<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13
or 15(d) of the
Securities Exchange Act of 1934
Commission File No. 001-12335
FOR THE QUARTER ENDED MARCH 31, 1998
BUTLER MANUFACTURING COMPANY
Incorporated in State of Delaware
BMA Tower - Penn Valley Park
Post Office Box 419917
Kansas City, Missouri 64141-0917
Phone: (816) 968-3000
I.R.S. Employer Identification Number: 44-0188420
Shares of common stock outstanding at
MARCH 31, 1998: 7,659,050
The name, address and fiscal year of the Registrant have not changed
since the last report.
The Registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months, and (2) has been subject to such filing requirements for the past 90
days.
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INDEX
<TABLE>
<CAPTION>
PART I. - FINANCIAL INFORMATION Page Number
<S> <C>
ITEM 1. Financial Statements 3
(1) Consolidated Financial Statements (unaudited):
Consolidated Statements of Operations for the Three Month
Periods Ended March 31, 1998 and 1997 3
Consolidated Balance Sheets as of March 31, 1998 and
December 31, 1997. 4
Consolidated Statements of Cash Flows for the Three Month
Periods Ended March 31, 1998 and 1997. 5
(2) Notes to Consolidated Financial Statements 6
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 7-8
PART II. - OTHER INFORMATION
ITEM 2. Changes in Securities 9
ITEM 6. Exhibits and Reports on Form 8-K 9
</TABLE>
In addition to historical information included herein, this Report contains
forward-looking statements and information that are based on management's
beliefs as well as on assumptions made by and information currently available to
management. These forward-looking statements and information are within the
meaning of the Private Securities Litigation Reform Act of 1995. When used in
this Report, the words "anticipate," "intend," "plan," "believe," "estimate,"
"expect," "may," "should," and similar expressions are intended to identify
forward-looking statements. Such statements are not guarantees of future
performance and involve certain risks, uncertainties and assumptions which could
cause the Company's future results and stock values to differ materially from
those expressed in such forward-looking statements.
Page 2
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BUTLER MANUFACTURING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three month periods ended March 31, 1998 and 1997
(unaudited)
($000's omitted, except for per share data)
<TABLE>
<CAPTION>
Three months ended
March 31,
--------------------
1998 1997
---- ----
<S> <C> <C>
Net sales $ 193,784 $ 188,102
Cost of sales 161,857 156,025
---------- -----------
Gross profit 31,927 32,077
Selling, general and administrative expenses 28,278 27,427
---------- -----------
Operating Income 3,649 4,650
Other income (expense), net 470 (134)
---------- -----------
Earnings before interest and taxes 4,119 4,516
Interest Expense 1,385 1,279
---------- -----------
Pretax earnings 2,734 3,237
Income tax expense 1,575 1,341
---------- -----------
Net earnings $ 1,159 $ 1,896
========== ===========
Basic earnings per common share $ .15 $ .25
========== ===========
Diluted earnings per common share $ .15 $ .25
========== ===========
Basic weighted average number of shares 7,653,321 7,574,596
Diluted weighted average number of shares 7,720,571 7,671,458
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
Page 3
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BUTLER MANUFACTURING COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 1998 and December 31, 1997
(unaudited)
($000's omitted)
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,944 $ 5,515
Receivables, net 113,162 106,882
Inventories:
Raw materials 44,889 59,937
Work in process 6,814 7,859
Finished goods 39,361 21,317
Lifo reserve (12,122) (10,822)
--------- ---------
Total inventory 78,942 78,291
Real estate developments in progress 23,924 22,401
Deferred tax assets 7,811 7,812
Other current assets 12,468 12,422
--------- ---------
Total current assets 239,251 233,323
Investments and other assets 37,596 35,887
Assets held for sale 9,423 9,423
Property, plant and equipment, at cost 244,512 239,747
Less accumulated depreciation (145,970) (143,408)
--------- ---------
Net property, plant and equipment 98,542 96,339
--------- ---------
$ 384,812 $ 374,972
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 3,930 $ 21,280
Current maturities of long-term debt 5,862 5,862
Accounts payable 68,739 72,266
Dividends payable 1,072 1,069
Accrued liabilities 50,941 55,846
Taxes on income 8,631 8,181
--------- ---------
Total current liabilities 139,175 164,504
Deferred tax liabilities 3,561 3,561
Other noncurrent liabilities 15,324 16,423
Long-term debt, less current maturities 68,651 33,918
Shareholders' equity:
Common stock, no par value, authorized 20,000,000
shares, issued 9,088,200 shares, at stated value 12,623 12,623
Cumulative foreign currency translation adjustment (149) 26
Retained earnings 176,606 175,373
--------- ---------
189,080 188,022
Less cost of common stock in treasury, 1,429,151 shares in
in 1998 and 1,451,205 shares in 1997 30,979 31,456
--------- ---------
Total shareholders' equity 158,101 156,566
--------- ---------
$ 384,812 $ 374,972
========= =========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
Page 4
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BUTLER MANUFACTURING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three month periods ended March 31, 1998 and 1997
(unaudited)
($000's omitted)
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 1,159 $ 1,896
Adjustments to reconcile net earnings to net cash used in operating
activities:
Depreciation and amortization 3,648 2,921
Equity (earnings) loss on joint ventures (168) (51)
Change in asset and liabilities, net of purchases of new businesses:
Receivables (6,280) 12,423
Inventories (651) (6,616)
Real estate developments in progress (1,523) (4,713)
Prepaid income taxes 1 --
Other current assets (46) (659)
Current liabilities excluding short-term debt (7,982) (22,988)
-------- --------
Net cash used in operating activities (11,842) (17,787)
Cash flows from investing activities:
Capital expenditures (5,103) (5,619)
Acquisition of new business -- (2,715)
Other, net (2,289) (2,456)
-------- --------
Net cash used in investing activities (7,392) (10,790)
Cash flows from financing activities:
Payment of dividends (1,069) (907)
Proceeds from issuance of long-term debt 35,000 346
Repayment of long-term debt (271) (55)
Net change in short-term debt (17,350) 27,131
Sale and issuance of treasury stock 477 362
Purchase of Treasury Stock -- --
Other, net 51 40
-------- --------
Net cash provided by financing activities 16,838 26,917
Effect of exchange rate changes on cash (175) (339)
-------- --------
Net increase (decrease) in cash and cash equivalents (2,571) (1,999)
Cash and cash equivalents at beginning of year 5,515 2,013
-------- --------
Cash and cash equivalents at March 31 $ 2,944 $ 14
======== ========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
Page 5
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BUTLER MANUFACTURING COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements have been
prepared in accordance with the accounting policies described in the
consolidated financial statements and related notes included in Butler
Manufacturing Company's 1997 Form 10-K. It is suggested that those consolidated
statements be read in conjunction with this report. The year-end financial
statements presented were derived from the Company's audited financial
statements. In the opinion of management, the accompanying consolidated
financial statements reflect all adjustments necessary for a fair presentation
of the financial position of Butler Manufacturing Company and the results of its
operations.
NOTE 2 - NEW ACCOUNTING PRONOUNCEMENTS
Comprehensive Income
- --------------------
In June 1997, the Financial Accounting Standards Board issued FASB Statement No.
130, "Reporting of Comprehensive Income" which requires reporting and display of
comprehensive income and its components in a full set of financial statements.
The Company has adopted this statement as of January 1, 1998 as required.
"Foreign Currency Translation Adjustment Total" is the Company's only
comprehensive income item as defined by the statement. Comprehensive income,
including after tax adjustments for foreign currency translation losses of $.1
million and $.2 million, were $1.1 million and $1.7 million, respectively for
the quarters ending March 31, 1998 and 1997
Start-up and Organizational Costs
- ---------------------------------
The AICPA issued in April 1998 Statement of Position 98-5, "Financial Reporting
of Start-up Costs and Organization Costs". The statement requires all costs of
start-up activities and organization costs to be expensed as incurred. The
Company has determined that the cumulative effect of adopting this change in
accounting principle is immaterial.
NOTE 3 - SHORT-TERM BORROWINGS
During the first quarter of 1998, the Company completed a $35 million
private placement of senior unsecured notes with Metropolitan Life Insurance
Company. The notes mature after fifteen years on March, 2013, with a fixed
interest rate of 6.57% payable semiannually on March 20 and September 20 of each
year. Annual principal payments of $3.5 million are required commencing in
March, 2004 and ending March, 2012, with the remaining principal payable in
March, 2013.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Cash and equivalents decreased $2.6 million in the first three months of 1998,
primarily due to increased investments in domestic operations and in working
capital. Working capital requirements were funded with an increase in short-term
borrowings. For the three months ended March 31, 1998, domestic short term
borrowings averaged $25.5 million for 90 days compared to $23.8 million for 90
days in 1997.
In March, the Company completed a $35 million private placement of senior
unsecured notes due March 20, 2013. The notes carry a fixed interest rate of
6.57%, and are payable in equal annual installments of $3.5 million beginning in
2004. Proceeds from the private placement were used to pay down the Company's
short-term line of credit and will be used to fund future investment
opportunities. The Company continues to maintain revolving bank credit
facilities aggregating $50 million to meet the needs of the Company. As of March
31, 1998, $1.8 million of the credit line was utilized to provide a bank letter
of credit to secure insurance obligations. Management believes the Company's
operating cash flow, along with the bank credit lines, are sufficient to meet
future liquidity requirements.
Butler Building Systems, Ltd., the Company's United Kingdom subsidiary,
maintains a separate line of credit with its local bank for approximately $2.5
million at current exchange rates. Management believes that this separate bank
line of credit is sufficient to meet future liquidity requirements.
Capital expenditures were $5.1 million for the first three months of 1998
compared to $5.6 million in 1997. Total capital expenditures are expected to be
approximately $18.5 million in 1998 and will be made primarily for the Company's
domestic operations. In 1997, capital expenditures totaled $30.2 million, and
were made primarily to increase capacity in the domestic and international metal
buildings businesses, as well as the architectural products business.
On January 20, 1998 the board of directors of declared a regular quarterly
dividend of $.14 per share payable on April 7, 1998 to shareholders of record on
March 24, 1998.
RESULTS OF OPERATIONS
Net sales of $194 million were up 3% from first quarter 1997 sales of $188
million. The 1997 sales amount included $6.6 million in sales from the Grain
Systems division which was sold in June 1997. The core U.S. metal buildings
business and the Lester wood frame buildings business had lower sales than a
year ago, due primarily to wet weather delaying the start and completion of
construction projects. The decline in sales for both businesses was more than
offset by increases in Architectural Products sales, and the sale of Butler Real
Estate projects.
The Architectural Products segment, which consist of the Vistawall group, had
increased sales for the quarter compared with the same period a year ago.
Shipments of engineered products and storefronts were particularly strong and
were the main contributor to Vistawall's increased sales for the quarter.
Net earnings for the quarter ended March 31, 1998 were $1.2 million or $.15 per
common share compared to $1.9 million or $.25 per common share in 1997 ($.05 is
from the Grain Systems division which was sold in June 1997). The domestic metal
buildings business operated at a lower level of earnings due to lower sales
volume in the first quarter of 1998. The international metal buildings business
incurred a somewhat larger loss than that of 1997, while Butler Real Estates'
earnings increased due to project sales. The Construction Services segment
incurred a loss in the first quarter due to lower revenues. The Vistawall
group's earnings increased due to greater volume.
Total backlog of $309 million increased 17% from comparable backlog of a year
ago.
Page 7
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ACCOUNTING STANDARDS
The Financial Accountings Standards Board issued Statement Number 130 "Reporting
of Comprehensive Income" which became effective in 1998. This statement
establishes standards for reporting and displaying of comprehensive income
items. The Company has adopted this statement and has chosen to disclose by
footnote the effect on interim reporting periods starting in 1998. The Company's
only comprehensive income item is Foreign Currency Translation Adjustments which
is disclosed.
In April 1998, the AICPA issued Statement of Position 98-5 Financial Reporting
of Costs of Start-up Activities, requiring the costs of start-up activities and
organization costs to be expensed as incurred. The effect of this new statement
on the Company is immaterial.
For additional comments, refer to the April 16, 1998 letter to shareholders,
which is attached as exhibit 19.
Page 8
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PART II. - OTHER INFORMATION
ITEM 2. Change in Securities.
On March 20, 1998, the Company entered into the Note Agreement
appended to this report as Exhibit 4 ( the "Note Agreement"), and
issued its $35 million Senior Notes to Metropolitan Life Insurance
Company in the form of Note attached as Exhibit A to the Note
Agreement. The Notes provide for payments of principal in the
amount of $3.5 million annually commencing March 20, 2004, and
mature on March 20, 2013. Interest is payable semiannually on
March 20, and September 20 of each year at 6.57% per annum.
Generally, section 7.5 of the Note Agreement imposes restrictions
on the payment of dividends in cash or property, the purchase of
the capital stock of the Company and certain other distributions
("Restricted Payments") if , after giving effect thereto, (I) the
aggregate amount of Restricted Payments made after December 31,
1997, to and including the date of the making of the Restricted
Payment would exceed the sum of (A) $15,000,000, plus (B) 75% of
Consolidated Net Income (or less 100% of any deficit) for each
fiscal year (or portion thereof) of the Company subsequent to
December 31, 1997, plus (C) the net cash proceeds received by the
Company after December 31, 1997, form the sale of shares of any
class of the Company's common or nonredeemable preferred stock and
(ii) no Default or Event of Default exists or would exist. A
similar note agreement providing for an additional $35 million of
borrowings, dated as of June 1, 1994, which appears as Exhibit 4.1
to the Company's Form 10-K for the year ended December 31, 1997
(the "1994 Note Agreement"), also contains restrictions on
Restricted Payments. Based on the above formula and the formula
appearing in the 1994 Note Agreement, an aggregate of $15 million
was available at March 31, 1998, for the payment of dividends and
other Restricted Payments.
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
4 Note Agreement dated as of March 1, 1998, Providing for $35
million of Senior Notes and Forms of Note and Subsidiary
Guaranty
19 April 16, 1998 letter to shareholders
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company has not filed any reports on Form 8-K during the
quarter ended March 31, 1998.
Page 9
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SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BUTLER MANUFACTURING COMPANY
May 13, 1998 /s/ John J. Holland
- ------------ ---------------------------
Date John J. Holland
Vice President - Finance
and Chief Financial Officer
May 13, 1998 /s/ Richard O. Ballentine
- ------------ -------------------------------
Date Richard O. Ballentine
Vice President, General Counsel
and Secretary
Page 10
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Exhibit 99
EXHIBIT INDEX
Exhibit
Number Description
- ------- ----------------------------------------------------------------------
4 Note Agreement dated as of March 1, 1998, providing for $35 million of
Senior Notes and Form of Note and Subsidiary Guaranty.
19 April 16, 1998 letter to shareholders
27 Financial Data Schedule
Schedules and Exhibits to the Note Agreement other than the Form of Note, and
Subsidiary Guaranty a list of which appears at the end of the table of Contents,
are not filed herewith and shall be furnished supplementary to the Commission
upon request.
Page 11
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Exhibit 4
BUTLER MANUFACTURING COMPANY
NOTE AGREEMENT
Dated as of March 1, 1998
$35,000,000 Principal Amount
6.57% Senior Notes
Due March 20, 2013
<PAGE> 13
Section 1. DESCRIPTION OF NOTES AND COMMITMENT.........................1
1.1. Description of Notes.......................................1
1.2. Commitment; Closing Date...................................1
1.3. Guaranty...................................................2
Section 2. PREPAYMENT OF NOTES........................................2
2.1. Required Prepayments.......................................2
2.2. Optional Prepayments.......................................3
2.3. Notice of Prepayments......................................3
2.4. Surrender of Notes on Prepayment or Exchange...............4
2.5. Direct Payment and Deemed Date of Receipt..................4
2.6. Allocation of Payments.....................................4
2.7. Payments Due on Saturdays, Sundays and Holidays............5
Section 3. REPRESENTATIONS............................................5
3.1. Representations of the Company.............................5
3.2. Representations of the Purchaser..........................12
Section 4. CLOSING CONDITIONS........................................13
4.1. Representations and Warranties............................13
4.2. Legal Opinions............................................14
4.3. Event of Default..........................................14
4.4. Payment of Fees and Expenses..............................14
4.5. Subsidiary Guaranty.......................................14
4.6. Credit Agreement..........................................14
4.7. Legality of Investment....................................14
4.8. Private Placement Number..................................14
4.9. Bank Waiver...............................................14
4.10. Proceedings and Documents.................................14
Section 5. INTERPRETATION OF AGREEMENT...............................15
5.1. Certain Terms Defined.....................................15
5.2. Accounting Principles.....................................23
5.3. Valuation Principles......................................23
5.4. Direct or Indirect Actions................................24
Section 6. AFFIRMATIVE COVENANTS.....................................24
6.1. Corporate Existence.......................................24
6.2. Insurance.................................................24
6.3. Taxes, Claims for Labor and Materials.....................24
6.4. Maintenance of Properties.................................24
<PAGE> 14
6.5. Maintenance of Records...................................24
6.6. Financial Information and Reports........................25
6.7. Inspection of Properties and Records.....................27
6.8. ERISA....................................................27
6.9. Compliance with Laws.....................................28
6.10. Acquisition of Notes.....................................28
6.11. Private Placement Number; NAIC...........................29
Section 7. NEGATIVE COVENANTS........................................29
7.1. Adjusted Consolidated Net Worth..........................29
7.2. Funded Debt..............................................29
7.3. Indebtedness of Subsidiaries.............................29
7.4. Liens....................................................30
7.5. Restricted Payments......................................31
7.6. Merger or Consolidation; Sale of Substantially
All Assets...........................................31
7.7. Sale of Assets...........................................32
7.8. Disposition of Stock of Restricted Subsidiaries..........33
7.9. Designation of Unrestricted Subsidiaries.................33
7.10. Transactions with Affiliates.............................34
7.11. Consolidated Tax Returns.................................34
7.12. Nature of Business.......................................34
Section 8. EVENTS OF DEFAULT AND REMEDIES THEREFOR..................34
8.1. Nature of Events.........................................34
8.2. Remedies on Default......................................35
8.3. Annulment of Acceleration of Notes.......................36
8.4. Other Remedies...........................................36
8.5. Conduct No Waiver; Collection Expenses...................36
8.6. Remedies Cumulative......................................37
8.7. Notice of Default........................................37
Section 9. AMENDMENTS, WAIVERS AND CONSENTS.........................37
9.1. Matters Subject to Modification..........................37
9.2. Solicitation of Holders of Notes.........................37
9.3. Binding Effect...........................................38
Section 10. FORM OF NOTES, REGISTRATION, TRANSFER, EXCHANGE AND
REPLACEMENT...........................................38
10.1. Form of Notes............................................38
10.2. Note Register............................................38
10.3. Issuance of New Notes upon Exchange or Transfer..........38
10.4. Replacement of Notes.....................................39
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Section 11. MISCELLANEOUS............................................39
11.1. Expenses.................................................39
11.2. Notices..................................................39
11.3. Reproduction of Documents................................40
11.4. Confidentiality..........................................40
11.5. Successors and Assigns...................................40
11.6. Law Governing............................................40
11.7. Headings.................................................40
11.8. Counterparts.............................................40
11.9. Reliance on and Survival of Provisions...................41
11.10. Integration and Severability.............................41
SCHEDULE I Principal Amount of Notes to Be Purchased................43
I Subsidiaries.............................................44
II Title to Properties......................................45
III Investments..............................................46
IV Funded Debt..............................................47
V Liens....................................................48
VI Current Insurance Carriers and Ratings...................49
EXHIBITS
A Form of 6.57% Senior Notes due March 20, 2013
B Form of Opinion of Purchaser's Counsel
C Form of Opinion of Company's and Guarantors' Counsel
D Form of Subsidiary Guaranty
<PAGE> 16
BUTLER MANUFACTURING COMPANY
NOTE AGREEMENT
Dated as of March 1, 1998
To the Purchaser
Named in Attached Schedule I
Ladies and Gentlemen:
BUTLER MANUFACTURING COMPANY, a Delaware corporation (the "Company"),
agrees with you as follows:
Section 1. DESCRIPTION OF NOTES AND COMMITMENT
1.1. Description of Notes. The Company has authorized the issuance and sale
of $35,000,000 aggregate principal amount of its Senior Notes (the "Notes"), to
be dated the date of issuance, to bear interest from such date (computed on the
basis of a 360-day year comprised of twelve 30-day months), payable
semi-annually on March 20 and September 20 of each year, commencing September
20, 1998, and at maturity, at the rate of 6.57% per annum prior to maturity and
shall bear interest on any overdue principal (including any overdue optional or
required prepayment), on any overdue Make-Whole Amount, and (to the extent
legally enforceable) on any overdue installment of interest at a rate equal to
the greater of (i) 8.57% per annum or (ii) 2% over the rate of interest publicly
announced by Nations Bank of Texas, N.A., as its "base" or "prime" rate. The
Notes shall be expressed to mature on March 20, 2013 and shall be substantially
in the form attached as Exhibit A. All payments on the Notes shall rank pari
passu with all senior unsecured Indebtedness including without limitation any
owed to banks. The term "Notes" as used herein shall include each Note delivered
pursuant to this Note Agreement (the "Agreement") and each Note delivered in
substitution or exchange therefor and, where applicable, shall include the
singular number as well as the plural. Any reference to you in this Agreement
shall in all instances be deemed to include any nominee of yours or any separate
account or other person on whose behalf you are purchasing Notes. You are
sometimes referred to herein as the "Purchaser."
1.2. Commitment; Closing Date. Subject to the terms and conditions hereof
and on the basis of the representations and warranties hereinafter set forth,
the Company agrees to issue and sell to you, and you agree to purchase from the
Company, Notes in the aggregate principal amount set forth opposite your name in
the attached Schedule I at a price of 100% of the principal amount thereof.
1
<PAGE> 17
Delivery of and payment for the Notes shall be made at the offices of
Gardner, Carton & Douglas, 321 North Clark Street, Quaker Tower, Chicago,
Illinois 60610, at 9:00 a.m., Chicago time, on March 20, 1998 or on such other
date not later than March 31, 1998, as you and the Company may mutually agree
(the "Closing Date"). The Notes shall be delivered to you in the form of one or
more Notes in fully registered form, issued in your name or in the name of your
nominee. Delivery of the Notes to you on the Closing Date shall be against
payment of the purchase price therefor in Federal funds or other funds in U.S.
dollars immediately available at NationsBank of Texas, Dallas, Texas, A.B.A. No.
111-000-025, Attention: Corporate Loans, for deposit in Account No. 375-0953187,
Reference: Butler Manufacturing Company. If on the Closing Date the
Company shall fail to tender the Notes to you, you shall be relieved of all
remaining obligations under this Agreement. Nothing in the preceding sentence
shall relieve the Company of any liability occasioned by such failure to deliver
the Notes. The funding and other obligations of the Purchaser under this
Agreement are several and not joint.
1.3. Guaranty. The Notes will be guaranteed by the Guarantors pursuant to
the Subsidiary Guaranty, provided that, upon request of the Company, if all
amounts due and owed under the Subsidiary Guaranty have been paid in full, the
Purchaser will agree to terminate the Subsidiary Guaranty if and when the
subsidiary guaranty delivered pursuant to the Credit Agreement is terminated. If
in the future any Subsidiary guarantees any indebtedness under the Credit
Agreement other than pursuant to the subsidiary guaranty delivered pursuant to
the Credit Agreement or any other senior unsecured indebtedness incurred by the
Company, it being acknowledged that such guaranty must comply with Section 7 of
this Agreement, such Subsidiary shall contemporaneously execute and deliver to
the Purchaser a guaranty substantially similar to the Subsidiary Guaranty.
Section 2. PREPAYMENT OF NOTES
2.1. Required Prepayments.
(a) In addition to payment of all outstanding principal of the Notes at
maturity and regardless of the amount of Notes which may be outstanding from
time to time, the Company shall prepay and there shall become due and payable on
March 20 in each year $3,500,000 of the aggregate unpaid principal amount of the
Notes or such lesser amount as would constitute payment in full on the Notes,
commencing March 20, 2004 and ending March 20, 2012, inclusive, with the
remaining principal payable on March 20, 2013. Each such prepayment shall be at
a price of 100% of the principal amount prepaid, together with interest accrued
thereon to the date of prepayment, without a Make-Whole Amount.
(b) In the event of a Change of Control Event, the Company, upon notice as
provided below, shall offer to prepay the entire principal amount outstanding of
the Notes at 100% of the principal amount thereof and without payment of the
Make-Whole Amount or any premium. The Company shall give notice of any offer to
prepay the Notes to each holder of the Notes within three Business Days after
any executive officer has knowledge of a Change of Control Event and in any
event not later than the date of such Change of Control Event. Such notice shall
be certified by the
2
<PAGE> 18
principal accounting officer or principal financial officer and shall specify
(i) the nature of the Change of Control Event, (ii) the date fixed for
prepayment, which shall not be later than the Effective Date of the Change of
Control, (iii) the estimated Effective Date of the Change of Control, if it has
not occurred, (iv) the accrued and unpaid interest applicable to the prepayment
and (v) the date by which any holder of a Note that wishes to accept such offer
must deliver notice thereof to the Company, which shall not be later than 10
calendar days prior to the date fixed for prepayment. Not earlier than seven
calendar days prior to the date fixed for prepayment, the Company shall give
written notice to each holder of the Notes of those holders who have given
notices of acceptance of the Company's offer, and the principal amount of Notes
held by each, and thereafter any holder may change its response to the Company's
offer by written notice to such effect delivered to the Company not less than
three calendar days prior to the date fixed for prepayment. Upon receipt by the
Company of any non-revoked notice of acceptance from any holder within the
required time period, the aggregate principal amount of Notes held by such
holder shall become due and payable on the prepayment date. Failure of a holder
to respond to a notice shall be deemed to be a rejection by such holder of the
offer to prepay.
2.2. Optional Prepayments.
(a) Upon notice as provided in Section 2.3, the Company may prepay the
Notes, in whole or in part, at any time on an interest payment date, in an
amount not less than $1,000,000, an integral multiple of $100,000 in excess
thereof or such lesser amount as shall constitute payment in full of the Notes.
Each such prepayment shall be at a price of 100% of the principal amount to be
prepaid, plus interest accrued thereon to the date of prepayment, plus the
Make-Whole Amount.
(b) Any optional prepayment of less than all of the Notes outstanding
pursuant to Section 2.2(a) or Section 7.7 shall be applied in accordance with
Section 2.6.
(c) Except as provided in Section 2.1, Section 7.7, and this Section 2.2,
the Notes shall not be prepayable in whole or in part.
2.3. Notice of Prepayments. The Company shall give notice of any optional
prepayment of the Notes pursuant to Section 2.2(a) to each holder of the Notes
not less than 10 Business Days nor more than 60 days before the date fixed for
prepayment, specifying (i) such date, (ii) the principal amount of the holder's
Notes to be prepaid on such date, (iii) the Determination Date for calculating
the Make-Whole Amount, (iv) a calculation of the estimated amount of the
Make-Whole Amount showing in detail the method of calculation and (v) the
accrued interest applicable to the prepayment. Notice of prepayment having been
so given, the aggregate principal amount of the Notes specified in such notice,
together with the Make-Whole Amount, if any, and accrued interest thereon shall
become due and payable on the prepayment date.
The Company also shall give notice to each holder of the Notes to be
prepaid pursuant to Section 2.2(a) by telecopy, telegram, telex or other
same-day written communication, confirmed by notice delivered by overnight
courier, as soon as practicable but in any event not less than 1 Business
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<PAGE> 19
Day prior to the prepayment date, of the Make-Whole Amount applicable to such
prepayment and the details of the calculations used to determine the amount of
such Make-Whole Amount.
2.4. Surrender of Notes on Prepayment or Exchange. Subject to Section 2.5,
upon any partial prepayment of a Note pursuant to this Section 2 or partial
exchange of a Note pursuant to Section 10.3, such Note may, at the option of the
holder thereof, (i) be surrendered to the Company pursuant to Section 10.3 in
exchange for a new Note or Notes equal to the principal amount remaining unpaid
on the surrendered Note, or (ii) be made available to the Company, at the
Company's principal office, for notation thereon of the portion of the principal
so prepaid or exchanged. No Note shall be issued in lieu of a Note the entire
principal amount of which has been prepaid.
2.5. Direct Payment and Deemed Date of Receipt. Notwithstanding any other
provision contained in the Notes or this Agreement, the Company will pay all
sums becoming due on each Note held by you or any subsequent Institutional
Holder by wire transfer of immediately available funds to such account as you or
such subsequent Institutional Holder have designated in Schedule I, or as you or
such subsequent Institutional Holder may otherwise designate by notice to the
Company (upon which notice the Company may rely without independent
investigation), in each case without presentment and without notations being
made thereon, except that any such Note so paid or prepaid in full shall be
surrendered to the Company for cancellation. Any wire transfer shall identify
such payment in the manner set forth in Schedule I and shall identify the
payment as principal, Make- Whole Amount, if any, and/or interest. You and any
subsequent Institutional Holder of a Note to which this Section 2.5 applies
agree that, before selling or otherwise transferring any such Note, you or it
will make a notation thereon of the aggregate amount of all payments of
principal theretofore made and of the date to which interest has been paid and,
upon written request of the Company, will provide a copy of such notations to
the Company. Any payment made pursuant to this Section 2.5 shall be deemed
received on the payment date only if received before 12:00 p.m., New York time.
Payments received after 12:00 p.m., New York time, shall be deemed received on
the next succeeding Business Day.
2.6. Allocation of Payments.
(a) In the case of a prepayment pursuant to Sections 2.1 or 2.2(a), if less
than the entire principal amount of all the Notes outstanding is to be paid, the
Company will prorate the aggregate principal amount to be paid among the Notes
in proportion to the aggregate unpaid principal amounts thereof.
(b) Any optional prepayment of less than all of the Notes outstanding
pursuant to Section 2.2(a) shall be applied to the outstanding principal amount
of the Notes in inverse order of maturity.
(c) Any optional prepayment pursuant to Section 7.7 or repurchase pursuant
to Section 6.10 of less than all of the Notes outstanding shall be applied to
reduce the principal amount of each of the remaining prepayments required by
Section 2.1 and the payment due at maturity in proportion to the ratio that the
principal amount of such prepayment or repurchase bears to the principal amount
of
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<PAGE> 20
outstanding Notes immediately prior to such prepayment or repurchase (after
giving effect to any prepayment made pursuant to Section 2.1 on the date of such
prepayment or repurchase). It is the intent of the parties to this Agreement
that each Note shall not be adversely affected in terms of yield or Weighted
Average Life to Maturity by any prepayment pursuant to Section 7.7 or repurchase
purchase to Section 6.10 except as consented to by the holder of such Note.
Section 2.7. Payments Due on Saturdays, Sundays and Holidays. If the date of any
required prepayment of the Notes or any interest payment date on the Notes or
the date fixed for any other payment of any Note or exchange of any Note is a
day other than a Business Day, then such payment, prepayment or exchange shall
be made on the next succeeding Business Day with interest payable through the
date of payment.
Section 3. REPRESENTATIONS
3.1. Representations of the Company. As an inducement to, and as part of
the consideration for, your purchase of the Notes pursuant to this Agreement,
the Company represents and warrants to you as follows:
(a) Corporate Organization and Authority. The Company is a solvent
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, has all requisite corporate power and authority to own
and operate its properties, to carry on its business as now conducted and as
presently proposed to be conducted, to enter into and perform this Agreement and
to issue and sell the Notes as contemplated in this Agreement. Each of the
Guarantors has the corporate power and authority and the legal right to execute
and deliver, and to perform its obligations under the Subsidiary Guaranty, and
has taken all necessary corporate action to authorize its execution, delivery
and performance of the Subsidiary Guaranty.
(b) Qualification to Do Business. The Company is duly licensed or qualified
and in good standing as a foreign corporation authorized to do business in each
jurisdiction where the nature of the business transacted by it or the character
of its properties owned or leased makes such qualification or licensing
necessary, except for jurisdictions, individually or in the aggregate, where the
failure to be so licensed or qualified could not reasonably be expected to have
a Material Adverse Effect.
(c) Subsidiaries. The Company has no Subsidiaries except those listed in
the attached Annex I, which correctly sets forth the jurisdiction of
incorporation and the percentage of the outstanding Voting Stock or equivalent
interest of each Subsidiary which is owned, of record or beneficially, by the
Company and/or one or more Subsidiaries. Each Subsidiary which is a Restricted
Subsidiary is so designated in Annex I. Each Subsidiary has been duly organized
and is validly existing and in good standing under the laws of its jurisdiction
of incorporation or organization and is duly licensed or qualified and in good
standing as a foreign corporation in each other jurisdiction where the nature of
the business transacted by it or the character of its properties owned or leased
makes such qualification or licensing necessary, except for jurisdictions,
individually or in the
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<PAGE> 21
aggregate, where the failure to be so licensed or qualified could not reasonably
be expected to have a Material Adverse Effect. Each Subsidiary has full
corporate power and authority to own and operate its properties and to carry on
its business as now conducted and as presently proposed to be conducted. The
Company and each Subsidiary have good and marketable title to all of the shares
they purport to own of the capital stock of each Subsidiary, free and clear in
each case of any Lien.
(d) Financial Statements. The consolidated balance sheets of the Company
and its Subsidiaries as of December 31, 1995 and 1996, and the related
consolidated statements of operations, retained earnings and cash flows for each
of the three years in the period ended December 31, 1996 accompanied by the
reports and unqualified opinion of KPMG Peat Marwick, independent public
accountants, copies of which have heretofore been delivered to you, were
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved (except as otherwise noted
therein) and present fairly the consolidated financial condition of the Company
and its Subsidiaries on such dates and their consolidated results of operations
and cash flows for the years then ended. The consolidated balance sheets of the
Company and its Subsidiaries as of December 31, 1997, and the related
consolidated statements of operations, retained earnings and cash flows for the
one year period ended December 31, 1997 accompanied by the reports and
unqualified opinion of Arthur Andersen LLP, independent public accountants,
copies of which have heretofore been delivered to you, were prepared in
accordance with generally accepted accounting principles consistently applied
throughout the periods involved (except as otherwise noted therein) and present
fairly the consolidated financial condition of the Company and its Subsidiaries
on such dates and their consolidated results of operations and cash flows for
the years then ended
(e) No Contingent Liabilities or Adverse Changes. Except as disclosed or
reflected in the audited consolidated balance sheet of the Company and its
Subsidiaries as of December 31, 1997 referred to in paragraph (d) above and the
notes to consolidated financial statements thereto, neither the Company nor any
Subsidiary has any contingent liabilities which, individually or in the
aggregate, are material to the Company and its Subsidiaries taken as a whole,
and since December 31, 1997, there have been no changes in the business,
prospects, profits, properties or condition, financial or otherwise, of the
Company and its Subsidiaries except changes occurring in the ordinary course of
business, which, individually or in the aggregate, have not had a Material
Adverse Effect.
(f) No Pending Litigation or Proceedings. There are no actions, suits or
proceedings pending or, to the knowledge of the Company, threatened against or
affecting the Company or any of its Subsidiaries, at law or in equity or before
or by any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, which
could reasonably be expected to result, either individually or in the aggregate,
in a Material Adverse Effect.
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<PAGE> 22
(g) Compliance with Law.
(i) Neither the Company nor any Subsidiary is: (x) in default with
respect to, or in violation of, any order, writ, injunction or decree
of any court to which it is a named party; or (y) in default under, or
in violation of, any law, rule, regulation, ordinance or order relating
to its or their respective businesses or properties, the sanctions and
penalties resulting from which defaults or violations described in
clauses (x) and (y) could reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect.
(ii) Neither the Company nor any Subsidiary nor any Affiliate of
the Company is an entity defined as a "designated national" within the
meaning of the Foreign Assets Control Regulations, 31 C.F.R. Chapter V,
or is in violation of, any Federal statute or Presidential Executive
Order, or any rules or regulations of any department, agency or
administrative body promulgated under any such statute or Order,
concerning trade or other relations with any foreign country or any
citizen or national thereof or the ownership or operation of any
property, and no restriction or prohibition under any such statute,
Order, rule or regulation which could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
(h) ERISA.
(i) The Company and each ERISA Affiliate have operated and
administered each Plan in compliance with all applicable laws except
for such instances of noncompliance as have not resulted in and could
not reasonably be expected to result in 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), and no event, transaction or condition has
occurred or exists that could 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 result in a Material Adverse Effect.
(ii) The present value of the aggregate benefit liabilities under
each of the Plans (other than Multiemployer Plans) which are defined
benefit plans, determined as of the end of such Plan's most recently
ended plan year on the basis of the actuarial assumptions specified for
funding purposes in such Plan's most recent actuarial valuation report,
did not exceed the aggregate current value of the assets of such Plan
allocable to such benefit liabilities unless such excess could not
reasonably be expected to result in a Material Adverse Effect. The term
"benefit liabilities" has the meaning specified in Section 4001 of
ERISA and the terms "current value" and "present value" have the
meaning specified in Section 3 of ERISA.
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<PAGE> 23
(iii) 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 could
reasonably be expected to result in a Material Adverse Effect.
(iv) The expected postretirement 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 has not resulted and could not reasonably be expected to
result in a Material Adverse Effect.
(v) The execution and delivery of this Agreement and the issuance
and sale of the Notes hereunder will not involve any transaction that
is subject to the prohibitions of Section 406 of ERISA or in connection
with which a tax could be imposed pursuant to Section 4975(c)(1)(A)-(D)
of the Code. The representation by the Company in the first sentence of
this Section 3.1(h)(v) is made in reliance upon and subject to the
accuracy of your representation in Section 3.2 as to the sources of the
funds used to pay the purchase price of the Notes to be purchased by
you.
(i) Title to Properties. Except as set forth on Annex II, the Company and
its Subsidiaries have (i) good and marketable title in fee simple or its
equivalent under applicable law to all the real property reflected as owned by
them on the most recent audited balance sheet described in the foregoing
paragraph (d) of this Section 3.1 or subsequently acquired by them and (ii) good
title to all of the personal property reflected in such balance sheet or
subsequently acquired by the Company or its Subsidiaries (except as sold or
otherwise disposed of in the ordinary course of business), in each case free
from all Liens or defects in title except those permitted by Section 7.5.
(j) Leases. The Company and its Subsidiaries enjoy peaceful and undisturbed
possession under all leases under which they are a lessee or are operating,
except for leases the termination of which, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect.
(k) Franchises, Patents, Trademarks and Other Rights. The Company and its
Subsidiaries have all franchises, permits, licenses and other authority
necessary to carry on their businesses as now being conducted and are not in
default thereunder, except for such franchises, permits, licenses or other
authority and defaults which, individually or in the aggregate, do not and could
not reasonably be expected to have a Material Adverse Effect. The Company and
its Subsidiaries own or possess all patents, trademarks, service marks, trade
names, copyrights, licenses and rights with respect to the foregoing necessary
for the present conduct of their respective businesses, without any known
conflict with the rights of others which could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
(l) Authorization; No Conflict. This Agreement and the Notes have been duly
authorized
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<PAGE> 24
on the part of the Company and the Agreement does, and the Notes when issued
will, constitute the legal, valid and binding obligations of the Company,
enforceable in accordance with their terms, except to the extent that
enforcement of the Notes may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws of general application relating to or
affecting the enforcement of the rights of creditors or by equitable principles,
regardless of whether enforcement is sought in equity or at law. The Subsidiary
Guaranty has been duly authorized on the part of each of the Guarantors and when
executed and delivered will constitute a legal, valid and binding obligation of
each of the Guarantors, enforceable in accordance with its terms, except to the
extent that enforcement thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws of general application
relating to or affecting the enforcement of the rights of creditors or by
equitable principles, regardless of whether enforcement is sought in equity or
at law. The sale of the Notes and compliance by the Company and the Guarantors
with all of the provisions of this Agreement, the Notes and the Subsidiary
Guaranty, as the case may be, (i) are within their respective corporate powers,
(ii) have been duly authorized by proper corporate action, (iii) are legal and
will not violate any provisions of any law or regulation or order of any court,
governmental authority or agency and (iv) will not result in any breach of any
of the provisions of, or constitute a default under, or result in the creation
of any Lien on any property of the Company or any Subsidiary under the
provisions of, any charter document, by-law, loan agreement or other agreement
or instrument to which the Company or any Subsidiary is a party or by which any
of them or their property may be bound.
(m) No Defaults. No event has occurred and no condition exists which, upon
the issuance of the Notes, would constitute a Default or an Event of Default.
Neither the Company nor any Subsidiary is in default under any charter document,
by-law, loan agreement or other agreement or instrument to which it is a party
or by which it or its property may be bound, except for defaults, individually
or in the aggregate, which do not, and could not reasonably be expected to, have
a Material Adverse Effect.
(n) Governmental Consent. Neither the nature of the Company or any of its
Subsidiaries, their respective businesses or properties, nor any relationship
between the Company or any of its Subsidiaries and any other Person, nor any
circumstances in connection with the offer, issuance, sale or delivery of the
Notes is such as to require a consent, approval or authorization of, or
withholding of objection on the part of, or filing, registration or
qualification with, any governmental authority on the part of the Company or any
Subsidiary in connection with the execution, delivery and performance of this
Agreement or the Subsidiary Guaranty or the offer, issuance, sale or delivery of
the Notes.
(o) Taxes. All tax returns required to be filed by the Company or any
Subsidiary in any jurisdiction have been filed, and all taxes, assessments, fees
and other governmental charges upon the Company or any Subsidiary, or upon any
of their respective properties, income or franchises, which are due and payable,
have been paid timely or within appropriate extension periods or contested in
good faith by appropriate proceedings and the collection thereof has been stayed
by the applicable governmental authority during the period of the contest and as
to which adequate reserves are
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maintained in accordance with generally accepted accounting principles. The
Company does not know of any proposed additional tax assessment against it or
any Subsidiary for which adequate provision has not been made on its books. The
respective Federal income tax liability of the Company and its Subsidiaries have
been finally determined by the Internal Revenue Service and satisfied for all
taxable years up to and including the taxable year ended December 31, 1991 and
no material controversy in respect of additional taxes due since such date is
pending or, to the Company's knowledge, has been threatened. The provisions for
taxes on the books of the Company and each Subsidiary are adequate for all open
years and for the current fiscal period.
(p) Status under Certain Statutes. Neither the Company nor any Subsidiary
is: (i) a "public utility company" or a "holding company," or an "affiliate" or
a "subsidiary company" of a "holding company," or an "affiliate" of such a
"subsidiary company," as such terms are defined in the Public Utility Holding
Company Act of 1935, as amended, or (ii) a "public utility" as defined in the
Federal Power Act, as amended, or (iii) an "investment company" or an
"affiliated person" thereof or an "affiliated person" of any such "affiliated
person," as such terms are defined in the Investment Company Act of 1940, as
amended.
(q) Private Offering. Neither the Company nor George K. Baum & Company (the
only Person authorized or employed by the Company as agent, broker, dealer or
otherwise in connection with the offering of the Notes or any similar security
of the Company) has offered any of the Notes or any similar security of the
Company for sale to, or solicited offers to buy any thereof from, or otherwise
approached or negotiated with respect thereto with, any prospective purchaser,
other than not more than 25 institutional investors, including the Purchaser,
each of whom was offered all or a portion of the Notes at private sale for
investment purposes only. Neither the Company nor anyone acting on its
authorization will offer the Notes or any part thereof or any similar securities
for issuance or sale to, or solicit any offer to acquire any of the same from,
anyone so as to bring the issuance and sale of the Notes within the provisions
of Section 5 of the Securities Act.
(r) Effect of Other Instruments. Neither the Company nor any Subsidiary is
bound by any agreement or instrument or subject to any charter or other
corporate restriction which, individually or in the aggregate, (i) in any way
materially restricts any Subsidiary's ability to pay dividends or make advances
to the Company or (ii) has or could reasonably be expected to have a Material
Adverse Effect.
(s) Use of Proceeds. The Company will apply the net proceeds from the sale
of the Notes to repay Indebtedness to banks and for working capital purposes.
None of the transactions contemplated in this Agreement (including, without
limitation thereof, the use of the proceeds from the sale of the Notes) will
violate or result in a violation of Section 7 of the Exchange Act, or any
regulations issued pursuant thereto, including, without limitation, Regulations
G, T, U and X of the Board of Governors of the Federal Reserve System (12
C.F.R., Chapter II). Neither the Company nor any Subsidiary owns or presently
intends to carry or purchase any "margin stock" within the meaning of Regulation
G, and none of the proceeds from the sale of the Notes will be used to purchase
or carry or refinance any borrowing the proceeds of which were used to purchase
or carry
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<PAGE> 26
any "margin stock" or "margin security" in violation of Regulations G, T, U or
X.
(t) Condition of Property. All of the facilities of the Company and its
Subsidiaries are in sound operating condition and repair except for facilities
being repaired in the ordinary course of business or facilities held for sale
which, individually or in the aggregate, are not material to the Company and its
Subsidiaries, on a consolidated basis.
(u) Books and Records. The Company and each of its Subsidiaries (i)
maintain books, records and accounts in reasonable detail which accurately and
fairly reflect their respective transactions and business affairs, and (ii)
maintain a system of internal accounting controls sufficient to provide
reasonable assurances that transactions are executed in accordance with
management's general or specific authorization and to permit preparation of
financial statements in accordance with generally accepted accounting
principles.
(v) Environmental Compliance. The operations of the Company and each
Subsidiary (including, without limitation, all operations and conditions at or
in the Facilities) comply in all material respects with all Environmental Laws;
the Company and each Subsidiary have obtained all permits under Environmental
Laws necessary to their respective operations, and all such permits are in good
standing, and the Company and each Subsidiary are in compliance with all terms
and conditions of such permits, except those with which the failure to comply
could not reasonably be expected to have a Material Adverse Effect; and neither
the Company nor any of its Subsidiaries has any known liability (contingent or
otherwise) in connection with any Release of any Hazardous Materials by the
Company or any of its Subsidiaries or the existence of any Hazardous Material
on, under or about any Facility that could give rise to an Environmental Claim
that, individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
(w) Full Disclosure. Neither the Private Placement Memorandum dated
February 1998 (including the enclosures) prepared by George K. Baum & Company
(the "Memorandum"), the financial statements referred to in paragraph (d) of
this Section 3.1, nor this Agreement, nor any other written statement or
document furnished by the Company to you in connection with the negotiation of
the sale of the Notes, taken together, contain any untrue statement of a
material fact or omit a material fact necessary to make the statements contained
therein or herein not misleading in light of the circumstances under which they
were made. There is no fact (exclusive of general economic, political or social
conditions or trends) particular to the Company and known by the Company which
the Company has not disclosed to you in writing and which has or could
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.
(x) Solvency of Company and Guarantors. After giving effect to the
transactions contemplated herein, (i) the present fair salable value of the
assets of each of the Guarantors and of the Company is in excess of the amount
that will be required by each to pay its respective probable liability on its
existing debts as said debts become absolute and matured, (ii) the Company has
received reasonably equivalent value in exchange for executing and delivering
the Notes and each of the Guarantors has received reasonably equivalent value in
exchange for executing and delivering the
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<PAGE> 27
Subsidiary Guaranty, (iii) the property remaining in the hands of each is not
unreasonably small capital, and (iv) each is able to pay its debts as they
mature.
(y) The current insurance carriers of the Company and its Restricted
Subsidiaries and the current ratings assigned to such carriers by A.M. Best
Company, Inc. are shown on Annex VI.
3.2. Representations of the Purchaser. (a) You represent, and in entering
into this Agreement the Company understands, that you are acquiring Notes for
your own account and not with a view to any distribution thereof; provided that
the disposition of your property shall at all times be and remain within your
control, subject, however, to compliance with Federal securities laws. You
acknowledge that the Notes have not been registered under the Securities Act and
you understand that the Notes must be held indefinitely unless they are
subsequently registered under the Securities Act or an exemption from such
registration is available. You have been advised that the Company does not
contemplate registering, and is not legally required to register, the Notes
under the Securities Act.
(b) You further represent that at least one of the following statements
is an accurate representation as to each source of funds (a "Source") to be used
by you to pay the purchase price of the Notes to be purchased by you hereunder:
(i) if you are an insurance company and the Source is a separate
account, the Source does not include assets allocated to any separate
account maintained by you in which any employee benefit plan (or its
related trust) has any interest, other than a separate account that is
maintained solely in connection with your fixed contractual obligations
under which the amounts payable, or credited, to such plan and to any
participant or beneficiary of such plan (including any annuitant) are
not affected in any manner by the investment performance of the
separate account; or
(ii) the Source is either (i) an insurance company pooled separate
account, within the meaning of Prohibited Transaction Exemption ("PTE")
90-1 (issued January 29, 1990), or (ii) a bank collective investment
fund, within the meaning of the PTE 91-38 (issued July 12, 1991) and,
except as you have disclosed to the Company in writing pursuant to this
paragraph (b), no employee benefit plan or group of plans maintained by
the same employer or employee organization beneficially owns more than
10% of all assets allocated to such pooled separate account or
collective investment fund; or
(iii) the Source constitutes assets of an "investment fund"
(within the meaning of Part V of the QPAM Exemption) managed by a
"qualified professional asset manager" or "QPAM" (within the meaning of
Part V of the QPAM Exemption), no employee benefit plan's assets that
are included in such investment fund, when combined with the assets of
all other employee benefit plans established or maintained by the same
employer or by an affiliate (within the meaning of Section V(c)(1) of
the QPAM Exemption) of such employer or by the same employee
organization and managed by such QPAM, exceed 20% of the total client
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<PAGE> 28
assets managed by such QPAM, the conditions of Part I(c) and (g) of the
QPAM Exemption are satisfied, neither the QPAM nor a person controlling
or controlled by the QPAM (applying the definition of "control" in
Section V(e) of the QPAM Exemption) owns a 5% or more interest in the
Company and (i) the identity of such QPAM and (ii) the names of all
employee benefit plans whose assets are included in such investment
fund have been disclosed to the Company in writing pursuant to this
paragraph (iii); or
(iv) the Source is a governmental plan; or
(v) the Source is one or more employee benefit plans, or a
separate account or trust fund comprised of one or more employee
benefit plans, each of which has been identified to the Company in
writing pursuant to this paragraph (v); or
(vi) the Source does not include assets of any employee benefit plan, other
than a plan exempt from the coverage of ERISA; or
(vii) the Source is an "insurance company general account" as such
term is defined in the Department of Labor Prohibited Transaction Class
Exemption 95-60 (issued July 12, 1995) ("PTE 95-60") and as of the date
of this Agreement there is no "employee benefit plan" with respect to
which the aggregate amount of such general account's reserves and
liabilities for the contracts held by or on behalf of such employee
benefit plan and all other employee benefit plans maintained by the
same employer (and affiliates thereof as defined in Section V(a)(1) of
PTE 95-60) or by the same employee organization (in each case
determined in accordance with the provisions of PTE 95-60) exceeds 10%
of the total reserves and liabilities of such general account (as
determined under PTE 95-60) (exclusive of separate account liabilities)
plus surplus as set forth in the National Association of Insurance
Commissioners Annual Statement filed with the state of domicile of such
Purchaser.
As used in this Section 3.2, the terms "employee benefit plan", "governmental
plan", "party in interest" and "separate account" shall have the respective
meanings assigned to such terms in Section 3 of ERISA.
Section 4. CLOSING CONDITIONS
Your obligation to purchase the Notes on the Closing Date shall be
subject to the performance by the Company of its agreements hereunder, which are
to be performed at or prior to the time of delivery of the Notes, and to the
following conditions to be satisfied on or before the Closing Date:
4.1. Representations and Warranties. The representations and warranties of
the Company and the Guarantors contained in this Agreement and the Subsidiary
Guaranty or otherwise made in writing in connection herewith or therewith shall
be true and correct on or as of the Closing Date and the Company shall have
delivered to you a certificate to such effect, dated the Closing Date and
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executed by an executive officer who is involved in financial matters on a
regular basis.
4.2. Legal Opinions. You shall have received from Gardner, Carton &
Douglas, who is acting as your special counsel in this transaction, and from
Lathrop & Gage, L.C., counsel for the Company and the Guarantors, and Richard O.
Ballentine, Esq., Vice President, General Counsel and Secretary of the Company
and an officer of each of the Guarantors, their respective opinions, dated such
Closing Date, in form and substance satisfactory to you and covering
substantially the matters set forth or provided in the attached Exhibits B and
C.
4.3. Event of Default. No Default or an Event of Default shall have
occurred and be continuing on the Closing Date, and the Company shall have
delivered to you a certificate to such effect, dated the Closing Date and
executed by an executive officer who is involved in financial matters on a
regular basis.
4.4. Payment of Fees and Expenses. The Company shall have paid all
reasonable fees, expenses, costs and charges, including the fees and expenses of
Gardner, Carton & Douglas, your special counsel, incurred by you and incident to
the proceedings in connection with, and transactions contemplated by, this
Agreement and the Notes.
4.5. Subsidiary Guaranty. The Guarantors shall have executed and delivered
the Subsidiary Guaranty.
4.6. Credit Agreement. The Company shall have delivered a copy of the
Credit Agreement, as in existence on the Closing Date, to you.
4.7. Legality of Investment. Your acquisition of the Notes shall constitute
a legal investment as of the Closing Date under the laws and regulations of each
jurisdiction to which you may be subject (without resort to any "basket" or
"leeway" provision which permits the making of an investment without
restrictions as to the character of the particular investment being made), and
such acquisition shall not subject you to any penalty or other onerous condition
in or pursuant to any such law or regulation; and you shall have received such
certificates or other evidence as you may reasonably request to establish
compliance with this condition.
4.8. Private Placement Number. A private placement number with respect to
the Notes shall have been issued by Standard & Poor's CUSIP Service Bureau (in
cooperation with the Securities Valuation Office of the National Association of
Insurance Commissioners).
4.9. Bank Waiver. Those lenders who are parties to (i) a Credit Agreement,
dated June 23, 1997, for a credit facility to the Company in the maximum
principal amount of $20,000,000, and (ii) a Credit Agreement, dated June 23,
1997, for a credit facility to the Company in the maximum principal amount of
$30,000,000, shall have executed and delivered to the Company a waiver of any
provisions contained in such Credit Agreements that prohibit the Company or the
Subsidiary Guarantors from entering into and performing the transactions
contemplated by this Agreement, and you shall have been provided a copy of such
waiver.
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4.10. Proceedings and Documents. All proceedings taken in connection with
the transactions contemplated by this Agreement, and all documents necessary to
the consummation of such transactions shall be satisfactory in form and
substance to you and your special counsel, and you and your special counsel
shall have received copies (executed or certified as may be appropriate) of all
legal documents or proceedings which you and they may reasonably request.
Section 5. INTERPRETATION OF AGREEMENT
5.1. Certain Terms Defined. The terms hereinafter set forth when used in
this Agreement shall have the following meanings:
Adjusted Consolidated Net Worth - The consolidated stockholders' equity
of the Company and its Restricted Subsidiaries, determined in accordance with
generally accepted accounting principles, less, as of any date of determination,
the amount, if any, by which the aggregate outstanding amount of Restricted
Investments made after the Closing Date exceeds 10% of consolidated
stockholders' equity of the Company and its Restricted Subsidiaries.
Affiliate - Any Person (other than a Restricted Subsidiary) (i) who is
a director or executive officer of the Company or any Restricted Subsidiary,
(ii) which directly or indirectly through one or more intermediaries controls,
or is controlled by, or is under common control with, the Company, (iii) which
beneficially owns or holds securities representing 5% or more of the combined
voting power of the Voting Stock of the Company or any Subsidiary or (iv) of
which securities representing 5% or more of the combined voting power of the
Voting Stock (or in the case of a Person which is not a corporation, 5% or more
of the equity) are beneficially owned or held by the Company or a Subsidiary.
The term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
Agreement - As defined in Section 1.1.
Bankruptcy Laws - As defined in Section 8.1(h)(ii).
Business Day - Any day, other than Saturday, Sunday or a legal holiday
or any other day on which banking institutions in Chicago or New York generally
are authorized by law to close.
Capitalized Lease - Any lease the obligation for Rentals with respect
to which, in accordance with generally accepted accounting principles, would be
required to be capitalized on a balance sheet of the lessee or for which the
amount of the asset and liability thereunder, as if so capitalized, would be
required to be disclosed in a note to such balance sheet.
Change of Control Event - the (i) acquisition through purchase or
otherwise, without the written consent of the Company, by any Person, or group
of Persons acting in concert, directly or
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indirectly, in one or more transactions, of beneficial ownership or control of
securities representing more than 50% of the combined voting power of the
Company's Voting Stock (including the agreement to act in concert by Persons who
beneficially own or control securities representing more than 50% of the
combined voting power of the Company's Voting Stock); or (ii) acquisition
through purchase or otherwise, with the written consent of the Company, by any
Person, or group of Persons acting in concert, directly or indirectly, in one or
more transactions, of beneficial ownership or control of securities representing
more than 50% of the combined voting power of the Company's Voting Stock
(including the agreement to act in concert by Persons who beneficially own or
control securities representing more than 50% of the combined voting power of
the Company's Voting Stock) and where less than one-third of the Directors of
the Company serving immediately prior to such acquisition, continue to serve as
Directors of the Company (or any successor thereof) after the consummation of
such acquisition.
Closing Date - As defined in Section 1.2.
Code - The Internal Revenue Code of 1986, as amended.
Consolidated Net Income - For any period, the net income (or deficit)
of the Company and its Restricted Subsidiaries for such period, determined on a
consolidated basis in accordance with generally accepted accounting principles
and after eliminating income or losses attributable to outstanding minority
interests, but excluding in any event (i) net income and losses of any
Restricted Subsidiary accrued prior to the date it became a Restricted
Subsidiary; (ii) net income and losses of any Person (other than a Restricted
Subsidiary), substantially all the assets of which have been acquired in any
manner, realized by such Person prior to the date of such acquisition; (iii) net
income and losses of any Person (other than a Restricted Subsidiary) with which
the Company or a Restricted Subsidiary shall have consolidated or which shall
have merged into or with the Company or a Restricted Subsidiary prior to the
date of such consolidation or merger; (iv) net income of any Person (other than
a Restricted Subsidiary) in which the Company or any Restricted Subsidiary has
an ownership interest except to the extent actually received in the form of cash
distributions to the Company or such Restricted Subsidiary; (v) any portion of
the net income of any Restricted Subsidiary which for any reason is legally or
contractually unavailable for payment of cash dividends to the Company or any
other Restricted Subsidiary; (vi) gains or losses resulting from any
reappraisal, revaluation, write-up or write-off of assets; (vii) any gains or
losses, or other earnings, properly classified as extraordinary in accordance
with generally accepted accounting principles; and (viii) any gains or losses on
the sale or other disposition of fixed or capital assets other than in the
ordinary course of business, and any taxes on such excluded gains and any tax
deductions or credits on account of any such excluded losses.
Consolidated Total Assets - The consolidated assets of the Company and
its Restricted Subsidiaries determined in accordance with generally accepted
accounting principles.
Consolidated Total Capitalization - The sum of Adjusted Consolidated
Net Worth and Funded
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Debt.
Credit Agreement - That certain Credit Agreement among the Company,
certain Lenders (as identified therein) and Nationsbank of Texas, N.A., as
Administrative Lender, dated as of June 28, 1994, as such agreement may be
amended, modified, supplemented or restated from time to time.
Default - Any event which, with the lapse of time or the giving of
notice, or both, would become an Event of Default.
Determination Date - The Business Day immediately preceding the date
fixed for a prepayment pursuant to Section 2.2(a) or Section 7.7 or the date of
declaration pursuant to Section 8.2.
Disposition - As defined in Section 7.7(a).
Effective Date of the Change of Control - The date on which a Change of
Control Event occurs.
Environmental Claim - Any notice of violation, claim, demand, abatement
order or other order by any governmental authority or any Person for any damage,
including, without limitation, personal injury (including sickness, disease or
death), tangible or intangible property damage, contribution, indemnity,
indirect or consequential damages, damage to the environment, nuisance,
pollution, contamination or other adverse effects on the environment, or for
fines, penalties or restrictions, resulting from or based upon (i) the existence
of a Release (whether sudden or non-sudden or accidental or non-accidental) of,
or exposure to, any Hazardous Material in, into or onto the environment at, in,
by, from or related to any Facility, (ii) the use, handling, transportation,
storage, treatment or disposal of Hazardous Materials in connection with the
operation of any Facility, or (iii) the violation, or alleged violation, of any
statutes, ordinances, orders, rules, regulations, permits, licenses or
authorizations of or from any governmental authority, agency or court relating
to environmental matters connected with the Facilities.
Environmental Laws - All laws relating to environmental matters,
including, without limitation, those relating to (i) fines, orders, injunctions,
penalties, damages, contribution, cost recovery compensation, losses or
injuries resulting from the Release or threatened Release of Hazardous
Materials and to the generation, use, storage, transportation, or disposal of
Hazardous Materials, in any manner applicable to the Company or any of its
Subsidiaries or any or their respective properties, including, without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act (42 U.S.C. Section 9601 et seq.), the Hazardous Material
Transportation Act (49 U.S.C. ss. 1801 et seq.), the Resource Conservation
and Recovery Act (42 U.S.C. ss. 6901 et seq.), the Federal Water Pollution
Control Act (33 U.S.C. ss. 1251 et seq.), the Clean Air Act (42 U.S.C. ss.
7401 et seq.), the Toxic Substances Control Act (15 U.S.C. ss. 2601 et
seq.), the Occupational Safety and Health Act (29 U.S.C. ss. 651 et seq.), and
the Emergency Planning and
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Community Right-to-Know Act (42 U.S.C. ss. 11001 et seq.), and (ii)
environmental protection, including, without limitation, the National
Environmental Policy Act (42 U.S.C. ss. 4321 et seq.), and comparable state
laws, each as amended or supplemented, and any similar or analogous local, state
and federal statutes and regulations promulgated pursuant thereto, each as in
effect as of the date of determination.
ERISA - The Employee Retirement Income Security Act of 1974, as amended
from time to time, and the rules and regulations promulgated thereunder from
time to time in effect.
ERISA Affiliate - Any trade or business (whether or not incorporated)
that is treated as a single employer together with the Company under Section 414
of the Code.
Event of Default - As defined in Section 8.1.
Exchange Act - The Securities Exchange Act of 1934, as amended, and as
it may be further amended from time to time.
Foreign Subsidiaries - The Subsidiaries which are organized,
established or maintained outside of the United States of America.
Facilities - Any real property (including, without limitation, all
buildings, fixtures or other improvements located thereon) now, or heretofore or
hereafter, owned, leased, operated or used (under permit or otherwise) by the
Company or any of its Subsidiaries or any of their respective predecessors.
Funded Debt - Of any Person, (i) all Indebtedness (other than
Capitalized Lease Obligations and Guaranties) having a final maturity of one
year or more from the date of origin thereof (or which is renewable or
extendible at the option of the obligor for a period or periods more than one
year from the date of origin), including current maturities, whether or not
included as current liabilities on the balance sheet of such Person prepared in
accordance with generally accepted accounting principles, (ii) all Capitalized
Lease Obligations of such Person, and (iii) all Guaranties of Indebtedness of
others (except Guaranties by the Company or any Restricted Subsidiary of Funded
Debt of a Restricted Subsidiary and Guaranties by a Restricted Subsidiary of
Funded Debt of the Company or another Restricted Subsidiary) having a final
maturity of one year or more from the date of origin thereof (or which is
renewable or extendible at the option of the obligor for a period or periods
more than one year from the date of origin).
Guaranties - All obligations (other than endorsements in the ordinary
course of business of negotiable instruments for deposit or collection) of a
Person guaranteeing or, in effect, guaranteeing any Indebtedness, dividend or
other obligation of any other Person in any manner, whether directly or
indirectly, including, without limitation, all obligations incurred through an
agreement, contingent or otherwise, by such Person: (i) to purchase such
Indebtedness or obligation or any property or
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assets constituting security therefor, (ii) to advance or supply funds (x) for
the purchase or payment of such Indebtedness or obligation, (y) to maintain
working capital or other balance sheet condition or (z) otherwise to advance or
make available funds for the purchase or payment of such Indebtedness or
obligation, (iii) to lease property or to purchase securities or other property
or services primarily for the purpose of assuring the owner of such Indebtedness
or obligation against loss in respect thereof, or (iv) otherwise to assure the
owner of the Indebtedness or obligation against loss in respect thereof. For the
purposes of all computations made under this Agreement, Guaranties in respect of
any Indebtedness for borrowed money shall be deemed to be Indebtedness equal to
the principal amount of such Indebtedness for borrowed money which has been
guaranteed, and Guaranties in respect of any other obligation or liability or
any dividend shall be deemed to be Indebtedness equal to the maximum aggregate
amount of such obligation, liability or dividend.
Guarantors - BMC Real Estate, Inc., BUCON, Inc., Butler Real Estate,
Inc., Butler Holdings, Inc., Innovative Building Technology, Inc., Lester's of
Minnesota, Inc. and Modu-Line Windows, Inc., each of which is a Subsidiary
listed on Annex I.
Hazardous Materials - (i) Any chemical, material or substance defined
as or included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "extremely hazardous waste," "restricted hazardous
waste," or "toxic substances" or words of similar import under any applicable
Environmental Laws; (ii) any oil, petroleum or petroleum derived substance, any
drilling fluids, produced waters and other wastes associated with the
exploration, development or production of crude oil, any flammable substances or
explosives, any radioactive materials, any hazardous wastes or substances, any
toxic wastes or substances or any other materials or pollutants that (a) pose a
hazard to any property of the Company or any of its Subsidiaries or to Persons
on or about such property or (b) cause such property to be in violation of any
Environmental Laws; (iii) friable asbestos, urea formaldehyde foam insulation,
electrical equipment which contains any oil or dielectric fluid containing
levels of polychlorinated biphenyls in excess of fifty parts per million; and
(iv) any other chemical, material or substance, exposure to which is prohibited,
limited or regulated by any governmental authority.
Indebtedness - For any Person, without duplication, all (i) obligations
for borrowed money or to pay the deferred purchase price of property or assets
(except trade account payables paid in the ordinary course), (ii) obligations
secured by any Lien upon property or assets owned by such Person, even though
such Person has not assumed or become liable for the payment of such
obligations, (iii) obligations created or arising under any conditional sale or
other title retention agreement with respect to property acquired,
notwithstanding the fact that the rights and remedies of the seller, lender or
lessor under such agreement in the event of default are limited to repossession
or sale of property, (iv) Capitalized Lease Obligations, and (v) Guaranties of
obligations of others of the character referred to in this definition.
Institutional Holder - Any bank, trust company, insurance company,
pension fund, mutual fund or other similar financial institution, including,
without limiting the foregoing, any "qualified
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institutional buyer" within the meaning of Rule 144A under the Securities Act,
which is or becomes a holder of any Note.
Investments - All investments made in cash or by delivery of property,
directly or indirectly, in any Person, whether by acquisition of shares of
capital stock, indebtedness or other obligations or securities or by loan,
advance, capital contribution or otherwise; provided, however, that
"Investments" shall not mean or include investments in property to be used, held
for use or consumed in the ordinary course of business.
Lien - Any mortgage, pledge, security interest, encumbrance, lien,
hypothecation, attachment or charge of any kind, including any agreement to
grant any of the foregoing, any conditional sale or other title retention
agreement, any lease in the nature thereof, any Capitalized Lease, and the
filing of or agreement to file any financing statement under the Uniform
Commercial Code of any jurisdiction in connection with any of the foregoing, but
excluding precautionary filings in connection with leases which are not
Capitalized Leases.
Make-Whole Amount - As of any Determination Date, if the Reinvestment
Yield on such Determination Date is lower than the interest rate payable on or
in respect of the Notes, the excess of (a) the present value of the principal
and interest payments to be foregone by any prepayment (exclusive of accrued
interest on such Notes through the date of prepayment) on such Notes to be
prepaid (taking into account the manner of application of such prepayment
required by Section 2.2(b)), determined by discounting (semi-annually on the
basis of a 360-day year composed of twelve 30-day months), such payments at a
rate that is equal to the Reinvestment Yield over (b) the aggregate principal
amount of such Notes then to be paid or prepaid. To the extent that the
Reinvestment Yield on any Determination Date is equal to or higher than the
interest rate payable on or in respect of such Notes, the Make-Whole Amount is
zero.
Material Adverse Effect - (i) A material adverse effect on the
business, properties, assets, results of operations, prospects or condition,
financial or otherwise, of the Company and its Restricted Subsidiaries, taken as
a whole, (ii) the material impairment of the ability of the Company to perform
its obligations under this Agreement or the Notes, (iii) the material impairment
of the ability of any Guarantor or group of Guarantors, which individually or
collectively are material to the Company and its Restricted Subsidiaries as a
whole, to perform its or their obligations under the Subsidiary Guaranty, or
(iv) the impairment of the ability of the holders of the Notes to enforce any of
such obligations.
Memorandum - As defined in Section 3.1(w).
Notes - As defined in Section 1.1.
PBGC - The Pension Benefit Guaranty Corporation or any successor
thereto.
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Person - Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
Plan - An "employee benefit plan" (as defined in Section 3(3) of ERISA)
that is or, within the preceding five years, has been established or maintained,
or to which contributions are or, within the preceding five years, have been
made or required to be made, by the Company or any ERISA Affiliate or with
respect to which the Company or any ERISA Affiliate may have any liability.
Purchaser - As defined in Section 1.1.
Reinvestment Yield - The sum of (i) 0.50% plus (ii) the yield as
compiled by and published on the display designated as PX-7 Bloomberg Financial
Services Markets Screen (or other on-the-run service acceptable to the holders
of not less than a majority in principal amount of the outstanding Notes) at
12:00 P.M. (New York time) on the Determination Date for U.S. Treasury
Securities having a maturity equal to the Weighted Average Life to Maturity of
the Notes then being prepaid or paid as of the date of prepayment or payment,
rounded to the nearest month, or if such yields shall not be reported as of such
time or the yields reported as of such time are not ascertainable in accordance
with the preceding clause, then the arithmetic mean of the yields published in
the statistical release designated H.15(519) of the Board of Governors of the
Federal Reserve System under the caption "U.S. Government Securities--Treasury
Constant Maturities" (the "statistical release") for the maturity corresponding
to the remaining Weighted Average Life to Maturity of the Notes then being
prepaid or paid as of the date of such prepayment or payment rounded to the
nearest month. For purposes of calculating the Reinvestment Yield, the most
recent weekly statistical release published prior to the applicable
Determination Date shall be used. If no maturity exactly corresponding to such
rounded Weighted Average Life to Maturity shall appear in the statistical
release, or in any or other acceptable service, yields for the two most closely
corresponding published maturities (one of which occurs prior and the other
subsequent to the Weighted Average Life to Maturity) shall be calculated
pursuant to this provision and the Reinvestment Yield shall be interpolated from
such yields on a straight-line basis (rounding in each of such relevant periods,
to the nearest month).
Release - Any release, spill, emission, leaking, pumping, pouring,
injection, escaping, deposit, disposal, discharge, dispersal, leaching or
migration into the indoor or outdoor environment (including, without limitation,
the abandonment or disposal of any barrels, containers or other closed
receptacles containing any Hazardous Materials), or into or out of any Facility,
including the movement of any Hazardous Material through the air, soil, surface
water, groundwater or property.
Rentals - As of the date of any determination thereof, all fixed
payments (including all payments which the lessee is obligated to make to the
lessor on termination of the lease or surrender of the property) payable by the
Company or a Restricted Subsidiary, as lessee or sublessee under a lease of real
or personal property, but exclusive of any amounts required to be paid by the
Company
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or a Restricted Subsidiary (whether or not designated as rents or additional
rents) on account of maintenance, repairs, insurance, taxes, assessments,
amortization and similar charges. Fixed rents under any so-called "percentage
leases" shall be computed on the basis of the minimum rents, if any, required to
be paid by the lessee, regardless of sales volume or gross revenues.
Restricted Investment - Any Investment by the Company or any Subsidiary
other than the following:
(i) Investments existing as of the date of this Agreement which are listed
in the attached Annex III;
(ii) Investments in Restricted Subsidiaries or in Persons which,
simultaneously with such Investment, become Restricted Subsidiaries;
(iii) Investments in certificates of deposit, time deposits and
banker's acceptances with final maturities of one year or less issued
by United States or Canadian commercial banks that are rated within the
2 highest rating classifications by Standard & Poor's Rating Group or
Moody's Investors Service, Inc. or, in the case of a Canadian bank, by
Thomson Bank Watch;
(iv) Investments in commercial paper maturing within 270 days of
the date of issuance and rated "A-2" or better by Standard & Poor's
Rating Group or "P-2" or better by Moody's Investors Service, Inc.;
(v) Investments in direct obligations of the United States of
America or in obligations of an agency thereof carrying the full faith
and credit of the United States of America or in direct obligations of
the Canadian government, in each case maturing within 3 years from the
date of issuance;
(vi) Investments in money market investment programs that are
properly classifiable as current assets in accordance with generally
accepted accounting principles;
(vii) Investments in municipal or Canadian provincial securities
maturing within 3 years of the date of acquisition and rated AA- or
better by Standard & Poor's Rating Group or Aa3 or better by Moody's
Investors Service, Inc., or their short-term equivalent ratings, or, in
the case of Canadian provincial securities, rated within the 2 highest
classifications of the leading provincial rating agency; and
(viii) Relocation, travel and similar advances to employees made
in the ordinary course of business consistent with past practice.
Restricted Subsidiary - Any Subsidiary so designated in Annex I and any
other Subsidiary that is subsequently so designated by resolution of the Board
of Directors of the Company, provided that such Subsidiary has not theretofore
been designated a Restricted Subsidiary.
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Securities Act - The Securities Act of 1933, as amended, and as it may
be further amended from time to time.
Source - As defined in Section 3.2(b).
Subsidiary - Any corporation of which shares of Voting Stock
representing more than 50% of the combined voting power of each outstanding
class of Voting Stock are owned or controlled, directly or indirectly, by the
Company.
Subsidiary Guaranty - The Subsidiary Guaranty, executed by the
Guarantors, substantially in the form of Exhibit D, as such agreement may be
amended, modified, supplemented or restated from time to time.
Unrestricted Subsidiary - Any Subsidiary that is not designated a
Restricted Subsidiary.
Voting Stock - Capital stock of any class of a corporation having power
to vote under ordinary circumstances for the election of members of the board of
directors of such corporation, or persons performing similar functions,
irrespective of whether or not at the time any class shall have special voting
power or rights as the result of the occurrence of any contingency.
Weighted Average Life to Maturity - As applied to any payment or
prepayment of principal of the Notes, at any date, the number of years obtained
by dividing (a) the principal amount of the Notes to be paid or prepaid into (b)
the sum of the products obtained by multiplying (i) the amount of each then
remaining required prepayment, including payment at final maturity, forgone by
virtue of such payment or prepayment, by (ii) the number of years (calculated to
the nearest 1/12th) which would have elapsed between such date and the making of
such required prepayment or payment.
Wholly-Owned - When applied to a Subsidiary, any Subsidiary 100% of the
Voting Stock of which is owned by the Company and/or its Wholly-Owned
Subsidiaries, other than directors' qualifying shares or, in the case of
Subsidiaries organized under the laws of a jurisdiction other than the United
States of America or any State thereof, nominal shares held by foreign nationals
in accordance with local law.
Terms that are defined in other Sections of this Agreement shall have
the meanings specified therein.
5.2. Accounting Principles. Where the character or amount of any asset or
liability or item of income or expense is required to be determined or any
consolidation or other accounting computation is required to be made for the
purposes of this Agreement, the same shall be done in accordance with (and
references elsewhere in this Agreement to generally accepted accounting
principles shall mean) United States generally accepted accounting principles in
effect from time to time, except where such principles are inconsistent with any
accounting treatment or computation required by this Agreement.
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5.3. Valuation Principles. Except where indicated expressly to the contrary
by the use of terms such as "fair value," "fair market value" or "market value,"
each asset, each liability and each capital item of any Person, and any quantity
derivable by a computation involving any of such assets, liabilities or capital
items, shall be taken at the net book value thereof for all purposes of this
Agreement. "Net book value" with respect to any asset, liability or capital item
of any Person shall mean the amount at which the same is recorded or, in
accordance with generally accepted accounting principles, should have been
recorded in the books of account of such Person, as reduced by any reserves
which have been or, in accordance with generally accepted accounting principles,
should have been set aside with respect thereto, but in every case (whether or
not permitted in accordance with generally accepted accounting principles)
without giving effect to any write-up, write-down or write-off (other than any
write-down or write-off the entire amount of which was charged to Consolidated
Net Income or to a reserve which was a charge to Consolidated Net Income)
relating thereto which was made after the date of this Agreement.
5.4. Direct or Indirect Actions. Where any provision in this Agreement
refers to action to be taken by any Person, or which such Person is prohibited
from taking, such provision shall be applicable whether the action in question
is taken directly or indirectly by such Person.
Section 6. AFFIRMATIVE COVENANTS
The Company agrees that, for so long as any amount remains unpaid on
any Note:
6.1. Corporate Existence. The Company will, and will cause each Restricted
Subsidiary to, maintain and preserve, its corporate existence and right to carry
on its business and use, and the Company will, and will cause each Restricted
Subsidiary to maintain, preserve, renew and extend all of its rights, powers,
privileges, franchises, licenses and permits necessary to the proper conduct of
its business; provided, however, that the foregoing shall not prevent any
transaction permitted by Section 7.6 or Section 7.7.
6.2. Insurance. The Company will, and will cause each Restricted Subsidiary
to, maintain insurance coverage with financially sound and reputable insurers in
such forms and amounts, with such deductibles and against such risks as are
required by law or sound business practice and are customary for corporations
engaged in the same or similar businesses and owning and operating similar
properties as the Company and its Subsidiaries.
6.3. Taxes, Claims for Labor and Materials. The Company will, and will
cause each Restricted Subsidiary to, pay and discharge when due, all taxes,
assessments and governmental charges or levies imposed upon it or its property
or assets, or upon properties leased by it (but only to the extent required to
do so by the applicable lease), trade accounts, and claims for work, labor or
materials, other than taxes, assessments, charges, levies, accounts or claims
which, individually or in the aggregate, are not material in amount or the
non-payment of which, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect, provided that neither the Company
nor any Restricted Subsidiary shall be required to pay any such tax, assessment,
charge,
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levy, account or claim, the payment of which is being contested in good faith
and by proper proceedings that will stay the forfeiture or sale of any property
and with respect to which adequate reserves are maintained in accordance with
generally accepted accounting principles.
6.4. Maintenance of Properties. The Company will, and will cause each
Restricted Subsidiary to, maintain, preserve and keep its properties (whether
owned in fee or a leasehold interest) in good repair and working order, ordinary
wear and tear excepted, and from time to time will make all necessary repairs,
replacements, renewals and additions.
6.5. Maintenance of Records. The Company will, and will cause each
Restricted Subsidiary to, keep at all times proper books of record and account
in which full, true and correct entries will be made of all dealings or
transactions of or in relation to the business and affairs of the Company or
such Restricted Subsidiary, in accordance with generally accepted accounting
principles consistently applied throughout the period involved (except for such
changes as are disclosed in such financial statements or in the notes thereto),
and the Company will, and will cause each Restricted Subsidiary to, provide
reasonable protection against loss or damage to such books of record and
account.
6.6. Financial Information and Reports. The Company will furnish to you and
to any other Institutional Holder (in duplicate if you or such other holder so
request) the following:
(a) As soon as available and in any event within 45 days after the end of
each of the first three quarterly accounting periods of each fiscal year of the
Company, a consolidated balance sheet of the Company and its Restricted
Subsidiaries as of the end of such period and consolidated statements of
operations of the Company and its Restricted Subsidiaries for the periods
beginning on the first day of such fiscal year and the first day of such
quarterly accounting period and a consolidated statement of cash flows beginning
on the first day of such fiscal year and ending on the date of such balance
sheet, setting forth in comparative form (x) the corresponding consolidated
statements of operations for the corresponding periods of the preceding fiscal
year, (y) the corresponding consolidated statements of cash flows for the
corresponding year to date period of the preceding fiscal year and (z) a
consolidated balance sheet as of the end of the preceding fiscal year, all in
reasonable detail prepared in accordance with generally accepted accounting
principles consistently applied throughout the period involved (except for
changes disclosed in such financial statements or in the notes thereto) and
certified by the chief financial officer or chief accounting officer of the
Company (i) outlining the basis of presentation, and (ii) stating that the
information presented in such statements presents fairly the financial position
of the Company and its Restricted Subsidiaries and the results of operations for
the period, subject to customary year-end audit adjustments;
(b) As soon as available and in any event within 90 days after the last day
of each fiscal year, a consolidated balance sheet of the Company and its
Restricted Subsidiaries as of the end of such fiscal year and the related
consolidated statements of operations, retained earnings and cash flows for such
fiscal year, in each case setting forth in comparative form figures for the
preceding
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fiscal year, all in reasonable detail, prepared in accordance with generally
accepted accounting principles consistently applied throughout the period
involved (except for changes disclosed in such financial statements or in the
notes thereto) and accompanied by a report, unqualified as to scope of audit and
unqualified as to going concern as to the consolidated balance sheet and the
related consolidated statements of operations, retained earnings and cash flows,
of KPMG Peat Marwick or any other firm of independent public accountants of
recognized national standing selected by the Company to the effect that such
financial statements have been prepared in conformity with generally accepted
accounting principles and present fairly, in all material respects, the
financial position of the Company and its Restricted Subsidiaries and that the
examination of such financial statements by such accounting firm has been made
in accordance with generally accepted auditing standards;
(c) Together with the financial statements delivered pursuant to paragraphs
(a) and (b) of this Section 6.6, (i) a management's discussion and analysis of
the financial condition and results of operations for the periods reported upon
by such financial statements, which discussion and analysis shall satisfy the
requirements of Item 303 of Securities and Exchange Commission Regulation S-K,
and (ii) a certificate of the chief financial officer or chief accounting
officer, (x) to the effect that such officer has re-examined the terms and
provisions of this Agreement and that, to the best knowledge of such officer
after due inquiry, at the date of such certificate, during the periods covered
by such financial reports and as of the end of such periods, the Company is not,
or was not, in default in the fulfillment of any of the terms, covenants,
provisions and conditions of this Agreement and that no Default or Event of
Default is occurring or has occurred as of the date of such certificate, during
such periods and as of the end of such periods, or if the signer is aware of any
Default or Event of Default, such officer shall disclose in such statement the
nature thereof, its period of existence and what action, if any, the Company has
taken or proposes to take with respect thereto, and (y) stating whether, to the
best knowledge of such officer after due inquiry, the Company is in compliance
with Sections 7.1 through 7.2 and setting forth, in sufficient detail, the
information and computations required to establish whether or not the Company
was in compliance with the requirements of Sections 7.1 through 7.8 during the
periods covered by the financial reports then being furnished and as of the end
of such periods;
(d) Together with the financial reports delivered pursuant to paragraph (b)
of this Section 6.6, an opinion of the independent certified public accountants
stating (i) that in making the examination necessary for expressing an opinion
on such financial statements, nothing came to their attention that caused them
to believe that there is in existence or has occurred any Default or Event of
Default hereunder (the occurrence of which is ascertainable by accountants in
the course of normal audit procedures) or, if such accountants shall have
obtained knowledge of any such Default or Event of Default, describing the
nature thereof and the length of time it has existed;
(e) Promptly after the Company obtains knowledge thereof, notice of any
litigation or any governmental proceeding pending against the Company or any
Subsidiary in which, individually or in the aggregate, liability could
reasonably be expected to exceed $3,000,000 or which could reasonably be
expected to otherwise have a Material Adverse Effect;
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(f) As soon as available and in any event within 15 days after the filing
or mailing thereof, copies of each financial statement, notice, report and proxy
statement which the Company shall furnish to its stockholders; copies of each
registration statement and periodic report, including but not limited to Forms
8-K, 10-K and 10-Q, which the Company may file with the Securities and Exchange
Commission, and any other similar or successor agency of the Federal government
administering the Securities Act, the Exchange Act or the Trust Indenture Act of
1939, as amended; without duplication, copies of each report (other than reports
relating solely to the issuance of, or transactions by others involving, its
securities) relating to the Company or its securities which the Company may file
with any securities exchange on which any of the Company's securities may be
registered; copies of any orders in any material proceedings to which the
Company or any of its Subsidiaries is a party, issued by any governmental
agency, Federal or state, having jurisdiction over the Company or any of its
Subsidiaries; and, except at such times as the Company is a reporting company
under Section 13 or 15(d) of the Exchange Act or has complied with the
requirements for the exemption from registration under the Exchange Act set
forth in Rule 12g-3-2(b), such financial or other information as any holder of
the Notes or prospective purchaser of the Notes may reasonably determine is
required to permit such holder to comply with the requirements of Rule 144A
under the Securities Act in connection with the resale by it of the Notes;
(g) As soon as available, a copy of each other report submitted to the
Company or any Restricted Subsidiary by independent accountants retained by the
Company or any Restricted Subsidiary in connection with any interim or special
audit made by them of the books of the Company or any Restricted Subsidiary;
(h) Promptly following any change in the composition of the Company's
Subsidiaries from that set forth in Annex I, as theretofore updated pursuant to
this paragraph, an updated list setting forth the information specified in Annex
I; and
(i) Such additional information as you or such other Institutional Holder
of the Notes may reasonably request concerning the Company and its Subsidiaries.
6.7. Inspection of Properties and Records. The Company will, and will cause
each Restricted Subsidiary to, permit any representative of you or any other
Institutional Holder, from the date hereof and until payment in full of the
Notes, to visit and inspect any of their properties, to examine their books of
account (including, without limitation, the financial and reporting systems of
the Company and its Restricted Subsidiaries), records, reports and other papers,
to make copies and extracts therefrom and to discuss their affairs, finances and
accounts with their officers and independent public accountants (and by this
provision the Company and its Restricted Subsidiaries authorize such accountants
to discuss with you or such Institutional Holder their affairs, finances and
accounts), all at such reasonable times and with reasonable notice and as often
as you or such Institutional Holder may reasonably request, and if at the time
thereof a Default or Event of Default has occurred and is continuing, at the
Company's expense.
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6.8. ERISA.
(a) All assumptions and methods used to determine the actuarial valuation
of employee benefits, both vested and unvested, under each Plan subject to Title
IV of ERISA and each such Plan, whether now existing or adopted after the date
hereof, will comply in all material respects with ERISA.
(b) The Company will not at any time permit any Plan established,
maintained or contributed to by it or any Restricted Subsidiary in the United
States or any ERISA Affiliate to:
(i) engage in any "prohibited transaction" as such term is defined in
Section 4975 of the Code or in Section 406 of ERISA;
(ii) incur any "accumulated funding deficiency" as such term is defined in
Section 302 of ERISA, whether or not waived; or
(iii) be terminated under circumstances which are likely to result in the
imposition of a lien on the property of the Company or any such Restricted
Subsidiary pursuant to Section 4068 of ERISA,
if the event or condition described in clauses (i), (ii) or (iii) above is
likely to subject the Company or any Restricted Subsidiary or ERISA Affiliate to
liabilities which, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.
(c) Upon request, the Company will furnish you or any other Institutional
Holder a copy of the annual report of each Plan (Form 5500) required to be filed
with the Internal Revenue Service no later than 45 days after the date such
report has been filed with the Internal Revenue Service.
(d) Promptly upon obtaining knowledge of the occurrence thereof, the
Company will give you and each other Institutional Holder notice of any of the
following events if the event could reasonably be expected to result in a
Material Adverse Effect: (i) a reportable event with respect to any Plan; (ii)
the institution of any steps by the Company, any Restricted Subsidiary, any
ERISA Affiliate or the PBGC to terminate any Plan; (iii) the institution of any
steps by the Company, any Restricted Subsidiary, or any ERISA Affiliate to
withdraw from any Plan; (iv) a prohibited transaction in connection with any
Plan; (v) any material increase in the contingent liability of the Company or
any Restricted Subsidiary with respect to any post-retirement welfare liability;
or (vi) the taking of any action by the Internal Revenue Service, the Department
of Labor or the PBGC or any other Person with respect to any of the foregoing.
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6.9. Compliance with Laws.
(a) The Company will, and will cause each Subsidiary to, comply with all
laws, rules and regulations, including Environmental Laws, relating to its or
their respective businesses, other than laws, rules and regulations the failure
to comply with which or the sanctions and penalties resulting therefrom,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect; provided, however, that the Company and its
Subsidiaries shall not be required to comply with laws, rules and regulations
the validity or applicability of which are being contested in good faith and by
appropriate proceedings which stay the enforcement thereof and as to which the
Company has established adequate reserves on its books in accordance with
generally accepted accounting principles.
(b) Promptly upon the occurrence thereof, the Company will give you and
each other Institutional Holder notice of the institution of any proceedings
against the Company or any Subsidiary, or the receipt of notice of any
Environmental Claim, which if determined adversely could, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
6.10. Acquisition of Notes. Neither the Company nor any Subsidiary or
Affiliate, directly or indirectly, will repurchase or offer to repurchase any
Notes unless the offer is made to repurchase Notes pro rata from all holders at
the same time and on the same terms. Any repurchase of less than all of the
Notes outstanding shall be applied in accordance with Section 2.6. The Company
will forthwith cancel any Notes in any manner or at any time acquired by the
Company or any Subsidiary or Affiliate and such Notes shall not be deemed to be
outstanding for any of the purposes of this Agreement or the Notes.
6.11. Private Placement Number; NAIC. The Company consents to (i) the
filing of copies of this Agreement with Standard & Poor's CUSIP Service Bureau
to obtain a private placement number and with the National Association of
Insurance Commissioners and (ii) the filing of copies of the financial
statements delivered pursuant to Section 6.6(b) with the National Association of
Insurance Commissioners.
SS.7. NEGATIVE COVENANTS
The Company agrees that, for so long as any amount remains unpaid on
any Note:
7.1. Adjusted Consolidated Net Worth. The Company will not permit at any
time its Adjusted Consolidated Net Worth to be less than $115,000,000.
7.2. Funded Debt. The Company will not, and will not permit any Restricted
Subsidiary to, create, assume, incur, or otherwise become liable for, directly
or indirectly, any Funded Debt other than:
(a) the Notes;
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(b) Funded Debt of the Company and its Restricted Subsidiaries outstanding
on the Closing Date and described in the attached Annex IV;
(c) Funded Debt of the Company to a Restricted Subsidiary or Funded Debt of
a Restricted Subsidiary to the Company or another Restricted Subsidiary; and
(d) additional Funded Debt, provided that at the time of incurring such
additional Funded Debt and after giving effect thereto and to the application of
the proceeds therefrom, the Funded Debt of the Company and its Restricted
Subsidiaries then to be outstanding does not exceed 60% of Consolidated Total
Capitalization.
7.3. Indebtedness of Subsidiaries. The Company will not permit any
Restricted Subsidiary to permit to create, assume, incur, or otherwise become
liable for, directly or indirectly, any additional Indebtedness, other than
Indebtedness to the Company or another Restricted Subsidiary, unless, at the
time of incurring such additional Indebtedness and after giving effect thereto
and to the application of the proceeds therefrom,
(a) such Indebtedness, if it constitutes Funded Debt, may be incurred
pursuant to Section 7.2(d); and
(b) the aggregate outstanding Indebtedness of Restricted Subsidiaries does
not exceed 15% of Consolidated Total Capitalization.
7.4. Liens. The Company will not, and will not permit any Restricted
Subsidiary to, permit to exist, create, assume or incur, directly or indirectly,
any Lien on its properties or assets, whether now owned or hereafter acquired,
except:
(a) Liens existing on property or assets of the Company or any Restricted
Subsidiary as of the Closing Date that are described in the attached Annex V and
Liens resulting from extensions, renewals, refinancings and refundings of
Indebtedness secured by such Liens, provided that there is no increase in the
principal amount of the Indebtedness secured thereby at the time of extension,
renewal, refinancing or refunding, and any new Lien attaches only to the
property which was subject to such Lien at the time of such extension, renewal,
refinancing or refunding; provided that this clause (a) shall not permit any
Liens securing Indebtedness owed to banks;
(b) Liens for taxes, assessments or governmental charges or levies not then
due and delinquent or the validity of which is being contested in good faith by
appropriate proceedings which stay the enforcement thereof and as to which the
Company has established adequate reserves on its books in accordance with
generally accepted accounting principles;
(c) Liens arising in connection with any legal proceeding, provided the
execution of such Liens is effectively stayed and such Liens are being contested
in good faith by appropriate proceedings and as to which the Company has
established adequate reserves on its books in accordance with generally accepted
accounting principles;
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(d) Liens arising in the ordinary course of business and not incurred in
connection with the borrowing of money, including encumbrances in the nature of
survey exceptions, zoning restrictions, easements, rights and restrictions of
record on the use of real property, statutory landlord's and lessor's liens and
mechanics' and materialmen liens in the ordinary course of business, which in
the aggregate do not materially interfere with the conduct of the business of
the Company and its Subsidiaries taken as a whole or materially impair the value
of the property subject thereto for the purpose of such business;
(e) Liens securing Indebtedness of a Restricted Subsidiary to the Company;
(f) Liens (i) existing on tangible property at the time of its acquisition
by the Company or a Restricted Subsidiary and not created in contemplation
thereof, whether or not the Indebtedness secured by such Lien is assumed by the
Company or such Restricted Subsidiary, or (ii) on tangible property created
substantially contemporaneously with the date of acquisition or within 180 days
of the acquisition or completion of construction thereof to secure or provide
for all or a portion of the purchase price or cost of construction of such
tangible property, or (iii) existing on tangible property of a Person at the
time such Person is merged into or consolidated with or is acquired by, or
substantially all of its tangible assets are acquired by, the Company or a
Restricted Subsidiary and not created in contemplation thereof, or (iv) securing
reimbursement obligations under letters of credit, or (v) renewals, extensions
or replacements of such Liens; provided, in each case, that (x) the incurrence
of the Indebtedness secured by such Liens does not violate or conflict with any
other provision of this Agreement, (y) such Liens do not extend to other
property of the Company or any Restricted Subsidiary and (z) the aggregate
principal amount of Indebtedness secured by each such Lien does not exceed 100%
of the cost or fair market value of the tangible property subject thereto;
(g) Liens not otherwise permitted by paragraphs (a) through (f) above
incurred subsequent to the Closing Date to secure Indebtedness; provided that
(i) the Indebtedness of the Company and its Restricted Subsidiaries secured by
Liens incurred pursuant to this paragraph (g) does not exceed 10% of Adjusted
Consolidated Net Worth and (ii) such Liens are not used to secure Indebtedness
outstanding at the time of incurrence of such Lien (or which could then be
incurred under the revolving credit portion of the Credit Agreement) or any
extension, renewal, replacement, refunding or refinancing of such Indebtedness;
and
(h) The Lien on cash advanced, together with the earnings and proceeds
thereof, to fund potential general liability and workers' compensation
reimbursement obligations under a bank letter of credit upon a default in
agreements providing for the letter of credit so long as the amounts advanced
have been adequately reserved against on the consolidated financial statements
of the Company.
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7.5. Restricted Payments. The Company will not, except as hereinafter
provided:
(a) declare or pay any dividends, either in cash or property, on any shares
of its capital stock of any class (except dividends or other distributions
payable solely in shares of common stock of the Company);
(b) directly or indirectly, or through any Subsidiary, purchase, redeem or
retire any shares of its capital stock of any class or any warrants, rights or
options to purchase or acquire any shares of its capital stock; or
(c) make any other payment or distribution, directly or indirectly, or
through any Subsidiary, in respect of its capital stock;
(all such declarations, payments, purchases, redemptions, retirements and
distributions described in clauses (a) through (c) being herein collectively
referred to as "Restricted Payments") if, after giving effect thereto, (i) the
aggregate amount of Restricted Payments made after December 31, 1997 to and
including the date of the making of the Restricted Payment in question would
exceed the sum of (A) $15,000,000, plus (B) 75% of Consolidated Net Income (or
less 100% of any deficit) for each fiscal year (or portion thereof) of the
Company subsequent to December 31, 1997, plus (C) the net cash proceeds received
by the Company after December 31, 1997 from the sale of shares of any class of
its common or nonredeemable preferred stock and (ii) no Default or Event of
Default exists or would exist.
7.6. Merger or Consolidation; Sale of Substantially All Assets. The Company
will not, and will not permit any Restricted Subsidiary to, merge or consolidate
with, or sell all or substantially all of its assets to, any Person, except
that:
(a) The Company may merge into or consolidate with, or sell all or
substantially all of its assets to, any Person or permit any Person to merge
into it, provided that no Default or Event of Default exists and that
immediately after giving effect thereto,
(i) The Company is the successor corporation or, if the Company is
not the successor corporation, (x) the successor corporation is a
solvent corporation organized under the laws of a state of the United
States of America or the District of Columbia and expressly assumes the
Company's obligations under the Notes and this Agreement and (y) the
holders of the Notes shall have received an opinion of legal counsel
reasonably acceptable to them that this Agreement and the Notes are
legal, valid and binding obligations of the successor corporation,
enforceable against the successor corporation in accordance with their
terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance, fraudulent transfer and other
similar laws affecting creditors' rights generally, and to the
application of general principles of equity;
(ii) There shall exist no Default or Event of Default; and
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(iii) The Company or such successor corporation could incur at least $1.00
of additional Funded Debt under Section 7.2; and
(b) Any Restricted Subsidiary may (i) merge into the Company or a
Wholly-Owned Restricted Subsidiary, or (ii) sell, transfer or lease all or any
part of its assets to the Company or a Wholly-Owned Restricted Subsidiary or
(iii) merge with any Person which, as a result of such merger, becomes a
Wholly-Owned Restricted Subsidiary, or (iv) merge with any Person which does not
become a Wholly-Owned Restricted Subsidiary as a result of such merger so long
as such merger is not prohibited by Section 7.7(a); provided in each instance
set forth in clauses (i) through (iv) that immediately before and after giving
effect thereto there shall exist no Default or Event of Default.
7.7. Sale of Assets.
(a) The Company will not, and will not permit any Restricted Subsidiary to
(other than in the ordinary course of business) sell, lease, transfer or
otherwise (including by way of merger or a sale and lease-back transaction)
dispose of (collectively a "Disposition") any assets, including capital stock of
Restricted Subsidiaries, in one or a series of transactions, to any Person
(other than the Company or a Restricted Subsidiary), (i) if in any fiscal year,
after giving effect to such Disposition, the aggregate net book value of assets
subject to Dispositions during such fiscal year would exceed 10% of Consolidated
Total Assets as of the end of the immediately preceding fiscal year or (ii) if a
Default or Event of Default exists or would exist after giving effect thereto.
(b) Notwithstanding the foregoing limitations in paragraph (a) of this
Section 7.7, the Company or a Restricted Subsidiary may make a Disposition and
the net book value of the assets subject to such Disposition shall not be
subject to or included in the foregoing limitations and computations if the
proceeds (net of taxes and related expenses) from such Disposition are either
(A) reinvested, within 180 days after such Disposition, in productive tangible
assets of a similar nature of the Company or its Restricted Subsidiaries or (B)
offered by the Company to be applied to the prepayment of the Notes on a pro
rata basis with other outstanding Indebtedness at a price of 100% of the
principal amount to be prepaid together with interest accrued to the date of
prepayment; provided, that if any holder of the Notes declines such repayment,
the pro rata proceeds which would have been paid to such holder shall not be
distributed to any other holders of the Notes or any other holders of
Indebtedness as part of such repayment. Any prepayment pursuant to this Section
7.7(b) of less than all of the Notes outstanding shall be applied in accordance
with Section 2.6.
7.8. Disposition of Stock of Restricted Subsidiaries. The Company will not
permit any Restricted Subsidiary to issue the capital stock of a Restricted
Subsidiary, or any warrants, rights or options to purchase, or securities
convertible into or exchangeable for, such capital stock, to any Person other
than the Company or a wholly-owned Restricted Subsidiary. The Company will not,
and will not permit any Restricted Subsidiary to, sell, transfer or otherwise
dispose of (other than to the Company or a wholly-owned Restricted Subsidiary)
any capital stock (including any warrants, rights or options to purchase, or
securities convertible into or exchangeable for, capital stock) or Indebtedness
of any Restricted Subsidiary, if, as a result, such Restricted Subsidiary would
cease to
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be a Subsidiary giving effect to all purchase, conversion and exchange
rights, unless:
(a) simultaneously therewith all Investments in such Restricted Subsidiary
owned by the Company and every other Restricted Subsidiary are simultaneously
disposed of as an entirety;
(b) the Board of Directors of the Company shall have determined that such
sale, transfer or disposition is in the best interests of the Company;
(c) such sale, transfer or other disposition (i) is to a Person for
consideration payable in cash or in the capital stock or indebtedness of such
Person and/or any of its affiliates and (ii) on terms reasonably deemed by the
Board of Directors to be adequate and satisfactory;
(d) such Restricted Subsidiary does not have any continuing Investment in
the Company or any other Subsidiary not being simultaneously disposed of; and
(e) such sale, transfer or other disposition is permitted by Section 7.7.
7.9. Designation of Unrestricted Subsidiaries. The Company will not
designate any Restricted Subsidiary as an Unrestricted Subsidiary unless
immediately before and after such designation:
(a) Such Subsidiary does not own any Investment in the Company or any
Restricted Subsidiary;
(b) There exists no Default or Event of Default; and
(c) The Company could incur at least $1.00 of additional Funded Debt.
7.10. Transactions with Affiliates. The Company will not, and will not
permit any Restricted Subsidiary to, enter into any transaction (including the
furnishing of goods or services) with an Affiliate except in the ordinary course
of business as presently conducted and on terms and conditions no less favorable
to the Company or such Restricted Subsidiary than would be obtained in a
comparable arm's-length transaction with a Person not an Affiliate.
7.11. Consolidated Tax Returns. The Company will not file, or consent to
the filing of, any consolidated Federal income tax return with any Person other
than a Subsidiary, except to the extent that the Company is required under the
Code to do otherwise.
7.12. Nature of Business. The Company will not, and will not permit any
Restricted Subsidiary to, engage in any businesses if, as a result, the general
nature of the businesses of the Company and its Restricted Subsidiaries, taken
as a whole, would be substantially changed from the businesses conducted and
described in the Memorandum, including exhibits.
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Section 8. EVENTS OF DEFAULT AND REMEDIES THEREFOR
8.1. Nature of Events. An "Event of Default" shall exist if any one or more
of the following occurs:
(a) Any default in the payment of interest when due on any of the Notes and
continuance of such default for a period of five Business Days;
(b) Any default in the payment of the principal of any of the Notes or the
Make-Whole Amount thereon, if any, at maturity, upon acceleration of maturity or
at any date fixed for prepayment;
(c) Any default (i) in the payment of the principal of, premium, if any,
interest on or any other amounts with respect to any other Indebtedness of the
Company or any Restricted Subsidiary aggregating in excess of $5,000,000 as and
when due and payable (whether by lapse of time, declaration, call for redemption
or otherwise) and the continuation of such default beyond the period of grace
(without regard to any waiver or amendment), if any, allowed with respect
thereto, or (ii) (other than a payment default) under any agreements of the
Company or any Restricted Subsidiary under or pursuant to which such
Indebtedness aggregating in excess of $5,000,000 is issued, resulting in the
acceleration of such Indebtedness;
(d) Any default in the observance of any covenant or agreement contained in
Sections 7.1 through 7.12 or Section 8.7;
(e) Any default in the observance or performance of any other covenant or
provision of this Agreement which is not remedied within 30 days;
(f) Any representation or warranty made by the Company in this Agreement or
in any written statement or certificate furnished by the Company in connection
with the issuance and sale of the Notes or furnished by the Company pursuant to
this Agreement, proves incorrect in any material respect as of the date of the
issuance or making thereof;
(g) Any judgment, writ or warrant of attachment or any similar process in
an aggregate amount in excess of $5,000,000 shall be entered or filed against
the Company or any Restricted Subsidiary or against any property or assets of
either and remain unpaid, unvacated, unbonded or unstayed (through appeal or
otherwise);
(h) The Company or any Subsidiary shall
(i) generally not pay its debts as they become due or admit in writing its
inability to pay its debts generally as they become due;
(ii) file a petition in bankruptcy or for reorganization or for the
adoption of an arrangement under the Federal Bankruptcy Code, or any similar
applicable bankruptcy or
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insolvency law, as now or in the future amended (herein collectively called
"Bankruptcy Laws"); file an answer or other pleading admitting or failing to
deny the material allegations of such a petition; fail to file, within the time
allowed for such purpose, an answer or other pleading denying or otherwise
controverting the material allegations of such a petition; or file an answer or
other pleading seeking, consenting to or acquiescing in relief provided for
under the Bankruptcy Laws;
(iii) make an assignment of all or a substantial part of its property for
the benefit of its creditors;
(iv) seek or consent to or acquiesce in the appointment of a receiver,
liquidator, custodian or trustee of it or for all or a substantial part of its
property;
(v) be finally adjudicated a bankrupt or insolvent;
(vi) be subject to the entry of a court order, which shall not be vacated,
set aside or stayed within 60 days from the date of entry, (A) appointing a
receiver, liquidator, custodian or trustee of it or for all or a substantial
part of its property, or (B) for relief pursuant to an involuntary case brought
under, or effecting an arrangement in, bankruptcy or (C) for a reorganization
pursuant to the Bankruptcy Laws or (D) for any other judicial modification or
alteration of the rights of creditors; or
(vii) be subject to the assumption of custody or sequestration by
a court of competent jurisdiction of all or a substantial part of its
property, which custody or sequestration shall not be suspended or
terminated within 60 days from its inception.
8.2. Remedies on Default. When any Event of Default described in paragraphs
(a) through (g) of Section 8.1 has occurred and is continuing, the holders of
more than 51% in aggregate principal amount of the Notes then outstanding may,
by notice to the Company, declare the entire principal, together with the
Make-Whole Amount (to the extent permitted by law), and all interest accrued on
all Notes to be, and such Notes shall thereupon become, forthwith due and
payable, without any presentment, demand, protest or other notice of any kind,
all of which are expressly waived. Notwithstanding the foregoing, when (i) any
Event of Default described in paragraphs (a) or (b) of Section 8.1 has occurred
and is continuing, any holder may by notice to the Company declare the entire
principal, together with the Make-Whole Amount (to the extent permitted by law),
and all interest accrued on the Notes then held by such holder to be, and such
Notes shall thereupon become, forthwith due and payable, without any
presentment, demand, protest or other notice of any kind, all of which are
expressly waived and (ii) any Event of Default described in paragraph (h) of
Section 8.1 has occurred, then the entire principal, together with the
Make-Whole Amount (to the extent permitted by law) and all interest accrued on
all outstanding Notes shall immediately become due and payable without
presentment, demand or notice of any kind. Upon the Notes or any of them
becoming due and payable as aforesaid, the Company will forthwith pay to the
holders of such Notes the entire principal of the Notes (in inverse order of
maturity) and interest accrued on such Notes,
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<PAGE> 52
plus the Make-Whole Amount which shall be calculated on the Determination Date.
8.3. Annulment of Acceleration of Notes. The provisions of Section 8.2 are
subject to the condition that if the principal of and accrued interest on the
Notes have been declared immediately due and payable by reason of the occurrence
of any Event of Default described in paragraphs (a) through (g), inclusive, of
Section 8.1, the holder or holders of more than 66-2/3% in aggregate principal
amount of the Notes then outstanding may, by written instrument filed with the
Company, rescind and annul such declaration and the consequences thereof,
provided that (i) at the time such declaration is annulled and rescinded no
judgment or decree has been entered for the payment of any monies due pursuant
to the Notes or this Agreement, (ii) all arrears of interest upon all the Notes
and all other sums payable under the Notes and under this Agreement or the
Guaranty (except any principal, interest or Make-Whole Amount, if any, on the
Notes which has become due and payable solely by reason of such declaration
under Section 8.2) shall have been duly paid and (iii) each and every Default or
Event of Default shall have been cured or waived; and provided further, that no
such rescission and annulment shall extend to or affect any subsequent Default
or Event of Default or impair any right consequent thereto.
8.4. Other Remedies. If any Event of Default shall be continuing, any
holder of Notes may enforce its rights by suit in equity, by action at law, or
by any other appropriate proceedings, whether for the specific performance (to
the extent permitted by law) of any covenant or agreement contained in this
Agreement or in the Notes or in aid of the exercise of any power granted in this
Agreement, and may enforce the payment of any Note held by such holder and any
of its other legal or equitable rights.
8.5. Conduct No Waiver; Collection Expenses. No course of dealing on the
part of any holder of Notes, nor any delay or failure on the part of any holder
of Notes to exercise any of its rights, shall operate as a waiver of such rights
or otherwise prejudice such holder's rights, powers and remedies. If the Company
fails to pay, when due, the principal of, or the interest on, any Note, or fails
to comply with any other provision of this Agreement, the Company will pay to
each holder, to the extent permitted by law, on demand, such further amounts as
shall be sufficient to cover the costs and expenses, including but not limited
to reasonable attorneys' fees, incurred by such holders of the Notes in
collecting any sums due on the Notes or in otherwise enforcing any of their
rights.
8.6. Remedies Cumulative. No right or remedy conferred upon or reserved to
any holder of Notes under this Agreement is intended to be exclusive of any
other right or remedy, and every right and remedy shall be cumulative and in
addition to every other right or remedy given under this Agreement or now or
hereafter existing under any applicable law. Every right and remedy given by
this Agreement or by applicable law to any holder of Notes may be exercised from
time to time and as often as may be deemed expedient by such holder, as the case
may be.
8.7. Notice of Default. With respect to Defaults, Events of Default or
claimed defaults, the Company will give the following notices:
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<PAGE> 53
(a) The Company promptly, but in any event within 5 days after the day on
which an executive officer of the Company first obtains actual knowledge
thereof, will furnish to each holder of a Note written notice of the occurrence
of a Default or an Event of Default. Such notice shall specify the nature of
such default, the period of existence thereof and what action the Company has
taken or is taking or proposes to take with respect thereto.
(b) If the holder of any Note or of any other evidence of Indebtedness of
the Company or any Subsidiary gives any notice or takes any other action with
respect to a claimed default, the Company will forthwith give written notice
thereof to each holder of the then outstanding Notes, describing the notice or
action and the nature of the claimed default.
Section 9. AMENDMENTS, WAIVERS AND CONSENTS
9.1. Matters Subject to Modification. Any term, covenant, agreement or
condition of this Agreement may, with the consent of the Company, be amended, or
compliance therewith may be waived (either generally or in a particular instance
and either retroactively or prospectively), if the Company shall have obtained
the consent in writing of the holder or holders of at least 51% in aggregate
principal amount of outstanding Notes; provided, however, that, without the
written consent of the holder or holders of all of the Notes then outstanding,
no such waiver, modification, alteration or amendment shall be effective which
will (i) change the time of payment (including any required prepayment) of the
principal of or the interest on any Note, (ii) reduce the principal amount
thereof or the Make-Whole Amount, if any, or change the rate of interest
thereon, (iii) change any provision of any instrument affecting the preferences
between holders of the Notes or between holders of the Notes and other creditors
of the Company, or (iv) change any of the provisions of Section 2.6, Section
8.2, Section 8.3 or this Section 9.
For the purpose of determining whether holders of the requisite
principal amount of Notes have made or concurred in any waiver, consent,
approval, notice or other communication under this Agreement, Notes held in the
name of, or owned beneficially by, the Company, any Subsidiary or any Affiliate
thereof, shall not be deemed outstanding.
9.2. Solicitation of Holders of Notes. The Company will not, directly or
indirectly, solicit, request or negotiate for or with respect to any proposed
waiver or amendment of any of the provisions of this Agreement or the Notes
unless each holder of the Notes (irrespective of the amount of Notes then owned
by it) shall concurrently be informed thereof by the Company and shall be
afforded the opportunity of considering the same and shall be supplied by the
Company with sufficient information to enable it to make an informed decision
with respect thereto. Executed or true and correct copies of any waiver or
consent effected pursuant to the provisions of this Section 9 shall be delivered
by the Company to each holder of outstanding Notes forthwith following the date
on which the same shall have been executed and delivered by the holder or
holders of the requisite percentage of outstanding Notes. The Company will not,
directly or indirectly, pay or cause to be paid any remuneration, whether by way
of supplemental or additional interest, fee or otherwise, to any holder of the
Notes as consideration for or as an inducement to the entering into by any
holder of the Notes
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<PAGE> 54
of any waiver or amendment of any of the terms and provisions of this Agreement
unless such remuneration is concurrently paid, on the same terms, ratably to
each holder of the then outstanding Notes.
9.3. Binding Effect. Any such amendment or waiver shall apply equally to
all the holders of the Notes and shall be binding upon them, upon each future
holder of any Note and upon the Company whether or not such Note shall have been
marked to indicate such amendment or waiver. No such amendment or waiver shall
extend to or affect any obligation not expressly amended or waived or impair any
right related thereto.
Section 10. FORM OF NOTES, REGISTRATION, TRANSFER, EXCHANGE AND REPLACEMENT
10.1. Form of Notes. Each Note initially delivered under this Agreement
will be in the form of one fully registered Note in the form attached as Exhibit
A. The Notes are issuable only in fully registered form and in denominations of
at least $100,000 (or the remaining outstanding balance thereof, if less than
$100,000).
10.2. Note Register. The Company shall cause to be kept at its principal
office a register (the "Note Register") for the registration and transfer of the
Notes. The names and addresses of the holders of Notes, the transfer thereof and
the names and addresses of the transferees of the Notes shall be registered in
the Note Register. The Company may deem and treat the person in whose name a
Note is so registered as the holder and owner thereof for all purposes and shall
not be affected by any notice to the contrary, until due presentment of such
Note for registration of transfer as provided in this Section 10.
10.3. Issuance of New Notes upon Exchange or Transfer. Upon surrender for
exchange or registration of transfer of any Note at the office of the Company
designated for notices in accordance with Section 11.2, the Company shall
execute and deliver, at its expense, one or more new Notes of any authorized
denominations requested by the holder of the surrendered Note, each dated the
date to which interest has been paid on the Notes so surrendered (or, if no
interest has been paid, the date of such surrendered Note), but in the same
aggregate unpaid principal amount as such surrendered Note, and registered in
the name of such person or persons as shall be designated in writing by such
holder. Every Note surrendered for registration of transfer shall be duly
endorsed, or be accompanied by a written instrument of transfer duly executed,
by the holder of such Note or by his attorney duly authorized in writing. The
Company may condition its issuance of any new Note in connection with a transfer
by any Person on the transferee making the representation in Section 3.2, by
Institutional Holders on compliance with Section 2.5 and on the payment to the
Company of a sum sufficient to cover any stamp tax or other governmental charge
imposed in respect of such transfer.
10.4. Replacement of Notes. Upon receipt of evidence satisfactory to the
Company of the loss, theft, mutilation or destruction of any Note, and in the
case of any such loss, theft or destruction upon delivery of a bond of indemnity
in such form and amount as shall be reasonably satisfactory to
39
<PAGE> 55
the Company or in the event of such mutilation upon surrender and cancellation
of the Note, the Company, without charge to the holder thereof, will make and
deliver a new Note, of like tenor in lieu of such lost, stolen, destroyed or
mutilated Note. If any such lost, stolen or destroyed Note is owned by you or
any other Institutional Holder, then the affidavit of an authorized officer of
such owner setting forth the fact of such loss, theft or destruction and of its
ownership of the Note at the time of such loss, theft or destruction shall be
accepted as satisfactory evidence thereof, and no further indemnity shall be
required as a condition to the execution and delivery of a new Note, other than
a written agreement of such owner (in form reasonably satisfactory to the
Company) to indemnify the Company.
Section 11. MISCELLANEOUS
11.1. Expenses. Whether or not the purchase of Notes herein contemplated
shall be consummated, the Company agrees to pay directly all reasonable expenses
in connection with the preparation, execution and delivery of this Agreement and
the transactions contemplated by this Agreement, including, but not limited to,
out-of-pocket expenses, filing fees of Standard & Poor's Corporation in
connection with obtaining a private placement number, charges and disbursements
of special counsel, photocopying and printing costs and charges for shipping the
Notes, adequately insured, to you at your home office or at such other address
as you may designate, and all similar expenses (including the fees and expenses
of counsel) relating to any proposed amendments, waivers or consents, whether or
not consummated, in connection with this Agreement or the Notes, including, but
not limited to, any such amendments, waivers or consents resulting from any
work-out, renegotiation or restructuring relating to the performance by the
Company of its obligations under this Agreement and the Notes. The Company also
agrees that it will pay and save you harmless against any and all liability with
respect to stamp and other documentary taxes, if any, which may be payable, or
which may be determined to be payable in connection with the execution and
delivery of this Agreement or the Notes (but not in connection with a transfer
of any Notes), whether or not any Notes are then outstanding. The obligations of
the Company under this Section 11.1 shall survive the retirement of the Notes.
11.2. Notices. Except as otherwise expressly provided herein, all
communications provided for in this Agreement shall be in writing and delivered
by overnight courier or by a facsimile with a copy also contemporaneously sent
by overnight courier, such notice to be deemed effective as of the time of
actual receipt by overnight courier (i) if to you, to the address set forth
below your name in Schedule I, or to such other address as you may in writing
designate, (ii) if to any other holder of the Notes, to such address as the
holder may designate in writing to the Company, and (iii) if to the Company, to
Butler Manufacturing Company, BMA Tower, One Penn Valley Park, Kansas City,
Missouri 64108, Attention: Chief Financial Officer, with a copy to the Vice
President, General Counsel and Secretary of the Company, or to such other
address as the Company may in writing designate.
11.3. Reproduction of Documents. This Agreement and all documents relating
hereto, including, without limitation, (i) consents, waivers and modifications
which may hereafter be
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<PAGE> 56
executed, (ii) documents received by you at the closing of the purchase of the
Notes (except the Notes themselves), and (iii) financial statements,
certificates and other information previously or hereafter furnished to you, may
be reproduced by you by any photographic, photostatic, microfilm, micro-card,
miniature photographic or other similar process, and you may destroy any
original document so reproduced. The Company agrees and stipulates that any such
reproduction which is legible shall be admissible in evidence as the original
itself in any judicial or administrative proceeding (whether or not the original
is in existence and whether or not such reproduction was made by you in the
regular course of business) and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence;
provided that nothing herein contained shall preclude the Company from objecting
to the admission of any reproduction on the basis that such reproduction is not
accurate, has been altered or is otherwise incomplete.
11.4. Confidentiality. The Purchaser or any holder of a Note shall employ
reasonable procedures in conformity with industry standards to maintain the
confidentiality of all confidential information heretofore or hereafter
disclosed by or on behalf of the Company pursuant to this Agreement and marked
confidential and shall not use such information other than as herein
contemplated. Notwithstanding the foregoing, the Purchaser or any holder of a
Note may disclose or disseminate such information to (i) its directors,
officers, employees and representatives, including its attorneys and
accountants; (ii) prospective purchasers of a Note; (iii) third parties as is
necessary or appropriate in connection with any law, statute, rule, regulation,
ordinance, order, decree, judgment, subpoena, pleading, discovery or similar
request or any suit, proceeding, investigation or requirement of any regulatory,
judicial, arbitration, governmental or industry body (including but not limited
to the National Association of Insurance Commissioners). In addition, the
Purchaser or any holder of a Note may disclose such confidential information if
(x) it is or hereafter becomes lawfully obtainable from other sources, (y)
necessary in connection with the enforcement of obligations of the Company
pursuant to the terms of this Agreement or (z) such duty as to confidentiality
is waived by the Company.
11.5. Successors and Assigns. This Agreement will inure to the benefit of
and be binding upon the parties hereto and their respective successors and
assigns.
11.6. Law Governing. This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois.
11.7. Headings. The headings of the Sections and subSections of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
11.8. Counterparts. This Agreement may be executed simultaneously in one or
more counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument, and it shall
not be necessary in making proof of this Agreement to produce or account for
more than one such counterpart or reproduction thereof permitted by Section
11.3.
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11.9. Reliance on and Survival of Provisions. All covenants,
representations and warranties made by the Company herein and in any
certificates delivered pursuant to this Agreement, whether or not in connection
with a closing, (i) shall be deemed to have been relied upon by you,
notwithstanding any investigation heretofore or hereafter made by you or on your
behalf and (ii) shall survive the delivery of this Agreement and the Notes.
11.10. Integration and Severability. This Agreement embodies the entire
agreement and understanding between you and the Company, and supersedes all
prior agreements and understandings relating to the subject matter hereof. In
case any one or more of the provisions contained in this Agreement or in any
Note, or application thereof, shall be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained in this Agreement and in any Note, and any other application thereof,
shall not in any way be affected or impaired thereby.
[THE REST OF THIS PAGE LEFT BLANK INTENTIONALLY]
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IN WITNESS WHEREOF, the Company and the Purchaser have caused this
Agreement to be executed and delivered by their respective officer or officers
thereunto duly authorized.
BUTLER MANUFACTURING COMPANY
By: __________________________________
Title: _______________________________
METROPOLITAN LIFE INSURANCE COMPANY
By:____________________________________
Title:_________________________________
<PAGE> 59
EXHIBIT A
BUTLER MANUFACTURING COMPANY
6.57% SENIOR NOTE
Due March 20, 2013
THIS NOTE MAY BE SUBJECT TO A HOME OFFICE PAYMENT AGREEMENT AND
ACCORDINGLY ANY PROSPECTIVE PURCHASER SHOULD FIRST VERIFY THE UNPAID
PRINCIPAL AMOUNT WITH THE COMPANY.
Registered Note No. R- ____ March ___, 1998
$ PPN: 123655 B* 2
BUTLER MANUFACTURING COMPANY, a Delaware corporation (the "Company"),
for value received, promises to pay to or registered assigns, on March 20, 2013,
the principal amount of Million Dollars ($ ) and to pay interest (computed on
the basis of a 360-day year of twelve 30-day months) on the principal amount
from time to time remaining unpaid hereon at the rate of 6.57% per annum from
the date hereof until maturity, payable on March 20 and September 20 in each
year, commencing September 20, 1998, and at maturity, and to pay interest on
overdue principal, Make-Whole Amount and (to the extent legally enforceable) on
any overdue installment of interest at a rate equal to the greater of (i) 8.57%
per annum or (ii) 2% over the rate of interest publicly announced by Nations
Bank of Texas, N.A., as its "base" or "prime" rate. Payments of the principal
of, the Make-Whole Amount, if any, and interest on this Note shall be made in
lawful money of the United States of America in the manner and at the place
provided in Section 2.5 of the Note Agreement as hereinafter defined.
This Note is issued under and pursuant to the terms and provisions of
the Note Agreement, dated as of March 1, 1998, entered into by the Company with
the Purchaser named in Schedule I thereto (the "Note Agreement"), and this Note
and any holder hereof are entitled to all of the benefits provided for by such
Note Agreement or referred to therein. Reference is made to the Note Agreement
for a statement of such benefits. Capitalized terms not otherwise defined herein
have the
1
<PAGE> 60
meanings ascribed to them in the Note Agreement.
As provided in the Note Agreement, upon surrender of this Note for
registration of transfer, duly endorsed or accompanied by a written instrument
of transfer duly executed by the registered holder hereof or its attorney duly
authorized in writing, a new Note for a like unpaid principal amount will be
issued to, and registered in the name of, the transferee upon the payment of the
taxes or other governmental charges, if any, that may be imposed in connection
therewith. The Company may treat the person in whose name this Note is
registered as the owner hereof for the purpose of receiving payment and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
This Note may be declared due prior to its expressed maturity date,
voluntary prepayments may be made hereon and certain prepayments are required to
be made, all in the events, on the terms and in the manner as provided in the
Note Agreement. Such prepayments include required prepayments on March 20 in
each year, commencing March 20, 2004 through March 20, 2012, inclusive, and
certain optional prepayments with a Make-Whole Amount.
Should the indebtedness represented by this Note or any part thereof be
collected in any proceeding provided for in the Note Agreement or be placed in
the hands of attorneys for collection, the Company agrees to pay, in addition to
the principal, Make-Whole Amount, if any, and interest due and payable hereon,
all costs of collecting this Note, including reasonable attorneys' fees and
expenses.
This Note and the Note Agreement are governed by and construed in
accordance with the laws of the State of Illinois.
BUTLER MANUFACTURING COMPANY
By __________________________
Its:.........................
2
<PAGE> 61
GUARANTY ENDORSEMENT
Payment of principal, interest and Make-Whole Amount, if any, with
respect to this Note is guaranteed pursuant to the terms of the Subsidiary
Guaranty dated March 20, 1998 executed and delivered by each of the undersigned.
Subject to the terms of such Subsidiary Guaranty, which are incorporated herein
by reference, each of the undersigned, jointly and severally, guarantees the
prompt payment when due of the principal, Make-Whole Amount, if any, and
interest on this Note.
BMC REAL ESTATE, INC. INNOVATIVE BUILDING TECHNOLOGY,
INC
By:.............................. By:..............................
Print Name:...................... Print Name:......................
Title:........................... Title:...........................
BUCON, INC. LESTER'S OF MINNESOTA, INC.
By:.............................. By:..............................
Print Name:...................... Print Name:......................
Title:........................... Title:...........................
BUTLER HOLDINGS, INC. MODU-LINE WINDOWS, INC.
By:.............................. By:..............................
Print Name:...................... Print Name:......................
Title:........................... Title:...........................
3
<PAGE> 62
BUTLER REAL ESTATE, INC.
By:..............................
Print Name:......................
Title:...........................
4
<PAGE> 63
EXHIBIT D
SUBSIDIARY GUARANTY
THIS SUBSIDIARY GUARANTY (this "Guaranty") dated March 20, 1998 is made by
BMC Real Estate, Inc., a Delaware corporation, BUCON, Inc., a Delaware
corporation, Butler Holdings, Inc., a Delaware corporation, Butler Real Estate,
Inc., a Delaware corporation, Innovative Building Technology, Inc., a Delaware
corporation, Lester's of Minnesota, Inc., a Minnesota corporation and Modu-Line
Windows, Inc., a Wisconsin corporation (each individually a "Guarantor" and
collectively the "Guarantors"), in favor of the holders from time to time of the
Notes hereinafter referred to, including each Purchaser listed on Schedule I to
the Note Agreement hereinafter referred to and its respective successors and
assigns (the "Purchaser").
W I T N E S S E T H:
WHEREAS, Butler Manufacturing Company, a Delaware corporation (the
"Company"), and the Purchaser listed on Schedule I thereto entered into a Note
Agreement dated as of March 1, 1998 (as amended, supplemented, restated or
otherwise modified from time to time in accordance with its terms and in effect,
the "Note Agreement");
WHEREAS, the Company owns all of the issued and outstanding capital stock
of the Guarantors and, by virtue of such ownership and otherwise, the Guarantors
will derive substantial benefits as a result of the purchase of the Company's
Notes (as defined in the Note Agreement) by the Purchaser;
WHEREAS, it is a condition precedent to the obligation of the Purchaser to
purchase the Company's Notes that the Guarantors shall have executed and
delivered this Guaranty to the Purchaser; and
WHEREAS, the Board of Directors of each Guarantor has determined that the
execution, delivery, and performance of this Guaranty is necessary and
convenient to the conduct, promotion and attainment of such Guarantor's business
and each of the Guarantors desires to execute this Guaranty to satisfy the
condition described in the preceding paragraph;
NOW, THEREFORE, in consideration of the premises and other benefits to the
Guarantors, and of the purchase of the Company's Notes by the Purchaser, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Guarantors hereby makes this Guaranty as follows:
SECTION 1. Definitions. Any capitalized terms not otherwise herein defined,
when used herein in capitalized form, shall have the respective meanings
attributed to them in the Note Agreement.
SECTION 2. Guaranty. (a) The Guarantors, jointly and severally, hereby
unconditionally and irrevocably guarantee to the Purchaser the due, prompt and
complete payment by the Company of the principal of, Make-Whole Amount, if any,
and interest on, and each other
<PAGE> 64
amount due under, the Notes, when and as the same shall become due and payable
(whether at stated maturity or by required or optional prepayment or by
declaration or otherwise) in accordance with the terms of the Notes and the Note
Agreement (the Notes and the Note Agreement being collectively hereinafter
referred to as the "Note Documents", and the amounts payable by the Company
under any of the Note Documents, and all other obligations of the Company
thereunder, being sometimes collectively hereinafter referred to as the
"Obligations"). This guaranty is a guaranty of payment, performance and
compliance and not just of collectibility and is in no way conditioned or
contingent upon any attempt to collect from or enforce performance or compliance
by the Company or upon any other event, contingency or circumstance whatsoever.
If for any reason whatsoever the Company shall fail or be unable duly,
punctually and fully to pay such amounts as and when the same shall become due
and payable or to perform or comply with any such obligation, covenant, term,
condition or undertaking, whether or not such failure or inability shall
constitute a "Default" or an "Event of Default" under any Note Document, the
Guarantors, without demand, presentment, protest or notice of any kind, will
forthwith pay or cause to be paid such amounts to the Purchaser under the terms
of such Note Document, in lawful money of the United States, at the place
specified in the Note Agreement, or perform or comply with the same or cause the
same to be performed or complied with, together with interest (to the extent
provided for under such Note Document) on any amount due and owing from the
Company. The Guarantors, promptly after demand, will pay to the Purchaser the
reasonable costs and expenses of collecting such amounts or otherwise enforcing
this Guaranty, including, without limitation, the reasonable fees and expenses
of counsel. The right of recovery against each of the Guarantors under this
Guaranty is, however, limited to the Fair Net Worth of such Guarantor, as of the
date of any determination thereof, less $20,000. For purposes of this Guaranty,
the "Fair Net Worth" of any Guarantor shall mean an amount equal to the fair
market value of such Guarantor's assets less all its liabilities (other than
such Guarantor's liabilities under this Guaranty), including all liabilities,
whether fixed or contingent, direct or indirect, disputed or undisputed, secured
or unsecured, and whether or not required to be reflected on a balance sheet
prepared in accordance with generally accepted accounting principles.
(b) Each Guarantor hereby agrees that to the extent a Guarantor shall have
paid more than its proportionate share of any payment made hereunder, such
Guarantor shall be entitled to seek and receive contribution from and against
any other Guarantor hereunder who has not paid its proportionate share of such
payment. Each Guarantor's right of contribution shall be subject to the terms
and conditions of Section 6 hereof. The provisions of this paragraph (b) shall
in no respect limit the obligations and liabilities of any Guarantor to the
Purchaser, and each Guarantor shall remain liable to the Purchaser for the full
amount guaranteed by such Guarantor hereunder.
<PAGE> 65
SECTION 3. Guarantor's Obligations Absolute and Unconditional. The
obligations of each Guarantor under this Guaranty shall be primary, absolute and
unconditional obligations of such Guarantor, shall not be subject to any
counterclaim, set-off, deduction, diminution, abatement, recoupment, suspension,
deferment, reduction or defense based upon any claim such Guarantor or any other
Person may have against the Company or any other Person, and to the full extent
permitted by applicable law shall remain in full force and effect without regard
to, and shall not be released, discharged or in any way affected by, any
circumstance or condition whatsoever (whether or not any Guarantor or the
Company shall have any knowledge or notice thereof), including, without
limitation:
(a) any termination, amendment or modification of or deletion from or
addition or supplement to or other change in any of the Note Documents or any
other instrument or agreement applicable to any of the parties to any of the
Note Documents;
(b) any furnishing or acceptance of any security, or any release of any
security, for the Obligations, or the failure of any security or the failure of
any Person to perfect any interest in any collateral;
(c) any failure, omission or delay on the part of the Company to conform or
comply with any term of any of the Note Documents or any other instrument or
agreement referred to in paragraph (a) above, including, without limitation,
failure to give notice to any Guarantor of the occurrence of a "Default" or an
"Event of Default" under any Note Document;
(d) any waiver of the payment, performance or observance of any of the
obligations, conditions, covenants or agreements contained in any Note Document,
or any other waiver, consent, extension, indulgence, compromise, settlement,
release or other action or inaction under or in respect of any of the Note
Documents or any other instrument or agreement referred to in paragraph (a)
above or any obligation or liability of the Company, or any exercise or
non-exercise of any right, remedy, power or privilege under or in respect of any
such instrument or agreement or any such obligation or liability;
(e) any failure, omission or delay on the part of the Purchaser to enforce,
assert or exercise any right, power or remedy conferred on the Purchaser in this
Guaranty, or any such failure, omission or delay on the part of the Purchaser in
connection with any Note Document, or any other action on the part of the
Purchaser;
(f) any voluntary or involuntary bankruptcy, insolvency, reorganization,
arrangement, readjustment, assignment for the benefit of creditors, composition,
receivership, conservatorship, custodianship, liquidation, marshalling of assets
and liabilities or similar proceedings with respect to the Company, any
Guarantor or to any other Person or any of their respective properties or
creditors, or any action taken by any trustee or receiver or by any court in any
such proceeding;
(g) any limitation on the liability or obligations of the Company or any
other Person under any of the Note Documents, or any discharge, termination,
cancellation,
<PAGE> 66
frustration, irregularity, invalidity or unenforceability, in whole or
in part, of any of the Note Documents or any other agreement or
instrument referred to in paragraph (a) above or any term hereof;
(h) any merger or consolidation of the Company or any Guarantor into or
with any other corporation, or any sale, lease or transfer of any of the assets
of the Company or any Guarantor to any other Person;
(i) any change in the ownership of any shares of capital stock of the
Company or any change in the corporate relationship between the Company and any
Guarantor, or any termination of such relationship;
(j) any release or discharge, by operation of law, of any Guarantor from
the performance or observance of any obligation, covenant or agreement contained
in this Guaranty;
(k) any lack of corporate power of the Company or any other Person at any
time liable for part or all of the Obligations;
(l) the existence of any claim, defense, set-off, or other rights which the
Company or any Guarantor may have at any time against the Purchaser, the Company
or any Guarantor, or any other Person, whether in connection with this Guaranty,
the Note Documents, the transactions contemplated thereby, or any other
transaction;
(m) any failure of the Purchaser to notify any Guarantor of any renewal,
extension, or assignment of the Obligations or any part thereof, or the release
of any security, or if any action taken or refrained from being taken by the
Purchaser, it being understood that the Purchaser shall not be required to give
any Guarantor any notice of any kind under any circumstance whatsoever with
respect to or in connection with the Obligations; or
(n) any other occurrence, circumstance, happening or event whatsoever,
whether similar or dissimilar to the foregoing, whether foreseen or unforeseen,
and any other circumstance which might otherwise constitute a legal or equitable
defense or discharge of the liabilities of a guarantor or surety or which might
otherwise limit recourse against any Guarantor.
SECTION 4. Full Recourse Obligations. The obligations of each of the
Guarantors set forth herein constitute the full recourse obligations of such
Guarantor enforceable against it to the full extent of all its assets and
properties.
SECTION 5. Waiver. Each of the Guarantors unconditionally waives, to the
extent permitted by applicable law, (a) notice of any of the matters referred to
in Section 3, (b) notice to the Guarantor of the incurrence of any of the
Obligations, notice to the Guarantor or the Company of any breach or default by
the Company with respect to any of the Obligations or any other notice that may
be required, by statute, rule of law or otherwise, to preserve any rights of the
Purchaser against the
<PAGE> 67
Guarantor, (c) presentment to or demand of payment from the Company or the
Guarantor with respect to any amount due under any Note Document or protest for
nonpayment or dishonor, (d) any right to the enforcement, assertion or exercise
by the Purchaser of any right, power, privilege or remedy conferred in the Note
Agreement or any other Note Document or otherwise, (e) any requirement of
diligence on the part of the Purchaser, (f) any requirement to exhaust any
remedies or to mitigate the damages resulting from any default under any Note
Document, (g) any notice of any sale, transfer or other disposition by the
Purchaser of any right, title to or interest in the Note Agreement or in any
other Note Document, (h) any right to assert against the Purchaser as a
counterclaim, set-off or cross-claim, any counterclaim, set-off or claim which
it may now or hereafter have against the Company or other Person liable on the
Obligations, and (i) any other circumstance whatsoever which might otherwise
constitute a legal or equitable discharge, release or defense of a guarantor or
surety or which might otherwise limit recourse against the Guarantor.
SECTION 6. No Subrogation, Contribution, Reimbursement or Indemnity.
Notwithstanding anything to the contrary in this Guaranty and the other Note
Documents, each of the Guarantors hereby irrevocably waives any and all claims
or other rights which may have arisen in connection with this Guaranty to be
subrogated to any of the rights (whether contractual, under the United States
Bankruptcy Code, as amended, including Section 509 thereof, under common law or
otherwise) of the Purchaser against the Company or against any collateral
security or guaranty or right of offset held by the Purchaser for the payment of
the Obligations. Each of the Guarantors hereby further irrevocably waives all
contractual, common law, statutory or other rights of reimbursement,
contribution, exoneration or indemnity (or any similar right) from or against
the Company which may have arisen in connection with this Guaranty, whether or
not such remedy or right arises in equity, or under contract, statute or common
law. So long as the Obligations remain, if any amount shall be paid by or on
behalf of the Company to any of the Guarantors on account of any of the rights
waived in this paragraph, such amount shall be held by the Guarantor in trust
for the benefit of the Purchaser, segregated from other funds of the Guarantor,
and shall, forthwith upon receipt by the Guarantor, be turned over to the
Purchaser (duly indorsed by such Guarantor to the Purchaser, if required), to be
applied against the Obligations, whether matured or unmatured, in such order as
the Purchaser may determine. The provisions of this paragraph shall survive the
term of this Guaranty and the payment in full of the Obligations. Each Guarantor
acknowledges that it will receive direct and indirect benefits from the sale of
the Notes by the Company and that the waiver set forth in this Section 6 is
knowingly made in contemplation of such benefits.
SECTION 7. Effect of Bankruptcy Proceedings, etc. This Guaranty shall
continue to be effective or be automatically reinstated, as the case may be, if
at any time payment, in whole or in part, of any of the sums due to the
Purchaser pursuant to the terms of the Note Agreement or any other Note Document
is rescinded or must otherwise be restored or returned by the Purchaser upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Company or any other Person, or upon or as a result of the appointment of a
custodian, receiver, trustee or other officer with similar powers with respect
to the Company or other Person or any substantial part of its property, or
otherwise, all as though such payment had not been made. If an event permitting
the acceleration of the maturity of the principal amount of the Notes shall at
any time have occurred and be continuing, and such acceleration shall at such
time be prevented by reason of the pendency against the Company or any other
Person of a case or proceeding under a bankruptcy or insolvency law, each
<PAGE> 68
of the Guarantors agrees that, for purposes of this Guaranty and its obligations
hereunder, the maturity of the principal amount of the Notes and all other
Obligations shall be deemed to have been accelerated with the same effect as if
the Purchaser had accelerated the same in accordance with the terms of the Note
Agreement or other applicable Note Document, and the Guarantors shall forthwith
pay such principal amount, Make-Whole Amount, if any, and interest thereon and
any other amounts guaranteed hereunder without further notice or demand.
SECTION 8. Term of Agreement. This Guaranty and all guaranties, covenants
and agreements of the Guarantors contained herein shall continue in full force
and effect and shall not be discharged until such time as all of the Obligations
shall be paid and performed in full and all of the agreements of the Guarantors
hereunder shall be duly paid and performed in full.
SECTION 9. Representations and Warranties. Each of the Guarantors hereby
represents and warrants to each Purchaser that all representations and
warranties set forth in Section 3.1 of the Note Agreement (each of which is
incorporated herein by reference) as to itself and not as to any other Person
are true and correct.
SECTION 10. Notices. All notices under the terms and provisions hereof
shall be in writing, and shall be delivered or sent by overnight delivery or
telecopy or mailed by first-class mail, postage prepaid, addressed (a) if to the
Company or the Purchaser at the address set forth in the Note Agreement or (b)
if to any of the Guarantors, at:
BMA Tower
31st Street and Southwest Trafficway
Kansas City, Missouri 64108
or at such other address as the Guarantors shall from time to time designate in
writing to the Purchaser. Any notice so addressed shall be deemed to be given
when so delivered or sent or, if mailed, on the third Business Day after being
so mailed.
SECTION 11. Survival. All warranties, representations and covenants made by
the Guarantors herein or in any certificate or other instrument delivered by it
or on its behalf hereunder shall be considered to have been relied upon by the
Purchaser and shall survive the execution and delivery of this Guaranty,
regardless of any investigation made by the Purchaser. All statements in any
such certificate or other instrument shall constitute warranties and
representations by the Guarantors hereunder.
SECTION 12. Miscellaneous. Any provision of this Guaranty 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. To the extent permitted
by applicable law, each of the Guarantors hereby waives any provision of law
that renders any provisions hereof prohibited or unenforceable in any respect.
The terms of this Guaranty shall be binding upon, and inure to the benefit of,
the Guarantors and the Purchaser and their respective successors and assigns. No
term or provision of
<PAGE> 69
this Guaranty may be changed, waived, discharged or terminated orally, but only
by an instrument in writing signed by the Guarantors and the Purchaser. The
Section and paragraph headings in this Guaranty are for convenience of reference
only and shall not modify, define, expand or limit any of the terms or
provisions hereof, and all references herein to numbered Sections, unless
otherwise indicated, are to Sections in this Guaranty.
SECTION 13. Information. Each Guarantor acknowledges and agrees that it
shall have the sole responsibility for obtaining from the Company such
information concerning the Company's financial condition or business operations
as such Guarantor may require, and that the Purchaser does not have any duty at
any time to disclose to any Guarantor any information relating to the business
operations or financial conditions of the Company.
SECTION 14. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS AND THE UNITED
STATES OF AMERICA. WITHOUT EXCLUDING ANY OTHER JURISDICTION, EACH GUARANTOR
AGREES THAT THE STATE AND FEDERAL COURTS OF ILLINOIS LOCATED IN CHICAGO,
ILLINOIS SHALL HAVE JURISDICTION OVER PROCEEDINGS IN CONNECTION HEREWITH.
SECTION 15. WAIVER OF JURY TRIAL. EACH GUARANTOR AND EACH PURCHASER HEREBY
KNOWINGLY, VOLUNTARILY, IRREVOCABLY AND INTENTIONALLY WAIVES, TO THE MAXIMUM
EXTENT PERMITTED BY LAW, ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
CLAIM ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY OF THE LOAN DOCUMENTS
OR THE TRANSACTIONS CONTEMPLATED THEREBY. THIS PROVISION IS A MATERIAL
INDUCEMENT TO EACH PURCHASER ENTERING INTO THE NOTE AGREEMENT.
SECTION 16. Ratable Benefit. This Guaranty is for the ratable benefit of
the Purchaser.
SECTION 17. Guarantor Insolvency. Should any Guarantor become insolvent,
fail to pay its debts generally as they become due, voluntarily seek, consent
to, or acquiesce in the benefits of any Bankruptcy Law or become a party to or
be made the subject of any proceeding provided for by any Bankruptcy Law (other
than as a creditor or claimant) that could suspend or otherwise adversely affect
the rights of the Purchaser granted hereunder, then the obligations of such
Guarantor under this Guaranty shall be, as between such Guarantor and the
Purchaser, a fully-matured, due, and payable obligation of such Guarantor to the
Purchaser (without regard to whether the Company is then in default under the
Note Agreement or whether any part of the Obligations is then due and owing by
the Company to such Purchaser), payable in full by such Guarantor to such
Purchaser upon demand, which shall be the estimated amount owing in respect of
the contingent claim created hereunder.
<PAGE> 70
[THE REST OF THIS PAGE LEFT BLANK INTENTIONALLY]
<PAGE> 71
IN WITNESS WHEREOF, each of the Guarantors has caused this
Guaranty to be duly executed as of the day and year first above written.
BMC REAL ESTATE, INC. INNOVATIVE BUILDING TECHNOLOGY, INC.
By:............................. By:.............................
Print Name:..................... Print Name:.....................
Title:.......................... Title:..........................
BUCON, INC. LESTER'S OF MINNESOTA, INC.
By:............................. By:..............................
Print Name:..................... Print Name:......................
Title:.......................... Title:...........................
BUTLER HOLDINGS, INC. MODU-LINE WINDOWS, INC.
By:............................. By:.............................
Print Name:..................... Print Name:.....................
Title:.......................... Title:..........................
BUTLER REAL ESTATE, INC.
By:.............................
Print Name:.....................
Title:..........................
548842.1
<PAGE> 1
Exhibit 19
LETTER TO SHAREHOLDERS
APRIL 16, 1998
Butler
Manufacturing
Company
FIRST
QUARTER
REPORT 1998
- -----------
THREE MONTHS ENDED
MARCH 31, 1998
BMA TOWER PENN VALLEY PARK KANSAS CITY, MO 64108
To Our Shareholders:
For the first quarter of 1998 Butler's sales of $194 million were up 3% from a
year ago. Net earnings of $1.2 million, or $.15 per share, were down from the
$1.9 million, or $.25 per share earned in the first quarter last year. First
quarter 1997 results included sales of about $6.6 million and net earnings of
$.5 million ($.05 per share) from the Grain Systems division which was sold in
June 1997.
In Butler's Building Systems group, the U.S. metal buildings business had lower
sales and earnings than a year ago. Extremely wet conditions on construction job
sites in most regions of the country significantly slowed the process of project
completions, causing Butler Builders to delay shipments until their work in
process was back on schedule. U.S. building orders were extremely strong in
March, indicating that most of this seasonal interruption is rapidly being
resolved. The Lester wood frame buildings division also had a lower quarter.
Their results were affected not only by weather conditions but also by weaker
demand for livestock confinement buildings because of severely depressed hog
prices. Butler Real Estate continued to contribute significant earnings in the
first quarter.
Our three international subsidiaries had a somewhat larger loss in the
aggregate, in the first quarter of 1998, than in the same period last year.
Europe performed acceptably against their sales and operating expectations, but
continued to suffer margin erosion resulting from the strength of the British
pound. The Hungarian plant is making excellent progress in producing Butler
structural frames, and the benefits of our new fabrication sourcing plans will
become increasingly apparent as the year progresses. Brazil had a larger
quarterly loss than anticipated. Major projects are not providing a consistent
plant loading to absorb manufacturing overhead. Actions are being taken to
expand marketing efforts and to reduce material and production costs. China
achieved first quarter results that were much better than last year and ahead of
their 1998 plan. Increased marketing attention in China is being directed
towards local Chinese enterprises as a consequence of the reduced current level
of foreign investment.
Butler Construction incurred an operating loss in the first quarter on lower
contract billings. They experienced temporary delays in the start-up of several
projects but have increased order rates and proposal activity substantially in
recent weeks.
The Vistawall group achieved a very solid first quarter with increases in both
sales and earnings. Shipments of engineered products and storefronts were
particularly strong.
<PAGE> 2
Butler's balance sheet reflects a recently completed $35 million private
placement of senior unsecured notes. The notes have a fifteen year maturity with
a fixed interest rate of 6.57%. We believe this financing, on very favorable
terms, will help continue to assure the liquidity and flexibility to make
investments in attractive opportunities for the future growth of your company.
Despite the slower start in 1998, prospects for Butler for the entire year
remain quite encouraging. Every indicator that we interpret suggests continuing
strength in the U.S. non-residential construction market. We also expect to
achieve solid progress in the financial results of our international buildings
businesses. At the end of the quarter, total backlog of $309 million was up 17%
from comparable backlog (excluding Grain Systems) a year ago. The mix of backlog
showed product up 24% and construction 4% lower.
We expect that operating earnings for all of 1998 will show substantial
improvement over 1997.
Cordially yours,
/s/ Robert H. West
- ------------------------------------
Robert H. West
Chairman and Chief Executive Officer
April 16, 1998
Butler Manufacturing Company
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BUTLER
MANUFACTURING COMPANY CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE QUARTER
ENDED MARCH 31, 1998, AND CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1998, AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000015840
<NAME> BUTLER MANUFACTURING COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 2,944
<SECURITIES> 0
<RECEIVABLES> 113,162
<ALLOWANCES> 0
<INVENTORY> 78,942
<CURRENT-ASSETS> 239,251
<PP&E> 244,512
<DEPRECIATION> 145,970
<TOTAL-ASSETS> 384,812
<CURRENT-LIABILITIES> 139,175
<BONDS> 68,651<F1>
0
0
<COMMON> 12,623
<OTHER-SE> 176,606<F2>
<TOTAL-LIABILITY-AND-EQUITY> 384,812
<SALES> 193,784
<TOTAL-REVENUES> 194,254<F3>
<CGS> 161,857
<TOTAL-COSTS> 161,857
<OTHER-EXPENSES> 28,278<F4>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,385
<INCOME-PRETAX> 2,734
<INCOME-TAX> 1,575
<INCOME-CONTINUING> 1,159
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,159
<EPS-PRIMARY> .15
<EPS-DILUTED> .15
<FN>
<F1>REFLECTS LONG-TERM DEBT, LESS CURRENT MATURITIES.
<F2>REFLECTS OTHER STOCKHOLDERS' EQUITY BEFORE DEDUCTIONS OF $31.0 MILLION COST OF
TREASURY STOCK.
<F3>REFLECTS NET SALES PLUS NET INTERNATIONAL JOINT VENTURE INCOME LESS NET OTHER
EXPENSE.
<F4>CONSISTS OF SELLING, GENERAL AND ADMINISTRATIVE EXPENSE.
</FN>
</TABLE>
