorporated.
1.4 "Administrator" means the entity, person, or committee designated by
the Company pursuant to Section 2.1 to administer the Plan on behalf of the
Company.
1.5 "Affiliated Employer" means the Employer and any corporation which is
a member of a controlled group of corporations (as defined in Code Section
414(b)) which include the Employer; any trade or business (whether or not
incorporated) which is under common control (as defined in Code Section 414(c))
with the Employer; any organization (whether or not incorporated) which is a
member of an affiliated service group (as defined in Code Section 414(m)) which
includes the Employer; and any other entity required to be aggregated with the
Employer pursuant to Regulations under Code Section 414(o).
1.6 "Anniversary Date" means the last day of the Plan Year.
1.7 "AXIA 401(k) Plan" means the AXIA Incorporated 401(k) Plan.
1.8 "Beneficiary" means the person to whom the share of a deceased
Participant's total account is payable, subject to the restrictions of Sections
7.2 and 7.6.
1.9 "Benefit Commencement Date" means with respect to each Participant or
Beneficiary, the date such Participant's or Beneficiary's benefit is paid to him
from the Trust Fund.
1.10 "Code" means the Internal Revenue Code of 1986, as amended.
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1.11 "Company" means AXIA Finance Corp., and after the date of the Merger
means AXIA Incorporated or any successors thereto.
1.12 "Company Stock" shall mean common stock issued by the Employer (or by
a corporation which is a member of the controlled group of corporations in which
the Employer is a member) which is readily tradeable on an established
securities market. If there is no common stock which meets the foregoing
requirement, the term "Company Stock" means common stock issued by the Employer
(or by a corporation which is a member of the same controlled group) having a
combination of voting power and dividend rights equal to or in excess of: (A)
that class of common stock of the Employer (or of any other such corporation)
having the greatest voting power, and (B) that class of stock of the Employer
(or of any other such corporation) having the greatest dividend rights.
Noncallable preferred stock shall be deemed to be "Company Stock" if such stock
is convertible at any time into stock which constitutes "Company Stock"
hereunder and if such conversion is at a conversion price which (as of the date
of the acquisition by the Trust) is reasonable.
1.13 "Company Stock Account" shall mean the account of a Participant which
is composed of the Matching Contribution Account and the Discretionary
Contribution Account.
1.14 "Compensation" shall mean a Participant's wages for the Plan Year
within the meaning of Code Section 3401(a) (for the purposes of income tax
withholding at the source) but determined without regard to any rules that limit
the remuneration included in wages based on the nature or location of the
employment or the services performed (such as the exception for agricultural
labor in Code Section 3401(a)(2)). For purposes of this Section, the
determination of Compensation shall be made by including amounts which are
contributed by the Employer pursuant to a salary reduction agreement and which
are not includible in the gross income of the Participant under Code Sections
125, 402(e)(3), 402(h)(1)(B), 403(b) or 457, and Employee contributions
described in Code Section 414(h)(2) that are treated as Employer contributions.
For a Participant's initial year of participation, Compensation shall be
recognized as of an Employee's effective date of participation pursuant to
Section 3.1.
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, the annual
Compensation of each Employee taken into account under the Plan shall not exceed
the "OBRA '93 Annual Compensation Limit." The "OBRA '93 Annual Compensation
Limit" is $150,000, as adjusted for increases in the cost of living in
accordance with Code Section 401(a)(17)(B). The cost of living adjustment in
effect for a calendar
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<PAGE>
year applies to any period, not exceeding 12 months, over which Compensation is
determined ("Determination Period") beginning in such calendar year. If a
Determination Period consists of fewer than 12 months, the "OBRA '93 Annual
Compensation Limit" will be multiplied by a fraction, the numerator of which is
the number of months in the Determination Period, and the denominator of which
is 12.
Any reference in this Plan to the limitation under Code Section 401(a)(17)
shall mean the "OBRA '93 Annual Compensation Limit" set forth in this Section.
If Compensation for any prior Determination Period is taken into account in
determining a Participant's benefits accruing in the current Plan Year, the
Compensation for that prior Determination Period is subject to the "OBRA '93
Annual Compensation Limit" in effect for that prior Determination Period. For
this purpose, for Determination Periods beginning before the first day of the
first Plan Year beginning on or after January 1, 1994, the "OBRA '93 Annual
Compensation Limit" is $150,000.
1.15 "Current Obligations" shall mean Trust obligations arising from
extension of credit to the Trust and payable in cash within (1) year from the
date an Employer contribution is due. Trust obligations shall include liability
for payment of taxes imposed by Code Section 2001 which liability is incurred
pursuant to Section 2210(b).
1.16 "Deferred Compensation" with respect to any Participant means that
portion of such Participant's total Compensation which has been contributed to
the Plan in accordance with the Participant's deferral election pursuant to
Section 4.2, excluding any such amounts distributed as excess "annual additions"
pursuant to Section 4.11(a).
1.17 "Discretionary Contributions" shall mean the contributions to the Plan
that are made by the Employer pursuant to Section 4.1(a)(3), and such
contributions will be invested primarily in shares of Company Stock.
1.18 "Discretionary Contribution Account" shall mean the account
established and maintained by the Administrator for each Participant with
respect to his total interest in the Plan and Trust resulting from the
Employer's Discretionary Contributions.
1.19 "Elective Account" means the account established and maintained by the
Administrator for each Participant with respect to his total interest in the
Plan and Trust resulting from the Elective Contributions. A separate accounting
shall be maintained with respect to that
-5-
<PAGE>
portion of the Elective Account attributable to Elective Contributions pursuant
to Section 4.2 and any Qualified Non-Elective Contributions.
1.20 "Elective Contribution" means the contributions to the Plan that are
made pursuant to the Participant's deferral election provided in Section 4.2.
1.21 "Eligible Employee" means any Employee who is not a Leased Employee
and who has satisfied the provisions of Section 3.1.
Employees whose employment is governed by the terms of a collective
bargaining agreement between Employee representatives (within the meaning of
Code Section 7701(a)(46)) and the Employer under which retirement benefits were
the subject of good faith bargaining between the parties, unless such agreement
expressly provides for such coverage in this Plan, will not be eligible to
participate in this Plan.
Employees who are nonresident aliens and who receive no earned income from
the Employer which constitutes income from sources within the United States
shall not be eligible to participate in this Plan.
1.22 "Employee" means any person who is employed by the Employer, but
excludes any person who is employed as an independent contractor. Employees
shall include Leased Employees.
1.23 "Employer" means AXIA Finance Corp. and any Participating Employer (as
defined in Section 111) which shall adopt this Plan; and any successor which
shall maintain this Plan, including, but not limited to, AXIA Incorporated after
the consummation of the Merger.
1.24 "ESOP" means an employee stock ownership plan that meets the
requirements of Code Section 4975(e)(7) and Regulation 54.4975-11.
1.25 "Excess Aggregate Contributions" means, with respect to any Plan Year,
the excess of the aggregate amount of the Matching Contributions and any
qualified non-elective contributions or elective deferrals taken into account
pursuant to Section 4.8(c) on behalf of Highly Compensated Participants for such
Plan Year, over the maximum amount of such contributions permitted under the
limitations of Section 4.8(a).
1.26 "Excess Contributions" means, with respect to a Plan Year, the excess
of Elective Contributions made on behalf of Highly Compensated Participants for
the Plan Year over the
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<PAGE>
maximum amount of such contributions permitted under Section 4.6(a). Excess
Contributions shall be treated as "annual additions" pursuant to Section
4.10(b).
1.27 "Excess Deferred Compensation" means, with respect to any taxable year
of a Participant, the excess of the aggregate amount of such Participant's
Deferred Compensation and the elective deferrals pursuant to Section 4.2(g)
actually made on behalf of such Participant for such taxable year, over the
dollar limitation provided for in Code Section 402(g), which is incorporated
herein by reference. Excess Deferred Compensation shall be treated as an "annual
addition" pursuant to Section 4.10(b) when contributed to the Plan unless
distributed to the affected Participant not later than the first April 15th
following the close of the Participant's taxable year. However, Excess Deferred
Compensation of Non-Highly Compensated Participants is not taken into account
for purposes of Section 4.6(a) to the extent such Excess Deferred Compensation
occurs pursuant to Section 4.2(f).
1.28 "Exempt Loan" means a loan made to the Plan by a disqualified person
or a loan to the Plan which is guaranteed by a disqualified person and which
satisfies the requirements of Section 2550.408b-3 of the Department of Labor
Regulations and Section 54.4975-7(b) of the Treasury Regulations and Section 5.4
hereof.
1.29 "Fiduciary" means any person who (a) exercises any discretionary
authority or discretionary control respecting management of the Plan or
exercises any authority or control respecting management or disposition of its
assets, (b) renders investment advice for a fee or other compensation, direct or
indirect, with respect to any monies or other property of the Plan or has any
authority or responsibility to do so, or (c) has any discretionary authority or
discretionary responsibility in the administration of the Plan, including, but
not limited to, the Trustee, the Employer and its representative body, and the
Administrator.
1.30 "Forfeiture" means that portion of a Participant's Account that is not
Vested in accordance with Section 7.4(b) and occurs on the earlier of:
(a) the distribution of the entire Vested portion of a Participant's
Account, or
(b) the last day of the Plan Year in which the Participant incurs five
(5) consecutive 1-Year Breaks in Service.
Furthermore, for purposes of paragraph (a) above, in the case of a
Terminated Participant whose Vested benefit is zero, such Terminated Participant
shall be deemed to have received a distribution
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<PAGE>
of his Vested benefit upon his termination of employment. Restoration of such
amounts shall occur pursuant to Section 7.4(e)(2). In addition, the term
"Forfeiture" shall also include amounts deemed to be Forfeitures pursuant to any
other provision of the Plan.
1.31 "Former Participant" means a person who has been a Participant, but
who has ceased to be a Participant for any reason.
1.32 "414(s) Compensation" means, with respect to any Participant, such
Participant's "415 Compensation" paid during a Plan Year. The amount of "414(s)
Compensation" with respect to any Participant shall include "414(s)
Compensation" for the entire twelve month period ending on the last day of such
Plan Year. For purposes of this Section, the determination of "414(s)
Compensation" shall be made by excluding (i) any elective deferral (as defined
in Code Section 402(g)(3)), and (ii) any amount which is contributed by the
Employer pursuant to a salary reduction agreement and which is not includible in
the gross income of the Participant under Code Sections 125 or 457.
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, the annual
"414(s) Compensation" of each Employee taken into account under the Plan shall
not exceed the "OBRA '93 Annual Compensation Limit." The "OBRA '93 Annual
Compensation Limit" is $150,000, as adjusted for increases in the cost of living
in accordance with Code Section 401(a)(17)(B). The cost of living adjustment in
effect for a calendar year applies to any period, not exceeding 12 months, over
which "414(s) Compensation" is determined ("Determination Period") beginning in
such calendar year. If a Determination Period consists of fewer than 12 months,
the "OBRA '93 Annual Compensation Limit" will be multiplied by a fraction, the
numerator of which is the number of months in the Determination Period, and the
denominator of which is 12.
Any reference in this Plan to the limitation under Code Section 401(a)(17)
shall mean the "OBRA '93 Annual Compensation Limit" set forth in this Section.
If "414(s) Compensation" for any prior Determination Period is taken into
account in determining a Participant's benefits accruing in the current Plan
Year, the "414(s) Compensation" for that prior Determination Period is subject
to the "OBRA '93 Annual Compensation Limit" in effect for that prior
Determination Period. For this purpose, for Determination Periods beginning
before the first day of the first Plan Year beginning on or after January 1,
1994, the "OBRA '93 Annual Compensation Limit" is $150,000.
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<PAGE>
1.33 "415 Compensation" means a Participant's wages, salaries, fees for
professional services and other amounts received (without regard to whether or
not an amount is paid in cash) for personal services actually rendered in the
course of employment with the Employer maintaining the Plan to the extent that
the amounts are includible in gross income (including, but not limited to,
commissions paid salesmen, compensation for services on the basis of a
percentage of profits, commissions on insurance premiums, tips, bonuses, fringe
benefits, and reimbursements or other expense allowances under a nonaccountable
plan (as described in Regulation 1.62-2(c)) for a Plan Year. "415 Compensation"
for a self-employed individual shall be equal to his earned income. "415
Compensation" shall exclude (1)(A) contributions made by the Employer to a plan
of deferred compensation to the extent that the contributions are not includable
in the gross income of the Participant for the taxable year in which
contributed, (B) Employer contributions made on behalf of an Employee to a
simplified employee pension plan described in Code Section 408(k) to the extent
such contributions are excludable from the Employee's gross income, (C) any
distributions from a plan of deferred compensation; (2) amounts realized from
the exercise of a non-qualified stock option or when restricted stock (or
property) held by an Employee either becomes freely trans ferable or is no
longer subject to a substantial risk of forfeiture; (3) amounts realized from
the sale, exchange or other disposition of stock acquired under a qualified
stock option; and (4) other amounts which receive special tax benefits, or
contributions made by the Employer (whether or not under a salary reduction
agreement) towards the purchase of any annuity contract described in Code
Section 403(b) (whether or not the contributions are actually excludable from
the gross income of the Employee). Notwithstanding anything herein to the
contrary, "415 Compensation" shall include (i) any elective deferral (as defined
in Code Section 402(g)(3)), and (ii) any amount which is contributed or deferred
by the Employer at the election of an Employee and which is not includible in
the gross income of the Employee by reason of Code Sections 125 or 457.
1.34 "Highly Compensated Employee" means any Employee who is in one or more
of the following groups:
(a) Employees who at any time during the determination year or the
look-back year were "five-percent owners."
(b) Employees who, during the look-back year, received "415
Compensation" in excess of $80,000 (or such other amount as determined by
the Secretary of the Treasury which reflects cost-of-living increases in
accordance with Code Section 414(q)(1)).
The "determination year" shall be the Plan Year for which testing is being
performed, and the "look-back year" shall be the twelve-month period preceding
the "determination year."
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<PAGE>
A former Employee shall be treated as a Highly Compensated Employee if (1)
such former Employee was a Highly Compensated Employee when he separated from
Service or (2) such former Employee was a Highly Compensated Employee at any
time after attaining age fifty-five (55).
For purposes of this Section, the determination of "415 Compensation" shall
be based only on "415 Compensation" which is actually paid and shall be made by
including amounts that would otherwise be excluded from a Participant's gross
income by reason of the application of Code Sections 125, 402(e)(3),
402(h)(1)(B) and, in the case of Employer contributions made pursuant to a
salary reduction agreement, by including amounts that would otherwise be
excluded from a participant's gross income by reason of the application of Code
Section 403(b).
In determining who is a Highly Compensated Employee, Employees who are non-
resident aliens and who received no earned income (within the meaning of Code
Section 911(d)(2)) from the Employer constituting United States source income
within the meaning of Code Section 861(a)(3) shall not be treated as Employees.
Additionally, all Employers shall be taken into account as a single employer and
leased employees within the meaning of Code Sections 414(n)(2) and 414(o)(2)
shall be considered Employees unless such leased employees are covered by a plan
described in Code Section 414(n)(5) and are not covered in any qualified plan
maintained by the Employer. The exclusion of leased employees for this purpose
shall be applied on a uniform and consistent basis for all of the Employer's
retirement plans.
1.35 "Highly Compensated Participant" means any Highly Compensated Employee
who is eligible to participate in the Plan.
1.36 "Hour of Service" means (1) each hour for which an Employee is
directly or indirectly compensated or entitled to compensation by the Employer
for the performance of duties during the applicable computation period; (2) each
hour for which an Employee is directly or indirectly compensated or entitled
to compensation by the Employer (irrespective of whether the employment
relationship has terminated) for reasons other than performance of duties (such
as vacation, holidays, sickness, jury duty, disability, lay-off, involuntary
military duty or leave of absence) during the applicable computation period; (3)
each hour for which back pay is awarded or agreed to by the Employer without
regard to mitigation of damages. These hours will be credited to the Employee
for the computation period or periods to which the award or agreement pertains
rather than the computation period in which the award, agreement or payment is
made. The same Hours of Service shall not be credited both under (1) or (2), as
the case may be, and under (3).
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Notwithstanding the above, (i) no more than 501 Hours of Service are
required to be credited to an Employee on account of any single continuous
period during which the Employee performs no duties (whether or not such period
occurs in a single computation period); (ii) an hour for which an Employee is
directly or indirectly paid, or entitled to payment, on account of a period
during which no duties are performed is not required to be credited to the
Employee if such payment is made or due under a plan maintained solely for the
purpose of complying with applicable worker's compensation, or unemployment
compensation or disability insurance laws; and (iii) Hours of Service are not
required to be credited for a payment which solely reimburses an Employee for
medical or medically related expenses incurred by the Employee.
For purposes of this Section, a payment shall be deemed to be made by or
due from the Employer regardless of whether such payment is made by or due from
the Employer directly, or indirectly through, among others, a trust fund, or
insurer, to which the Employer contributes or pays premiums and regardless of
whether contributions made or due to the trust fund, insurer, or other entity
are for the benefit of particular Employees or are on behalf of a group of
Employees in the aggregate.
An Hour of Service must be counted for the purpose of determining a Year of
Service, a year of participation for purposes of accrued benefits, a 1-Year
Break in Service, and employment commencement date (or reemployment commencement
date). The provisions of Department of Labor regulations 2530.200b-2(b) and (c)
are incorporated herein by reference.
1.37 "Investment Funds" means the funds into which the assets of the Trust
Fund shall be invested as set forth in Section 4.13.
1.38 "Investment Manager" means any person, firm or corporation who is a
registered investment adviser under the Investment Advisers Act of 1940, a bank
or an insurance company, and (a) who has the power to manage, acquire, or
dispose of Plan assets, and (b) who acknowledges in writing his fiduciary
responsibility to the Plan.
1.39 "Key Employee" means an Employee as defined in Code Section 416(i) and
the Treasury Regulations thereunder. Generally, a Key Employee shall include
any Employee or former Employee (and his Beneficiaries) who, at any time during
the Plan Year or any of the preceding four (4) Plan Years, is:
(a) an officer of the Employer (as that term is defined within the
meaning of the regulations under Code Section 416) having annual "415
Compensation" greater than
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50 percent of the amount in effect under Code Section 415(b)(1)(A) for any
such Plan Year. Whether an individual is an officer shall be determined by
the Employer on the basis of all the facts and circumstances, such as an
individual's authority, duties, and term of office, not on the mere fact
that the individual has the title of an officer. For any such Plan Year,
officers considered to be Key Employees will be no more than the fewer of:
(1) Fifty (50) Employees; or
(2) Ten percent (10%) of the Employees or, if greater than ten
percent (10%), three (3) Employees.
For this purpose, the highest paid officers shall be selected. For
purposes of determining the number of officers taken into account, the
following Employees shall be excluded:
(A) Employees who have not completed six (6) months of service;
(B) Employees who normally work less than seventeen and one-half
(17 1/2) hours per week;
(C) Employees who normally work during not more than six (6)
months during any year;
(D) Employees who have not attained age twenty-one (21); and
(E) Employees who are included in a unit of employees covered by
an agreement which the Secretary of Labor finds to be a
collective bargaining agreement between employee
representatives and the Employer, except to the extent
provided in the Regulations.
(b) one of the ten Employees having annual "415 Compensation" from the
Employer for a Plan Year greater than the dollar limitation in effect under
Code Section 415(c)(1)(A) for the calendar year in which such Plan Year
ends and owning (or considered as owning within the meaning of Code Section
318) both more than one-half percent (1/2%) interest and the largest
interests in the Employer.
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(c) a "five percent owner" of the Employer, which is any person who
owns (or is considered as owning within the meaning of Code Section 318)
more than five percent (5%) of the outstanding stock of the Employer or
stock possessing more than five percent (5%) of the total combined voting
power of all stock of the Employer or, in the case of an unincorporated
business, any person who owns more than five percent (5%) of the capital or
profits interest in the Employer. In determining percentage ownership
hereunder, employers that would otherwise be aggregated under Code Sections
414(b), (c), (m) and (o) shall be treated as separate employers.
(d) a "one percent owner" of the Employer having annual "415
Compensation" from the Employer of more than $150,000. "One percent owner"
means any person who owns (or is considered as owning within the meaning of
Code Section 318) at least one percent (1%) of the outstanding stock of the
Employer or stock possessing more than one percent (1%) of the total
combined voting power of all stock of the Employer.
1.40 "Late Retirement Date" means the first day of the month coinciding
with or next following a Participant's actual Retirement Date after having
reached his Normal Retirement Date.
1.41 "Leased Employee" means any Employee who would be within the meaning
of Code Section 414(n)(2) unless such Leased Employee is covered by a plan
described in Code Section 414(n)(5) and Leased Employees do not constitute more
than 20% of the recipient's nonhighly compensated work force.
1.42 "Matching Contribution" means the contributions to the Plan that are
made by the Employer pursuant to Section 4.1(a)(2), and such contributions will
be invested primarily in shares of Company Stock.
1.43 "Matching Contribution Account" means the account established and
maintained by the Administrator for each Participant with respect to his total
interest in the Plan and Trust resulting from the Employer's Matching
Contributions.
1.44 "Merger" means the consummation of the merger of AXIA Finance Corp.
with AXIA Incorporated.
1.45 "Non-Highly Compensated Participant" means any Participant who is not
a Highly Compensated Employee.
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1.46 "Non-Key Employee" means any Employee or former Employee (and his
Beneficiaries) who is not a Key Employee.
1.47 "Non-Top Heavy Plan Year" means a Plan Year which is not a Top Heavy
Plan Year.
1.48 "Normal Retirement Date" means the first day of the month coinciding
with or next following the Participant's Normal Retirement Age (65th birthday).
A Participant shall become fully Vested in his Account upon attaining his Normal
Retirement Age.
1.49 "1-Year Break in Service" means a Plan Year during which an Employee
has not completed more than 500 Hours of Service with the Employer. An Employee
shall not incur a 1-Year Break in Service for the Plan Year in which he becomes
a Participant, dies, retires or suffers Total and Permanent Disability. Further,
solely for the purpose of determining whether a Participant has incurred a 1-
Year Break in Service, Hours of Service shall be recognized for "authorized
leaves of absence" and "maternity and paternity leaves of absence." Years of
Service and 1-Year Breaks in Service shall be measured on the same computation
period.
"Authorized leave of absence" means an unpaid, temporary cessation from
active employment with the Employer pursuant to an established nondiscriminatory
policy, whether occa sioned by illness, military service, or any other reason.
A "maternity or paternity leave of absence" shall mean an absence from work
for any period by reason of the Employee's pregnancy, birth of the Employee's
child, placement of a child with the employee in connection with the adoption of
such child, or any absence for the purpose of caring for such child for a period
immediately following such birth or placement. For this purpose, Hours of
Service shall be credited for the computation period in which the absence from
work begins, only if credit therefore is necessary to prevent the Employee from
incurring a 1-Year Break in Service, or, in any other case, in the immediately
following computation period. The Hours of Service credited for a "maternity or
paternity leave of absence" shall be those which would normally have been
credited but for such absence, or, in any case in which the Administrator is
unable to determine such hours normally credited, eight (8) Hours of Service per
day. The total Hours of Service required to be credited for a "maternity or
paternity leave of absence" shall not exceed 501.
1.50 "Other Investments Account" means the account of a Participant which
is credited with his share of the net gain (or loss) of the Plan, Forfeitures
and Employer Contributions in other than Company Stock and which is debited with
payments made to pay for Company Stock. No Company Stock shall be allocated to
or held in the Other Investments Account.
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1.51 "Participant" means any Eligible Employee who participates in the Plan
as provided in Section 3.1, and has not for any reason become ineligible to
participate further in the Plan.
1.52 "Plan" means this instrument, including all amendments thereto.
1.53 "Plan Merger Date" means the date that the AXIA 401(k) Plan is merged
into the Plan.
1.54 "Plan Year" means the Plan's accounting year of twelve (12) months
commencing on January 1 of each year and ending the following December 31,
except for the first Plan Year which commenced on the Effective Date.
1.55 "Qualified Non-Elective Contribution" means the Employer's
contributions to the Plan made pursuant to Section 4.7(b). Such contributions
shall be considered an Elective Contribution for the purposes of the Plan and
used to satisfy the Actual Deferral Percentage tests of Section 4.6(a).
In addition, the Employer's contributions to the Plan that are made
pursuant to Section 4.9(f) and used to satisfy the Actual Contribution
Percentage tests of Section 4.8(a) shall be considered Qualified Non-Elective
Contributions and be subject to the provisions of Sections 4.2(d) and 4.2(e).
1.56 "Regulation" means the Income Tax Regulations as promulgated by the
Secretary of the Treasury or his delegate, and as amended from time to time.
1.57 "Retired Participant" means a person who has been a Participant, but
who has become entitled to retirement benefits under the Plan.
1.58 "Retirement Date" means the date as of which a Participant retires,
whether such retirement occurs on a Participant's Normal Retirement Date or Late
Retirement Date (see Section 71).
1.59 "Super Top Heavy Plan" means a plan described in Section 12.3(b).
1.60 "Terminated Participant" means a person who has been a Participant,
but whose employment has been terminated other than by death, Total and
Permanent Disability or retirement.
1.61 "Top Heavy Plan" means a plan described in Section 12.3(a).
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1.62 "Top Heavy Plan Year" means a Plan Year during which the Plan is a Top
Heavy Plan.
1.63 "Total and Permanent Disability" means a physical or mental condition
of a Participant resulting from bodily injury, disease, or mental disorder which
renders him incapable of continuing his usual and customary employment with the
Employer for at least twelve (12) months. The disability of a Participant shall
be determined by a licensed physician chosen by the Administrator. The
determination shall be applied uniformly to all Participants.
1.64 "Trustee" means the person or entity named as trustee herein or in any
separate trust forming a part of this Plan, and any successors.
1.65 "Trust Fund" means the assets of the Plan and Trust as the same shall
exist from time to time.
1.66 "Unallocated Company Stock Suspense Account" means an account
containing Company Stock acquired with the proceeds of an Exempt Loan and which
has not been released from such account and allocated to the Participants'
Company Stock Accounts.
1.67 "Valuation Date" means the last day of the Plan Year or any other date
as determined by the Administrator.
1.68 "Vested" means the portion of a Participant's Account that is
nonforfeitable.
1.69 "Year of Service" shall mean the computation period of twelve (12)
consecutive months, herein set forth, during which an Employee has at least
1,000 Hours of Service.
For purposes of eligibility for participation, the initial computation
period shall begin with the date on which the Employee first performs an Hour of
Service, which includes service performed prior to the Effective Date. The
participation computation period beginning after a 1-Year Break in Service shall
be measured from the date on which an Employee again performs an Hour of
Service. The participation computation period shall shift to the Plan Year
which includes the anniversary of the date on which the Employee first performed
an Hour of Service.
For purposes of determining a Participant's vested percentage under Section
7.4(b), the computation period shall be the Plan Year. For the initial Plan
Year, which begins on the Effective Date and ends on December 31, 1998, a
Participant shall receive credit for a Year of Service for
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vesting purposes under Section 7.4(b) if the Participant has at least 500
Hours of Service during the initial Plan Year. Notwithstanding the foregoing,
for any short Plan Year, the determination of whether an Employee has completed
a Year of Service shall be made in accordance with Department of Labor
regulation 2530.203-2(c). No service with the Employer or any Affiliated
Employer prior to the Effective Date shall be recognized for the purpose of
calculating a Participant's vested percentage under Section 7.4(b).
Years of Service with any corporation, trade or business which is a
member of a controlled group of corporations or under common control (as defined
by Code Sections 414(b) and 414(c)),or which is a member of an affiliated
service group (as defined by Code Section 414(m)), or with any other entity
required to be aggregated with an Employer under Code Section 414(o) shall be
recognized.
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ARTICLE 2
ADMINISTRATION
2.1 Assignment and Designation of Administrative Authority
(a) The Company shall appoint one or more Administrators. Initially,
the Administrator shall be the Company, and thereafter the entity, person,
or committee appointed by the Company. Any person, including, but not
limited to, the Employees of the Company, shall be eligible to serve as an
Administrator. Any person so appointed other than the Company shall
signify his acceptance by filing written acceptance with the Company. An
Administrator may resign by delivering his written resignation to the
Company or be removed by the Company by delivery of written notice of
removal, to take effect at a date specified therein, or upon delivery to
the Administrator if no date is specified.
(b) The Company, upon the resignation or removal of an Administrator,
shall promptly designate in writing a successor to this position. If the
Company does not appoint an Administrator, the Company will function as the
Administrator.
(c) The Company shall be empowered to appoint and remove the
Administrator from time to time as it deems necessary for the proper
administration of the Plan to assure that the Plan is being operated for
the exclusive benefit of the Participants and their Beneficiaries in
accordance with the terms of the Plan, the Code, and the Act.
(d) The Company shall periodically review the performance of any the
Administrator or other person to whom duties have been delegated or
allocated by it under the provisions of this Plan or pursuant to procedures
established hereunder. This requirement may be satisfied by formal
periodic review by the Company or by a qualified person specifically
designated by the Company, through day-to-day conduct and evaluation, or
through any other appropriate method.
(e) The Company will furnish Plan Fiduciaries and Participants with
notices and information statements when voting rights must be exercised
pursuant to Section 8.2.
(f) The Company shall advise the Trustee of the names of the members
of the Administrators, and the Trustee shall be entitled to rely thereon
until similarly advised of a change in the membership of the
Administrators.
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2.2 Allocation and Delegation of Responsibilities
If more than one person is appointed as Administrator, the Company may
designate the responsibilities of each Administrator as may be specified by the
Company and accepted in writing by each Administrator. In the event that no
such delegation is made by the Company, the Administrators may allocate the
responsibilities among themselves, in which event the Administrators shall
notify the Company and the Trustee in writing of such action and specify the
responsibilities of each Administrator. The Trustee thereafter shall accept and
rely upon any documents executed by the appropriate Administrator until such
time as the Company or the Administrators file with the Trustee a written
revocation of such designation.
2.3 Powers and Duties of the Administrator
The primary responsibility of the Administrator is to administer the Plan
for the exclusive benefit of the Participants and their Beneficiaries, subject
to the specific terms of the Plan. The Administrator shall administer the Plan
in accordance with its terms and shall have the power necessary to carry out the
provisions of the Trust and to determine all questions arising in connection
with the administration, interpretation, and application of the Plan and Trust.
Any such determination by the Administrator shall be conclusive and binding upon
all persons. The Administrator may establish procedures, correct any defect,
supply any information, or reconcile any inconsistency in such manner and to
such extent as shall be deemed necessary or advisable to carry out the purpose
of the Plan; provided, however, that any procedure, discretionary act,
interpretation or construction shall be done in a nondiscriminatory manner based
upon uniform principles consistently applied and shall be consistent with the
intent that the Plan shall continue to be deemed a qualified plan under the
terms of Code Section 401(a), and shall comply with the terms of the Act and all
regulations issued pursuant thereto. The Administrator shall have all powers
necessary or appropriate to accomplish his duties under this Plan.
The Administrator shall be charged with the duties of the general
administration of the Plan and the authority to direct the Trustee under the
Trust, including, but not limited to, the following:
(a) to determine all questions relating to the eligibility of
Employees to participate or remain a Participant hereunder;
(b) to compute, certify, and direct the Trustee with respect to the
amount and the kind of benefits to which any Participant shall be entitled
hereunder;
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(c) to authorize and direct the Trustee with respect to all
disbursements from the Trust;
(d) to maintain all necessary records for the administration of the
Plan;
(e) to interpret the provisions of the Plan and to make and publish
such rules for regulation of the Plan as are consistent with the terms
hereof;
(f) to determine the size and type of any contract to be purchased
from any insurer, and to designate the insurer from which such contract
shall be purchased;
(g) to compute and certify to the Employer from time to time the sums
of money necessary or desirable to be contributed to the Trust Fund;
(h) to establish a "funding policy and method", i.e., it shall consult
with the Employer, and it shall determine whether the Plan has a short
range need for liquidity (e.g., to pay benefits) or whether liquidity is a
long range goal and investment growth (and stability of same) is a more
current need, or shall appoint a qualified person to do so. Such "funding
policy and method" shall be consistent with the objectives of this Plan and
with the requirements of Title I of the Act;
(i) to establish and communicate to Participants a procedure and
method to insure that each Participant will vote Company Stock allocated to
such Participant's Company Stock Account pursuant to Section 8.2;
(j) to enter into a written agreement with regard to the payment of
federal estate tax pursuant to Code Section 2210(b);
(k) to assist any Participant regarding his rights, benefits, or
elections available under the Plan; and
(l) to direct the investment and reinvestment of the Trust Fund and
the income therefrom, as more particularly specified hereinafter including,
by way of example and not of limitation, to direct the Trustee to purchase,
sell or dispose of "qualifying employer securities" and to enter into an
Exempt loan.
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2.4 Records and Reports
The Administrator shall keep a record of all actions taken and shall keep
all other books of account, records, and other data that may be necessary for
proper administration of the Plan and shall be responsible for supplying all
information and reports to the Internal Revenue Service, Department of Labor,
Participants, Beneficiaries and others as required by law.
2.5 Audit
(a) If an audit of the Plan's records shall be required by the Act and
the regulations thereunder for any Plan Year, the Administrator shall
appoint an independent qualified public accountant for that purpose. Such
accountant shall, after an audit of the books and records of the Plan in
accordance with generally accepted auditing standards, within a reasonable
period after the close of the Plan Year, furnish to the Administrator and
the Trustee a report of his audit setting forth his opinion as to whether
each of the following statements, schedules or lists, or any others that
are required by Section 103 of the Act or the Secretary of Labor to be
filed with the Plan's annual report, are presented fairly and in conformity
with generally accepted accounting principles applied consistently:
(i) statement of the assets and liabilities of the Plan;
(ii) statement of changes in net assets available to the Plan;
(iii) statement of receipts and disbursements, a schedule of all
assets held for investment purposes, a schedule of all loans or fixed
income obligations in default at the close of the Plan Year;
(iv) a list of all leases in default or uncollectible during the
Plan Year;
(v) the most recent annual statement of assets and liabilities of
any bank common or collective trust fund in which Plan assets are
invested or such information regarding separate accounts or trusts
with a bank or insurance company as the Administrator deems necessary;
and
(vi) a schedule of each transaction or series of transactions
involving an amount in excess of five percent (5%) of Plan assets.
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All auditing and accounting fees shall be an expense of and may, at
the election of the Administrator, be paid from the Trust Fund.
(b) If some or all of the information necessary to enable the
Administrator to comply with Section 103 of the Act is maintained by a
bank, insurance company, or similar institution, regulated and supervised
and subject to periodic examination by a state or federal agency, it shall
transmit and certify the accuracy of that information to the Administrator
as provided in Section 103(b) of the Act within one hundred twenty (120)
days after the end of the Plan Year or such other date as may be prescribed
under regulations of the Secretary of Labor.
2.6 Appointment of Advisors
The Administrator may appoint counsel, specialists, advisors, and other
persons as the Administrator deems necessary or desirable in connection with the
administration of this Plan.
2.7 Information from Employer
To enable the Administrator to perform his functions, the Employer shall
supply full and timely information to the Administrator on all matters relating
to the Compensation of all Participants, their Hours of Service, their Years of
Service, their retirement, death, disability, or termination of employment, and
such other pertinent facts as the Administrator may require; and the
Administrator shall advise the Trustee of such of the foregoing facts as may be
pertinent to the Trustee's duties under the Plan. The Administrator may rely
upon such information as is supplied by the Employer and shall have no duty or
responsibility to verify such information.
2.8 Payment of Expenses
All expenses of administration may be paid out of the Trust Fund unless
paid by the Employer. Such expenses shall include any expenses incident to the
functioning of the Administrator, including, but not limited to, fees of
accountants, counsel, the Trustee and other specialists and their agents, and
other costs of administering the Plan and/or the Trust. Until paid, the
expenses shall constitute a liability of the Trust Fund. However, the Employer
may reimburse the Trust Fund for any administration expense incurred, and the
Trust Fund may reimburse the Employer for any administration expense paid by the
Employer on behalf of the Trust Fund. Any administration expense paid to the
Trust Fund as a reimbursement shall not be considered an Employer contribution.
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2.9 Actions by Administrator
The Administrator shall hold meetings upon such notice and at such time and
places as it may from time to time determine. Notice to a member shall not be
required if waived in writing by that member. A majority of the members of the
Administrator duly appointed shall constitute a quorum for the transaction of
business. All resolutions or other actions taken by the Administrator at any
meeting where a quorum is present shall be by vote of a majority of those
present at such meeting and entitled to vote. Resolutions may be adopted or
other action taken without a meeting upon written consent signed by all of the
Administrators.
2.10 Claims Procedure
Claims for benefits under the Plan may be filed with the Administrator on
forms supplied by the Employer. Written notice of the disposition of a claim
shall be furnished to the claimant within 90 days after the application is
filed. In the event the claim is denied, the reasons for the denial shall be
specifically set forth in the notice in language calculated to be understood by
the claimant, pertinent provisions of the Plan shall be cited, and, where
appropriate, an explanation as to how the claimant can perfect the claim will be
provided. In addition, the claimant shall be furnished with an explanation of
the Plan's claims review procedure.
2.11 Claims Review Procedure
Any Employee, Former Employee, or Beneficiary of either, who has been
denied a benefit by a decision of the Administrator pursuant to Section 2.10
shall be entitled to request the Administrator to give further consideration to
his claim by filing with the Administrator (on a form which may be obtained from
the Administrator) a request for a hearing. Such request, together with a
written statement of the reasons why the claimant believes his claim should be
allowed, shall be filed with the Administrator no later than 60 days after
receipt of the written notification provided for in Section 2.10. The
Administrator shall then conduct a hearing within the next 60 days, at which the
claimant may be represented by an attorney or any other representative of his
choosing and at which the claimant shall have an opportunity to submit written
and oral evidence and arguments in support of his claim. At the hearing (or
prior thereto upon 5 business days written notice to the Administrator) the
claimant or his representative shall have an opportunity to review all documents
in the possession of the Administrator which are pertinent to the claim at issue
and its disallowance. Either the claimant or the Administrator may cause a
court reporter to attend the hearing and record the proceedings. In such event,
a complete written transcript of the proceedings shall be furnished to both
parties by the court reporter. The full expense of any such court reporter
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and such transcripts shall be borne by the party causing the court reporter to
attend the hearing. A final decision as to the allowance of the claim shall be
made by the Administrator within 60 days of receipt of the appeal (unless there
has been an extension of 60 days due to special circumstances, provided the
delay and the special circumstances occasioning it are communicated to the
claimant within the 60 day period). Such communication shall be written in a
manner calculated to be understood by the claimant and shall include specific
reasons for the decision and specific references to the pertinent Plan
provisions on which the decision is based.
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ARTICLE 3
ELIGIBILITY
3.1 Conditions of Eligibility
Any Eligible Employee shall become a Participant as of the dates set forth
below coincident with or next following the Eligible Employee's completion of
one-half (1/2) Year of Service and his or her attaining the age of twenty one
(21) years:
(a) the date of the Merger;
(b) January 1; or
(c) July 1.
3.2 Effect of Participation upon the Acceptance of Any Benefits under this
Plan
An Eligible Employee shall automatically be bound by the terms and
conditions of the Plan and all amendments hereto.
3.3 Determination of Eligibility
The Administrator shall determine the eligibility of each Employee for
participation in the Plan based upon information furnished by the Employer.
Such determination shall be conclusive and binding upon all persons, as long as
the same is made pursuant to the Plan and the Act. Such determination shall be
subject to review as provided for in Section 2.10 and 2.11.
3.4 Termination of Eligibility
In the event a Participant shall go from a classification of an Eligible
Employee to a noneligible Employee, such Former Participant shall continue to
vest in his interest in the Plan for each Year of Service completed while a
noneligible Employee, until such time as his Participant's Account shall be
forfeited or distributed pursuant to the terms of the Plan. Additionally, his
interest in the Plan shall continue to share in the earnings of the Trust Fund.
If such Former Participant returns to an eligible class of Employees and has not
incurred a 1-Year Break in Service, such Former Participant will participate
immediately upon such return. If such Former Participant has
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incurred a 1-Year Break in Service, eligibility will be determined under the
Plan's break in service rules.
3.5 Omission of Eligible Employee
If, in any Plan Year, any Employee who should be included as a Participant
in the Plan is erroneously omitted and discovery of such omission is not made
until after a contribution by his Employer for the year has been made, the
Employer shall make a subsequent contribution with respect to the omitted
Employee in the amount which the Employer would have contributed with respect to
him had he not been omitted. Such contribution shall be made regardless of
whether or not it is deductible in whole or in part in any taxable year under
applicable provisions of the Code.
3.6 Inclusion of Ineligible Employee
If, in any Plan Year, any person who should not have been included as a
Participant in the Plan is erroneously included and discovery of such incorrect
inclusion is not made until after a contribution for the year has been made, the
Employer shall not be entitled to recover the contribution made with respect to
the ineligible person regardless of whether or not a deduction is allowable with
respect to such contribution. In such event, the amount contributed with
respect to the ineligible person shall constitute a Forfeiture (except for
Deferred Compensation which shall be distributed to the ineligible person) for
the Plan Year in which the discovery is made.
3.7 Military Service
Notwithstanding any provision of the Plan to the contrary, contributions,
benefits and service credit with respect to qualified military service will be
provided in accordance with Code Section 414(u).
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ARTICLE 4
CONTRIBUTION AND ALLOCATION
4.1 Employer Contribution
(a) Except as provided in paragraph (1) below, for each Plan Year, the
Employer shall contribute to the Plan:
(1) Commencing on a date which shall be determined by the
Employer and shall be no later than the Plan Merger Date, the amount
of the total salary reduction elections of all Participants made
pursuant to Section 4.2(a), which amount shall be deemed the Elective
Contributions; plus
(2) Except as provided below for the first Plan Year, a
contribution equal to fifty percent (50%) of each Participant's
Elective Contribution, which amount shall be deemed the Matching
Contribution. In applying the matching percentage in the previous
sentence, only Elective Contributions up to three percent (3%) of
Compensation shall be considered. For the first Plan Year, a
contribution equal to twenty-five percent (25%) of the sum of each
Participant's Elective Contribution under this Plan for the first Plan
Year and each Participant's Elective Deferral (as defined in the AXIA
401(k) Plan) contribution to the AXIA 401(k) Plan during its 1998 Plan
Year; provided that in applying the matching percentage to such sum,
only Elective Contributions under the Plan and Elective Deferrals
under the AXIA 401(k) Plan up to three percent (3%) of Compensation
shall be considered.
(3) A contribution in an amount as may be determined by its Board
of Directors or its delegates, which amount shall be deemed the
Discretionary Contribution.
(b) The employer contributions for any Plan Year, subject to the
limitation provided above, shall not exceed the maximum amount allowable as
a deduction to the Employer under the provisions of Code Section 404.
(c) Notwithstanding the foregoing, to the extent necessary to provide
the top heavy minimum allocations as set forth in Section 4.5(j), the
Employer shall make a contribution even if it exceeds the amount which is
deductible under Code Section 404.
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(d) Notwithstanding the foregoing or any provision to the contrary,
the Employer contributions to the Trust shall never bee less than the
amount required to enable the Trust to discharge its Current Obligations
and notwithstanding whether some or all of such contributions may fail to
qualify for income tax deductions by the Employer.
4.2 Participant's Salary Reduction Election
(a) Each Participant may elect to defer from one percent (1%) to
fifteen percent (15%) (in whole percentage points) of his Compensation
subject to the limitations of this Section. The amount by which
Compensation is reduced pursuant to such election shall be that
Participant's Deferred Compensation and shall be allocated to the
Participant's Elective Account. Elections by Participants pursuant to this
Section shall be effective as soon as administratively possible in relation
to the payroll procedures of the Employer.
(b) At any time during the Plan Year, a Participant may change his
election as to the rate of Deferred Compensation upward or downward within
the foregoing limitations, to be effective on the first day of the next
Plan Year quarter. A notice of election change shall be made in accordance
with procedures established by the Administrator.
(c) A Participant may temporarily suspend Elective Contributions under
the Plan, as of the first day of next Plan Year quarter without terminating
his participation in the Plan, in accordance with procedures established by
the Administrator. A Participant may resume Elective Contributions,
specifying the first day of the Plan Year quarter in which Elective
Contributions are to resume, in accordance with procedures established by
the Administrator.
(d) The balance in each Participant's Elective Account shall be fully
Vested at all times and shall not be subject to forfeiture for any reason
except as provided for in Sections 4.2(g) and 4.7(a)(2).
(e) Amounts held in a Participant's Elective Account may not be
distributable prior to the earlier of:
(1) his separation from service, Total and Permanent Disability,
or death;
(2) his attainment of age 59 1/2;
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(3) termination of the Plan without establishment of a "successor
plan," as that term is described in Regulation 1.401(k)-1(d)(3) by the
Employer or an Affiliated Employer;
(4) the date of the sale by the Employer to an entity that is not
an Affiliated Employer of substantially all of the assets of an
Employer's trade or business (within the meaning of Code Section
409(d)(2)) with respect to a Participant who continues employment with
the corporation acquiring such assets; or
(5) the date of the sale by the Employer or an Affiliated
Employer of substantially all of its interest in a subsidiary (within
the meaning of Code Section 409(d)(3)) to an entity which is not an
Affiliated Employer with respect to a Participant who continues
employment with such subsidiary.
(f) A Participant's Deferred Compensation made pursuant to this Plan
and all other plans, contracts or arrangements of the Employer shall not
exceed, during any taxable year of the Participant, the limitation imposed
by Code Section 402(g), as in effect at the beginning of such taxable year.
If such dollar limitation is exceeded, a Participant will be deemed to have
notified the Administrator of such excess amount which shall be distributed
in a manner consistent with Section 4.2(g). The dollar limitation shall be
adjusted annually pursuant to the method provided in Code Section 415(d) in
accordance with Regulations.
(g) If a Participant's Deferred Compensation under this Plan together
with any elective deferrals (as defined in Regulation 1.402(g)-1(b)) under
another qualified cash or deferred arrangement (as defined in Code Section
401(k)), a simplified employee pension (as defined in Code Section 408(k)),
a salary reduction arrangement (within the meaning of Code Section
3121(a)(5)(D)), a deferred compensation plan under Code Section 457, or a
trust described in Code Section 501(c)(18) cumulatively exceed the
limitation imposed by Code Section 402(g) (as adjusted annually in
accordance with the method provided in Code Section 415(d) pursuant to
Regulations) for such Participant's taxable year, the Participant may, not
later than March 1 following the close of his taxable year, notify the
Administrator in writing of such excess and request that his Deferred
Compensation under this Plan be reduced by an amount specified by the
Participant. In such event, the Administrator may direct the Trustee to
distribute such excess amount, and any income allocable to such amount, to
the Participant not later than the first April 15th following the close of
the Participant's taxable year. Any distribution of less than the entire
amount of Excess Deferred Compensation and income shall be treated as a pro
rata distribution of Excess Deferred
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Compensation and income. The amount distributed shall not exceed the
Participant's Deferred Compensation under the Plan for the taxable year.
Any distribution on or before the last day of the Participant's taxable
year must satisfy each of the following conditions:
(1) the distribution must be made after the date on which the
Plan received the Excess Deferred Compensation;
(2) the Participant shall designate the distribution as Excess
Deferred Compensation; and
(3) the Plan must designate the distribution as a distribution of
Excess Deferred Compensation.
Any distribution made pursuant to this Section 4.2(g) shall be made
first from unmatched Deferred Compensation and, thereafter, from Deferred
Compensation which is matched. Matching Contributions which relate to such
Deferred Compensation shall be forfeited.
(h) In the event a Participant has received a hardship distribution
pursuant to Regulation 1.401(k)-1(d)(2)(iii)(B) from any other plan
maintained by the Employer, then such Participant shall not be permitted to
elect to have Deferred Compensation contributed to the Plan on his behalf
until the first day of the calendar quarter following a period of twelve
(12) months following the receipt of distribution. Furthermore, the dollar
limitation under Code Section 402(g) shall be reduced, with respect to the
Participant's taxable year following the taxable year in which the hardship
distribution was made, by the amount of such Participant's Deferred
Compensation, if any, pursuant to this Plan (and any other plan maintained
by the Employer) for the taxable year of the hardship distribution.
(i) The Employer and/or the Administrator shall adopt any procedures
necessary to implement the salary reduction elections provided for herein.
(j) All amounts allocated to a Participant's Elective Account shall be
invested pursuant to Section 4.13.
(k) In any case, where any of the foregoing provisions of this Section
4.2 are not in conformity with Regulations that are from time to time
promulgated, the nonconforming provision may be amended retroactively to
assure conformity.
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4.3 Amount of Employer's Contribution
The Employer shall determine the amount of contribution to be made to the
Plan. In determining such contribution, the Employer shall be entitled to rely
upon an estimate of the total Compensation for all Participants and the
Participants' Elective Contributions. The Employer's determination of such
contribution shall be binding on all Participants, the Employer, and the
Trustee. The Trustee shall have no right or duty to inquire into the amount of
the Employer's contribution or the method used in determining the amount of the
Employer's contribution, but shall be accountable only for funds actually
received by the Trustee.
4.4 Time of Payment of Employer's Contribution
Employer contributions will be paid in cash, Company Stock, or other
property within the time prescribed by law, including extensions of time, for
the filing of the Employer's federal income tax return for the Employer's fiscal
year. Company Stock and other property will be valued at their then fair market
value.
Elective Contributions accumulated through payroll deductions shall be paid
to the Trustee as of the earliest date on which such contributions can
reasonably be segregated from the Employer's general assets, but in any event by
the fifteenth (15th) business day of the month following the month in which such
amounts would otherwise have been payable to the Participant in cash, unless
such time period may be extended pursuant to regulations promulgated by the
Department of Labor. The provisions of Department of Labor regulations 2510.3-
102 are incorporated herein by reference. Furthermore, any additional Employer
contributions which are allocable to the Participant's Elective Account for a
Plan Year shall be paid to the Plan no later than the twelve-month period
immediately following the close of such Plan Year.
Notwithstanding the above, to the extent that the Plan has Current
Obligations, the Employer's Matching Contribution and Discretionary Contribution
will be paid to the Plan in cash in sufficient timely amounts to meet the terms
of Current Obligations.
4.5 Allocation of Contributions, Earnings and Forfeitures
(a) The Administrator shall establish and maintain certain accounts in
the name of each Participant to which the Administrator shall credit all
amounts allocated to each such Participant as hereafter set forth.
However, the Administrator may separately account for
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that portion of each Participant's Account attributable to Top Heavy Plan
Years and Non-Top Heavy Plan Years.
(b) The Employer shall provide the Administrator with all information
required by the Administrator to make a proper allocation of the Elective,
Matching and Discretionary Contributions for each Plan Year. Within 45
days after the date of receipt by the Administrator of such information,
the Administrator shall allocate such contribution as follows:
(1) With respect to the Elective Contribution made pursuant to
Section 4.2, to each Participant's Elective Account in an amount equal
to the Participant's Deferred Compensation for the year.
(2) With respect to the Matching Contribution made pursuant to
Section 4.1(a), to each Participant's Matching Contribution Account in
accordance with Section 4.1(a)(2). Except, however, a Participant who
does not perform an Hour of Service on the last day of a Plan Year
shall not share in the Matching Contribution for that Plan Year,
unless required pursuant to Section 4.5(l) or 4.5(o).
(3) With respect to the Discretionary Contribution for each Plan
Year pursuant to Section 4.1(a)(3), to each Participant's
Discretionary Contribution Account in the same proportion that each
such Participant's Compensation for the year bears to the total
Compensation of all Participants for such year. Except, however, a
Participant who does not perform an Hour of Service on the last day of
a Plan Year or who performs less than a Year of Service during the
Plan Year shall not share in the Discretionary Contribution for that
Plan Year, unless required pursuant to Section 4.5(l) or 4.5(o).
(c) The Company Stock Account of each Participant shall be credited as
of each Anniversary Date with Forfeitures of Company Stock and his
allocable share of Company Stock (including fractional shares) purchased
and paid for by the Plan or contributed in kind by the Employer. Stock
dividends on Company Stock held in his Company Stock Account shall be
credited to his Company Stock Account when paid. Cash dividends on Company
Stock held in his Company Stock Account shall be used to repay an Exempt
Loan, so long as one exists. If no such Exempt Loan exists, cash dividends
may, in the sole discretion of the Administrator, be credited to the
Participant's Other Investments Account or distributed in accordance with
Section 7.5(e).
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Company Stock acquired by the Plan with the proceeds of an Exempt Loan
shall only be allocated to each Participant's Company Stock Account upon
release from the Unallocated Company Stock Suspense Account as provided in
Section 4.5(g) herein. Company Stock acquired with the proceeds of an
Exempt Loan shall be an asset of the Trust Fund and maintained in the
Unallocated Company Stock Suspense Account.
Company Stock received by the Trust during a Plan Year with respect to
a contribution by the Employer for the preceding Plan Year shall be
allocated to the accounts of Participants as of the Anniversary Date at the
end of such preceding Plan Year.
(d) Earnings (or losses) of the Trust Fund will be determined as of
the last day of each Anniversary Date. Earnings (or losses) of the Trust
Fund shall be allocated in the same proportion that each Participant's and
Former Participant's nonsegregated accounts (other than each Participant's
and Former Participant's Company Stock Account) bear to the total of all
Participants' and Former Participants' nonsegregated accounts (other than
Participants' and Former Participants' Company Stock Account) as of such
date. Each segregated account maintained on behalf of a Participant or
Former Participant shall be credited or charged with its separate earnings
and losses.
Earnings or losses do not include the interest paid under any
installment contract for the purchase of Company Stock by the Trust Fund or
on any loan used by the Trust Fund to purchase Company Stock, nor does it
include income received by the Trust Fund with respect to Company Stock
acquired with the proceeds of an Exempt Loan to the extent such income is
used to repay the loan; all income received by the Trust Fund from Company
Stock acquired with the proceeds of an Exempt Loan which have not been
allocated to a Participant's Company Stock Account shall be used to repay
such loan until the loan is fully repaid.
(e) The Administrator shall establish accounting procedures for the
purpose of making the allocations, valuations and adjustments to
Participants' Accounts provided for in this Section. Should the
Administrator determine that the strict application of its accounting
procedures will not result in an equitable and nondiscriminatory allocation
among the Participants' Accounts, it may modify its procedures for the
purpose of achieving an equitable and nondiscriminatory allocation in
accordance with the general concepts of the Plan and the provisions of this
Section, provided, however, that such adjustments to achieve equity shall
not reduce the Vested portion of a Participant's Account.
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(f) Separate accounts shall be maintained for all inactive
Participants who have a Vested interest in the Plan. Such separate
accounts shall not require a segregation of the Plan assets and no
Participant shall acquire any right to or interest in any specific asset of
the Trust as a result of the allocations provided for in the Plan. All
allocations will be made as of the Anniversary Date referred to in this
Section.
(g) All Company Stock acquired by the Plan with the proceeds of an
Exempt Loan must be added to and maintained in the Unallocated Company
Stock Suspense Account. Such Company Stock shall be released and withdrawn
from that account as if all Company Stock in that account were encumbered.
For each Plan Year during the duration of the loan, the number of shares of
Company Stock released shall equal the number of encumbered shares held
immediately before release for the current Plan Year multiplied by a
fraction, the numerator of which is the amount of principal paid for the
Plan Year and the denominator of which is the sum of the numerator plus the
principal to be paid for all future Plan Years. As of each Anniversary
Date, the Plan must consistently allocate to each Participant's Account, in
the same manner as Discretionary Contributions pursuant to Section
4.1(a)(3) are allocated, non-monetary units (shares and fractional shares
of Company Stock) representing each Participant's interest in assets
withdrawn from the Unallocated Company Stock Suspense Account. Income
earned with respect to Company Stock in the Unallocated Company Stock
Suspense Account shall be used to repay the Exempt Loan used to purchase
such Company Stock. Any income which is not so used must be allocated as
income of the Plan.
(h) As of each Anniversary Date, any amounts which became Forfeitures
since the last Anniversary Date shall first be made available to reinstate
previously forfeited account balances of Former Participants, if any, in
accordance with Section 7.4(e). The remaining Forfeitures, if any, shall
be allocated among the Participants' Accounts in the same proportion that
each such Participant's Compensation for the Plan Year bears to the total
Compensation of all such Participants for the Plan Year. Provided,
however, that in the event the allocation of Forfeitures provided herein
shall cause the "annual addition" (as defined in Section 4.10) to any
Participant's Account to exceed the amount allowable by the Code, the
excess shall be reallocated in accordance with Section 4.11.
Except, however, a Participant who does not perform an Hour of Service
on the last day of a Plan Year or who performs less than a Year of Service
during a Plan Year shall not share in the Plan Forfeitures for that year,
unless required pursuant to Section 4.5(l) or 4.5(o).
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(i) Minimum Allocations Required for Top Heavy Plan Years:
Notwithstanding the foregoing, for any Top Heavy Plan Year, the sum of the
Employer's contributions and Forfeitures allocated to the Account of each
Non-Key Employee shall be equal to at least three percent (3%) of such Non-
Key Employee's "415 Compensation." However, if (i) the sum of the
Employer's contributions and Forfeitures allocated to the Account of each
Key Employee for such Top Heavy Plan Year is less than three percent (3%)
of each Key Employee's "415 Compensation" and (ii) this Plan is not
required to be included in an Aggregation Group to enable a defined benefit
plan to meet the requirements of Code Section 401(a)(4) or 410, the sum of
the Employer's contributions and Forfeitures allocated to the Account of
each Non-Key Employee shall be equal to the largest percentage allocated to
the Account of each Key Employee. However, in determining whether a Non-
Key Employee has received the required minimum allocation, such Non-Key
Employee's Deferred Compensation and Matching Contributions needed to
satisfy the "Actual Contribution Percentage" tests pursuant to section
4.8(a) shall not be taken into account.
Except, however, no such minimum allocation shall be required in this
Plan for any Non-Key Employee who participates in another defined
contribution plan subject to Code Section 412 providing such benefits
included with this Plan in a Required Aggregation Group.
(j) For purposes of the minimum allocations set forth above, the
percentage allocated to the Participant's Account of any Key Employee shall
be equal to the ratio of the sum of the Employer's contribution and
Forfeitures allocated on behalf of such Key Employee divided by the "415
Compensation" for such Key Employee.
(k) For any Top Heavy Plan Year, the minimum allocations set forth
above shall be allocated to the Participant's Account of all Non-Key
Employees who are Participants and who are employed by the Employer on the
last day of the Plan Year, including Non-Key Employees who have (1) failed
to complete a Year of Service; (2) declined to make mandatory contributions
(if required) or, in the case of a cash or deferred arrangement, elective
contributions to the Plan; and (3) been excluded from participation because
of their level of Compensation.
(l) In lieu of the above, if a Non-Key Employee participates in this
Plan and a defined benefit pension plan included in a Required Aggregation
Group which is top heavy, a minimum allocation of five percent (5%) of "415
Compensation" shall be provided under this Plan.
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The extra minimum allocation (required by Section 4.10(m) to provide
higher limitations) will not be provided.
(m) Any Participant who terminated employment during the Plan Year for
any reason including death, Total and Permanent Disability or retirement,
shall share only in the allocations of earnings or losses as provided in
this Section. However, if any non-segregated account of a Participant has
been distributed prior to the subsequent Anniversary Date or other
Valuation Date, no earnings and losses shall be credited.
(n) Notwithstanding anything herein to the contrary, Participants
terminating for reasons of death or Total and Permanent Disability or after
his or her Retirement Date shall share in the allocations of contributions
and Forfeitures provided for in this Section regardless of whether they
performed an Hour of Service on the last day of a Plan Year or completed a
Year of Service during the Plan Year.
(o) If a Former Participant is reemployed after five (5) consecutive
1-Year Breaks in Service, then separate accounts shall be maintained as
follows:
(1) one account for nonforfeitable benefits attributable to pre-
break service; and
(2) one account representing his status in the Plan attributable
to post-break service.
4.6 Actual Deferral Percentage Tests
(a) For each Plan Year, the annual allocation derived from Elective
Contributions to a Participant's Elective Account shall satisfy one of the
following tests:
(1) The "Actual Deferral Percentage" for the Highly Compensated
Participant group for the Plan Year being tested shall not be more
than the "Actual Deferral Percentage" of the Non-Highly Compensated
Participant group for the previous Plan Year multiplied by 1.25, or
(2) The excess of the "Actual Deferral Percentage" for the Highly
Compensated Participant group for the Plan Year being tested over the
"Actual Deferral Percentage" for the Non-Highly Compensated
Participant group for the
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previous Plan Year shall not be more than two percentage points.
Additionally, the "Actual Deferral Percentage" for the Highly
Compensated Participant group for the Plan Year being tested shall not
exceed the "Actual Deferral Percentage" for the Non-Highly Compensated
Participant group for the previous Plan Year multiplied by 2. The
provisions of Code Section 401(k)(3) and Regulation 1.401(k)-1(b) are
incorporated herein by reference.
For purposes of this Section, the individuals taken into account in
determining the "Actual Deferral Percentage" for the Non-Highly Compensated
Participant group for the previous Plan Year shall be those individuals who
were Non-Highly Compensated Participants during the previous Plan Year,
without regard to the individuals' status in the current Plan Year.
The Employer may elect to apply the limit under this Section based on
the "Actual Deferral Percentage" for the Non-Highly Compensated Participant
group for the Plan Year being tested rather than the previous Plan Year,
but if the Employer so elects, such election may not be changed except as
provided by the Secretary of Treasury.
To prevent the multiple use of the alternate method described in (2)
above and in Code Section 401(m)(9)(A), any Highly Compensated Participant
eligible to make Elective Contributions pursuant to Section 4.2 and to make
Employee contributions or to receive matching contributions under this Plan
or under any other plan maintained by the Employer or an Affiliated
Employer shall have his actual contribution ratio reduced pursuant to
Regulation 1.401(m)-2, the provisions of which are incorporated herein by
reference.
(b) For the purposes of this Section, "Actual Deferral Percentage"
means, with respect to the Highly Compensated Participant group and Non-
Highly Compensated Participant group for a Plan Year, the average of the
ratios, calculated separately for each Employee in such group, of the
amount of Elective Contributions allocated to each Participant's Elective
Account for such Plan Year, to such Employee's "414(s) Compensation" for
such Plan Year. The actual deferral ratio for each Employee and the
"Actual Deferral Percentage" for each group shall be calculated to the
nearest one-hundredth of one percent. Employer Elective Contributions
allocated to each Non-Highly Compensated Participant's Elective Account
shall be reduced by Excess Deferred Compensation to the extent such excess
amounts are made under this Plan or any other plan maintained by the
Employer.
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(c) For the purposes of Sections 4.6(a) and 4.7, a Highly Compensated
Participant and a Non-Highly Compensated Participant shall include any
Employee eligible to make a deferral election pursuant to Section 4.2,
whether or not such deferral election was made or suspended pursuant to
Section 4.2.
(d) For the purposes of this Section and Code Sections 401(a)(4),
410(b) and 401(k), if two or more plans that include cash or deferred
arrangements are considered one plan for the purposes of Code Section
401(a)(4) or 410(b) (other than Code Section 410(b)(2)(A)(ii)), the cash or
deferred arrangements included in such plans shall be treated as one
arrangement. In addition, two or more cash or deferred arrangements may be
considered as a single arrangement for purposes of determining whether or
not such arrangements satisfy Code Sections 401(a)(4), 410(b) and 401(k).
In such a case, the cash or deferred arrangements included in such plans
and the plans including such arrangements shall be treated as one
arrangement and as one plan for purposes of this Section and Code Sections
401(a)(4), 410(b) and 401(k). Plans may be aggregated under this paragraph
(d) only if they have the same plan year.
Notwithstanding the above, an ESOP or the ESOP portion of this Plan
may not be combined with the non-ESOP portion of this Plan for purposes of
determining whether the ESOP or this Plan satisfies this Section and Code
Sections 401(a)(4), 410(b) and 401(k).
(e) For the purposes of this Section, if a Highly Compensated
Participant is a participant under two (2) or more cash or deferred
arrangements (other than a cash or deferred arrangement that is part of an
ESOP) of the Employer or an Affiliated Employer, all such cash or deferred
arrangements shall be treated as one (1) cash or deferred arrangement for
the purpose of determining the deferral percentage with respect to such
Highly Compensated Participant. However, if the cash or deferred
arrangements have different plan years, this paragraph shall be applied by
treating all cash or deferred arrangements ending with or within the same
calendar year as a single arrangement.
(f) Notwithstanding the above, the determination and treatment of
Elective Contributions and the "Actual Deferral Percentage" of any
Participant shall satisfy such other requirements as may be prescribed by
the Secretary of the Treasury.
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4.7 Adjustment to Actual Deferral Percentage Tests
In the event that the initial allocations of the Elective Contributions
made pursuant to Section 4.2 do not satisfy one of the tests set forth in
Section 4.6(a), the Administrator shall adjust the Elective Contribution
pursuant to the options set forth below:
(a) (1) On or before the 15th day of the third month following the
end of each Plan Year, Excess Contributions (as defined below) shall be
distributed to Highly Compensated Participants in accordance with the
following procedure:
(i) The dollar amount of Excess Contributions for each
Highly Compensated Participant shall be calculated. For this
purpose, the amount of Excess Contributions for a Highly
Compensated Participant for a Plan Year is the amount (if any) by
which the Employee's Elective Contributions must be reduced for
the Employee's actual deferral ratio to equal the highest
permitted actual deferral ratio under the Plan.
To calculate the highest permitted actual deferral ratio
under the Plan, the actual deferral ratio of the Highly
Compensated Participant with the highest actual deferral ratio is
reduced by the amount required to cause the Employee's actual
deferral ratio to equal the percentage of the Highly Compensated
Participant with the next highest actual deferral ratio. If a
lesser reduction would enable the Plan to satisfy one of the
tests under Section 4.6(a), only this lesser reduction may be
made. This process is repeated until the Plan satisfies one of
the tests under Section 4.6(a). The highest actual deferral ratio
remaining under the Plan after the leveling is the highest
permitted actual deferral ratio.
(ii) The total dollar amounts calculated under (i) above
shall be determined. Such total amount shall be distributed in
accordance with (iii) and (iv) below.
(iii) The Elective Contributions of the Highly Compensated
Participant with the highest dollar amount of Elective
Contributions shall be reduced by the amount required to cause
that Highly Compensated Participant's Elective Contributions to
equal the dollar amount of the Elective Contributions of the
Highly Compensated Participant with the next highest
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dollar amount of Elective Contributions. Such amount shall be
distributed to the Highly Compensated Participant with the
highest dollar amount of Elective Contributions. If more than one
Highly Compensated Participant has the highest dollar amount of
Elective Contributions, such amount shall be distributed equally
to such Highly Compensated Participants. However, if a lesser
reduction, when added to the total dollar amount already
distributed under this paragraph (iii), would equal the amount
determined under paragraph (ii), only the lesser reduction amount
shall be distributed.
(iv) If the total amount distributed after the application
of paragraph (iii) is less than the amount determined under
paragraph (ii), the application of paragraph (iii) shall be
repeated.
In determining the amount of Excess Contributions to be distributed
with respect to an affected Highly Compensated Participant as determined
herein, such amount shall be reduced by any Excess Deferred Compensation
previously distributed to such affected Highly Compensated Participant for
his taxable year ending with or within such Plan Year. If there is a loss
allocable to such excess amount, the distribution shall in no event be less
than the lesser of the Participant's Elective Account or the Participant's
Deferred Compensation for the Plan Year.
(2) With respect to the distribution of Excess Contributions
pursuant to this paragraph (a), such distribution:
(i) may be postponed, but not later than the close of the
Plan Year following the Plan Year to which they are allocable;
(ii) shall be made first from unmatched Deferred
Compensation and, thereafter, from Deferred Compensation which is
matched. Matching Contributions which relate to such Deferred
Compensation shall be forfeited;
(iii) shall be adjusted for income; and
(iv) shall be designated by the Employer as a distribution
of Excess Contributions (and income).
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(3) Any distribution of less than the entire amount of Excess
Contributions shall be treated as a pro rata distribution of Excess
Contributions and income.
(b) Within twelve (12) months after the end of the Plan Year, if
necessary, the Employer may make a special Qualified Non-Elective
Contribution on behalf of Non-Highly Compensated Participants in an amount
sufficient to satisfy one of the tests set forth in Section 4.6(a). Such
contribution shall be allocated to the Participant's Elective Account of
each Non-Highly Compensated Participant in the same proportion that each
Non-Highly Compensated Participant's Compensation for the year bears to the
total Compensation of all Non-Highly Compensated Participants.
(c) If during a Plan Year the projected aggregate amount of Elective
Contributions to be allocated to all Highly Compensated Participants under
this Plan would, by virtue of the tests set forth in Section 4.6(a), cause
the Plan to fail such tests, then the Administrator may automatically
reduce proportionately or in the order provided in Section 4.7(a) each
affected Highly Compensated Participant's deferral election made pursuant
to Section 4.2 by an amount necessary to satisfy one of the tests set forth
in Section 4.6(a).
4.8 Actual Contribution Percentage Tests
(a) For each Plan Year, the "Actual Contribution Percentage" for the
Highly Compensated Participant group shall not exceed the greater of:
(1) 125 percent (125%) of such percentage for the Non-Highly
Compensated Participant group for the previous Plan Year; or
(2) the lesser of 200 percent (200%) of such percentage for the
Non-Highly Compensated Participant group for the previous Plan Year, or
such percentage for the Non-Highly Compensated Participant group for the
previous Plan Year plus 2 percentage points.
For purposes of this Section, the individuals taken into account in
determining the Actual Contribution Percentage for the Non-Highly
Compensated Participant group for the previous Plan Year shall be those
individuals who were Non-Highly Compensated Participants during the
previous Plan Year, without regard to the individuals' status in the
current Plan Year.
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The Employer may elect to apply the limit under this Section based on
the "Actual Contribution Percentage" for the Non-Highly Compensated
Participant group for the Plan Year being tested rather than the previous
Plan Year, but if the Employer so elects, such election may not be changed
except as provided by the Secretary of Treasury.
To prevent the multiple use of the alternative method described in (2)
above and Code Section 401(m)(9)(A), any Highly Compensated Participant
eligible to make elective deferrals under any cash or deferred arrangement
maintained by the Employer and to make Employee contributions or to receive
matching contributions under this Plan or any other plan maintained by the
Employer shall have his actual contribution ratio reduced pursuant to
Regulation 1.401(m)-2. The provisions of Code Section 401(m) and
Regulations 1.401(m)-1(b) and 1.401(m)-2 are incorporated herein by
reference.
(b) For the purposes of this Section and Section 4.9, "Actual
Contribution Percentage" for a Plan Year means, with respect to the Highly
Compensated Participant group and Non-Highly Compensated Participant group,
the average of the ratios (calculated separately for each Participant in
each group) of:
(1) the sum of Matching Contributions made pursuant to Section
4.1(a)(2) on behalf of each such Participant for such Plan Year; to
(2) the Participant's "414(s) Compensation" for such Plan Year.
(c) For purposes of determining the "Actual Contribution Percentage"
and the amount of Excess Aggregate Contributions pursuant to Section
4.9(d), only Matching Contributions (excluding Matching Contributions
forfeited pursuant to Section 4.2(g) or 4.7(a)(2)) contributed to the Plan
prior to the end of the succeeding Plan Year shall be considered. In
addition, the Administrator may elect to take into account, with respect to
Employees eligible to have Matching Contributions allocated to their
accounts, elective deferrals (as defined in Regulation 1.402(g)-1(b)) and
qualified non-elective contributions (as defined in Code Section
401(m)(4)(C)) contributed to any plan maintained by the Employer. Such
elective deferrals and qualified non-elective contributions shall be
treated as Employer contributions subject to Regulation 1.401(m)-1(b)(5)
which is incorporated herein by reference. However, the Plan Year must be
the same as the plan year of the plan to which the elective deferrals and
the qualified non-elective contributions are made.
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(d) For purposes of this Section and Code Sections 401(a)(4), 410(b)
and 401(m), if two or more plans of the Employer to which matching
contributions, Employee contributions, or both, are made are treated as one
plan for purposes of Code Sections 401(a)(4) or 410(b) (other than the
average benefits test under Code Section 410(b)(2)(A)(ii)), such plans
shall be treated as one plan. In addition, two or more plans of the
Employer to which matching contributions, Employee contributions, or both,
are made may be considered as a single plan for purposes of determining
whether or not such plans satisfy Code Sections 401(a)(4), 410(b) and
401(m). In such a case, the aggregated plans must satisfy this Section and
Code Sections 401(a)(4), 410(b) and 401(m) as though such aggregated plans
were a single plan. Plans may be aggregated under this paragraph only if
they have the same plan year.
Notwithstanding the above, an ESOP or the ESOP portion of this Plan
may not be combined with the non-ESOP portion of this Plan for purposes of
determining whether the ESOP or this Plan satisfies this Section and Code
Sections 401(a)(4), 410(b) and 401(m).
(e) If a Highly Compensated Participant is a participant under two or
more plans (other than an ESOP) which are maintained by the Employer to
which matching contributions, Employee contributions, or both, are made,
all such contributions on behalf of such Highly Compensated Participant
shall be aggregated for purposes of determining such Highly Compensated
Participant's actual contribution ratio. However, if the plans have
different plan years, this paragraph shall be applied by treating all plans
ending with or within the same calendar year as a single plan. For
purposes of this paragraph, contributions under a plan that is an ESOP may
not be aggregated with contributions under a plan that is not an ESOP.
(f) For purposes of Sections 4.8(a) and 4.9, a Highly Compensated
Participant and Non-Highly Compensated Participant shall include any
Employee eligible to have Matching Contributions made pursuant to Section
4.1(a)(2) (whether or not a deferral election was made) allocated to his
account for the Plan Year.
4.9 Adjustment to Actual Contribution Percentage Tests
(a) In the event that the "Actual Contribution Percentage" for the
Highly Compensated Participant group exceeds the "Actual Contribution
Percentage" for the Non-Highly Compensated Participant group pursuant to
Section 4.8(a), the Administrator (on or before the fifteenth day of the
third month following the end of the Plan Year, but in no event
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later than the close of the following Plan Year) shall direct the Trustee
to distribute Excess Aggregate Contributions in accordance with the
following procedure:
(1) The dollar amount of Excess Aggregate Contributions for each
Highly Compensated Participant shall be calculated. For this purpose,
the amount of Excess Aggregate Contributions for a Highly Compensated
Participant for a Plan Year is the amount (if any) by which the
Employee's Matching Contributions must be reduced for the Employee's
actual contribution ratio to equal the highest permitted actual
contribution ratio under the Plan.
To calculate the highest permitted actual contribution ratio
under the Plan, the actual contribution ratio of the Highly
Compensated Participant with the highest actual contribution ratio is
reduced by the amount required to cause the Employee's actual
contribution ratio to equal the percentage of the Highly Compensated
Participant with the next highest actual contribution ratio. If a
lesser reduction would enable the Plan to satisfy one of the tests
under Section 4.8(a), only this lesser reduction may be made. This
process is repeated until the Plan satisfies one of the tests under
Section 4.8(a). The highest actual contribution ratio remaining under
the Plan after the leveling is the highest permitted actual
contribution ratio.
(2) The total dollar amounts calculated under (1) above shall be
determined. Such total amount (and income allocable to such amount)
shall be distributed and/or forfeited in accordance with (3) and (4)
below.
(3) The Matching Contributions of the Highly Compensated
Participant with the highest dollar amount of Matching Contributions
shall be reduced by the amount required to cause that Highly
Compensated Participant's Matching Contributions to equal the dollar
amount of the Matching Contributions of the Highly Compensated
Participant with the next highest dollar amount of Matching
Contributions. The Vested portion of such amount (and income) shall
be distributed to the Highly Compensated Participant with the highest
dollar amount of Matching Contributions, and the non-Vested portion
(and income) shall be forfeited. If more than one Highly Compensated
Participant has the highest dollar amount of Matching Contributions,
such amount shall be distributed and/or forfeited equally to such
Highly Compensated Participants. However, if a lesser reduction, when
added to the total dollar amount already distributed and/or forfeited
under this paragraph (3),
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would equal the amount determined under paragraph (2), only the lesser
reduction amount shall be distributed and/or forfeited.
(4) If the total amount distributed and/or forfeited after the
application of paragraph (3) is less than the amount determined under
paragraph (2), the application of paragraph (3) shall be repeated.
(b) Any distribution and/or Forfeiture of less than the entire amount
of Excess Aggregate Contributions (and income) shall be treated as a pro
rata distribution and/or Forfeiture of Excess Aggregate Contributions and
income thereon. Distribution of Excess Aggregate Contributions shall be
designated by the Employer as a distribution of Excess Aggregate
Contributions (and income). Forfeitures of Excess Aggregate Contributions
shall be treated in accordance with Section 4.5(i). However, no such
Forfeiture may be allocated to a Highly Compensated Participant whose
contributions are reduced pursuant to this Section.
(c) Excess Aggregate Contributions, including forfeited Matching
Contributions, shall be treated as Employer contributions for purposes of
Code Sections 404 and 415 even if distributed from the Plan. Forfeited
Matching Contributions that are reallocated to Participants' Accounts for
the Plan Year in which the forfeiture occurs shall be treated as an "annual
addition" for the Participants to whose Accounts they are reallocated and
for the Participants from whose Accounts they are forfeited.
(d) For each Highly Compensated Participant, the amount of Excess
Aggregate Contributions is equal to the Matching Contributions made
pursuant to Section 4.1(a)(2) and any qualified non-elective contributions
or elective deferrals taken into account pursuant to Section 4.8(c) on
behalf of the Highly Compensated Participant (determined prior to the
application of this paragraph) minus the amount determined by multiplying
the Highly Compensated Participant's actual contribution ratio (determined
after application of this paragraph) by his "414(s) Compensation." The
actual contribution ratio must be rounded to the nearest one-hundredth of
one percent. In no case shall the amount of Excess Aggregate Contribution
with respect to any Highly Compensated Participant exceed the amount of
Matching Contributions and any qualified non-elective contributions or
elective deferrals taken into account pursuant to Section 4.8(c) on behalf
of the Highly Compensated Participant for such Plan Year.
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(e) If during a Plan Year the projected aggregate amount of Matching
Contributions to be allocated to all Highly Compensated Participants under
this Plan would, by virtue of the tests set forth in Section 4.8(a), cause
the Plan to fail such tests, then the Administrator may automatically
reduce proportionately or in the order provided in Section 4.9(a) each
affected Highly Compensated Participant's projected share of such
contributions by an amount necessary to satisfy one of the tests set forth
in Section 4.8(a).
(f) Notwithstanding the above, within twelve (12) months after the end
of the Plan Year, the Employer may make a special Qualified Non-Elective
Contribution on behalf of Non-Highly Compensated Participants in an amount
sufficient to satisfy one of the tests set forth in Section 4.8(a). Such
contribution shall be allocated to the Participant's Elective Account of
each Non-Highly Compensated Participant in the same proportion that each
Non-Highly Compensated Participant's Compensation for the year bears to the
total Compensation of all Non-Highly Compensated Participants. A separate
accounting shall be maintained for the purpose of excluding such
contributions from the "Actual Deferral Percentage" tests pursuant to
Section 4.6(a).
4.1 Maximum Annual Additions
(a) Notwithstanding the foregoing, the maximum "annual additions"
credited to a Participant's Accounts for any "limitation year" shall equal
the lesser of: (1) $30,000 or (2) twenty-five percent (25%) of the
Participant's "415 Compensation" for such "limitation year." For any short
"limitation year," the dollar limitation in (1) above shall be reduced by a
fraction, the numerator of which is the number of full months in the short
"limitation year" and the denominator of which is twelve (12).
(b) For purposes of applying the limitations of Code Section 415,
"annual additions" means the sum credited to a Participant's accounts for
any "limitation year" of (1) Employer contributions, (2) Employee
contributions, (3) Forfeitures, (4) amounts allocated to an individual
medical account, as defined in Code Section 415(l)(2), which is part of a
pension or annuity plan maintained by the Employer and (5) amounts derived
from contributions paid or accrued after December 31, 1985, in taxable
years ending after such date, which are attributable to post-retirement
medical benefits allocated to the separate account of a key employee (as
defined in Code Section 419A(d)(3)) under a welfare benefit plan (as
defined in Code Section 419(e)) maintained by the Employer. For purposes
of the preceding sentence, the amount of Employer contributions shall be
determined based upon the lesser of (i) the fair market value of the
Company Stock contributed to the Trust
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(determined at the time of contribution); or (ii) the amount of cash
contributed to the Trust. Except, however, the "415 Compensation"
limitation referred to in paragraph (a)(2) above shall not apply to: (1)
any contribution for medical benefits (within the meaning of Code Section
419A(f)(2)) after separation from service which is otherwise treated as an
"annual addition," or (2) any amount otherwise treated as an "annual
addition" under Code Section 415(l)(1).
(c) For purposes of applying the limitations of Code Section 415, the
transfer of funds from one qualified plan to another is not an "annual
addition." In addition, the following are not Employee contributions for
purposes of Section 4.10(b)(2): (1) rollover contributions (as defined in
Code Sections 402(c)(5), 403(a)(4), 403(b)(8) and 408(d)(3)); (2)
repayments of loans made to a Participant from the Plan; (3) repayments of
distributions received by an Employee pursuant to Code Section 411(a)(7)(B)
(cash-outs); (4) repayments of distributions received by an Employee
pursuant to Code Section 411(a)(3)(D) (mandatory contributions); (5)
Employee contributions to a simplified employee pension excludable from
gross income under Code Section 408(k); and (6) the amount of the sale
proceeds in excess of the basis of the Company Stock held in the
Unallocated Company Stock Suspense Account.
The limitations of Code Section 415 shall not apply to (1) Forfeitures
of Company Stock purchased with the proceeds of an Exempt Loan and (2)
Employer contributions which are deductible under Code Section 404(a)(9)(B)
and charged against a Participant's Account, if no more than one-third of
the Employer contributions for the year which are deductible under Code
Section 404(a)(9) are allocated to the Accounts of Highly Compensated
Employees.
(d) For purposes of applying the limitations of Code Section 415, the
"limitation year" shall be the Plan Year.
(e) The limitation stated in paragraph (a)(1) above shall be adjusted
annually as provided in Code Section 415(d) pursuant to the Regulations.
The adjusted limitation is effective as of January 1st of each calendar
year and is applicable to "limitation years" ending with or within that
calendar year.
(f) For the purpose of this Section, all qualified defined benefit
plans (whether terminated or not) ever maintained by the Employer shall be
treated as one defined benefit
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plan, and all qualified defined contribution plans (whether terminated or
not) ever maintained by the Employer shall be treated as one defined
contribution plan.
(g) For the purpose of this Section, if the Employer is a member of a
controlled group of corporations, trades or businesses under common control
(as defined by Code Section 1563(a) or Code Section 414(b) and (c) as
modified by Code Section 415(h)) is a member of an affiliated service group
(as defined by Code Section 414(m)), or is a member of a group of entities
required to be aggregated pursuant to Regulations under Code Section
414(o), all Employees of such Employers shall be considered to be employed
by a single Employer.
(h) For the purpose of this Section, if this Plan is a Code Section
413(c) plan, all Employers of a Participant who maintain this Plan will be
considered to be a single Employer.
(i) If a Participant participates in more than one defined
contribution plan maintained by the Employer which have different
Anniversary Dates, the maximum "annual additions" under this Plan shall
equal the maximum "annual additions" for the "limitation year" minus any
"annual additions" previously credited to such Participant's accounts
during the "limitation year."
(1) If a Participant participates in both a defined contribution
plan subject to Code Section 412 and a defined contribution plan not
subject to Code Section 412 maintained by the Employer which have the
same Anniversary Date, "annual additions" will be credited to the
Participant's accounts under the defined contribution plan subject to
Code Section 412 prior to crediting "annual additions" to the
Participant's accounts under the defined contribution plan not subject
to Code Section 412.
(2) If a Participant participates in more than one defined
contribution plan not subject to Code Section 412 maintained by the
Employer which have the same Anniversary Date, the maximum "annual
additions" under this Plan shall equal the product of (A) the maximum
"annual additions" for the "limitation year" minus any "annual
additions" previously credited under subparagraphs (1) or (2) above,
multiplied by (B) a fraction (i) the numerator of which is the "annual
additions" which would be credited to such Participant's accounts
under this Plan without regard
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to the limitations of Code Section 415 and (ii) the denominator of
which is such "annual additions" for all plans described in this
subparagraph.
(j) If an Employee is (or has been) a Participant in one or more
defined benefit plans and one or more defined contribution plans maintained
by the Employer, the sum of the defined benefit plan fraction and the
defined contribution plan fraction for any "limitation year" may not exceed
1.0.
(k) The defined benefit plan fraction for any "limitation year" is a
fraction, the numerator of which is the sum of the Participant's projected
annual benefits under all the defined benefit plans (whether or not
terminated) maintained by the Employer, and the denominator of which is the
lesser of 125 percent of the dollar limitation determined for the
"limitation year" under Code Sections 415(b) and (d) or 140 percent of the
amount which may be taken into account under Code Section 415(b)(1)(B) with
respect to the Participant under the plan for such year, including any
adjustments under Code Section 415(b).
Notwithstanding the above, if the Participant was a participant as of
the first day of the first "limitation year" beginning after December 31,
1986, in one or more defined benefit plans maintained by the Employer which
were in existence on May 6, 1986, the denominator of this fraction will not
be less than 125 percent of the sum of the annual benefits under such plans
which the Participant had accrued as of the close of the last "limitation
year" beginning before January 1, 1987, disregarding any changes in the
terms and conditions of the plan after May 5, 1986. The preceding sentence
applies only if the defined benefit plans individually and in the aggregate
satisfied the requirements of Section 415 for all "limitation years"
beginning before January 1, 1987.
(l) The defined contribution plan fraction for any "limitation year"
is a fraction, the numerator of which is the sum of the annual additions to
the Participant's Account under all the defined contribution plans (whether
or not terminated) maintained by the Employer for the current and all prior
"limitation years" (including the annual additions attributable to the
Participant's nondeductible Employee contributions to all defined benefit
plans, whether or not terminated, maintained by the Employer, and the
annual additions attributable to all welfare benefit funds, as defined in
Code Section 419(e), and individual medical accounts, as defined in Code
Section 415(l)(2), maintained by the Employer), and the denominator of
which is the sum of the maximum aggregate amounts for the current and all
prior "limitation years" of service with the Employer (regardless of
whether a defined contribution plan was maintained by the Employer). The
maximum aggregate amount in any "limitation year" is
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the lesser of 125 percent of the dollar limitation determined under Code
Sections 415(b) and (d) in effect under Code Section 415(c)(1)(A) or 35
percent of the Participant's Compensation for such year.
If the employee was a Participant as of the end of the first day of
the first limitation year beginning after December 31, 1986, in one or more
defined contribution plans maintained by the Employer which were in
existence on May 6, 1986, the numerator of this fraction will be adjusted
if the sum of this fraction and the defined benefit fraction would
otherwise exceed 1.0 under the terms of this Plan. Under the adjustment,
an amount equal to the product of (1) the excess of the sum of the
fractions over 1.0 times (2) the denominator of this fraction, will be
permanently subtracted from the numerator of this fraction. The adjustment
is calculated using the fractions as they would be computed as of the end
of the last limitation year beginning before January 1, 1987, and
disregarding any changes in the terms and conditions of the Plan made after
May 5, 1986, but using the Section 415 limitation applicable to the first
limitation year beginning on or after January 1, 1987. The annual addition
for any "limitation year" beginning before January 1, 1987 shall not be
recomputed to treat all Employee contributions as annual additions.
(m) Notwithstanding the foregoing, for any "limitation year" in which
the Plan is a Top Heavy Plan, 100 percent shall be substituted for 125
percent in paragraph 4.10(k) and 4.10(l) unless the extra minimum
allocation is being provided pursuant to Section 45. However, for any
"limitation year" in which the Plan is a Super Top Heavy Plan, 100 percent
shall be substituted for 125 percent in any event.
(n) Notwithstanding anything contained in this Section to the
contrary, the limitations, adjustments and other requirements prescribed in
this Section shall at all times comply with the provisions of Code Section
415 and the Regulations thereunder, the terms of which are specifically
incorporated herein by reference.
4.11 Adjustment for Excessive Annual Additions
(a) If as a result of the allocation of Forfeitures, a reasonable
error in estimating a Participant's Compensation, a reasonable error in
determining the amount of elective deferrals (within the meaning of Code
Section 402(g)) that may be made with respect to any Participant under the
limits of Section 4.10) or other facts and circumstances to which
Regulation 1.415-6(b)(6) shall be applicable, the "annual additions" under
this Plan would cause the maximum "annual additions" to be exceeded for any
Participant, the Administrator
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shall (1) distribute any elective deferrals (within the meaning of Code
Section 402(g)(3)) credited for the "limitation year" to the extent that
the return would reduce the "excess amount" in the Participant's accounts
(2) hold any "excess amount" remaining after the return of any elective
deferrals in a "Section 415 suspense account" (3) use the "Section 415
suspense account" in the next "limitation year" (and succeeding "limitation
years" if necessary) to reduce Employer contributions for the Participant
if that Participant is covered by the Plan as of the end of the "limitation
year," or if the Participant is not so covered, allocate and reallocate the
"Section 415 suspense account" in the next "limitation year" (and
succeeding "limitation years" if necessary) to all Participants in the Plan
before any Employer or Employee contributions which would constitute
"annual additions" are made to the Plan for such "limitation year" (4)
reduce Employer contributions to the Plan for such "limitation year" by the
amount of the "Section 415 suspense account" allocated and reallocated
during such "limitation year."
(b) For purposes of this Article, "excess amount" for any Participant
for a "limitation year" shall mean the excess, if any, of (1) the "annual
additions" which would be credited to his account under the terms of the
Plan without regard to the limitations of Code Section 415 over (2) the
maximum "annual additions" determined pursuant to Section 4.10.
(c) For purposes of this Section, "Section 415 suspense account" shall
mean an unallocated account equal to the sum of "excess amounts" for all
Participants in the Plan during the "limitation year." The "Section 415
suspense account" shall not share in any earnings or losses of the Trust
Fund.
4.1 Transfers and Rollovers from Other Qualified Plans
(a) With the consent of the Administrator, amounts may be transferred
from other qualified plans by Participants, provided that the trust from
which such funds are transferred permits the transfer to be made and the
transfer will not jeopardize the tax exempt status of the Plan or create
adverse tax consequences for the Employer. The amounts transferred shall
be set up in a separate account herein referred to as a "Rollover Account."
Such account shall be fully Vested at all times and shall not be subject to
Forfeiture for any reason.
(b) Amounts in a Participant's Rollover Account shall be held by the
Trustee pursuant to the provisions of this Plan and may not be withdrawn
by, or distributed to the Participant, in whole or in part, except as
provided in paragraphs (c) and (d) of this Section.
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(c) Except as permitted by Regulations (including Regulation 1.411(d)-
4), amounts attributable to elective contributions (as defined in
Regulation 1.401(k)-1(g)(3)), including amounts treated as elective
contributions, which are transferred from another qualified plan in a plan-
to-plan transfer shall be subject to the distribution limitations provided
for in Regulation 1.401(k)-1(d).
(d) At Normal Retirement Date, or such other date when the Participant
or his Beneficiary shall be entitled to receive benefits, the fair market
value of the Participant's Rollover Account shall be used to provide
additional benefits to the Participant or his Beneficiary. Any
distributions of amounts held in a Participant's Rollover Account shall be
made in a manner which is consistent with and satisfies the provisions of
Section 7.5, including, but not limited to, all notice and consent
requirements of Code Section 411(a)(11) and the Regulations thereunder.
Furthermore, such amounts shall be considered as part of a Participant's
benefit in determining whether an involuntary cash-out of benefits without
Participant's consent may be made.
(e) All amounts allocated to a Participant's Rollover Account shall be
invested in Investment Funds in accordance with the direction of the
Participant pursuant to Section 4.13.
(f) For purposes of this Section, the term "qualified plan" shall mean
any tax qualified plan under Code Section 401(a). The term "amounts
transferred from other qualified plans" shall mean: (i) amounts transferred
to this Plan directly from another qualified plan; (ii) distributions from
another qualified plan which are eligible rollover distributions and which
are either transferred by the Employee to this Plan within sixty (60) days
following his receipt thereof or are transferred pursuant to a direct
rollover; (iii) amounts transferred to this Plan from a conduit individual
retirement account provided that the conduit individual retirement account
has no assets other than assets which (A) were previously distributed to
the Employee by another qualified plan as a lump-sum distribution (B) were
eligible for tax-free rollover to a qualified plan and (C) were deposited
in such conduit individual retirement account within sixty (60) days of
receipt thereof and other than earnings on said assets; and (iv) amounts
distributed to the Employee from a conduit individual retirement account
meeting the requirements of clause (iii) above, and transferred by the
Employee to this Plan within sixty (60) days of his receipt thereof from
such conduit individual retirement account.
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(g) Prior to accepting any transfers to which this Section applies,
the Administrator may require the Employee to establish that the amounts to
be transferred to this Plan meet the requirements of this Section and may
also require the Employee to provide an opinion of counsel satisfactory to
the Employer that the amounts to be transferred meet the requirements of
this Section.
(h) This Plan shall not accept any direct or indirect transfers (as
that term is defined and interpreted under Code Section 401(a)(11) and the
Regulations thereunder) from a defined benefit plan, money purchase plan
(including a target benefit plan), stock bonus or profit sharing plan which
would otherwise have provided for a life annuity form of payment to the
Participant.
(i) Notwithstanding anything herein to the contrary, a transfer
directly to this Plan from another qualified plan (or a transaction having
the effect of such a transfer) shall be permitted only if it will not
result in the elimination or reduction of any protected benefits under Code
Section 411(d)(6).
4.1 Directed Investment Account
(a) A Participant's Elective Account shall be invested at the
Participant's election in the Investment Funds as the Administrator may
approve for investment purposes. Except as provided in paragraph (c), a
Participant may not direct the investment of his Company Stock Account.
That portion of the Account of a Participant who directs the investment
thereof shall be considered a Directed Investment Account which shall not
share in Trust Fund earnings.
(b) The Trustee shall divide the Trust Fund into the number and types
of Investment Funds as the Administrator may approve for investment
purposes. Designation by a Participant to the various Investment Funds
shall be in increments of five percent (5%). The Administrator shall
implement rules and requirements pertaining to changes by Participants in
their investment allocations among the Investment Funds.
(c) Each Qualified Participant may elect within ninety (90) days after
the close of each Plan Year during the Qualified Election Period to direct
the Trustee in writing as to the investment of 25 percent of the total
number of shares of Company Stock acquired by or contributed to the Plan
that have ever been allocated to such Qualified Participant's Company Stock
Account (reduced by the number of shares of Company Stock previously
invested
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pursuant to a prior election under this subparagraph). In the case of the
election year in which the Participant can make his last election, the
preceding sentence shall be applied by substituting "50 percent" for "25
percent." If the Qualified Participant elects to direct the Trustee as to
the investment of his Company Stock Account, such direction shall be
effective no later than 180 days after the close of the Plan Year to which
such direction applies. In lieu of directing the Trustee as to the
investment of his Company Stock Account, the Qualified Participant may
elect a distribution in cash or Company Stock of the portion of his Company
Stock Account covered by the election within ninety (90) days after the
last day of the period during which the election can be made. Any such
distribution of Company Stock shall be subject to Section 7.11.
(d) For the purposes of this Section the following definitions shall
apply:
(1) "Qualified Participant" means any Participant or Former
Participant who has completed ten (10) Years of Service as a
Participant and has attained age 55.
(2) "Qualified Election Period" shall mean the six (6) Plan Year
period beginning with the first Plan Year in which the Participant
first becomes a Qualified Participant.
(e) A separate Directed Investment Account shall be established for
each Participant who has directed an investment. Transfers between the
Participant's regular account and his Directed Investment Account shall be
charged and credited as the case may be to each account. The Directed
Investment Account shall not share in Trust Fund earnings, but it shall be
charged or credited as appropriate with the net earnings, gains, losses and
expenses as well as any appreciation or depreciation in market value during
each Plan Year attributable to such account. To the extent so directed,
the Trustees are relieved of their fiduciary responsibilities as provided
in Section 404 of the Act.
4.1 Suspense Account
All Employer contributions, Forfeitures and earnings (or losses) of the
Trust Fund shall be held in a suspense account until allocated to the applicable
Participants' Accounts.
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ARTICLE 5
FUNDING AND INVESTMENT POLICY
5.1 Application of Cash
Elective Contributions shall be invested pursuant to Section 4.13(a) and
(b). Employer Matching Contributions and Discretionary Contributions in cash
received by the Trust Fund shall first be applied to pay any Current Obligations
of the Trust Fund.
5.2 Investment Policy - Matching and Discretionary Contributions
(a) All Employer Matching Contributions and Discretionary
Contributions are to be invested primarily in Company Stock.
(b) With due regard to subparagraph (a) above, the Administrator may
direct the Trustee to invest funds under the Plan in other property as
described in the Trust Agreement or direct the Trustee to hold such funds
in cash or cash equivalents.
(c) The Plan may not obligate itself to acquire Company Stock from a
particular holder thereof at an indefinite time determined upon the
happening of an event such as the death of the holder.
(d) The Plan may not obligate itself to acquire Company Stock under a
put option binding upon the Plan. However, at the time a put option is
exercised, the Plan may be given an option to assume the rights and
obligations of the Employer under a put option binding upon the Employer.
(e) All purchases or sales of Company Stock and the price of such
purchases or sales shall be made as the Administrator instructs the
Trustee. All purchases of Company Stock shall be made at a price which, in
the judgment of the Administrator, does not exceed the fair market value
thereof. All sales of Company Stock shall be made at a price which, in the
judgment of the Administrator, is not less than the fair market value
thereof. The valuation rules set forth in Article 6 shall be applicable.
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5.3 Transactions Involving Company Stock
All purchases or sales of Company Stock and the price of such purchases or
sales shall be made as the Administrator instructs the Trustee. All purchases
of Company Stock shall be made at a price which, in the judgment of the
Administrator, does not exceed the fair market value thereof. All sales of
Company Stock shall be made at a price which, in the judgment of the
Administrator, is not less than the fair market value thereof. The valuation
rules set forth in Article shall be applicable.
5.4 Loans to the Trust
(a) The Plan may, but only upon the direction of the Administrator,
borrow money for any lawful purpose, provided, the proceeds of an Exempt
Loan are used within a reasonable time after receipt only for any or all of
the following purposes:
(1) To acquire Company Stock.
(2) To repay such loan.
(3) To repay a prior Exempt Loan.
(b) All loans to the Trust which are made or guaranteed by a
disqualified person must satisfy all requirements applicable to Exempt
Loans including but not limited to the following:
(1) The loan must be at a reasonable rate of interest;
(2) Any collateral pledged to the creditor by the Plan shall
consist only of the Company Stock purchased with the borrower funds;
(3) Under the terms of the loan, any pledge of Company Stock
shall provide for the release of shares so pledged on a pro-rata basis
pursuant to Section 4.5(g);
(4) Under the terms of the loan, the creditor shall have no
recourse against the Plan except with respect to such collateral,
earnings attributable to such collateral,
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Employer contributions (other than contributions of Company Stock)
that are made to meet Current Obligations and earnings attributable to
such contributions;
(5) The loan must be for a specific term and may not be payable
at the demand of any person, except in the cause of a default;
(6) The term of the loan (including the sum of the expired
duration of the loan, any renewal period, any extension period, and
the duration of any new loan) shall not exceed ten (10) years;
(7) The loan must provide for annual payments of principal and
interest at a cumulative rate that is not less rapid at any time than
level payments of such amounts for ten (10) years;
(8) In the event of default upon an Exempt Loan, the value of the
Trust Fund transferred in satisfaction of the Exempt Loan shall not
exceed the amount of default. If the lender is a disqualified person,
an Exempt Loan shall provide for a transfer of Trust Funds upon
default only upon and to the extent of the failure of the Plan to meet
the payment schedule of the Exempt Loan; and
(9) Exempt Loan payments during a Plan Year must not exceed an
amount equal to: (A) the sum, over all Plan Years, of all Employer
contributions made by the Employer to the Plan with respect to such
Exempt Loan and earnings on such Employer contributions, less (B) the
sum of the Exempt Loan payments in all preceding Plan Years. A
separate accounting shall be maintained for such Employer
contributions and earnings until the Exempt Loan is repaid.
(c) The term "disqualified person" means a person who is a Fiduciary,
a person providing services to the Plan, an Employer any of whose Employees
are covered by the Plan, an employee organization any of whose members are
covered by the Plan, an owner, direct or indirect, of 50% or more of the
total combined voting power of all classes of voting stock or of the total
value of all classes of the stock, or an officer, director, 10% or more
shareholder, or a Highly Compensated Employee.
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5.5 Company Stock - 1042 Transactions
(a) No portion of the Trust Fund attributable to (or allocable in lieu
of) Company Stock acquired by the Plan in a sale to which Code Section 1042
or Code Section 2057 applies may accrue or be allocated directly or
indirectly under any plan maintained by the Employer meeting the
requirements of Code Section 401(a):
(1) during the "Nonallocation Period", for the benefit of:
(i) any taxpayer who makes an election under Code Section
1042(a) with respect to Company Stock or any decedent if the
executor of the estate of the decedent makes a qualified sale to
which Code Section 2057 applies,
(ii) any individual who is related to the taxpayer or the
decedent (within the meaning of Code Section 267(b)), or
(2) for the benefit of any other person who owns (after
application of Code Section 318(a)) more than 25 percent of:
(i) any class of outstanding stock of the Employer or
Affiliated Employer which issued such Company Stock, or
(ii) the total value of any class of outstanding stock of
the Employer or Affiliated Employer.
(b) Except, however, subparagraph (a)(1)(ii) above shall not apply to
lineal descendants of the taxpayer, provided that the aggregate amount
allocated to the benefit of all such lineal descendants during the
"Nonallocation Period" does not exceed more than five (5) percent of the
Company Stock (or amounts allocated in lieu thereof) held by the Plan which
are attributable to a sale to the Plan by any person related to such
descendants (within the meaning of Code Section 267(c)(4)) in a transaction
to which Code Section 1042 is applied.
(c) A person shall be treated as failing to meet the stock ownership
limitation under paragraph (a)(2) above if such person fails such
limitation:
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(1) at any time during the one (1) year period ending on the date
of sale of Company Stock to the Plan, or
(2) on the date as of which Company Stock is allocated to
Participants in the Plan.
(d) For purposes of this Section, "Nonallocation Period" means the
period beginning on the date of the sale of the Company Stock and ending on
the later of:
(1) the date which is ten (10) years after the date of the sale
of the Company Stock, or
(2) the date of the Plan allocation attributable to the final
payment of the Exempt Loan incurred in connection with such sale.
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ARTICLE 6
VALUATIONS
The Administrator shall direct the Trustee, as of each Anniversary Date,
and at such other date or dates deemed necessary by the Administrator, herein
called "Valuation Date," to determine the net worth of the assets comprising the
Trust Fund as it exists on the Valuation Date prior to taking into consideration
any contribution to be allocated for that Plan Year. In determining such net
worth, the Trustee shall value the assets comprising the Trust Fund at their
fair market value as of the Valuation Date and shall deduct all expenses for
which the Trustee has not yet obtained reimbursement from the Employer or the
Trust Fund. The Administrator shall have the duty of determining the fair
market value (or sometimes referred to as "value") of Company Stock.
For purposes of Section 5.3, 7.11 and this Section, valuations must be made
in good faith and based on all relevant factors for determining the fair market
value of securities. In the case of a transaction between a Plan and a
disqualified person, value must be determined as of the date of the transaction.
For all other Plan purposes, value must be determined as of the most recent
valuation date under the Plan. An independent appraisal will not in itself be a
good faith determination of value in the case of a transaction between the Plan
and a disqualified person. However, in other cases, a determination of fair
market value based on at least an annual appraisal independently arrived at by a
person who customarily makes such appraisals and who is independent of any party
to the transaction will be deemed to be a good faith determination of value.
Company Stock not readily tradeable on an established securities market shall be
valued by an independent appraiser appointed by the Administrator meeting
requirements similar to the requirements of the Regulations prescribed under
Code Section 170(a)(1).
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ARTICLE 7
DETERMINATION AND DISTRIBUTION OF BENEFITS
7.1 Determination of Benefits upon Retirement
A Participant who terminates his employment on or after his Normal
Retirement Date shall be distributed a benefit in accordance with Section 7.5
equal in value to the balance in the Participant's Elective Account as of his
Benefit Commencement Date, and the sum of the balances in the Participant's
Matching Contribution and Discretionary Contribution Accounts to be determined
as of the Valuation Date immediately preceding the Participant's Benefit
Commencement Date.
7.2 Determination of Benefits upon Death
(a) Upon the death of a Participant before his Normal Retirement Date
or other termination of his employment, the Participant's Beneficiary shall
be distributed a benefit in accordance with Section 7.5 equal in value to
the balance in the Participant's Elective Account as of the Benefit
Commencement Date and the sum of the balances in the Participant's Matching
Contribution and Discretionary Contribution Accounts to be determined as of
the Valuation Date immediately preceding such Benefit Commencement Date.
Upon the death of a Former Participant whose benefit has not been
distributed, the Former Participant's Beneficiary shall be distributed in
accordance with Section 7.5, the amount that would have been distributed to
the Former Participant.
(b) The Administrator may require such proper proof of death and such
evidence of the right of any person to receive payment of the value of the
account of a deceased Participant as the Administrator may deem desirable.
The Administrator's determination of death and of the right of any person
to receive payment shall be conclusive.
(c) The Beneficiary of the death benefit payable pursuant to this
Section shall be the Participant's spouse; provided, however, the
Participant may designate a Beneficiary other than his spouse if:
(1) the spouse has waived her right to be the Participant's
Beneficiary, or
(2) the Participant has no spouse, or
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(3) the Participant is legally separated or has not been
abandoned (within the meaning of local law) and the Participant has a
court order to such effect (and there is no "qualified domestic
relations order" as defined in Code Section 414(p) which provides
otherwise), or
(4) the spouse cannot be located.
In such event, the designation of a Beneficiary shall be made on a form
satisfactory to the Administrator. A Participant may at any time revoke
his designation of a Beneficiary or change his Beneficiary by filing
written notice of such revocation or change with the Administrator.
However, the Participant's spouse must again consent in writing to any such
change or revocation unless the original consent acknowledged that the
spouse had the right to limit consent only to a specific Beneficiary and
that the spouse voluntarily elected to relinquish such right. In the event
no valid designation of Beneficiary exists at the time of the Participant's
death, the death benefit shall be payable to his estate.
(d) Any consent by the Participant's spouse to waive any rights to the
death benefit must be in writing, must acknowledge the effect of such
waiver, and be witnessed by a Plan representative or a notary public.
Further, the spouse's consent must be irrevocable and must acknowledge the
specific nonspouse Beneficiary.
7.3 Determination of Benefits in Event of Disability
In the event a Participant's employment is terminated due to a Total and
Permanent Disability prior to his Normal Retirement Date or other termination of
his employment, such Participant shall be distributed a benefit in accordance
with Section 7.5 equal in value to the balance in the Participant's Elective
Account as of his Benefit Commencement Date and the sum of the balances in the
Participant's Matching Contribution and Discretionary Contribution Accounts to
be determined as of the Valuation Date immediately preceding his Benefit
Commencement Date.
7.4 Determination of Benefits upon Termination
(a) Each Participant whose employment is terminated for any reason
other than Total and Permanent Disability, retirement or death shall be
distributed a benefit in accordance with Section 7.5 equal in value the
balance in the Participant's Elective Account as of his Benefit
Commencement Date and the sum of his Vested interest in the balances
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in the Participant's Matching Contribution and Discretionary Contribution
Accounts determined as of the Valuation Date immediately preceding his
Benefit Commencement Date.
(b) For purposes of this Section, a Participant's Vested interest in
his Matching Contribution and Discretionary Contribution Accounts shall be
determined by such Participant's Years of Service for vesting purposes in
accordance with the following schedule:
Years of Service Vested Interest
---------------- ---------------
Less than 1 year 0%
1 year 20%
2 years 40%
3 years 60%
4 years 80%
5 years 100%
If a portion of a Participant's Matching Contribution and Discretionary
Contribution Accounts is forfeited, Company Stock allocated to the
Participant's Company Stock Account must be forfeited only after the
Participant's Other Investments Account has been depleted. If interest in more
than one class of Company Stock has been allocated to a Participant's Company
Stock Account, the Participant must be treated as forfeiting the same
proportion of each such class.
(c) The computation of a Participant's nonforfeitable percentage of
his interest in the Plan shall not be reduced as the result of any direct
or indirect amendment to this Article. In the event that the Plan is
amended to change or modify any vesting schedule, a Participant with at
least three (3) Years of Service as of the expiration date of the election
period may elect to have his nonforfeitable percentage computed under the
Plan without regard to such amendment. If a Participant fails to make such
election, then such Participant shall be subject to the new vesting
schedule. The Participant's election period shall commence on the adoption
date of the amendment and shall end 60 days after the latest of:
(1) the adoption date of the amendment,
(2) the effective date of the amendment, or
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(3) the date the Participant receives written notice of the
amendment from the Employer or Administrator.
(d) Paragraph (b) above notwithstanding, a Participant shall have a
100% Vested interest in his Accounts upon attainment of Normal Retirement
Date or upon the occurrence of his death or Total and Permanent Disability.
(e) (1) If any Former Participant shall be reemployed by the
Employer before a 1-Year Break in Service occurs, he shall continue to
participate in the Plan in the same manner as if such termination had
not occurred.
(2) If any Former Participant shall be reemployed by the Employer
before five (5) consecutive 1-Year Breaks in Service, and such Former
Participant had received a distribution of his entire Vested interest
prior to his reemployment, his forfeited account shall be reinstated
only if he repays the full amount distributed to him before the
earlier of five (5) years after the first date on which the
Participant is subsequently reemployed by the Employer or the close of
the first period of five (5) consecutive 1-Year Breaks in Service
commencing after the distribution. In the event the Former
Participant does repay the full amount distributed to him, the
undistributed portion of the Participant's Account must be restored in
full, unadjusted by any gains or losses occurring subsequent to the
Anniversary Date or other valuation date preceding his termination.
The source for such reinstatement shall first be any Forfeitures
occurring during the year. If such source is insufficient, then the
Employer shall contribute an amount which is sufficient to restore any
such forfeited Accounts; provided, however, that if a Discretionary
Contribution is made for such year pursuant to Section 4.1(a)(3), such
contribution shall first be applied to restore any such Accounts and
the remainder shall be allocated in accordance with Section 4.5.
(3) If any Former Participant is reemployed after a 1-Year Break
in Service has occurred, Years of Service shall include Years of
Service prior to his 1-Year Break in Service subject to the following
rules:
(i) If a Former Participant has a 1-Year Break in Service,
his pre-break and post-break service shall be used for computing
Years of Service for eligibility and for vesting purposes only
after he has been
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employed for one (1) Year of Service following the date of his
reemployment with the Employer;
(ii) Each non-vested Former Participant shall lose credits
otherwise allowable under (i) above if his consecutive 1-Year
Breaks in Service equal or exceed the greater of (A) five (5) or
(B) the aggregate number of his pre-Break of Service;
(ii) After five (5) consecutive 1-Year Breaks in Service, a
Former Participant's Vested Account balance attributable to pre-
break service shall not be increased as a result of post-break
service;
(iv) If a Former Participant who has not had his Years of
Service before a 1-Year Break in Service disregarded pursuant to
(ii) above completes one (1) Year of Service for eligibility
purposes following his reemployment with the Employer, he shall
participate in the Plan retroactively from his date of
reemployment;
(v) If a Former Participant who has not had his Years of
Service before a 1-Year Break in Service disregarded pursuant to
(ii) above completes a Year of Service (a 1-Year Break in Service
previously occurred, but employment had not terminated), he shall
participate in the Plan retroactively from the first day of the
Plan Year during which he completes one (1) Year of Service.
7.5 Distribution of Benefits
(a) Except as provided in paragraph (c) below with respect to the
Company Stock Account, payment of a Participant's benefit hereunder shall
be made as soon as administratively feasible after the Valuation Date
coincident or next succeeding the date the Participant or his Beneficiary
becomes entitled to a benefit pursuant to Sections 7.1, 7.2, 7.3 or 7.4.
(b) The Administrator, pursuant to the election of the Participant (or
if no election has been made prior to the Participant's death, by his
Beneficiary), shall direct the Trustee to distribute to a Participant or
his Beneficiary any amount to which he is entitled under the Plan in one
lump-sum payment.
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(c) Notwithstanding the above, the Administrator may, unless the
Participant elects in writing a longer distribution period, distribute to a
Participant or his Beneficiary Company Stock in substantially equal
monthly, quarterly, semiannual, or annual installments over a period not
longer than five (5) years. In the case of a Participant with an account
balance in the Plan in excess of $500,000, the five (5) year period shall
be extended one (1) additional year (but not more than five (5) additional
years) for each $100,000 or fraction thereof by which such balance exceeds
$500,000. The dollar limits shall be adjusted at the same time and in the
same manner as provided in Code Section 415(d). If (i) a Participant's
benefit does not exceed $5,000, or (ii) a Participant's benefit exceeds
$5,000 and the Participant elects, the Administrator will commence
distribution of the Participant's Company Stock Account balance not later
than one year after the close of the Plan Year (A) in which the Participant
separates from service on account of retirement, Total and Permanent
Disability or death, or (B) which is the fifth Plan Year following the Plan
Year in which the Participant otherwise separates from service, except that
this clause (ii) shall not apply if the Participant is reemployed by the
Employer before distribution is required to begin under this clause (ii).
Notwithstanding anything herein to the contrary, any Company Stock
allocated to a Participant's Company Stock Account purchased by means of an
Exempt Loan may not be distributed until after such Exempt Loan is repaid
in full.
(d) Any distribution to a Participant who has a benefit which exceeds,
or has ever exceeded, $5,000 at the time of any prior distribution shall
require such Participant's consent if such distribution commences prior to
the later of his Normal Retirement Age or age 62. With regard to this
required consent:
(1) The Participant must be informed of his right to defer
receipt of the distribution. If a Participant fails to consent, it
shall be deemed an election to defer the commencement of payment of
any benefit. However, any election to defer the receipt of benefits
shall not apply with respect to distributions which are required under
Section 7.5(h).
(2) Notice of the rights specified under this paragraph shall be
provided no less than 30 days and no more than 90 days before the
first day on which all events have occurred which entitle the
Participant to such benefit.
(3) Written consent of the Participant to the distribution must
not be made before the Participant receives the notice and must not be
made more than 90 days
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before the first day on which all events have occurred which entitle
the Participant to such benefit.
(4) No consent shall be valid if a significant detriment is
imposed under the Plan on any Participant who does not consent to the
distribution.
If the value of a Participant's benefit does not exceed $5,000 and has
never exceeded $5,000 at the time of any prior distribution, the
Administrator may direct the Trustee to cause the entire benefit to be paid
to such Participant without regard to Participant's election.
(e) Notwithstanding anything herein to the contrary, cash dividends on
shares of Company Stock allocated to Participants' Accounts may be paid to
Participants or their Beneficiaries, as determined in the sole discretion
of the Administrator, within 90 days after the close of the Plan Year in
which the dividend is paid.
(f) Except as limited by Sections 7.5 and 7.6, whenever the Trustee is
to make a distribution or to commence a series of payments on or before an
Anniversary Date, the distribution or series of payments may be made or
begun on such date or as soon thereafter as is practicable, but in no event
later than 180 days after the Anniversary Date. Except, however, unless a
Former Participant elects in writing to defer the receipt of benefits (such
election may not result in a death benefit that is more than incidental),
the payment of benefits shall begin not later than the 60th day after the
close of the Plan Year in which the latest of the following events occurs:
(1) the date on which the Participant attains the Normal
Retirement Age specified herein,
(2) the 10th anniversary of the year in which the Participant
commenced participation in the Plan, or
(3) the date the Participant terminates his service with the
Employer.
(g) Any part of a Participant's benefit which is retained in the Plan
after the Anniversary Date on which his participation ends will continue to
be treated as a Company Stock Account or as an Other Investments Account as
provided in Article 4. However, neither account will be credited with any
further Employer Contributions or Forfeitures.
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(h) Notwithstanding any provision in the Plan to the contrary, the
distribution of a Participant's benefits shall be made in accordance with
the following requirements and shall otherwise comply with Code Section
401(a)(9) and the Regulations thereunder (including Regulation Section
1.401(a)(9)-2), the provisions of which are incorporated herein by
reference:
(1) A Participant's benefits shall be distributed to him not
later than April 1st of the calendar year following the calendar year
in which the Participant attains age 70 1/2 if such Participant
attains age 70 1/2 prior to January 1, 1999. With respect to a
Participant who attains age 70 1/2 on or after January 1, 1999, such
Participant's benefits shall be distributed to him not later than
April 1st of the calendar year following the later of (i) the calendar
year in which the Participant attains age 70 1/2 or (ii) the calendar
year in which the Participant retires, provided, however, that this
clause (ii) shall not apply in the case of a Participant who is a
"five (5) percent owner" with respect to the Plan Year ending in the
calendar year in which he attains age 70 1/2. Alternatively,
distributions to a Participant must begin no later than the applicable
April 1st as determined under the preceding sentence and must be made
over a period certain measured by the life expectancy of the
Participant (or the life expectancies of the Participant and his
designated Beneficiary) in accordance with Regulations.
(2) Distributions to a Participant and his Beneficiaries shall
only be made in accordance with the incidental death benefit
requirements of Code Section 401(a)(9)(G) and the Regulations
thereunder.
(i) For purposes of this Section, the life expectancy of a Participant
and a Participant's spouse may, at the election of the Participant or the
Participant's spouse, be redetermined in accordance with Regulations. The
election, once made, shall be irrevocable. If no election is made by the
time distributions must commence, then the life expectancy of the
Participant and the Participant's spouse shall not be subject to
recalculation. Life expectancy and joint and last survivor expectancy
shall be computed using the return multiples in Tables V and VI of
Regulation 1.72-9.
(j) If a distribution is made at a time when a Participant is not
fully Vested in his Account (employment has not terminated) and the
Participant may increase the Vested percentage in such Account:
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(1) a separate account shall be established for the Participant's
interest in the Plan as of the time of distribution; and
(2) at any relevant time, the Participant's Vested portion of the
separate account shall be equal to an amount ("X") determined by the
formula:
X equals P(AB plus (R x D)) - (R x D)
For purposes of applying the formula, P is the Vested percentage at
the relevant time; AB is the account balance at the relevant time; D is the
amount of distribution; and R is the ratio of the account balance at the
relevant time to the account balance after distribution.
7.6 How Plan Benefit will be Distributed
(a) Distribution of a Participant's Company Stock Account may be made
in cash or Company Stock or both, provided, however, that if a Participant
or Beneficiary so demands, such Company Stock Account shall be distributed
only in the form of Company Stock. Prior to making a distribution of
benefits, the Administrator shall advise the Participant or his
Beneficiary, in writing, of the right to demand that his Company Stock
Account be distributed solely in Company Stock. If the Participant or his
Beneficiary fails to make such demand in writing within 90 days after
receipt of such written notice, the Administrator shall direct the Trustee
to make such distribution in such form as the Administrator, in his sole
discretion, shall determine.
Any distributions of cash hereunder shall be equal to Company Stock
held in the Participant's Company Stock Account on the Anniversary Date
subsequent to the event triggering a distribution, valued at the fair
market price per share of Company Stock as determined in accordance with
Article 6 as of the Anniversary Date immediately prior to the distribution.
For purposes of this Section, an "event triggering a distribution" shall
include but not be limited to retirement, death, disability, termination of
service and the election to commence receiving benefits hereunder pursuant
to Section 7.5.
(b) If a Participant or Beneficiary demands that his Company Stock
Account be distributed solely in Company Stock, distribution of a
Participant's Company Stock Account will be made entirely in whole shares
or other units of Company Stock. Any fractional unit value unexpended will
be distributed in cash. If Company Stock is not available for purchase by
the Trustee, then the Trustee shall hold such balance until Company Stock
is acquired and
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then make such distribution. If the Trustee is unable to
purchase the Company Stock required for distribution, he shall make
distribution in cash within one (1) year after the date the distribution
was to be made, except in the case of a retirement distribution which shall
be made within sixty (60) days after the close of the Plan Year in which a
Participant's retirement occurs.
(c) The Trustee will make distribution from the Trust only on
instructions from the Administrator.
(d) Notwithstanding anything contained herein to the contrary, if the
Employer's charter or by-laws restrict ownership of substantially all
shares of Company Stock to Employees and the Trust Fund, as described in
Code Section 409(h)(2), the distribution of a Participant's Company Stock
Account may be made entirely in cash without granting the Participant the
right to demand distribution in shares of Company Stock or distribute
entirely in Company Stock subject to a requirement that such Company Stock
may be resold to the Employer pursuant to Section 7.11.
(e) Except as otherwise provided herein, Company Stock distributed by
the Trustee may be restricted as to sale or transfer by the by-laws or
articles of incorporation of the Employer, provided restrictions are
applicable to all Company Stock of the same class. If a Participant is
required to offer the sale of his Company Stock to the Employer before
offering to sell his Company Stock to a third party, in no event may the
Employer pay a price less than that offered to the distributed by another
potential buyer making a bona fide offer and in no event shall the Trustee
pay a price less than the fair market value of the Company Stock.
(f) Except as otherwise provided in this Plan, a Participant is not
entitled to any payment, withdrawal or distribution under the Plan during
his participation. If any such partial distribution is made, the
Participant's benefit when computed will be reduced by the amount of any
such advance.
(g) If Company Stock acquired with the proceeds of an Exempt Loan
(described in Section 5.4 hereof) is available for distribution and
consists of more than one class, a Participant or his Beneficiary to whom a
distribution of such Company Stock is being made must receive substantially
the same proportion of each class.
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(h) Notwithstanding any provision in the Plan to the contrary,
distributions upon the death of a Participant shall be made in accordance
with the following requirements and shall otherwise comply with Code
Section 401(a)(9) and the Regulations thereunder. If it is determined,
pursuant to Regulations, that the distribution of a Participant's interest
has begun and the Participant dies before his entire interest has been
distributed to him, the remaining portion of such interest shall be
distributed at least as rapidly as under the method of distribution
selected pursuant to Section 7.5 as of his date of death. If a Participant
dies before he has begun to receive any distributions of his interest under
the Plan or before distributions are deemed to have begun pursuant to
Regulations, then his death benefit shall be distributed to his
Beneficiaries by December 31st of the calendar year in which the fifth
anniversary of his date of death occurs.
However, in the event that the Participant's spouse (determined as of
the date of the Participant's death) is his Beneficiary, then in lieu of
the preceding rules, distributions must be made over a period not extending
beyond the life expectancy of the spouse and must commence on or before the
later of (1) December 31st of the calendar year immediately following the
calendar year in which the Participant died; or (2) December 31st of the
calendar year in which the Participant would have attained 70 1/2. If the
surviving spouse dies before distributions to such spouse begin, then the
5-year distribution requirement of this section shall apply as if the
spouse was the Participant.
(i) For purposes of this Section, the life expectancy of a Participant
and a Participant's spouse may, at the election of the Participant or the
Participant's spouse, be redetermined in accordance with Regulations. The
election, once made, shall be irrevocable. If no election is made by the
time distributions must commence, then the life expectancy of the
Participant and the Participant's spouse shall not be subject to
recalculation. Life expectancy and joint and last survivor expectancy
shall be computed using the return multiples in Tables V and VI of
Regulation 1.72-9.
7.7 Distribution for Minor Beneficiary
In the event a distribution is to be made to a minor, then the
Administrator may, in the Administrator's sole discretion, direct that such
distribution be paid to the legal guardian, or if none, to a parent of such
Beneficiary or a responsible adult with whom the Beneficiary maintains his
residence, or to the custodian for such Beneficiary under the Uniform Gift to
Minors Act or Gift to Minors Act, if such is permitted by the laws of the state
in which said Beneficiary resides. Such a
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payment to the legal guardian or parent of a minor Beneficiary shall fully
discharge the Trustee, Employer, and Plan from further liability on account
thereof.
7.8 Location of Participant or Beneficiary Unknown
In the event that all, or any portion, of the distribution payable to a
Participant or his Beneficiary hereunder shall, at the expiration of five (5)
years after it shall become payable, remain unpaid solely by reason of the
inability of the Administrator, after sending a registered letter, return
receipt requested, to the last known address, and after further diligent effort,
to ascertain the whereabouts of such Participant or his Beneficiary, the
amount so distributable shall be reallocated in the same manner as a Forfeiture
pursuant to the Plan. In the event a Participant or Beneficiary is located
subsequent to his benefit being reallocated, such benefit shall be restored.
7.9 Right of First Refusals
(a) If any Participant, his Beneficiary or any other person to whom
shares of Company Stock are distributed from the Plan (the "Selling
Participant") shall, at any time, desire to sell some or all of such shares
(the "Offered Shares") to a third party (the "Third Party"), the Selling
Participant shall give written notice of such desire to the Employer and
the Administrator, which notice shall contain the number of shares offered
for sale, the proposed terms of the sale and the names and addresses of
both the Selling Participant and Third Party. Both the Trust Fund and the
Employer shall each have the right of first refusal for a period of
fourteen (14) days from the date the Selling Participant gives such written
notice to the Employer and the Administrator (such fourteen (14) day period
to run concurrently against the Trust Fund and the Employer) to acquire the
Offered Shares. As between the Trust Fund and the Employer, the Trust Fund
shall have priority to acquire the shares pursuant to the right of first
refusal. The selling price and terms shall be the same as offered by the
Third Party.
(b) If the Trust Fund and the Employer do not exercise their right of
first refusal within the required fourteen (14) day period provided above,
the Selling Participant shall have the right, at any time following the
expiration of such fourteen (14) day period, to dispose of the Offered
Shares to the Third Party; provided, however, that (i) no disposition shall
be made to the Third Party on terms more favorable to the Third Party than
those set forth in the written notice delivered by the Selling Participant
above, and (ii) if such disposition shall not be made to a third party on
the terms offered to the Employer and the Trust Fund, the offered Shares
shall again be subject to the right of first refusal set forth above.
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(c) The closing pursuant to the exercise of the right of first refusal
under Section 7.9(a) above shall take place at such place agreed upon
between the Administrator and the Selling Participant, but not later than
ten (10) days after the Employer or the Trust Fund shall have notified the
Selling Participant of the exercise of the right of first refusal. At such
closing, the Selling Participant shall deliver certificates representing
the Offered Shares duly endorsed in blank for transfer, or with stock
powers attached duly executed in blank with all required transfer tax
stamps attached or provided for, and the Employer or the Trust Fund shall
deliver the purchase price, or an appropriate portion thereof, to the
Selling Participant.
(d) Except as provided in this Paragraph (d), no Company Stock
acquired with the proceeds of an Exempt Loan complying with the
requirements of Section 5.4 hereof shall be subject to a right of first
refusal. Company Stock, which is acquired with the proceeds of an Exempt
Loan which is distributed to a Participant or Beneficiary shall be subject
to the right of first refusal, provided for in Paragraph (a) of this
Section only so long as the Company Stock is not publicly traded. The term
"publicly traded" refers to a securities exchange registered under
Section 6 of the Securities Exchange Act of 1934 (the "1934 Act") (15
U.S.C. 78f) or that is quoted on a system sponsored by a national
securities association registered under Section l5A(b) of the 1934 Act (15
U.S.C. 780). In addition, in the case of Company Stock which was acquired
with the proceeds of a loan described in Section 5.4, the selling price and
other terms under the right must not be less favorable to the seller than
the greater of the value of the security determined under 26 CFR 54.4975-
11(d)(5), or the purchase price and other terms offered by a buyer (other
than the Employer or the Trust Fund), making a good faith offer to purchase
the security. The right of first refusal must lapse no later than fourteen
(14) days after the security holder gives notice to the holder of the right
that an offer by a third party to purchase the security has been made. The
right of first refusal shall comply with the provisions of Paragraphs (a),
(b) and (c) of this Section, except to the extent those provisions may
conflict with the provisions of this paragraph.
7.10 Stock Certificate Legend
Certificates for shares distributed pursuant to the Plan shall contain the
following legend:
"The shares represented by this certificate are transferable only upon
compliance with the terms of the AXIA FINANCE CORP. EMPLOYEE STOCK
OWNERSHIP AND 401(k) PLAN (to be renamed AXIA INCORPORATED EMPLOYEE STOCK
OWNERSHIP AND
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401(k) PLAN) originally effective as of July 21, 1998, a copy of said Plan
being on file in the office of the Company."
7.11 Put Option
(a) If Company Stock which was not acquired with the proceeds of an
Exempt Loan is distributed to a Participant and such Company Stock is not
readily tradable on an established securities market, a Participant has a
right to require the Employer to repurchase the Company Stock distributed
to such Participant under a fair valuation formula. Such Stock shall be
subject to the provisions of Section 7.11(c).
(b) Company Stock which is acquired with the proceeds of an Exempt
Loan and which is not publicly traded when distributed, or if it is subject
to a trading limitation when distributed, must be subject to a put option.
For purposes of this paragraph, a "trading limitation" on a Company Stock
is a restriction under any Federal or State securities law or any
regulation thereunder, or an agreement (not prohibited by Section 7.12)
affecting the Company Stock which would make the Company Stock not as
freely tradeable as stock not subject to such restriction.
(c) The put option must be exercisable only by a Participant, by the
Participant's donees, or by a person (including an estate or its
distributee) to whom the Company Stock passes by reason of a Participant's
death. (Under this paragraph "Participant" or "Former Participant" means a
Participant or Former Participant and the Beneficiaries of the Participant
under the Plan.) The put option must permit a Participant to put the
Company Stock to the Employer. Under no circumstances may the put option
bind the Plan. However, it shall grant the Plan an option to assume the
rights and obligations of the Employer at the time the put option is
exercised. If it is known at the time a loan is made that Federal or State
law will be violated by the Employer's honoring such put option, the put
option must permit the Company Stock to be put, in a manner consistent with
such law, to a third party (e.g., an affiliate of the Employer or a
shareholder other than the Plan) that has substantial net worth at the time
the loan is made and whose net worth is reasonably expected to remain
substantial.
The put option shall commence as of the day following the date the
Company Stock is distributed to the former Participant and end 60 days
thereafter and if not exercised within such 60-day period, an additional
60-day option shall commence one year after the date the stock was
distributed to the Former Participant (or such other 60-day period as
provided in
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regulations promulgated by the Secretary of the Treasury).
However, in the case of Company Stock that is publicly traded without
restrictions when distributed but ceases to be so traded within either of
the 60-day periods described herein after distribution, the Employer must
notify each holder of such Company Stock in writing on or before the tenth
day after the date the Company Stock ceases to be so traded that for the
remainder of the applicable 60-day period the Company Stock is subject to
the put option. The number of days between the tenth day and the date on
which notice is actually given, if later than the tenth day, must be added
to the duration of the put option. The notice must inform distributees of
the term of the put options that they are to hold. The terms must satisfy
the requirements of this paragraph.
The put option is exercised by the holder notifying the Employer in
writing that the put option is being exercised; the notice shall state the
name and address of the holder and the number of shares to be sold. The
period during which a put option is exercisable does not include any time
when a distributee is unable to exercise it because the party bound by the
put option is prohibited from honoring it by applicable Federal or State
law. The price at which a put option must be exercisable is the value of
the Company Stock determined in accordance with Article 6. Payment under
the put option involving a "Total Distribution" shall be paid in
substantially equal monthly, quarterly, semiannual or annual installments
over a period certain beginning not later than thirty (30) days after the
exercise of the put option and not extending beyond (5) years. The
deferral of payment is reasonable if adequate security and a reasonable
interest rate on the unpaid amounts are provided. The amount to be paid
under the put option involving installment distributions must be paid not
later than thirty (30) days after the exercise of the put option. Payment
under a put option must not be restricted by the provisions of a loan or
any other arrangement, including the terms of the employer's articles of
incorporation, unless so required by applicable state law.
For purposes of this Section, "Total Distribution" means a
distribution to a Participant or Former Participant within one taxable year
of the entire Vested Participant's Account.
(d) An arrangement involving the Plan that creates a put option must
not provide for the issuance of put options other than as provided under
this Section. The Plan (and the Trust Fund) must not otherwise obligate
itself to acquire Company Stock from a particular holder thereof at an
indefinite time determined upon the happening of an event such as the death
of the holder.
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7.12 Nonterminable Protections and Rights
Except as provided in Section 7.9 and Section 7.11, no Company Stock
acquired with the proceeds of a loan described in Section 5.4 hereof may be
subject to a put, call, or other option, or buy-sell or similar arrangement when
held by and when distributed from the Trust Fund, whether or not the Plan is
then an ESOP. The protections and rights granted in this Section and in Section
7.9 and Section 7.11 are nonterminable, and such protections and rights shall
continue to exist under the terms of this Plan so long as any Company Stock
acquired with the proceeds of a loan described in Section 5.4 hereof is held by
the Trust Fund or by any Participant or other person for whose benefit such
protections and rights have been created, and neither the repayment of such loan
nor the failure of the Plan to be an ESOP, nor an amendment of the Plan shall
cause a termination of said protections and rights.
7.13 Participant Loans
A Participant may make application to the Administrator to borrow from his
Elective Account (not his Company Stock Account), and the Administrator in its
sole discretion may permit such a loan. Loans shall be granted in a uniform and
nondiscriminatory manner on terms and conditions determined by the Administrator
which shall not result in more favorable treatment of Highly Compensated
Employees and shall be set forth in written procedures promulgated by the
Administrator in accordance with applicable governmental regulations. All such
loans shall also be subject to the following terms and conditions:
(a) The amount of the loan when added to the amount of any outstanding
loan or loans to the Participant from any other plan of the Employer or an
Affiliated Employer which is qualified under Code Section 401(a) shall not
exceed the lesser of (i) $50,000, reduced by the excess, if any, of the
highest outstanding balance of loans from all such plans during the one-
year period ending on the day before the date on which such loan was made
over the outstanding balance of loans from the Plan on the date on which
such loan was made or (ii) fifty percent (50%) of the present value of the
Participant's Vested Account balance under the Plan. In no event shall a
loan of less than $500 or more than $50,000 be made to a Participant. A
Participant may not have more than one (1) loan outstanding at a time under
this Plan.
(b) The loan shall be for a term not to exceed five (5) years, unless
the loan is used to acquire any dwelling unit which within a reasonable
time is to be used as a principal residence of the Participant. The loan
shall be evidenced by a note signed by the Participant.
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The loan shall be payable in periodic installments and shall bear interest
at a reasonable rate which shall be determined by the Administrator on a
uniform and consistent basis and set forth in the procedures in accordance
with applicable governmental regulations. Payments by a Participant who is
an Employee will be made by means of payroll deduction from the
Participant's compensation. If the Participant is not receiving
compensation from the Employer, the loan repayment shall be made in
accordance with the terms and procedures established by the Administrator.
A Participant may repay an outstanding loan in full at any time.
(c) In the event an installment payment is not paid within seven (7)
days following the monthly due date, the Administrator shall give written
notice to the Participant sent to his last known address. If such
installment payment is not made within thirty (30) days thereafter, the
Administrator shall proceed with foreclosure in order to collect the full
remaining loan balance or shall make such other arrangements with the
Participant as the Administrator deems appropriate. Foreclosures need not
be effected until occurrence of a distributable event under the terms of
the Plan and no rights against the Participant or the security shall be
deemed waived by the Plan as a result of such delay.
(d) The unpaid balance of the loan, together with interest thereon,
shall become due and payable upon the date of distribution of the Account
and the Trustee shall first satisfy the indebtedness from the amount
payable to the Participant or to the Participant's Beneficiary before
making any payments to the Participant or to the Beneficiary.
(e) Any loan to a Participant under the Plan shall be adequately
secured. Such security shall include a pledge of a portion of the
Participant's right, title and interest in the Trust Fund which shall not
exceed fifty percent (50%) of the present value of the Participant's Vested
Account balance under the Plan as determined immediately after the loan is
extended. Such pledge shall be evidenced by the execution of a promissory
note by the Participant which shall grant the security interest and provide
that, in the event of any default by the Participant on a loan repayment,
the Administrator shall be authorized to take any and all appropriate
lawful actions necessary to enforce collection of the unpaid loan.
(f) A request by a Participant for a loan shall be made in writing to
the Administrator and shall specify the amount of the loan. If a
Participant's request for a loan is approved by the Administrator, the
Administrator shall furnish the Trustee with written instructions directing
the Trustee to make the loan in a lump-sum payment of cash to the
Participant. The cash for such payment shall be obtained by redeeming
proportionately as
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of the date of payment the Investment Fund or Funds, or portions thereof,
that are credited to the particular Account of such Participant.
(g) A loan to a Participant shall be considered an investment of the
separate Account(s) of the Participant from which the loan is made. All
loan repayments shall be credited pro rata to such separate Account(s) and
reinvested exclusively in shares of one or more of the Investment Funds in
accordance with Section 4.13.
7.14 Qualified Domestic Relations Order Distribution
All rights and benefits, including elections, provided to a Participant in
this Plan shall be subject to the rights afforded to any "alternate payee" under
a "qualified domestic relations order." Furthermore, a distribution to an
"alternate payee" shall be permitted if such distribution is authorized by a
"qualified domestic relations order," even if the affected Participant has not
separated from service and has not reached the "earliest retirement age" under
the Plan. For the purposes of this Section, "alternate payee," "qualified
domestic relations order" and "earliest retirement age" shall have the meaning
set forth under Code Section 414(p).
7.15 Payment of Distribution Directly to Eligible Retirement Plan
(a) Notwithstanding any provision of the Plan to the contrary that
would otherwise limit a Distributee's election under this Section, a Distributee
may elect, at the time and in the manner prescribed by the Administrator, to
have any portion of an Eligible Rollover Distribution paid directly to an
Eligible Retirement Plan specified by the Distributee in a Direct Rollover.
(b) For purposes of this Section, the following definitions shall
apply:
(1) Eligible Rollover Distribution. An Eligible Rollover
Distribution is any distribution of all or any portion of the balance
to the credit of the Distributee, except that an Eligible Rollover
Distribution does not include: any distribution that is one of a
series of substantially equal periodic payments (not less frequently
than annually) made for the life (or life expectancy) of the
Distributee or the joint lives (or joint life expectancies) of the
Distributee and the Distributee's designated Beneficiary, or for a
specified period of ten years or more; any distribution to the extent
such distribution is required under Section 401(a)(9) of the Code; and
the portion of any distribution that is not includible in gross income
(determined without
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regard to the exclusion for net unrealized appreciation with respect
to employer securities).
(2) Eligible Retirement Plan. An Eligible Retirement Plan is an
individual retirement account described in Section 408(a) of the Code,
an individual retirement annuity described in Section 408(b) of the
Code, an annuity plan described in Section 403(a) of the Code, or a
qualified trust described in Section 401(a) of the Code, that accepts
the Distributee's Eligible Rollover Distribution. However, in the
case of an Eligible Rollover Distribution to the surviving spouse, an
Eligible Retirement Plan is an individual retirement account or
individual retirement annuity.
(3) Distributee. A Distributee includes an Employee or former
Employee. In addition, the Employee's or former Employee's surviving
spouse and the Employee's or former Employee's spouse or former spouse
who is the alternate payee under a qualified domestic relations order,
as defined in Section 414(p) of the Code, are Distributees with regard
to the interest of the spouse or former spouse.
(4) Direct Rollover: A Direct Rollover is a payment by the Plan
to the Eligible Retirement Plan specified by the Distributee.
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ARTICLE 8
TRUSTEE
8.1 Basic Responsibilities of the Trustee
The Trustee shall have the following categories of responsibilities:
(a) With respect to Company Stock, the Company Stock Account, or an
Exempt Loan, except as directed solely by the Administrator,
(1) the Trustee shall not sell, acquire or dispose of Company
Stock or
(2) enter into any Exempt Loan.
Upon direction of the Administrator, up to one hundred percent (100%)
of the Matching Contributions and Discretionary Contributions may be
invested in Company Stock.
(b) With respect to the Other Investments Account and Directed
Investment Account, the Trustee shall invest such Participant's Accounts in
accordance with Section 4.13(a) and (b).
(c) At the direction of the Administrator, the Trustee shall pay
benefits required under the Plan to be paid to Participants, or, in the
event of their death, to their Beneficiaries.
(d) The Trustee shall maintain records of receipts and disbursements,
and furnish to the Employer and/or Administrator for each Plan Year a
written annual report according to Section 3.2 of the Trust Agreement.
(e) If there shall be more than one Trustee, they shall act by a
majority of their number, but may authorize one or more of them to sign
papers on their behalf.
8.2 Voting Company Stock and Tender Offers
The Trustee shall vote all Company Stock held by it as part of the Plan
assets at such time and in such manner as the Administrator shall direct.
Provided, however, that if any agreement entered into by the Trustee, upon the
direction of the Administrator, provides for voting of any
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shares of Company Stock pledged as security for any obligation of the Plan, then
such shares of Company Stock shall be voted in accordance with such agreement.
If the Administrator fails or refuses to give the Trustee timely instructions as
to how to vote any Company Stock held by the Trustee and which the Administrator
otherwise has the right to vote, the Trustee shall not vote such Company Stock
and shall consider the Administrator's failure or refusal to give timely
instructions as an exercise of the Administrator's rights and a directive to the
Trustee not to vote said Company Stock. The Trustee shall not vote Company Stock
when a Participant or Beneficiary, pursuant to this Section, fails to exercise a
right to vote Company Stock.
Notwithstanding the foregoing, if the Employer has a registration-type
class of securities, each Participant or Beneficiary shall be entitled, in lieu
of the Administrator, to direct the Trustee as to the manner in which the
Company Stock allocated to the Company Stock Account of such Participant or
Beneficiary is to be voted. If the Employer does not have a registration-type
class of securities, each Participant or Beneficiary in the Plan shall be
entitled, in lieu of the Administrator, to direct the Trustee as to the manner
in which voting rights on shares of Company Stock which are allocated to the
Company Stock Account of such Participant or Beneficiary are to be exercised
with respect to any corporate matter which involves the voting of such shares
with respect to the approval or disapproval of any corporate merger or
consolidation, recapitalization, reclassification, liquidation, dissolution,
sale of substantially all assets of a trade or business, or such similar
transaction as prescribed in Regulations. For purposes of this Section the term
"registration-type class of securities" means" (A) a class of securities
required to be registered under Section 12 of the Securities Exchange Act of
1934; and (B) a class of securities which would be required to be so registered
except for the exemption from registration provided in subsection (g)(2)(H) of
such Section 12.
The Trustee shall notify each Participant or Beneficiary of each tender or
exchange offer and utilize its best efforts to distribute or cause to be
distributed to such Participant or Beneficiary in a timely manner all
information received by the Trustee as a recordholder of shares of Company Stock
in connection with any such tender or exchange offer. Each Participant or
Beneficiary shall have the right from time to time with respect to the shares of
Company stock allocated to his account, to instruct the Trustee in writing as to
the manner in which to respond to any tender or exchange offer which shall be
pending or which may be made in the future for all shares of Company Stock or
any portion thereof. A Participant's or Beneficiary's instructions shall remain
in force until superseded in writing by the Participant or Beneficiary. The
Trustee shall tender or exchange such shares of Company Stock as and to the
extent so instructed. Unless and until shares of Company Stock are tendered or
exchanged, the individual instructions received by the Trustee from Participant
or Beneficiaries shall be held in strict confidence by the Trustee and shall not
be divulged or released
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to any person, including, but not limited to officers or Employees of the
Employer, or of any other Participating Employer; provided, however, that the
Trustee shall advise the Employer, at any time upon request, of the total number
of shares not subject to instructions to tender or exchange. The Trustee shall
not make recommendations to Participants or Beneficiaries on whether to instruct
the Trustee to tender or exchange.
The Trustee shall not vote, sell, convey or transfer any allocated shares
of Company Stock for which no directions are timely received from Participants
or Beneficiaries pursuant to the immediately preceding paragraph, and shares of
Company Stock held by the Trustee which are not allocated to Participants'
Company Stock Accounts shall be voted by the Trustee only in the manner directed
by the Administrator.
Notwithstanding any other provision to the contrary, the Trustee may vote
the shares of Company Stock held by the Trust as it determines to fulfill its
fiduciary duties.
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ARTICLE 9
AMENDMENT, TERMINATION, AND MERGERS
9.1 Amendment
The Company shall have the right at any time to amend the Plan. However,
no such amendment shall authorize or permit any part of the Trust Fund (other
than such part as is required to pay taxes and administration expenses) to be
used for or diverted to purposes other than for the exclusive benefit of the
Participants or their Beneficiaries or estates; no such amendment shall cause
any reduction in the amount credited to the account of any Participant or cause
or permit any portion of the Trust Fund to revert to or become the property of
the Employer; and no such amendment which affects the rights, duties or
responsibilities of the Trustee and Administrator may be made without the
Trustee's and Administrator's written consent. Any such amendment shall become
effective as provided therein upon its execution. The Trustee shall not be
required to execute any such amendment unless the Trust provisions contained
herein are a part of the Plan and the amendment affects the duties of the
Trustee hereunder.
In addition, no such amendment shall have the effect of terminating the
protections and rights set forth in Section 7.12, unless such termination shall
then be permitted under the applicable provisions of the Code and Treasury
Regulations; such a termination is currently expressly prohibited by Section
54.4975-11(a)(3)(ii) of the Treasury Regulations.
For the purposes of this Section, a Plan amendment which has the effect of
eliminating or reducing an early retirement benefit or eliminating an optional
form of benefit (as provided in Treasury regulations) shall be treated as
reducing the amount credited to the account of a Participant.
9.2 Termination
The Company shall have the right at any time to terminate the Plan by
delivering to the Trustee and Administrator written notice of such termination
with respect to that Employer. A complete discontinuance of an Employer's
contributions to the Plan shall be deemed to constitute a termination with
respect to that Employer. Upon any termination (full or partial) or complete
discontinuance of contributions, all amounts credited to the affected
Participants' Accounts shall become 100% Vested and shall not thereafter be
subject to forfeiture and all unallocated amounts shall be allocated to the
accounts of all Participants in accordance with the provisions hereof. Upon
such termination of the Plan, the Company, by written notice to the Trustee and
Administrator, may direct either:
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(a) complete distribution of the assets in the Trust Fund to the
Participants, in cash or in kind, in one "qualified total distribution" (as
such term is defined in the Code) as soon as the Trustee deems it to be in
the best interests of the Participants; or,
(b) continuation of the Trust created by this agreement and the
distribution of benefits at such time and in such manner as though the Plan
had not been terminated.
9.3 Merger or Consolidation
This Plan and Trust may be merged or consolidated with, or its assets
and/or liabilities may be transferred to any other Plan and Trust only if the
benefits which would be received by a Participant of this Plan, in the event
of a termination of the Plan immediately after such transfer, merger or
consolidation, are at least equal to the benefits the Participant would have
received if the Plan had terminated immediately before the transfer, merger or
consolidation.
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ARTICLE 10
MISCELLANEOUS
10.1 Participant's Rights
This Plan shall not be deemed to constitute a contract between the Employer
and any Participant or to be a consideration or an inducement for the employment
of any Participant or Employee. Nothing contained in this Plan shall be deemed
to give any Participant or Employee the right to be retained in the service of
the Employer or to interfere with the right of the Employer to discharge any
Participant or Employee at any time regardless of the effect which such
discharge shall have upon him as a Participant of this Plan.
10.2 Alienation
(a) Subject to the exceptions provided below, no benefit which shall
be payable out of the Trust Fund to any person (including a Participant or
his Beneficiary) shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, or charge, and
any attempt to anticipate, alienate, sell, transfer, assign, pledge,
encumber, or charge the same shall be void; and no such benefit shall in
any manner be liable for, or subject to, the debts, contracts, liabilities,
engagements, or torts of any such person, nor shall it be subject to
attachment or legal process for or against such person, and the same shall
not be recognized by the Trustee, except to such extent as may be required
by law.
(b) This provision shall not apply to the extent a Participant or
Beneficiary is indebted to the Plan, for any reason, under any provision of
the Plan. At the time a distribution is to be made to or for a
Participant's or Beneficiary's benefit, such proportion of the amount
distributed as shall equal such indebtedness shall be paid by the Trustee
to the Trustee or the Administrator, at the direction of the Administrator,
to apply against or discharge such indebtedness. Prior to making a
payment, however, the Participant or Beneficiary must be given written
notice by the Administrator that such indebtedness is to be so paid in
whole or part from his Participant's Account. If the Participant or
Beneficiary does not agree that the indebtedness is a valid claim against
his Vested Participant's Account, he shall be entitled to a review of the
validity of the claim in accordance with procedures provided in Article 2.
(c) This provision shall not apply to a "qualified domestic relations
order" defined in Code Section 414(p), and those other domestic relations
orders permitted to be so
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treated by the Administrator under the provisions of the Retirement Equity
Act of 1984. The Administrator shall establish a written procedure to
determine the qualified status of domestic relations orders and to
administer distributions under such qualified orders. Further, to the
extent provided under a "qualified domestic relations order," a former
spouse of a Participant shall be treated as the spouse or surviving spouse
for all purposes under the Plan.
10.3 Construction of Plan
This Plan and Trust shall be construed and enforced according to the Act and the
laws of the State of Texas, other than its laws respecting choice of law, to the
extent not preempted by the Act.
10.4 Gender and Number
Wherever any words are used herein in the masculine, feminine or neuter
gender, they shall be construed as though they were also used in another gender
in all cases where they would so apply, and whenever any words are used herein
in the singular or plural form, they shall be construed as though they were also
used in the other form in all cases where they would so apply.
10.5 Legal Action
In the event any claim, suit, or proceeding is brought regarding the Trust
and/or Plan established hereunder to which the Trustee or the Administrator may
be a party, and such claim, suit, or proceeding is resolved in favor of the
Trustee or Administrator, they shall be entitled to be reimbursed from the Trust
Fund for any and all costs, attorney's fees, and other expenses pertaining
thereto incurred by them for which they shall have become liable.
10.6 Prohibition Against Diversion of Funds
Except as provided below and otherwise specifically permitted by law, it
shall be impossible by operation of the Plan or of the Trust, by termination of
either, by power of revocation or amendment, by the happening of any
contingency, by collateral arrangement or by any other means, for any part of
the corpus or income of any trust fund maintained pursuant to the Plan or any
funds contributed thereto to be used for, or diverted to, purposes other than
the exclusive benefit of Participants, Retired Participants, or their
Beneficiaries.
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10.7 Return of Funds
(a) Notwithstanding anything herein to the contrary, if, pursuant to
an application filed by or in behalf of the Plan, the Commissioner of
Internal Revenue Service or his delegate should determine that the Plan
does not initially qualify as a tax-exempt plan and trust under Sections
401 and 501 of the Code, and such determination is not contested, or if
contested, is finally upheld, then the Plan shall be void ab initio and all
amounts contributed to the Plan by the Employer, less expenses paid, shall
be returned within one year and the Plan shall terminate, and the Trustee
shall be discharged from all further obligations.
(b) Notwithstanding any provisions to the contrary, except Sections
3.6, 3.6, and 4.2(c), any contribution by the Employer to the Trust Fund is
conditioned upon the deductibility of the contribution by the Employer
under the Code and, to the extent any such deduction is disallowed, the
Employer may within one (1) year following a final determination of the
disallowance, whether by agreement with the Internal Revenue Service or by
final decision of a court of competent jurisdiction, demand repayment of
such disallowed contribution and the Trustee shall return such contribution
within one (1) year following the disallowance. Earnings of the Plan
attributable to the excess contribution may not be returned to the
Employer, but any losses attributable thereto must reduce the amount so
returned.
(c) In the event the Employer shall make an excessive or erroneous
contribution under a mistake of fact pursuant to Section 403(c)(2)(A) of
the Act, the Employer may demand repayment of such excessive or erroneous
contribution at any time within one (1) year following the time of payment
and the Trustees shall return such amount to the Employer within the one
(1) year period. Earnings of the Plan attributable to the excess or
erroneous contributions may not be returned to the Employer but any losses
attributable thereto must reduce the amount so returned.
10.8 Bonding
Every Fiduciary, except a bank or an insurance company, unless exempted by
the Act and regulations thereunder, shall be bonded in an amount not less than
10% of the amount of the funds such Fiduciary handles; provided, however, that
the minimum bond shall be $1,000 and the maximum bond, $500,000. The amount of
funds handled shall be determined at the beginning of each Plan Year by the
amount of funds handled by such person, group, or class to be covered and their
predecessors, if any, during the preceding Plan Year, or if there is no
preceding Plan Year, then
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by the amount of the funds to be handled during the then current year. The bond
shall provide protection to the Plan against any loss by reason of acts of fraud
or dishonesty by the Fiduciary alone or in connivance with others. The surety
shall be a corporate surety company (as such term is used in Section 412(a)(2)
of the Act), and the bond shall be in a form approved by the Secretary of Labor.
Notwithstanding anything in the Plan to the contrary, the cost of such bonds
shall be an expense of and may, at the election of the Administrator, be paid
from the Trust Fund or by the Employer.
10.9 Receipt and Release for Payments
Any payment to any Participant, his legal representative, Beneficiary, or
to any guardian or committee appointed for such Participant or Beneficiary in
accordance with the provisions of the Plan, shall, to the extent thereof, be in
full satisfaction of all claims hereunder against the Trustee and the Employer,
either of whom may require such Participant, legal representative, Beneficiary,
guardian or committee, as a condition precedent to such payment, to execute a
receipt and release thereof in such form as shall be determined by the Trustee
or Employer.
10.10 Action by the Employer
Whenever the Employer under the terms of the Plan is permitted or required
to do or perform any act or matter or thing, it shall be done and performed by a
person duly authorized by its legally constituted authority.
10.11 Named Fiduciaries and Allocation of Responsibility
The "Named Fiduciaries" of this Plan are (1) the Employer, (2) the
Administrator, (3) the Trustee and (4) any Investment Manager appointed
hereunder. The Named Fiduciaries shall have only those specific powers, duties,
responsibilities, and obligations as are specifically given them under the Plan.
In general, the Employer shall have the sole responsibility for making the
contributions provided for under Section 4.1; and shall have the sole authority
to appoint and remove the Trustee, the Administrator, and any Investment Manager
which may be provided for under the Plan; to formulate the Plan's "funding
policy and method"; and to amend or terminate, in whole or in part, the Plan.
The Administrator shall have the sole responsibility for the administration of
the Plan, which responsibility is specifically described in the Plan. The
Trustee shall have the sole responsibility of management of the assets held
under the Trust, except those assets, the management of which has been assigned
to an Investment Manager, who shall be solely responsible for the management of
the assets assigned to it, all as specifically provided in the Plan. Each Named
Fiduciary warrants that any directions given, information furnished, or action
taken by it shall be in
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accordance with the provisions of the Plan, authorizing or providing for such
direction, information or action. Furthermore, each Named Fiduciary may rely
upon any such direction, information or action of another Named Fiduciary as
being proper under the Plan, and is not required under the Plan to inquire into
the propriety of any such direction, information or action. It is intended under
the Plan that each Named Fiduciary shall be responsible for the proper exercise
of its own powers, duties, responsibilities and obligations under the Plan. No
Named Fiduciary shall guarantee the Trust Fund in any manner against investment
loss or depreciation in asset value. Any person or group may serve in more than
one Fiduciary capacity.
10.12 Headings
The headings and subheadings of this Plan have been inserted for
convenience of reference and are to be ignored in any construction of the
provisions hereof.
10.13 Uniformity
All provisions of this Plan shall be interpreted and applied in a uniform,
nondiscriminatory manner.
10.14 Securities and Exchange Commission Approval
The Company may request an interpretative letter from the Securities and
Exchange Commission stating that the transfers of Company Stock contemplated
hereunder do not involve transactions requiring a registration of such Company
Stock under the Securities Act of 1933. In the event that a favorable
interpretative letter is not obtained, the Employer reserves the right to amend
the Plan and Trust retroactively to their effective dates in order to obtain a
favorable interpretative letter or to terminate the Plan.
10.15 Indemnification
Neither the Employer, any of its officers or directors, the Administrator
nor the Trustee shall be personally liable for any action or inaction with
respect to any duty or responsibility imposed upon such person by the terms of
the Plan, unless such action or inaction is judicially determined to be a breach
of that person's fiduciary responsibility with respect to the Plan under any
applicable law. The Employer may indemnify or purchase insurance to underwrite
indemnity for the Administrator and/or the Employer's board of directors against
any personal liability or expense except for his own gross negligence.
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10.16 Controlling Law
All legal questions pertaining to the Plan, all construction and all
Regulations shall be determined in accordance with the laws of the State of
Delaware and the United States. All contributions shall be deemed to have been
made under such laws. Notwithstanding anything in this Agreement to the
contrary, the effective dates provided for herein for the application of any
Code Section to this Plan shall be extended in accordance with any act of
Congress or any effective Regulation, Ruling or other measure of like import.
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ARTICLE 11
PARTICIPATING EMPLOYERS
11.1 Adoption by Other Employers
Notwithstanding anything herein to the contrary, with the consent of the
Employer and Trustee, any other corporation or entity, whether an affiliate or
subsidiary or not, may adopt this Plan and all of the provisions hereof, and
participate herein and be known as a Participating Employer, by a properly
executed document evidencing said intent and will of such Participating
Employer.
11.2 Requirements of Participating Employers
(a) Each such Participating Employer shall be required to use the same
Trustee as provided in this Plan.
(b) The Trustee may, but shall not be required to, commingle, hold and
invest as one Trust Fund all contributions made by Participating Employers,
as well as all increments thereof.
(c) The transfer of any Participant from or to an Employer
participating in this Plan, whether he be an Employee of the Employer or a
Participating Employer, shall not affect such Participant's rights under
the Plan, and all amounts credited to such Participant's Account as well as
his accumulated service time with the transferor or predecessor, and his
length of participation in the Plan, shall continue to his credit.
(d) All rights and values forfeited by termination of employment shall
insure only to the benefit of the Employee-Participants of the
Participating Employer by which the forfeiting Participant was employed.
(e) Any expenses of the Trust which are to be paid by the Employer or
borne by the Trust Fund shall be paid by each Participating Employer in the
same proportion that the total amount standing to the credit of all
Participants employed by such Employer bears to the total standing to the
credit of all Participants.
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11.3 Designation of Agent
Each Participating Employer shall be deemed to be a part of this Plan;
provided, however, that with respect to all of its relations with the Trustee
and Administrator for the purpose of this Plan, each Participating Employer
shall be deemed to have designated irrevocably the Employer as its agent.
Unless the context of the Plan clearly indicates the contrary, the word
"Employer" shall be deemed to include each Participating Employer as related to
its adoption of the Plan.
11.4 Employee Transfers
It is anticipated that an Employee may be transferred between Participating
Employers, and in the event of any such transfer, the Employee involved shall
carry with him his accumulated service and eligibility. No such transfer shall
effect a termination of employment hereunder, and the Participating Employer to
which the Employee is transferred shall thereupon become obligated hereunder
with respect to such Employee in the same manner as was the Participating
Employer from whom the Employee was transferred.
11.5 Participating Employer's Contribution
All contributions made by a Participating Employer, as provided for in this
Plan, shall be determined separately on the basis of its total Compensation
paid, and shall be paid to and held by the Trustee for the exclusive benefit of
the Employees of the Participating Employer and the Beneficiaries of such
Employees, subject to all the terms and conditions of this Plan. Any Forfeiture
by an Employee of a Participating Employer subject to allocation during each
Plan Year shall be allocated for the benefit of all Participants of the Plan in
accordance with the provisions of this Plan.
11.6 Amendment
Amendment of this Plan by the Employer at any time when there shall be a
Participating Employer hereunder shall only be by the written action of each and
every Participating Employer and with the consent of the Trustee where such
consent is necessary in accordance with the terms of this Plan.
11.7 Discontinuance of Participation
Any Participating Employer shall be permitted to discontinue or revoke its
participation in the Plan. At the time of any such discontinuance or
revocation, satisfactory evidence thereof and
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of any applicable conditions imposed shall be delivered to the Trustee. The
Trustee shall thereafter upon receiving written direction from the Administrator
transfer, deliver and assign Contracts and other Trust Fund assets allocable to
the Participants of such Participating Employer to such new Trustee as shall
have been designated by such Participating Employer, in the event that it has
established a separate pension plan for its Employees. If no successor is
designated, the Trustee shall retain such assets for the Employees of said
Participating Employer pursuant to the provisions of Article VII hereof. In no
such event shall any part of the corpus or income of the Trust as it relates to
such Participating Employer be used for or diverted for purposes other than for
the exclusive benefit of the Employees of such Participating Employer.
11.8 Administrator's Authority
The Administrator shall have authority to make any and all necessary rules
or regulations, binding upon all Participating Employers and all Participants,
to effectuate the purpose of this Article.
11.9 Participating Employer Contribution for Affiliate
If any Participating Employer is prevented in whole or in part from making
a contribution to the Trust Fund which it would otherwise have made under the
Plan by reason of having no current or accumulated earnings or profits, or
because such earnings or profits are less than the contribution which it would
otherwise have made, then, pursuant to Code Section 404(a)(3)(B), so much of the
contribution which such Participating Employer was so prevented from making may
be made, for the benefit of the participating employees of such Participating
Employer, by the other Participating Employers who are members of the same
affiliated group within the meaning of Code Section 1504 to the extent of their
current or accumulated earnings or profits, except that such contribution by
each such other Participating Employer shall be limited to the proportion of its
total current and accumulated earnings or profits remaining after adjustment for
its contribution to the Plan made without regard to this paragraph which the
total prevented contribution bears to the total current and accumulated earnings
or profits of all the Participating Employers remaining after adjustment for all
contributions made to the Plan without regard to this paragraph.
A Participating Employer on behalf of whose employees a contribution is
made under this paragraph shall not reimburse the contributing Participating
Employers.
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ARTICLE 12
TOP-HEAVY STATUS
12.1 Article Controls
Any Plan provisions to the contrary notwithstanding, the provisions of this
Article shall control to the extent required to cause the Plan to comply with
the requirements imposed under Code Section 416.
12.2 Definitions
For purposes of this Article, the following terms and phrases shall have
these respective meanings:
(a) Account Balance: As of any Valuation Date, the aggregate amount
credited to an individual's account or accounts under a qualified defined
contribution plan maintained by the Employer or an Affiliated Employer
(excluding employee contributions which were deductible within the meaning
of Section 219 of the Code and rollover or transfer contributions made
after December 31, 1983 by or on behalf of such individual to such plan
from another qualified plan sponsored by an entity other than the Employer
or an Affiliated Employer), increased by (1) the aggregate distributions
made to such individual from such plan during a five-year period ending on
the Determination Date and (2) the amount of any contributions due as of
the Determination Date immediately following such Valuation Date.
(b) Accrued Benefit: As of any Valuation Date, the present value
(computed on the basis of the Assumptions) of the cumulative accrued
benefit (excluding the portion thereof which is attributable to employee
contributions which were deductible pursuant to Section 219 of the Code, to
rollover or transfer contributions made after December 31, 1983 by or on
behalf of such individual to such plan from another qualified plan
sponsored by an entity other than the Employer or an Affiliated Employer,
to proportional subsidies or to ancillary benefits) of an individual under
a qualified defined benefit plan maintained by the Employer or an
Affiliated Employer increased by (1) the aggregate distributions made to
such individual from such plan during a five-year period ending on the
Determination Date and (2) the estimated benefit accrued by such individual
between such Valuation Date and the Determination Date immediately
following such Valuation Date. Solely for the purpose of determining top-
heavy status, the Accrued Benefit of an individual shall be determined
under (1) the method, if any, that uniformly applies for accrual purposes
under all qualified
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defined benefit plans maintained by the Employer or an Affiliated Employer,
or (2) if there is no such method, as if such benefit accrued not more
rapidly than under the slowest accrual rate permitted under Section
411(b)(1)(C) of the Code.
(c) Aggregation Group: The group of qualified plans maintained by the
Employer and each Affiliated Employer consisting of (1) each plan in which
a Key Employee participates and each other plan which enables a plan in
which a Key Employee participates to meet the requirements of sections
401(a)(4) or 410 of the Code ("Required Aggregation Group"), or by Employee
participates, each other plan which enables a plan in which a Key Employee
participates to meet the requirements of sections 401(a)(4) or 410 of the
Code and any other plan which the Employer elects to include as a part of
such group ("Permissive Aggregation Group"); provided, however, that the
Employer may not elect to include a plan in such a Permissive Aggregation
Group if its inclusion would cause the group to fail to meet the
requirements of sections 401(a)(4) or 410 of the Code.
(d) Assumptions: The interest rate and mortality assumptions
specified for top-heavy status determination purposes in any defined
benefit plan included in the Aggregation Group including the Plan.
(e) Determination Date: For the first Plan Year of any plan, the last
day of such Plan Year and for each subsequent Plan Year of such plan, the
last day of the preceding Plan Year.
(f) Key Employee: A "key employee" as defined in Section 416(i) of
the Code and the Treasury Regulations thereunder.
(g) Plan Year: With respect to any plan, the annual accounting period
used by such plan for annual reporting purposes.
(h) Remuneration: Compensation within the meaning of Section
415(c)(3) of the Code, as limited by Section 401(a)(17) of the Code for
Plan Years beginning after December 31, 1988.
(i) Valuation Date: With respect to any Plan Year of any defined
contribution plan, the most recent date within the twelve-month period
ending on a Determination Date as of which the trust fund established under
such plan was valued and the net income (or loss) thereof allocated to
participants' accounts. With respect to any Plan Year of any
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defined benefit plan, the most recent date within a twelve-month period
ending on a Determination Date as of which the plan assets were valued for
purposes of computing plan costs for purposes of the requirements imposed
under Section 412 of the Code.
12.3 Top-Heavy Status
(a) The Plan shall be deemed to be top-heavy for a Plan Year, if, as
of the Determination Date for such Plan Year, (1) the sum of Account
Balances of Participants who are Key Employees exceeds 60% of the sum of
Account Balances of all Participants unless an Aggregation Group including
the Plan is not top-heavy or (2) an Aggregation Group including the Plan is
top-heavy. An Aggregation Group shall be deemed to be top-heavy as of a
Determination Date if the sum (computed in accordance with Section
416(g)(2)(B) of the Code and the Treasury Regulations promulgated
thereunder) of (1) the Account Balances of Key Employees under all defined
contribution plans included in the Aggregation Group and (2) the Accrued
Benefits of Key Employees under all defined benefit plans included in the
Aggregation Group exceeds 60% of the sum of the Account Balances and the
Accrued Benefits of all individuals under such plans. Notwithstanding the
foregoing, the Account Balances and Accrued Benefits of individuals who are
not Key Employees in any Plan Year but who were Key Employees in any prior
Plan Year shall not be considered in determining the top-heavy status of
the Plan for such Plan Year. Further, notwithstanding the foregoing, the
Account Balances and Accrued Benefits of individuals who have not performed
services for the Employer at any time during the five-year period ending on
the applicable Determination Date shall not be considered.
(b) This Plan shall be a Super Top Heavy Plan for any Plan Year in
which as of the Determination Date, (1) the Accrued Benefits of Key
Employees and (2) the sum of Account Balances of Key Employees under this
Plan and all plans of an Aggregation Group exceeds ninety percent (90%) of
the Accrued Benefits and the Account Balances of all Key and Non-Key
Employees under the Plan and all plans and all plans of an Aggregation
Group.
12.4 Termination of Top-Heavy Status
If the Plan has been deemed to be top-heavy for one or more Plan Years and
thereafter ceases to be top-heavy, the provisions of this Article shall cease to
apply to the Plan effective as of the Determination Date on which it is
determined to no longer be top-heavy.
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12.5 Effect of Article
Notwithstanding anything contained herein to the contrary, the provisions
of this Article shall automatically become inoperative and of no effect to the
extent not required by the Code or the Act.
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IN WITNESS WHEREOF, this Plan has been executed this 21 day of July, 1998,
effective as of the day and year first above written.
"EMPLOYER"
AXIA FINANCE CORP.
By: /s/John D. Hawkins
Name: John D. Hawkins
Title: Vice President
EXECUTION PAGE TO THE
AXIA FINANCE CORP.
EMPLOYEE STOCK OWNERSHIP AND 401(k) PLAN
to be renamed
AXIA INCORPORATED
EMPLOYEE STOCK OWNERSHIP AND 401(k) PLAN
<PAGE>
EXHIBIT 10.3
AXIA FINANCE CORP.
EMPLOYEE STOCK OWNERSHIP AND 401(K) PLAN
TRUST AGREEMENT
To Be Renamed
AXIA INCORPORATED
EMPLOYEE STOCK OWNERSHIP AND 401(K) PLAN
TRUST AGREEMENT
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1.
TITLE AND DEFINITIONS............................................. 2
1.1 TITLE....................................................... 2
1.2 DEFINITIONS................................................. 2
1.3 TRUST FUND.................................................. 2
1.4 CONFLICT BETWEEN PLAN AND TRUST............................. 2
1.5 ADMINISTRATOR............................................... 2
1.6 ACTION BY COMPANY OR ADMINISTRATOR.......................... 2
1.7 FIDUCIARY RESPONSIBILITY.................................... 3
ARTICLE 2.
RESPONSIBILITIES AND POWERS OF THE TRUSTEE........................ 4
2.1 BASIC RESPONSIBILITIES OF THE TRUSTEE....................... 4
2.2 INVESTMENT POWERS OF THE TRUSTEE............................ 4
2.3 OTHER POWERS OF THE TRUSTEE................................. 5
2.4 PROHIBITED TRANSACTIONS..................................... 8
2.5 INVESTMENT MANAGERS......................................... 8
2.6 VOTING COMPANY STOCK HELD IN THE TRUST FUND................. 8
2.7 PUT OPTION.................................................. 10
ARTICLE 3.
DUTIES OF THE TRUSTEE............................................. 11
3.1 DUTIES OF THE TRUSTEE REGARDING PAYMENTS.................... 11
3.2 ANNUAL REPORT OF THE TRUSTEE................................ 11
3.3 AUDIT....................................................... 12
ARTICLE 4.
MISCELLANEOUS..................................................... 14
4.1 TRUSTEE'S COMPENSATION AND EXPENSES AND TAXES............... 14
4.2 RESIGNATION, REMOVAL AND SUCCESSION OF TRUSTEE.............. 14
4.3 INDEMNIFICATION............................................. 15
4.4 LIMITATION OF LIABILITY OF TRUSTEE.......................... 15
4.5 MERGER OR CONSOLIDATION INVOLVING CORPORATE TRUSTEE......... 16
4.6 LIMITATION ON PARTICIPANTS' RIGHTS.......................... 17
4.7 NO REVERSION IN COMPANY..................................... 17
4.8 RECEIPT OR RELEASE.......................................... 17
4.9 GOVERNING LAW............................................... 17
4.10 MULTIPLE COUNTERPARTS....................................... 17
4.11 AMENDMENT................................................... 18
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4.12 BOND OF TRUSTEE............................................. 18
4.13 SUCCESSORS AND ASSIGNS...................................... 18
4.14 GENDER DESIGNATION.......................................... 18
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AXIA FINANCE CORP.
EMPLOYEE STOCK OWNERSHIP AND 401(K) PLAN
TRUST AGREEMENT
To Be Renamed
AXIA INCORPORATED
EMPLOYEE STOCK OWNERSHIP AND 401(K) PLAN
TRUST AGREEMENT
THIS TRUST AGREEMENT is made and entered into by and between AXIA Finance
Corp., a Delaware corporation (the "Company") and First Bankers Trust Company
(the "Trustee"), and evidences the terms of a Trust for the benefit of
Participants in the AXIA Finance Corp. Employee Stock Ownership and 401(k) Plan.
W I T N E S S E T H:
WHEREAS, effective as of July 21, 1998, the Company intends to
maintain the AXIA Finance Corp. Employee Stock Ownership and 401(k) Plan (the
"Plan") and a trust (the "Trust") for the purpose of funding the benefits
provided for by the Plan;
WHEREAS, the parties hereto desire to execute a separate trust
agreement which sets forth the rights and duties of the Trustee, and the terms
and conditions under which the trust is to be established and administered.
NOW, THEREFORE, it is mutually understood and agreed as follows:
<PAGE>
ARTICLE 1.
TITLE AND DEFINITIONS
1.1 TITLE
This Trust Agreement shall be known as the AXIA Finance Corp. Employee
Stock Ownership and 401(k) Plan Trust Agreement; provided however, that
subsequent to the Acquisition (as defined in the Plan), this Trust Agreement
shall be known as the AXIA Incorporated Employee Stock Ownership and 401(k)
Plan Trust Agreement.
1.2 DEFINITIONS
All of the terms used herein shall have the same meaning as set forth in
Article 1 of the Plan, to the extent defined therein.
1.3 TRUST FUND
The "Trust Fund" as of any date shall mean all property then held by the
Trustee under this Trust Agreement, and the "Trust Fund" shall be known as the
AXIA Finance Corp. Employee Stock Ownership and 401(k) Trust; provided however,
that subsequent to the Acquisition, this "Trust Fund" shall be known as the AXIA
Incorporated Employee Stock Ownership and 401(k) Trust.
1.4 CONFLICT BETWEEN PLAN AND TRUST
If there is a conflict between the terms of the Plan and this Trust
Agreement, the terms of the Trust Agreement shall be controlling with respect to
the Trustee's powers, rights, duties, and liabilities.
1.5 ADMINISTRATOR
The Plan is administered by a plan administrator (the "Administrator"),
appointed by the Company pursuant to the Plan. If no Administrator is appointed
by the Company, the Company shall serve as the Administrator. The Secretary of
the Company will certify to the Trustee from time to time the person or persons
appointed as Administrator. The Trustee may rely on the latest certificate
received without further inquiry or verification.
1.6 ACTION BY COMPANY OR ADMINISTRATOR
Any action required or permitted to be taken by the Company or the
Administrator under the Trust Agreement shall be by resolution by the Board of
Directors of the Company, resolution by the Administrator, or shall be by a
person or persons authorized by resolution of the Company's Board of Directors
or by resolution by the Administrator to take such action.
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1.7 FIDUCIARY RESPONSIBILITY
The Company, the Administrator, any Investment Manager appointed pursuant
to Section 2.5, and any other fiduciaries with respect to the Plan or Trust
shall discharge their duties thereunder solely in the interest of the
Participants and Beneficiaries, for the exclusive purpose of providing their
benefits and defraying reasonable expenses of the Plan and Trust administration,
with the care, skill, prudence and diligence under the circumstances then
prevailing that a prudent man acting in like capacity and familiar with such
matters would use in the conduct of an enterprise of a like character with like
aims.
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ARTICLE 2.
RESPONSIBILITIES AND POWERS OF THE TRUSTEE
2.1 BASIC RESPONSIBILITIES OF THE TRUSTEE
The Trustee, except to the extent that authority has been delegated to an
Investment Manager pursuant to Section 2.5, shall have the following categories
of responsibilities:
(a) With respect to Company Stock, the Company Stock Account, or an Exempt
Loan, except as directed solely by the Administrator,
(1) the Trustee shall not sell, acquire or dispose of Company Stock or
(2) enter into any Exempt Loan.
Upon direction of the Administrator, up to one hundred percent (100%) of the
Matching Contribution Account and Discretionary Contribution Account (both as
defined in the Plan) may be invested in Company Stock.
(b) With respect to the Other Investments Account and Directed Investment
Account, the Trustee shall invest such Participant's Accounts as directed by
Section 4.13(a) and (b) of the Plan.
(c) At the direction of the Administrator, the Trustee shall pay benefits
required under the Plan to be paid to Participants, or, in the event of their
death, to their Beneficiaries.
(d) The Trustee shall maintain records of receipts and disbursements of the
Trust, and furnish to the Company and/or Administrator for each Plan Year a
written annual report according to Section 3.2 of this Trust Agreement.
(e) If there shall be more than one Trustee, they shall act by a majority
of their number, but may authorize one or more of them to sign papers on their
behalf.
2.2 INVESTMENT POWERS OF THE TRUSTEE
Subject to the limitations set forth in Section 2.1(a) and 2.1(b), except
to the extent that authority to direct investments has been delegated to one or
more Investment Managers pursuant to Section 2.5 and as further provided in this
Trust Agreement, the Trustee shall make investments as set forth below only as
directed by the Administrator.
(a) The Trustee shall invest and reinvest the Trust Fund to keep it
invested without distinction between principal and income as directed by the
Administrator. Also, the Trustee shall invest the Trust Fund in such
securities or property, real or personal, wherever situated, as the
Administrator shall direct the Trustee, including, but not limited
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to, stocks, common or preferred, bonds and other evidences of indebtedness or
ownership, and real estate or any interest therein. The investments shall not
be restricted to securities or other property of the character expressly
authorized by the applicable law for trust investments; however, the
Administrator shall give due regard to any limitations imposed by the Internal
Revenue Code of 1986, as amended (the "Code") or the Employee Retirement
Income Security Act of 1974, as amended (the "Act") so that at all times the
Plan and this Trust Agreement may be qualified under Sections 401(a) and
501(a) of the Code.
(b) The Trustee shall from time to time at the direction of the
Administrator transfer to a common, collective, or pooled trust fund
maintained by any corporate Trustee hereunder, including any one or more of
the Trustee's funds, all or such part of the Trust Fund as the Administrator
may direct, and such part or all of the Trust Fund so transferred shall be
subject to all the terms and provisions of the common, collective, or pooled
trust fund which contemplate the commingling for investment purposes of such
trust assets with trust assets of other trusts. To the extent required by
Revenue Ruling 81-100, and further to the extent consistent with the Trust
Agreement, the instrument creating any such trust fund, is hereby incorporated
and made a part of this Trust Agreement. From time to time at the direction
of the Administrator, the Trustee shall withdraw from such common, collective,
or pooled trust fund all or such part of the Trust Fund as the Administrator
may direct.
(c) The Trustee, at the direction of the Administrator, shall employ a bank
or trust company pursuant to the terms of its usual and customary bank agency
agreement, under which the duties of such bank or trust company shall be of a
custodial, clerical, and record-keeping nature.
(d) In the event the Trustee invests any part of the Trust Fund, pursuant
to the directions of the Administrator in any shares of stock issued by the
Company, and the Administrator thereafter directs the Trustee to dispose of
such investment, or any part thereof, under circumstances that, in the opinion
of counsel for the Trustee, require registration of the securities under the
Securities Act of 1933 and/or qualification of the securities under the Blue
Sky laws of any state or states, then the Company at its own expense, will
take or cause to be taken any and all such action as may be necessary or
appropriate to effect such registration and/or qualification.
2.3 OTHER POWERS OF THE TRUSTEE
Subject to the other provisions of this Agreement, the Trustee, in addition
to all powers and authorities under common law, statutory authority, including
the Act, and other provisions of the Plan, shall have the following powers and
authorities, except to the extent that authority to direct investments has been
delegated to one or more Investment Managers pursuant to Section 2.5, to be
exercised only as directed by the Administrator:
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(a) To purchase, or subscribe for, any securities or other property and to
retain the same. In conjunction with the purchase of securities, margin
accounts may be opened and maintained;
(b) To sell, exchange, convey, transfer, grant options to purchase, or
otherwise dispose of any securities or other property held by the Trustee, by
private contract or at public auction. No person dealing with the Trustee
shall be bound to see to the application of the purchase money or to inquire
into the validity, expediency, or propriety of any such sale or other
disposition, with or without advertisement;
(c) Except as provided in Section 2.6, to vote upon any stocks, bonds, or
other securities; to give general or special proxies or powers of attorney
with or without power of substitution; to exercise any conversion privileges,
subscription rights or other options, and to make any payments incidental
thereto; to oppose, or to consent to, or otherwise participate in, corporate
reorganizations or other changes affecting corporate securities, and to
delegate discretionary powers, and to pay any assessments or charges in
connection therewith; and generally to exercise any of the powers of an owner
with respect to stocks, bonds, securities, or other property;
(d) To cause any securities or other property to be registered in the
Trustee's own name or in the name of one or more of the Trustee's nominees,
and to hold any investments in bearer form, but the books and records of the
Trustee shall at all times show that all such investments are part of the
Trust;
(e) To keep such portion of the Trust Fund in cash or cash balances as the
Trustee may, from time to time, deem to be in the best interests of the Plan,
without liability for interest thereon;
(f) To accept and retain for such time as the Trustee may deem advisable
any securities or other property received or acquired as Trustee hereunder,
whether or not such securities or other property would normally be purchased
as investments hereunder;
(g) To make, execute, acknowledge, and deliver any and all documents of
transfer and conveyance and any and all other instruments that may be
necessary or appropriate to carry out the powers herein granted;
(h) To employ suitable agents and counsel and to pay their reasonable
expenses and compensation, and such agent or counsel may or may not be agent
or counsel for the Company;
(i) To invest the Trust Funds in time deposits or savings accounts bearing
a reasonable rate of interest in the Trustee's bank;
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(j) To invest in Treasury Bills and other forms of United States government
obligations;
(k) To deposit monies in federally insured savings accounts or certificates
of deposit in banks or savings and loan associations;
(l) To consent to or otherwise participate in reorganizations,
recapitalizations, consolidations, mergers, and similar transactions with
respect to other securities held in the Trust Fund other than qualifying
employer securities and to pay any assessments or charges in connection
therewith;
(m) To pool all or any of the Trust Fund with assets belonging to any other
qualified employee pension benefit trust created by the Company or an
affiliated company of the Company, and to commingle such assets and make joint
or common investments and carry joint accounts on behalf of this Plan and such
other trust or trusts, allocating undivided shares or interests in such
investments or accounts or any pooled assets of the two or more trusts in
accordance with their respective interests;
(n) To invest and reinvest the Trust Fund in any kind of real or personal
property including, but not limited to, securities of any open-end or closed-
end management type investment company or investment trust registered under
the Federal Investment Company Act of 1940 which would be regarded by prudent
businessmen as a safe investment. The fact that the Trustee or any affiliate
of the Trustee is providing services to and receiving remuneration from the
foregoing investment company or trust as investment advisor, custodian,
transfer agent, registrar, or otherwise, shall not preclude the Trustee from
investing in the securities of such investment company or investment trust, so
long as the other conditions of the exemption contained in Prohibited
Transaction Class Exemption 77-4 are met; and
(o) To exercise all the rights, powers, options, and privileges now or
hereinafter granted to the Trustee under the laws of the State of Texas,
except such as conflict with the terms of this Trust Agreement or the Act.
The Trustee shall have, hold, manage, control, use, invest and reinvest,
disburse, and dispose of the Trust Fund as if the Trustee were the owner
thereof in fee simple instead of in trust, subject only to such limitations as
are contained herein, or such of the laws of the State of Texas as cannot be
waived, and always as subject to the Act.
In particular, but not in limitation thereof, the Trustee shall have no
authority, discretion or control with respect to the acquisition, holding and/or
disposition of Company Stock or any other asset of the Plan or the entering into
an Exempt Loan or the terms thereof or the application of payments made
thereunder, but shall have the power to acquire, hold or dispose of Company
Stock and any other asset of the Plan or enter into an Exempt Loan or transact
such related matters only upon the express direction of the Administrator. Any
direction of the Administrator may be of a continuing nature or otherwise, and
may be revoked in writing by the Committee at any time.
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Neither the Trustee or any other persons shall be under any duty to question any
such direction of the Administrator and the Trustee shall as promptly as
possible comply with any directions given by the Administrator hereunder. The
Trustee shall not be responsible for any loss which may result from the failure
or refusal of the Administrator to give any such required approval.
2.4 PROHIBITED TRANSACTIONS
Notwithstanding anything in Section 2.3 to the contrary, unless (i) as
directed by the Administrator, or (ii) as directed by the Investment Manager, or
(iii) prior approval is obtained from the Secretary of Labor, the Trustee shall
not engage in any transaction prohibited by Section 406 of the Act, or which is
subject to tax under Section 4975 of the Code.
2.5 INVESTMENT MANAGERS
The Company and/or Administrator may appoint one or more Investment
Managers to direct the investments to be made by the Trustee with any part or
all of the assets of the Trust Fund. Except as otherwise provided by law, the
Trustee shall have no obligation for investment of any assets of the Trust Fund
which are subject to investment directions from any Investment Manager.
Appointment of any Investment Manager shall be made by written notice to the
Investment Manager and the Trustee, which notice shall specify those powers,
rights and duties of the Trustee under this Trust Agreement that are delegated
to the Investment Manager and that portion of the assets of the Trust Fund
subject to investment direction. An Investment Manager so appointed pursuant to
this Section shall be either a registered investment adviser under the
Investment Advisers Act of 1940, a bank, as defined in said Act, or an insurance
company qualified to manage, acquire and dispose of the Trust Fund under the
laws of more than one state of the United States. Any such Investment Manager
shall acknowledge to the Trustee in writing that it has accepted such
appointment and that it is a fiduciary with respect to the Plan and this Trust
Agreement. The Trustee shall follow the directions of an Investment Manager
regarding the investment, sale and reinvestment of any portion of the Trust Fund
as shall be subject to investment direction by an Investment Manager under the
provisions of this Section 2.5. The Trustee shall be under no duty or obligation
to review any investment decision pursuant to the direction of an Investment
Manager under this Section 2.5, nor shall the Trustee make any recommendation
with respect to the disposition or continued retention of any such investment.
In connection with the investment of the Trust Fund, the Trustee shall have no
responsibility or liability for the acts of any Investment Manager or for acting
without question on the direction of, or failing to act in the absence of any
direction from such Investment Manager. An Investment Manager may resign at any
time upon written notice to the Company and/or Plan Administrator and the
Trustee. The Company and/or Plan Administrator may remove an Investment Manager
at any time by written notice to the Investment Manager.
2.6 VOTING COMPANY STOCK HELD IN THE TRUST FUND
The Trustee shall vote all Company Stock held by it as part of the Plan
assets at such time and in such manner as the Administrator shall direct.
Provided, however, that if any agreement entered into by the Trustee, upon the
direction of the Administrator, provides for voting of any
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<PAGE>
shares of Company Stock pledged as security for any obligation of the Plan, then
such shares of Company Stock shall be voted in accordance with such agreement.
If the Administrator fails or refuses to give the Trustee timely instructions as
to how to vote any Company Stock held by the Trustee and which the Administrator
otherwise has the right to vote, the Trustee shall not vote such Company Stock
and shall consider the Administrator's failure or refusal to give timely
instructions as an exercise of the Administrator's rights and a directive to the
Trustee not to vote said Company Stock. The Trustee shall not vote Company Stock
when a Participant or Beneficiary, pursuant to this Section, fails to exercise a
right to vote Company Stock.
Notwithstanding the foregoing, if the Company has a registration-type class
of securities, each Participant or Beneficiary shall be entitled, in lieu of the
Administrator, to direct the Trustee as to the manner in which the Company Stock
allocated to the Company Stock Account of such Participant or Beneficiary is to
be voted. If the Company does not have a registration-type class of securities,
each Participant or Beneficiary in the Plan shall be entitled, in lieu of the
Administrator, to direct the Trustee as to the manner in which voting rights on
shares of Company Stock which are allocated to the Company Stock Account of such
Participant or Beneficiary are to be exercised with respect to any corporate
matter which involves the voting of such shares with respect to the approval or
disapproval of any corporate merger or consolidation, recapitalization,
reclassification, liquidation, dissolution, sale of substantially all assets of
a trade or business, or such similar transaction as prescribed in Regulations.
For purposes of this Section the term "registration-type class of securities"
means (A) a class of securities required to be registered under Section 12 of
the Securities Exchange Act of 1934; and (B) a class of securities which would
be required to be so registered except for the exemption from registration
provided in subsection (g)(2)(H) of such Section 12.
The Trustee shall notify each Participant or Beneficiary of each tender or
exchange offer and utilize its best efforts to distribute or cause to be
distributed to such Participant or Beneficiary in a timely manner all
information received by the Trustee as a record holder of shares of Company
Stock in connection with any such tender or exchange offer. Each Participant or
Beneficiary shall have the right from time to time with respect to the shares of
Company stock allocated to his account, to instruct the Trustee in writing as to
the manner in which to respond to any tender or exchange offer which shall be
pending or which may be made in the future for all shares of Company Stock or
any portion thereof. A Participant's or Beneficiary's instructions shall remain
in force until superseded in writing by the Participant or Beneficiary. The
Trustee shall tender or exchange such shares of Company Stock as and to the
extent so instructed. Unless and until shares of Company Stock are tendered or
exchanged, the individual instructions received by the Trustee from Participant
or Beneficiaries shall be held in strict confidence by the Trustee and shall not
be divulged or released to any person, including, but not limited to officers or
Employees of the Company, or of any other Participating Employer; provided,
however, that the Trustee shall advise the Company, at any time upon request, of
the total number of shares not subject to instructions to tender or exchange.
The Trustee shall not make recommendations to Participants or Beneficiaries on
whether to instruct the Trustee to tender or exchange.
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The Trustee shall not vote, sell, convey or transfer any allocated shares
of Company Stock for which no directions are timely received from Participants
or Beneficiaries pursuant to the immediately preceding paragraph, and shares of
Company Stock held by the Trustee which are not allocated to Participants'
Company Stock Accounts shall be voted by the Trustee only in the manner directed
by the Administrator.
Notwithstanding any other provision of this Section to the contrary, the
Trustee may vote the shares of Company Stock held by the Trust as it determines
necessary to fulfill its fiduciary duties.
2.7 PUT OPTION
If the distribution of a Participant's Company Stock Account is to be made
in cash, or a distribution pursuant to Section 4.13(c) of the Plan or the
Trustee expects to incur substantial Trust expenses which will not be paid
directly by the Company, and the Trustee determines that the Trust has
insufficient cash to make anticipated distributions or pay Trust expenses, the
Trust shall have a "put option" on Company Stock it holds to the Company for the
purposes of making such anticipated distributions and paying such expenses.
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ARTICLE 3.
DUTIES OF THE TRUSTEE
3.1 DUTIES OF THE TRUSTEE REGARDING PAYMENTS
(a) The Trustee shall make distributions from the Trust Fund at such times
and in such numbers of shares or other units of Company Stock and amounts of
cash to or for the benefit of the person entitled thereto under the Plan as
the Administrator directs in writing. Any undistributed part of a
Participant's interest in his accounts shall be retained in the Trust Fund
until the Administrator directs its distribution. Where distribution is
directed in Company Stock, the Trustee shall cause an appropriate certificate
to be issued to the person entitled thereto and mailed to the address
furnished by the Administrator. Any portion of a Participant's account under
the Plan to be distributed in cash shall be paid by the Trustee mailing a
check to the designated person at his or her latest known address. If a
dispute arises as to who is entitled to or should receive any benefit or
payment, the Trustee may withhold or cause to be withheld such payment until
the dispute has been resolved.
(b) As directed by the Administrator, the Trustee shall make payments out
of the Trust Fund. Such directions or instructions need not specify the
purpose of the payments so directed and the Trustee shall not be responsible
in any way respecting the purpose or propriety of such payments except as
mandated by the Act.
(c) In the event that any distribution or payment directed by the
Administrator shall be mailed by the Trustee to the person specified in such
direction at the latest address of such person filed with the Administrator,
and shall be returned to the Trustee because such person cannot be located at
such address, the Trustee shall promptly notify the Administrator of such
return. Upon the expiration of sixty (60) days after such notification, such
direction shall become void and unless and until a further direction by the
Administrator is received by the Trustee with respect to such distribution or
payment, the Trustee shall thereafter con tinue to administer the Trust Fund
as if such direction had not been made by the Administrator. The Trustee
shall not be obligated to search for or ascertain the whereabouts of any such
person.
3.2 ANNUAL REPORT OF THE TRUSTEE
Within sixty (60) days after the later of the Anniversary Date or receipt
of the Company's final contribution for each Plan Year, the Trustee shall
furnish to the Company and/or Administrator a written statement of account with
respect to the Plan Year setting forth:
(a) the net income, or loss, of the Trust Fund;
(b) the gains, or losses, realized by the Trust Fund upon sales or other
disposition of the assets;
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(c) the increase, or decrease, in the value of the Trust Fund, other than
Company Stock;
(d) all payments and distributions made from the Trust Fund; and
(e) such further information as the Trustee and/or Administrator deems
appropriate.
3.3 AUDIT
(a) If an audit of the Plan's records shall be required by the Act and the
regulations thereunder for any Plan Year, the Administrator shall direct the
Trustee on behalf of all Participants to engage an independent qualified
public accountant selected by the Administrator for that purpose. After an
audit of the books and records of the Trust Fund in accordance with generally
accepted auditing standards, such accountant shall, within a reasonable period
after the close of the Plan Year, furnish to the Administrator and the Trustee
a report of his audit setting forth his opinion as to whether each of the
following statements, schedules or lists, or any others that are required by
Section 103 of the Act or the Secretary of Labor to be filed with the Plan's
annual report, are presented fairly and in conformity with generally accepted
accounting principles applied consistently:
(1) statement of the assets and liabilities of the Trust Fund;
(2) statement of changes in net assets available to the Trust Fund;
(3) statement of receipts and disbursements, a schedule of all
assets held for investment purposes, a schedule of all loans or fixed income
obligations in default at the close of the Plan Year;
(4) a list of all leases in default or uncollectible during the Plan
Year;
(5) the most recent annual statement of assets and liabilities of
any bank common or collective trust fund in which the Trust Fund is invested
or such infor mation regarding separate accounts or trusts with a bank or
insurance company as the Trustee and/or Administrator deem necessary; and
(6) a schedule of each transaction or series of transactions
involving an amount in excess of five percent (5%) of the Trust Fund as
specified in appropriate governmental regulations.
All auditing and accounting fees shall be an expense of and may, at the
election of the Administrator, be paid from the Trust Fund.
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(b) If some or all of the information necessary to enable the Administrator
to comply with Section 103 of the Act is maintained by a bank, insurance
company, or similar institution, regulated and supervised and subject to
periodic examination by a state or federal agency, it shall transmit and
certify the accuracy of that information to the Administrator as provided in
Section 103(b) of the Act within one hundred twenty (120) days after the end
of the Plan Year or such other date as may be prescribed under regulations of
the Secretary of Labor.
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ARTICLE 4.
MISCELLANEOUS
4.1 TRUSTEE'S COMPENSATION AND EXPENSES AND TAXES
The Trustee shall be paid such reasonable compensation as shall from time
to time be agreed upon in writing by the Company and/or Administrator and the
Trustee. An individual serving as Trustee who already receives full-time pay
from the Company shall not receive compensation under this Trust Agreement. In
addition, the Trustee shall be reimbursed for any reasonable expenses,
including, but not limited to reasonable counsel, accounting, actuarial, and
consulting fees incurred by it as Trustee. Such compensation and expenses shall
be paid from the Trust Fund unless paid or advanced by the Company. All taxes
of any kind and all kinds whatsoever that may be levied or assessed under
existing or future laws upon, or in respect of, the Trust Fund or the income
thereof, shall be paid from the Trust Fund. It is understood by the parties
hereto that the Company shall pay for the Trustee's compensation and expenses
hereunder.
4.2 RESIGNATION, REMOVAL AND SUCCESSION OF TRUSTEE
(a) The Trustee may resign at any time by delivering to the Company, at
least thirty (30) days before its effective date, a written notice of his
resignation.
(b) The Company may remove the Trustee by mailing written notice of its
removal by registered or certified mail, addressed to such Trustee at the
Trustee's last known address, at least thirty (30) days before the notice's
effective date.
(c) Upon the death, resignation, incapacity, or removal of any Trustee, a
successor may be appointed by the Company, and such successor, upon accepting
such appointment in writing and delivering same to the Company, shall, without
further act, become vested with all the estate, rights, powers, discretions,
and duties of his predecessor with like respect as if it were originally named
as a Trustee herein. Until such a successor is appointed, the remaining
Trustee or Trustees shall have full authority to act under the terms of the
Plan. In the event that no successor Trustee is appointed, the Trustee (i)
may apply to a court of competent jurisdiction for the appointment of a
successor Trustee or for instructions, or (ii) the individual members of the
Board of Directors of the Company shall act as successor Trustee. Any
expenses incurred by the Trustee in connection with the said application shall
be paid from the Trust Fund as an expense of administration.
(d) The Company may designate one or more successors prior to the death,
resignation, incapacity, or removal of a Trustee. In the event a successor is
so designated by the Company and accepts such designation, the successor
shall, without further act, become vested with all the estate, rights, powers,
discretions, and duties of its predecessor with the like effect as if such
person or entity were originally named as Trustee herein immediately upon the
death, resignation, incapacity, or removal of his predecessor.
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<PAGE>
(e) Whenever any Trustee hereunder ceases to serve as such, it shall
furnish to the Company and Administrator a written statement of account with
respect to the portion of the Plan Year during which such person or entity
served as Trustee. This statement shall be either (i) included as part of the
annual statement of account for the Plan Year required under Section 3.2 of
this Trust Agreement or (ii) set forth in a special statement. Any such
special statement of account should be rendered to the Company no later than
the due date of the annual statement of account for the Plan Year.
(f) Upon settlement of the Trustee's account, the Trustee shall transfer to
the successor Trustee the Trust as it is then constituted and true copies of
its records relating to the Trust Fund. Upon the completion of this transfer,
the Trustee's responsibilities under the Trust Agreement shall cease and the
Trustee shall be discharged from further accountability for all matters
embraced in its settlement; provided, however, that the Trustee executes and
delivers all documents and written instruments that are necessary to transfer
and convey the right, title and interest in the Trust Fund, and all rights and
privileges with respect to the Trust Fund, to the successor Trustee.
4.3 INDEMNIFICATION
From time to time, the Company shall certify to the Trustee the names of
the persons authorized to act on behalf of the Administrator. All directions to
the Trustee by the Administrator shall be in writing, properly certified by a
designated representative thereof. To the maximum extent permitted by law, the
Trustee shall not be liable and the Company shall indemnify the Trustee and
agree to hold the Trustee harmless from all liabilities and claims (including
reasonable attorney's fees and expenses in defending against such liabilities
and claims) against the Trustee arising from (i) any actions or omissions taken
by the Trustee pursuant to the written instructions of the Administrator or (ii)
any actions or omissions taken by the Trustee in the absence of such written
instructions where specifically permitted by the terms of this Plan, unless such
liability or expense results from negligence, reckless, or willful acts of
commission or omission by the Trustee. The foregoing indemnification shall also
apply to liabilities and claims against the Trustee arising from any breach of
fiduciary responsibility by a fiduciary with respect to the Plan, unless the
Trustee is determined to be a co-fiduciary to the Plan under the Act and (i)
participates knowingly in or knowingly undertakes to conceal such breach, (ii)
has enabled such fiduciary to commit such breach by the Trustee's failure to
discharge its fiduciary duties or (iii) has actual knowledge of such breach and
fails to take reasonable action to remedy such breach. The Trustee shall be
entitled to collect on the Company's indemnity under this Section only from the
Company and shall not be entitled to payment directly or indirectly from the
Trust Fund. The Trustee and the Company may execute a letter agreement further
delineating the indemnification agreement of this Section 4.3 provided the
agreement is consistent with and does not violate ERISA.
4.4 LIMITATION OF LIABILITY OF TRUSTEE
(a) If the Trustee makes a written request for directions from the
Administrator, concerning a matter for which the Administrator is responsible
in accordance with the terms
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of the Plan, the Trustee shall await such directions without incurring
liability. The Trustee has no authority to act in the absence of such
requested directions.
(b) The Trustee shall not be liable to any person for making any
distribution, failing to make any distribution, or discontinuing any
distribution on the direction of the Administrator, or for failing to make any
distribution by reason of the Administrator's failure to direct that such
distribution be made, concerning a matter for which the Administrator is
responsible in accordance with the terms of the Plan. The Trustee has no duty
to inquire whether any direction or absence of direction is in conformity with
the provisions of the Plan. The Trustee has no duty to enforce or collect
Company contributions.
(c) The Trustee is not responsible for determining the adequacy of the
Trust Fund to meet liabilities under the Plan, and is not liable for any
obligations of the Plan or the Trust Fund in excess of the assets of the Trust
Fund.
(d) The Trustee shall not be liable for the acts or omissions of any
fiduciary or other person with respect to the Plan or the Trust Fund except to
the extent required under Section 405(a) of the Act, if applicable.
(e) The Trustee is not responsible for any matter affecting the
administration of the Plan by the Company, the Administrator, or any other
person or persons to whom responsibility for administration of the Plan is
delegated pursuant to the terms of the Plan.
(f) The Trustee may seek judicial protection by any action or proceeding it
deems necessary to settle the account of the Trustee, or a judicial
determination or a declaratory judgment as to a question of construction of
the Trust, or instruction as to action under this Trust Agreement, provided
the Trustee has first satisfied the procedures set forth in Section 4.4(a).
The Trustee need join only the Plan Administrator and the Company as party's
defendant although the Trustee may join other parties.
(g) The Trustee shall be fully protected, to the maximum extent provided by
law, in relying upon and following all directives and instructions from the
Company, Administrator, Participants and Beneficiaries, including, without
limitation, such directives and instructions with respect to the making of
Exempt Loans, the acquisition, holding and disposition of Company Stock and
the voting of the same.
4.5 MERGER OR CONSOLIDATION INVOLVING CORPORATE TRUSTEE
Any corporation or association into which a corporation or association
acting as Trustee hereunder may be merged or with which it may be consolidated,
or any corporation resulting from any merger, reorganization or consolidation to
which such Trustee may be a party, shall be the successor of the Trustee
hereunder without the necessity of any appointment or other action, provided it
does not resign and is not removed.
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4.6 LIMITATION ON PARTICIPANTS' RIGHTS
Participation in this Trust Fund shall not give any employee of the Company
the right to be retained in the Company's employ or any right to an interest in
this Trust Fund other than as herein provided. All benefits payable hereunder
shall be provided solely from the Trust Fund.
4.7 NO REVERSION IN COMPANY
The Company shall have no right, title or interest in the Trust Fund, nor
shall any part of the Trust Fund revert to the Company, directly or indirectly,
unless:
(a) A contribution is made by the Company by mistake of fact and such
contribution is returned to the Company within one year after payment to the
Trustee; or
(b) A contribution conditioned on the deductibility thereof is disallowed
as an expense for federal income tax purposes and such contribution (to the
extent disallowed) is returned to the Company within one year after the
disallowance of the deduction.
The amount of any contribution that may be returned to the Company pursuant
to subparagraph (a) or (b) above must be reduced by any losses of the Trust Fund
allocable thereto.
4.8 RECEIPT OR RELEASE
Any payment to any Participant or his Beneficiary in accordance with the
provisions of this Trust Agreement shall, to the extent thereof, be in full
satisfaction of all claims against the Trustee, the Administrator and the
Company, and the Administrator may require such Participant or Beneficiary to
execute a receipt and release to such effect as a condition precedent to such
payment.
4.9 GOVERNING LAW
This Trust Agreement shall be construed, administered and governed in all
respects under applicable federal law and to the extent that federal law is
inapplicable, under the laws of the State of Texas; provided, however, that if
any provision is susceptible to more than one interpretation, such
interpretation shall be given thereto as is consistent with the Trust Fund being
a qualified trust within the meaning of Sections 401(a) and 501(a) of the Code.
If any provision of this instrument shall be held by a court of competent
jurisdiction to be invalid or unenforceable, the remaining provisions hereof
shall continue to be fully effective.
4.10 MULTIPLE COUNTERPARTS
This Trust Agreement may have been executed in multiple counterparts, each
of which shall be deemed an original. Said counterparts shall constitute the
same instruments, which may be sufficiently evidenced by any one counterpart.
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4.11 AMENDMENT
This Trust Agreement may be amended from time to time by the Company,
except as follows:
(a) The duties and liabilities of the Trustee cannot be changed without the
Trustee's consent; and
(b) Except as provided in Section 4.7, under no condition shall an
amendment result in the return or repayment to the Company of any part of the
Trust Fund or the income from it or result in the distribution of the Trust
Fund for the benefit of anyone other than persons entitled to benefits under
the Plan.
4.12 BOND OF TRUSTEE
The Trustee shall not be required to give any bond or other security for
faithful performance of its services and duties, or for any other purpose except
as may be required by the Act.
4.13 SUCCESSORS AND ASSIGNS
This Trust Agreement shall inure to the benefit of, and be binding upon,
the parties hereto, and their successors and assigns.
4.14 GENDER DESIGNATION
As used in this Trust Agreement, the masculine gender shall include the
feminine and neuter genders.
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IN WITNESS WHEREOF, the undersigned have executed this Trust Agreement the
21st day of July, 1998, effective as of July 21, 1998.
AXIA FINANCE CORP.
By:/s/ John D. Hawkins
--------------------------------
Name: John D. Hawkins
-----------------------------
Title: Vice President
----------------------------
FIRST BANKERS TRUST COMPANY
By:/s/ Norman T. Rosson
--------------------------------
Name: Norman T. Rosson
------------------------------
Title: Senior Vice President
-----------------------------
EXECUTION PAGE TO THE
AXIA FINANCE CORP.
EMPLOYEE STOCK OWNERSHIP AND
401(K) PLAN TRUST AGREEMENT
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EXHIBIT 10.8
$77,000,000 SENIOR SECURED FACILITY
By and Among
AXIA FINANCE CORP. and AXIA INCORPORATED
as Borrower
and
AMES TAPING TOOL SYSTEMS, INC. AND
TAPE TECH TOOL CO. INC.
as Guarantors
and
PARIBAS
as Agent and as a Lender
and
THE LENDERS PARTY THERETO
CLOSING DATE: July 22,1998
Dallas, Texas
<PAGE>
TABLE OF CONTENTS
PAGE
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ARTICLE I DEFINITIONS; ACCOUNTING TERMS
1.01 Definitions............................................... 1
1.02 Type of Advances.......................................... 24
1.03 Accounting Terms.......................................... 24
1.04 Miscellaneous............................................. 24
ARTICLE II THE LOANS
2.01 The Revolving Credit Loans................................ 24
2.02 Acquisition Facility Loans................................ 25
2.03 The Term Loan and the ESOP Loan........................... 25
2.04 Notice of Advance......................................... 26
2.05 The Notes................................................. 26
2.06 Disbursement of Funds..................................... 27
2.07 Conversions and Continuances.............................. 28
2.08 Mandatory Repayments...................................... 28
2.09 Prepayments............................................... 30
2.10 Method and Place of Payments.............................. 32
2.11 Pro Rata Advances/Payments................................ 33
2.12 Interest.................................................. 33
2.13 Interest Periods.......................................... 34
2.14 Interest Rate Not Ascertainable........................... 35
2.15 Change in Legality........................................ 35
2.16 Increased Costs, Taxes or Capital Adequacy Requirements... 36
2.17 LIBOR Advance Prepayment and Default Penalties............ 37
2.18 Tax Forms................................................. 38
ARTICLE III LETTERS OF CREDIT
3.01 Letters of Credit......................................... 38
3.02 Letter of Credit Requests................................. 39
3.03 Letter of Credit Participations........................... 40
3.04 Increased Costs........................................... 41
3.05 Conflict Between Applications and Agreement............... 42
i
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ARTICLE IV FEES; COMMITMENTS
4.01 Fees........................................................ 42
4.02 Reduction of Total Commitment............................... 42
4.03 Reduction of Total Revolving Credit Commitment.............. 43
ARTICLE V CONDITIONS PRECEDENT
5.01 Conditions Precedent to the Initial Advance................. 43
5.02 Conditions Precedent to All Credit Events................... 46
5.03 Delivery of Documents....................................... 47
5.04 Acquisition Facility Loans.................................. 47
ARTICLE VI REPRESENTATIONS AND WARRANTIES
6.01 Organization and Qualification.............................. 49
6.02 Authorization and Validity.................................. 49
6.03 Governmental Consents....................................... 50
6.04 Conflicting or Adverse Agreements or Ratifications.......... 50
6.05 Title to Assets; Licenses and Permits....................... 50
6.06 Litigation.................................................. 51
6.07 Financial Statements........................................ 51
6.08 No Defaults................................................. 51
6.09 Investment Company Act...................................... 51
6.10 Utility Regulation.......................................... 51
6.11 ERISA....................................................... 52
6.12 Environmental Matters....................................... 52
6.13 Purpose of Loans............................................ 53
6.14 Subsidiaries................................................ 53
6.15 Solvency.................................................... 54
6.16 Accuracy of Information..................................... 54
6.17 Insurance................................................... 54
6.18 Indebtedness and Contingent Liabilities..................... 54
6.19 Compliance with Laws........................................ 54
6.20 Security Interests.......................................... 55
6.21 Material Contracts.......................................... 55
6.22 Year 2000................................................... 55
ARTICLE VII AFFIRMATIVE COVENANTS
7.01 Information Covenants....................................... 55
7.02 Books, Records and Inspections.............................. 58
ii
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PAGE
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7.03 Insurance and Maintenance of Properties.................... 58
7.04 Payment of Taxes........................................... 59
7.05 Corporate Existence........................................ 59
7.06 Compliance with Statutes................................... 59
7.07 ERISA...................................................... 59
7.08 Utility Regulation......................................... 60
7.09 Subsidiaries............................................... 60
7.10 Material Contracts......................................... 60
7.11 Merger of Finance Corp. into AXIA.......................... 60
ARTICLE VIII NEGATIVE COVENANTS
8.01 Change in Business......................................... 60
8.02 Consolidation, Merger or Sale of Assets.................... 61
8.03 Indebtedness............................................... 61
8.04 Liens...................................................... 62
8.05 Investments................................................ 64
8.06 Guaranties................................................. 64
8.07 Restricted Payments........................................ 65
8.08 Change in Accounting....................................... 66
8.09 Prepayment of Other Indebtedness........................... 66
8.10 Transactions with Affiliates............................... 66
8.11 Subsidiaries' Stock........................................ 66
8.12 Material Contracts......................................... 66
8.13 Fixed Charge Coverage Ratio................................ 66
8.14 Capital Expenditures....................................... 68
8.15 Fiscal Year................................................ 68
8.16 Sale/Leaseback Transactions................................ 69
ARTICLE IX EVENTS OF DEFAULT AND REMEDIES
9.01 Events of Default.......................................... 69
9.02 Primary Remedies........................................... 71
9.03 Other Remedies............................................. 72
ARTICLE X THE AGENT
10.01 Authorization and Action................................... 72
10.02 Agents' Reliance........................................... 72
10.03 Agent and Affiliates....................................... 73
10.04 Lender Credit Decision..................................... 74
10.05 Agent's Indemnity.......................................... 74
iii
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PAGE
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10.06 Successor Agent............................................ 75
10.07 Notice of Default.......................................... 75
ARTICLE XI MISCELLANEOUS
11.01 Amendments................................................. 75
11.02 Notices.................................................... 75
11.03 No Waiver, Remedies........................................ 77
11.04 Costs, Expenses and Taxes.................................. 77
11.05 Indemnity.................................................. 77
11.06 Right of Setoff............................................ 78
11.07 Governing Laws............................................. 79
11.08 Interest................................................... 79
11.09 Survival of Representations and Warranties................. 80
11.10 Successors and Assigns; Participations..................... 80
11.11 Confidentiality............................................ 82
11.12 Pro Rata Treatment......................................... 83
11.13 Separability............................................... 83
11.14 Execution in Counterparts.................................. 83
11.15 Interpretation............................................. 83
11.16 Limitation by Law.......................................... 84
11.17 Submission to Jurisdiction................................. 85
11.18 Waiver of Jury Trial....................................... 85
11.19 Final Agreement of the Parties............................. 85
11.20 Company Assumption of Obligations of Finance Corp.;
Certain Matters Concerning Binding Effect on AXIA,
AHC, Ames and TapeTech..................................... 86
11.21 Waiver of Consumer Rights.................................. 86
11.22 Nonapplicability of Chapter 346; Selection of Optional
Interest Rate Ceilings..................................... 86
iv
<PAGE>
CREDIT AGREEMENT
This CREDIT AGREEMENT (this "Agreement"), dated as of July 22, 1998, is by
and among AXIA FINANCE CORP., a Delaware corporation ("Finance Corp.") to be
merged on or after the Effective Date into AXIA INCORPORATED, a Delaware
corporation (such corporation prior to the merger, "AXIA"), PARIBAS, a bank
organized under the laws of France acting through its Houston Agency, as Agent
(individually, "Paribas", and in such agency capacity, the "Agent"), and the
banks and other financial institutions listed on the signature pages hereto
under the caption "Lenders" (collectively, together with all successors and
assigns, the "Lenders").
Finance Corp. has requested the Lenders provide the Company (as herein
defined) with a $76,500,000 credit facility pursuant to which Lenders will
commit to make: (a) revolving credit loans of up to $15,000,000, (b) a term loan
of $35,000,000, (c) a second term loan of $1,500,000, and (d) acquisition term
loans of up to $25,000,000 in the aggregate. The proceeds of the $35,000,000
term loan and approximately $3,000,000 of the revolving credit loans shall be
used (i) to repay certain indebtedness and obligations of AXIA, (ii) to make a
loan by Finance Corp. to AXIA Acquisition Corp. to be used by Parent (as herein
defined) solely to finance the purchase of capital stock of AXIA Holdings Corp.
("AHC") pursuant to the Merger Agreement (as herein defined) and to pay
transaction expenses relating thereto, and (iii) to pay certain transaction
expenses incurred in connection with such purchase. The proceeds of the
$1,500,000 term loan shall be used to fund Finance Corp.'s loan to its employee
stock ownership plan ("ESOP") to enable the ESOP to purchase shares of common
stock of AXIA Group, Inc. ("Holding Co."). After the merger of Finance Corp.
into and with AXIA, (a) the proceeds of the $15,000,000 revolving credit loans
shall be used for general corporate purposes and for the issuance of letters of
credit, and (b) the proceeds of the $25,000,000 acquisition term loans shall be
used, during the Acquisition Facility Funding Period (as herein defined), to
finance Permitted Acquisitions (as herein defined). In connection therewith, the
Agent has agreed to serve as Agent for the Lenders.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
set forth herein, the Company (as herein defined), the Agent, and the Lenders
agree as follows:
ARTICLE I
DEFINITIONS; ACCOUNTING TERMS
SECTION 1.01 DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings:
"Acquisition" has the meaning specified in Section 6.13
"Acquisition Agreements" has the meaning specified in Section 5.04.
"Acquisition EBITDA" means:
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(i) as of any measurement date for any period ending prior to July 31,
1999, the sum of (a) EBITDA of the Company and its Subsidiaries for the
period commencing on the Effective Date and ending on the measurement date,
plus (b) the aggregate Scheduled Pro Forma EBITDA for each month prior to
the Effective Date that is within the twelve (12) month period immediately
preceding the measurement date, plus (c) the Adjusted Target EBITDA of each
Prior Target or, as applicable, the Adjusted Target EBITDA of a Prior
Target attributable to the assets acquired from such Prior Target, for any
portion of such twelve (12) month period occurring prior to the date of the
Company's acquisition of such Prior Target or the related assets but only
to the extent that such Adjusted Target EBITDA for such Prior Target can be
established based upon financial statements of the Prior Target; and
(ii) as to any measurement date for any period ending on or after July
31, 1999, the sum of (a) EBITDA of the Company and its Subsidiaries for the
twelve (12) month period immediately preceding the measurement date plus
(b) the Adjusted Target EBITDA of each Prior Target or, as applicable, the
Adjusted Target EBITDA of a Prior Target attributable to the assets
acquired from such Prior Target, for any portion of such twelve (12) month
period occurring prior to the date of the Company's acquisition of such
Prior Target or the related assets but only to the extent that such
Adjusted Target EBITDA for such Prior Target can be established based upon
financial statements of the Prior Target.
"Acquisition Facility Commitment" shall mean, with respect to the
Acquisition Facility and as to any Lender, the amount set forth opposite such
Lender's name on the signature pages hereof, as modified from time to time
pursuant to the terms hereof, aggregating $25,000,000 as of the date hereof.
"Acquisition Facility Commitment Fee" shall have the meaning assigned to
such term in Section 4.01(b) hereof.
"Acquisition Facility Funding Period" shall mean the period commencing with
the Effective Date, and ending on June 30, 2001.
"Acquisition Facility Lender" means any Lender having an Acquisition
Facility Commitment hereunder.
"Acquisition Facility Loans" has the meaning specified in Section 2.02.
"Acquisition Facility Maturity Date" means June 30, 2004, unless
accelerated pursuant to Section 9.02.
"Acquisition Facility Notes" shall mean the Acquisition Facility Notes of
the Company, executed and delivered as provided in Section 2.05(d) hereof, in
substantially the form of Exhibit 2.05D annexed hereto, as amended, modified or
supplemented from time to time.
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"Acquisition Facility Pro Forma Senior Debt Leverage Ratio" means, as to
any proposed acquisition, the ratio of (a) the sum of (i) Senior Debt of the
Company and its Subsidiaries as of the date of the proposed acquisition plus
(ii) the amounts to be borrowed under the Acquisition Facility Commitments in
connection with the proposed acquisition, plus (iii) any other Indebtedness that
constitutes Senior Debt to be incurred or assumed in connection with such
proposed acquisition, to (b) the sum of (i) Acquisition EBITDA plus (ii)
Adjusted Target EBITDA.
"Acquisition Facility Pro Forma Total Debt Leverage Ratio" means, as to any
proposed acquisition, the ratio of (a) the sum of (i) Total Debt of the Company
and its Subsidiaries as of the date of the proposed acquisition plus (ii) the
amounts to be borrowed under the Acquisition Facility Commitments in connection
with the proposed acquisition, plus (iii) any other Indebtedness that
constitutes Total Debt to be incurred or assumed in connection with such
proposed acquisition, to (b) the sum of (i) Acquisition EBITDA plus (ii)
Adjusted Target EBITDA.
"Acquisition Facility Total Draw Amount" shall have the meaning assigned to
such term in Section 2.08(d) hereof.
"Additional ESOP" means any employee stock ownership plan (other than the
ESOP) as long as any loans by the Company to such plan pursuant to Section
8.05(d) do not exceed the amount permitted by such Section 8.05(d).
"Adjusted Target EBITDA" means, for the most recently completed twelve
month period prior to the date of determination for which financial statements
are available, the sum of the following, each calculated without duplication for
the Target or the assets acquired for such period: (1) Target EBITDA; plus (2)
all of those expenses which have been deducted in calculating Target EBITDA for
such period and which will be eliminated in the future upon the consummation of
the proposed acquisition by the Company as approved by Agent; minus (3) all
income or gains which have been added in calculating Target EBITDA for such
period and which will be eliminated in the future upon the consummation of the
proposed acquisition by the Company as approved by Agent.
"Administrative Questionnaire" means an Administrative Questionnaire in the
form of Exhibit 1.01A, completed by each Lender and provided to the Agent and
the Company.
"Advance" means (a) in respect of any Revolving Credit Loan or an
Acquisition Facility Loan an advance pursuant to a Notice of Advance or a notice
under Section 2.04(b), as the case may be, and (b) in respect of each of the
Term Loan and ESOP Loan, a single advance made on the Effective Date, in each
case comprised of a single Type of Loan made by all the Lenders concurrently to
the Company (or resulting from a conversion or continuance of all or any portion
(subject to minimums herein specified) having, in the case of LIBOR Rate
Advances, the same Interest Period (except as otherwise provided in this
Agreement)).
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"Advance Date" means, with respect to each Advance, the Business Day upon
which the proceeds of such Advance are to be made available to the Company as
selected by the Company in the relevant Notice of Advance, or a notice under
Section 2.04(b) as the case may be.
"Affiliate" means any Person controlling, controlled by or under common
control with any other Person. For purposes of this definition, "control"
(including "controlled by" and of under common control with") means the
possession, directly or indirectly, of the power to either (a) vote 10% or more
of the securities having ordinary voting power for election of directors of such
Person or (b) direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities or otherwise.
Notwithstanding the foregoing, no individual shall be deemed to be an Affiliate
of a corporation solely by reason of his or her being an officer or director of
such corporation.
"Agent" has the meaning specified in the introduction to this Agreement.
"Agent's Letter" means that certain letter to The Sterling Group, Inc.
dated May 7, 1998, from Paribas and acknowledged by The Sterling Group, Inc.
"Agreement" has the meaning specified in the introduction to this
Agreement.
"AHC" has the meaning specified in the introduction to this Agreement.
"Alternate Base Rate" means, for any day, a rate per annum (rounded upwards
to the nearest 1/100 of 1%) equal to the greater of (a) the Prime Rate in
effect on such day and (b) the Federal Funds Effective Rate in effect on such
day plus 1/2 of 1% per annum. If, for any reason, the Agent shall have
determined (which determination shall be conclusive absent manifest error) that
it is unable to ascertain the Federal Funds Effective Rate, including the
inability or failure of the Agent to obtain sufficient quotations in accordance
with the terms hereof, the Alternate Base Rate shall be determined without
regard to clause (b) of the first sentence of this definition until the
circumstances giving rise to such inability no longer exist. Any change in the
Alternate Base Rate due to a change in the Prime Rate or the Federal Funds
Effective Rate shall be effective on the effective date of such change in the
Prime Rate or the Federal Funds Effective Rate, respectively.
"Alternate Base Rate Advance" means any Advance bearing interest at a rate
determined by reference to the Alternate Base Rate in accordance with the
provisions of Article II.
"Ames" means Ames Taping Tool Systems Inc., a Delaware corporation.
"Applicable Lending Office" means, with respect to each Lender, such
Lender's Domestic Lending Office in the case of an Alternate Base Rate Advance
and such Lender's LIBOR Lending Office in the case of a LIBOR Rate Advance.
"Application for Letter of Credit" means a letter of credit application in
a form satisfactory to the Issuing Bank.
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"Assignment and Acceptance" has the meaning specified in Section 11.10(c).
"AXIA" has the meaning specified in the introduction to this Agreement.
"Bankruptcy Code" has the meaning specified in Section 9.01(f).
"Board" means the Board of Governors of the Federal Reserve System of the
United States (or any successor) and any other banking authority to which the
Lenders are subject for Eurocurrency Liabilities or any other category of
deposits or liabilities by reference to which the LIBOR Rate is determined.
"Borrowing Base" shall mean, at any time, an amount equal to the sum (as
reflected in the Borrowing Base Certificate most recently delivered to the Agent
prior to such time) of
(A) Eighty-five percent (85%) of the Eligible Accounts (other than Eligible
Foreign Accounts), plus
(B) Seventy percent (70%) of the Eligible Foreign Accounts, but in no event
shall the portion of the Borrowing Base attributable to this clause (B) be
greater than $2,000,000 in the aggregate, plus
(C) Sixty percent (60%) of the Eligible Inventory, plus
(D) 100% of any cash held by the Agent as security for the Letter of Credit
Obligations.
"Borrowing Base Certificate" means, as of any date, a certificate as to the
Borrowing Base as of such date in the form of Exhibit 1.01B.
"Business Day" means any day (other than a day which is a Saturday, Sunday
or legal holiday in the State of Texas) on which banks are open for business in
Houston, Texas and New York and, if the applicable Business Day relates to any
LIBOR Rate Advance, on which dealings are carried on in the London eurodollar
market.
"Capital Expenditures" means all of the capital expenditures of the Company
and its Subsidiaries on a consolidated basis which, pursuant to GAAP, are
capitalized for balance sheet purposes.
"Capitalized Lease Obligations" means all lease or rental obligations of
the Company and its Subsidiaries determined on a consolidated basis which,
pursuant to GAAP, are capitalized for balance sheet purposes.
"Casualty Event" means with respect to any item of property, whether real,
personal or mixed, the total loss or constructive total loss (including, but not
limited to, as a result of
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destruction, damage, or seizure thereof by a governmental authority for a period
equal to the lesser of (i) the remaining period before the Term Loan Maturity
Date and (ii) one hundred eighty days after the occurrence of such event).
"Carryover Letters of Credit" shall mean those certain one or more Letters
of Credit issued by American National Bank and Trust Company of Chicago for the
account of AXIA prior to the Execution Date which are outstanding on the
Effective Date, true and correct copies of which are attached hereto as Schedule
1.01CLC.
"Change of Control" occurs when any Unrelated Person or any Unrelated
Persons, other than the Designated Shareholders, acting together which would
constitute a Group together with any Affiliates or Related Persons thereof (in
each case also constituting Unrelated Persons other than the Designated
Shareholders) shall at any time either (i) Beneficially Own more than 35% of the
aggregate voting power of all classes of Voting Equity Interests of the Company
or Holding Co. or (ii) succeed in having sufficient of its or their nominees
elected to the Board of Directors of Holding Co. such that such nominees, when
added to any existing director remaining on the Board of Directors of the
Company or Holding Co. after such election who is an Affiliate or Related Person
of such Person or Group, shall constitute a majority of the Board of Directors
of the Company or Holding Co.; provided, however, no Change of control shall
have occurred so long as the Designated Shareholders (or any combination
thereof) shall retain more than 50% of the aggregate voting power of all classes
of Voting Equity Interests of the Company and Holding Co. As used herein (a)
"Beneficially Own" shall mean "beneficially own" as defined in Rule 13d-3 of the
Securities Exchange Act of 1934, as amended, or any successor provision thereto;
provided, however, that, for purposes of this definition, a Person shall not be
deemed to Beneficially Own securities tendered pursuant to a tender or exchange
offer made by or on behalf of such Person or any of such Person's Affiliates
until such tendered securities are accepted for purchase or exchange; (b)
"Group" shall mean a "group" for purposes of Section 13(d) of the Securities
Exchange Act of 1934, as amended; (c) "Unrelated Person" shall mean at any time
any Person other than the Company and Holding Co. or any of their Subsidiaries
and other than any trust for any employee benefit plan of the Company and
Holding Co. or any of their reported Subsidiaries; (d) "Related Person" of any
Person shall mean any other Person owning (1) 5% or more of the outstanding
common stock of such Person or (2) 5% or more of the Voting Equity Interests of
such Person; and (e) "Designated Shareholders" means (1) each Person who owns
any capital stock of Holding Co. on the Effective Date, (2) the officers,
employees and directors of Holding Co. or any of its Subsidiaries, (3) any
Person who on the Effective Date is or was before such date an officer,
director, stockholder, employee or consultant of The Sterling Group, Inc., (4)
the ESOP and any Additional ESOP, (5) any savings or investment plan sponsored
by Holding Co. or any of its Subsidiaries, (6) with respect to any Person
covered by the preceding clauses (1) through (5) (A) in the case of an entity,
any Affiliate of such Person, and (B) in the case of an individual, any spouse,
parent, sibling, child or grandchild (in each case, whether such relationship
arises from birth, adoption or through marriage), and (7) any trust, limited
liability company, corporation, limited or general partnership or other entity,
a majority of interest of the beneficiaries, stockholders, partners or owners
(direct or beneficial) of which are Persons of the type referred to in the
preceding clauses (1) through (6).
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"Code" means the Internal Revenue Code of 1986, as amended and the
regulations promulgated thereunder.
"Commitment" means the obligation of each of the Lenders to enter into and
perform this Agreement, to make available the Loans and to issue the Letters of
Credit to the Company in the amounts shown on the signature page of each Lender
hereto (or, as to any Lender that has entered into an Assignment and Acceptance,
in the amount resulting after giving effect to each Assignment and Acceptance
entered into by such Lender) and all other duties and obligations of the Lenders
hereunder.
"Company" means (a) before the Company Merger, Finance Corp., and (b) upon
and after the Company Merger, AXIA Incorporated, a Delaware corporation.
"Company Group" means, collectively, the Company and its Subsidiaries and
individually, any one of the foregoing; provided, however, that Company Group
also shall include Parent for purposes of Sections 6.01, 6.02, 6.03, 6.10, 6.15
(but only as to the period beginning on the Execution Date and continuing
through the Effective Date), Section 6.20 (but only as to the Security Documents
executed by Parent), 9.01(b), 9.01(d) (but only as to the Security Documents
executed by Parent), 9.01(f), 9.01(g) and the last sentence of Section 6.04.
"Company Merger" means the merger of Finance Corp. with and into AXIA, with
AXIA being the surviving entity.
"Credit Event" means the making of any Advance, the conversion of any
Advance into, or continuation of any Advance as, a LIBOR Rate Advance or the
issuance of any Letter of Credit.
"Default" means the occurrence of any event which with the giving of notice
or the passage of time or both would be an Event of Default.
"Default Rate" means the lesser of (a) the Highest Lawful Rate and (b) the
sum of (i) the Alternate Base Rate or, as to any LIBOR Rate Advance, during any
Interest Period in which an Event of Default is continuing, the LIBOR Rate for
such LIBOR Rate Advance, as the case may be, plus (ii) the applicable Margin,
plus (iii) two percent (2%) per annum.
"Derivatives" means, with respect to any Person, foreign exchange,
commodity, currency and interest rate swaps, floors, caps, collars, forward
sales, options and other similar transactions or combinations of the foregoing.
"Designated Payment Date" means September 30, December 31, March 31 and
June 30, in any calendar year, provided, however, if in any such year a
Designated Payment Date shall be a day which is not a Business Day, such
Designated Payment Date shall be the next succeeding Business Day, and such
extension of time shall be included in determining the amount to be paid on such
date.
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"Domestic Lending Office" means, with respect to any Lender, the office of
such Lender designated from time to time as its "Domestic Lending Office"
hereunder.
"Domestic Subsidiaries" means the Subsidiaries of the Company that are
created or organized in or under the laws of the United States or any state
thereof and have their chief executive office and principal place of business in
the United States.
"Domestic Substantially Owned Subsidiaries" means the Substantially Owned
Subsidiaries of the Company that also are Domestic Subsidiaries.
"EBITDA" means, with respect to any Person for any measurement period,
without duplication, the result of net income less any non-cash income to the
extent included in determining net income and without giving effect to any non-
recurring items, extraordinary gains or losses from the sale of assets or write
down in the value of assets owned by the Company and its Subsidiaries for such
period plus depreciation, amortization, Interest Expense, taxes, and other non-
cash charges for such period to the extent deducted in determining net income.
"Effective Date" means the date on which all conditions to make an Advance
set forth in Section 5.01 are first met or waived in accordance with Section
11.01 hereof.
"Eligible Accounts" means, as to the Company and its Domestic Substantially
Owned Subsidiaries on a consolidated basis at any time of determination, all
Receivables of such Persons, each of which meets all of the following criteria
on the date of any determination:
(a) the payment of such Receivable is not more than sixty (60) days past
due;
(b) such Receivable was created in connection with the sale or rental of
Inventory, the performance of a service by the Company or any Domestic
Substantially Owned Subsidiary of the Company in the ordinary course of
business;
(c) such Receivable represents a legal, valid and binding payment
obligation of the account debtor enforceable in accordance with its terms and
arises from an enforceable contract the performance of which, insofar as it
relates to such Receivable, has been completed by the Company or such
Subsidiary;
(d) the Company or such Domestic Substantially Owned Subsidiary has good
title to such Receivable, and the Agent for the benefit of the Lenders, holds a
perfected first priority Lien (including compliance with the Federal Assignment
of Claim Act or any similar statute or regulation, if necessary) in such
Receivable pursuant to the Security Documents;
(e) such Receivable is not evidenced by a promissory note or other
instrument;
(f) such Receivable is not subject to any set-off (excluding any Receivable
set-off supported by a letter of credit satisfactory to the Agent),
counterclaim, defense, allowance,
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adjustment or understanding with the account debtor thereon that in any way
could reasonably be expected to adversely affect the payment of said Receivable,
and there exists no dispute by the account debtor concerning its payment
obligation for such Receivable (or the lesser amount that is not subject to any
of the same); provided, however, that any such Receivable, if otherwise an
Eligible Account, shall only not be an Eligible Account to the extent of such
set-off, counterclaim, defense, allowance, adjustment or understanding;
(g) such Receivable is payable in the United States and is denominated in
U.S. dollars;
(h) such Receivable or portion thereof due from an account debtor and
together with all other Receivables due from such account debtor, does not
comprise more than ten percent (10%) of the aggregate Receivables of the Company
and its Subsidiaries, provided, that in the event such account debtor or its
parent is rated at least BBB+ or the equivalent thereof by Standard & Poor's
Ratings Group or at least Baa1 or the equivalent thereof by Moody's Investors
Service, Inc., then such Receivable together with all other Receivables due from
such account debtor does not comprise more then twenty-five percent (25%) of the
aggregate Receivables of the Company and its Subsidiaries; provided, further,
that any such Receivable, if otherwise an Eligible Account, shall only not be an
Eligible Account to the extent of such excess;
(i) such Receivable is from an account debtor domiciled in the United
States; and
(j) such Receivable is not due from an account debtor subject to a
proceeding of the kind described in Section 9.01(f) or (g).
"Eligible Assignee" means (a) any Lender or any Affiliate thereof and (b)
any other bank or financial institution approved by the Agent and the Company.
"Eligible Foreign Accounts" means, as to the Company and its Substantially
Owned Subsidiaries on a consolidated basis at any time of determination, all
Receivables with respect to which (i) the account debtor with respect to such
Receivable is not domiciled in the United States and/or (ii) the Receivable is
owed to a Foreign Subsidiary, provided that each such Receivable meets all of
the following criteria on the date of any determination:
(a) the payment of such Receivable is not more than sixty (60) days past
due;
(b) such Receivable was created in connection with the sale or rental of
Inventory, the performance of a service by the Company or any Substantially
Owned Subsidiary in the ordinary course of business;
(c) such Receivable represents a legal, valid and binding payment
obligation of the account debtor enforceable in accordance with its terms and
arises from an enforceable contract the performance of which, insofar as it
relates to such Receivable, has been completed by the Company or such
Subsidiary;
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(d) the Company or such Substantially Owned Subsidiary has good title to
such Receivable and such Receivable is not subject to any Lien other than a Lien
permitted under Section 8.04(f);
(e) such Receivable is not evidenced by a promissory note or other
instrument;
(f) such Receivable is not subject to any set-off (excluding any Receivable
set-off supported by a letter of credit satisfactory to the Agent),
counterclaim, defense, allowance, adjustment or understanding with the account
debtor thereon that in any way could reasonably be expected to adversely affect
the payment of said Receivable, and there exists no dispute by the account
debtor concerning its payment obligation for such Receivable (or the lesser
amount that is not subject to any of the same); provided, however, that any such
Receivable, if otherwise an Eligible Foreign Account, shall only not be an
Eligible Foreign Account to the extent of such set-off, counterclaim, defense,
allowance, adjustment or understanding;
(g) such Receivable or portion thereof due from an account debtor and
together with all other Receivables due from such account debtor, does not
comprise more than ten percent (10%) of the aggregate Receivables of the Company
and its Subsidiaries, provided, that in the event such account debtor or its
parent is rated at least BBB+ or the equivalent thereof by Standard & Poor's
Ratings Group or at least Baal or the equivalent thereof by Moody's Investors
Service, Inc., then such Receivable together with all other Receivables due from
such account debtor does not comprise more then twenty-five percent (25%) of the
aggregate Receivables of the Company and its Subsidiaries; provided, further,
that any such Receivable, if otherwise an Eligible Foreign Account, shall only
not be an Eligible Foreign Account to the extent of such excess; and
(h) such Receivable is not due from an account debtor subject to a
proceeding of the kind described in Section 9.01(f) or (g).
"Eligible Inventory " means, as to the Company and its Domestic
Substantially Owned Subsidiaries on a consolidated basis at any time of
determination, the value (determined at the lower of cost or market) of all
Inventory owned by (and in the possession or under the control of the Company or
a Domestic Substantially Owned Subsidiary or is in the possession of a Person
who is not an Affiliate pursuant to a rental agreement between such Person and
the Company or a Domestic Substantially Owned Subsidiary) the Company or a
Domestic Substantially Owned Subsidiary which is located in the United States
and in which the Agent for the benefit of the Lenders has a perfected first
priority security interest pursuant to the Security Documents (subject only to
Permitted Liens under Section 8.04(b), (c)(i), (c)(ii) and (e)), but shall not
include any of the following:
(a) Inventory that has been shipped or delivered to any Person on
consignment;
(b) Inventory to the extent subject to any reasonable claim disputing the
Company's or any domestic Substantially Owned Subsidiary's title to or right to
possession of such Inventory;
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(c) any allowances, reserves or accruals related to any Inventory;
(d) Inventory evidenced by a negotiable or non-negotiable document of
title; and
(e) Inventory that is not salable or not rentable in the ordinary course of
business.
"Employee Plan" means any employee benefit plan, program or policy with
respect to which the Company or any ERISA Affiliate may have any liability or
any obligation to contribute, other than a Plan or a Multiemployer Plan.
"Environmental Laws" means applicable federal, state or local laws, rules
or regulations, and any applicable judicial interpretations thereof, including
any judicial or administrative order, judgment, permit, approval decision or
determination, in each case pertaining to conservation or protection of the
environment, in effect at the time in question, including the Clean Air Act, the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"),
the Federal Water Pollution Control Act, the Occupational Safety and Health Act,
the Resource Conservation and Recovery Act, the Safe Drinking Water Act, the
Toxic Substances Control Act, the Superfund Amendments and Reauthorization Act
of 1986, the Hazardous Materials Transportation Act and analogous state and
local laws as may be amended from time to time thereby imposing either more or
less stringent requirements as relates to activity occurring after the effective
date of any such amendments.
"Equity Interests" in any Person means any and all shares, interests,
rights to purchase, warrants, options, convertible debt, participations or other
equivalents of or interests in (however designated) corporate stock or other
equity participations, including, membership interests or partnership interests,
whether general or limited, in such Person, together with all other rights and
interests convertible into or exchangeable for any of the foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended and the regulations promulgated thereunder.
"ERISA Affiliate" means (a) any Person which, together with the Company, is
treated as a "single employer" under section 414 of the Code, and (b) any
Subsidiary of the Company.
"ESOP" has the meaning specified in the introduction to this Agreement.
"ESOP Lender" means any Lender having an ESOP Loan Commitment.
"ESOP Loan" has the meaning specified in Section 2.03(b).
"ESOP Loan Commitment" means, with respect to the ESOP Loan and as to any
Lender, the amount set forth opposite such Lender's name on the signature pages
hereof aggregating $1,500,000.
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"ESOP Loan Maturity Date" means June 30, 2002, unless accelerated pursuant
to Section 9.02.
"ESOP Note" has the meaning specified in Section 2.05(c).
"Eurocurrency Liabilities" has the meaning specified in Regulation D as in
effect from time to time.
"Events of Default" has the meaning specified in Section 9.01.
"Excess Cash Flow" means, with respect to the Company and its Subsidiaries
determined on a consolidated basis for any fiscal year period ending after the
Effective Date, the sum of the following to the extent accruing after the
Effective Date, (a) EBITDA for such period, minus (b) the amount equal to (i)
actual Capital Expenditures (exclusive of Capitalized Lease Obligations)
incurred during such period plus (ii) the amount of Capital Expenditures for
such period permitted to be made in the next succeeding fiscal year under
Section 8.14(c), minus (iii) the amount of Capital Expenditures carried forward
from the prior fiscal year under Section 8.14(c) for such period, minus (c) cash
taxes, cash Interest Expense and scheduled payments or any voluntary prepayment
of principal made under the Term Loan, the Acquisition Loan and the ESOP Loan
(but only to the extent that net income for such period was not reduced for any
expense incurred by the Company for contributions to the ESOP), minus (d) any
dividend or payment permitted under Section 8.07(a)(ii) to the extent not
deducted in determining EBITDA for such period, minus (e) scheduled principal
payments under Capitalized Lease Obligations made during such period, and minus
(f) scheduled principal payments under all other Indebtedness made during such
period (but only to the extent that net income for such period was not reduced
for any expense incurred by the Company for contributions to any Additional
ESOP).
"Execution Date" means the date upon which this Agreement shall have been
executed by the Company, the Lenders, and the Agent.
"Federal Funds Effective Rate" means, for any day, the weighted average of
the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by the Agent from three federal funds brokers of
recognized standing selected by it.
"Fees" means all amounts payable pursuant to Section 4.01.
"Finance Corp." has the meaning specified in the introduction to this
Agreement.
"Financials" has the meaning specified in Section 6.07.
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"Financial Statement Delivery Date" means the last day on which the
quarterly or annual financial statements of the Company are to be delivered to
the Agent and the Lenders pursuant to Section 7.01(a) or Section 7.01(b), as the
case may be.
"Fixed Charge Coverage Ratio" means, as to any Person for any period, a
fraction, the numerator of which is EBITDA for such period minus cash taxes for
such period, and the denominator of which is Fixed Charges of such Person for
such period.
"Fixed Charges" means the sum of (a) scheduled payments of principal under
the Term Loan, the Acquisition Facility Loan and the ESOP Loan for such period
(but only to the extent that net income for such period was not reduced for any
expense incurred by the Company for contributions to the ESOP), (b) cash
Interest Expense for such period, (c) the lesser of (I) Scheduled Capital
Expenditures for such period and (II) actual Capital Expenditures for such
period which were not financed with purchase money Indebtedness or Capitalized
Lease Obligations otherwise permitted hereunder, (d) scheduled principal
payments under Capitalized Lease Obligations for such period, (e) scheduled
principal payments under all other Indebtedness made during such period (but
only to the extent that net income for such period was not reduced for any
expense incurred by the Company for contributions to any Additional ESOP), and
(f) payments permitted under Section 8.07(a)(ii), Section 8.07(a)(iii) and
Section 8.07(b)(ii) during such period (to the extent not deducted in
determining EBITDA for such period).
"Foreign Subsidiary" means a Subsidiary of Borrower that is not a Domestic
Subsidiary.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States applied on a consistent basis.
"Guaranty" means collectively (i) those certain Guaranty Agreements dated
the Execution Date executed by TapeTech and Ames, respectively, and (ii) any
subsequent guaranty agreement executed and delivered pursuant to Section 7.09.
"Hazardous Materials" means (a) hazardous waste as defined in applicable
regulations issued pursuant to the Resource Conservation and Recovery Act of
1976, or in any applicable federal, state or local law or regulation, (b)
hazardous substances, as defined in CERCLA, or in any applicable state or
local law or regulation, (c) gasoline or any other petroleum product, (d) toxic
substances, as defined in the Toxic Substances Control Act of 1976, or in any
applicable federal, state or local law or regulation, (e) insecticides,
fungicides, or rodenticides, as defined in the Federal Insecticide, Fungicide,
and Rodenticide Act of 1975, or in any applicable federal, state or local law or
regulation as each such act, statute or regulation may be amended from time to
time, and (f) asbestos.
"Highest Lawful Rate" means, as to any Lender, the maximum nonusurious rate
of interest that, under applicable law, may be contracted for, taken, reserved,
charged or received by such Lender on the Loans or other obligations under the
Loan Documents at any time or from time to time after taking into account all
amounts that constitute interest. If the maximum rate of interest which, under
applicable law, any of the Lenders is permitted to charge the Company on
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<PAGE>
the Loans or other obligations shall change after the date hereof, then, to the
extent permitted or required by applicable law, the Highest Lawful Rate shall be
automatically increased or decreased, as the case may be, as of the effective
time of such change without notice to the Company or any other Person.
"Holding Co." has the meaning specified in the introduction to this
Agreement.
"Indebtedness" means, with respect to any Person, without duplication, (a)
all indebtedness of such Person for borrowed money (whether by loan or the
issuance and sale of debt securities) or for the deferred purchase price of
property or services (other than accounts payable), (b) all indebtedness of such
Person created or arising under any conditional sale or other title retention
agreement with respect to any property, (c) Capitalized Lease Obligations of
such Person, (d) all guaranties of such Person of Indebtedness of others
(including the granting of a Lien on the Company's or any Subsidiaries' assets
as security for such indebtedness) or other contingent liabilities of such
Person for Indebtedness of others of any kind (including any letter of credit,
any other letter of credit reimbursement obligations, any guarantee of the
financial position or covenants of any Person or any obligation as buyer under
any "take or pay" contract or similar arrangement), (e) any "mark to market"
exposure resulting from any Derivatives or any hedging transaction and (f) all
obligations to deliver goods or services in consideration of advance payments,
excluding such obligations incurred in the ordinary course of business as
conducted by the Company and its Subsidiaries.
"Indenture" means that certain Indenture, dated as of July 22, 1998,
between State Street Bank and Trust Company of Connecticut, N.A., as Indenture
Trustee, and Finance Corp., AXIA and other parties thereto, relating to the
issuance of the Subordinated Debt.
"Interest Expense" means, with respect to the Company and its Subsidiaries
determined on a consolidated basis, for any period the total interest expense
for such period determined in conformity with GAAP and including any interest
expense attributable to Capitalized Lease Obligations.
"Interest Period" has the meaning specified in Section 2.13.
"Inventory" means, as to the Company and its Subsidiaries, inventory as
defined in Article 9 of the Uniform Commercial Code (including goods held for
lease or rental in the ordinary course of business but excluding work-in-process
which is not readily marketable in its current form).
"Investment" means, as applied to any Person, any direct or indirect
purchase or other acquisition by such Person of the stock or other securities of
any other Person, or any direct or indirect loan, advance or capital
contribution by such Person to any other Person, and any other item which would
be classified as an "investment" on a balance sheet of such Person prepared in
accordance with GAAP, including any direct or indirect contribution by such
Person of property or assets to a joint venture, partnership or other business
entity in which such Person retains an interest.
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<PAGE>
"Issuing Bank" means, for each Letter of Credit, the Agent (or, at the
option of the Company, any other Lender designated by the Company and approved
in writing by the Agent, such approval not to be unreasonably withheld) as the
issuing bank for such Letter of Credit; provided, however, that American
National Bank and Trust Company of Chicago shall be included as an Issuing Bank
with respect to the Carryover Letters of Credit.
"Lender" has the meaning provided in the introduction to this Agreement.
"Letter of Credit Fee" shall mean:
(a) for any Letter of Credit with respect to the period during which
it is outstanding prior to the Financial Statement Delivery Date for the
Company's fiscal quarter ending on September 30, 1998, (i) payable to the
Issuing Bank, a 0.25% per annum fronting fee on the face amount of each
Letter of Credit, and (ii) payable pro rata to the Lenders, the sum of (A)
2.25% per annum on the face amount of such Letter of Credit minus (B) the
amount of the fronting fee on such Letter of Credit; and
(b) for any Letter of Credit with respect to the period during which
it is outstanding on or after the Financial Statement Delivery Date for any
of the Company's fiscal quarters ending after September 30, 1998, (i)
payable to the Issuing Bank, a 0.25% fronting fee on the face amount of
each Letter of Credit, and (ii) payable pro rata to the Lenders, the sum of
(A) the applicable Margin for any LIBOR Rate Advance minus (B) the amount
of the fronting fee on such Letter of Credit.
"Letter of Credit Obligations" means at any time the sum of (a) the
aggregate then undrawn and unexpired amount of outstanding Letters of Credit and
(b) the aggregate amount of drawings under Letters of Credit not reimbursed
pursuant to Section 3.03(c).
"Letter of Credit Request " has the meaning specified in Section 3.02(a).
"Letters of Credit" has the meaning specified in Section 3.01(a).
"LIBOR Lending Office" means, with respect to each Lender, the branches or
affiliates of such Lender designated as its "LIBOR Lending Office" from time to
time hereunder.
"LIBOR Rate" means, with respect to any LIBOR Rate Advance for any Interest
Period, (a) the interest rate per annum shown on page 3750 of the Dow Jones &
Company Telerate screen or any successor page as the composite offered rate for
London interbank deposits with a period comparable to the Interest Period for
such LIBOR Rate Advance, as shown under the heading "USD" at 11:00 a.m. (London
time) two (2) Business Days prior to the first day of such Interest Period or
(b) if the rate in clause (a) of this definition is not shown for any particular
day, the average interest rate per annum (rounded upwards, if necessary, to the
next 1/16th of 1%) offered to the Agent in the interbank eurodollar market for
dollar deposits of amounts in funds comparable to the principal amount of the
LIBOR Rate Advance to which such LIBOR Rate is to
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<PAGE>
be applicable with maturities comparable to the Interest Period for which such
LIBOR Rate will apply as of approximately 11:00 a.m. (Houston, Texas time) two
(2) Business Days prior to the commencement of such Interest Period.
"LIBOR Rate Advance" means any Advance bearing interest at a rate
determined by reference to the LIBOR Rate in accordance with the provisions of
Article II.
"Lien" means when used with respect to any Person, any mortgage, lien,
charge, pledge, security interest or encumbrance of any kind (whether voluntary
or involuntary and whether imposed or created by operation of law or otherwise)
upon, or pledge of, any of its property or assets, whether now owned or
hereafter acquired, any lease that constitutes a security interest pursuant to
section 1.201 of the Texas Business and Commerce Code, any capital lease in the
nature of the foregoing, any conditional sale agreement or other title retention
agreement, in each case, for the purpose, or having the effect, of protecting a
creditor against loss or securing the payment or performance of an obligation.
"Loan" and "Loans" means, Revolving Credit Loans, the Term Loan, the ESOP
Term Loan, Acquisition Facility Loans and any Advances under Letters of Credit.
"Loan Documents" means this Agreement, the Notes, the Guaranty, any
agreement with respect to a Derivative entered into with a Lender existing from
time to time and the Security Documents.
"Majority Lenders" means Lenders holding at least 51% of the Total
Commitment (or, if the Total Commitment has been terminated, Lenders holding 51%
of the sum of the Loans plus the Letter of Credit Obligations).
"Margin" means, with respect to any Advance made under any Loan, the rate
of interest per annum determined as set forth below as a function of the Type of
such Loan:
(a) during the period from the Execution Date through the Financial
Statement Delivery Date for the fiscal quarter ending on September 30,
1998:
LIBOR RATE ALTERNATE BASE
ADVANCE RATE ADVANCE
---------- --------------
2.25% 1.00%
(b) during the period between any two Financial Statement Delivery
Dates for any Margin Period occurring after September 30, 1998, the rate
determined by reference to the pricing grid below as a function of the
ratio of Total Debt (on the last day of the quarter most recently ended
prior to the Financial Statement Delivery Date that is the commencement
date of such Margin Period) to EBITDA:
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RATIO OF TOTAL APPLICABLE BASE APPLICABLE
DEBT TO EBITDA RATE MARGIN LIBOR MARGIN
-------------- --------------- ------------
= or greater than 5.25 1.00% 2.25%
= or greater than 4.75 and less than 5.25 0.75% 2.00%
= or greater than 4.25 and less than 4.75 0.50% 1.75%
= or greater than 3.50 and less than 4.25 0.25% 1.50%
less than 3.50 0.00% 1.00%
"Margin Period" means a period commencing on the most recent Financial
Statement Delivery Date and ending on the next Financial Statement Delivery
Date.
"Material Adverse Effect" means, relative to any occurrence of whatever
nature (including any adverse determination in any litigation, arbitration or
governmental investigation or proceeding), (a) a material adverse effect on the
financial condition, business, operations or assets of the Company and its
Subsidiaries taken as a whole, or (b) a material impairment of the ability of
the Company on an individual basis or the Company and its Subsidiaries taken as
a whole to perform obligations under the Loan Documents or (c) an impairment of
the validity or enforceability of any Loan Document which materially affects the
benefits intended to be bestowed thereunder.
"Material Contracts" means those agreements listed on Schedule 1.01MC
hereto.
"Merger Agreement" means the Agreement and Plan of Merger dated as of June
18, 1998 between Parent and AHC.
"Multiemployer Plan" means any plan which is a "multiemployer plan" (as
such term is defined in section 4001(a)(3) of ERISA) to which the Company or any
ERISA Affiliate contributes or has any obligation or liability to make
contributions, including any withdrawal liability, contingent or otherwise.
"Net Cumulative Retained Excess Cash Flow" means, as of any date of
measurement, the sum of (a) the cumulative amount of all Retained Excess Cash
Flow (as defined below) for each of Company's fiscal years ending after the
Effective Date, minus (b) the aggregate amount of all Investments which are
described in Section 8.05(g) and all Capital Expenditures described in Section
8.14(b) made during the Company's fiscal years ending after the Effective Date
from such Excess Cash Flow. "Retained Excess Cash Flow" means, as to any of the
Company's fiscal year periods, the portion of Excess Cash Flow for such fiscal
year which remains after deducting and giving effect to the prepayment of the
Loans in the amount of 50% of Excess Cash Flow pursuant to Section 2.09(b)(iii),
all as determined after giving effect to such prepayment on the date that it was
due or paid (whichever is earlier).
"Net Worth" means, as to the Company and its Subsidiaries determined on a
consolidated basis, at any time the aggregate amount which, in accordance with
GAAP, constitutes shareholders' equity.
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"Notes" means the Revolving Credit Notes, the Term Notes, the ESOP Notes
and the Acquisition Facility Notes and "Note" means any one of the same.
"Notice of Advance" has the meaning specified in Section 2.04.
"Notice of Conversion" has the meaning specified in Section 2.07.
"Notice of Default" has the meaning specified in Section 9.02.
"Obligations" means all the obligations of the Company now or hereafter
existing under the Loan Documents, whether for principal interest, Fees,
expenses, indemnification or otherwise.
"Other Activities" has the meaning specified in Section 10.03.
"Other Financings" has the meaning specified in Section 10.03.
"Parent" means AXIA Acquisition Corp. ("AAC") until such time as AAC is
merged into AHC, and means AHC from and after the time that AAC is merged into
AHC.
"Parent Loan" means the loan in the stated amount of the Parent Note from
Finance Corp. to Parent evidenced by the Parent Note.
"Parent Merger" means the merger of Parent with and into AHC, with AHC
being the surviving entity.
"Parent Merger Certificate" shall mean a certificate or articles of merger
which describe the occurrence of the Parent Merger.
"Parent Note" means that certain promissory note executed by Parent, as
maker, to Finance Corp. dated as of the Effective Date evidencing the loan by
Finance Corp. of an amount equal to approximately $96,200,000 to be used solely
for the purpose of purchasing the capital stock of AHC and certain transaction
expenses incurred in connection with such purchase.
"Payment Office" means the office of the Agent located at 1200 Smith
Street, Suite 3100, Houston, Texas 77002, or such other office as the Agent may
hereafter designate in writing as such to the other parties hereto.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to all or any of its functions under ERISA.
"Permitted Acquisitions" shall mean acquisitions of not less than 90% of
all of the Voting Equity Interests of a Person or of all or substantially all of
(a) such Person's assets or (b) the
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<PAGE>
assets of a division or branch of such Person, in each case, in a transaction
that satisfies all the applicable criteria set out in Section 5.04 which have
not otherwise been waived by Agent.
"Permitted Investments" means, as to any Person:
(a) securities issued or directly and fully guaranteed or insured by
the United States or any agency or instrumentality thereof (provided that the
full faith and credit of the United States is pledged in support thereof) having
maturities of not more than twelve months from the date of acquisition by such
Person;
(b) bankers acceptances or time deposits and certificates of deposit
with maturities of not more than twelve months from the date of acquisition by
such Person which deposits or certificates are either (i) insured by the Federal
Deposit Insurance Corporation or (ii) in any Lender or commercial bank
incorporated in the United States or any United States branch of any other
commercial bank and, in the case of any such other commercial bank, having
capital, surplus and undivided profits aggregating $200,000,000 or more with a
short-term unsecured debt rating of at least Al from Standard & Poor's Ratings
Group or PI from Moody's Investors Service;
(c) commercial paper issued by any Person incorporated in the United
States rated at least Al or the equivalent thereof by Standard & Poor's Ratings
Group or at least PI or the equivalent thereof by Moody's Investors Service and,
in each case, maturing not more than six months after the date of acquisition by
such Person;
(d) investments in any security issued by an investment company
registered under Section 8 of the Investment Company Act of 1940 (15 U.S.C.
80a-8) that is a money market fund in compliance with all applicable
requirements of SEC Rule 2a-7 (17 CFR 270.2a-7);
(e) money market mutual funds, all of the assets of which are invested
in securities and instruments of the types set forth in clauses (a) through (d)
above;
(f) repurchase or reverse repurchase agreements respecting obligations
with a term of not more than seven days for underlying securities of the types
described in clause (a) above entered into with any bank listed in or meeting
the qualifications specified in clause (b) above;
(g) deposits in local currencies in bank accounts of non-U.S.
Affiliates of Company not to exceed in the aggregate $1,000,000 at any time;
(h) capital contributions in or loans to Foreign Subsidiaries in the
aggregate amount not to exceed in the aggregate $250,000 at any time
outstanding; and
(i) any loans by a Foreign Subsidiary to any other Foreign Subsidiary.
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"Permitted Liens" has the meaning specified in Section 8.04.
"Person" means an individual, partnership, corporation (including a
business trust), limited liability company, joint stock company, trust,
unincorporated association, joint venture or other entity, or a federal, foreign
or domestic state or political subdivision thereof or any agency of such state
or subdivision.
"Plan" means any employee pension benefit plan (as defined in section 3(2)
of ERISA), subject to Title IV of ERISA or section 412 of the Code, other than a
Multiemployer Plan, with respect to which the Company, its Subsidiaries or an
ERISA Affiliate contributes or has an obligation or liability to contribute,
including any such plan that may have been terminated.
"Prime Rate" shall mean the rate which The Chase Manhattan Bank announces
from time to time as its prime rate, effective as of the date announced as the
effective date of any change in such prime rate. Without notice to the Company
or any other Person, the Prime Rate shall change automatically from time to time
as and in the amount by which such prime rate shall fluctuate. The Prime Rate is
a reference rate and does not necessarily represent the lowest or best rate
actually charged to any customer. The Agent may make commercial loans or other
loans at rates of interest at, above or below the Prime Rate.
"Prior Target" means all Targets acquired or whose assets have been
acquired in a Permitted Acquisition.
"Qualified Domestic Substantially Owned Subsidiary" means a Domestic
Substantially Owned Subsidiary of the Company which has executed and delivered
to the Agent for the benefit of the Lenders all of the guaranties, security
agreements, deeds of trust, pledge agreements and other documentation described
in Section 7.09.
"Receivable" means, as to the Company or any Subsidiary, at any time of
determination thereof the unpaid portion of the obligation, as stated on the
respective invoice, or if no invoice, other writing or an electronic medium, of
an account debtor of such Person in respect of Inventory, goods, technology or
other assets purchased and shipped, leased or rented or services rendered in the
ordinary course of business of such Person.
"Register" has the meaning specified in Section 11.10(d).
"Regulation D" means Regulation D of the Board (respecting reserve
requirements), as the same is from time to time in effect, and all official
rulings and interpretations thereunder or thereof.
"Regulation U" means Regulation U of the Board (respecting margin credit
extended by banks), as the same is from time to time in effect, and all official
rulings and interpretations thereunder or thereof.
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"Regulation X" means Regulation X of the Board (respecting borrowers who
obtain margin credit), as the same is from time to time in effect, and all
official rulings and interpretations thereunder or thereof.
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing into
the environment (including the abandonment or discarding of barrels, containers
and other closed receptacles) other than in accordance with Environmental Laws.
"Reportable Event" means an event described in section 4043(c) of ERISA
with respect to a Plan, other than an event described in paragraphs (1) through
(8) as to which the 30 day notice requirement has been waived by the PBGC.
"Reserve Percentage" means, for any Interest Period and for any Lender, the
reserve percentage applicable during such Interest Period under regulations
issued from time to time by the Board (or if more than one such percentage is so
applicable, the daily average for such percentages for those days in such
Interest Period during which any such percentage shall be so applicable) for
determining the maximum reserve requirement (including any marginal,
supplemental or emergency reserves) for such Lender in respect of liabilities or
assets consisting of or including Eurocurrency Liabilities.
"Responsible Officer" means, with respect to any Person, the chairman of
the board of directors, the president, chief executive officer, chief financial
officer or treasurer of such Person.
"Revolving Credit Commitment" means, with respect to the Revolving Credit
Loans and as to any Lender, the amount set forth opposite such Lender's name on
the signature pages hereof, as modified from time to time pursuant to the terms
hereof.
"Revolving Credit Commitment Fee" has the meaning specified in Section
4.01(a).
"Revolving Credit Lender" means any Lender having a Revolving Credit
Commitment hereunder.
"Revolving Credit Loan" has the meaning specified in Section 2.01.
"Revolving Credit Maturity Date" means June 30, 2004, unless accelerated
pursuant to Section 9.02.
"Revolving Credit Note" has the meaning specified in Section 2.05(a).
"Scheduled Capital Expenditures" has the meaning specified in Section 8.14.
"Scheduled Pro Forma EBITDA" means, as to any month set forth below, the
corresponding amount of "Pro Forma EBITDA" set forth below:
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Month Pro Forma EBITDA
----- ----------------
October 1997 $2,130,000
November 1997 $2,130,000
December 1997 $2,130,000
January 1998 $2,340,000
February 1998 $2,340,000
March 1998 $2,340,000
April 1998 $2,302,667
May 1998 $2,302,667
June 1998 $2,302,667
July 1998 $2,302,667
"Security Documents" means all those certain security agreements, pledge
agreements, stock certificates, mortgages, assignments, UCC financing
statements, lien consents and waivers and all other similar documents executed
by the Company and its Subsidiaries and/or the Parent, as the case may be, in
connection herewith granting to the Agent for the benefit of the Lenders a Lien
in substantially all of the assets of the Company and its Domestic Subsidiaries
(other than stock of Foreign Subsidiaries, which is limited to 66%) and the
common stock of the Company, the voting capital stock of the Domestic
Subsidiaries owned by the Company or any of its Domestic Subsidiaries and 66% of
the voting capital stock of the Foreign Subsidiaries owned by the Company or any
of its Domestic Subsidiaries as security for the Obligations.
"Senior Debt" means, at the time of determination, the sum of (a) all
Indebtedness of the Company and the Subsidiaries determined on a consolidated
basis minus (b) the Subordinated Debt or other Indebtedness of the Company and
its Subsidiaries determined on a consolidated basis which is pari passu or
junior to the Subordinated Debt and subject to subordination agreements
satisfactory to the Agent.
"Subsidiary" means with respect to any Person (a) any corporation,
partnership, association, joint venture or other entity of which securities or
other ownership interests having ordinary voting power to elect a majority of
the directors (or other Persons performing similar functions) are at the time
owned by such Persons directly or indirectly and (b) any corporation,
partnership, association, joint venture or other entity in which such Person,
directly or indirectly, has greater than 50% of the equity interest.
"Subordinated Debt" means the unsecured subordinated Indebtedness of the
Company evidenced by $100,000,000 aggregate principal amount of 10 3/4% Senior
Subordinated Notes of the Company due 2008 and including any exchange notes
issued by the Company in exchange for such Senior Subordinated Notes.
"Substantially Owned Subsidiary" a Subsidiary of the Company in which the
Company owns not less than 90% of the Equity Interests and Voting Equity
Interests thereof.
"TapeTech" means TapeTech Tool Co. Inc., a Delaware corporation.
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"Target" has the meaning specified in Section 5.04.
"Target EBITDA" means, with respect to a Target determined on a
consolidated basis for the most recently completed 12 month period prior to the
date of determination, without duplication, the result of net income less any
non-cash income to the extent included in determining net income and without
giving effect to any non-recurring items, extraordinary gains or losses from the
sale of assets or write down in the value of assets owned by the Target for such
period plus depreciation, amortization, Target Interest Expenses (as hereinafter
defined), taxes, and other non-cash charges for such period to the extent
deducted in determining net income. For purposes of this definition, "Target
Interest Expenses" means, with respect to the Target determined on a
consolidated basis, for any period the total interest expense for such period
determined in conformity with GAAP and including any interest expense
attributable to Target Capitalized Lease Obligations (as hereinafter defined).
"Target Capitalized Lease Obligations" means all lease or rental obligations of
the Target which, pursuant to GAAP, are capitalized for balance sheet purposes.
"Term Loan" has the meaning specified in Section 2.03(a).
"Term Loan Commitment" means, with respect to the Term Loan and as to any
Lender, the amount set forth opposite such Lender's name on the signature pages
hereof under the heading "Term Loan" aggregating $35,000,000.00.
"Term Loan Lender" means any Lender having a Term Loan Commitment
hereunder.
"Term Loan Maturity Date" means June 30, 2004, unless accelerated pursuant
to Section 9.02.
"Term Note" has the meaning specified in Section 2.05(b).
"Total Commitment" shall mean the sum of the Lenders' Term Loan
Commitments, ESOP Loan Commitments, Acquisition Facility Commitments and Total
Revolving Credit Commitments, as the same may be reduced from time to time in
accordance with the provisions of this Agreement.
"Total Debt" means, as to any Person at any time, without duplication, all
outstanding Indebtedness for borrowed money, all outstanding obligations
evidenced by bonds, debentures, notes, or other similar instruments, all
Capitalized Lease Obligations, and all guaranties of outstanding Indebtedness
for borrowed money or Capitalized Lease Obligations (without regard to maturity)
of other Persons.
"Total Revolving Credit Commitment" means $15,000,000 as same may be
reduced pursuant to Section 4.02 or 4.03.
"Type" has the meaning specified in Section 1.02.
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"Unfunded Current Liability" means, with respect to any Plan, the amount,
if any, by which the value of the benefit liabilities under the Plan as of the
close of its most recent Plan year exceeds the fair market value of the assets
of the Plan, determined in accordance with section 412 of the Code.
"Unutilized Commitment" at, any time, means (a) with respect to Revolving
Credit Loans, the Total Revolving Credit Commitment less Letter of Credit
Obligations less the outstanding Advances under the Revolving Credit Loans as
same may be reduced pursuant to Section 4.02 or 4.03, and (b) during the
Acquisition Facility Funding Period, with respect to the Acquisition Facility
Loans, the Lenders' Acquisition Facility Commitments less the outstanding
Advances under the Acquisition Facility Loans as same may be reduced pursuant to
Section 4.02.
"Voting Equity Interests" means the Equity Interests in a corporation or
other Person with voting power under ordinary circumstances for the election of
directors (or persons performing similar functions) of such Person, whether at
all times or only so long as no senior class of securities has such voting power
by reason of any contingency.
SECTION 1.02 Type of Advances. Advances hereunder are distinguished by
"Type". The Type of an Advance refers to the determination whether such Advance
is a LIBOR Rate Advance or an Alternate Base Rate Advance.
SECTION 1.03. Accounting Terms. All accounting terms not defined herein
shall be construed in accordance with GAAP, as applicable, and all calculations
required to be made hereunder and all financial information (other than
projections) required to be provided hereunder shall be done or prepared in
accordance with GAAP, except as otherwise specified herein.
SECTION 1.04. Miscellaneous. In determining whether or not an item or event
is "material" under this Agreement, due consideration shall be taken into
account of insurance, indemnity, escrow or similar arrangements to the extent
that they are then available with respect to such item or event.
ARTICLE II
THE LOANS
SECTION 2.01 The Revolving Credit Loans. Subject to the terms and
conditions hereof, each Revolving Credit Lender severally agrees at any time and
from time to time on and after the Effective Date and prior to the Revolving
Credit Maturity Date, to make and maintain revolving credit loans (the
"Revolving Credit Loans") up to the amount of such Lender's Revolving Credit
Commitment to the Company, which Loans (1) shall, at the option of the Company,
be made and maintained pursuant to one or more Advances comprised of Alternate
Base Rate Advances or LIBOR Rate Advances; provided that all Loans comprising
all or a portion of the same Advance shall when made be of the same Type, (2) in
the case of any LIBOR Rate Advance, shall be made in the minimum amount of
$1,000,000 and integral multiples of $100,000, (3) in the case
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of any Alternate Base Rate Advance, shall be made in the minimum amount of
$250,000 (or if less, in the aggregate amount of the Unutilized Commitment)
and integral multiples of $50,000, and (4) may be repaid and, so long as no
Default or Event of Default exists hereunder, reborrowed, at the option of the
Company in accordance with the provisions hereof. Notwithstanding the foregoing,
the aggregate outstanding principal balance of all Revolving Credit Loans plus
the Letter of Credit Obligations shall not exceed the lesser of the Borrowing
Base then in effect and the Total Revolving Credit Commitment. There shall be no
further Advances after the Revolving Credit Maturity Date.
SECTION 2.02 Acquisition Facility Loans. Subject to the terms and
conditions hereof each Acquisition Facility Lender severally agrees at any time
and from time to time on and after the Effective Date and prior to the
expiration of the Acquisition Facility Funding Period, to make and maintain term
loans in an amount up to such Lender's Acquisition Facility Commitment (the
"Acquisition Facility Loans") to the Company for the purpose of funding
Permitted Acquisitions, which Loans (1) shall, at the option of the Company, be
made and maintained pursuant to one or more Advances comprised of Alternate Base
Rate Advances or LIBOR Rate Advances; provided that all Loans comprising all or
a portion of the same Advance shall when made be of the same Type, (2) in the
case of any LIBOR Rate Advance, shall be made in the minimum amount of
$1,000,000 and integral multiples of $100,000, (3) in the case of any Alternate
Base Rate Advance, shall be made in the minimum amount of $250,000 (or if less,
in the aggregate amount of the unutilized Acquisition Facility Commitments) and
integral multiples of $50,000, and (4) once repaid may not be reborrowed.
Notwithstanding the foregoing, the aggregate outstanding principal balance of
all Acquisition Facility Loans shall not exceed the Lenders' Acquisition
Facility Commitments.
SECTION 2.03 The Term Loan and the ESOP Loan.
(a) Term Loan. Subject to the terms and conditions herein set forth, each
Term Loan Lender agrees to make and maintain a term loan in the amount of such
Lender's Term Loan Commitment (the "Term Loan") to the Company. The Term Loan
shall be fully advanced on the Effective Date, and no Term Loan Lender shall
have an obligation to make any additional Advance under the Term Loan after such
date. Any amount repaid under the Term Loan may not be reborrowed. All amounts
outstanding under the Term Loan shall at the option of the Company, be made and
maintained as Alternate Base Rate Advances or LIBOR Rate Advances; provided that
all Loans comprising all or a portion of the same Advance shall when made be of
the same Type.
(b) The ESOP Loan. Subject to the terms and conditions herein set forth,
each ESOP Lender agrees to make and maintain a term loan in the amount of such
Lender's ESOP Loan Commitment (the "ESOP Loan") to the Company. The ESOP Loan
shall be fully advanced on the Effective Date, and no ESOP Lender shall have an
obligation to make any additional Advance under the ESOP Loan after such date.
Any amount repaid under the ESOP Loan may not be reborrowed. All amounts
outstanding under the ESOP Loan shall at the option of the Company, be made and
maintained as Alternate Base Rate Advances or LIBOR Rate Advances;
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provided that all Loans comprising all or a portion of the same Advance shall
when made be of the same Type.
SECTION 2.04 Notice of Advance.
(a) Revolving Credit Loans. Whenever the Company requires an Advance
under the Revolving Credit Loans, it shall give written notice thereof (a
"Notice of Advance") (or telephonic notice promptly confirmed in writing) to the
Agent (i) in the case of an Alternate Base Rate Advance, not later than 11:00
a.m. (Houston, Texas time) on the date of such Advance and (ii) in the case of a
LIBOR Rate Advance, not later than 11:00 a.m. (Houston, Texas time) three (3)
Business Days prior to the date of such Advance. Each Notice of Advance shall be
irrevocable and shall be in the form of Exhibit 2.04 hereto, specifying (A) the
aggregate principal amount of the Advance to be made, (B) the Advance Date for
such Advance (which shall be a Business Day), (C) whether it is to be an
Alternate Base Rate Advance or a LIBOR Rate Advance and (D) if the proposed
Advance is to be a LIBOR Rate Advance, the initial Interest Period to be
applicable thereto. The Agent shall promptly give the Revolving Credit Lenders
written notice or telephonic notice (promptly confirmed in writing) of each
proposed Advance, of each Revolving Credit Lender's proportionate share thereof
and of the other matters covered by each Notice of Advance.
(b) Acquisition Facility Loans. Whenever the Company requires an
Advance under the Acquisition Facility Loans during the Acquisition Facility
Funding Period, it shall give written notice thereof (or telephonic notice
promptly confirmed in writing) to the Agent (i) in the case of an Alternate Base
Rate Advance, not later than 11:00 a.m. (Houston, Texas time) on the date of
such Advance and (ii) in the case of a LIBOR Rate Advance, not later than 11:00
a.m. (Houston, Texas time) three (3) Business Days prior to the date of such
Advance. Each such notice shall be irrevocable, shall specify the aggregate
principal amount of such Advance and the date of such Advance (which shall be a
Business Day) and shall specify, (A) the aggregate principal amount of the
Advance to be made, (B) the date of such Advance (which shall be a Business
Day), (C) whether it is to be an Alternate Base Rate Advance or a LIBOR Rate
Advance and (D) if the proposed Advance is to be a LIBOR Rate Advance, the
initial Interest Period to be applicable thereto. The Agent shall promptly give
the Acquisition Facility Lenders written notice or telephonic notice (promptly
confirmed in writing) of each proposed Acquisition Facility Loan, of each
Acquisition Facility Lender's proportionate share thereof and of the other
matters covered by each such notice.
SECTION 2.05 The Notes.
(a) The Company's obligations to repay the Revolving Credit Loans made
by each Revolving Credit Lender shall be evidenced by a revolving credit
promissory note duly executed and delivered by the Company to each Revolving
Credit Lender substantially in the form of Exhibit 2.05A hereto (each a
"Revolving Credit Note" and collectively, the "Revolving Credit Notes"), and
each Revolving Credit Note shall (i) be payable to the order of such Lender,
(ii) be in a stated principal amount equal to the Revolving Credit Commitment of
such Lender, (iii) be payable prior to maturity as provided herein and mature on
the Revolving Credit Maturity
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Date, (iv) bear interest as provided in the appropriate clause of Section 2.12
and (v) be entitled to the benefits of this Agreement and the other Loan
Documents.
(b) The Company's obligation to repay the Term Loan made by each Term
Loan Lender shall be evidenced by a term promissory note duly executed and
delivered by the Company to each Term Loan Lender substantially in the form of
Exhibit 2.05B hereto (each a "Term Note" and collectively, the "Term Notes"),
and each Term Note shall (i) be payable to the order of such Lender, (ii) be in
a stated principal amount equal to the Term Loan Commitment of such Lender,
(iii) be payable prior to maturity as provided herein and mature on the Term
Loan Maturity Date, (iv) bear interest as provided in the appropriate clause of
Section 2.12 and (v) be entitled to the benefits of this Agreement and the other
Loan Documents.
(c) The Company's obligation to repay the ESOP Loan made by each ESOP
Lender shall be evidenced by a term promissory note duly executed and delivered
by the Company to each ESOP Lender substantially in the form of Exhibit 2.05C
hereto (each an "ESOP Note" and collectively, the "ESOP Notes"), and each ESOP
Note shall (i) be payable to the order of such Lender, (ii) be in a stated
principal amount equal to the ESOP Loan Commitment of such Lender, (iii) be
payable prior to maturity as provided herein and mature on the ESOP Loan
Maturity Date, (iv) bear interest as provided in the appropriate clause of
Section 2.12 and (v) be entitled to the benefits of this Agreement and the other
Loan Documents.
(d) The Company's obligation to repay the Acquisition Facility Loans
made by the Acquisition Facility Lender shall be evidenced by a promissory note
duly executed and delivered by the Company to the Acquisition Facility Lender
substantially in the form of Exhibit 2.05D hereto (each an "Acquisition Facility
Note" and collectively, the "Acquisition Facility Notes"), and shall (i) be in a
stated principal amount equal to the Acquisition Facility Commitment of such
Lender, (ii) be payable prior to maturity as provided herein and mature on the
Acquisition Facility Maturity Date, (iii) bear interest as provided in the
appropriate clause of Section 2.12 and (iv) be entitled to the benefits of this
Agreement and the other Loan Documents.
SECTION 2.06 Disbursement of Funds.
(a) With respect to any Advance to be made under any Loan, no later
than 1:00 p.m. (Houston, Texas time) on any Advance Date, each Lender shall make
available its pro rata portion of the amount of such Advance in U.S. dollars and
in immediately available funds at the Payment Office. The Agent shall
immediately credit the amounts so received as directed by the Company.
(b) Unless the Agent shall have been notified by any Lender prior to
disbursement of an Advance by the Agent that such Lender does not intend to make
available to the Agent such Lender's portion of the Advance to be made on such
date, the Agent may assume that such Lender has made such amount available to
the Agent on such Advance Date and the Agent may, in reliance upon such
assumption, make available to the Company a corresponding amount. If such
corresponding amount is not in fact made available to the Agent by such Lender
and the Agent has made available same to the Company, the Agent shall be
entitled to recover
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such corresponding amount on demand from such Lender. If such Lender does not
pay such corresponding amount forthwith upon the Agent's demand therefor, the
Agent shall promptly notify the Company, and the Company shall pay such
corresponding amount to the Agent within two (2) Business Days after demand
therefor. The Agent shall also be entitled to recover from such Lender or the
Company, as the case may be, interest on such corresponding amount from the date
such corresponding amount was made available by the Agent to the Company to the
date such corresponding amount is recovered by the Agent, at a rate per annum
equal to, (i) as to any Lender, the Federal Funds Effective Rate on the date of
such Advance and (ii) as to the Company, at the LIBOR Rate or Alternative Base
Rate, as the case may be, applicable to such Advance plus the applicable Margin.
Nothing herein shall be deemed to relieve any Lender from its obligation for its
Commitments hereunder or to prejudice any rights which the Company may have
against any Lender as a result of any default by such Lender hereunder.
SECTION 2.07 Conversions and Continuances. Subject to the provisions of
Section 2.17 hereof, the Company shall have the option to convert on any
Business Day all or a portion of the outstanding principal amount of one Type of
Advance into another Type of Advance or continue all or a portion of any LIBOR
Advance for an additional Interest Period or Interest Periods, provided, no
Advances may be converted into or continued as LIBOR Rate Advances if an Event
of Default is in existence on the date of the conversion or continuation. Except
as provided in Section 2.13(b), each such conversion or continuation shall be
effective by the Company giving the Agent written notice (each a "Notice of
Conversion") (a) prior to 11:00 a.m. (Houston, Texas time) at least three (3)
Business Days prior to the date of such conversion in the case of conversion or
continuation into or continuance as a LIBOR Rate Advance and (b) prior to 11:00
a.m. (Houston, Texas time) on the date of such conversion in the case of a
conversion into an Alternate Base Rate Advance, specifying each Advance (or
portions thereof) to be so converted or continued and, if to be converted into
or continued as a LIBOR Rate Advance, the Interest Period to be initially
applicable thereto. The Agent shall thereafter promptly notify each affected
Lender of such Notice of Conversion. In no event shall there be more than five
(5) LIBOR Rate Advances outstanding at any time.
SECTION 2.08 Mandatory Repayments.
(a) The Revolving Credit Notes. All outstanding principal (and any
accrued, unpaid interest) on the Revolving Credit Notes shall be due and payable
on the Revolving Credit Maturity Date. Notwithstanding anything to the contrary
contained in this Agreement or in any other Loan Document, the aggregate
outstanding principal balance of the Revolving Credit Notes plus the Letter of
Credit Obligations shall not exceed the lesser of the Borrowing Base and the
Total Revolving Credit Commitment. The Revolving Credit Lenders shall never be
required to make any Advance under the Revolving Credit Loans or issue any
Letter of Credit that would cause the aggregate outstanding principal balance of
the Revolving Credit Notes plus the Letter of Credit Obligations at any time
exceeds the lesser of the Borrowing Base and the Total Revolving Credit
Commitment, the Company shall immediately repay the principal of the Revolving
Credit Notes in an amount at least equal to such excess. If after giving effect
to any
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such principal repayment the Letter of Credit Obligations exceed the lesser of
the Borrowing Base and the Total Revolving Credit Commitment, the Company shall
pay an amount of cash equal to such excess to the Agent to be held as security
for the Letter of Credit Obligations, which shall be refunded once the lesser of
the Borrowing Base or the total Revolving Credit Commitment is greater than the
aggregate outstanding principal balance of the Revolving Credit Notes plus the
Letter of Credit Obligations.
(b) Term Notes. (i) Outstanding principal on the Term Notes shall be due
and payable on each Designated Payment Date commencing December 31, 1998, in
such aggregate amounts and for such periods as follows:
DESIGNATED TERM LOAN INSTALLMENT DUE ON
PAYMENT DATE EACH DESIGNATED PAYMENT DATE
------------ ----------------------------
December 31, 1998 $ 833,333
March 31, 1999 $ 833,333
June 30, 1999 $ 833,334
September 30, 1999 $1,000,000
December 31, 1999 $1,000,000
March 31, 2000 $1,000,000
June 30, 2000 $1,000,000
September 30, 2000 $1,375,000
December 31, 2000 $1,375,000
March 31, 2001 $1,375,000
June 30, 2001 $1,375,000
September 30, 2001 $1,687,500
December 31, 2001 $1,687,500
March 31, 2002 $1,687,500
June 30, 2002 $1,687,500
September 30, 2002 $1,875,000
December 31, 2002 $1,875,000
March 31, 2003 $1,875,000
June 30, 2003 $1,875,000
September 30, 2003 $2,187,500
December 31, 2003 $2,187,500
March 31, 2004 $2,187,500
Term Loan Maturity Date All remaining principal balance
(c) The ESOP Notes. Outstanding principal on the ESOP Notes shall be due
and payable on each Designated Payment Date commencing September 30, 1998, in
equal installments of $93,750.00 in the aggregate for all ESOP Lenders. All
outstanding principal (and
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any accrued, unpaid interest) on the ESOP Notes shall be due and payable on the
ESOP Loan Maturity Date.
(d) The Acquisition Facility Notes. The aggregate principal amount of
the Acquisition Facility Loans as of the last day of the Acquisition Facility
Funding Period ("Acquisition Facility Total Draw Amount"), shall be payable on
each Designated Payment Date commencing September 30, 2001 in such aggregate
amounts and for such Designated Payment Date as follows:
PERCENTAGE OF ACQUISITION FACILITY
DESIGNATED TOTAL DRAW AMOUNT DUE ON
PAYMENT DATE EACH DESIGNATED PAYMENT DATE
---------------------------------- -------------------------------
September 30, 2001 6.25%
December 31, 2001 6.25%
March 31, 2002 6.25%
June 30, 2002 6.25%
September 30, 2002 8.75%
December 31, 2002 8.75%
March 31, 2003 8.75%
June 30, 2003 8.75%
September 30, 2003 10.0%
December 31, 2003 10.0%
March 31, 2004 10.0%
Acquisition Facility Maturity Date All remaining principal balance
SECTION 2.09 Prepayments.
(a) Voluntary Prepayments. The Company shall have the right to
voluntarily prepay Advances in whole or in part upon giving, in the case of a
LIBOR Rate Advance, two (2) Business Days' prior written notice to the Agent and
in the case of an Alternate Base Rate Advance written notice by 11:00 a.m.
(Houston, Texas time) on day of such prepayment to the Agent. Upon receipt of
such notice, the Agent shall promptly notify each applicable Lender of the
contents thereof and of such Lender's percentage participation of such
prepayment. If any such notice is given, the amount specified in such notice
shall be due and payable on the date specified therein and (a) no LIBOR Rate
Advance may be prepaid prior to the last day of its Interest Period unless,
simultaneously therewith, the Company pays to the Agent for the benefit of the
affected Lenders, all sums necessary to compensate such Lenders for all costs
and expenses resulting from such prepayment, as reasonably determined by such
Lenders, including but not limited to those costs described in Section 2.17
hereof; (b) each partial prepayment shall be made (i) in the case of a
prepayment of a LIBOR Rate Advance, in a minimum aggregate principal amount of
$1,000,000 and integral multiples of $100,000, and (ii) in the case of a
prepayment of an Alternate Base Rate Advance, in a minimum aggregate amount of
$250,000
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and integral multiples of $50,000; and (c) during the Acquisition Facility
Funding Period, each prepayment of any Loans, other than Revolving Loans shall
be applied pro rata to each remaining principal installment of the Term Loan and
the ESOP Loan. After the Acquisition Facility Funding Period, each prepayment of
any Loans, other than Revolving Loans shall be applied pro rata to each
remaining principal installment of the Term Loan, ESOP Loan and Acquisition
Facility Loans until repayment of the Term Loan, ESOP Loan and Acquisition
Facility Loans in full. The amount of the Term Loan, ESOP Loan and Acquisition
Facility Loan prepaid may not be reborrowed.
(b) Mandatory Prepayments. The Company shall prepay the Loans in
amounts equal to:
(i) 100% of the net cash proceeds of all asset sales or other
dispositions (except sales of Inventory and surplus or obsolete assets in
the ordinary course of business that do not prejudice the Lenders in any
material way and dispositions permitted under subparagraphs (a)-(f) of
Section 8.02) generating net after-tax proceeds individually or in the
aggregate in excess of $1,000,000 per annum by the Company or any of its
Subsidiaries (such prepayment to be made on or before the fifth day
following the day of the receipt of such proceeds by the Company or any of
its Subsidiaries);
(ii) 100% of the net cash proceeds of all sale/leaseback
transactions by the Company, the Parent or any of their respective
Subsidiaries in the aggregate in excess of $1,000,000 per annum (such
prepayment to be made on or before the fifth day following the day of the
receipt of such proceeds by the Company or any of its Subsidiaries);
(iii) 50% of Excess Cash Flow for the immediately preceding
fiscal year (such prepayment to be made on or before each April 15
beginning April 15, 1999);
(iv) 100% of the net cash proceeds of any debt financing of the
Company or its Subsidiaries excluding Indebtedness permitted under
subparagraphs (a)-(i) of Section 8.03 (such prepayment to be made on or
before the fifth day following the day of the receipt of such proceeds by
the Company or any of its Subsidiaries); and
(v) 100% of the aggregate net cash proceeds of each Casualty
Event to the extent that the aggregate amount of net cash proceeds of all
Casualty Events exceeds $1,000,000 during any fiscal year (unless (A) the
Company has notified the Agent in writing, prior to the Company's receipt
of such proceeds, that the Company intends to apply such proceeds toward
replacement, restoration, rebuilding or repair of the damaged property
within one hundred eighty (180) days after the receipt of such net cash
proceeds and (B) at all times prior to such application of the proceeds, to
the extent that such proceeds are in excess of $1,000,000 with respect to
any Casualty Event, they are deposited in an escrow account with a
financial institution acceptable to the Agent and are encumbered by a
perfected first priority security interest in favor of the Agent for the
benefit of the Lenders not subject to any other Liens), such prepayment to
be made on or
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before the fifth day following the day of the receipt of such proceeds by
the Company or any of its Subsidiaries.
(c) Any prepayments required by paragraph (b) above shall be applied
first to outstanding Alternate Base Rate Advances up to the full amount thereof,
then to outstanding LIBOR Rate Advances up to the full amount thereof and then
as cash collateral for outstanding Letters of Credit up to the full amount of
the Letter of Credit Obligations then existing, such cash collateral to be held
by the Agent for the benefit of the Lenders in a special cash collateral
account.
(d) During the Acquisition Facility Funding Period all mandatory
prepayments shall be applied pro rata to each remaining principal installment of
the Term Loan and the ESOP Loan until repayment of the Term Loan and ESOP Loan
in full, then to the Revolving Credit Loans. After the Acquisition Facility
Funding Period, all mandatory prepayments shall be applied pro rata to each
remaining principal installment of the Term Loan, ESOP Loan and Acquisition
Facility Loans until repayment of the Term Loan, ESOP Loan and Acquisition
Facility Loans in full, then to the Revolving Credit Loans. The amount of the
Term Loan, ESOP Loan and Acquisition Facility Loan prepaid may not be
reborrowed.
SECTION 2.10 Method and Place of Payments. (a) Except as otherwise
specifically provided herein, all payments under this Agreement due from the
Company shall be made to the Agent for the benefit of the affected Lenders, not
later than 11:00 a.m. (Houston, Texas time) on the date when due and shall be
made in lawful money of the United States in immediately available funds at the
Payment Office.
(b) Except with respect to withholdings of United States taxes, as
provided in Section 2.18, all payments (whether of principal, interest, Fees,
reimbursements or otherwise) by the Company, under this Agreement shall be made
without set-off or counterclaim and shall be made free and clear of and without
deduction for any present or future tax, levy, impost or any other charge, if
any, of any nature whatsoever now or hereafter imposed by any taxing authority.
Except with respect to withholdings of United States taxes as provided in
Section 2.18, if the making of such payments by the Company is prohibited by law
unless such a tax, levy, impost or other charge is deducted or withheld
therefrom, the Company shall pay to the Agent, on the date of each such payment,
such additional amounts (without duplication of any amounts required to be paid
by the Company pursuant to Section 2.16 or Section 3.04) as may be necessary in
order that the net amounts received by the Lenders after such deduction or
withholding shall equal the amounts which would have been received if such
deduction or withholding were not required. The Company shall confirm that all
applicable taxes, if any, imposed on this Agreement or transactions hereunder
shall have been properly and legally paid by it to the appropriate taxing
authorities by sending official tax receipts or notarized copies of such
receipts to the Agent within thirty (30) days after payment of any applicable
tax. Notwithstanding the foregoing, in no event shall the compensation payable
under this Section 2.10(b) (to the extent, if any, constituting interest under
applicable laws) together with all amounts constituting interest under
applicable laws and payable in connection with this Agreement, the Notes and the
other Loan Documents exceed the Highest Lawful Rate. Each Lender agrees that it
will use reasonable
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efforts to designate a different Applicable Lending Office for the Loans due to
it affected by any matter described in this section 2.10, if such designation
will avoid or reduce the liability of the Company to such Lender under this
Section 2.10 so long as such designation is not disadvantageous to such Lender
as determined by such Lender in its sole discretion.
SECTION 2.11 Pro Rata Advances/Payments. All Advances under this Agreement
shall be incurred from the affected Lenders pro rata, and all payments in
respect of any Loan from the Company to the Agent shall be applied, on the basis
of the Lenders' respective percentage participations in the Revolving Credit
Commitment, the ESOP Loan Commitment, the Term Loan Commitment or the
Acquisition Facility Commitment, as the case may be. It is understood that no
Lender shall be responsible for any default by any other Lender in its
obligation to make Advances hereunder and that each Lender shall be obligated to
make the Advances provided to be made by it hereunder, regardless of the failure
of any other Lender to fulfill its commitments hereunder.
SECTION 2.12 Interest. (a) Subject to Section 11.08, the Company agrees to
pay interest on the total outstanding principal balance from time to time of all
Alternate Base Rate Advances from the date of each respective Advance to
maturity (whether by acceleration or otherwise) at a rate per annum which shall
at all times be equal to the lesser of (i) the Highest Lawful Rate and (ii) the
Alternate Base Rate in effect from time to time plus the applicable Margin as
such applicable Margin may change from time to time. If the Alternate Base Rate
is based on the Prime Rate, interest shall be computed on the basis of the
actual number of days elapsed over a year of 365 or 366 days, as the case may
be. If the Alternate Base Rate is based on the Federal Funds Effective Rate,
interest shall be computed on the basis of the actual number of days elapsed
over a year of 360 days.
(b) Subject to Section 11.08, the Company agrees to pay interest on
the total outstanding principal balance of all LIBOR Rate Advances from time to
time from the date of each respective Advance to maturity (whether by
acceleration or otherwise) at a rate per annum (computed on the basis of the
actual number of days elapsed over a year of 360 days) which shall, during each
Interest Period applicable thereto, be equal to the lesser of (i) the Highest
Lawful Rate and (ii) the applicable LIBOR Rate for such Interest Period plus the
applicable Margin. The applicable LIBOR Rate shall be fixed for each Interest
Period and shall not change during said Interest Period but the applicable
Margin, which is added to the LIBOR Rate to determine the total interest payable
to the affected Lender, shall be adjusted, effective on the first day of each
Margin Period, whether or not said adjustment occurs at a time other than the
beginning of an Interest Period.
(c) Subject to Section 11.08, overdue principal and to the extent
permitted by law, overdue interest in respect of any Advance and all other
amounts owing hereunder shall bear interest for each day that such amounts are
overdue at a rate per annum equal to the Default Rate.
(d) Interest on each Advance shall accrue from and including the date
of such Advance to but excluding the date of any repayment thereof and shall be
payable (i) in respect of LIBOR Rate Advances (A) on the last day of the
Interest Period applicable thereto and, in the
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case of any Interest Period in excess of three months, on each day which occurs
every three months after the initial date of such Interest Period and on the
last day of the Interest Period and (B) on the date of any voluntary or
mandatory repayment of the Term Loan or any conversion or continuance to the
extent of interest accrued on such amount prepaid, converted or continued, (ii)
in respect of Alternate Base Rate Advances (A) on each Designated Payment Date
and (B) on the date of any voluntary or mandatory repayment to the extent of
interest accrued on such amount prepaid, and (iii) at maturity (whether by
acceleration or otherwise) and, after maturity, on demand.
(e) The Agent, upon determining the LIBOR Rate for any Interest
Period, shall notify the Company thereof. Each such determination shall, absent
manifest error, be final and conclusive and binding on all parties hereto. In
addition, prior to the due date for the payment of interest on any Advances set
forth in the immediately preceding paragraph, the Agent shall notify the Company
of the amount of interest due by the Company on all outstanding Advances on the
applicable due date, but any failure of the Agent to so notify the Company shall
not reduce the Company's liability for the amount owed.
(f) Subject to Section 11.08, the Company shall pay to the Agent for
the account of each affected Lender, so long as the Lenders shall be required
under regulations of the Board to maintain reserves with respect to liabilities
or assets consisting of or including Eurocurrency Liabilities, additional
interest on the unpaid principal amount of each such LIBOR Rate Advance from the
date of such Advance until such principal amount is paid in full, at an interest
rate per annum equal at all times during the Interest Period for such Advance to
the lesser of (i) the Highest Lawful Rate and (ii) the remainder obtained by
subtracting (A) the LIBOR Rate for such Interest Period from (B) the rate
obtained by dividing such LIBOR Rate referred to in clause (A) above by that
percentage equal to 100% minus the Reserve Percentage of such Lender for such
Interest Period. Such additional interest (i) shall be determined by such Lender
as incurred, (ii) shall be evidenced by a certificate setting forth in
reasonable detail the amount thereof, based on the foregoing calculation, and
(iii) shall be payable upon demand therefor by the Company to such Lender. Each
determination by such Lender of additional interest due under this Section
2.12(f) shall be conclusive and binding for all purposes in the absence of
manifest error.
SECTION 2.13 Interest Periods. (a) At the time the Company gives any Notice
of Advance or Notice of Conversion in respect of the making of, or conversion
into, a LIBOR Rate Advance, the Company shall have the right to elect, by giving
the Agent on the dates and at the times specified in Section 2.04 or Section
2.07, as the case may be, notice of the interest period (each an "Interest
Period") applicable to such LIBOR Rate Advance, which Interest Period shall be
either a one, two, three or six-month period; provided, that:
(i) the Initial Interest Period for any LIBOR Rate Advance shall
commence on the date of such LIBOR Rate Advance (including the date of any
conversion thereto or continuance thereof pursuant to Section 2.07); each
Interest Period occurring thereafter in respect of such LIBOR Rate Advance
shall commence on the expiration date of the immediately preceding Interest
Period;
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(ii) if any Interest Period relating to a LIBOR Rate Advance
begins on a day for which there is no numerically corresponding day in
the calendar month at the end of such Interest Period, such Interest Period
shall end on the last Business Day of such calendar month;
(iii) if any Interest Period would otherwise expire on a day which
is not a Business Day, such interest Period shall expire on the next
succeeding Business Day, provided, that if there are no more Business Days
in that month, the Interest Period shall expire on the proceeding Business
Day; and
(iv) no Interest Period for Advances shall extend beyond the
Revolving Credit Maturity Date, Term Loan Maturity Date, Acquisition
Facility Maturity Date or ESOP Loan Maturity Date, as the case may be.
(b) If, upon the expiration of any Interest Period applicable to a
LIBOR Rate Advance, the Company has failed to elect a new Interest Period to be
applicable to such Advance as provided above, the Company shall be deemed to
have elected to convert such Advance into an Alternate Base Rate Advance
effective as of the expiration date of such current Interest Period.
SECTION 2.14 Interest Rate Not Ascertainable. In the event that the Agent
shall determine (which determination shall, absent manifest error, be final,
conclusive and binding upon all parties) that on any date for determining the
LIBOR Rate for any Interest Period, by reason of any changes arising after the
date of this Agreement affecting the LIBOR interbank market, adequate and fair
means do not exist for ascertaining the applicable interest rate on the basis
provided for in the definition of LIBOR Rate, then, and in any such event, the
Agent shall forthwith give notice to the Company and to the Lenders of such
determination. Until the Agent notifies the Company that the circumstances
giving rise to the suspension described herein no longer exist, the obligations
of the Lenders to make LIBOR Rate Advances shall be suspended.
SECTION 2.15 Change in Legality. (a) Notwithstanding anything to the
contrary herein contained, if any change in any law or regulation or in the
interpretation thereof by any governmental authority charged with the
administration or interpretation thereof shall make it unlawful for any Lender
or its LIBOR Lending Office to make or maintain any LIBOR Rate Advance or to
give effect to its obligations as contemplated hereby, then, by prompt written
notice to the Company, such Lender may:
(i) declare that LIBOR Rate Advances will not thereafter be made
by such Lender hereunder, whereupon the Company shall be prohibited from
requesting LIBOR Rate Advances from such Lender hereunder (and instead, any
request for a LIBOR Rate Advance, as to such Lender, shall be deemed to be
a request for an Alternate Base Rate Advance), unless such declaration is
subsequently withdrawn; and
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(ii) require that all outstanding LIBOR Rate Advances made by
such Lender be converted to Alternate Base Rate Advances, in which event
(A) all such LIBOR Rate Advances made by such Lender shall be automatically
converted to Alternate Base Rate Advances as of the effective date of such
notice as provided in paragraph (b) below (or if so designated by such
Lender in such notice, effective as of another date) and (B) all payments
and prepayments of principal which would otherwise have been applied to
repay the converted LIBOR Rate Advances shall instead be applied to repay
the Alternate Base Rate Advances resulting from the conversion of such
LIBOR Rate Advances.
(b) For purposes of this Section 2.15, a notice to the Company by any
Lender pursuant to paragraph (a) above shall be effective on the date of receipt
thereof by the Company.
SECTION 2.16 Increased Costs, Taxes or Capital Adequacy Requirements. (a)
If, after the Execution Date, the application or effectiveness of any applicable
law or regulation or compliance by any Lender with any applicable guideline or
request from any central bank or governmental authority (whether or not having
the force of law) (i) shall change the basis of taxation of payments to such
Lender of the principal of or interest on any LIBOR Rate Advance made by such
Lender or any other Fees or amounts payable hereunder (other than taxes imposed
or measured on the overall net or gross income or revenue of such Lender or its
Applicable Lending Office or franchise taxes imposed upon it by the jurisdiction
in which such Lender or its Applicable Lending Office has an office), (ii) shall
impose, modify or deem applicable any reserve, special deposit or similar
requirement with respect to any LIBOR Rate Advance made by such Lender against
assets of, deposits with or for the account of, or credit extended by, such
Lender (without duplication of any amounts paid pursuant to Section 2.12(f) or
(iii) shall impose on such Lender any other condition affecting this Agreement
or any LIBOR Rate Advance made by such Lender, and the result of any of the
foregoing shall be to increase the cost to such Lender of maintaining its
Revolving Credit Commitment, Term Loan Commitment, ESOP Loan Commitment or the
Acquisition Facility Commitment, as the case may be, or of making or maintaining
any LIBOR Rate Advance or to reduce the amount of any sum received or receivable
by such Lender hereunder (whether of principal, interest or otherwise) in
respect thereof by an amount deemed in good faith by such Lender to be material,
then the Company shall pay to such Lender such additional amount as will
compensate it for such increase or reduction upon demand.
(b) If any Lender shall have determined in good faith that any change
after the Execution Date of any law, rule, regulation or guideline regarding
capital adequacy, or any change in the interpretation or administration thereof
or compliance with any request or directive regarding capital adequacy (whether
or not having the force of law) of any such authority, central bank or
comparable agency issued after the Execution Date has or would have the effect
of reducing the rate of return on the capital of such Lender as a consequence
of, or with reference to, such Lender's obligations hereunder to a level below
that which it could have achieved but for such change by an amount deemed in
good faith by such Lender to be material, then, from time to time, the Company
shall pay to the Agent for the benefit of such Lender such additional amount as
will reasonably compensate it for such reduction upon demand.
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(c) Each Lender will notify the Company through the Agent of any event
occurring after the date of this Agreement which will entitle it to compensation
pursuant to this Section 2.16, as promptly as practicable. A certificate (i)
stating that the compensation sought to be recovered pursuant to this Section
2.16 is generally being charged to other similarly situated customers and (ii)
setting forth in reasonable detail the amount necessary to compensate the Lender
in question as specified in paragraph (a) or (b) above, as the case may be, and
the calculation of such amount under clause (a)(i), shall be delivered to the
Company and shall be conclusive absent manifest error. The Company shall pay to
the Agent for the account of such Lender the amount shown as due on any such
certificate upon demand. The failure on the part of any Lender to demand
increased compensation with respect to any Interest Period shall not constitute
a waiver of the right to demand compensation thereafter, provided that with
respect to events occurring prior to any notice as to such events given under
this Section 2.16(c), such Lenders shall only be entitled to recover
compensation for such events occurring over a period of 120 days. Upon the
request of the Company, each Lender agrees that it will use reasonable efforts
to designate a different Applicable Lending Office for the Loans due to it
affected by the matter described in Sections 2.16(a) and 2.16(b), if such
designation will avoid or reduce the liability of the Company to such Lender
under this Section 2.16 so long as such designation is not disadvantageous to
such Lender as determined by such Lender in its sole discretion.
(d) Except as expressly provided in Section 2.16(c) failure on the
part of any Lender to demand compensation for any increased costs or reduction
in amounts received or receivable or reduction in return on capital with respect
to any Interest Period shall not constitute a waiver of such Lender's rights to
demand compensation for any increased costs or reduction in amounts received or
receivables or reduction in return on capital with respect to such Interest
Period or any other Interest Period.
SECTION 2.17 LIBOR Advance Prepayment and Default Penalties. Subject to
Section 11.08, the Company shall indemnify each Lender against any loss or
expense (other than loss of profit) which it may sustain or incur as a
consequence of (a) an advance of, or a conversion into, or a continuance of,
LIBOR Rate Advances that does not occur on the date specified therefor in a
Notice of Advance or Notice of Conversion, (b) any payment, prepayment or
conversion of a LIBOR Rate Advance required by any other provision of this
Agreement or otherwise made on a date other than the last day of the applicable
Interest Period or (c) any default in the payment or prepayment of the principal
amount of any LIBOR Advance or any part thereof or interest accrued thereon, as
and when due and payable (at the due date thereof, by notice of prepayment or
otherwise). Such loss or expense shall include the amount equal to the excess
determined by each Lender of (i) its cost of obtaining the funds for the Advance
being paid, prepaid or converted or not borrowed (based on the LIBOR Rate) for
the period from the date of such payment, prepayment or conversion or failure to
borrow to the last day of the Interest Period for such Advance (or, in the case
of a failure to borrow, the Interest Period for the Advance which would have
commenced on the date of such failure to borrow) over (ii) the amount of
interest (as determined by each Lender) that would be realized in reemploying
the funds so paid, prepaid or converted or not borrowed for such period or
Interest Period, as the case may be.
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The Agent on behalf of the Lenders, will notify the Company of any loss or
expense which will entitle the Lenders to compensation pursuant to this Section
2.17, as promptly as is practicable. A certificate of any Lender setting forth
any amount which it is entitled to receive pursuant to this Section 2.17 shall
be delivered to the Company and shall be conclusive absent manifest error. The
Company shall pay to the Agent for the account of the Lenders the amount shown
as due on any certificate upon demand. Without prejudice to the survival of any
other obligations of the Company hereunder, the obligations of the Company under
this Section 2.17 shall survive the termination of this Agreement and the
assignment of any of the Notes. The failure on the part of any Lender to demand
compensation with respect to this Section 2.17 shall not constitute a waiver of
the right to demand compensation thereafter, provided that with respect to any
loss or expense incurred prior to any notice as to such loss or expense given
under this Section 2.17, such Lender shall only be entitled to recover
compensation for such loss or expense incurred over a period of 120 days.
SECTION 2.18 Tax Forms. With respect to each Lender (including, but not
limited to, any Lender added by assignment pursuant to Section 11.10) which is
organized under the laws of a jurisdiction outside the United States, on the
date of the initial Advance hereunder, and from time to time thereafter if
requested by the Company or the Agent, each such Lender (including assignees of
any thereof from time to time) shall provide the Agent and the Company with the
forms prescribed by the Internal Revenue Service of the United States certifying
as to such Lender's status for purposes of determining exemption from United
States withholding taxes with respect to all payments to be made to such Lender
hereunder or other documents satisfactory to the Company and the Agent
indicating that all payments to be made to such Lender hereunder are subject to
such tax at a rate reduced by an applicable tax treaty. Unless the Company and
the Agent have received such forms or such documents indicating that payments
hereunder are not subject to United States withholding tax or are subject to
such tax at a rate reduced by an applicable tax treaty, the Company or the Agent
shall withhold taxes from such payments at the applicable statutory rate in the
case of payments to or for any Lender organized under the laws of a jurisdiction
outside the United States.
ARTICLE III
LETTERS OF CREDIT
SECTION 3.01 Letters of Credit. (a) Subject to and upon the terms and
conditions herein set forth, the Issuing Bank agrees that it will at any time
and from time to time on or after the Effective Date and prior to the Revolving
Credit Maturity Date, following its receipt of a Letter of Credit Request and
Application for Letter of Credit, issue for the account of the Company and in
support of the obligations of the Company or any of its Subsidiaries, one or
more letters of credit (the "Letters of Credit"), up to a maximum amount
outstanding at any one time for all Letters of Credit of $2,000,000, provided
that the Issuing Bank shall not issue any Letter of Credit if at the time of
such issuance: (i) Letter of Credit Obligations shall be greater than an amount
which, when added to all Advances under the Revolving Credit Notes then
outstanding, would exceed the lesser of the Borrowing Base and the Total
Revolving Credit Commitment or (ii) the expiry date or, in the case of any
Letter of Credit containing an expiration
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date that is extendible at the option of the Issuing Bank, the initial expiry
date, of such Letter of Credit is a date that is later than the Revolving Credit
Maturity Date, provided, further, the Carryover Letters of Credit each shall be
deemed to have been issued under this Agreement and constitute a part of the
Obligations.
(b) The Issuing Bank shall neither renew or extend nor permit the
renewal or extension of any Letter of Credit (which renewal or extension will
not be for any period ending after the Revolving Credit Maturity Date) if any of
the conditions precedent to such renewal set forth in Section 5.02 are not
satisfied or waived or, after giving effect to such renewal, the expiry date of
such Letter of Credit would be a date that is later than the Revolving Credit
Maturity Date.
SECTION 3.02 Letter of Credit Requests. (a) Whenever the Company desires
that a Letter of Credit be issued for its account or that the existing
expiration date shall be extended, it shall give the Issuing Bank (with copies
to be sent to the Agent and each other Revolving Credit Lender) (i) in the case
of a Letter of Credit to be issued, at least five (5) Business Days' prior
written request therefor and (ii) in the case of the extension of the existing
expiry date of any Letter of Credit, at least five (5) Business Days prior to
the date on which the Issuing Bank must notify the beneficiary thereof that the
Issuing Bank does not intend to extend such existing expiry date. Each such
request shall be executed by the Company and shall be in the form of Exhibit
3.02 attached hereto (each a "Letter of Credit Request") and shall be
accompanied by an Application for Letter of Credit therefor, completed to the
reasonable satisfaction of the Issuing Bank, and such other certificates,
documents and other papers and information as the Issuing Bank or the Agent may
reasonably request. Each Letter of Credit shall be denominated in U.S. dollars,
shall expire no later than the date specified in Section 3.01, shall not be in
an amount greater than is permitted under the clause (i) of Section 3.01(a) and
shall be in such form as may be reasonably approved from time to time by the
Issuing Bank and the Company.
(b) The making of each Letter of Credit Request shall be deemed to be
a representation and warranty by the Company that such Letter of Credit may be
issued in accordance with, and will not violate the requirements of this
Agreement. Unless the Issuing Bank has received notice from any Revolving Credit
Lender before it issues the respective Letter of Credit or extends the existing
expiry date of a Letter of Credit that one or more of the conditions specified
in Article V are not then satisfied, or that the issuance of such Letter of
Credit would violate this Agreement, then the Issuing Bank shall issue the
requested Letter of Credit for the account of the Company in accordance with the
Issuing Bank's usual and customary practices. Upon its issuance of any Letter of
Credit or the extension of the existing expiry date of any Letter of Credit, as
the case may be, the Issuing Bank shall promptly notify the Company and the
Agent and the Agent shall notify each Revolving Credit Lender of such issuance
or extension, which notices shall be accompanied by a copy of the Letter of
Credit actually issued or a copy of any amendment extending the existing expiry
date of any Letter of Credit, as the case may be.
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SECTION 3.03 Letter of Credit Participations. (a) All Letters of Credit
issued subsequent hereto shall be deemed to have been sold and transferred by
the Issuing Bank to each Revolving Credit Lender, and each Revolving Credit
Lender shall be deemed irrevocably and unconditionally to have purchased and
received from the Issuing Bank, without recourse or warranty, an undivided
interest and participation (to the extent of such Lender's percentage
participation in the Revolving Credit Commitments) in each such Letter of Credit
(including extensions of the expiry date thereof), each substitute Letter of
Credit, each drawing made thereunder and the obligations of the Company under
this Agreement and the other Loan Documents with respect thereto, and any
security therefor or guaranty pertaining thereto.
(b) In determining whether to pay under any Letter of Credit, the
Issuing Bank shall have no obligation relative to the Revolving Credit Lenders
other than to confirm that any documents required to be delivered under such
Letter of Credit appear to have been delivered and that they appear to comply on
their face with the requirements of such Letter of Credit.
(c) In the event that the Issuing Bank makes any payment under any
Letter of Credit, the same shall be considered an Alternate Base Rate Advance
without further action by any Person. The Issuing Bank shall promptly notify the
Agent, which shall promptly notify each Revolving Credit Lender thereof. Each
Revolving Credit Lender shall immediately pay to the Agent for the account of
the Issuing Bank the amount of such Lender's percentage participation of such
Advance. If any Revolving Credit Lender shall not have so made its percentage
participation available to the Agent, such Lender agrees to pay interest
thereon, for each day from such date until the date such amount is paid at the
lesser of (i) the Federal Funds Effective Rate and (ii) the Highest Lawful Rate.
(d) The Issuing Bank shall not be liable for, and the obligations of
the Company and the Revolving Credit Lenders to make payments to the Agent for
the account of the Issuing Bank with respect to Letters of Credit shall not be
subject to, any qualification or exception whatsoever, including any of the
following circumstances:
(i) any lack of validity or enforceability of this Agreement or
any of the other Loan Documents;
(ii) the existence of any claim, setoff, defense or other right
which the Company may have at any time against a beneficiary named in a
Letter of Credit, any transferee of any Letter of Credit, the Agent, any
Issuing Bank, any Revolving Credit Lender, or any other Person, whether in
connection with this Agreement, any Letter of Credit, the transactions
contemplated herein or any unrelated transactions (including any underlying
transaction between the Company and the beneficiary named in any such
Letter of Credit);
(iii) any draft, certificate or any other document presented
under the Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
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(iv) the surrender or impairment of any security for the
performance or observance of any of the terms of any of the Loan Documents;
or
(v) the occurrence of any Default or Event of Default.
(e) The Issuing Bank shall not be liable for any error, omission,
interruption or delay in transmission, dispatch or delivery of any message or
advice, however transmitted in connection with any Letter of Credit, except for
errors or omissions caused by such Issuing Bank's gross negligence or willful
misconduct. IT IS THE EXPRESS INTENTION OF THE PARTIES HERETO THAT SUCH ISSUING
BANK, ITS OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS (OTHER THAN WITH RESPECT TO
ANY CLAIMS BY THE ISSUING BANK AGAINST ANY SUCH OFFICER, DIRECTOR, EMPLOYEE OR
AGENT THEREOF) SHALL BE INDEMNIFIED AND HELD HARMLESS FROM, SUBJECT TO THE SAME
TYPE OF PROTECTIONS SET FORTH IN SECTION 11.05(B), ANY ACTION TAKEN OR OMITTED
BY SUCH PERSON UNDER OR IN CONNECTION WITH ANY LETTER OF CREDIT OR ANY RELATED
DRAFT OR DOCUMENT ARISING OUT OF OR RESULTING FROM SUCH PERSON'S SOLE OR
CONTRIBUTORY NEGLIGENCE, BUT NOT FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT
OF SUCH PERSON. The Company agrees that any action taken or omitted by the
Issuing Bank under or in connection with any Letter of Credit or the related
drafts or documents, if done in accordance with the standards of care specified
in the Uniform Customs and Practice for Documentary Credits (1993 Revision),
International Chamber of Commerce, Publication No. 500 (and any subsequent
revisions thereof approved by a Congress of the International Chamber of
Commerce and adhered to by the Issuing Bank) and, to the extent not inconsistent
therewith, the Uniform Commercial Code of the State of Texas, shall not result
in any liability of the Issuing Bank to the Company.
SECTION 3.04 Increased Costs. (a) Notwithstanding any other provision
herein, but subject to Section 11.08, if any Revolving Credit Lender shall have
determined in good faith that any change after the Execution Date of any law,
rule, regulation or guideline or the application or effectiveness of any
applicable law or regulation or any change after the Execution Date in the
interpretation or administration thereof, or compliance by any Revolving Credit
Lender (or any lending office of such Lender) with any applicable guideline or
request from any central bank or governmental authority (whether or not having
the force of law) issued after the Effective Date either (i) shall impose,
modify or make applicable any reserve, deposit, capital adequacy or similar
requirement against Letters of Credit issued, or participated in, by any
Revolving Credit Lender or (ii) shall impose on any Revolving Credit Lender any
other conditions (without duplication of taxes covered in Section 2.16(a)(i) and
excluding the taxes specifically excluded in the parenthetical clause in
Section 2.16(a)(i) affecting this Agreement or any Letter of Credit; and the
result of any of the foregoing is to increase the cost to any Revolving Credit
Lender of issuing, maintaining or participating in any Letter of Credit, or
reduce the amount received or receivable by any Revolving Credit Lender
hereunder with respect to Letters of Credit, by an amount deemed by such Lender
to be material, then, from time to time, the Company shall pay to the Agent for
the account of such Lender such additional amount or amounts as will reasonably
compensate such Lender for such increased cost or reduction by such Lender.
(b) Each Revolving Credit Lender will notify the Company through the
Agent of any event occurring after the date of this Agreement which will entitle
such Lender to
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compensation pursuant to subsection (a) above, as promptly as practicable. A
certificate of such Lender (i) stating that the compensation sought to be
recovered pursuant to this Section 3.04 is generally being charged to other
similarly situated customers and (ii) setting forth in reasonable detail such
amount or amounts as shall be necessary to compensate such Lender as specified
in subsection (a) above shall be delivered to the Company (with a copy to the
Agent) and shall be conclusive absent manifest error. The Company shall pay to
the Agent for the account of such Lender the amount shown as due on any such
certificate upon demand; provided that with respect to events occurring prior to
any notice as to such events given under the Section 3.04(b), such Lender shall
only be entitled to recover compensation for such events occurring over a period
of 120 days.
(c) Except as expressly provided in Section 3.04(b), failure on the
part of any Revolving Credit Lender to demand compensation for any increased
costs or reduction in amounts received or receivable or reduction in return on
capital with respect to any Letter of Credit shall not constitute a waiver of
such Lender's rights to demand compensation for any increased costs or reduction
in amounts received or receivable or reduction in return on capital with respect
to such Letter of Credit.
SECTION 3.05 Conflict between Applications and Agreement. To the extent
that any provision of any application related to any Letter of Credit is
inconsistent with the provisions of this Agreement, the provisions of this
Agreement shall control.
ARTICLE IV
FEES; COMMITMENTS
SECTION 4.01 Fees.
(a) The Company agrees to pay to the Agent for the account of each
Revolving Credit Lender a commitment fee (the "Revolving Credit Commitment Fee")
for the period from and including the Effective Date to the Revolving Credit
Maturity Date, computed at a rate per annum of three-eighths of one percent
(0.375%) on the average daily unused amount of the outstanding Revolving Credit
Commitments. Accrued Revolving Credit Commitment Fees shall be calculated to the
day immediately preceding each Designated Payment Date and to the date the Total
Revolving Credit Commitment is terminated. Revolving Credit Commitment Fees
shall be due and payable in arrears (i) on each Designated Payment Date
commencing on the first such date following the Execution Date and (ii) on the
Revolving Credit Maturity Date.
(b) The Company agrees to pay to the Agent for the account of each
Acquisition Facility Lender a commitment fee (the "Acquisition Facility
Commitment Fee") for the period from and including the Effective Date to the
expiration of the Acquisition Facility Funding Period, computed at a rate per
annum of three-eighths of one percent (0.375%) on the average daily unused
amount of the outstanding Acquisition Facility Commitments. Accrued Acquisition
Facility Commitment Fees shall be calculated to the day immediately preceding
each Designated Payment Date and to the last day of the Acquisition Facility
Funding Period. Acquisition Facility Commitment Fees shall be due and payable in
arrears (i) on each Designated
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Payment Date commencing on the first such date following the Execution Date and
(ii) on the last day of the Acquisition Facility Funding Period.
(c) The Company agrees to pay Letter of Credit Fees to the Issuing
Bank and each Lender in the applicable amount of the same payable thereto as set
forth in the definition of Letter of Credit Fee set forth in Section 1.01.
Accrued Letter of Credit Fees shall be due and payable in arrears (i) on each
Designated Payment Date commencing on the first such date following the
Execution Date and (ii) on the Revolving Credit Maturity Date, and shall be
calculated on the basis of a 360-day year.
(d) The Company agrees to pay to the Agent, for the account of Agent,
in connection with its duties as Agent and its arrangement and syndication of
this credit facility; and for the account of each Lender as consideration for
such Lender making available the Loans, all of such fees as have been agreed to
pursuant to the Agent's Letter.
(e) In no event shall the Fees payable under this Section 4.01 (to the
extent, if any, constituting interest under applicable laws) together with all
amounts constituting interest under applicable laws and payable in connection
with this Agreement, the Notes and the other Loan Documents exceed the Highest
Lawful Rate.
SECTION 4.02 Reduction of Total Commitment. Upon at least five (5) Business
Days' prior written notice to the Agent, the Company shall have the right
without premium or penalty, to reduce or terminate the Unutilized Commitment in
part or in whole; provided, that (a) any such reduction shall reduce
proportionately the Revolving Credit Commitment of each of the Revolving Credit
Lenders or the Acquisition Facility Commitment of each of the Acquisition
Facility Lenders, whichever is applicable and (b) any partial reduction shall be
in the amount of $1,000,000 or integral multiples thereof.
SECTION 4.03 Reduction of Total Revolving Credit Commitment. The Revolving
Credit Commitments, if not sooner terminated, shall terminate on the Revolving
Credit Maturity Date.
ARTICLE V
CONDITIONS PRECEDENT
SECTION 5.01 Conditions Precedent to the Initial Advance. The obligation of
each Lender to make its initial Advance to the Company is subject to the
condition that the Agent shall have received the following, each in form and
substance reasonably satisfactory to the Agent:
(a) this Agreement executed by the Company;
(b) one Revolving Credit Note for each Revolving Credit Lender, each
executed by the Company and payable to the order of said Lender in the amount of
its Revolving Credit Commitment;
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(c) one Term Note for each Term Loan Lender, each executed by the
Company and payable to the order of said Lender in the amount of its Term Loan
Commitment;
(d) one ESOP Note for each ESOP Lender, each executed by the Company
and payable to the order of said Lender in the amount of its ESOP Loan
Commitment;
(e) one Acquisition Facility Note for each Acquisition Facility
Lender, each executed by the Company and payable to the order of said Lender in
the amount of its Acquisition Facility Commitment;
(f) the Guaranty;
(g) the Security Documents executed by the Company, the Subsidiaries,
and the Parent, as the case may be, including all certificates evidencing shares
of stock of the Company, and Subsidiaries pledged to the Agent for the benefit
of the Lenders under the terms of any Security Document, together with related
stock powers duly executed by the Parent and the Company, as the case may be;
(h) a Borrowing Base Certificate dated as of May 31, 1998, executed by
an authorized officer of the Company;
(i) a Notice of Advance with respect to the initial Advance meeting
the requirements of Section 2.04(a);
(j) a certificate (i) of the secretary or an assistant secretary of
each of the Parent, Finance Corp., AXIA and the Company and each of their
respective Subsidiaries party hereto certifying (A) true and complete copies of
each of the articles or certificate of incorporation, as amended and in effect,
of such Person, the bylaws, as amended and in effect, of such Person and the
resolutions adopted by the Board of Directors of such Person, (1) authorizing
the execution, delivery and performance by such Person of the Loan Documents to
which it is or will be a party and, as to the Company, the Advances to be made
hereunder, (2) approving the forms of the Loan Documents to which it is or will
be a party and which will be delivered at or prior to the date of the initial
Advance, and (3) authorizing officers of such Person to execute and deliver the
Loan Documents to which it is or will be a party and any related documents,
including, any agreement contemplated by this Agreement, and (B) the incumbency
and specimen signatures of the officers of such Person executing any documents
on its behalf and (ii) of a Responsible Officer of the Company certifying, (A)
that there has been no change in the businesses or financial condition of AXIA
and its Subsidiaries since December 31, 1997 which would reasonably be expected
to have a Material Adverse Effect, and (B) that no Default or Event of Default
shall have occurred and be continuing or would result from the initial Advance;
(k) favorable, signed opinions addressed to the Agent and the Lenders
from Bracewell & Patterson, L.L.P., counsel to Holding Co., the Parent, Finance
Corp. and the
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Company and their respective Subsidiaries, in form and substance satisfactory to
the Agent and its counsel;
(1) the Agent shall have received the payment for the Agent and the
Lenders, as applicable, of all Fees and expenses agreed upon by such parties and
the Company to be payable on or prior to the Execution Date;
(m) certificates of appropriate public officials as to the existence,
good standing and qualification to do business as a foreign corporation, as
applicable, of the Parent, Finance Corp. and the Company and their respective
Subsidiaries in each jurisdiction in which the failure to be so qualified or in
good standing would reasonably be expected to have a Material Adverse Effect;
(n) a Solvency Certificate executed by the chief financial officer of
the Company that, after giving effect to the Merger Agreement, the Company
Merger and the transaction(s) contemplated thereby, (i) the aggregate fair value
and present fair saleable value of the Company's assets would exceed the
Company's total liabilities, including identified contingent liabilities; (ii)
the Company is able to pay its debts as they become absolute and mature in the
ordinary course of business; and (iii) the Company does not have an unreasonably
small amount of capital to engage in its business, as management has indicated
it is now conducted and is proposed to be conducted, following the consummation
of the Acquisition;
(o) Landlord Lien Waivers as required by the Agent for Inventory
locations located on leasehold estates listed on Schedule 5.01(o);
(p) copies of the executed Indenture evidencing the Subordinated Debt;
(q) a copy of each opinion of counsel delivered in connection with the
Merger Agreement either containing in the body thereof the right of the Agent
and the Lenders to rely thereon or accompanied by a letter from the Person
delivering such opinion authorizing reliance thereon by the Agent and the
Lenders;
(r) Certificates of Insurance evidencing the existence of all
insurance required to be maintained pursuant to Section 6.17;
(s) evidence of cancellation of existing debt facilities and Liens
securing such facilities (or written payoff letters in form and substance
acceptable to the Agent in its sole discretion);
(t) evidence satisfactory to the Agent that not less than $28,000,000
in equity has been contributed to the Parent and not less than $97,000,000 of
Subordinated Debt has been contributed to Finance Corp.; and
(u) evidence satisfactory to the Agent that the following has occurred
or will occur immediately following funding on the Effective Date:
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(i) the Parent Merger; and
(ii) the Company Merger.
The acceptance of the benefits of the initial Credit Event shall
constitute a representation and warranty by the Company to the Agent and each of
the Lenders that all of the conditions specified in this Section 5.01, shall
have been satisfied or waived as of that time.
SECTION 5.02. Conditions Precedent to All Credit Events. The obligation of
the Lenders to make any Advance or issue a Letter of Credit is subject to the
further conditions precedent that on the date of such Credit Event:
(a) The conditions precedent set forth in Section 5.01 shall have
theretofore been satisfied or waived;
(b) The representations and warranties set forth in Article VI of this
Agreement and the representations and warranties set forth in the Guaranty and
the Security Documents shall be true and correct in all material respects as of,
and as if such representations and warranties were made on, the date of the
proposed Advance or Letter of Credit, as the case may be (unless such
representation and warranty expressly relates to an earlier date or is no longer
true and correct solely as a result of transactions not prohibited by the Loan
Documents), and the Company shall be deemed to have certified to the Agent and
the Lenders that such representations and warranties are true and correct in all
material respects (unless such representation and warranty expressly relates to
an earlier date or is no longer true and correct solely as a result of
transactions not prohibited by the Loan Documents) by submitting a Notice of
Advance;
(c) The Company shall have complied with the provisions of Section
2.04 or Section 3.02, as applicable;
(d) No Default or Event of Default shall have occurred and be
continuing or would result from such Credit Event;
(e) No Material Adverse Effect shall have occurred since the delivery
of the most recent financials; and
(f) The Agent shall have received such other consents, approvals,
opinions or documents as the Agent may reasonably request.
The acceptance of the benefits of each such Credit Event shall constitute a
representation and warranty by the Company to the Agent and each of the Lenders
that all of the conditions specified in this Section 5.02 above exist as of that
time.
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SECTION 5.03 Delivery of Documents. All of the Notes, Security Documents,
certificates and legal opinions referred to in this Article V, unless otherwise
specified, shall be delivered to the Agent for the account of each of the
Lenders and, except for the Notes, if requested by the Agent in sufficient
copies for each of the Lenders and shall be reasonably satisfactory in form and
substance to the Agent. Any Lender may request in writing to the Agent and the
Company a copy of any other document or paper referred to in this Article V and
the Company will thereafter provide same to such Lender.
SECTION 5.04 Acquisition Facility Loans. The obligation of each Lender to
make any Acquisition Facility Loan is subject to the further conditions
precedent that on the date of such Credit Event, unless waived by the Majority
Lenders:
(a) Acquisition Request. Company shall have provided to the Agent and
the Agent have in turn delivered to each Lender at least ten (10) Business Days
prior to the date that the proposed Acquisition Facility Loan is to be
requested, the following: (i) the name of the Person (the "Target") who is to be
acquired or whose assets are to be acquired; (ii) a description of the nature of
the Target's business; (iii) copies of the documentation (or substantially final
drafts of the documentation) intended to effect the proposed acquisition (the
"Acquisition Agreements"); (iv) a summary of the terms and conditions of the
proposed acquisition; (v) a certificate of the chief financial officer or chief
executive officer of the Company certifying that no Default or Event of Default
exists or could reasonably be expected to occur as a result of the proposed
acquisition; and (vi) any other information the Agent may reasonably request. In
addition, at least ten (10) Business Days prior to the date that the Acquisition
Facility Loan is to be requested, the Company and the management of the Target
must have been made available to the Agent and the Lenders to answer questions
regarding the proposed acquisition and the documentation related thereto.
(b) Acquisition Criteria. The Company shall provide to the Agent and
each Lender evidence of the following, unless otherwise consented to by the
Majority Lenders:
(i) The Company has completed due diligence on the Target and the
assets to be acquired satisfactory to Agent, including, without limitation,
if and to the extent appropriate, a due diligence investigation as to the
compliance in all material respects with all Environmental Laws by the
Target and the assets to be acquired;
(ii) The Target is involved in the same general type of business
activities as the Company and the Subsidiaries and types of business
activities reasonably related thereto;
(iii) If the proposed acquisition is an acquisition of the stock
of a Target, the acquisition will be structured so that the Target will
become a Substantially Owned Subsidiary. If the proposed acquisition is an
acquisition of assets, the acquisition will be structured so that either
the Company or a Substantially-Owned Subsidiary of the Company shall
acquire the assets;
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(iv) Neither the Target nor its assets shall be subject to any
contingent obligations (including contingent obligations arising from any
environmental liabilities), environmental liabilities, unsatisfied judgments
or any pending action, charge, claim, demand, suit, proceeding, petition,
governmental investigation or arbitration that could reasonably be expected
to result in the proposed acquisition having a Material Adverse Effect;
(v) The following criteria have been satisfied:
(A) The Company shall have provided to the Agent and each
Lender (i) copies of (a) the financial statements of the Target for
the twelve (12) month period prior to the closing of the proposed
Acquisition for which financial statements are available and (b)
audited or reviewed financial statements (by an accounting firm
acceptable to Agent) for the most recently completed fiscal year of
the Target, containing at a minimum, a balance sheet, statement of
income and statement of cash flow prepared in accordance with GAAP, in
form and substance acceptable to the Agent, and (ii) a pro forma
financial projection of the Company and the Subsidiaries (including
the Target) for the period of 12 months following the date of the
consummation of the proposed acquisition which reflects compliance
with the financial covenants set forth in Section 8.13 and Section
8.14 of this Agreement;
(B) The Acquisition Facility Pro Forma Total Debt Leverage
Ratio as of the date of the proposed acquisition shall not be greater
than five and three-quarters (5.75) to one (1.00);
(C) The Acquisition Facility Pro Forma Senior Debt Leverage
Ratio as of the date of the proposed acquisition shall not be greater
than three (3.00) to one (1.00);
(D) Adjusted Target EBITDA less the Target's unfinanced
Capital Expenditures for such period is greater than zero; and
(E) A certificate of a Responsible Officer of the Company
certifying to the calculations demonstrating compliance with this
clause (v).
(c) Acquisition Agreements. Prior to the closing of the Acquisition
Facility Loans to be used for the proposed acquisition, (i) Agent and the
Lenders shall have received executed or final copies of the Acquisition
Agreements relating to the proposed acquisition; (ii) the Acquisition Agreements
shall be in full force and effect and no material term or condition thereof
shall have been amended, modified, or waived after the execution thereof (other
than solely to extend the date by which the proposed acquisition is required to
occur) except those a copy of which was received by Agent and the Lenders prior
to the closing of such Acquisition Facility Loans; (iii) none of the parties to
the Acquisition Agreements shall have failed to perform any material obligation
or covenant required by the Acquisition Agreements to be
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performed or complied with by it on or before the date of the closing of the
proposed acquisition unless waived with the consent of the Agent; and (iv) Agent
shall have received a certificate from a Responsible Officer of the Company to
the effect set forth in clauses (i), (ii) and (iii) above.
(d) Proposed Target Loan Documents. If the proposed acquisition is an
acquisition of the stock of a Target, then (i) the Target shall execute and
deliver to Agent the documentation required by Section 7.09, (ii) the Company or
the relevant Domestic Subsidiary, as the case may be, shall execute and deliver
to the Agent an amendment to the relevant Security Documents describing as
collateral thereunder the stock of the Target (or if the Target is a Foreign
Subsidiary, 66% thereof), and (iii) the Company or the relevant Domestic
Subsidiary, as the case may be, shall deliver to the Agent the certificates
representing the stock of the Target (or if the Target is a Foreign Subsidiary,
66% thereof) together with undated stock powers duly executed in blank. If the
proposed acquisition is an acquisition of assets, the Company or the Domestic
Subsidiary acquiring the assets shall execute and deliver to the Agent such
documentation reasonably requested by Agent to cause substantially all of the
property acquired to be subject to a perfected Lien in favor of Agent for the
benefit of the Lenders and for such Lien to have priority over all other Liens
other than Permitted Liens.
ARTICLE VI
REPRESENTATIONS AND WARRANTEES
In order to induce the Lenders to enter into this Agreement and to make the
Advances provided for herein, the Company for itself, the Parent and each of its
Subsidiaries makes, on or as of the occurrence of each such Credit Event (except
to the extent such representations or warranties relate to an earlier date or
are no longer true and correct in all material respects solely as a result of
transactions not prohibited by the Loan Documents), the following
representations and warranties to the Agent and the Lenders:
SECTION 6.01 Organization and Qualification. Each member of the Company
Group (a) is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization, (b) has
the corporate power to own its property and to carry on its business as now
conducted and (c) is duly qualified as a foreign corporation to do business and
is in good standing, in each case in each jurisdiction in which the failure to
be so qualified or in good standing would reasonably be expected to have a
Material Adverse Effect.
SECTION 6.02 Authorization and Validity. Each member of the Company Group
has the corporate power and authority to execute, deliver and perform its
obligations hereunder and under the other Loan Documents to which it is a party
and all such action has been duly authorized by all necessary corporate
proceedings on its part. The Loan Documents to which any member of the Company
Group is a party have been duly and validly executed and delivered by such
member of the Company Group and constitute valid and legally binding agreements
of such member of the Company Group enforceable in accordance with the
respective terms thereof, except, in each case, as such enforceability may be
limited by bankruptcy, insolvency,
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reorganization, moratorium, fraudulent transfer or other similar laws relating
to or affecting the enforcement of creditors' rights generally and general
principles of equity.
SECTION 6.03 Governmental Consents. No authorization, consent, approval,
license or exemption (other than such exemptions that exist under applicable
law, that are permitted, or that have been obtained) of any Person or filing or
registration with any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, is necessary for the
valid execution, delivery or performance by any member of the Company Group of
any Loan Document to which it is a party or for the grant of a security interest
in or mortgage on the collateral covered by the Loan Documents, except such
matters relating to performance as would ordinarily be done in the ordinary
course of business after the Effective Date.
SECTION 6.04 Conflicting or Adverse Agreements or Ratifications. No member
of the Company Group is a party to any contract or agreement or subject to any
restriction which would reasonably be expected to have a Material Adverse
Effect. As of the Execution Date, all agreements (other than this Agreement and
the other Loan Documents and the agreements evidencing the Subordinated Debt) of
the Company and its Subsidiaries relating to the lending of money or the
issuance of letters of credit to or for the account of any party are described
hereto on Schedule 6.04. Neither the execution nor delivery of the Loan
Documents nor compliance with the terms and provisions hereof or thereof will be
contrary to the provisions of, or constitute a default under (a) the charter or
bylaws of any member of the Company Group or (b) any applicable law or any
applicable regulation, order, writ, injunction or decree of any court or
governmental instrumentality or (c) any material agreement to which any member
of the Company Group is a party or by which it is bound or to which it is
subject.
SECTION 6.05 Title to Assets; Licenses and Permits. The Company has good
title to all personal property and good and indefeasible title to or a
subsisting leasehold interest in, all realty as reflected as of the Effective
Date on its books and records as being owned or leased by it after giving effect
to the Merger, subject to no Liens, except Permitted Liens. All of such assets
are being maintained by the appropriate Person in good working condition in
accordance with industry standards. All of the real property, other than the
Company's and its Subsidiaries' retail sales locations, which are owned or
leased by the Company as of the Effective Date are set forth on Schedule 6.05
hereto, with the applicable owner or lessee, location and real property interest
identified thereon. True, correct and complete copies of (i) each such real
property lease (and all amendments thereto) of which the Company has possession
or knowledge have been delivered to the Agent and (ii) all real property leases
(and amendments thereto), other than leases limited to the Company's and its
Subsidiaries' retail sales locations, executed after the Effective Date have
been delivered to the Agent. The items of real and personal property owned by or
leased to and used by the Company or any of its Subsidiaries constitute all of
the material assets used in the conduct of their respective businesses as
presently conducted after giving effect to the Merger, and neither this
Agreement nor any other Loan Document, nor any transaction contemplated under
any such agreement, will affect any right, title or interest of the Company or
any of its Subsidiaries in and to any of such assets in a manner that would have
or is reasonably likely to have a Material Adverse Effect. To the knowledge of
the Company there are no actual,
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threatened or alleged defaults with respect to any leases of real property under
which the Company or any of its Subsidiaries is bound after giving effect to the
Merger which would have or is reasonably likely to have a Material Adverse
Effect. After giving effect to the Merger, the Company and each of its
Subsidiaries is current and in good standing with respect to all governmental
approvals, permits, certificates, licenses, consents and franchises necessary to
continue to conduct its business and to own or lease and operate its properties
as heretofore conducted, owned, leased or operated except where any such failure
to maintain, obtain or comply with approvals, permits, certificates, licenses,
consents and franchises would not have a Material Adverse Effect.
SECTION 6.06 Litigation. Except as shown on Schedule 6.06 as of the
Effective Date, no proceedings before any court or governmental agency or
department are pending against any member of the Company Group and, to the
knowledge of the Company, none of same have been threatened against any one in
the Company Group, which could reasonably be expected to have a Material Adverse
Effect. At any time after the Effective Date, no proceedings against or
affecting anyone in the Company Group are pending or, to the knowledge of the
Company, threatened before any court or governmental agency or department which
could reasonably be expected to have a Material Adverse Effect.
SECTION 6.07 Financial Statements. Prior to the Execution Date, Finance
Corp. has furnished to the Lenders the audited financial statements of AXIA and
its consolidated subsidiaries as of December 31, 1997 (such financials,
collectively, "Financials"). The Financials have been prepared in conformity
with GAAP consistently applied and present fairly, in all material respects, the
financial condition of AXIA and its consolidated subsidiaries as of the dates
thereof. Since December 31, 1997, through the Effective Date, there has not
occurred any event which would reasonably be expected have a Material Adverse
Effect.
SECTION 6.08 No Defaults. The Company and its Subsidiaries are not in
default (a) under any material provisions of any instrument evidencing any
Indebtedness or of any agreement relating thereto in such manner as to cause a
Material Adverse Effect or (b) in any respect under or in violation of any
order, writ, injunction or decree of any court or governmental instrumentality,
in such manner as to cause a Material Adverse Effect or (c) under any provision
of any Material Contract, which default would reasonably be expected to have a
Material Adverse Effect.
SECTION 6.09 Investment Company Act. Each of the Company and its
Subsidiaries is not, nor are they directly or indirectly controlled by or acting
on behalf of any Person which is, an "investment company," as such term is
defined in the Investment Company Act of 1940, as amended.
SECTION 6.10 Utility Regulation. Neither the Company nor any of its
respective Subsidiaries, is (i) a "holding company," or a "subsidiary company"
of a "holding company," or an "affiliate" of a "holding company," or an
"affiliate" of a "subsidiary company" of a "holding company", or a "public
utility company" within the meaning of the Public Utility Holding Company Act of
1935 or (ii) an "electric utility" or "public utility" within the meaning of the
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Federal Power Act or (iii) an "electric utility," "public utility," or "utility"
under any state law regulating public utilities.
SECTION 6.11 ERISA. (a) The Company and each ERISA Affiliate have operated
and administered each Plan and Employee Plan in compliance with all applicable
laws except for such instances of noncompliance as have not resulted in and
would not reasonably be expected to have a Material Adverse Effect. Neither the
Company nor any ERISA Affiliate has incurred any liability pursuant to Title I
or IV of ERISA or the penalty or excise tax provisions of the Code relating to
employee benefit plans (as defined in Section 3 of ERISA) which would
individually or in the aggregate reasonably be expected to have a Material
Adverse Effect and no event, transaction or condition has occurred or exists
that would reasonably be expected to result in the incurrence of any such
liability by the Company or any ERISA Affiliate, or in the imposition of any
Lien on any of the rights, properties or assets of the Company or any ERISA
Affiliate, in either case pursuant to Title I or IV of ERISA or to such penalty
or excise tax provisions or to Section 401(a)(29) or 412 of the Code, other than
such liabilities or Liens as would not individually or in the aggregate
reasonably be expected to have a Material Adverse Effect.
(b) No accumulated funding deficiency (as defined in section 412 of
the Code or section 302 of ERISA), whether or not waived, exists or is expected
to be incurred with respect to any Plan that individually or in the aggregate
would reasonably be expected to have a Material Adverse Effect.
(c) The Company and its ERISA Affiliates have not incurred withdrawal
liabilities (and are not subject to contingent withdrawal liabilities) under
section 4201 or 4204 of ERISA in respect of Multiemployer Plans that
individually or in the aggregate would reasonably be expected to have a Material
Adverse Effect.
(d) The expected post-retirement benefit obligation (determined as of
the last day of the Company's most recently ended fiscal year in accordance with
Financial Accounting Standards Board Statement No. 106, without regard to
liabilities attributable to continuation coverage mandated by section 4980B of
the Code) of the Company and its Subsidiaries would not reasonably be expected
to have a Material Adverse Effect.
SECTION 6.12 Environmental Matters. Except as disclosed on Schedule 6.12
the Company and its Subsidiaries (a) possess all environmental, health and
safety licenses, permits, authorizations, registrations, approvals and similar
rights necessary under Environmental Laws for the Company and its Subsidiaries
to conduct their operations as now being conducted, except where failure to have
such licenses, permits, authorizations, registrations, approvals, and similar
rights would not reasonably be expected to have a Material Adverse Effect, and
(b) each of such licenses, permits, authorizations, registrations, approvals and
similar rights is valid and subsisting, in full force and effect and enforceable
by the Company and its Subsidiaries, and the Company and its Subsidiaries are in
compliance with all terms, conditions or other provisions of such permits,
authorizations, regulations, approvals and similar rights except for such
failure or noncompliance that, individually or in the aggregate for the Company
and its Subsidiaries, would not reasonably be expected to have a Material
Adverse Effect. Except as disclosed on
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Schedule 6.12, neither the Company nor any Subsidiary has received any written
notices of any violation or noncompliance with, or remedial obligation under,
any Environmental Laws (other than any violation, non-compliance, or remedial
obligation that has been cured or would not reasonably be expected to have a
Material Adverse Effect) and there are no writs, injunctions, decrees, orders or
judgments outstanding under the Environmental Laws, or lawsuits, claims,
proceedings, or, to the knowledge of the Company, investigations or inquiries
pending or threatened under Environmental Laws, relating to the ownership, use,
condition, maintenance or operation of, or conduct of business related to, any
property owned, leased or operated by the Company and its Subsidiaries or other
assets of the Company and its Subsidiaries other than those violations,
instances of noncompliance, obligations, writs, injunctions, decrees, orders,
judgments, lawsuits, claims, proceedings, investigations or inquiries that,
individually or in the aggregate for the Company and its Subsidiaries, would not
reasonably be expected to have a Material Adverse Effect. Except as disclosed on
Schedule 6.12, there are no obligations, undertakings or liabilities arising out
of or relating to Environmental Laws which the Company and its Subsidiaries have
agreed to, assumed or retained, or by which the Company and its Subsidiaries are
adversely affected, by contract or otherwise, except such obligations,
undertakings or liabilities as would not reasonably be expected to have a
Material Adverse Effect. Except as disclosed on Schedule 6.12, the Company and
its Subsidiaries have not received a written notice or claim to the effect that
any of them are or may be liable to any other Person as the result of a Release
or threatened Release of a Hazardous Material except such notice or claim that
would not reasonably be expected to have a Material Adverse Effect.
SECTION 6.13 Purpose of Loans. (a) The proceeds of the Advances of the Term
Loan and approximately $3,000,000 of the Revolving Credit Loans will be used (i)
by Finance Corp. to repay certain indebtedness and obligations of AXIA and to
fund the Parent Loan to the Parent to be used by the Parent solely to finance
the purchase of the stock of AHC and AXIA pursuant to the Merger Agreement (the
"Acquisition") and to pay certain transaction expenses incurred in connection
with the Acquisition, and (ii) by the Company for general corporate purposes.
The proceeds of the ESOP Loan will be loaned by the Company to the ESOP to
enable the ESOP to purchase Holding Co. common stock.
(b) None of the proceeds of any Advance will be used directly or
indirectly for the purpose of purchasing or carrying any "margin stock" within
the meaning of Regulation U (herein called "margin stock") or for the purpose of
reducing or retiring any indebtedness which was originally incurred to purchase
or carry margin stock, or for any other purpose which might constitute this
transaction as a "purpose credit" within the meaning of Regulation U. Neither
the Company nor any agent acting on its behalf has taken or will take any action
which might cause this Agreement or any other Loan Document to violate, or
involve the Lenders in a violation of, Regulation U, Regulation X or any other
regulation of the Board of Governors or to violate the Securities and Exchange
Act of 1934, as amended and the rules and regulations promulgated thereunder.
SECTION 6.14 Subsidiaries. On the Effective Date, except as disclosed on
Schedule 6.14, the Company does not have any Subsidiaries and is not a party to
any joint
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venture, partnership or similar organization. Upon the consummation of the
Company Merger, the Company will have Ames and TapeTech as its additional
Subsidiaries.
SECTION 6.15 Solvency. After giving effect to the initial Advance
hereunder, the Merger, and all other Indebtedness of the Company at the time of
such Advance, (i) the fair value and present fair saleable value of the
Company's assets exceeds the Company's stated liabilities and identified
contingent liabilities; (ii) the Company is able to pay its debts as they become
due; and (iii) the Company has sufficient capital to engage in its business as
management has indicated it is now conducted and is proposed to be conducted
following the consummation of the Acquisition.
SECTION 6.16 Accuracy of Information. Neither this Agreement nor any other
document, certificate, statement or other further information (excluding
projections), taken as a whole, furnished in writing to the Agent or any Lender
by or on behalf of the Company or any of its Subsidiaries in connection with
this Agreement or any transaction contemplated hereby, taken as a whole,
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained herein and therein not
misleading. The financial information with respect to the Company's projections,
copies of which have been furnished to each Lender prior to the Execution Date,
were prepared in good faith on the basis of the assumptions stated therein,
which assumptions were believed by the Company to be reasonable in all material
respects at the time made.
SECTION 6.17 Insurance. The Company and its Subsidiaries maintain insurance
of such types as is usually carried by corporations of established reputation
engaged in the same or similar businesses and similarly situated with
financially sound, responsible and reputable insurance companies or associations
(or, as to workers' compensation or similar insurance, with an insurance fund or
by self-insurance authorized by the jurisdiction in which its operations are
carried on) and in such amounts (and with co-insurance and deductibles) as such
insurance is usually carried by corporations of established reputation and
engaged in the same or similar businesses and similarly situated. Neither the
Company nor its Subsidiaries maintains any formalized self-insurance program
with respect to its assets or operations or material risks with respect thereto
in excess of $2,500,000 in the aggregate.
SECTION 6.18 Indebtedness and Contingent Liabilities. As of the Effective
Date, except as listed on Schedule 6.18 or as otherwise permitted hereby, the
Company does not have any outstanding Indebtedness (excluding the Loans and the
Subordinated Debt) or material contractually assumed contingent liabilities.
SECTION 6.19 Compliance with Laws. The Company and its Subsidiaries are in
compliance with all of the following, (except as to ERISA and Environmental
Laws, only to the extent required under Sections 6.11 and 6.12, respectively) as
applicable in respect of the conduct of their respective businesses and the
ownership of their respective properties: all statutes, material regulations and
material orders of, and all restrictions imposed by all governmental bodies,
except any failure to comply that would not reasonably be expected to have a
Material Adverse Effect.
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SECTION 6.20 Security Interests. The Security Documents create valid Liens
in all of the collateral described therein in favor of the Agent for the benefit
of the Lenders securing the Obligations and constitute (subject to (i) the
filing after the Effective Date of financing statements and assignments of
patents and trademarks delivered to the Agent on the Execution Date and
thereafter from time to time and (ii) delivery of any collateral after the
Effective Date as provided herein or any other Loan Document) perfected first
priority (other than Permitted Liens) Liens in substantially all of such
collateral described therein subject to no Liens other than Permitted Liens
(other than titled equipment, rolling stock and patents, trademarks, copyrights
and similar items existing or issued outside of the United States).
SECTION 6.21 Material Contracts. (a) As of the Execution Date, the Material
Contracts have been duly executed and delivered by, and constitute the legal,
valid and binding obligation of the Company and its Subsidiaries to the extent
that it is a party thereto, and to its knowledge all other parties thereto,
enforceable against such parties in accordance with its terms, (i) are in full
force and effect and (ii) except as disclosed to the Agent, have not been
amended or modified in any material respect.
(b) All consents required under the Material Contracts in connection
with (i) the Merger and (ii) the Security Documents have been obtained by the
Company.
SECTION 6.22. Year 2000. Any reprogramming required to permit the proper
functioning, in and following the year 2000, of (i) the Company's computer
systems and (ii) equipment containing embedded microchips (including systems and
equipment supplied by others or with which Company's systems interface) and the
testing of all such systems and equipment, as so reprogrammed, which are
required for the Company and its Subsidiaries to operate their businesses as
they have prior to the Effective Date will be completed by September 30, 1999.
The cost to the Company of such reprogramming and testing and of the reasonably
foreseeable consequences of year 2000 to the Company (including, without
limitation, reprogramming errors and the failure of others' systems or
equipment) will not result in a Default of an Event of Default. Except for such
of the reprogramming referred to in the preceding sentence as may be necessary,
the computer and management information systems of the Company and its
Subsidiaries are and, with ordinary course upgrading and maintenance, will
continue to be, sufficient to permit the Company to conduct its business.
ARTICLE VII
AFFIRMATIVE COVENANTS
The Company covenants and agrees that on and after the date hereof and
until the Notes are paid in full and the Total Commitment has terminated:
SECTION 7.01 Information Covenants. Except for those items described below
in Sections 7.01(c), (e), (f), (h) and (i) which will be furnished by the
Company to the Agent, the Company will furnish or cause to be furnished to each
Lender:
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(a) As soon as available, and in any event within thirty (30) days
after each month-end and forty-five (45) days after the close of each of the
first three fiscal quarters in each fiscal year of the Company, the consolidated
monthly and consolidated quarterly unaudited balance sheets of the Company and
its Subsidiaries as of the end of such periods and the related consolidated and
consolidating (on a business unit basis) unaudited statements of income and cash
flows for such periods, setting forth, in each case, commencing on the Financial
Statement Delivery Date after the first anniversary of this Agreement,
comparative figures for the related periods in the prior fiscal year and,
commencing fiscal year 1999 on a quarterly basis, for the budget delivered
pursuant to subsection (h) below, all of which shall be certified by any
Responsible Officer as fairly presenting in all material respects, the financial
position of the Company as of the end of such period and the results of its
operations for the period then ended in accordance with GAAP, subject to changes
resulting from normal year-end adjustments, excluding footnotes; and
(b) As soon as available, and in any event within ninety (90) days
after the close of each fiscal year of the Company, the audited consolidated and
unaudited consolidating (on a business unit basis) balance sheets of the Company
and its Subsidiaries as at the end of such fiscal year and the related audited
consolidated and unaudited consolidating (on a business unit basis) statements
of income and cash flows for such fiscal year, setting forth, in each case,
comparative figures for the preceding fiscal year and (i) in the case of such
consolidated financials certified by Deloitte & Touche, L.L.P. or other
independent certified public accountants of recognized national standing, whose
report shall be without limitation as to the scope of the audit and unqualified
and otherwise reasonably satisfactory in substance to the Agent and (ii) in the
case of such consolidating financials certified as set forth in Section 7.01 (a)
above.
(c) Promptly after any Responsible Officer of the Company obtains
knowledge thereof, notice of;
(i) any material violation of, noncompliance with, or remedial
obligations under, Environmental Laws,
(ii) any material Release or threatened material Release of
Hazardous Materials affecting any property owned, leased or operated by the
Company or its Subsidiaries,
(iii) the existence of any event or condition which constitutes
a Default or an Event of Default,
(iv) any material violation of public health or welfare laws or
regulations,
(v) the filing of any tax or other governmental Liens,
(vi) the creation of any Subsidiary,
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(vii) any Person having given any written notice to the Company
or its Subsidiaries or taken any other action with respect to a claimed
default or event of default under any Material Contract or under any other
instrument or agreements in each case which would reasonably be expected to
have a Material Adverse Effect,
(viii) the institution of any litigation in which the damages
claimed are in excess of $500,000 beyond the amount which is covered by the
Company's insurance for which the insurer has acknowledged coverage with
respect thereto, and
(ix) any other condition or event which, in the opinion of
management of the Company, would reasonably be expected to have a Material
Adverse Effect, which notice shall specify the nature and period of
existence thereof and specifying the notice given or action taken by such
Person and the nature of any such claimed default, event or condition and,
in the case of an Event of Default or Default, what action has been taken,
is being taken or is proposed to be taken with respect thereto.
(d) On any Financial Statement Delivery Date, a certificate of a
Responsible Officer to the effect that no Default or Event of Default exists or,
if any Default or Event of Default does exist, specifying the nature and extent
thereof and the action that is being taken or that is proposed to be taken with
respect thereto, which certificate shall set forth the calculations required to
establish whether the Company was in compliance with the provisions of Section
8.13 and Section 8.14 as at the end of such fiscal period or year, as the case
may be.
(e) As soon as available and in any event within twenty-five (25) days
after the end of each month commencing August, 1998, a Borrowing Base
Certificate and an aging of Receivables in form and substance reasonably
satisfactory to the Agent.
(f) Upon request by the Agent any existing environmental report, study
or audit of the Company's or its Subsidiaries' procedures and policies, assets
and operations in respect of Environmental Laws as the Agent may reasonably
request, provided that such existing report, study or audit is in the possession
of the Company or its Subsidiaries or, if not in their possession, is reasonably
obtainable from a third party having possession and subject to such conditions
and requirements as the Company or its Subsidiaries may reasonably impose to
protect legal privilege, provided that such conditions or requirements may not
extend to withholding information pertaining to factual circumstances or
conditions that the Company would otherwise be required to disclose under this
Agreement.
(g) Promptly upon receipt thereof, a copy of any report or management
letter submitted to the Company or its Subsidiaries by its independent
accountants in connection with any regular or special audit of the Company's or
its Subsidiaries' records.
(h) Within sixty (60) days after the start of each fiscal year of the
Company beginning with fiscal year 1999, a financial plan and budget of the
Company and its Subsidiaries for such fiscal year prepared by the Company in its
ordinary course of business, which financial
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plan and budget shall include a balance sheet and related statements of income
and cash flow for such fiscal year.
(i) From time to time and with reasonable promptness, such other
information or documents as the Agent or any Lender through the Agent may
reasonably request.
(j) Promptly upon filing, a copy of any Company Current Report Form 8K
filed by the Company with the Securities and Exchange Commission (or any
governmental body or agency succeeding to the functions of the Securities and
Exchange Commission).
SECTION 7.02 Books, Reports and Inspections. The Company and its
Subsidiaries will maintain corporate books and financial records, and will
permit, or cause to be permitted any Person designated by the Agent, and after
the occurrence and during the continuance of an Event of Default, any Person
designated by any Lender, to visit and inspect any of the properties of the
Company, to examine such corporate books and financial records of the Company
and to make copies thereof or extracts therefrom and to discuss the affairs,
finances and accounts of any such corporations with the officers, employees and
agents of the Company and its Subsidiaries, with their independent public
accountants, all at such reasonable times and upon reasonable notice and as
often as the Agent may reasonably request. Upon the occurrence and during the
continuance of an Event of Default, any Person designated by the Agent may
request that such independent public accountants obtain Receivable confirmation
reports from account receivable debtors of the Company and its Subsidiaries.
SECTION 7.03 Insurance and Maintenance of Properties. (a) The Company will
and will cause its Subsidiaries to keep reasonably adequately insured by
financially sound and reputable insurers all of its material property, which is
of a character, and in amounts and against such risks, usually and reasonably
insured by similar Persons engaged in the same or similar businesses (subject
to reasonable deductibles and reasonable self-insurance), including, without
limitation, insurance against fire, casualty, business interruption and any
other hazards normally insured against. The Company will at all times maintain
and will cause its Subsidiaries to maintain insurance against its liability for
injury to Persons or property, which insurance shall be by financially sound and
reputable insurers and in such amounts and form as are customary for
corporations of established reputation engaged in the same or a similar business
and owning and operating similar properties (subject to reasonable deductibles
and reasonable self-insurance), and shall annually provide the Agent a listing
of all such insurance and such other certificates and other evidence thereof, as
the Agent shall reasonably request. A listing of all policies existing on the
Execution Date (including policy limits) of the Company and its Subsidiaries is
attached hereto as Schedule 7.03. The Company shall obtain and cause its
Subsidiaries to obtain all such endorsements as are available to such policies
showing the Agent as an additional insured, and, at the Agent's option, co-loss
payee, thereunder. In the event that any improvements are located on any real
property of the Company or any Subsidiary designated as "flood prone" or a
"flood risk area," as defined by the Flood Disaster Protection Act of 1973 (42
U.S.C. (S) 4121), then the Company or such Subsidiary shall maintain flood
insurance in an amount required by the National Flood Insurance Program on such
improvements and shall comply with all additional requirements of the National
Flood Insurance Program as set forth
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herein. All policies of insurance required by the terms of this
Agreement or any Security Document shall provide that at least fifteen
(15) days prior written notice be given to the Agent of any termination,
cancellation, reduction or other material modification of such
insurance.
(b) The Company will cause all of its and its Subsidiaries'
Properties used or useful in the conduct of their respective businesses
to be maintained and kept in good condition, repair and working order
and supplied with all necessary equipment and will cause to be made all
reasonably necessary repairs, renewals and replacements thereof, all as
in the reasonable judgment of the Company may be reasonably necessary so
that the business carried on in connection therewith may be properly
conducted at all times.
SECTION 7.04 Payment of Taxes. The Company will pay and discharge
and will cause its Subsidiaries to pay and discharge all material taxes,
assessments and governmental charges or levies imposed upon them or upon
their respective incomes or profits, or upon any properties belonging to
any of them, prior to the date on which penalties attach thereto, except
for such amounts that are being contested in good faith and by
appropriate actions and for which appropriate reserves have been made on
the books of such entity in accordance with GAAP.
SECTION 7.05 Corporate Existence. The Company will do all things
necessary and will cause its Subsidiaries to do all things necessary to
(i) except as permitted under Section 8.02, preserve and keep in full
force and effect their respective corporate existences and (ii) maintain
all rights, franchise agreements, business contracts, patents,
trademarks, licenses and Material Contacts as may be required so that
the business carried on in connection therewith may be properly
conducted at all times, except for any failure to so maintain that would
not reasonably be expected to have a Material Adverse Effect.
SECTION 7.06 Compliance with Statues. The Company will comply with
and will cause its Subsidiaries to comply with all applicable statutes
(except as to ERISA and Environmental Laws, only to the extent required
under Sections 6.11 and 6.12, respectively), regulations and orders of,
and all applicable restrictions imposed by, all governmental bodies,
domestic or foreign, except for any failure to so comply that would not
reasonably be expected to have a Material Adverse Effect.
SECTION 7.07 ERISA. Immediately after any Responsible Officer of
the Company knows or has reason to know any of the following items are
true, the Company will deliver or cause to be delivered to the Agent a
certificate of a Responsible Officer of the Company setting forth
details as to such occurrence and such action, if any, the Company or
any ERISA Affiliate is required or proposes to take, together with any
notices required or proposed to be given to or filed with or by the
Company or its ERISA Affiliate with respect thereto: that a Reportable
Event has occurred or that an application may be or has been made to the
Secretary of the Treasury for a waiver or modification of the minimum
funding standard; that a Multiemployer Plan has been or may be
terminated, reorganized, partitioned or declared insolvent under Title
IV of ERISA; that any required contribution which is material to a Plan,
Multiemployer Plan or Employee Plan has not been or may not be timely
made; that proceedings may be or have been instituted under
Section 4069(a) of ERISA to impose liability on the Company or an ERISA
Affiliate or under
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Section 4042 of ERISA to terminate a Plan or appoint a trustee to administer a
Plan; that the Company or any ERISA Affiliate has incurred or may incur any
liability (including any contingent or secondary liability) on account of the
termination of or withdrawal from a Plan or a Multiemployer Plan; and that the
Company or any ERISA Affiliate may be required to provide security to a Plan
under section 401(a)(29) of the Code; or any other conditions(s) exist(s) or may
occur with respect to one or more Plans, Employee Plans and/or Multiemployer
Plans which would reasonably be expected to result, individually or in the
aggregate, in a Material Adverse Effect.
SECTION 7.08 Utility Regulation. The Company will cause the representations
and warranties set forth in Section 6.10 hereof to be and remain at all times
true and correct.
SECTION 7.09 Subsidiaries. The Company will (a) cause any Person that on
the Effective Date is, or on or after the Effective Date becomes, a Domestic
Subsidiary of the Company (including, but not limited to, Ames and TapeTech) to
execute in form and substance satisfactory to the Agent guaranties, security
agreements, deeds of trust and/or other security instruments in favor of the
Agent for the benefit of the Lenders sufficient to (x) obligate such Domestic
Subsidiary for repayment of all the Loans and (xx) pledge substantially all of
such Domestic Subsidiaries' assets as collateral for the Loans, and (b) execute,
and cause any such Domestic Subsidiary to execute, as applicable, one or more
pledge agreements in favor of the Agent for the benefit of the Lenders in form
and substance satisfactory to the Agent pledging all of its shares of capital
stock of any such Subsidiary that is either a direct Subsidiary of the Company
or a direct Subsidiary of a Subsidiary (except that for purposes of this clause
(b), pledges of shares of voting capital stock of which a Foreign Subsidiary is
the issuer shall be limited to a pledge of sixty-six percent (66%) of such
shares of such voting capital stock).
SECTION 7.10 Material Contracts. The Company will notify the Agent of any
material default under any Material Contract promptly after a Responsible
Officer obtains knowledge thereof.
SECTION 7.11 Merger of Finance Corp. into AXIA. Not later than the close of
business on the Effective Date, Finance Corp. shall have been merged with and
into AXIA, with AXIA being the surviving entity.
ARTICLE VIII
NEGATIVE COVENANTS
The Company covenants and agrees as to itself and each of its Subsidiaries
that on and after the date hereof and until the Notes are paid in full and the
Total Commitment has terminated:
SECTION 8.01 Change in Business. The Company and its Subsidiaries will not
engage in any businesses not of the same general type as, or reasonably related
to, those conducted by the Company on the Effective Date.
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SECTION 8.02 Consolidation, Merger or Sale of Assets. Neither the Company
nor any Subsidiary will wind up, liquidate or dissolve its affairs, or enter
into any transaction of merger or consolidation, or sell, transfer or otherwise
dispose of all or any part of its property or assets (other than sales of
Inventory and surplus or obsolete assets in the ordinary course of business,
provided that any disposal does not prejudice the Lenders in any material way),
except that:
(a) any Subsidiary of the Company may merge, consolidate, wind up,
liquidate or dissolve into and with the Company or any Substantially-Owned
Subsidiary of the Company;
(b) the Company and its Subsidiaries may make Investments permitted
hereby;
(c) the Company may sell or otherwise dispose of its assets to any
Qualified Domestic Substantially Owned Subsidiary, and any Subsidiary of the
Company may sell or otherwise dispose of its assets to the Company or a
Qualified Domestic Substantially Owned Subsidiary of the Company;
(d) the Company or its Subsidiaries may sell assets in an aggregate
amount not to exceed $1,000,000 in any fiscal year;
(e) the Company or its Subsidiaries may make Permitted Acquisitions;
and
(f) the Company may effect the Company Merger.
Upon the request and at the expense of the Company in connection with any
sale, transfer or other disposition of property or assets permitted hereunder or
under any other Loan Document, and so long as no Default or Event of Default has
occurred and is continuing, the Agent shall upon request execute and deliver, or
shall cause the secured party, mortgagee, trustee or other appropriate Person to
execute and deliver, to the Company duly executed releases or partial releases,
as applicable, of any Lien pursuant to any Loan Document which it may have in
such property or assets, in form and substance reasonably satisfactory to the
Agent, the secured party, mortgagee, trustee or other appropriate Person, as the
case may be, and the Company.
SECTION 8.03 Indebtedness. The Company will not, and will not permit any
Subsidiary to, create, incur, assume or permit to exist any Indebtedness except:
(a) Indebtedness existing hereunder;
(b) the Subordinated Debt or any other Indebtedness of the Company or
any of its Subsidiaries which is expressly and validly subordinated to the
Obligations pursuant to terms, conditions and amounts of such other subordinated
Indebtedness which are satisfactory to the Majority Lenders in their reasonable
discretion;
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(c) Capitalized Lease Obligations and purchase money financing not to
exceed $2,500,000 in the aggregate outstanding at any time;
(d) Indebtedness (i) relating to loans or advances permitted under
Section 8.05 or (ii) constituting guaranties permitted under Section 8.06;
(e) Indebtedness that constitutes "mark to market" exposure resulting
from any Derivative or other hedging transaction for the purpose of hedging in
the ordinary course of business against fluctuations in interest rates,
commodity prices and foreign exchange rates;
(f) obligations under "take or pay" contracts or similar arrangements
entered into the ordinary course of business; provided that the Company or any
of its Subsidiaries have not made payments under any such contracts or
arrangements other than payments for products received or products the Company
or any of its Subsidiaries reasonably expects it will be able to receive within
one year from the date the payment was made and the amount of all such payments
in the aggregate could not reasonably be expected to have a Material Adverse
Effect;
(g) Indebtedness that constitutes a renewal, refinancing or extension
of any Indebtedness referred to in this Section 8.03; provided, that (i) no
Lien existing at the time of such renewal, refinancing or extension shall be
extended to cover any property not already subject to such Lien and (ii) the
principal amount of any Indebtedness renewed, refinanced or extended shall not
exceed the amount of such Indebtedness outstanding immediately prior to such
renewal, refinancing or extension plus the reasonable costs incurred to renew,
refinance or extend such Indebtedness;
(h) Indebtedness existing on the Execution Date that is described on
Schedule 8.03; and
(i) other Indebtedness, not to exceed $5,000,000 in the aggregate at
any time outstanding.
SECTION 8.04 Liens. The Company will not, and will not permit any
Subsidiary to, create, incur, assume or suffer to exist any Lien upon or with
respect to any of its property or assets of any kind whether now owned or
hereafter acquired (nor will it covenant with any other Person not to grant such
a lien to the Agent other than with respect to assets encumbered by a Lien
permitted hereby), except in connection with the following which are permitted
liens ("Permitted Liens"):
(a) Liens existing on the Execution Date and listed on Schedule
8.04(a);
(b) Liens for taxes or assessments or other governmental charges or
levies, either not yet due and payable or being contested in good faith and by
appropriate actions for which adequate reserves have been established;
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(c) non-consensual Liens imposed by operation of law including,
without limitation, (i) landlord Liens for rent not yet due and payable, and
(ii) Liens for materialmen, mechanics, warehousemen, carriers, employees,
workmen, repairmen, current wages or accounts payable not yet delinquent and
arising in the ordinary course of business or being contested in good faith by
appropriate proceedings and subject to maintenance of adequate reserves;
(d) easements, rights-of-way, restrictions and other similar Liens or
imperfections to title which do not materially interfere with the occupation,
use, and enjoyment by the Company or any of its Subsidiaries of the property or
asset encumbered thereby or materially impair the value of the property or asset
subject thereto and none of which are violated by existing or proposed
improvements or land use of such property or asset;
(e) Liens arising under worker's compensation laws, unemployment
insurance laws or similar legislation;
(f) Liens in favor of the Agent for the benefit of the Lenders
pursuant to the Loan Documents;
(g) Liens securing Indebtedness permitted by Section 8.03(c);
(h) Liens of any judgments or orders not constituting an Event of
Default;
(i) any right of set off relating to any Indebtedness or Investment
that is not prohibited by this Agreement;
(j) any renewal extension or replacement of any Lien referred to in
subparagraph (a) above; provided, that no Lien arising or existing as a result
of such extension, renewal or replacement shall be extended to cover any
property not theretofore subject to the Lien being extended, renewed or replaced
and provided that the principal amount of the Indebtedness secured thereby shall
not exceed the principal amount of the Indebtedness so secured at the time of
such extension, renewal or replacement;
(k) Liens in favor of Rubbermaid on raw materials purchased from
Rubbermaid and products thereof;
(1) Liens from deposits or pledges securing bids, tenders, or
contracts (other than contracts for the payment of money) made in the ordinary
course of business or securing or in lieu of surety, appeal or customs bonds in
proceedings to which the Company or any of its Subsidiaries is a party;
(m) landlord Liens encumbering goods and fixtures located on the
premises leased to the Company by such landlord (but no other assets or
properties) arising in the ordinary course of business which secure only rents
payable under the lease of such premises and other ordinary and customary
charges and reimbursement items arising under such lease; and
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(n) other Liens which are not material that secure obligations which
do not exceed $100,000 in the aggregate.
SECTION 8.05 Investments. The Company will not, and will not permit any
Subsidiary to, directly or indirectly, make or own any Investment in any Person,
except:
(a) the Company and its Subsidiaries may make and own Permitted
Investments;
(b) the Company and its Subsidiaries may continue to own Investments
owned by such Person on the Execution Date as set forth on Schedule 8.05(b);
(c) loans by any Domestic Subsidiary to the Company or any other
Domestic Substantially Owned Subsidiary, or loans in the ordinary course of
business by the Company to any Qualified Domestic Substantially Owned
Subsidiary, and loans by any Foreign Subsidiaries to the Company or any
Substantially Owned Subsidiary of the Company;
(d) loans by the Company to the ESOP or any Additional ESOP to
purchase shares of the Parent in the aggregate at any time outstanding not in
excess of $2,000,000;
(e) Investments arising out of loans and advances for expenses, travel
per diem and similar items in the ordinary course of business to officers,
directors, and employees not to exceed $500,000 in the aggregate outstanding at
any time;
(f) other Investments in an amount not to exceed $500,000 outstanding
at any time;
(g) other Investments by the Company and its Qualified Domestic
Substantially Owned Subsidiaries provided that, after giving effect to each such
Investment, the Company would have positive Net Cumulative Retained Excess Cash
Flow on the date upon which such Investment is made;
(h) Permitted Acquisitions;
(i) buybacks of employee stock permitted by Section 8.07; and
(j) the Parent Loan.
SECTION 8.06 Guaranties. The Company will not, and will not permit any
Subsidiary to, directly or indirectly, guarantee the Indebtedness of any Person,
except:
(a) endorsements of instruments for deposit or collection in the
ordinary course of business;
(b) guaranties in favor of the Agent or the Lenders evidenced by a
Loan Document;
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(c) subordinated guaranties of the Subordinated Debt which are
expressly subordinated in writing to all guaranties and other obligations
(contingent or otherwise) of the Company or such Subsidiary, as the case may be,
with respect to the Obligations pursuant to subordination agreements
satisfactory to the Agent;
(d) guaranties by the Company of any obligations of its Subsidiaries
incurred in the ordinary course of business and not prohibited hereby; and
(e) guaranties by Subsidiaries of Indebtedness of the Company and
other Subsidiaries if such Indebtedness is permitted under Section 8.03.
SECTION 8.07 Restricted Payments. The Company will not, and will not permit
any Subsidiary to, (a) pay any dividends or make any other distributions, direct
or indirect, on account of any shares of any class of stock of the Company or
such Subsidiary now or hereafter outstanding, except as follows, provided that
(except as to payments of ordinary director fees to directors under subclause
(ii), payments to the Company under subclause (iv) but only to the extent that
such payments are made by a wholly-owned Subsidiary of the Company, and payments
under subclause (iii)) there is not then in existence any Default or Event of
Default (i) dividends payable solely in shares of stock or warrants, rights or
options to acquire shares of stock of the Company or any Subsidiary, (ii)
payments to or on behalf of the Parent in reimbursement of actual out of pocket
costs and expenses paid to Persons which are not Affiliates of the Company, not
to exceed in any fiscal year $500,000, (iii) payments by the Company to the
Parent pursuant to a tax sharing agreement reasonably satisfactory to the Agent
between such parties, (iv) payments by a Substantially Owned Subsidiary of the
Company to its shareholders, (v) the Parent Loan on the Effective Date from
Finance Corp. to Parent for the sole purpose of funding the purchase price for
the Acquisition and to pay transaction expenses relating thereto and (vi)
cancellation of the Parent Loan, or transfer of the Parent Note to the Parent,
at any time after the consummation of the Company Merger; or (b) redeem, retire,
purchase or make any other acquisition, direct or indirect, of any shares of any
class of stock of the Company, the Parent or Holding Co. and/or of any warrants,
rights or options to acquire any such shares, now or hereafter outstanding,
except as follows, provided that there is not then in existence any Default or
Event of Default (i) to the extent that the consideration therefor consists
solely of shares of stock (including warrants, rights or options relating
thereto) of the Company and (ii) payments by the Company to the Parent or
Holding Co. or payments made directly by the Company to be used to repurchase,
redeem, acquire or retire for value any capital stock of the Parent or Holding
Co. pursuant to any stockholders' agreement, management equity subscription plan
or agreement, stock option plan or agreement, any Additional ESOP or the ESOP
(but the requirement that there be no Default or Event of Default as a condition
to payments under this subclause (ii) shall not apply to the extent necessary to
maintain the ESOP's or any Additional ESOP's qualification under the Code) or
other employee benefit plan or agreement; provided that the aggregate price
paid, and not reimbursed, for all such repurchased, redeemed, acquired or
retired capital stock shall not exceed during any one fiscal year of the Company
the greater of (A) $250,000 or (B) the minimum amount required under the ESOP or
any Additional ESOP.
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SECTION 8.08 Change in Accounting. The Company will not change its method
of accounting except for (a) immaterial changes permitted by GAAP in which the
Company's auditors concur or (b) changes required by GAAP; provided that the
Company and the Agent shall negotiate in good faith, to renegotiate any affected
provision of this Agreement to reflect any such change. The Company shall notify
the Agent and the Lenders in writing promptly upon any material change to the
extent same is not disclosed in the financial statements required under Section
7.01 hereof.
SECTION 8.09 Prepayment of Other Indebtedness. The Company (a) will not
make any voluntary prepayments or defeasements of principal or interest on any
other Indebtedness of the Company including the Subordinated Debt (including any
redemptions prior to scheduled maturity whether voluntary or obligatory), except
for permanent reduction of Indebtedness other than the Subordinated Debt and (b)
will not amend any material term (including interest, payment or subordination
terms) of any other Indebtedness including the Subordinated Debt without the
prior written consent of the Lenders except such amendments of Indebtedness
other than Subordinated Debt which do not make any material term less favorable
to the Company or the Lenders.
SECTION 8.10 Transactions with Affiliates. Other than (a) those
arrangements disclosed to and approved by the Agent in writing which are to be
created on or before the Effective Date, or (b) payment of reasonable and
customary salaries, benefits and directors fees in the ordinary course of
business, the Company will not, and will not permit any Subsidiary to, directly
or indirectly, engage in any transaction with any Affiliate, including the
purchase, sale or exchange of assets or the rendering of any service, except
transactions in the ordinary course of business or pursuant to the reasonable
requirements of its business and, in each case, upon terms that are no less
favorable than those which might be obtained in an arm's-length transaction at
the time from non-Affiliates.
SECTION 8.11 Subsidiaries' Stock. After the Effective Date, the Company
will not sell, transfer or otherwise dispose of any class of stock or any of the
voting rights of any Subsidiary of the Company, except as permitted under
Section 8.02.
SECTION 8.12 Material Contracts. Neither the Company nor any of its
Subsidiaries will amend, cancel or breach any of the Material Contracts except
such amendments, cancellations or breaches as would not reasonably be expected
to cause a Material Adverse Effect.
SECTION 8.13 Financial Ratios.
(a) Fixed Charge Coverage Ratio. The Company will not permit at any
time the Fixed Charge Coverage Ratio of the Company and its Subsidiaries on a
consolidated basis to be (i) for the period from the Effective Date to and
including December 31, 1998, less than 1.05 to 1.0 and (ii) at any time after
December 31, 1998, less than 1.05 to 1.0. For the sole purpose of the
computation of the Fixed Charge Coverage Ratio in this subparagraph, (I) as to
any determination of the amounts of EBITDA, cash taxes and Fixed Charges to be
including in the
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Fixed Charge Coverage Ratio calculation for any period ending prior to September
30, 1999, the amount of such items shall be included only to the extent that
such amounts arose during the period commencing on the Effective Date and ending
as of such determination date, and (II) as to any determination of the EBITDA,
cash taxes and Fixed Charges to be included in the Fixed Charge Coverage Ratio
for any period ending on or after September 30, 1999, the amount of such items
shall be included to the extent that such amounts arose during the four (4)
fiscal quarter period immediately preceding such determination date. The first
test date for determination of the Company's compliance with the covenant
contained in this Section 8.13(a) shall be December 31, 1998.
(b) Total Debt to Acquisition EBITDA Ratio. The Company will not
permit at any time the ratio of (i) Total Debt of the Company and its
Subsidiaries on a consolidated basis at such time to (ii) Acquisition EBITDA of
the Company and its Subsidiaries on a consolidated basis, to be greater than (a)
for the period from the Effective Date to and including June 30, 2001, greater
than 5.75 to 1.0, (b) for the period from July 1, 2001 to and including
September 30, 2001, greater than 5.50 to 1.0, (c) for the period from October 1,
2001 to and including December 31, 2001, greater than 5.25 to 1.0, (d) for the
period from January 1, 2002 to and including March 31, 2002, greater than 5.00
to 1.0, (e) for the period from April 1, 2002 to and including June 30, 2002,
greater than 4.75 to 1.0, (f) for the period from July 1, 2002 to and including
September 30, 2002, greater than 4.50 to 1.0, (g) for the period from October 1,
2002 to and including December 31, 2002, greater than 4.25 to 1.0, (h) for the
period from January 1, 2003 to and including March 31, 2003, greater than 4.0 to
1.0, (i) during the period from April 1, 2003 to and including June 30, 2003,
and for each fiscal quarter of the Company ending after such date, greater than
3.75 to 1.0. The first test date for the determination of the Company's
compliance with the covenant contained in this Section 8.13(b) shall be
September 30, 1998.
(c) Net Worth. The Company will not permit at any time Net Worth
(determined without giving effect to reductions due to the value of common stock
held by the ESOP or any Additional ESOP or foreign currency translation gains or
losses) to be less than Applicable Minimum Net Worth (as defined below).
"Applicable Minimum Net Worth" means for the Company and its Subsidiaries on a
consolidated basis: (x) during each fiscal quarter of the Company ending prior
to September 30, 1998, $24,000,000; and (y) during each fiscal quarter of the
Company ending on or after September 30, 1998 (for purposes of this definition,
the "current fiscal quarter of the Company"), the sum of (i) the Applicable
Minimum Net Worth that was applicable to the immediately prior fiscal quarter of
the Company, plus (ii) seventy-five percent (75%) of the positive net income, if
any, of the Company and its Subsidiaries on a consolidated basis arising during
the current fiscal quarter of the Company, plus (iii) seventy-five percent (75%)
of the proceeds of any equity offering of the Company or its Subsidiaries during
the current fiscal quarter of the Company.
(d) Interest Coverage Ratio. The Company will not permit at any time
the ratio for the Company and its Subsidiaries on a consolidated basis of (i)
EBITDA for the Company and its Subsidiaries on a consolidated basis to (ii) cash
Interest Expense for the Company and its Subsidiaries on a consolidated basis to
be: (A) for the period from the Execution Date to and including December 31,
1999, less than 1.75 to 1.0; (B) for the period
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from January 1, 2000 to and including June 30, 2000, less than 1.85 to 1.0; (C)
for the period from July 1, 2000 to and including June 30, 2001, less than 2.00
to 1.0; (D) for the period from July 1, 2001 to and including December 31, 2002,
less than 2.25 to 1.0; and for the period from January 1, 2003 through and
including March 31, 2003, and thereafter, less than 2.50 to 1.0. For the sole
purpose of the computation of the ratio set forth in this subparagraph (d), (I)
as to any determination date of the amounts of EBITDA to be included in the
ratio calculation for any period ending prior to September 30, 1999, the amount
of such items shall be included only to the extent that such amounts arose
during the period commencing on the Effective Date and ending as of such
determination date, and (II) as to any determination of EBITDA to be included in
such ratio for any period ending on or after September 30, 1999, the amount of
such items shall be included to the extent that such amounts arose during the
four (4) fiscal quarter period immediately preceding such determination date.
The first test date for determination of the Company's compliance with the
covenant contained in this Section 8.13(d) shall be December 31, 1998.
SECTION 8.14 Capital Expenditures. (a) Except as permitted in subclauses
(b) and (c) below, the Company will not permit any Capital Expenditures to be,
in the aggregate, in excess of the following amounts during the following
periods of the Company (together with the amounts described in clause (c) below
of this Section 8.14, "Scheduled Capital Expenditures"):
SCHEDULED CAPITAL
PERIOD EXPENDITURE AMOUNT
------ ------------------
Effective Date Through December 31, 1998 $3,000,000
Fiscal Year 1999 $5,000,000
Fiscal Year 2000 and Each Fiscal Year Thereafter $5,500,000
(b) The Company and its Domestic Substantially Owned Subsidiaries may
make additional Capital Expenditures provided that, after giving effect to each
such Capital Expenditure, the Company would have positive Net Cumulative
Retained Excess Cash Flow on the date upon which such Capital Expenditure is
made.
(c) To the extent any amount of Scheduled Capital Expenditures is not
used during any single calendar year, such unexpended amount may be carried
forward and expended during the next calendar year (but not any other calendar
year); provided that during any calendar year in which such unexpended amounts
have been so carried forward, all Capital Expenditures are deemed to apply first
to the carry forward amount and then to the Scheduled Capital Expenditures for
such year.
SECTION 8.15 Fiscal Year. The Company will not change its fiscal year end.
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SECTION 8.16 Sale/Leaseback Transactions. The Company will not enter, and
will not permit any Subsidiary to enter, into any arrangement with any Person or
to which such Person is a party providing for the leasing by the Company or any
of its Subsidiaries of real or personal property which has been or is to be sold
or transferred by the Company or such Subsidiary to such 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 Company; provided that
the Company or any of its Subsidiaries may at any time enter into sale/leaseback
transactions so long as the aggregate amount of all such obligations incurred by
the Company and its Subsidiaries does not exceed $2,500,000 outstanding at any
time.
ARTICLE IX
EVENTS OF DEFAULT AND REMEDIES
9.01 Events of Default. The following events shall constitute Events of
Default ("Events of Default") hereunder:
(a) any installment of principal on any Note shall not be paid on the
date on which such payment is due, or any payment of interest on any Note or any
payment of any Fee shall not be paid on or before the fifth (5th) day after such
payment is due; or
(b) any representation or warranty made or, for purposes of Article
VI, deemed made by the Company or any member of the Company Group herein or in
any of the Loan Documents or other document, certificate or financial statement
delivered in connection with this Agreement or any other Loan Document shall
prove to have been incorrect in any material respect when made or deemed made or
reaffirmed, as the case may be; or
(c) the Company shall fail to perform or observe any duty or covenant
contained in Article VIII (other than those contained in Section 8.04(b), (c) or
(e)), or in Section 7.01(f) or Section 7.03(a) or Section 7.09 hereof; or
(d) the Company or any member of the Company Group shall fail to
perform or observe any duty or covenant contained in (i) Section 7.01(a), (b),
(c), (d), (e), or (h) or Section 8.04(b), (c), or (e) and such failure is not
remedied within the earlier of (A) ninety (90) days or (B) ten (10) days after
the earlier of (x) notice of such failure by the Agent to the Company or (xx)
after a Responsible Officer of the Company or any Subsidiary has actual
knowledge thereof; or (ii) this Agreement or any Loan Document, other than those
referenced in Section 9.0l(a), (b), (c) or clause (i) of this Section 9.01(d)
and such failure is not remedied within the earlier of (A) ninety (90) days or
(B) thirty (30) days after the earlier of (x) notice of such failure by the
Agent to the Company or (xx) after a Responsible Officer of the Company or any
Subsidiary has actual knowledge thereof; or
(e) the Company or any member of the Company Group shall (i) fail to
make (whether as primary obligor or as guarantor or other surety) any principal
payment of or interest or premium, if any, on any instruments of Indebtedness in
the aggregate in excess of $500,000 allowed hereunder (other than the Notes) and
such failure remains outstanding beyond any period
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of grace provided with respect thereto or (ii) fail to duly observe, perform or
comply with any agreement, with any Person, or any term or condition of any
instrument of Indebtedness in excess of $500,000 beyond any period of grace
provided with respect thereto, if such failure causes (unless such failure has
been waived by the holder(s) of such Indebtedness), or permits the holder(s) to
cause, such obligations to become due prior to any stated maturity; or
(f) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking (i) relief
in respect of the Company or any member of the Company Group or of a substantial
part of the property or assets of the Company or any member of the Company
Group, under Title 11 of the United States Code, as now or hereafter in effect,
or any successor thereto (the "Bankruptcy Code"), or any other federal or state
bankruptcy, insolvency, receivership or similar law, (ii) the appointment of a
receiver, trustee, custodian, sequestrator, conservator or similar official for
the Company or any member of the Company Group or for a substantial part of the
property or assets of the Company or any member of the Company Group or (iii)
the winding-up or liquidation of the Company or any member of the Company Group;
and such proceeding or petition shall continue undismissed for sixty (60) days
or an order or decree approving or ordering any of the foregoing shall be
entered; or
(g) the Company or any member of the Company Group shall (i)
voluntarily commence any proceeding or file any petition seeking relief under
the Bankruptcy Code or any other federal or state bankruptcy, insolvency,
receivership or similar law, (ii) consent to the institution of or fail to
contest in a timely and appropriate manner, any proceeding or the filing of any
petition described in clause (f) above, (iii) apply for or consent to the
appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for the Company or any member of the Company Group or for a
substantial part of the property or assets of the Company or any member of the
Company Group, (iv) file an answer admitting the material allegations of a
petition filed against it in any such proceeding, (v) make a general assignment
for the benefit of creditors, (vi) admit in writing its inability or fail
generally to pay its debts as they become due or (vii) take any action for the
purpose of effecting any of the foregoing; or
(h) the Company shall (i) fail to make any principal payment of or
interest or premium, if any, on the Subordinated Debt beyond any period of grace
provided with respect thereto, (ii) fail to duly observe, perform or comply with
any agreement beyond any period of grace provided with respect thereto, if such
failure causes, or permits the holder(s) of the Subordinated Debt to cause, such
obligations to become due prior to any stated maturity or (iii) become obligated
to redeem, repurchase or repay all or any portion of any principal, interest or
premium on the Subordinated Debt prior to its scheduled payment; or
(i) a judgment or order, which with other outstanding judgments and
orders against the Company or any member of the Company Group (other than the
Parent) equal or exceed $500,000 in the aggregate (to the extent not covered by
insurance as to which the respective insurer has acknowledged coverage), shall
be entered against the Company or any member of the Company Group and (A) within
sixty (60) days after entry thereof such judgment shall not have been paid or
discharged or execution thereof stayed pending appeal or, prior to the
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expiration of any such stay, such judgment shall not have been paid or
discharged or (B) any enforcement proceeding shall have been commenced (and not
stayed) by any creditor upon such judgment, or
(j) if (A) (i) any Plan shall fail to satisfy the minimum funding
standards of ERISA or the Code for any plan year or part thereof or a waiver of
such standards or extension of any amortization period is sought or granted
under section 412 of the Code, (ii) a notice of intent to terminate any Plan
shall have been or is reasonably expected to be filed with the PBGC or the PBGC
shall have instituted proceedings under ERISA section 4042 to terminate or
appoint a trustee to administer any Plan or the PBGC shall have notified the
Company or any Subsidiary or any ERISA Affiliate that a Plan may become subject
to any such proceedings, (iii) any Plan shall have any Unfunded Current
Liability, (iv) the Company or any Subsidiary or any ERISA Affiliate shall have
incurred or is reasonably expected to incur any liability pursuant to Title I or
IV of ERISA or the penalty or excise tax provisions of the Code relating to
employee benefit plans, (v) the Company or any Subsidiary or any ERISA Affiliate
withdraws from any Multiemployer Plan, (vi) the Company or any Subsidiary or any
ERISA Affiliate fails to make any contribution due, or payment to or with
respect to, any employee benefit plan, or (vii) the Company or any Subsidiary or
any ERISA Affiliate establishes or amends any employee welfare benefit plan that
provides post-employment welfare benefits in a manner that would increase the
liability of the Company or any Subsidiary or any ERISA Affiliate thereunder,
and (B) any such event or events described in clauses (i) through (vii) above,
either individually or together with any other such event or events, would
reasonably be expected to have a Material Adverse Effect; or
(k) after the Effective Date, the occurrence of any Change of Control
(as such term is defined in this Agreement) or any "Change of Control" as such
term is defined in the Indenture; or
(1) the Obligations shall cease, except as permitted hereby, being
secured by substantially all of the assets of the Company (other than the
portion of the capital stock of the Foreign Subsidiaries which is in excess of
66% of such capital stock).
SECTION 9.02 Primary Remedies. In the event of any Event of Default, and at
any time after the occurrence of any Event of Default, the Agent shall, if
requested by the Majority Lenders, by written notice to the Company (a "Notice
of Default") take any or all of the following actions (without prejudice to the
rights of any Lender to enforce any other rights it may have against the
Company, provided that, if an Event of Default specified in Section 9.01(f) or
Section 9.01(g) shall occur, the following shall occur automatically without the
giving of any Notice of Default): (a) declare the Total Commitment terminated
whereupon the Total Commitment shall forthwith terminate immediately and any
Revolving Credit Commitment Fee and Acquisition Facility Commitment Fee shall
forthwith become due and payable without any other notice of any kind, (b)
declare the principal of and any accrued and unpaid interest in respect of all
Advances, and all obligations owing hereunder, to be, whereupon the same shall
become, forthwith due and payable without presentment, demand, notice of demand
or of dishonor and non-payment, protest, notice of protest, notice of intent to
accelerate, declaration or
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notice of acceleration or any other notice of any kind, all of which are hereby
waived by the Company; and (c) exercise any rights or remedies under any of the
Loan Documents.
SECTION 9.03 Other Remedies. Upon the occurrence and during the continuance
of any Event of Default, the Agent may proceed to protect and enforce its and
the Lenders' rights, either by suit in equity or by action at law or both,
whether for the specific performance of any covenant or agreement contained in
this Agreement or in any other Loan Document or in aid of the exercise of any
power granted in this Agreement or in any other Loan Document; or may proceed to
enforce the payment of all amounts owing to the Lenders under the Loan Documents
and any accrued and unpaid interest thereon in the manner set forth herein or
therein; it being intended that no remedy conferred herein or in any of the
other Loan Documents is to be exclusive of any other remedy, and each and every
remedy contained herein or in any other Loan Document shall be cumulative and
shall be in addition to every other remedy given hereunder and under the other
Loan Documents or now or hereafter existing at law or in equity or by statute or
otherwise.
ARTICLE X
THE AGENT
SECTION 10.01 Authorization and Action. Each Lender hereby irrevocably
appoints and authorizes the Agent to act on its behalf and to exercise such
powers under this Agreement and the other Loan Documents as are specifically
delegated to or required of the Agent by the terms hereof, together with such
powers as are reasonably incidental thereto. The Agent may perform any of its
duties hereunder by or through its agents and employees. The duties of the Agent
shall be mechanical and administrative in nature; the Agent shall not have by
reason of this Agreement or any other Loan Document a fiduciary relationship in
respect of any Lender; and nothing in this Agreement or any other Loan Document,
expressed or implied, is intended to, or shall be so construed as to, impose
upon the Agent any obligations in respect of this Agreement or any other Loan
Document except as expressly set forth herein or therein. As to any matters not
expressly provided for by this Agreement, the Notes or the other Loan Documents
(including enforcement or collection of the Notes), the Agent shall not be
required to exercise any discretion or take any action, but shall be required to
act or to refrain from acting (and shall be fully protected in so acting or
refraining from acting) upon the instructions of the Majority Lenders, and such
instructions shall be binding upon the Lenders and all holders of Notes and the
Obligations; provided, that the Agent shall not be required to take any action
which exposes the Agent to personal liability or which is contrary to this
Agreement or applicable law.
SECTION 10.02 Agent's Reliance. (a) Neither the Agent nor any of its
directors, officers, agents or employees shall be liable to the Lenders for any
action taken or omitted to be taken by it or them under or in connection with
this Agreement, the Notes or any of the other Loan Documents (i) with the
consent or at the request of the Majority Lenders or (ii) in the absence of its
or their own gross negligence or willful misconduct (IT BEING THE EXPRESS
INTENTION OF THE PARTIES HERETO THAT THE AGENT AND ITS DIRECTORS, OFFICERS,
AGENTS AND
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EMPLOYEES SHALL HAVE NO LIABILITY FOR ACTIONS AND OMISSIONS UNDER THIS SECTION
10.02 RESULTING FROM THEIR SOLE ORDINARY OR CONTRIBUTORY NEGLIGENCE).
(b) Without limitation of the generality of the foregoing, the Agent:
(i) may treat the payee of each Note and the Obligations as the holder thereof
until the Agent receives written notice of the assignment or transfer thereof
signed by such payee and in form satisfactory to the Agent; (ii) may consult
with legal counsel (including counsel for the Company), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken in good faith by it in accordance with the
advice of such counsel, accountants or experts; (iii) makes no warranty or
representation to any Lender and shall not be responsible to any Lender for any
statements, warranties or representations made in or in connection with this
Agreement, any Note or any other Loan Document; (iv) except as otherwise
expressly provided herein, shall not have any duty to ascertain or to inquire as
to the performance or observance of any of the terms, covenants or conditions of
this Agreement, any Note or any other Loan Document or to inspect the property
(including the books and records) of the Company, (v) shall not be responsible
to any Lender for the due execution, legality, validity, enforceability,
collectibility, genuineness, sufficiency or value of this Agreement, any Note,
any other Loan Document or any other instrument or document furnished pursuant
hereto or thereto; (vi) shall not be responsible to any Lender for the
perfection or priority of any Lien securing the Obligations; and (vii) shall
incur no liability under or in respect of this Agreement, any Note or any other
Loan Document by acting upon any notice, consent, certificate or other
instrument or writing (which may be by telegram, telecopier, cable or telex)
reasonably believed by it to be genuine and signed or sent by the proper party
or parties.
SECTION 10.03 Agent and Affiliates. Without limiting the right of any other
Lender to engage in any business transactions (including, but not limited to,
equity investments) with the Company or any of its Affiliates, with respect to
their commitments, the Loans made by them and the Notes issued to them, the
Agent and each other Lender who may become the Agent shall have the same rights
and powers under this Agreement and its Notes as any other Lender and may
exercise the same as though it was not the Agent; and the term "Lender" or
"Lenders" shall, unless otherwise expressly indicated, include Paribas and any
such other Lender, in their individual capacities. Paribas, each other Person
who becomes the Agent and their respective Affiliates may be engaged in, or may
hereafter engage in, one or more loans, letters of credit, leasings or other
financing activity not the subject of this Agreement (collectively, the "Other
Financings") with the Company or any of its Affiliates, or may act as trustee on
behalf of or depository for, or otherwise engage in business transactions with
the Company or any of its Affiliates (all Other Financings and other such
business transactions being collectively, the "Other Activities") with no
responsibility to account therefor to the Lenders. Without limiting the rights
and remedies of the Lenders specifically set forth herein, no other Lender by
virtue of being a Lender hereunder shall have any interest in (a) any Other
Activities, (b) any present or future guaranty by or for the account of the
Company not contemplated or included herein, (c) any present or future offset
exercised by the Agent in respect of any such Other Activities, (d) any present
or future property taken as security for any such Other Activities or (e) any
property now or hereafter in the possession or control of the Agent which may be
or become security for the obligations of the Company hereunder and under the
Notes by reason of the general
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description of indebtedness secured, or of property contained in any other
agreements, documents or documents related to such Other Activities; provided,
however, that if any payment in respect of such guaranties or such property or
the proceeds thereof shall be applied to reduction of the Obligations evidenced
hereunder and by the Note, then each Lender shall be entitled to share in such
application according to its pro rata portion of such Obligations.
SECTION 10.04 Lender Credit Decision. Each Lender acknowledges and agrees
that it has, independently and without reliance upon the Agent or any other
Lender and based on the financial statements referred to in Section 7.01 and
such other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Lender also
acknowledges and agrees that it will, and without reliance upon the Agent or any
other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement and the other Loan Documents.
SECTION 10.05 Agent's Indemnity. (a) The Agent shall not be required,
insofar as the Lenders are concerned, to take any action hereunder or to
prosecute or defend any suit in respect of this Agreement, the Notes or any
other Loan Document unless indemnified to the Agent's satisfaction by the
Lenders against loss, cost, liability and expense. If any indemnity furnished to
the Agent shall become impaired, it may call for additional indemnity and cease
to do the acts indemnified against until such additional indemnity is given. In
addition, the Lenders agree to indemnify the Agent (to the extent not reimbursed
by the Company), ratably according to the respective aggregate principal amounts
of the Notes then held by each of them (or if no Notes are at the time
outstanding, ratably according to the respective amounts of the Total
Commitment), from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whosoever which may be imposed on, incurred by, or
asserted against the Agent in any way relating to or arising out of this
Agreement or any action taken or omitted by the Agent (in such capacity) under
this Agreement, the Notes and the other Loan Documents. Without limitation of
the foregoing, each Lender agrees to reimburse the Agent promptly upon demand
for its ratable share of any out-of-pocket expenses (including reasonable
counsel fees) incurred by the Agent in connection with the preparation,
execution, administration, or enforcement of, or legal advice in respect of
rights or responsibilities under, this Agreement, the Notes and the other Loan
Documents to the extent that the Agent is not reimbursed for such expenses by
the Company. The provisions of this Section 10.05(a) shall survive the
termination of this Agreement, the payment of the Obligations and/or the
assignment of any of the Notes.
(b) Notwithstanding the foregoing, no Lender shall be liable under
this Section 10.05(b) to the Agent for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements due to the Agent resulting from the Agent's gross
negligence or willful misconduct. EACH LENDER AGREES, HOWEVER, THAT IT
EXPRESSLY INTENDS, UNDER THIS SECTION 10.05(b) TO INDEMNIFY THE AGENT RATABLY AS
AFORESAID FOR ALL SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES,
ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES AND DISBURSEMENTS ARISING OUT OF OR
RESULTING FROM THE AGENT'S SOLE ORDINARY OR CONTRIBUTORY NEGLIGENCE.
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SECTION 10.06 Successor Agent. The Agent may resign at any time by giving
written notice thereof to the Lenders and the Company and may be removed as
Agent under this Agreement, the Notes and the other Loan Documents at any time
with or without cause by the Majority Lenders. Upon any such resignation or
removal the Majority Lenders shall have the right to appoint a successor Agent,
subject to the approval of the Company, if no Event of Default has occurred and
is continuing (which approval will not be unreasonably withheld). If no
successor Agent shall have been so appointed by the Majority Lenders, and shall
have accepted such appointment, within 30 calendar days after the resigning
Agent's giving of notice of resignation or the Majority Lenders' removal of the
resigning Agent, then the retiring Agent may, on behalf of the Lenders, appoint
a successor Agent, which shall be a commercial bank organized under the laws of
the United States of America or of any state thereof and having a combined
capital and surplus of at least $200,000,000. Upon the acceptance of any
appointment as Agent hereunder and under the Notes and the other Loan Documents
by a successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, power, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations under
this Agreement, the Notes and the other Loan Documents. After any retiring
Agent's resignation or removal as Agent hereunder and under the Notes and the
other Loan Documents, the provisions of this Article X shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent
under this Agreement, the Notes and the other Loan Documents. If for any reason
there shall not be any duly appointed Agent, the Lenders shall act collectively
by taking actions on the direction of the Majority Lenders until an agent is
duly appointed as Agent hereunder.
SECTION 10.07 Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Agent shall have received notice from a Lender or the
Company referring to this Agreement, describing such Default or Event of Default
and stating that such notice is a "notice of default." If the Agent receives
such notice, the Agent shall give notice thereof to the Lenders; provided
however, if such notice is received from a Lender, the Agent also shall give
notice thereof to the Company. The Agent shall be entitled to take action or
refrain from taking action with respect to such Default or Event of Default as
provided in Section 10.01 and Section 10.02.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01 Amendments. No amendment or waiver of any provision of this
Agreement, any Note or any other Loan Document, nor consent to any departure by
the Company herefrom or therefrom, shall in any event be effective unless the
same shall be in writing and signed by the Company, as to amendments, and by the
Majority Lenders in all cases, and then, in any case, such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given provided, no such amendment shall be effective unless signed by
all of the Lenders if it attempts to: (a) change the definition of "Commitment,"
"Designated Payment Date," "Majority Lenders," "Margin," "Revolving Credit
Commitment," "Revolving Credit Maturity Date," "Term Loan Commitment," "Term
Loan Maturity Date,
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"Acquisition Facility Commitment," "Acquisition Facility Maturity Date," "ESOP
Loan Commitment," "ESOP Loan Maturity Date," "Total Commitment," or "Total
Revolving Credit Commitment"; (b) unless consented to by the affected Lender,
reduce or increase the amount or alter the terms of the Commitment of any Lender
or subject any Lender to additional obligations; (c) modify this Section 11.01;
(d) waive any Default under Section 9.01 (a); (e) unless consented to by the
affected Lender, in any manner change the amount of, or any date fixed for, any
payment of principal or interest on the Notes or any Fee or the reimbursement
obligations of the Company under any Letter of Credit; (f) modify or waive the
mandatory prepayment requirements set forth in Section 2.08 hereof or the
allocation of such prepayments to the Lenders; or (g) except as expressly
permitted hereby, release any collateral pledged as security for the Obligations
or release any Guarantor from its obligations under the Guaranty.
SECTION 11.02 Notices. Except with respect to telephone notifications
specifically permitted pursuant to Article II, all notices, consents, requests,
approvals, demands and other communications provided for herein shall be in
writing (including telecopy communications) and mailed, telecopied, sent by
overnight courier or delivered:
(a) If to the Company: 100 West 22nd Street, Suite 134
Lombard, Illinois 60148
Telecopy No: (630) 629-3361
Attention: Lyle Feye
(b) If to the Agent: 2121 San Jacinto, Suite 930
Dallas, Texas 75201
Telecopy No: (214) 969-0260
Attention: Christopher S. Goodwin
with copies to: Paribas
1200 Smith Street, Suite 3100
Houston, Texas 77002
Telecopy No: (713) 659-3832
Attention: Loan Administration
and to: Patton Boggs LLP
2200 Ross Avenue, Suite 900
Dallas, Texas 75201
Telecopy No. (214) 871-2688
Attention: James C. Chadwick, Esq.
if to any Lender: To the address specified by such Lender (or
the Agent on behalf of such Lender) to the
Company
or, in the case of any party hereto, such other address or telecopy number as
such party may hereafter specify for such purpose by notice to the other
parties.
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(c) All communications to the Agent shall, when mailed, telecopied or
delivered, be effective when mailed by certified mail, return receipt requested
to such party at its address specified above, or telecopied to any party to the
telecopy number set forth above, or delivered personally to such party at its
address specified above; provided, that communications to the Agent pursuant to
Article II shall not be effective until actually received by the Agent.
SECTION 11.03 No Waiver, Remedies. No failure on the part of any Lender or
the Agent to exercise, and no delay in exercising, any right hereunder, under
any Note or under any other Loan Document shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right, or any abandonment or
discontinuance of any steps to enforce such right, preclude any other or further
exercise thereof or the exercise of any other right. No notice to or demand on
the Company in any case shall entitle the Company to any other or further notice
or demand in similar or other circumstances. The remedies herein are cumulative
and not exclusive of any other remedies provided by law, at equity or in any
other agreement.
SECTION 11.04 Costs, Expenses and Taxes. The Company agrees to pay on
demand: (a) all reasonable out-of-pocket costs and expenses of the Agent in
connection with the preparation, execution and delivery of this Agreement, the
Notes, the other Loan Documents and the other documents to be delivered
hereunder, including the reasonable fees and out-of-pocket expenses of counsel
for the Agent with respect thereto and with respect to advising the Agent as to
its rights and responsibilities under this Agreement, the Notes and the other
Loan Documents, and any modification, supplement or waiver of any of the terms
of this Agreement or any other Loan Document, (b) all reasonable costs and
expenses of any Lender, including reasonable legal fees and expenses, in
connection with the enforcement of or preservation of rights under this
Agreement, the Notes and the other Loan Documents and (c) reasonable costs and
expenses incurred in connection with third party professional services required
by the Agent such as appraisers, environmental consultants, accountants or
similar Persons, provided that, prior to any Event of Default hereunder, the
Agent will first obtain the consent of the Company to such expense, which
consent shall not be unreasonably withheld. Without prejudice to the survival of
any other obligations of the Company hereunder and under the Notes, the
obligations of the Company under this Section 11.04 shall survive the
termination of this Agreement or the replacement of the Agent and each
assignment of the Notes.
SECTION 11.05 Indemnity. (a) The Company shall indemnify and hold harmless
the Agent and each Lender and each Affiliate thereof and their respective
directors, officers, employees and agents (OTHER THAN WITH RESPECT TO ANY CLAIM
BY THE AGENT, AND/OR ANY LENDER OR AFFILIATE, DIRECTOR, OWNER, EMPLOYEE OR AGENT
THEREOF AGAINST THE AGENT, OR ANY LENDER, OR ANY AFFILIATE, DIRECTOR, OFFICER,
EMPLOYEE OR AGENT THEREOF) (such indemnified Persons called the "Indemnitees")
from and against any and all losses, liabilities, claims or damages (including
reasonable legal fees and expenses) to which any of them may become subject,
insofar as such losses, liabilities, claims or damages arise out of or result
from (i) this Agreement, the Notes or any other Loan Document or any actual or
proposed use by the Company of the proceeds of any extension of credit
hereunder, (ii) any investigation, litigation, claims, or demands under any
Environmental Laws, or (iii) any other proceeding (including any threatened
investigation or proceeding) relating to the foregoing clauses (i) and (ii),
whether in each such
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case arising as a result of this Agreement or any of the other Loan Documents or
the transactions contemplated hereby, and the Company shall reimburse such
Indemnitees, upon demand for any expenses (including legal fees) reasonably
incurred in connection with any such investigation or proceeding; but excluding
any such losses, liabilities, claims, lines or expenses incurred by reason of
the gross negligence or willful misconduct of the Indemnitees. WITHOUT LIMITING
ANY PROVISION OF THIS AGREEMENT, IT IS THE EXPRESS INTENTION OF THE PARTIES
HERETO THAT EACH INDEMNITEE SHALL BE INDEMNIFIED AND HELD HARMLESS AGAINST ALL
SUCH LOSSES, LIABILITIES, CLAIMS OR DAMAGES ARISING OUT OF OR RESULTING FROM
THE SOLE ORDINARY OR CONTRIBUTORY NEGLIGENCE OF SUCH INDEMNITEE, BUT NOT FROM
THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNITEE. Without prejudice
to the survival of any other obligations of the Company hereunder and under the
other Loan Documents, the obligations of the Company under this Section 11.05
shall survive the termination of this Agreement and the other Loan Documents and
the payment of the Obligations or the assignment of the Notes.
(b) Notwithstanding anything set forth herein to the contrary, the
Company shall not, in connection with any one legal proceeding or claim, or
separate but related proceedings or claims arising out of the same general
allegations of circumstances, in which the interest of the Indemnitees (in the
reasonable judgment of such Indemnitees) does not differ in any material
respect, be liable to the Indemnitees (or any of them) under any of the
provisions set forth herein for the fees or expenses of more than one separate
firm of attorneys in each jurisdiction in which legal action is being taken or
may be taken at any time, which firm shall be selected by the Agent (or, if the
Agent fails to so select after notice from the Indemnitees involved, such firm
shall be selected by such Indemnitees), except for any additional firms
reasonably recommended by such firm in good faith for purposes of obtaining
special expertise in any area of law or for purposes of having local counsel in
each court in which such proceeding or proceedings are pending. In any
litigation or other proceeding in which the interests of the Company and any
Indemnitee affected thereby are not adverse (in the reasonable judgment of such
Indemnitee) and with respect to which such Indemnitee may seek indemnification
or reimbursement from the Company hereunder, the Company shall be entitled to
participate (in conjunction with counsel for the Indemnitees), at the Company's
expense, in the defense of such litigation or proceeding with its own counsel.
No Indemnitee shall consent to entry of any judgment or enter into any
settlement of any action or proceeding that would give rise to any liability of
the Company hereunder without the prior written consent of the Company (which
consent shall not be unreasonably withheld).
SECTION 11.06 Right of Setoff. If any Event of Default shall have occurred
and be continuing, each Lender is hereby authorized at any time and from time to
time, to the fullest extent permitted by law, to set off and apply any and all
deposits held and other obligations owing by such Lender, or any branch, or
subsidiary or Affiliate, to or for the credit or the account of the Company
against any and all the Obligations of the Company now or hereafter existing
under this Agreement and the other Loan Documents and other obligations of the
Company held by such Lender, irrespective of whether or not such Lender shall
have made any demand under this Agreement, its Note or the Obligations and
although the Obligations may be unmatured. The rights of each Lender under this
Section 11.06 are in addition to other rights and remedies (including other
rights of setoff) which such Lender may have.
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SECTION 11.07 Governing Law. This Agreement, all Notes, the other Loan
Documents and all other documents executed in connection herewith shall be
deemed to be contracts and agreements executed by the Company and each Lender
under the laws of the State of Texas and of the United States of America and for
all purposes shall be construed in accordance with, and governed by, the laws of
said state and of the United States of America. Without limitation of the
foregoing, nothing in this Agreement, or in the Notes or in any other Loan
Document shall be deemed to constitute a waiver of any rights which any Lender
may have under applicable federal legislation relating to the amount of interest
which such Lender may contact for, take, receive or charge in respect of the
Loan and the Loan Documents, including any right to take, receive, reserve and
charge interest at the rate allowed by the law of the state where any Lender is
located.
SECTION 11.08 Interest. It is the intention of the parties hereto that the
Agent, the Issuing Bank and each Lender shall conform strictly to usury laws
applicable to it, if any. Notwithstanding anything to the contrary set forth
herein, in any other Loan Document or in any other document or instrument, no
provision of any of the Loan Documents or any other instrument or document
furnished pursuant hereto or in connection herewith is intended or shall be
construed to require the payment or permit the collection of interest in excess
of the maximum non-usurious rate permitted by applicable law. Each provision in
this Agreement and each other Loan Document, agreement or writing is expressly
limited so that in no event whatsoever shall the amount paid, or otherwise
agreed to be paid, to the Agent, the Issuing Bank or any Lender, or charged,
contracted for, reserved, taken or received by the Agent, Issuing Bank or any
Lender, for the use, forbearance or detention of the money to be loaned under
this Agreement or any Loan Document or otherwise (including any sums paid as
required by any covenant or obligation contained herein or in any other Loan
Document which is for the use, forbearance or detention of such money), exceed
that amount of money which would cause the effective rate of interest to exceed
the Highest Lawful Rate, and all amounts owed under this Agreement and each
other Loan Document, agreement or writing shall be held to be subject to
reduction to the effect that such amounts so paid or agreed to be paid, charged,
contracted for, reserved, taken or received which are for the use, forbearance
or detention of money under this Agreement or such Loan Document, agreement or
writing shall in no event exceed that amount of money which would cause the
effective rate of interest to exceed the Highest Lawful Rate. If the
transactions with any Lender, the Issuing Bank or the Agent contemplated hereby
would be usurious under applicable law then, in that event, notwithstanding
anything to the contrary in any Note payable to such Lender, this Agreement, any
other Loan Document or any other agreement or writing, it is agreed that in the
event that the maturity of any Note payable to such Lender is accelerated or in
the event of any required or permitted prepayment, then such consideration that
constitutes interest under law applicable to such Lender, the Issuing Bank or
the Agent may never include more than the maximum amount allowed by such
applicable law and excess interest, if any, to such Lender, the Issuing Bank or
the Agent provided for in this Agreement or otherwise shall be canceled
automatically as of the date of such acceleration or prepayment and, if
theretofore paid, shall be credited by such Lender, the Issuing Bank or the
Agent on the principal amount of the indebtedness owed to such Lender, the
Issuing Bank or the Agent by the Company and any excess refunded by such Lender,
the Issuing Bank or the Agent, as the case may be, to the
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Company. Anything in any Note or any other Loan Document, agreement or writing
to the contrary notwithstanding, the Company shall not be required to pay
unearned interest on any Note or other Loan Document, agreement or writing and
the Company shall not be required to pay interest on the Obligations at a rate
in excess of the Highest Lawful Rate, and if the effective rate of interest
which would otherwise be payable under such Note or other Loan Document,
agreement or writing would exceed the Highest Lawful Rate, or if the holder of
such Note or other Loan Document, agreement or writing shall receive any
unearned interest or shall receive monies that are deemed to constitute interest
which would increase the effective rate of interest payable by the Company under
such Note or other Loan Document, agreement or writing to a rate in excess of
the Highest Lawful Rate, then (a) the amount of interest which would otherwise
be payable by the Company shall be reduced to the amount allowed under
applicable law and (b) any unearned interest paid by the Company or any interest
paid by the Company in excess of the Highest Lawful Rate shall in the first
instance be credited on the principal of the Obligations of the Company (or if
all such Obligations shall have been paid in full, refunded to the Company). It
is further agreed that, without limitation of the foregoing, all calculations of
the rate of interest contracted for, reserved, taken, charged or received by any
Lender, the Issuing Bank or the Agent under the Notes, the Obligations and the
other Loan Documents, agreements and writings or made for the purpose of
determining whether such rate exceeds the Highest Lawful Rate, shall be made, to
the extent permitted by usury laws applicable to such Lender, the Issuing Bank
or the Agent, as the case may be, by amortizing, prorating and spreading in
equal parts during the period of the full stated term of the Notes and this
Agreement.
SECTION 11.09 Survival of Representations and Warranties. All
representations and warranties contained herein or made in writing by the
Company in connection herewith and the other Loan Documents shall survive the
execution and delivery of this Agreement, the Notes and the other Loan
Documents, and the termination of the Total Commitment of the Lenders and will
bind and inure to the benefit of the respective successors and assigns of the
parties hereto, whether so expressed or not, provided, that the Total Commitment
of the Lenders shall not inure to the benefit of any non-approved successor or
assign of the Company.
SECTION 11.10 Successors and Assigns; Participations. (a) All covenants,
promises and agreements by or on behalf of the Company or the Lenders that are
contained in this Agreement shall bind and inure to the benefit of their
respective permitted successors and assigns. The Company may not assign or offer
any of its rights or obligations hereunder without the consent of the Lenders.
(b) Any of the Lenders may assign to or sell participations to an
Eligible Assignee a portion of its rights and obligations under this Agreement
and the other Loan Documents (including a portion of its share of the Total
Commitment, the Advances and the Obligations of the Company owing to it and the
Notes); provided, that, in the case of participations (i) such Eligible
Assignees shall be entitled to the cost protection provisions contained in
Article II and Section 11.04 to the extent the Lender selling the participation
is so entitled, (ii) the Company shall continue to deal solely and directly with
the Agent in connection with its rights and obligations under this Agreement and
the other Loan Documents and (iii) each Lender shall retain the sole right and
responsibility to enforce the Obligations relating to the
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Loans including, without limitation, the right to approve any amendment,
modification or waiver of any provision of this Agreement; but such Lender may
grant a participant rights only to the extent such amendments, modifications or
waivers would effect such participant interests in any fees payable hereunder
(including, without limitation, the amount and the dates fixed for payment of
any such fees) or the amount of principal or the rate of interest payable on, or
the dates fixed for any payment of principal or of interest on, the Loans.
Except with respect to cost protections provided to a participant pursuant to
this paragraph hereof, no participant shall be a third party beneficiary of this
Agreement nor shall it be entitled to enforce any rights provided to the Lenders
against the Company under this Agreement.
(c) A Lender may assign to any of its Affiliates and to any other
Lender and, with the prior written consent of the Company and the Agent (which
consents shall not be unreasonably withheld), a Lender may assign to one or more
other Eligible Assignees, all or a portion of its interests, rights, and
obligations under this Agreement and the other Loan Documents (including all or
a portion of its share of the Total Commitment and the same portion of the Loans
and other obligations of the Company at the time owing to it and the Note held
by it); provided however, that each such assignment (i) shall be in a minimum
principal amount of not less than $5,000,000 or such Lender's remaining
Commitment, (ii) shall not reduce any Lender's Commitment to an amount less than
$5,000,000 (other than to zero) and shall be of a constant, and not a varying,
percentage of the assigning Lender's Revolving Credit Commitment, Term Loan
Commitment, ESOP Loan Commitment and the Acquisition Facility Commitment and the
rights and obligations attendant to such under this Agreement, (iii) the parties
to each such assignment shall execute and deliver to the Agent, for its
acceptance, an Assignment and Acceptance in form and substance satisfactory to
the Agent (an "Assignment and Acceptance") substantially in the form of
Exhibit 11.10 hereto, and any Note subject to such assignment and (iv) no
assignment shall be effective until receipt by the Agent from the assignee or
assignor of a reasonable service fee in respect of said assignment equal to
$2,500 from the assignee. Upon such execution, delivery, acceptance and
recording, from and after the effective date specified in each Assignment and
Acceptance, which effective date shall be at least five (5) Business Days after
the execution thereof unless otherwise agreed to by the assigning Lender, the
Eligible Assignee thereunder and the Agent (x) the Eligible Assignee thereunder
shall be a party hereto and to the other Loan Documents and to the extent
provided in such Assignment and Acceptance, have the rights and obligations of a
Lender hereunder and under the other Loan Documents and (y) the assignor Lender
thereunder shall to the extent provided in such Assignment and Acceptance, be
released from its obligations under this Agreement and the other Loan Documents
(and, in the case of an Assignment and Acceptance covering all of the remaining
portion of an assigning Lender's rights and obligations under this Agreement and
the other Loan Documents, such Lender shall cease to be a party hereto except,
in the case of an Issuing Bank, with respect to Letters of Credit issued by such
Issuing Bank which are then outstanding).
(d) The Agent shall maintain at its office (i) a copy of each
Assignment and Acceptance delivered to it and (ii) a register (the "Register")
for the recordation of the names and addresses (and taxpayer identification
numbers, if any) of the Lenders and the principal amount and types of Loans
owing to each Lender pursuant to the terms hereof from time to time. The entries
in the Register shall be conclusive in the absence of manifest error, and the
Company, the
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Agent, and the Lenders shall treat each Person whose name is recorded in the
Register pursuant to the terms hereof as a "Lender" hereunder for all purposes
of this Agreement and the Loan Documents. The Register shall be available for
inspection by the Company, the Agent, and any Lender at any reasonable time and
from time to time upon reasonable prior notice.
(e) Upon its receipt of a copy of (or copies of signed counterparts
of) a duly completed and fully executed Assignment and Acceptance, together with
the existing Note or Notes of the assigning Lender subject to such Assignment
and Acceptance, the Agent shall (i) accept such Assignment and Acceptance, (ii)
record the information contained therein in the Register and (iii) give prompt
notice thereof to the Company and the affected Lenders. Not later than five (5)
Business Days after the receipt of the notice from the Agent referred to in
clause (iii) above, the Company, at its own expense shall execute and deliver to
the Agent, in exchange for the Note or Notes of the assigning Lender surrendered
to the Agent pursuant to this paragraph, a new Note or Notes payable to the
order of the assignee Lender and its registered assigns in the principal amount
of the Loans assigned to it. Any such new Note shall be substantially in the
form of Exhibit 2.05A, 2.05B, 2.05C, and 2.05D, hereto as appropriate. Canceled
Notes shall be promptly returned to the Company.
(f) Notwithstanding any other provision herein but subject to Section
11.11, any Lender may, in connection with any assignment or participation or
proposed assignment or participation pursuant to this Section 11.10(f) disclose
to the assignee or participant or proposed assignee or participant, any
information relating to the Company or any Subsidiary furnished to such Lender
by or on behalf of the Company or any Subsidiary.
(g) Anything in this Section 11.10 to the contrary notwithstanding,
any Lender may at any time, without the consent of the Company or the Agent,
assign and pledge all or any portion of its Commitments and the Loans owing to
it to any Federal Reserve Bank (and its transferees) as collateral security
pursuant to Regulation A of the Board and any Operating Circular issued by such
Federal Reserve Bank. No such assignment shall release the assigning Lender from
its obligations hereunder.
SECTION 11.11 Confidentiality. Each Lender agrees to exercise its best
efforts to keep any information delivered or made available by the Company
confidential from anyone other than Persons employed or retained by such Lender
who are or are expected to become engaged by such Lender in evaluating,
approving, structuring or administering the Loans and who are subject to this
confidentiality provision; provided that nothing herein shall prevent any Lender
from disclosing such information (a) to any other Lender, (b) pursuant to
subpoena or upon the order of any court or administrative agency, (c) upon the
request or demand of any regulatory agency (including self-regulatory agencies)
or authority having jurisdiction over such Lender, (d) which has been publicly
disclosed, (e) to the extent reasonably required in connection with any
litigation to which the Agent, any Lender, the Company or its respective
Affiliates may be a party, (f) to the extent reasonably required in connection
with the exercise of any remedy hereunder, (g) to such Lender's legal counsel
and independent auditors (who are subject to this confidentiality provision or
similar confidentiality provision), (h) to any actual or proposed participant or
assignee of all or part of its rights hereunder which has agreed in writing to
be
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bound by the provisions of this Section 11.11 and (i) which is clearly not
confidential. To the extent legally permitted, each Lender will use its best
reasonable efforts to promptly notify the Company of any information that it is
required or requested to deliver pursuant to clause (b), (c) or (e) of this
Section 11.11; provided that no notice shall be required for any review of
information by representatives of regulators at any Lender's places of business.
SECTION 11.12 Pro Rata Treatment. (a) Except as otherwise specifically
permitted hereunder, each payment or prepayment of principal, if permitted under
this Agreement, and each payment of interest with respect to an Advance shall be
made pro rata among the Lenders on the basis of their respective percentage
participations in the Revolving Credit Commitment, the ESOP Loan Commitment, the
Term Loan Commitment or the Acquisition Facility Commitment, as the case may be.
(b) Each Lender agrees that if, through the exercise of a right of
banker's lien, setoff or claim of any kind against the Company as a result of
which the unpaid principal portion of the Notes and the Obligations held by it
shall be proportionately less than the unpaid principal portion of the Notes and
Obligations held by any other Lender, it shall be deemed to have simultaneously
purchased from such other Lender a participation in the Notes and Obligations
held by such other Lender, in the amount required to render such amounts
proportional; provided, however, that if any such purchase or purchases or
adjustments shall be made pursuant to this Section 11.12(b) and the payment
giving rise thereto shall thereafter be recovered, such purchase or purchases or
adjustments shall be rescinded to the extent of such recovery and the purchase
price or prices or adjustments restored without interest.
SECTION 11.13 Separability. Should any clause, sentence, paragraph or
section of this Agreement be judicially declared to be invalid, unenforceable or
void, such decision will not have the effect of invalidating or voiding the
remainder of this Agreement, and the parties hereto agree that the part or parts
of this Agreement so held to be invalid, unenforceable or void will be deemed to
have been stricken herefrom and the remainder will have the same force and
effectiveness as if such part or parts had never been included herein.
SECTION 11.14 Execution in Counterparts. This Agreement may be executed in
any number of counterparts and by different 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.
SECTION 11.15 Interpretation. (a) In this Agreement, unless a clear
contrary intention appears:
(i) the singular number includes the plural number and vice
versa;
(ii) reference to any gender includes each other gender;
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(iii) the words "herein," "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision,
(iv) reference to any Person includes such Person's successors
and assigns but, if applicable, only if such successors and assigns are
permitted by this Agreement, and reference to a Person in a particular
capacity excludes such Person in any other capacity or individually,
provided that nothing in this clause is intended to authorize any
assignment not otherwise permitted by this Agreement;
(v) except as expressly provided to the contrary herein,
reference to any agreement, document or instrument (including this
Agreement) means such agreement, document or instrument as amended,
supplemented or modified and in effect from time to time in accordance with
the terms thereof and, if applicable, the terms hereof and reference to any
Note or other note includes any Note issued pursuant hereto in extension or
renewal thereof and in substitution or replacement therefor;
(vi) unless the context indicates otherwise, reference to any
Article, Section, Schedule or Exhibit means such Article or Section hereof
or such Schedule or Exhibit hereto;
(vii) the words "including" (and with correlative meaning
"include") means including, without limiting the generality of any
description preceding such term;
(viii) with respect to the determination of any period of time
except as expressly provided to the contrary, the word "from" means "from
and including" and the word "to" means "to but excluding"; and
(ix) reference to any law, rule or regulation means such as
amended, codified or reenacted, in whole or in part, and in effect from
time to time.
(b) The Article and Section headings herein and the Table of Contents
are for convenience only and shall not affect the construction hereof.
(c) No provision of this Agreement shall be interpreted or construed
against any Person solely because that Person or its legal representative
drafted such provision.
SECTION 11.16 Limitation by Law. All rights, remedies and powers provided
in this Agreement and the other Loan Documents may be exercised only to the
extent that the exercise thereof does not violate any applicable provision of
law, and all the provisions of this Agreement and the other Loan Documents are
intended to be subject to all applicable mandatory provisions of law which may
be controlling and to be limited to the extent necessary so that they will not
render this Agreement or any other Loan Document illegal, not binding, invalid
or unenforceable, in whole or in part, or not entitled to be recorded,
registered or filed under the provisions of any applicable law.
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SECTION 11.17 SUBMISSION TO JURISDICTION. (a) ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS MAY BE
BROUGHT IN THE COURTS OF THE STATE OF TEXAS, HARRIS COUNTY, OR OF THE UNITED
STATES FOR THE SOUTHERN DISTRICT OF TEXAS AND, BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, THE COMPANY HEREBY IRREVOCABLY ACCEPTS IN RESPECT OF ITS PROPERTY,
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS WITH RESPECT TO ANY
SUCH ACTION OR PROCEEDING, THE COMPANY FURTHER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAKING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL
POSTAGE PREPAID, TO IT AT ITS ADDRESS PROVIDED IN SECTION 11.02 SUCH SERVICE TO
BECOME EFFECTIVE THIRTY (30) DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL
AFFECT THE RIGHT OF THE AGENT OR ANY LENDER TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST
THE COMPANY IN ANY OTHER JURISDICTION.
(b) THE COMPANY HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY
NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR
PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT BROUGHT IN THE
COURTS REFERRED TO IN THE FIRST SENTENCE OF CLAUSE (a) ABOVE AND HEREBY FURTHER
IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY
SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
SECTION 11.18 WAIVER OF JURY TRIAL. THE COMPANY, THE AGENT, THE ISSUING
BANK AND EACH LENDER HEREBY WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE LAW,
ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND
ANY RIGHTS UNDER THIS AGREEMENT OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR
AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION
HEREWITH OR ARISING FROM OR RELATING TO ANY BANKING RELATIONSHIP EXISTING IN
CONNECTION WITH THIS AGREEMENT, AND AGREES, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT
AND NOT BEFORE A JURY.
SECTION 11.19 FINAL AGREEMENT OF THE PARTIES. THIS AGREEMENT (INCLUDING THE
SCHEDULES AND EXHIBITS HERETO), THE NOTES AND THE OTHER LOAN DOCUMENTS REPRESENT
THE FINAL AGREEMENT BETWEEN THE PARTIES RELATING TO THE SUBJECT MATTER HEREOF
AND THEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
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CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
WRITTEN OR ORAL AGREEMENTS BETWEEN THE PARTIES.
SECTION 11.20 Company Assumption of Obligations of Finance Corp.; Certain
Matters Concerning Binding Effect On AXIA, AHC, Ames and TapeTech. AXIA hereby
assumes and agrees to pay, perform and discharge all of the obligations of
Finance Corp. under this Agreement and all other Loan Documents, whether for
interest, fees, expenses, indemnification or any other obligation whatsoever.
This Agreement and the other Loan Documents, together with the other agreements
and instruments executed in connection therewith, shall not become binding upon
AXIA until the earlier of (i) the filing of the Parent Merger Certificate with
the Secretary of State of the State of Delaware, or (ii) the Company notifying
the Agent in writing that the Parent Merger has been consummated. The Security
Documents, together with the other agreements and instruments executed in
connection therewith, executed by AHC, Ames and TapeTech shall not become
binding upon AHC, Ames and TapeTech until the earlier of (i) the filing of the
Parent Merger Certificate with the Secretary of State of the State of Delaware
or (ii) the Company notifying the Agent in writing that the Parent Merger has
been consummated.
SECTION 11.21 WAIVER OF CONSUMER RIGHTS. COMPANY HEREBY WAIVES ITS RIGHTS
UNDER THE DECEPTIVE TRADE PRACTICES - CONSUMER PROTECTION ACT, SECTION 17.41
ET. SEQ. BUSINESS & COMMERCE CODE, A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND
PROTECTIONS. AFTER CONSULTATION WITH AN ATTORNEY OF ITS OWN SELECTION, COMPANY
VOLUNTARILY CONSENTS TO THIS WAIVER. COMPANY EXPRESSLY WARRANTS AND REPRESENTS
THAT IT (a) IS NOT IN A SIGNIFICANTLY DISPARATE BARGAINING POSITION RELATIVE TO
THE AGENT AND EACH LENDER, AND (b) HAS BEEN REPRESENTED BY LEGAL COUNSEL IN
CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
SECTION 11.22. Nonapplicability of Chapter 346; Selection of Optional
Interest Rate Ceilings. The Company, the Agent and the Lenders hereby agree
that, except for Section 346.004 thereof, the provisions of Chapter 346 of the
Texas Finance Code (Vernon's Texas Code Annotated), as amended from time to time
(as amended, the "Texas Finance Code") shall not apply to this Agreement or any
of the other Financing Agreements. To the extent that any of the optional
interest rate ceilings provided in Chapter 303 of the Texas Finance Code may be
available for application to any loan(s) or extension(s) of credit under this
Agreement for the purpose of determining the maximum allowable interest
hereunder pursuant to the Texas Finance Code, the applicable "monthly ceiling"
(as such term is defined in Chapter 303 of the Texas Finance Code) from time to
time in effect shall be used to the extent that it is so available, and if such
"monthly ceiling" at any time is not so available then the applicable "weekly
ceiling" (as such term is defined in Chapter 303 of the Texas Finance Code) from
time to time in effect shall be used to the extent that it is so available.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, the Company, the Guarantors, the Agent and the Lenders
have caused this Agreement to be duly executed by their respective authorized
officers as of the day and year first above written.
FINANCE CORP.:
AXIA FINANCE CORP.
By: /s/ SUSAN O. RHENEY
--------------------------------
Name: Susan 0. Rheney
Title: President
AXIA:
AXIA INCORPORATED
By: /s/ LYLE J. FEYE
--------------------------------
Name: Lyle J. Feye
Title: Vice President - Finance
AGENT:
PARIBAS
By: /s/ CHRIS GOODWIN
--------------------------------
Name: Chris Goodwin
Title: Director
By: /s/ DEANNA C. WALKER
--------------------------------
Name: Deanna C. Walker
Title: Vice President
<PAGE>
LENDER:
Revolving Credit PARIBAS
Commitment: $2,254,901.98
Term Loan
Commitment: $5,261,437.90 By: /s/ CHRIS GOODWIN
--------------------------------
Name: Chris Goodwin
Title: Director
ESOP Loan
Commitment: $225,490.19
Acquisition Facility
Commitment: $3,758,169.93 By: /s/ DEANNA C. WALKER
--------------------------------
Name: Deanna C. Walker
Title: Vice President
Address:
1200 Smith Street, Suite 3100
Houston, Texas 77002
Telecopy No.: (713) 659-3832
Domestic Lending Office
-----------------------
1200 Smith Street, Suite 3100
Houston, Texas 77002
Eurodollar Lending Office
-------------------------
1200 Smith Street, Suite 3100
Houston, Texas 77002
<PAGE>
LENDER:
Revolving Credit THE CIT GROUP/BUSINESS CREDIT, INC.
Commitment: $1,960,784.31
Term Loan
Commitment: $4,575,163.40 By: /s/ DAN HUGHES
--------------------------------
Name: Dan Hughes
------------------------------
Title: Vice President
-----------------------------
ESOP Loan
Commitment: $196,078.43
Acquisition Facility
Commitment: $3,267,973.86
Address:
5420 LBJ Freeway, Suite 200
Dallas, Texas 75240
Telecopy No.: (972) 455-1690
Domestic Lending Office
-----------------------
5420 LBJ Freeway, Suite 200
Dallas, Texas 75240
Eurodollar Lending Office
-------------------------
5420 LBJ Freeway, Suite 200
Dallas, Texas 75240
<PAGE>
LENDER:
Revolving Credit AMERICAN NATIONAL BANK AND
Commitment: $1,960,784.31 TRUST COMPANY OF CHICAGO
Term Loan
Commitment: $4,575,163.40 By: /s/ KYLE FREIMUTH
--------------------------------
Name: Kyle Freimuth
------------------------------
Title: Assistant Vice President
-----------------------------
ESOP Loan
Commitment: $196,078.43
Acquisition Facility
Commitment: $3,267,973.86
Address:
120 South LaSalle
Chicago, Illinois 60603
Telecopy No.: (312) 648-5739
Domestic Lending Office
-----------------------
120 South LaSalle
Chicago, Illinois 60603
Eurodollar Lending Office
-------------------------
120 South LaSalle
Chicago, Illinois 60603
<PAGE>
LENDER:
Revolving Credit LASALLE NATIONAL BANK
Commitment: $1,764,705.88
Term Loan
Commitment: $4,117,647.06 By: /s/ SCOTT R. THICK
--------------------------------
Name: Scott R. Thick
------------------------------
Title: Structured Finance Officer
-----------------------------
ESOP Loan
Commitment: $176,470.59
Acquisition Facility
Commitment: $2,941,176.47
Address:
135 S. LaSalle Street, Room 306
Chicago, Illinois 60603
Telecopy No.: (312) 606-8423
Domestic Lending Office
-----------------------
135 S. LaSalle Street, Room 306
Chicago, Illinois 60603
Eurodollar Lending Office
-------------------------
135 S. LaSalle Street, Room 306
Chicago, Illinois 60603
<PAGE>
LENDER:
Revolving Credit NATIONAL BANK OF CANADA
Commitment: $1,764,705.88
Term Loan
Commitment: $4,117,647.06 By: /s/ WILLIAM HANDLEY
--------------------------------
Name: William Handley
------------------------------
Title: Vice President
-----------------------------
ESOP Loan
Commitment: $176,470.59
Acquisition Facility
Commitment: $2,941,176.47 By: /s/ LARRY L. SEARS
--------------------------------
Name: Larry L. Sears
------------------------------
Title: Vice President and Manager
-----------------------------
Address:
2121 San Jacinto, Suite 1850
Dallas, Texas 75201
Telecopy No.: (214) 871-2015
Domestic Lending Office
-----------------------
125 W. 55th Street
New York, New York 10019
Eurodollar Lending Office
-------------------------
125 W. 55th Street
New York, New York 10019
<PAGE>
LENDER:
Revolving Credit NATIONAL CITY BANK
Commitment: $1,764,705.88
Term Loan
Commitment: $4,117,647.06 By: /s/ DIEGO TOBON
--------------------------------
Name: Diego Tobon
------------------------------
Title: Vice President
-----------------------------
ESOP Loan
Commitment:$176,470.59
Acquisition Facility
Commitment: $2,941,176.47
Address:
1900 East Ninth Street
Cleveland, Ohio 44114
Telecopy No.: (216) 222-0003
Domestic Lending Office
-----------------------
1900 East Ninth Street
Cleveland, Ohio 44114
Eurodollar Lending Office
-------------------------
1900 East Ninth Street
Cleveland, Ohio 44114
<PAGE>
LENDER:
Revolving Credit THE BANK OF NOVA SCOTIA
Commitment: $1,764,705.88
Term Loan
Commitment: $4,117,647.06 By: /s/ F.C.H. ASHBY
-----------------------------------
Name: F.C.H. Ashby
---------------------------------
Title: Senior Manager Loan Operations
--------------------------------
ESOP Loan
Commitment: $176,470.59
Acquisition Facility
Commitment: $2,941,176.47
Address:
600 Peachtree Street N.E., Suite 2700
Atlanta, Georgia 30308
Telecopy No.: (404) 888-8998
Domestic Lending Office
-----------------------
600 Peachtree Street N.E., Suite 2700
Atlanta, Georgia 30308
Eurodollar Lending Office
-------------------------
600 Peachtree Street N.E., Suite 2700
Atlanta, Georgia 30308
<PAGE>
LENDER:
Revolving Credit THE NORTHERN TRUST COMPANY
Commitment: $1,764,705.88
Term Loan
Commitment: $4,117,647.06 By: /s/ ROBERT J. MALLICOAT
--------------------------------
Name: Robert J. Mallicoat
------------------------------
Title: Vice President
-----------------------------
ESOP Loan
Commitment: $176,470.59
Acquisition Facility
Commitment: $2,941,176.47
Address:
50 South LaSalle
Chicago, Illinois 60675
Telecopy No.: (312) 444-7028
Domestic Lending Office
-----------------------
50 South LaSalle
Chicago, Illinois 60675
Eurodollar Lending Office
-------------------------
50 South LaSalle
Chicago, Illinois 60675
<PAGE>
EXHIBIT 10.9
BORROWER SECURITY AGREEMENT
THIS BORROWER SECURITY AGREEMENT (the "Agreement") dated as of July 22,
1998, is made and entered into by AXIA FINANCE CORP., a Delaware corporation
("AXIA Finance"), and AXIA INCORPORATED, a Delaware corporation ("AXIA Inc."),
jointly and severally, in favor of PARIBAS, a bank organized under the laws of
France acting through its Houston, Texas agency, as agent ("Agent"), and the
Lenders (as defined below) for the benefit of all Lenders. AXIA Finance and Axia
Inc., together with AXIA Incorporated following the Company Merger (as defined
in the Credit Agreement defined below) as the surviving entity of the Company
Merger, at times are referred to herein individually and collectively as
"Debtor".
WITNESSETH:
WHEREAS, Debtor, Agent and Lenders (as defined in the Credit Agreement) are
parties to a Credit Agreement of even date herewith (as the same may be amended
and in effect from time to time, the "Credit Agreement"), providing for
extensions of credit to be made to Debtor by Lenders;
WHEREAS, it is a condition precedent to the making of Loans and the
issuance of Letters of Credit under the Credit Agreement that AXIA Finance shall
have executed and delivered this Agreement;
NOW, THEREFORE, in consideration of the premises and in order to induce
Lenders to make Loans and to issue Letters of Credit under the Credit Agreement,
Debtor hereby agrees with Agent for its benefit and the benefit of Lenders as
follows:
SECTION 1. Definitions
1.1 Certain Defined Terms. Terms defined in the Credit Agreement and not
otherwise defined herein have the respective meanings provided for in the Credit
Agreement. The following terms, as used herein, have the meanings set forth
below:
"Accounts" means all "accounts" (as defined in the UCC) now owned or
hereafter created or acquired by Debtor including without limitation, all of the
following now owned or hereafter created or acquired by Debtor: (a) accounts
receivable, contract rights, book debts, notes, drafts and other obligations or
indebtedness owing to Debtor arising from the sale, lease, rental or exchange of
goods or other property and/or the performance of services; (b) Debtor's rights
in, to and under all purchase orders for goods, services or other property; (c)
Debtor's rights to any goods, services or other property represented by any of
the foregoing (including returned or repossessed goods and unpaid sellers'
rights of rescission, replevin, reclamation and rights to stoppage in transit);
(d) monies due to or to become due to Debtor under all contracts for the sale,
lease or exchange of goods or other property and/or the performance of services
(whether or not yet earned by performance on the part of Debtor); and (e)
Proceeds (as defined below) of any of
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<PAGE>
the foregoing and all collateral security and guaranties of any kind given by
any Person with respect to any of the foregoing.
"Collateral" has the meaning assigned to that term in Section 2.
"Collateral Account" has the meaning assigned to that term in Section 7.1.
"Copyright License" means any written agreement now or hereafter in
existence granting to Debtor any right to use any Copyright (excluding any such
agreement if and to the extent that any attempt to grant a security interest
hereunder in any such agreement without the consent of a third party would
constitute a breach thereof and such consent has not been obtained by Debtor).
"Copyrights" means collectively all of the following: (a) all copyrights,
rights and interests in copyrights, works protectable by copyright, copyright
registrations and copyright applications now owned or hereafter created or
acquired by Debtor; (b) all renewals of any of the foregoing; (c) all income,
royalties, damages and payments now or hereafter due and/or payable under any of
the foregoing, including, without limitation, damages or payments for past or
future infringements of any of the foregoing; (d) the right to sue for past,
present and future infringements of any of the foregoing; (e) all rights
corresponding to any of the foregoing throughout the world; and (f) all goodwill
associated with and symbolized by any of the foregoing.
"Copyright Security Agreement" means the copyright security agreement to be
executed and delivered by Debtor to Agent, substantially in the form of
Exhibit A, as such agreement may hereafter be amended, supplemented or otherwise
modified from time to time.
"Documents" means all "documents" (as defined in the UCC) or other receipts
covering, evidencing or representing goods now owned or hereafter acquired by
Debtor.
"Equipment" means all "equipment" (as defined in the UCC) now owned or
hereafter acquired by Debtor including, without limitation, all computers,
computer components and other computer hardware, printers, communications
equipment, office equipment, machinery, motor vehicles, trucks, trailers,
vessels, aircraft, rolling stock and automatic taping and finishing tools, and
all parts thereof and all additions and accessions thereto and replacements
therefor.
"Excluded Property" means property encumbered by a Lien existing on the
date of this Agreement which is listed on Schedule 8.04(a) of the Credit
Agreement, but only if the security agreement which created such Lien provides
that the granting of any additional Lien on such property constitutes a default
under such security agreement.
"Fixtures" means all "fixtures" (as defined in the UCC) now owned or
hereafter acquired by Debtor including, without limitation, all plant Fixtures;
business Fixtures; other Fixtures and storage office facilities, wherever
located; and all additions and accessions thereto and replacements therefor.
2
<PAGE>
"General Intangibles" means all "general Intangibles" (as defined in the
UCC) now owned or hereafter acquired by Debtor, including, without limitation,
all right, title and interest of Debtor in and to: (a) all agreements, leases,
licenses and contracts to which Debtor is or may become a party; (b) all
obligations or indebtedness owing to Debtor (other than Accounts) from whatever
source arising, including, without limitation, any obligations owed to Debtor by
third parties in connection with the agreements relating to the clean up of
Hazardous Materials or compliance with Environmental Laws; (c) all tax refunds;
(d) Intellectual Property; (e) computer software, source code, object code,
manuals and instructions, together with all diskettes, tape and any other
physical representation or eminent thereof; and (f) all trade secrets and other
confidential information relating to the business of Debtor including, by way of
illustration and not limitation, the names and addresses of, and credit and
other business information concerning, Debtor's past, present or future
customers; the prices which Debtor obtains for its services or at which it sells
merchandise; estimating and cost procedures; profit margins; policies and
procedures pertaining to the sale and design of equipment, components, devices
and services furnished by Debtor; information concerning suppliers of Debtor;
and information concerning the manner of operation, business plans, pledges,
projections, and all other information of any kind or character, whether or not
reduced in writing, with respect to the conduct by Debtor of its business not
generally known by the public. The term "General Intangibles" excludes any
software licenses or similar licenses that are not permitted to be pledged in
accordance with the terms thereof.
"Instruments" means all "instruments", "chattel paper" or "letters of
credit" (each as defined in the UCC) including, but not limited to, promissory
notes, drafts, bills of exchange and trade acceptances, now owned or hereafter
acquired by Debtor.
"Intellectual Property" shall mean collectively all of the following:
Copyrights, Copyright Licenses, Patents, Patent Licenses, Trademarks and
Trademark Licenses.
"Inventory" means all "inventory" (as defined in the UCC), now owned or
hereafter acquired by Debtor, wherever located including, without limitation,
finished goods, raw materials, work in process and other materials and supplies
(including packaging and shipping materials) used or consumed in the manufacture
or production thereof (including without limitation automatic taping and
finishing tools and parts) and goods which are returned to or repossessed by
Debtor.
"Patent License" means any written agreement now or hereafter in existence
granting to Debtor any right to use any invention on which a Patent is in
existence (excluding any such agreement if and to the extent that any attempt to
grant a security interest hereunder in any such agreement without the consent of
a third party would constitute a breach thereof and such consent has not been
obtained by Debtor).
"Patents" means collectively all of the following: (a) all patents and
patent applications now owned or hereafter created or acquired by Debtor
including, without limitation, patentable inventions; (b) the reissues,
divisions, continuations, renewals, extensions and continuations-in-part of any
of the foregoing; (c) all income, royalties, damages or payments now and
hereafter
3
<PAGE>
due and/or payable under any of the foregoing with respect to any of the
foregoing, including, without limitation, damages or payments for past or future
infringements of any of the foregoing; (d) the right to sue for past, present
and future infringements of any of the foregoing; (e) all rights corresponding
to any of the foregoing throughout the world; and (f) all goodwill associated
with any of the foregoing.
"Patent Security Agreement" means a patent security agreement executed and
delivered by Debtor to Agent, substantially in the form of Exhibit B as such
agreement may be amended, supplemented or otherwise modified from time to time.
"Proceeds" means all proceeds of, and all other profits, rentals or
receipts, in whatever form, arising from the collection, sale, lease, exchange,
assignment, licensing or other disposition of, or realization upon, any
Collateral including, without limitation, all claims of Debtor against third
parties for loss of, damage to or destruction of, or for proceeds payable under,
or unearned premiums with respect to, policies of insurance with respect to any
Collateral, and any condemnation or requisition payments with respect to any
Collateral, in each case whether now existing or hereafter arising.
"Secured Obligations" has the meaning assigned to that term in Section 3.
"Security Interests" means the security interests granted pursuant to
Section 2, as well as all other security interests created or assigned by Debtor
as additional security for the Secured Obligations pursuant to the provisions of
this Agreement.
"Trademark License" means any written agreement now or hereafter in
existence granting to Debtor any right to use any Trademark (excluding any such
agreement if and to the extent that any attempt to grant a security interest
hereunder in any such agreement without the consent of a third party would
constitute a breach thereof and such consent has not been obtained by Debtor).
"Trademarks" means collectively all of the following now owned or hereafter
created or acquired by Debtor: (a) all trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles, service
marks, logos, other business identifiers, prints and labels on which any of the
foregoing have appeared or appear, all registrations and recordings thereof, and
all applications in connection therewith including registrations, recordings and
applications in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any State thereof or any other country or
any political subdivision thereof; (b) all reissues, extensions or renewals
thereof; (c) all income, royalties, damages and payments now or hereafter due
and/or payable under any of the foregoing or with respect to any of the
foregoing including damages or payments for past or future infringements of any
of the foregoing; (d) the right to sue for past, present and future
infringements of any of the foregoing; (e) all rights corresponding to any of
the foregoing throughout the world; and (f) all goodwill associated with and
symbolized by any of the foregoing.
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<PAGE>
"Trademark Security Agreement" means the trademark security agreement
executed and delivered by Debtor to Agent substantially in the form of Exhibit C
as such agreement may hereafter be amended, supplemented or otherwise modified
from time to time.
"UCC" means the Uniform Commercial Code as in effect on the date hereof in
the State of Texas, as amended from time to time, and any successor statute;
provided that if by reason of mandatory provisions of law, the perfection or the
effect of perfection or non-perfection of the Security Interest in any
Collateral is governed by the Uniform Commercial Code as in effect on or after
the date hereof in any other jurisdiction, "UCC" means the Uniform Commercial
Code as in effect in such other jurisdiction for purposes of the provision
hereof relating to such perfection or effect of perfection or non-perfection.
1.2 Other Definition Provisions. References to "Sections", "subsections",
"Exhibits" and "Schedules" shall be to Sections, subsections, Exhibits and
Schedules, respectively, of this Agreement unless otherwise specifically
provided. Any of the terms defined in subsection 1.1 may, unless the context
otherwise requires, be used in the singular or the plural depending on the
reference. All references to statutes and related regulations shall include any
amendments of same and any successor statutes and regulations.
SECTION 2. Grant of Security Interests
In order to secure the payment and performance of the Secured Obligations
in accordance with the terms thereof, Debtor hereby assigns and grants to Agent
for the benefit of Lenders a continuing security interest in and to all right,
title and interest of Debtor in the following property (but excluding Excluded
Property), whether now owned or existing or hereafter acquired or arising and
regardless of where located (all being collectively referred to as the
"Collateral"):
(A) Accounts;
(B) Inventory;
(C) General Intangibles;
(D) Documents;
(E) Instruments;
(F) Equipment;
(G) Fixtures;
(H) all deposit accounts of Debtor maintained with any bank or
financial institution;
5
<PAGE>
(I) the Collateral Account, all cash deposited therein from time to
time and other monies and property of Debtor in the possession or under the
control of Agent or any Lender;
(J) all books, records, ledger cards, files, correspondence, computer
programs, tapes, disks and related data processing software that at any
time evidence or contain information relating to any of the property
described in subparts (A) - (I) above or are otherwise necessary or helpful
in the collection thereof or realization thereon; and
(K) products and Proceeds of all or any of the property described in
subparts (A) - (J) above.
Notwithstanding the foregoing, so long as no Event of Default has occurred and
is continuing, Debtor may otherwise dispose of Collateral in accordance with and
subject to the restrictions contained in Section 8.02 of the Credit Agreement.
SECTION 3. Security for Obligations
This Agreement secures the payment and performance of the Obligations and
all obligations of every nature of Debtor and/or the Guarantors now or hereafter
existing under this Agreement and any other Loan Documents to which any of
Debtor and/or any of the Guarantor is a party and all renewals, extensions,
restructurings and refinancings of any of the above (all such debts, obligations
and liabilities of Debtor being collectively called the "Secured Obligations").
SECTION 4. Debtor Remains Liable
Anything herein to the contrary notwithstanding: (a) each of Debtor and the
Guarantors shall remain liable under the contracts and agreements to which it is
a party included in the Collateral to the extent set forth therein to perform
all of its duties and obligations thereunder to the same extent as if this
Agreement had not been executed; (b) the exercise by Agent of any of the rights
hereunder shall not release Debtor or any Guarantor from any of its duties or
obligations under the contracts and agreements to which any of them is a party
included in the Collateral; and (c) Agent or Lenders shall not have any
obligation or liability under the contracts and agreements included in the
Collateral by reason of this Agreement, nor shall Agent or Lenders be obligated
to perform any of the obligations or duties of Debtor and/or the Guarantors
thereunder or to take any action to collect or enforce any claim for payment
assigned hereunder.
SECTION 5. Representations and Warranties
In order to induce Agent and each Lender to enter into the Loan Documents,
Debtor represents and warrants to Agent and to each Lender that the following
statements are and will be true, correct and complete:
5.1 Location of Equipment, Fixtures and Inventory. Substantially all of
the Equipment and Inventory is located in the United States of America at the
places specified in
6
<PAGE>
Section B and C of Schedule I except for (i) goods in transit and (ii) goods
that are on rental in the ordinary course of business to Persons other than
Affiliates pursuant to a written rental agreement between such Person and Debtor
and (iii) other locations specified in Schedule I. Substantially all Fixtures
are located in the United States of America at the places specified in Section B
of Schedule I. Schedule B and Schedule C of Schedule I may be updated from time
to time to reflect a change of location of Collateral described in the foregoing
provisions of this Section 5.1 to another location within the continental United
States by written notice to the Agent within thirty (30) days after such change
in location.
5.2 Ownership of Collateral. Except for the Liens permitted by
Section 8.04 of the Credit Agreement, Debtor owns the Collateral free and clear
of any Lien.
5.3 Office Locations; Fictitious Names. The chief executive office and
the office where Debtor keeps its books and records are both located at the
place specified in Section A of Schedule I, which Section A of Schedule I may be
updated from time to time to reflect a change of location to another location
within the continental United States by written notice to the Agent within
thirty (30) days after such change in location. Section B of Schedule I sets
forth substantially all locations where Debtor has a place of business, which
Section B of Schedule I may be updated from time to time to reflect additional
places of business by written notice to the Agent within thirty (30) days after
such change in location. Debtor does not do business and has not done business
during the five years prior to the date hereof under any trade name or
fictitious business name except as disclosed on Schedule II.
5.4 Perfection. This Agreement and the Trademark Security Agreement, the
Patent Security Agreement and the Copyright Security Agreement executed pursuant
hereto create a valid and enforceable security interest in the Collateral,
securing the payment of the Secured Obligations, including, without limitation,
all future Loans pursuant to the Credit Agreement and the Notes, and all
extensions, renewals and other modifications thereof. Upon the filing of UCC
financing statements naming Debtor as debtor and Agent as secured party in the
jurisdictions set forth in Schedule III hereto, the delivery to Agent of all
Collateral the possession of which is necessary to perfect the security interest
therein, the notation of the Agent's security interest on all certificates of
title evidencing Equipment, and the release or assignment to Agent of the
security interests described on Schedule IV hereto, the filing of the Trademark
Security Agreement with the United States Patent and Trademark Office, the
Filing of the Patent Security Agreement with the United States Patent and
Trademark Office and the Filing of the Copyright Security Agreement with the
United States Copyright Office, to the extent such actions are sufficient under
applicable law, the security interests created hereby shall constitute
perfected, first priority security interests upon all the Collateral (other than
Trademarks and Trademark Licenses registered in countries other than the United
States) which shall be superior and prior to the rights of all third Persons now
existing or hereafter arising, except for the Liens permitted by Section 8.04 of
the Credit Agreement and except for Collateral in the possession of third
Persons and goods in transit as permitted by Section 6.5.
SECTION 6. Further Assurances; Covenants
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<PAGE>
6.1 Other Documents and Actions. Debtor will, from time to time, at its
expense, promptly execute and deliver all further instruments and documents and
take all further action that may be necessary or desirable, or that Agent may
reasonably request, in order to perfect and protect any Security Interests
granted or purported to be granted hereby or to enable Agent to exercise and
enforce its rights and remedies hereunder, or the rights and remedies of any
Lender, with respect to any Collateral or to carry out the provisions and
purposes hereof. Without limiting the generality of the foregoing, Debtor will:
(a) execute and file such financing or continuation statements, or amendments
thereto, and such other instruments or notices, as may be necessary or
desirable, and as Agent may request, in order to perfect and preserve the
Security Interests granted or purported to be granted hereby; (b) upon Agent's
request, appear in and defend any action or proceeding that may affect Debtor's
title to or Agent's Security Interests in the Collateral.
6.2 Agent Authorized. Debtor hereby authorizes Agent to file one or more
financing or continuation statements, and amendments thereto (or similar
documents required by any laws of any applicable jurisdiction), relating to all
or any part of the Collateral without the signature of Debtor.
6.3 Corporate or Name Change. Debtor will not change its name or use any
other trade name or fictitious business name not disclosed on Schedule II
without notifying the Agent in writing within ten (10) days of the same during
the term of this Agreement.
6.4 Business Locations. Debtor will keep substantially all the Collateral
in the United States of America at the locations specified on Schedule I, except
for goods in transit and goods otherwise permitted to be in the possession of
third Persons pursuant to Section 5.1 or the Credit Agreement.
6.5 Third Parties in Possession of Collateral. Debtor shall not permit
any material amount of Inventory to be held by third Persons other than (a)
goods in transit, (b) goods that are on rental in the ordinary course of
business to Persons other than Affiliates of Debtor pursuant to a written rental
agreement between such Person and Debtor, and (c) goods held by any
warehouseman, bailee, agent, processor or other Person that is not an Affiliate
of Debtor, where, if requested by the Agent (i) such Person has been notified of
the Security Interests created hereby and instructed to hold all such Collateral
for Agent's account subject to Agent's instructions, and (ii) there has been
taken all other actions the Agent deems necessary to perfect and protect its and
the Debtor's interests in such Collateral pursuant to the requirements of the
UCC of the applicable jurisdiction where the warehouseman, bailee, agent,
processor or other Person is located (including, if necessary and requested by
the Agent, the filing of a financing statement in the proper jurisdiction naming
the applicable Person as Debtor and the Debtor as secured party and notifying
such Person's secured lenders of the Debtor's interest in such Collateral before
the third Person receives possession of the Collateral in question).
6.6 Instruments. Upon the request of the Agent, Debtor will deliver and
pledge to Agent each Instrument in excess of $50,000, duly endorsed and/or
accompanied by duly executed instruments of transfer or assignment, all in form
and substance satisfactory to Agent
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except that prior to the occurrence of a Default or an Event of Default Debtor
may retain for collection and use in the ordinary course of business any checks
representing Proceeds of Accounts received in the ordinary course of business.
6.7 Certificates of Title; Equipment. At the request of Agent, Debtor
shall promptly deliver to Agent any and all certificates of title, applications
for title or similar evidence of ownership of all Equipment where possession of,
notation on or registration with respect to such certificate is necessary or
advisable for perfection of a security interest therein and shall cause Agent to
be named as lienholder on any such certificate of title or other evidence of
ownership. Debtor shall promptly inform Agent of any additions to or deletions
from the Equipment that causes a Material Adverse Effect and shall not permit
any such items to become Fixtures to real estate other than real estate
described in the mortgages and/or deeds of trust in favor of the Agent for the
benefit of the Lenders which secure the Obligations.
6.8 [Intentionally Omitted]
6.9 [Intentionally Omitted]
6.10 [Intentionally Omitted]
6.11 [Intentionally Omitted]
6.12 Collateral Description. Upon the reasonable request of Agent, Debtor
will furnish to Agent, from time to time, statements and schedules further
identifying and describing the Collateral and such other reports in connection
with the Collateral as Agent may reasonably request, all in reasonable detail.
6.13 [Intentionally Omitted]
6.14 Records of Collateral. Debtor shall keep full and accurate books and
records relating to the Collateral and shall stamp or otherwise mark such books
and records in such manner as Agent may reasonably request in order to perfect,
or preserve the priority of, the Security Interest granted herein indicating
that the Collateral is subject to the Security Interests.
6.15 [Intentionally Omitted]
6.16 [Intentionally Omitted]
6.17 Compliance with Terms of Accounts, etc. The Debtor shall perform and
comply with all obligations in respect of the agreements with third Persons
representing the Collateral and all other agreements with Third Persons to which
it is a party or by which it is bound, except where nonperformance or
noncompliance would not have a Material Adverse Effect.
SECTION 7. Collateral Account; Proceeds of Collateral.
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7.1 Cash Account. At the request of Agent made at any time after the
occurrence and during the continuance of an Event of Default, Debtor shall
establish with Agent or at a bank designated by Agent a cash collateral account
(the "Collateral Account") in the name and under the control of Agent into which
there shall be deposited from time to time the cash proceeds of the Collateral
required to be delivered to Agent after the occurrence and during the
continuation of an Event of Default pursuant to Section 7.2 or any other
provision of this Agreement. Any income received by Agent with respect to the
balance from time to time standing to the credit of the Collateral Account shall
remain, or be deposited, in the Collateral Account. All right, title and
interest in and to the cash amounts on deposit from time to time in the
Collateral Account shall vest in Agent and shall constitute part of the
Collateral.
7.2 Customer Payments; Proceeds of Other Collateral. At Agent's request
made at any time after the occurrence and during the continuance of an Event of
Default, Debtor shall instruct all customers and other Persons obligated with
respect to all Accounts to make all payments either (a) directly to Agent (by
instructing that such payments be remitted to a post office box which shall be
in the name and under the control of Agent) or (b) to one or more other banks in
any state in the United States (by instructing that such payments be remitted to
a post office box which shall be in the name and the control of such bank) under
a lockbox agreement in the form and substance satisfactory to the Agent in its
sole discretion duly executed by Debtor and such bank or under other
arrangements pursuant to which Debtor shall have irrevocably instructed such
other bank (and such other bank shall have agreed) to remit all proceeds of such
payments directly to Agent for deposit into the Collateral Account or as Agent
may otherwise instruct such bank. All such payments made to Agent shall be
deposited in the Collateral Account. Any Proceeds received by Debtor in
violation of this Section 7.2 shall be promptly delivered to the Agent and until
so delivered, all such Proceeds shall be held in trust by Debtor for the benefit
of Agent (and on behalf of Lenders) and shall be segregated from any other funds
or property of Debtor.
7.3 Proceeds of Other Collateral. Debtor agrees that if the Proceeds of
any Collateral hereunder (other than the payments received in the ordinary
course of business in respect of Accounts) shall be received by it, Debtor shall
as promptly as possible deliver such Proceeds to the Agent to be held and
applied to the Secured Obligations in accordance with the terms of the Credit
Agreement. Until so delivered, all such Proceeds shall be held in trust by
Debtor for the benefit of Agent (on behalf of Lenders) and shall be segregated
from any other funds or property of Debtor.
7.4 Direction to Pay. Debtor hereby authorizes and directs Agent to apply
the balance from time to time outstanding in the Collateral Account to the
Secured Obligations as required pursuant to the terms of the Credit Agreement.
SECTION 8. Agent Appointed Attorney-in-Fact
Debtor hereby irrevocably appoints Agent as Debtor's attorney-in-fact, with
full authority in the place and stead of Debtor and in the name of Debtor, Agent
or otherwise, from time to time after the occurrence and during the continuation
of an Event of Default, in Agent's
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discretion, to take any action and to execute any instrument that Agent may deem
necessary or advisable to accomplish the purposes of this Agreement, including,
without limitation:
(a) to obtain and adjust insurance required to be paid to Agent;
(b) to ask, demand, collect, sue for, recover, compound, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
(c) to receive, endorse, and collect any drafts or other Instruments
and Documents in connection with clauses (a) and (b) above;
(d) to file any claims or take any action or institute any
proceedings that Agent may deem necessary or desirable for the collection
of any of the Collateral or otherwise to enforce the rights of Agent with
respect to any of the Collateral;
(e) to pay or discharge taxes or Liens, levied or placed upon or
threatened against the Collateral, the legality or validity thereof and the
amounts necessary to discharge the same to be determined by Agent in its
sole discretion, and such payments made by Agent to become obligations of
Debtor to Agent, due and payable immediately without demand;
(f) to sign and endorse any invoices, freight or express bills, bills
of lading, storage or warehouse receipts, assignments, verifications and
notices in connection with Accounts and other documents relating to the
Collateral; and
(g) generally to sell, transfer, pledge, make any agreement with
respect to or otherwise deal with any of the Collateral as fully and
completely as though Agent were the absolute owner thereof for all
purposes, and to do, at Agent's option and Debtor's expense, at any time or
from time to time, all acts and things that Agent deems necessary to
protect, preserve or realize upon the Collateral, including, without
limitation, to file one or more continuation or financing statements, and
amendments thereto (or similar documents required by any laws of any
applicable jurisdiction), relating to all or any part of the Collateral
without the signature of Debtor.
Debtor hereby ratifies and approves all acts of Agent made or taken pursuant to
this Section 8. Neither Agent nor any Person designated by Agent shall be liable
for any acts or omissions or for any error of judgment or mistake of fact or
law. This power, being coupled with an interest, is irrevocable so long as this
Agreement shall remain in force.
SECTION 9. Transfers and Other Liens
Except as otherwise permitted herein or by the Credit Agreement, Debtor
shall not:
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(a) sell, assign (by operation of law or otherwise) or otherwise
dispose of, or grant any option with respect to, any of the Collateral; or
(b) create or suffer to exist any lien, security interest or other
charge or encumbrance upon or with respect to any of the Collateral to
secure indebtedness of any Person except for the Security Interest created
by this Agreement.
SECTION 10. Remedies
If any Event of Default shall have occurred and be continuing, Agent may
exercise in respect of the Collateral, in addition to all other rights and
remedies provided for herein or otherwise available to it, all the rights and
remedies of a secured party on default under the UCC (whether or not the UCC
applies to the affected Collateral) and also may: (a) require Debtor to, and
Debtor hereby agrees that it will, at its expense and upon request of Agent
forthwith, assemble all or part of the Collateral as directed by Agent and make
it available to Agent at a place to be designated by Agent which is reasonably
convenient to both parties; (b) withdraw all cash in the Collateral Account and
apply such monies in payment of the Secured Obligations in the manner provided
in Section 13; (c) without notice or demand or legal process, enter upon any
premises of Debtor and take possession of the Collateral; and (d) without notice
except as specified below, sell the Collateral or any part thereof in one or
more parcels at public or private sale, at any of the Agent's offices or
elsewhere, at such time or times, for cash, on credit or for future delivery,
and at such price or prices and upon such other terms as are commercially
reasonable. Debtor agrees that, to the extent notice of sale shall be required
by law, at least ten days notice to Debtor of the time and place of any public
sale or the time after which any private sale is to be made shall constitute
reasonable notification. At any sale of the Collateral, if permitted by law,
Agent may bid (which bid may be, in whole or in part, in the form of
cancellation of indebtedness) for the purchase of the Collateral or any portion
thereof for the account of Agent (on behalf of Lenders). Agent shall not be
obligated to make any sale of Collateral regardless of notice of sale having
been given. Agent may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned. To
the extent permitted by law, Debtor hereby specifically waives all rights of
redemption, stay or appraisal which it has or may have under any law now
existing or hereafter enacted.
SECTION 11. License of Intellectual Property
Debtor hereby assigns, transfers and conveys to Agent, effective upon the
occurrence of any Event of Default, the nonexclusive right and license to use
all Intellectual Property owned or used by Debtor together with any goodwill
associated therewith, all to the extent necessary to enable Agent to realize on
the Collateral and any successor or assign to enjoy the benefits of the
Collateral. This right and license shall inure to the benefit of all successors,
assigns and transferees of Agent and its successors, assigns and transferees,
whether by voluntary conveyance, operation of law, assignment, transfer,
foreclosure, deed in lieu of foreclosure or otherwise. Such right and license is
granted free of charge, without requirement that any monetary payment whatsoever
be made to Debtor by Agent.
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SECTION 12. Limitation on Duty of Agent With Respect to Collateral
Agent shall have no duty with respect to any Collateral in its possession
or control (or in the possession or control of any agent or bailee) or with
respect to any income thereon or the preservation of rights against prior
parties or any other rights pertaining thereto. Agent shall be deemed to have
exercised reasonable care in the custody and preservation of the Collateral in
its possession if the Collateral is accorded treatment substantially equal to
that which it accords its own property. Agent shall not be liable or responsible
for any loss or damage to any of the Collateral, or for any diminution in the
value thereof, by reason of the act or omission of any warehouseman, carrier,
forwarding agency, consignee or other agent or bailee selected by Agent.
SECTION 13. Application of Proceeds
Upon the occurrence and during the continuance of an Event of Default, the
proceeds of any sale of, or other realization upon, all or any part of the
Collateral and any cash held in the Collateral Account shall be applied or paid
as provided in the Credit Agreement.
SECTION 14. Expenses
Debtor shall pay all reasonable insurance expenses and all reasonable
expenses of protecting, storing, warehousing, appraising, insuring, handling,
maintaining and shipping the Collateral, all costs, fees and expenses of
perfecting and maintaining the Security Interests, any and all excise, property,
sales and use taxes imposed by any federal, state, local or foreign authority on
any of the Collateral, or with respect to periodic appraisals and inspections of
the Collateral, or with respect to the sale or other disposition thereof. If
Debtor fails to promptly pay any portion of the above expenses when due or to
perform any other obligation of Debtor under this Agreement, Agent or any other
Lender may, at its option, but shall not be required to, after ten (10) days
notice to the Debtor pay or perform the same and charge Debtor's account for all
costs and expenses incurred therefor, and Debtor agrees to reimburse Agent or
such Lender therefor on demand. All sums so paid or incurred by Agent or any
other Lender for any of the foregoing, any and all other sums for which Debtor
may become liable hereunder and all costs and expenses (including reasonable
attorneys' fees, legal expenses and court costs) incurred by Agent or any other
Lender in enforcing or protecting the Security Interests or any of their rights
or remedies under this Agreement shall be payable on demand, shall constitute
Obligations, shall bear interest until paid at the Default Rate provided in the
Credit Agreement and shall be secured by the Collateral.
SECTION 15. Termination of Security Interests; Release of Collateral
Upon payment in full of all Secured Obligations and the termination of all
Commitments and Letters of Credit, the Security Interests shall terminate and
all rights to the Collateral shall revert to Debtor. Upon such termination of
the Security Interests or release of any Collateral, Agent will, at the expense
of Debtor, execute and deliver to Debtor such documents as Debtor
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shall reasonably request to evidence the termination of the Security Interests
or the release of such Collateral, as the case may be.
SECTION 16. Notices
All notices, approvals, requests, demands and other communications
hereunder shall be given in accordance with the notice provision of the Credit
Agreement.
SECTION 17. Waivers; Non-Exclusive Remedies
No failure on the part of Agent and/or any Lender to exercise, and no delay
in exercising and no course of dealing with respect to, any power, privilege or
right under the Credit Agreement, this Agreement or any other Loan Document
shall operate as a waiver thereof, nor shall any single or partial exercise by
Agent and/or any Lender of any power, privilege or right under the Credit
Agreement, this Agreement or any other Loan Document preclude any other or
further exercise thereof or the exercise of any other power, privilege or right.
The powers, privileges and rights in this Agreement, the Credit Agreement and
the other Loan Documents are cumulative and are not exclusive of any other
remedies provided by law.
SECTION 18. Successors and Assigns
This Agreement is for the benefit of Agent and Lenders and their successors
and assigns, and in the event of an assignment of all or any of the Secured
Obligations, subject to Section 11.10 of the Credit Agreement, the rights
hereunder, to the extent applicable to the Secured Obligations so assigned, may
be transferred with such Secured Obligations. This Agreement shall be binding on
Debtor and its successors and assigns.
SECTION 19. Changes in Writing
No amendment, modification, termination or waiver of any provision of this
Agreement or consent to any departure by Debtor therefrom, shall in any event be
effective without the written concurrence of Agent and Debtor and, to the extent
required by the Credit Agreement, Majority Lenders.
SECTION 20. Applicable Law
THIS AGREEMENT HAS BEEN DELIVERED AT AND SHALL BE DEEMED TO HAVE BEEN MADE
HARRIS COUNTY, TEXAS AND SHALL BE INTERPRETED, AND THE RIGHTS AND LIABILITIES OF
THE PARTIES HERETO DETERMINED, IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS
APPLICABLE TO AGREEMENTS EXECUTED, DELIVERED AND PERFORMED WITHIN SUCH STATE
EXCEPT WITH RESPECT TO PERFECTION AND THE EFFECT OF PERFECTION OR NONPERFECTION
OF A SECURITY INTEREST, AND IN SUCH CASE, THE LAW OF THE STATE APPLICABLE UNDER
THE UCC SHALL APPLY AS PART OF THE CONSIDERATION FOR NEW VALUE THIS DAY
RECEIVED.
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DEBTOR HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED
WITHIN TEXAS, WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT, AND
CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY REGISTERED MAIL DIRECTED TO
IT AT THE ADDRESS STATED BELOW ITS SIGNATURE HEREOF. IN ADDITION, DEBTOR HEREBY
WAIVES TRIAL BY JURY AND WAIVES ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED
HEREUNDER AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS
DEEMED APPROPRIATE BY THE COURT.
SECTION 21. [Intentionally Omitted]
SECTION 22. Headings
Section and subsection headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose or be given any substantive effect.
SECTION 23. Counterparts
This Agreement may be executed in any number of counterparts, all of which
taken together shall constitute one and the same agreement and any of the
parties hereto may execute this Agreement by signing any such counterpart.
SECTION 24. Subrogation
If any proceeds of the Notes or the Loans have been used to extinguish any
indebtedness of Debtor heretofore secured by the Collateral, then, to the extent
of the proceeds so used, Agent for the benefit of the Lenders shall be
subrogated to all of the rights, claims, liens and interests existing against
the Collateral heretofore held by or in favor of the holder of such indebtedness
and such former rights, claims, liens and interests are not waived but rather
are continued in full force and effect in favor of Agent for the benefit of the
Lenders and are merged with the security interest created herein as cumulative
security for the repayment of the Secured Obligations.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
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Witness the due execution hereof by the duly authorized officer of the
undersigned as of the day first above written.
AXIA INCORPORATED
By: /s/ LYLE J. FEYE
-----------------------------
Lyle J. Feye
Vice President-Finance
AXIA FINANCE CORP.
By: /s/ SUSAN O. RHENEY
-----------------------------
Susan 0. Rheney
President and Secretary
<PAGE>
EXHIBIT 10.10
PLEDGE AND SECURITY AGREEMENT
[AXIA INCORPORATED]
THIS PLEDGE AND SECURITY AGREEMENT (this "Agreement") is executed as of the
22nd day of July, 1998 by AXIA INCORPORATED, a Delaware corporation ("Pledgor"),
in favor of PARIBAS, a bank organized under the laws of France acting through
its Houston, Texas agency, as agent for the benefit of the Lenders (as defined
below) under the Credit Agreement (as defined below) ("Pledgee")
RECITALS:
A. Pledgor. AXIA FINANCE CORP. and Pledgee have entered into that
certain Credit Agreement dated of even date herewith along with the Lenders
named therein (collectively, the "Lender") (as amended, modified or supplemented
from time to time, the "Credit Agreement"), pursuant to which the Lender has
agreed to make available to Pledgor a credit facility subject to the terms and
conditions contained therein.
B. Pledgor is the legal, record and beneficial owner of substantially
all of the issued and outstanding common stock listed on Schedule I, issued by
the subsidiaries of Pledgor listed on Schedule I (collectively the "Issuer"),
evidenced by Issuer's common stock certificates registered in the name of
Pledgor, copies of which are attached hereto as Schedule I (the "Initial Pledged
Stock").
C. Pledgor, by virtue of its ownership of the Initial Pledged Stock,
deems it to be in its best interest, based on sound judgment, in that valuable
benefits will be derived by the pledgor by virtue of the loans, to execute and
deliver to Pledgee this Agreement.
D. In consideration of these premises and in order to induce the Lenders
to extend the credit pursuant to the Credit Agreement, and for other good and
valuable consideration. the receipt and sufficiency of which is hereby
acknowledged, the Pledgor and Pledgee hereby agree as follows:
AGREEMENTS:
1. Defined Terms. Unless otherwise defined herein, terms defined in the
Credit Agreement shall have such defined meanings when used herein.
2. Pledge. The Pledgor hereby pledges, assigns, hypothecates, transfers
and delivers to the Pledgee, and hereby grants to Pledgee, as agent for the
benefit of the Lenders, a first lien on, and security interest in, (a) the
Initial Pledged Stock, (b) all shares of stock, common or preferred, options,
interests, participations, and other equivalents, warrants, convertible
debentures and all agreements, instruments and documents convertible, in whole
or part, into any one or more of the foregoing (collectively, "Stock") of the
Issuer which Pledgor shall, from time to time, become entitled to receive or
shall receive as set forth in Section 3 hereof (together with
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any Stock options or rights received pursuant to Section 3 hereof, the
"Additional Pledged Stock"; the Additional Pledged Stock and the Initial Pledged
Stock being sometimes hereinafter referred to as the "Pledged Stock"), (c) all
other Collateral (as defined in Section 4 hereof) as may be pledged to Pledgee
at any time and from time to time hereunder and (d) all proceeds thereof,
together with appropriate undated stock powers duly executed in blank except as
to the name of the issuer, as collateral security for (i) the due and punctual
payment and performance by Pledgor of its obligations, covenants, agreements and
liabilities, absolute or contingent, liquidated or unliquidated, now existing or
hereinafter incurred under, arising out of or in connection with this Agreement,
(ii) the prompt and complete payment when due (whether at the stated due date,
by acceleration or otherwise) of the unpaid principal of and interest on the
Notes issued to evidence the Loans made by the Lenders to the Pledgor pursuant
to the Credit Agreement as well as collection costs therefor, and (iii) the due
and punctual payment and performance by Pledgor of all other Obligations (as
defined in the Credit Agreement) to the Lenders, absolute or contingent,
liquidated or unliquidated, now existing or hereinafter incurred (all the
foregoing being hereinafter called the "Obligations").
3. Stock Dividends, Distributions, etc. If, while this Agreement is in
effect, the Pledgor shall become entitled to receive or shall receive any Stock
certificate (including, without limitation, any certificate representing a Stock
dividend or a distribution in connection with any reclassification, increase or
reduction of capital, or issued in connection with any reorganization), option
or rights, whether as an addition to, in substitution of, or in exchange for any
shares of any Pledged Stock, or otherwise, the Pledgor agrees to accept the same
as Pledgee's agent and to hold the same in trust on behalf of and for the
benefit of the Pledgee segregated from the other assets of the Pledgor and to
deliver the same forthwith to the Pledgee, in the exact form received, with the
endorsement of the Pledgor, when necessary and/or appropriate, to undated stock
powers, duly executed in blank except as to the name of the issuer, to be held
by the Pledgee, subject to the terms hereof, as additional collateral security
for the Obligations, and such other documents as the Pledgee shall reasonably
request in order to perfect the Pledgee's security interest therein. Any sums
paid upon or in respect of the Pledged Stock upon the liquidation or dissolution
of Issuer shall be paid over to the Pledgee, to be held by it in trust as
additional collateral security for the Obligations; and in case any distribution
of capital shall be made on or in respect of the Pledged Stock or any property
shall be distributed upon or with respect to the Pledged Stock pursuant to the
recapitalization or reclassification of the capital of Issuer or pursuant to the
reorganization thereof, the property so distributed shall be delivered to the
Pledgee, to be held by it as additional collateral security for the Obligations.
All sums of money and property so paid or distributed in respect of the Pledged
Stock which are received by the Pledgor shall, until paid or delivered to the
Pledgee, be held by the Pledgor in trust, segregated from the other assets of
the Pledgor, as additional collateral security for the Obligations.
4. Collateral. The Pledged Stock and all other property at any time and
from time to time pledged to Pledgee hereunder (whether described in Schedule I
hereof or not) and all income therefrom and proceeds thereof, are herein
collectively sometimes called the "Collateral".
5. Record Ownership of Pledged Stock. Upon the occurrence and during the
continuance of an Event of Default, Pledgee may have the Pledged Stock
registered in its name,
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or in the name of its nominee or nominees, as pledgee; and, as to any Pledged
Stock so registered, Pledgee shall execute and deliver (or cause to be executed
and delivered) to Pledgor all such proxies, powers of attorney, dividend coupons
or orders, and other documents as Pledgor may reasonably request for the purpose
of enabling Pledgor to exercise the voting rights and powers which it is
entitled to exercise under this Agreement and to receive the dividends and other
payments in respect of the Pledged Stock which it is authorized to receive and
retain under this Agreement and the Credit Agreement.
6. Voting of Pledged Stock. As long as an Event of Default has not
occurred and is not continuing, Pledgor shall be entitled to exercise all voting
rights pertaining to the Pledged Stock; provided, however, that no vote shall be
cast or consent, waiver or ratification given or action taken which would impair
the Collateral or violate any provision of this Agreement, the Credit Agreement
or the other Loan Documents, including, without limitation, any act which would
increase the authorized issued or outstanding shares of capital Stock of Issuer.
After the occurrence and during the continuance of an Event of Default, upon
notice by Pledgee, the right to vote the Pledged Stock and all other corporate
rights pertaining to the Pledged Stock shall be vested exclusively in Pledgee,
including any and all rights of conversion, exchange, subscription or any other
rights, privileges or options pertaining to any shares of the Pledged Stock as
if Pledgee were the absolute owner thereof, including, without limitation, the
right to exchange at its discretion any and all of the Pledged Stock upon the
merger, consolidation, reorganization, recapitalization or other readjustment of
Issuer or upon the exercise by Issuer or the Pledgee of any right, privilege or
option pertaining to any shares of the Pledged Stock, and in connection
therewith, to deposit and deliver any and all of the Pledged Stock with any
committee, depository, transfer agent, registrar or other designated agency upon
such terms and conditions as it may determine, all without liability except to
account for property actually received by it, but the Pledgee shall have no duty
to exercise any of the aforesaid rights, privileges or options or be responsible
for any failure to do so or delay in so doing. To this end, Pledgor hereby
irrevocably constitutes and appoints Pledgee the proxy and attorney-in-fact of
Pledgor, with full power of substitution, to vote, and to act with respect to,
the Pledged Stock standing in the name of Pledgor or with respect to which
Pledgor is entitled to vote and act, subject to the understanding that such
proxy may not be exercised unless an Event of Default has occurred and is
continuing. The proxy herein granted is coupled with an interest, is
irrevocable, and shall continue until the Obligations have been paid and
performed in full.
7. Limitations on Pledgee's Obligations. The Pledgee shall not be liable
for failure to collect or realize upon the Obligations or any collateral
security or guarantee therefor, or any part thereof, or for any delay in so
doing nor shall the Pledgee be under any obligation to take any action
whatsoever with regard thereto.
8. The Pledgee's Appointment as Attorney-in-Fact. (a) In addition to,
and without limiting the scope of any other provision in this Agreement, the
Pledgor hereby irrevocably constitutes and appoints the Pledgee and any officer
or agent thereof, with full power of substitution, as its true and lawful
attorney-in-fact with full irrevocable power and authority in the place and
stead of the Pledgor and in the name of the Pledgor or in its own name, from
time to time in the Pledgee's discretion, for the purpose of carrying out the
actions and to execute any
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and all documents and instruments which may be necessary or desirable to
accomplish the purposes of this Agreement and, without limiting the generality
of the foregoing, hereby gives the Pledgee the power and right, on behalf of the
Pledgor, without notice to or assent by the Pledgor to do the following upon the
occurrence and during the continuance of an Event of Default; (i) to ask,
demand, collect, receive and give acquittances and receipts for any and all
monies due and to become due under the Collateral; (ii) in the name of the
Pledgor or its own name or otherwise, to take possession of and endorse and
collect any checks, drafts, notes, acceptances or other instruments for the
payment of moneys due under the Collateral; (iii) to file any claim or to take
any other action or proceeding in any court of law or equity or otherwise deemed
appropriate by the Pledgee for the purpose of collecting any and all such moneys
due under the Collateral, whenever payable; (iv) to pay or discharge taxes,
liens, security interests or other encumbrances levied or placed on or
threatened against the Collateral; (v) to direct any party liable for any
payment under the Collateral to make payment of any and all moneys due and to
become due thereunder directly to the Pledgee or as the Pledgee shall direct;
(vi) to receive payment of and receipt for any and all moneys, claims and other
amounts due and to become due at any time in respect of or arising out of any
Collateral; (vii) to commence and prosecute any suits, actions or proceedings at
law or in equity in any court of competent jurisdiction to collect the
Collateral or any part thereof and to enforce any other right in respect of the
Collateral; (viii) to defend any suit, action or proceeding brought against the
Pledgor with respect to any Collateral; (ix) to settle, compromise or adjust any
suit, action or proceeding described above and, in connection therewith, to give
such discharges or releases as the Pledgee may deem appropriate; (x) exercise
voting rights attributable to the Pledged Stock pursuant to Section 6; and (xi)
generally to sell, transfer, pledge, make any agreement with respect to or
otherwise deal with any of the Collateral as fully and completely as though the
Pledgee were the absolute owner thereof for all purposes, and to do, at the
Pledgee's option and the Pledgor's expense, at any time, or from time to time,
all acts and things which the Pledgee deems necessary to protect, preserve or
realize upon the Collateral and the Pledgee's security interest therein, in
order to effect the intent of this Agreement, all as fully and effectively as
the Pledgor might do.
The Pledgor hereby ratifies all that said attorneys shall lawfully do or
cause to be done by virtue hereof. This power of attorney is a power coupled
with an interest and shall be irrevocable.
(b) The powers conferred on the Pledgee hereunder are solely to
protect its interests, as Agent for the Lenders, in the Collateral and shall not
impose any duty upon it to exercise any such powers. Pledgee shall be
accountable only for amounts that it actually receives as a result of the
exercise of such powers and neither it nor any of its officers, directors,
employees or agents shall be responsible to the Pledgor for any act or failure
to act.
(c) The Pledgor also authorizes the Pledgee, at any time and from
time to time, to execute, in connection with any sale of the Collateral, any
endorsements, assignments or other instruments of conveyance or transfer with
respect to the Collateral.
9. Performance by the Pledgee of the Pledgor's Obligations. If the
Pledgor fails to perform or comply with any of its agreements contained herein
and the Pledgee, as provided for
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by the terms of this Agreement, shall itself perform or comply, or otherwise
cause performance or compliance, with such agreement, then the expenses of the
Pledgee incurred in connection with such performance or compliance, together
with interest thereon to accrue at a rate of interest equal to the Highest
Lawful Rate (as defined in the Credit Agreement) from the date such expenses are
incurred, shall be payable by the Pledgor to the Pledgee on demand and shall
constitute Obligations secured hereby.
10. Events of Default. The occurrence of any of the following shall
constitute an "Event of Default" under this Agreement:
(a) Any representation, warranty or statement made or deemed made by
the Pledgor herein or in connection herewith shall prove to have been incorrect
or untrue in any material respect on or as of the date made or deemed made,
(b) The Pledgor shall default in the observance or performance of any
term, covenant, or agreement contained herein; or
(c) Any "Events of Default", as such term is defined in the Credit
Agreement, shall occur and be continuing.
11. Remedies. (a) Upon the occurrence and during the continuance of any
Event of Default, and at any time thereafter, the Pledgee, without demand of
performance or other demand, advertisement or notice of any kind (except the
notice specified below of time and place of public or private sale) to or upon
the Pledgor or any other person (all and each of which demands, advertisements
and/or notices are hereby expressly waived), may forthwith collect, receive,
appropriate and realize upon the Collateral for the benefit of the Lenders, or
any part thereof, and/or may forthwith sell, assign, give option or options to
purchase, contract to sell or otherwise dispose of and deliver said Collateral,
or any part thereof, in one or more parcels at public or private sale or sales,
at any exchange, broker's board or at the Pledgee's offices or elsewhere upon
such terms and conditions as it may deem advisable and at such prices as it may
deem best, for cash or on credit or for future delivery without assumption of
any credit risk, with the right to the Pledgee upon any such sale or sales,
public or private, to purchase the whole or any part of said Collateral so sold,
free of any right or equity of redemption in the Pledgor, which right or equity
is hereby expressly waived or released. The Pledgee shall apply the net proceeds
of any such collection, recovery, receipt, appropriation, realization or sale,
after deducting all reasonable costs and expenses of every kind incurred therein
or incidental to the care, safekeeping or otherwise of any and all of the
Collateral or in any way relating to the rights of the Pledgee hereunder,
including reasonable attorneys' fees and legal expenses, to the payment in whole
or in part of the Obligations in such order as the Pledgee may elect (in
accordance with the Credit Agreement), the Pledgor remaining liable for any
deficiency remaining unpaid after such application, and only after so applying
such net proceeds and after the payment by the Pledgee of any amount required by
any provision of law, including, without limitation, Section 9-504(a)(3) of
the Uniform Commercial Code of the State of Texas (the "Code"), need the Pledgee
account for the surplus, if any, to the Pledgor. The Pledgor agrees that, to the
extent permitted by law, the Pledgee need not give more than ten (10) days'
notice of the time and place of any public
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sale or of the time after which a private sale or other intended disposition is
to take place and that such notice is reasonable notification of such matters.
No notification need be given to the Pledgor if it has signed after default a
statement renouncing or modifying any right to notification of sale or other
intended disposition. IN ADDITION TO THE RIGHTS AND REMEDIES GRANTED TO IT IN
THIS AGREEMENT AND IN ANY OTHER INSTRUMENT OR AGREEMENT SECURING, EVIDENCING OR
RELATING TO ANY OF THE OBLIGATIONS, THE PLEDGEE SHALL HAVE ALL THE RIGHTS AND
REMEDIES OF A SECURED PARTY UNDER THE CODE. All waivers by the Pledgor of rights
(including rights to notice) and all rights and remedies afforded the Pledgor
herein, and all other provisions of this Agreement, are expressly made subject
to any applicable mandatory provisions of law limiting, or imposing conditions
(including conditions as to reasonableness) upon such waivers of the
effectiveness thereof or any such rights and remedies. Any sale or other
disposition of the Collateral shall be in compliance with all provisions of all
applicable statutes, laws, ordinances, regulations, orders, writs, injunctions
or decrees of any applicable Governmental Authority ("Law"). For purposes of
this Agreement, "Governmental Authority" means any nation or government, any
state, county, or city and any political subdivision of any of the foregoing and
any entity exercising exclusive, legislative, judicial, regulatory or
administrative functions of or pertaining to government (including applicable
securities laws, and regulations and applicable provisions of the Code).
(b) If Pledgee shall determine to exercise its right to sell any or
all of the Pledged Stock pursuant to this Section 11 hereof, and if in the
opinion of counsel for Pledgee it is advisable to have the Pledged Stock, or
that portion thereof to be sold, registered under the provisions of the
Securities Act of 1933, as amended (the "Securities Act"), the Pledgor will
cause the Issuer of such Pledged Stock to execute and deliver, and cause the
directors and officers thereof to execute and deliver, all at the Pledgor's
expense, all such instruments and documents, and to do or cause to be done all
such other acts and things as may be necessary to register the Pledged Stock, or
that portion thereof to be sold, under the provisions of the Securities Act and
to cause the registration statement relating thereto to become effective and to
remain effective for a period of 180 days from the date of the first public
offering of the Pledged Stock, or that portion thereof to be sold, and to make
all amendments thereto and/or to the related prospectus which are necessary, all
in conformity with the requirements of the Securities Act and the rules and
regulations of the Securities and Exchange Commission applicable thereto. The
Pledgor agrees to cause each Issuer to comply with the provisions of the
securities or "Blue Sky" laws of any jurisdiction which Pledgee shall designate
and to cause Issuer to make available to its security holders, as soon as
practicable, an earnings statement which will satisfy the provisions of
Section 11(a) of the Securities Act.
(c) The Pledgor recognizes that the Pledgee may be unable to effect a
public sale of any or all the Pledged Stock by reason of certain prohibitions
contained in the Securities Act and applicable state securities laws, but may be
compelled to resort to one or more private sales thereof to a restricted group
of purchasers who will be obliged to agree, among other things, to acquire such
securities for their own account for investment and not with a view to the
distribution or resale thereof. The Pledgor acknowledges and agrees that any
such private sale may result in prices and other terms less favorable to the
seller than if such sale were a public
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sale and, notwithstanding such circumstances, agrees that any such private sale
shall be deemed to have been made in a commercially reasonable manner. Pledgee
shall be under no obligation to delay a sale of any of the Pledged Stock for the
period of time necessary to permit the Issuer of such securities to register
such securities for public sale under the Securities Act, or under applicable
state securities laws, even if the Issuer would agree to do so.
(d) The Pledgor further agrees to do or cause to be done all such
other acts and things as may be necessary to make such sale or sales of any
portion of all of the Pledged Stock valid and binding and in compliance with any
and all applicable laws, regulations, orders, writs, injunctions, decrees or
awards of any and all courts, arbitrators or governmental instrumentalities,
domestic or foreign, having jurisdiction over any such sale or sales, all at the
Pledgor's expense. The Pledgor further agrees that a breach of any of the
covenants contained in this Section 11 will cause irreparable injury to Pledgee,
that Pledgee has no adequate remedy at law in respect of such breach and, as a
consequence, agrees that each and every covenant contained in this paragraph
shall be specifically enforceable against the Pledgor and the Pledgor hereby
waives and agrees not to assert any defenses against an action for specific
performance of such covenants except for a defense that no default of the
covenants, terms or conditions of the Credit Agreement has occurred. The Pledgor
further acknowledges the impossibility of ascertaining the amount of damages
which would be suffered by Pledgee by reason of a breach of any such covenants
and, consequently, agrees that, if Pledgee shall sue for damages for breach,
Pledgor shall pay, as liquidated damages and not as a penalty, an amount equal
to the value of the Pledged Stock on the date Pledgee shall demand compliance
with this paragraph.
12. Waiver of Subrogation. Notwithstanding anything to the contrary in
this Agreement, unless and until the Obligations have been indefeasibly paid and
performed in full, the Pledgor hereby irrevocably waives all rights Pledgor may
have at law or in equity (including, without limitation, any law subrogating the
Pledgor to the rights of the Pledgee) to seek contribution, indemnification, or
any other form of reimbursement from the Pledgor, any other guarantor or
pledgor, or any other person now or hereafter primarily or secondarily liable
for any obligations of the Pledgor to the Pledgee, for any disbursement made by
the Pledgor under or in connection with this Agreement or otherwise. The Pledgor
further agrees that, to the extent that the waiver of any such subrogation,
contribution, reimbursement, indemnity or otherwise is found to be void or
voidable for any reason, any such rights which the Pledgor may have shall be
junior and subordinate in all respects to the rights of the Pledgee against the
Pledgor.
13. Actions by Pledgee. No action that the Pledgee or any Lender may take
or omit to take in connection with the Credit Agreement or any of the other Loan
Documents, any indebtedness owing by Pledgor to the Pledgee or the Lenders
(including, without limitation, renewals, extensions, modifications and
increases thereof), or any security for the payment of any indebtedness of
Pledgor to the Pledgee or the Lenders, or for the performance of any obligation
or undertaking of Pledgor, nor any course of dealing with Pledgor or any other
Person, shall release the Pledgor from his obligations hereunder, affect this
Agreement in any way, or afford the Pledgor any recourse against the Pledgee or
any of the Lenders. By way of example, but not in limitation of the foregoing,
the Pledgor hereby expressly agrees that the Pledgee or the any of the Lenders
may, from time to time, without notice to the Pledgor:
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(a) sell, assign, transfer or grant participations in the Loans
and/or any right held by the Pledgee or any Lender pursuant to or in connection
with the Credit Agreement and the Loan Documents;
(b) amend, change, or modify, in whole or in part, any documents or
instruments evidencing, securing or relating to any indebtedness or undertaking
of Pledgor to the Pledgee or the Lenders;
(c) accelerate, change, extend, or renew the time for payment of the
Notes or any other indebtedness arising under any documents or instruments
evidencing, securing or relating to any indebtedness or undertaking of Pledgor
to the Pledgee or the Lenders;
(d) compromise or settle any amount due or owing, or claimed to be
due or owing, under the Notes or under any documents or instruments evidencing,
securing or relating to any indebtedness or undertaking of Pledgor to the
Pledgee or the Lenders;
(e) surrender, release, or subordinate any or all security for any
indebtedness or undertaking of Pledgor to the Pledgee or the Lenders or accept
additional or substituted security therefor;
(f) release any guarantor or pledgor of any indebtedness or
undertaking of the Pledgor to the Pledgee or the Lenders, or substitute or add
additional guarantors or pledgors; and
(g) apply collateral securing the Notes to other indebtedness also
secured by such collateral.
The provisions of this Agreement shall extend and be applicable to all renewals,
increases, amendments, extensions, modifications of and substitutions for the
Credit Agreement and the other Loan Documents, and all references herein to the
Credit Agreement and the other Loan Documents shall be deemed to include any
renewal, increase, extension, amendment or modification thereof or substitution
therefor.
14. No Impairment. The obligations, guaranties, undertakings, covenants,
agreements and duties of the Pledgor under this Agreement shall not be affected
or impaired by any of the following, although without notice to or consent of
the Pledgor:
(a) any failure, omission or delay on the part of the Pledgee or the
Lenders (i) to enforce, assert or exercise any right, power or remedy conferred
on the Pledgee by the provisions of the Credit Agreement and the other Loan
Documents or otherwise inuring to the holders of the rights of the Pledgee or
the Lenders under the Credit Agreement and the other Loan Documents, or (ii) to
make demand first upon Pledgor or to proceed against Pledgor;
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(b) the voluntary or involuntary liquidation, dissolution, sale of
all or substantially all assets, marshaling of assets or liabilities,
receivership, conservatorship, assignment for the benefit of creditors,
insolvency, bankruptcy, reorganization, arrangement, composition or other
proceedings under laws for the protection of debtors affecting Pledgor or any of
the assets of Pledgor, or any discharge from liability or rejection of
burdensome contracts or obligations in the course of or resulting from any such
proceedings;
(c) the release, by operation of law or otherwise, of Pledgor from
any obligation under the Credit Agreement or any of the other Loan Documents;
(d) the invalidity, deficiency, illegality or unenforceability of the
Credit Agreement or any of the other Loan Documents, in whole or in part, or of
any of the provisions thereof, or failure to perfect or maintain perfection of
any security, or any defense or excuse for failure to perform on account of
force majeure, act of God, casualty, impossibility, impracticability, or other
defense or excuse whatsoever; or
(e) without limiting the foregoing, any fact or event (whether or not
similar to any of the foregoing) which in the absence of this provision would or
might constitute or afford a legal or equitable discharge or release of or
defense to a guarantor or surety.
None of the foregoing shall be a defense to this Agreement, and this Agreement
is a primary obligation of the Pledgor.
15. Other Pledgors or Guarantors. The liabilities and obligations of the
Pledgor hereunder shall not be reduced or limited by reason of any guaranty or
pledge executed in favor of the Pledgee or any of the Lenders by any other
Person, and this Agreement shall be enforceable against the Pledgor without
regard to any such guaranty or pledge.
16. Representations, Warranties and Covenants of the Pledgor. The Pledgor
represents and warrants that (a) it is the legal, record and beneficial owner
of, and has good and, subject to applicable securities laws described in
Section 11 hereof, marketable title to, the Initial Pledged Stock, subject to no
pledge, lien, mortgage, hypothecation, security interest, charge, option, voting
proxy or other encumbrance whatsoever, except the existing lien and security
interest created by this Agreement; (b) this Agreement has been duly authorized,
executed and delivered by Pledgor and constitutes a legal, valid and binding
obligation of the Pledgor, and is enforceable in accordance with its terms; (c)
no consent of any other party (including, without limitation, the stockholders
or creditors of the Pledgor) and no consent, license, permit, approval or
authorization of, exemption by, notice or report to, or registration, filing or
declaration with, any Governmental Authority, domestic or foreign, is required
to be obtained by the Pledgor, the Pledgee or any Lender in connection with the
execution, delivery or performance of this Agreement or the pledge of such
shares hereunder, in each case which has not been obtained or made, as the case
may be, and is not in full force and effect; (d) the execution, delivery and
performance of this Agreement will not violate any provision of any applicable
Law, or of any mortgage, indenture, lease, contract, or other agreement,
instrument or undertaking to which Pledgor is a party or which purports to be
binding upon Pledgor or upon any of its assets and will
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not result in the creation or imposition of any lien, charge or encumbrance on
or security interest in any of the assets of Pledgor except as contemplated by
this Agreement or the Credit Agreement; (e) all the shares of the Initial
Pledged Stock have been duly and validly issued, are fully paid and non-
assessable and have not been issued in violation of any preemptive or other
rights of any person; (f) the Pledgor has not created any options, warrants,
rights, calls, commitments, plans, contracts or other agreements of any
character, which provide for the purchase, issuance or transfer of any shares of
capital stock of Issuer pledged hereby; and (g) the pledge, assignment and
delivery of such Initial Pledged Stock pursuant to this Agreement constitutes
and, provided Pledgee retains possession of the Initial Pledged Stock, at all
times (disregarding, however the effects of the change in any law relating to
the pledge of stock generally) will constitute a valid first lien on and a first
perfected security interest in such shares of the Initial Pledged Stock, and the
proceeds thereof, subject to no prior Lien, or to any agreement purporting to
grant to any third party other than Pledgee for the benefit of the Lenders a
security interest in the property or assets of the Pledgor which would include
the Initial Pledged Stock. Pledgor covenants and agrees that at its expense it
will defend the right, title and security interest of the Pledgee in and to the
Pledged Stock and the proceeds thereof against the claims and demands of all
persons whomsoever; and covenants and agrees that he will have like title to and
right to pledge any other property at any time hereafter pledged to the Pledgee
for the benefit of the Lenders as Collateral hereunder and will likewise defend
the right of the Pledgee for the benefit of the Lenders thereto and security
interest therein.
17. No Disposition, etc. Except as otherwise permitted in the Credit
Agreement, without the prior written consent of the Pledgee, Pledgor agrees that
it will not sell, assign, transfer, exchange, or otherwise dispose of, or grant
any option with respect to, the Collateral, nor will it create, incur or permit
to exist any pledge, lien, mortgage, hypothecation, security interest, charge,
option or any other encumbrance with respect to any of the Collateral, or any
interest therein, or any proceeds thereof, except for the lien and security
interest provided for by this Agreement and except as permitted by this
Agreement or by the Credit Agreement. Without the prior written consent of the
Pledgee, the Pledgor agrees that it will not vote to enable Issuer to issue or
sell any stock or other securities of any nature in addition to or in exchange
or substitution for the Pledged Stock or grant or issue any options, warrants,
or rights of any kind to acquire, or securities convertible into, shares of
Issuer's stock.
18. Further Assurances. Pledgor agrees that at any time and from time to
time upon the written request of the Pledgee, the Pledgor will execute and
deliver such further documents and do such further acts and things which are
necessary in the reasonable judgment of the Pledgee to effect the purpose of
this Agreement or to obtain, maintain and perfect the security interest granted
under this Agreement in any applicable jurisdiction, and any expense of Pledgee
and/or the Lenders so incurred shall be a part of the Obligations.
19. Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
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20. No Waiver; Cumulative Remedies. The Pledgee shall not by any act,
delay, omission or otherwise be deemed to have waived any of its rights or
remedies hereunder and no waiver shall be valid unless in writing, signed by the
Pledgee, and then only to the extent therein set forth. A waiver by the Pledgee
or any Lender of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which Pledgee and each Lender would
otherwise have on any future occasion. No failure to exercise nor any delay in
exercising on the part of the Pledgee or any Lender, any right, power or
privilege hereunder, shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided are cumulative and may be
exercised singly or concurrently, and are not exclusive of any rights or
remedies provided by Law.
21. Waivers, Amendments, Entirety. None of the terms or provisions of
this Agreement may be waived, altered, modified or amended except by an
instrument in writing, duly executed by the Pledgee. This Agreement and all
obligations of the Pledgor hereunder shall be binding upon the successors and
assigns of the Pledgor, and shall, together with the rights and remedies of
Pledgee and each Lender hereunder, inure to the benefit of each of Pledgee and
the Lenders and their successors and assigns. THIS AGREEMENT REPRESENTS THE
FINAL AGREEMENT BETWEEN THE PARTIES HERETO AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
22. GOVERNING LAW. THIS AGREEMENT HAS BEEN DELIVERED AT AND SHALL BE
DEEMED TO HAVE BEEN MADE HARRIS COUNTY, TEXAS AND SHALL BE INTERPRETED, AND THE
RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED, IN ACCORDANCE WITH THE
LAWS OF THE STATE OF TEXAS APPLICABLE TO AGREEMENTS EXECUTED, DELIVERED AND
PERFORMED WITHIN SUCH STATE EXCEPT WITH RESPECT TO PERFECTION AND THE EFFECT OF
PERFECTION OR NONPERFECTION OF A SECURITY INTEREST, AND IN SUCH CASE, THE LAW OF
THE STATE APPLICABLE UNDER THE UNIFORM COMMERCIAL CODE SHALL APPLY AS PART OF
THE CONSIDERATION FOR NEW VALUE THIS DAY RECEIVED. DEBTOR HEREBY CONSENTS TO THE
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN TEXAS, WAIVES PERSONAL
SERVICE OF ANY AND ALL PROCESS UPON IT, AND CONSENTS THAT ALL SUCH SERVICE OF
PROCESS BE MADE BY REGISTERED MAIL DIRECTED TO IT AT THE ADDRESS STATED BELOW
ITS SIGNATURE HEREOF. IN ADDITION, DEBTOR HEREBY WAIVES TRIAL BY JURY AND WAIVES
ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED HEREUNDER AND CONSENTS TO THE
GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE
COURT.
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23. Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties on separate counterparts and each such
counterpart shall be deemed to be an original, but all such counterparts shall
together constitute one and the same Agreement.
24. Reinstatement. This Agreement shall remain in full force and effect
and continue to be effective should any petition be filed by or against the
Pledgor or Issuer for liquidation or reorganization, should the Pledgor or
Issuer become insolvent or make an assignment for the benefit of creditors or
should a receiver or trustee be appointed for all or any significant part of the
Pledgor's or Issuer's assets and shall continue to be effective or be
reinstated, as the case may be, if at any time payment and performance of the
Obligations, or any part thereof is, pursuant to applicable Law, rescinded or
reduced in amount, or must otherwise be restored or returned by any obligee of
the Obligations, whether as a "voidable preference", "fraudulent conveyance", or
otherwise, all as though such payment or performance had not been made. In the
event that any payment, or any part thereof, is rescinded, reduced, restored or
returned, the Obligations shall be reinstated and deemed reduced only by such
amount and not so rescinded, reduced, restored or returned.
25. Effectiveness. This Agreement shall be effective as to Axia
Incorporated after the Effective Time, as such term is defined in the Merger
Agreement.
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IN WITNESS WHEREOF, Pledgor has caused this Agreement to be duly executed
and delivered as of the day and year first above written.
AXIA INCORPORATED
BY: /s/ LYLE J. FEYE
--------------------------------
Lyle J. Feye
Vice President-Finance
<PAGE>
EXHIBIT 10.11
[THE STERLING GROUP LETTERHEAD APPEARS HERE]
June 23, 1998
AXIA Group, Inc.
c/o The Sterling Group, Inc.
8 Greenway Plaza, Suite 702
Houston, Texas 77046
Ladies and Gentlemen:
This letter agreement will confirm the agreement between The Sterling Group,
Inc. ("TSG") and AXIA Group, Inc. ("AXIA"), AXIA Acquisition Corp. and each of
their present and future direct and indirect wholly-owned subsidiaries
(collectively, the "Companies" and individually, a "Company"), in connection
with AXIA Group, Inc.'s acquisition of AXIA Holdings, Inc. (the "Acquisition"),
as follows:
1. Services. TSG has provided or will provide consulting services (the
"Services") to the Companies in connection with the organization of the
Companies, structuring the Acquisition, the financing and refinancing
thereof, arrangements for outside consulting services, advice with respect
to employee benefit and compensation arrangements and other reasonable
assistance when and as requested by the Companies prior to and following the
consummation of the Acquisition.
2. Fees and Expenses.
(a) For its services in connection with the Acquisition, TSG will be
entitled to receive from the Companies at the consummation of the
Acquisition a fee in the amount of Two Million Five Hundred Thousand
Dollars ($2,500,000) together with reimbursement of all expenses
paid or incurred (including expenses of any consultant) by TSG in
connection therewith. Any fee paid by TSG to Gary L. Rosenthal
("GLR") shall not be reimbursed to TSG by the Companies. The
Companies will reimburse any Expenses incurred by GLR in connection
with or related to the Acquisition.
(b) For its services performed from and after the consummation of the
Acquisition, TSG will be entitled to receive from the Companies on
January 1 of each year commencing January 1, 1999 and terminating
January 1, 2008 (i) an annual cash fee in the amount of One Hundred
<PAGE>
Letter Agreement
Page 2 of 5
June 23, 1998
Thousand Dollars ($100,000) and (ii) an annual grant of AXIA
Group, Inc.'s common stock having a value of One Hundred
Thousand Dollars ($100,000) calculated based upon the latest
ESOP valuation of such common stock. In addition, TSG shall be
entitled to receive reimbursement of all expenses paid or
incurred (including expenses of any consultant) by TSG in
connection with its services to the Companies. Such expenses
shall be reimbursed to TSG by the Companies promptly upon
request by TSG.
3. Future Corporate Transactions. The Companies agree that if any of the
Companies determine, within ten years after the closing of the Acquisition,
to dispose of or acquire (regardless of the form of such transaction, and
whether directly or through one or more affiliated entities) assets of a
value of $1 million or more or any business (each a "Future Corporate
Transaction"), TSG is hereby retained by the Companies, in connection with
each Future Corporate Transaction, to provide services to the Companies of
the same nature as the Services (to the extent required), and the Companies
will pay to TSG, at the consummation of each Future Corporate Transaction, a
fee in the amount of one percent (1.0%) of the Project Value thereof and,
regardless of whether such Future Corporate Transaction is consummated, the
Companies shall reimburse TSG for all expenses paid or incurred by TSG in
connection therewith. In addition, the Companies agree that if any of the
Companies determine, within ten years after the closing of the Acquisition,
to offer securities for sale to the public or in private placement to raise
any debt or equity financing (each a "Future Securities Transaction"), TSG
is hereby retained by the Companies, in connection with each Future
Securities Transaction, to provide consulting services to the Companies in
connection therewith, and the Companies will pay to TSG, at the consummation
of each Future Securities Transaction, a fee in the amount of one-half
percent (0.5%) of the aggregate gross selling price of such securities, and
regardless of whether such Future Securities Transaction is consummated, the
Companies shall reimburse TSG for all expense paid or incurred by TSG in
connection therewith. The obligations of the Companies under this Section to
retain TSG with respect to a Future Corporate Transaction or a Future
Securities Transaction shall terminate prior to the expiration of the ten
year period referred to herein if no principal, or officer director of TSG
or any of their respective affiliates or family members (or trusts for the
benefit of any such person) owns any equity securities of AXIA or its
successors at the time the Company determines to engage in the Future
Corporate Transaction or Future Securities Transaction.
For purposes of this Agreement, the term "Project Value" shall mean the
aggregate consideration paid or received by the Company to or from a third
party to consummate an acquisition or disposition plus the aggregate amount
of all liabilities assumed by the acquiring party in connection with an
acquisition or disposition.
4. Expense Reimbursement. Reimbursement for expenses incurred by TSG in
connection with the Acquisition shall include reimbursement of an allocated
percentage of TSG's professional liability insurance premium for 1998. The
allocation shall be determined in good faith by TSG in its sole discretion.
<PAGE>
Letter Agreement
Page 3 of 5
June 23, 1998
5. For so long as any principal, officer or director of TSG or any of their
respective affiliates or family members or trusts for the benefit of any
such person owns any equity securities of AXIA or its successors, TSG
shall be entitled to designate one observer who shall be entitled to
attend all special and regular meetings of the Board of Directors of AXIA
or its successors. Reasonable expenses incurred by the observer in
connection with attendance of Board meetings shall be reimbursed by the
Companies.
6. Indemnification. The Companies, jointly and severally, agree to indemnify
and hold harmless TSG, its consultants, each of their respective
controlling persons and each director, officer, employee, principal,
consultant, affiliate and agent thereof (each an "Indemnified Person")
from and against any and all losses, claims, damages and liabilities,
joint or several, to which any Indemnified Person may become subject
relating to or arising out of, or in connection with, any advice or
services provided under this Agreement or the transactions contemplated by
this Agreement, the Acquisition (including, without limitation, the use of
proceeds from the sale of securities and the financing of the Acquisition)
or any related transaction (including without limitation, that certain
letter agreement among TSG, and Banque Paribas dated May 7, 1998 and any
agreement between TSG, and Chase Securities, Inc. related to the
Acquisition, and the transactions contemplated thereby), and to reimburse
each Indemnified Person, promptly upon demand, for expenses (including
reasonable counsel fees and expenses) as they are incurred in connection
with the investigation of, giving testimony or furnishing documents for,
preparation for or defense of any pending or threatened loss, claim,
damage or liability, or any litigation, proceeding or other action in
respect thereof (collectively, "Actions"), including any amount paid in
settlement of any litigation, proceeding or other action (commenced or
threatened), to which the Companies shall have consented in writing (such
consent not to be unreasonably withheld), whether or not any Indemnified
Person is a party and whether or not liability resulted therefrom;
provided, however, that the indemnity contained in this Agreement will not
apply to any Indemnified Person with respect to losses, claims, damages,
liabilities or related expenses that are found in a final judgment by a
court of competent jurisdiction (not subject to further appeal) to have
resulted from the willful misconduct or gross negligence of such
Indemnified Person. In addition, the Companies will not, without prior
written consent of TSG, settle, compromise or consent to the entry of any
judgment in or otherwise seek to terminate any pending or threatened
Action in respect of which indemnification or contribution may be sought
hereunder (whether or not any Indemnified Person is a party thereto)
unless such settlement, compromise, consent or termination includes an
unconditional release of each Indemnified Person from all liabilities
arising out of such Action.
Promptly after receipt by an Indemnified Person of written notice with
respect to the commencement of any investigation, claim or other Action
with respect to which such Indemnified Person may seek indemnification
hereunder, such Indemnified Person shall notify the Companies in writing
at the address set forth on the first page hereof of such Action; but the
omission so to notify the Companies shall not relieve the Companies from
any liability that the Companies may have hereunder to such Indemnified
Person to the extent that such omission does not materially prejudice or
materially adversely affect the Companies. The Indemnified Persons shall
be entitled to retain separate counsel of their own
<PAGE>
Letter of Agreement
Page 4 of 5
June 23, 1998
choice; provided that the Companies shall not be responsible for the
fees and expenses of more than one firm of attorneys (and local counsel,
if appropriate) for all of the Indemnified Persons in any single Action,
unless the Indemnified Persons shall have been advised that there may be
one or more legal defenses available to any of them that may be
different from or additional to those available to the others, in which
event each such Indemnified Person shall be entitled to separate counsel
at the expense of the Companies.
If indemnification is found in a final judgment by a court of competent
jurisdiction (not subject to further appeal) for reason of public
policy not to be available, the Companies and TSG agree to contribute to
the losses, claims, damages, liabilities or expenses (or actions in
respect thereof) for which such indemnification is held unavailable in
such proportion as is appropriate to reflect the relative benefits to
and fault of the Companies, on the one hand, and TSG, on the other hand,
in connection with the matter giving rise to such losses, claims,
damages, liabilities or expenses (or actions in respect thereof).
Notwithstanding the foregoing, TSG shall not be obligated to contribute
any amount hereunder that exceeds the fees and expenses received by TSG
hereunder. No person found liable for a fraudulent misrepresentation
(within the meaning of Section 11 (f) of the Securities Act of 1933, as
amended) shall be entitled to contribution from any person who is not
found liable for such fraudulent misrepresentation.
The Companies also agree, jointly and severally, that no Indemnified
Person shall have any liability (whether direct or indirect, in contract
or tort or otherwise) to the Companies for or in connection with advice
or services rendered or to be rendered by any Indemnified Person
pursuant to this Agreement, the Acquisition, the financing thereof, the
transactions contemplated thereby or any Indemnified Person's actions or
inaction's in connection with any such advice, services or transactions
except for liabilities that are determined by a judgment of a court of
competent jurisdiction (not subject to further appeal) to have resulted
from such Indemnified Person's gross negligence or willful misconduct in
connection with any such advice, actions, inaction's or services.
If any term, provision, covenant or restriction contained in this
Section is held by a court of competent jurisdiction or other authority
to be invalid, void, unenforceable or against public policy, the
remainder of the terms, provisions, covenants and restrictions contained
in the Agreement shall remain in full force and effect and shall in no
way be affected, impaired or invalidated.
The provisions contained in this Section 6 shall remain in full force
and effect (i) whether or not any of the transactions contemplated
hereby are consummated, (ii) regardless of the termination or completion
of any Indemnified Person's services hereunder, (iii) notwithstanding
the termination of this agreement and (iv) notwithstanding any
investigation made by or on behalf of TSG or any Indemnified Person.
7. Renewal. Unless written notice of non-renewal is issued by either TSG or
AXIA not less than ninety or more than one hundred and twenty days
before the termination of the obligations of TSG to provide services and
the obligations of the Companies to compensate and reimburse TSG under
the provisions of paragraphs 2 (b) and 3 above, than such obligations
will be automatically renewed for
<PAGE>
Letter of Agreement
Page 5 of 5
June 23, 1998
additional periods of one year each from the date the obligations would
have expired had notice of non-renewal been issued.
8. Termination. This agreement may be terminated by (i) TSG at any time; or
(ii) by either party for cause only and only upon thirty days written
notice of the intention to terminate. For the purposes of this
agreement, for cause shall mean only the material breach of a party in
honoring its obligations as set forth in this agreement.
The party intending to terminate this agreement for cause shall issue to
the other party a written notice of intention to terminate which shall
contain (i) a notice that the agreement will be terminated for cause,
(ii) a detailed description of the material breach alleged to have been
committed and (iii) a notice that said termination shall be effective
thirty days after it is received by the recipient unless within said
thirty days the recipient remedies the breach or in the case of a breach
that cannot in good faith be remedied within said period, the recipient
institutes good faith measures to remedy said breach.
9. Governing Law. This Agreement shall be governed by, and constructed in
accordance with, the laws of the State of Texas, without giving effect
to choice of law doctrines requiring the application of laws of any
other jurisdiction.
If the foregoing meets with your approval and correctly expresses our agreement,
please sign and return the enclosed duplicate copy of this letter.
Very truly yours,
THE STERLING GROUP, INC.
By: /s/ T. Hunter Nelson
--------------------------------
Name: T. Hunter Nelson
Title: Principal
ACKNOWLEDGED AND AGREED:
AXIA GROUP, INC.
By: /s/ Susan O. Rheney
------------------------------
President
AXIA ACQUISITION CORP.
By: /s/ Susan O. Rheney
-----------------------------
President
<PAGE>
EXHIBIT 10.12
INDEMNITY AGREEMENT
This Indemnity Agreement ("Agreement") is made and entered into by and
between AXIA INCORPORATED, a Delaware corporation ("Company"), and
_______________ ("Indemnitee").
Introduction
Indemnitee is a director, officer or employee of the Company. The parties
desire that the Company provide indemnification (including advancement of
expenses) to Indemnitee against any and all liabilities asserted against
Indemnitee to the fullest extent permitted by the Delaware General Corporation
Law and any other law (including statutory law and law established by judicial
decision) of the State of Delaware (collectively, "Law"), as the Law presently
exists and may be expanded from time to time. Based on such premise, and for
certain good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereby agree as follows:
1. Continued Service. Indemnitee will serve at the will of the Company
or under separate contract, if such exists, as a director and/or officer of the
Company for so long as Indemnitee is duly elected and qualified in accordance
with the Bylaws of the Company or until Indemnitee tenders Indemnitee's
resignation to the Company, or as an employee for so long as Indemnitee is
employed by the Company.
2. Indemnification. The Company shall indemnify Indemnitee as follows:
2.1 The Company shall indemnify Indemnitee when Indemnitee was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Company), by
reason of the fact that Indemnitee is or was a director, officer, employee or
agent of the Company, or is or was serving at the request of the Company as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by Indemnitee in connection with such action, suit or proceeding
(including punitive and similar damages, to the extent permitted by Law) if
Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to
be in or not opposed to the best interests of the Company, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe that
Indemnitee's conduct was unlawful.
<PAGE>
2.2 The Company shall indemnify Indemnitee when Indemnitee was or is
a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Company to procure a judgment
in its favor by reason of the fact that Indemnitee is or was a director,
officer, employee or agent of the Company, or is or was serving at the request
of the Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by Indemnitee in
connection with the defense or settlement of such action or suit if Indemnitee
acted in good faith and in a manner that Indemnitee reasonably believed to be in
or not opposed to the best interests of the Company and except that no
indemnification pursuant to this Agreement shall be made in respect of any
claim, issue or matter as to which Indemnitee shall have been adjudged to be
liable to the Company unless and only to the extent that the Court of Chancery
or the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, Indemnitee is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
2.3 Any indemnification under Sections 2.1 and 2.2 (unless ordered by
a court) shall be made by the Company only as authorized in the specific case
upon a determination, in accordance with the procedures set forth in Section 3,
that indemnification of Indemnitee is proper in the circumstances because
Indemnitee has met the applicable standard of conduct set forth in such Sections
2.1 and 2.2. Subject to Section 3.3, such determination shall be made (1) by
the board of directors of the Company by a majority vote of a quorum consisting
of directors who were not parties to such action, suit or proceeding, or (2) if
such a quorum is not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (3) by the stockholders of the Company.
2.4 Expenses (including attorneys' fees) incurred by Indemnitee in
defending any civil, criminal, administrative, or investigative action, suit or
proceeding shall be paid from time to time by the Company in advance of the
final disposition of such action, suit or proceeding, within 14 days after the
receipt by the Company from Indemnitee of a Statement of Undertaking in
substantially the form set forth in Exhibit A, in which Indemnitee (1) states
that Indemnitee has reasonably incurred actual expenses in defending a civil,
criminal, administrative, or investigative action, suit or proceeding and (2)
undertakes to repay such amount if it shall ultimately be determined that
Indemnitee is not entitled to be indemnified by the Company as authorized in
this Section 2.
2.5 The indemnification and advancement of expenses provided by, or
granted pursuant to, this Section 2 shall not be deemed exclusive of any other
rights to which Indemnitee
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<PAGE>
may be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors, Law or otherwise, both as to action in Indemnitee's
official capacity and as to action in another capacity while holding such
office, shall continue after Indemnitee has ceased to be a director, officer,
employee or agent of the Company, and shall inure to the benefit of the heirs,
executors and administrators of Indemnitee.
2.6 The termination of any action, suit or proceeding by judgment,
order, settlement or conviction or upon a plea of nolo contendere or its
equivalent shall not, of itself, create a presumption that Indemnitee did not
act in good faith and in a manner which Indemnitee reasonably believed to be in
or not opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that Indemnitee's
conduct was unlawful.
3. Determination of Right to Indemnification. For the purpose of making
the determination of whether to indemnify Indemnitee in a specific case under
Section 2.3, the board of directors of the Company, independent legal counsel or
stockholders, as the case may be, shall make the determination in accordance
with the following procedures:
3.1 Indemnitee shall submit to the board of directors a Statement of
Request for Indemnification in substantially the form set forth in Exhibit B, in
which Indemnitee states that Indemnitee has met the applicable standard of
conduct set forth in Sections 2.1 and 2.2.
3.2 Indemnitee's submission of a Statement of Request for
Indemnification to the board of directors shall create a rebuttable presumption
that Indemnitee has met the applicable standard of conduct set forth in Sections
2.1 and 2.2 and, therefore, is entitled to indemnification under Section 2. The
board of directors, independent legal counsel or stockholders, as the case may
be, shall determine, within 45 days after submission of the Statement of Request
for Indemnification, specifically that Indemnitee is so entitled, unless it or
they shall possess clear and convincing evidence to rebut the foregoing
presumption, which evidence shall be disclosed to Indemnitee with particularity
in a sworn written statement signed by all persons who participated in the
determination and voted to deny indemnification.
3.3 At Indemnitee's option, Indemnitee may elect that the
determination as to indemnification is to be made by Independent Counsel (as
defined below), in which event the Independent Counsel shall be selected by
Indemnitee, and Indemnitee shall give written notice to the Company
("Independent Counsel Notice") within 10 days after the delivery of the
Statement of Request for Indemnification advising it of the identity of the
Independent Counsel so selected (unless Indemnitee shall request in the
Independent Counsel Notice that such selection be made by the board
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<PAGE>
of directors of the Company), in which event the Company shall give written
notice to Indemnitee within 10 days after receipt of Indemnitee's Independent
Counsel Notice advising Indemnitee of the identity of the Independent Counsel so
selected). In either event, Indemnitee or the Company, as the case may be, may,
within seven days after such written notice of selection shall have been given,
deliver to the Company or to Indemnitee, as the case may be, a written objection
to such selection. Any objection to selection of Independent Counsel pursuant to
this Section 3.3 may be asserted only on the ground that the Independent Counsel
so selected does not meet the requirements of the definition of "Independent
Counsel" below, and the objection shall set forth with particularity the factual
basis of such assertion. If such written objection is timely made, the
Independent Counsel so selected may not serve as Independent Counsel unless and
until a court has determined that such objection is without merit. In the event
of a timely written objection to a choice of Independent Counsel, the party
originally selecting the Independent Counsel shall have seven days to make an
alternate selection of Independent Counsel and to give written notice of such
selection to the other party, after which time such other party shall have seven
days to make a written objection to such alternate selection. If, within 45 days
after submission by Indemnitee of a Statement of Request for Indemnification
pursuant to Section 3.1 hereof, no Independent Counsel shall have been selected
and not objected to, either the Company or Indemnitee may petition a court of
competent jurisdiction (the "Court") for resolution of any objections that shall
have been made by the Company or Indemnitee to the other's selection of
Independent Counsel and/or for the appointment as Independent Counsel of a
person selected by the Court or by such other person as the Court shall
designate, and the person with respect to whom an objection is so resolved or
the person so appointed shall act as Independent Counsel for purposes of the
determination to be made under Section 2.3 hereof. The Company shall pay any and
all reasonable fees and expenses of Independent Counsel incurred by such
Independent Counsel in connection with acting pursuant to hereto and provide
such person with appropriate indemnification, and the Company shall pay all
reasonable fees and expenses incident to the procedures of this Section 3.3,
regardless of the manner in which such Independent Counsel was selected or
appointed. The rights and obligations of the parties under this Section 3.3
shall be subject to, and shall be given effect only to the extent permitted by,
applicable Law.
3.4 If the person or persons empowered or selected under this
Agreement to determine whether Indemnitee is entitled to indemnification shall
not have made a determination within 45 days after receipt by the Company of the
Statement of Request for Indemnification by Indemnitee therefor (or, if the
determination of entitlement to indemnification is to be made by Independent
Counsel pursuant to Section 3.3 of this Agreement, and such determination shall
not have been made and delivered in written opinion within 90 days after (i)
such Independent Counsel's being appointed, (ii) the overruling by the Court of
objections to such Counsel's selection or (iii) expiration of all periods for
the Company or Indemnitee to object to such Counsel's selection), the requisite
determination of entitlement to indemnification shall be deemed to have been
made and
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<PAGE>
Indemnitee shall be entitled to such indemnification, absent a prohibition of
such indemnification under applicable Law; provided, however, that such 45-day
period may be extended for a reasonable time, not to exceed an additional 30
days, if the person making the determination with respect to entitlement to
indemnification in good faith requires such additional time for the obtaining or
evaluating of documentation and/or information relating to such determination;
and provided, further, that the 45-day limitation set forth in this Section 3.4
shall not apply and such period shall be extended as necessary if Independent
Counsel is not to make the determination pursuant to section 3.3 of this
Agreement and if within 30 days after receipt by the Company of the Statement of
Request for Indemnification the Board has resolved to submit such determination
to the stockholders for their consideration at an annual meeting thereof to be
held within 90 days after such receipt and such determination is made thereat,
or a special meeting of stockholders is called within 30 days after such receipt
for the purpose of making such determination, such meeting is held for such
purpose within 60 days after having been so called and such determination is
made thereat.
4. Merger, Consolidation or Change in Control. If the Company is a
constituent corporation in a merger or consolidation, whether the Company is the
resulting or surviving corporation or is absorbed as a result thereof, or if
there is a change in control of the Company, or a sale or other complete
disposition of all or substantially all of the assets of the Company, Indemnitee
shall stand in the same position under this Agreement with respect to the
resulting, surviving, changed or acquiring corporation or other entity as
Indemnitee would have with respect to the Company if its separate existence had
continued or if there had been no change in the control of the Company or a sale
or other complete disposition of all or substantially all of the assets of the
Company.
5. Certain Definitions. For the purposes of this Agreement, the
following terms shall have the indicated meanings and understandings:
5.1 The term "other enterprise" shall include, among others, employee
benefit plans and civic, non-profit and charitable organizations, whether or not
incorporated.
5.2 The term "fines" shall include any excise taxes assessed on
Indemnitee with respect to any employee benefit plan.
5.3 The term "serving at the request of the Company" shall include
any service, at the request or with the express or implied authorization of the
Company, as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, which service imposes
duties on, or involves services by, Indemnitee with respect to such corporation,
partnership, joint venture, trust or other enterprise, its participants or
beneficiaries. If Indemnitee
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<PAGE>
acted in good faith and in a manner Indemnitee reasonably believed to be in or
not opposed to the best interests of such other enterprise, its participants or
beneficiaries, Indemnitee shall be deemed to have acted in a manner not opposed
to the best interests of the Company.
5.4 The term "change of control" shall include any change in the
ownership of a majority of the outstanding voting securities of the Company or
in the composition of a majority of the members of the board of directors of the
Company.
5.5 The term "Independent Counsel" means a law firm, or a member of a
law firm, that is experienced in matters of corporation law and neither
contemporaneously is, nor in the five years theretofore has been, retained to
represent: (a) the Company or Indemnitee in any matter material to either such
party, (b) any other party to the proceeding giving rise to a claim for
indemnification hereunder or (c) the beneficial owner, directly or indirectly,
of securities of the Company representing 25% or more of the combined voting
power of the Company's then outstanding voting securities. Notwithstanding the
foregoing, the term "Independent Counsel" shall not include any person who,
under the applicable standards of professional conduct then prevailing, would
have a conflict of interest in representing either the Company or Indemnitee in
an action to determine Indemnitee's rights under this Agreement.
6. Attorneys' Fees. If Indemnitee institutes any legal action to enforce
Indemnitee's rights under this Agreement, or to recover damages for breach of
this Agreement, Indemnitee, if Indemnitee prevails in whole or in part, shall be
entitled to recover from the Company all fees and expenses (including attorneys'
fees) incurred by Indemnitee in connection therewith.
7. Deposit of Funds In Trust. If the Company voluntarily decides to
dissolve or to file a petition for relief under the applicable bankruptcy,
moratorium or similar laws, then not later than 10 days prior to such
dissolution or filing, the Company shall deposit in trust for the sole and
exclusive benefit of Indemnitee a cash amount equal to all amounts previously
authorized to be paid to Indemnitee hereunder, such amounts to be used to
discharge the Company's obligations to Indemnitee hereunder. Any amounts in
such trust not required for such purpose shall be returned to the Company. This
Section 7 shall not apply to the dissolution of the Company in connection with a
transaction as to which Section 4 applies.
8. Amendments to Law. This Agreement is intended to provide indemnity to
Indemnitee to the fullest extent allowed under Law, including but not limited to
statutory law and judicial decisions. Accordingly, to the extent permitted by
Law, if the Law permits greater indemnity than the indemnity set forth herein,
or if any amendment is made to any Law expanding the indemnity permissible under
Law, the indemnity obligations contained herein automatically shall
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<PAGE>
be expanded, without the necessity of action on the part of any party, to the
extent necessary to provide to Indemnitee the fullest indemnity permissible
under Law.
9. Miscellaneous Provisions.
9.1 This Agreement shall continue for so long as Indemnitee serves as
a director of the Company or as a director, officer, partner, employee, agent or
fiduciary of any other corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise in which the Indemnitee served at the request
of the Company, and thereafter shall survive until and terminate upon the later
to occur of: (a) the final termination of all pending proceedings in respect of
which Indemnitee is granted rights of indemnification or advancement of expenses
hereunder and of any proceeding commenced by Indemnitee relating thereto; or (b)
the expiration of all statutes of limitation applicable to possible claims
arising out of Indemnitee's services as described above. This Agreement shall
be binding upon the Company and its successors and assigns and shall inure to
the benefit of Indemnitee and Indemnitee's heirs, executors, legal
representatives and administrators.
9.2 This Agreement constitutes the full understanding of the parties
and a complete and exclusive statement of the terms and conditions of this
Agreement and supersedes all prior negotiations, understandings and agreements,
whether written or oral, between the parties, their affiliates, and their
respective principals, shareholders, directors, officers, employees, consultants
and agents with respect thereto; provided, however, that no rights of Indemnitee
under any certificate of incorporation, bylaw, insurance policy, Law or other
agreement shall be limited or terminated by this Agreement.
9.3 No alteration, modification, amendment, change or waiver of any
provision of this Agreement shall be effective or binding on any party hereto
unless the same is in writing and is executed by all parties hereto.
9.4 If a court of competent jurisdiction declares that any provision
of this Agreement is illegal, invalid or unenforceable, then such provision
shall be modified automatically to the extent necessary to make such provision
fully legal, valid or enforceable. If such court does not modify any such
provision as contemplated herein, but instead declares it to be wholly illegal,
invalid or unenforceable, then such provision shall be severed from this
Agreement, this Agreement and the rights and obligations of the parties hereto
shall be construed as if this Agreement did not contain such severed provision,
and this Agreement otherwise shall remain in full force and effect.
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<PAGE>
9.5 This Agreement shall be enforceable by and against the Company,
the Indemnitee and their respective executors, legal representatives,
administrators, heirs, successors and assignees.
9.6 This Agreement shall be governed by, construed under, and
enforced in accordance with the laws of the State of Delaware without reference
to the conflict-of-laws provisions thereof.
9.7 This Agreement may be executed by the parties hereto in
multiple counterparts, each of which shall be deemed an original for all
purposes, and all of which together shall constitute one and the same
instrument.
9.8 The Company shall be precluded from asserting in any judicial
proceeding commenced under this Agreement that the procedures and presumptions
of this Agreement are not valid, binding and enforceable and shall stipulate in
any such court that the Company is bound by all the provisions of this
Agreement.
9.9 Unless otherwise expressly provided herein, all notices,
requests, demands, consents, waivers, instructions, approvals and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if personally delivered to or mailed, certified mail return receipt
requested, first-class postage paid, addressed as follows:
If to the Company, to it at:
AXIA Incorporated
100 W. 22nd Street, Suite 134
Lombard, Illinois 60148
Attn: President
If to Indemnitee, to Indemnitee at:
____________________________________
____________________________________
____________________________________
____________________________________
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<PAGE>
or to such other address or to such other addressees as any party shall have
last designated as its address or addressee by notice to the other party. All
notices and other communications given to any party in accordance with the
provisions of this Agreement shall be deemed to have been given when delivered
or sent to the intended recipient thereof in accordance with the provisions of
this Section 9.9.
The parties hereto have executed this Agreement effective as of ______,
199__.
COMPANY:
AXIA INCORPORATED
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
INDEMNITEE:
By:
--------------------------------
Print Name:
------------------------
-9-
<PAGE>
EXHIBIT A
STATEMENT OF UNDERTAKING
STATE OF __________________ (S)
(S)
COUNTY OF _________________ (S)
I, __________________________________, being first duly sworn, depose and
say as follows:
1. This Statement of Undertaking is submitted pursuant to the Indemnity
Agreement dated ______________, between _____________________, a Delaware
corporation ("Company"), and me.
2. I am requesting the advancement of certain actual expenses which I
have reasonably incurred in defending a civil or criminal action, suit or
proceeding by reason of the fact that I am or was a director, officer, employee
or agent of the Company or I am serving or have served at the request of the
Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise.
3. I hereby undertake to repay this advancement of expenses if it is
ultimately determined that I am not entitled to be indemnified by the Company.
4. I am requesting the advancement of expenses in connection with the
following action, suit or proceeding:
I have executed this Statement of Undertaking on _______
___________________.
_______________________________
Signature
_______________________________
Print Name
Subscribed and sworn to before me on ___________________.
_______________________________
Notary Public in and for
said state and county
My commission expires:_________
<PAGE>
EXHIBIT B
STATEMENT OF REQUEST FOR INDEMNIFICATION
STATE OF __________________ (S)
(S)
COUNTY OF _________________ (S)
I, ___________________________________, being first duly sworn, depose and
say as follows:
1. This Statement of Request for Indemnification is submitted pursuant to
the Indemnity Agreement dated _________________, between ____________________, a
Delaware corporation ("Company"), and me.
2. I am requesting indemnification against expenses (including attorneys'
fees) and, with respect to any action not by or in the right of the Company,
judgments, fines and amounts paid in settlement, all of which have been actually
and reasonably incurred by me in connection with a certain action, suit or
proceeding to which I am a party or am threatened to be made a party by reason
of the fact that I am or was a director, officer, employee or agent of the
Company or I am serving or have served at the request of the Company as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise.
3. With respect to all matters related to any such action, suit or
proceeding, I acted in good faith and in a manner I reasonably believed to be in
or not opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, I had no reason to believe that my conduct was
unlawful.
4. I am requesting indemnification in connection with the following suit,
action or proceeding:
I have executed this Statement of Request for Indemnification on
______________________.
_______________________________
Signature
_______________________________
Print Name
<PAGE>
Subscribed and sworn to before me on ___________________.
_______________________________
Notary Public in and for
said state and county
My Commission expires:_________
<PAGE>
EXHIBIT 10.13
TAX SHARING AGREEMENT
This Agreement is effective as of the first day of the consolidated return
year ending December 31, 1998, and is entered into between AXIA Group, Inc. (the
"Parent"), AXIA Holdings Corp., AXIA Incorporated, Ames Taping Tool Systems
Inc., and TapeTech Tool Company, Inc. (the "Subsidiaries").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the parties (hereinafter sometimes referred to as "Members"; or in
the singular "Member") hereto are part of an affiliated group of corporations of
which Parent is the common parent (the "AXIA Group, Inc. Affiliated Group") as
defined in Section 1504(a) of the Internal Revenue Code of 1986, as amended (the
"Code"); and
WHEREAS, the AXIA Group, Inc. Affiliated Group will file a consolidated
federal income tax return for its initial taxable period ending December 31,
1998 in accordance with Section 1501 of the Code and is required to file
consolidated income tax returns for years subsequent to such year; and
WHEREAS, it is the intent and desire of the parties hereto that a method be
established for allocating the AXIA Group, Inc. Affiliated Group's consolidated
federal regular income tax liability and its consolidated federal minimum tax
liability among the Members (as required by Section 1552(a) of the Code); for
reimbursing the Parent for payment of such tax liability; and to provide for the
allocation and payment of any refund arising from a carryback of tax items or
attributes, such as net operating losses or tax credits, from subsequent tax
years.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties hereto agree as follows:
1. CONSOLIDATED FEDERAL INCOME TAX RETURN. Parent shall file a U.S.
consolidated federal income tax return for the AXIA Group, Inc. Affiliated Group
for the taxable year ending December 31, 1998 and for each subsequent taxable
year in respect of which this Agreement is in effect and for which the AXIA
Group, Inc. Affiliated Group is required or permitted to file a consolidated
federal income tax return. The Parent and each
-1-
<PAGE>
of the Subsidiaries shall execute and file such consents, elections, and other
documents that may be required or appropriate for the proper filing of such
returns.
2. ALLOCATION ELECTION UNDER SECTION 1552(B) OF THE CODE. Consistent
with the requirements of Section 1552(b) of the Code and Sections 1.1552-1(d) of
the Regulations, Parent shall, within the time permitted under the Code and the
Regulations, cause the AXIA Group, Inc. Affiliated Group to elect a method to
apportion its consolidated federal regular income tax liability from those
methods permitted by the Regulations, and Parent shall cause the AXIA Group,
Inc. Affiliated Group to apportion its consolidated federal regular income tax
liability among the Members in accordance with such method. The Parent shall
cause the AXIA Group, Inc. Affiliated Group to allocate its consolidated federal
minimum tax liability as provided in Proposed Regulations Section 1.1552-1(g).
3. ALLOCATION OF REGULAR CONSOLIDATED FEDERAL INCOME TAX LIABILITY AMONG
MEMBERS. The Members agree to determine and allocate the consolidated federal
regular income tax liability of the AXIA Group, Inc. Affiliated Group among
themselves in the following manner:
Step 1. The consolidated federal regular income tax liability of the
AXIA Group, Inc. Affiliated Group, as determined under Section 1.1502-2,
shall be allocated to the Members as provided in Paragraph 2 of this
Agreement;
4. ALLOCATION OF CONSOLIDATED FEDERAL MINIMUM TAX LIABILITY AMONG
MEMBERS. The Members of the AXIA Group, Inc. Affiliated Group agree to
determine and allocate the consolidated federal minimum tax liability among
themselves in the following manner:
Step 1. The consolidated federal minimum tax liability of the AXIA
Group, Inc. Affiliated Group shall be allocated among the Members as
provided in Paragraph 2 of this Agreement;
5. RULES REGARDING ALLOCATION METHOD. Regarding the application of the
allocation method in Paragraphs 3 and 4 of this Agreement, it is acknowledged
that the amount of consolidated federal regular income tax liability or the
consolidated federal minimum tax liability of the AXIA Group, Inc. Affiliated
Group allocated to each Member
-2-
<PAGE>
under the method elected in Paragraph 2 of this Agreement shall (i) decrease the
earnings and profits of such Member, and (ii) be treated as a liability of such
Member for such amount.
6. ADMINISTRATION OF TAX ALLOCATION AGREEMENT. The provisions of this
Agreement shall be administered by the chief financial officer of Parent.
7. PAYMENTS. Each Member shall pay the Parent its allocated consolidated
federal regular income tax liability and/or consolidated federal minimum tax
liability as determined under Paragraphs 3 and 4 of this Agreement. Payments
are to be made no later than thirty days after the date of filing of the
consolidated federal income tax return for such taxable year.
8. ESTIMATED TAX ASSESSMENT. The chief financial officer of Parent shall
have the right to assess Members their share of estimated tax payments to be
made on the projected consolidated federal income tax liability for each year.
Payment to the chief financial officer shall be made ten days after such
assessment. Such member will receive credit for such prepayments in the year-
end computation under Paragraph 7 of this Agreement.
9. CARRY BACK OR FORWARD OF CONSOLIDATED NET OPERATING LOSS OR CREDIT TO
SEPARATE RETURN YEAR OR CONSOLIDATED RETURN YEAR FOR OTHER AFFILIATED GROUP. If
part or all of an unused consolidated net operating loss or tax credit is
allocated to a Member pursuant to Section 1.1502-21T of the Regulations, and it
is carried back or forwarded to a year in which such Member filed a separate
income tax return or a consolidated federal income tax return with another
affiliated group, any refund or reduction in tax liability arising from the
carryback or carryover shall be retained by such Member. (If such refund or
reduction goes to some entity other than the Member, then such entity shall pay
over such amount to the Member.) Notwithstanding the above, the Parent shall
determine whether an election shall be made not to carryback any consolidated
net operating loss arising in a consolidated return year (including any portion
allocated to a Member under Section 1.1502-21T) in accordance with Section
172(b)(3)(C) of the Code.
10. ADJUSTMENT TO CONSOLIDATED FEDERAL INCOME TAX LIABILITY. If the
consolidated federal income tax liability of the AXIA Group, Inc. Affiliated
Group is adjusted for any taxable period, whether by means of an amended return,
claim for refund, or after-tax audit by the Service, the liability of each
Member shall be recomputed under Paragraphs 2, 3 and 4 of this Agreement to give
effect to such adjustments. In the case of
-3-
<PAGE>
a refund, the Parent shall make payment to each Member for its shares of the
refund, determined in the same manner as in Paragraph 7 of this Agreement,
within thirty days after the refund is received by the Parent, and in the case
of an increase in tax liability, each Member shall pay to the Parent its
allocable share of such increased tax liability within ten days after receiving
notice of such liability from the Parent. If any interest is to be paid or
received as a result of a consolidated federal income tax deficiency or refund,
such interest shall be allocated to the Members in the ratio each Member's
change on consolidated federal income tax liability bears to the total change in
tax liability. Any penalty shall be allocated upon such basis as the chief
financial officer of the Parent deems just and proper in view of all applicable
circumstances.
11. TERM. This Agreement shall apply to the taxable year specified in the
preamble of this Agreement, and all subsequent taxable years, unless the Members
agree in writing to terminate the Agreement. Notwithstanding such termination,
this Agreement shall continue in effect with respect to any payment or refunds
due for all taxable periods prior to termination.
12. ASSIGNABILITY. The Agreement shall not be assignable by any Member
without the prior written consent of the others.
13. AVAILABILITY OF RECORDS. All material including, but not limited to,
returns, supporting schedules, work papers, correspondence, and other documents
relating to the consolidated federal income tax returns filed for a taxable year
during which this Agreement was in effect shall be made available to any Member
to the Agreement during regular business hours for a minimum period equal to
applicable federal record retention requirements.
14. RESOLUTION OF DISPUTES. A dispute or difference between the parties
with respect to the operation or interpretation of this Agreement shall be
decided by three arbitrators who must all be certified public accountants. Each
Member (or if there are more than three members, all members will be divided
into three groups) shall elect an arbitrator. The court of arbitrators shall be
held in the office of Parent. The parties shall bear the cost of arbitration,
including all fees for attorneys and accountants, in a ratio to be determined by
Parent.
15. DEPARTURE OF MEMBER FROM AXIA GROUP, INC. AFFILIATED GROUP. Any
Member which leaves the consolidated group shall be bound by this Agreement.
-4-
<PAGE>
16. ADDITIONAL MEMBERS. The Members hereto specifically recognize that
from time to time other companies may become Members of the AXIA Group, Inc.
Affiliated Group and hereby agree that such new Members may become parties to
this Agreement by executing the master copy of this Agreement which shall be
maintained at Parent's headquarters. It will not be necessary for all the other
Members to resign the Agreement but the new Member may simply sign the existing
Agreement and it will be effective as if the old Members had resigned.
17. CHANGE IN CONSOLIDATED INCOME TAX LAW. Any alteration, modification,
addition, deletion, or other change in the consolidated income tax return
provision of the Code or the regulations thereunder shall automatically be
applicable to this Agreement mutatis mutandis.
18. CONTINUATION OF AGREEMENT. Failure of one or more parties hereto to
qualify by meeting the definition of Member of the "AXIA Group, Inc. Affiliated
Group" shall not operate to terminate this Agreement with respect to the other
parties as long as two or more parties hereto continue so to qualify.
19. SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the
respective successors and assigns of the parties hereto; but no assignment shall
relieve any party's obligations hereunder without the written consent of the
other parties.
20. CHOICE OF LAW. This Agreement shall be governed by the laws of the
State of Delaware.
IN WITNESS WHEREOF, the parties hereto have caused their names to be
subscribed and executed by their respective authorized officers on the dates
indicated, effective as of the date first written above.
PARENT
AXIA Group, Inc.
By: /s/ Lyle J. Feye
----------------------------------
Name: Lyle J. Feye
--------------------------------
Date: July 22, 1998 Title: VP Finance
-------------------------------
-5-
<PAGE>
SUBSIDIARIES
AXIA Holdings Corp.
By: /s/ Lyle J. Feye
----------------------------------
Name: Lyle J. Feye
--------------------------------
Date: July 22, 1998 Title: VP Finance
-------------------------------
AXIA Incorporated
By: /s/ Lyle J. Feye
----------------------------------
Name: Lyle J. Feye
--------------------------------
Date: July 22, 1998 Title: VP Finance
-------------------------------
Ames Taping Tool Systems Inc.
By: /s/ Lyle J. Feye
----------------------------------
Name: Lyle J. Feye
--------------------------------
Date: July 22, 1998 Title: VP Finance
-------------------------------
TapeTech Tool Company, Inc.
By: /s/ Lyle J. Feye
----------------------------------
Name: Lyle J. Feye
--------------------------------
Date: July 22, 1998 Title: VP Finance
-------------------------------
-6-
<PAGE>
EXHIBIT 12
AXIA INCORPORATED
STATEMENT REGARDING COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS, EXCEPT RATIO)
<TABLE>
<CAPTION>
Predecessor Company
---------------------------- Six Months Ended
Period Ended Period Ended Period Ended Year Ended December 31, June 30,
Dec. 31, March 15, Dec. 31, ----------------------- ----------------
1993 1994 1994 1995 1996 1997 1997 1998
------------ ------------ ------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Income from continuing
operations before
income taxes 2,075 759 6,760 8,227 13,206 15,607 7,864 9,944
Fixed Charges 7,778 1,646 5,892 7,362 5,903 4,500 2,411 1,820
----- ----- ------ ------ ------ ------ ------ ------
9,853 2,405 12,652 15,589 19,109 20,107 10,275 11,764
Fixed Charges:
Interest expense 7,084 1,500 5,300 6,596 5,123 3,710 2,029 1,393
Capitalized interest -- -- -- -- -- -- -- 28
Interest factor relating
to rentals(a) 694 146 592 766 780 790 382 399
----- ----- ------ ------ ------ ------ ------ ------
7,778 1,646 5,892 7,362 5,903 4,500 2,411 1,820
Ratio of earnings to fixed
charges 1.27 1.46 2.15 2.12 3.24 4.47 4.26 6.46
===== ===== ====== ====== ====== ====== ====== ======
</TABLE>
(a) Represents interest expense factor related to rental expense
<PAGE>
EXHIBIT 21
State or Other
Jurisdictions of
Subsidiary Incorporation
---------- ----------------
Ames Taping Tool
Systems Inc. Delaware
Ames Taping Tools Manitoba,
of Canada Limited Canada
Compagnie Fischbein, S.A. Belgium
Fischbein Packaging Singapore
(Singapore) PTE. LTD.
TapeTech Tool Company Inc. Delaware
Fischbein France S.A.R.L. France
Fischbein Limited United Kingdom
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report (and to all references to our Firm) included in or made a part of this
Registration Statement on Form S-4.
ARTHUR ANDERSEN LLP
Chicago, Illinois
September 23, 1998
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Axia Incorporated on
Form S-4 of our report on Axia Finance Corporation dated June 23, 1998,
appearing in the Prospectus, which is part of this Registration Statement. We
also consent to the reference to us under the heading "Experts" in such
Prospectus.
DELOITTE & TOUCHE
Houston, Texas
September 29, 1998
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer or director of
AXIA Incorporated, a Delaware corporation (the "Company"), hereby constitutes
and appoints Gary L. Rosenthal and Lyle J. Feye, and each of them (with full
power to each of them to act alone), the undersigned's true and lawful attorney-
in-fact and agent, for the undersigned and on the undersigned's behalf and in
the undersigned's name, place and stead, in any and all capacities, to sign,
execute and file with the Securities and Exchange Commission the Company's
Registration Statement on Form S-4 (or other appropriate form), together with
all amendments thereto, with all exhibits and any and all documents required to
be filed with respect thereto with any regulatory authority, granting unto said
attorneys, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
in order to effectuate the same as fully to all intents and purposes as the
undersigned might or could do if personally present, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or either of them, may
lawfully do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereto signed this power of
attorney this 28th day of August, 1998.
/s/ Dennis W. Sheehan
---------------------
Dennis W. Sheehan
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer or director of
AXIA Incorporated, a Delaware corporation (the "Company"), hereby constitutes
and appoints Gary L. Rosenthal and Lyle J. Feye, and each of them (with full
power to each of them to act alone), the undersigned's true and lawful attorney-
in-fact and agent, for the undersigned and on the undersigned's behalf and in
the undersigned's name, place and stead, in any and all capacities, to sign,
execute and file with the Securities and Exchange Commission the Company's
Registration Statement on Form S-4 (or other appropriate form), together with
all amendments thereto, with all exhibits and any and all documents required to
be filed with respect thereto with any regulatory authority, granting unto said
attorneys, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
in order to effectuate the same as fully to all intents and purposes as the
undersigned might or could do if personally present, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or either of them, may
lawfully do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereto signed this power of
attorney this 28th day of August, 1998.
/s/ Susan O. Rheney
-------------------
Susan O. Rheney
<PAGE>
EXHIBIT 25
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
_________
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility
of a Trustee Pursuant to Section 305(b)(2)
STATE STREET BANK AND TRUST COMPANY
(Exact name of trustee as specified in its charter)
Massachusetts 04-1867445
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
225 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
Maureen Scannell Bateman, Esq. Executive Vice President and General Counsel
225 Franklin Street, Boston, Massachusetts 02110
(617) 654-3253
(Name, address and telephone number of agent for service)
AXIA INCORPORATED
(Exact name of obligor as specified in its charter)
DELAWARE 13-3205251
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 WEST 22ND STREET, SUITE 134,LOMBARD, ILLINOIS 60148
(Address of principal executive offices) (Zip Code)
10 3/4% SENIOR SUBORDINATED NOTES DUE 2008
(Title of indenture securities)
<PAGE>
GENERAL
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO WHICH
IT IS SUBJECT.
Department of Banking and Insurance of The Commonwealth of
Massachusetts, 100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System, Washington, D.C.,
Federal Deposit Insurance Corporation, Washington, D.C.
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee or of its parent, State
Street Corporation.
(See note on page 2.)
ITEM 3. THROUGH ITEM 15. NOT APPLICABLE.
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF ELIGIBILITY.
1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN EFFECT.
A copy of the Articles of Association of the trustee, as now in
effect, is on file with the Securities and Exchange Commission
as Exhibit 1 to Amendment No. 1 to the Statement of Eligibility
and Qualification of Trustee (Form T-1) filed with the
Registration Statement of Morse Shoe, Inc. (File No. 22-17940)
and is incorporated herein by reference thereto.
2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE
BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION.
A copy of a Statement from the Commissioner of Banks of
Massachusetts that no certificate of authority for the trustee
to commence business was necessary or issued is on file with the
Securities and Exchange Commission as Exhibit 2 to Amendment No.
1 to the Statement of Eligibility and Qualification of Trustee
(Form T-1) filed with the Registration Statement of Morse Shoe,
Inc. (File No. 22-17940) and is incorporated herein by reference
thereto.
3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE TRUST
POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS SPECIFIED IN
PARAGRAPH (1) OR (2), ABOVE.
A copy of the authorization of the trustee to exercise corporate
trust powers is on file with the Securities and Exchange
Commission as Exhibit 3 to Amendment No. 1 to the Statement of
Eligibility and Qualification of Trustee (Form T-1) filed with
the Registration Statement of Morse Shoe, Inc. (File No.
22-17940) and is incorporated herein by reference thereto.
4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS
CORRESPONDING THERETO.
A copy of the by-laws of the trustee, as now in effect, is on
file with the Securities and Exchange Commission as Exhibit 4 to
the Statement of Eligibility and Qualification of Trustee (Form
T-1) filed with the Registration Statement of Eastern Edison
Company (File No. 33-37823) and is incorporated herein by
reference thereto.
1
<PAGE>
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR IS IN
DEFAULT.
Not applicable.
6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY
SECTION 321(B) OF THE ACT.
The consent of the trustee required by Section 321(b) of the Act
is annexed hereto as Exhibit 6 and made a part hereof.
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED
PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING AUTHORITY.
A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its supervising
or examining authority is annexed hereto as Exhibit 7 and made a
part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor or any underwriter for
the obligor, the trustee has relied upon information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer furnished to Item 2. of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company, a corporation
organized and existing under the laws of The Commonwealth of Massachusetts, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Boston and The
Commonwealth of Massachusetts, on the 2nd day of September, 1998.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Susan T. Keller
---------------------------------
Susan T. Keller
Vice President
2
<PAGE>
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act
of 1939, as amended, in connection with the proposed issuance by AXIA
INCORPORATED. of its Senior Subordinated Notes, we hereby consent that reports
of examination by Federal, State, Territorial or District authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request therefor.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Susan T. Keller
---------------------------------
Susan T. Keller
Vice President
Dated: September 2, 1998
3
<PAGE>
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking institution
organized and operating under the banking laws of this commonwealth and a member
of the Federal Reserve System, at the close of business June 30, 1998, published
in accordance with a call made by the Federal Reserve Bank of this District
pursuant to the provisions of the Federal Reserve Act and in accordance with a
call made by the Commissioner of Banks under General Laws, Chapter 172, Section
22(a).
<TABLE>
<CAPTION>
Thousands of
ASSETS Dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin....................................................... 1,553,703
Interest-bearing balances................................................................................ 12,440,716
Securities.................................................................................................... 9,436,138
Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and its Edge subsidiary...................................................................... 8,785,353
Loans and lease financing receivables:
Loans and leases, net of unearned income .............................. 6,633,608
Allowance for loan and lease losses.................................... 92,999
Allocated transfer risk reserve........................................ 0
Loans and leases, net of unearned income and allowances.................................................. 6,540,609
Assets held in trading accounts............................................................................... 1, 267,679
Premises and fixed assets..................................................................................... 491,928
Other real estate owned....................................................................................... 100
Investments in unconsolidated subsidiaries.................................................................... 1,278
Customers' liability to this bank on acceptances outstanding.................................................. 68,312
Intangible assets............................................................................................. 231,294
Other assets.................................................................................................. 1,667,282
----------
Total assets.................................................................................................. 42,484,392
==========
LIABILITIES
Deposits:
In domestic offices...................................................................................... 12,553,371
Noninterest-bearing .............................. 10,204,405
Interest-bearing.................................. 2,348,966
In foreign offices and Edge subsidiary................................................................... 16,961,571
Noninterest-bearing............................... 154,792
Interest-bearing.................................. 16,806,779
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary...................................................................... 8,182,794
Demand notes issued to the U.S. Treasury and Trading Liabilities.............................................. 0
Trading liabilities........................................................................................... 883,096
Other borrowed money.......................................................................................... 361,141
Subordinated notes and debentures............................................................................. 0
Bank's liability on acceptances executed and outstanding...................................................... 68,289
Other liabilities............................................................................................. 1,017,284
Total liabilities............................................................................................. 40,027,546
----------
EQUITY CAPITAL
Perpetual preferred stock and related surplus................................................................. 0
Common stock.................................................................................................. 29,931
Surplus....................................................................................................... 455,288
Undivided profits and capital reserves/Net unrealized holding gains (losses).................................. 1,964,924
Net unrealized holding gains (losses) on available-for-sale securities........................................ 15,557
Cumulative foreign currency translation adjustments........................................................... (8,854)
Total equity capital.......................................................................................... 2,456,846
----------
Total liabilities and equity capital.......................................................................... 42,484,392
----------
</TABLE>
4
<PAGE>
I, Rex S. Schuette, Senior Vice President and Comptroller of the above named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
David A. Spina
Marshall N. Carter
Truman S. Casner
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