<PAGE> 1
As filed with the Securities and Exchange Commission on , 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CONTINENTAL GLOBAL GROUP, INC.
(Exact name of registrant as specified in its charter)
------------------------
<TABLE>
<S> <C> <C>
DELAWARE 3535 34-1506889
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification No.)
incorporation or organization)
</TABLE>
CO-REGISTRANTS AND SUBSIDIARY GUARANTORS *
<TABLE>
<S> <C> <C> <C>
CONTINENTAL CONVEYOR & EQUIPMENT COMPANY DELAWARE 3535 34-1603197
GOODMAN CONVEYOR COMPANY DELAWARE 3535 34-1603196
</TABLE>
------------------------
* Such entities can be contacted through Continental Global Group, Inc.
438 INDUSTRIAL DRIVE
WINFIELD, ALABAMA 35594
(205) 487-6492
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
------------------------
C. EDWARD BRYANT, JR.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CONTINENTAL GLOBAL GROUP, INC.
438 INDUSTRIAL DRIVE
WINFIELD, ALABAMA 35594
(205) 487-6492
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
JEFFREY J. MARGULIES, ESQ.
SQUIRE, SANDERS & DEMPSEY L.L.P.
4900 KEY TOWER, 127 PUBLIC SQUARE
CLEVELAND, OHIO 44114-1304
(216) 479-8500
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=================================================================================================
TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED NOTE PRICE(1) REGISTRATION FEE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
11% Series B Senior Notes
due 2007(2).............. $120,000,000 100% $120,000,000 $36,364
=================================================================================================
</TABLE>
(1) Estimated solely for purposes of computing the registration fee pursuant to
Rule 457(f).
(2) Continental Conveyor & Equipment Company and Goodman Conveyor Company will
guarantee the payment of the 11% Series B Senior Notes due 2007. Pursuant to
Rule 457(n), no separate filing fee is required for the guarantees.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
================================================================================
<PAGE> 2
PROSPECTUS
, 1997
CONTINENTAL GLOBAL GROUP, INC.
OFFER TO EXCHANGE
11% SERIES B SENIOR NOTES DUE 2007
FOR ANY AND ALL OUTSTANDING
11% SERIES A SENIOR NOTES DUE 2007
- -------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1997, UNLESS EXTENDED.
- -------------------------------------------------------------------------------
Continental Global Group, Inc., a Delaware corporation (the "Company"),
hereby offers, upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying letter of transmittal (the "Letter of
Transmittal") to exchange its 11% Series B Senior Notes due 2007 (the "Series B
Notes") for an equal principal amount of its 11% Series A Senior Notes due 2007
(the "Series A Notes"), of which $120 million principal amount is outstanding
(the "Exchange Offer"). The Series B Notes have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
Registration Statement (as defined) of which this Prospectus is a part. The
Series B Notes and the Series A Notes are collectively referred to herein as the
"Senior Notes."
Upon the terms and subject to the conditions set forth in this Prospectus
and the Letter of Transmittal, the Company will accept for exchange any and all
Series A Notes that are validly tendered and not withdrawn by 5:00 p.m., New
York City time, on , 1997, unless the Exchange Offer is extended (the
"Expiration Date"). Tenders of Series A Notes may be withdrawn at any time prior
to 5:00 p.m., New York City time, on the Expiration Date. The Exchange Offer is
not conditioned upon any minimum principal amount of Series A Notes being
tendered for exchange. Series A Notes may be tendered only in integral multiples
of $1,000. See "The Exchange Offer."
The Series B Notes will evidence the same debt as the Series A Notes for
which they are exchanged, and will be entitled to the benefits of the same
indenture, dated as of April 1, 1997 (the "Indenture"), among the Company, the
Subsidiary Guarantors (as defined) and Norwest Bank Minnesota, National
Association, as trustee (the "Trustee"). The form and terms of the Series B
Notes are the same as the form and terms of the Series A Notes, except that the
Series B Notes have been registered under the Securities Act and the holders of
the Series B Notes will not be entitled to the benefit of certain registration
and exchange rights granted to the holders of the Series A Notes under the
Registration Rights Agreement (as defined), which rights will terminate upon the
consummation of the Exchange Offer. See "The Exchange Offer" and "Description of
Senior Notes."
The Series B Notes will be senior unsecured obligations of the Company and
will rank pari passu in right of payment with all current and future unsecured
senior indebtedness (as defined) of the Company and senior to all subordinated
indebtedness of the Company. The Company's obligations under the Series B Notes
will be jointly and severally guaranteed by each direct and indirect Subsidiary
(as defined) of the Company (other than Foreign Subsidiaries (as defined))
existing on the closing date of the Exchange Offer and by certain other
Subsidiaries of the Company formed or acquired thereafter. The Subsidiary
Guarantees (as defined) will be senior unsecured obligations of the Subsidiary
Guarantors and will rank pari passu in right of payment with all current and
future unsecured senior indebtedness of the Subsidiary Guarantors and senior to
all subordinated indebtedness of the Subsidiary Guarantors. The Subsidiary
Guarantees will be limited as described herein. See "Description of Senior
Notes--Subsidiary Guarantees." Certain of the Company's Subsidiaries are parties
to the Revolving Credit Facility (as defined) and all obligations thereunder are
secured by a first priority lien on substantially all of the assets of such
Subsidiaries. BCE (as defined) is a party to the Australian Revolving Credit
Facility (as defined) and all obligations thereunder are secured by a first
priority lien on substantially all of the assets of the BCE Subsidiaries (as
defined). On a pro forma basis, as of March 31, 1997, after giving effect to (i)
the Series A Notes Offering (as defined), (ii) the application of the net
proceeds therefrom, (iii) the BCE Acquisition (as defined) and (iv) the
Hewitt-Robins Acquisition (as defined), the aggregate principal amount of
secured indebtedness of the Company, secured indebtedness of the Subsidiary
Guarantors and indebtedness of the Company's Foreign Subsidiaries which would
have effectively ranked senior to the Senior Notes would have been approximately
$5.9 million. The Indenture will permit the Company and its Subsidiaries to
incur additional indebtedness, including secured indebtedness, subject to
certain limitations. See "Description of Senior Notes."
The Series B Notes will bear interest at the same rate and on the same terms
as the Series A Notes. Accordingly, interest on the Series B Notes will be
payable semiannually in cash in arrears on April 1 and October 1 of each year,
commencing October 1, 1997, accruing from April 1, 1997 (which was the date of
issuance
(Cover continued on following page)
SEE "RISK FACTORS" BEGINNING ON PAGE 14 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE SERIES
B NOTES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 3
(Continued from previous page)
of the Series A Notes) at the rate of 11% per annum, and the Series B Notes will
mature on April 1, 2007. Holders of Series A Notes whose Series A Notes are
accepted for exchange will be deemed to have waived the right to receive any
payment in respect of interest on the Series A Notes accrued up until the date
of the issuance of the Series B Notes. Because the Series B Notes will bear
interest from the issue date of the Series A Notes, such waiver will not result
in the loss of interest income to such holders.
The Series B Notes will be redeemable at the option of the Company, in whole
or in part, at any time on or after April 1, 2002 at the redemption prices set
forth herein, plus accrued and unpaid interest and Liquidated Damages (as
defined), if any, to the date of redemption. Notwithstanding the foregoing, at
any time prior to April 1, 2000, the Company may redeem up to 33 1/3% of the
original aggregate principal amount of the Senior Notes with the net proceeds of
one or more offerings of common stock of the Company at a redemption price equal
to 110% of the principal amount thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, to the date of redemption; provided, that after any
such redemption, 66 2/3% of the original aggregate principal amount of the
Senior Notes remains outstanding. Upon the occurrence of a Change of Control (as
defined), the Company will be required to offer to purchase the Senior Notes at
a purchase price equal to 101% of the aggregate principal amount thereof, plus
accrued and unpaid interest and Liquidated Damages, if any, to the date of
purchase. See "Description of Senior Notes."
Based on an interpretation by the staff of the Securities and Exchange
Commission (the "Commission") set forth in no-action letters issued to third
parties, the Company believes that the Series B Notes issued pursuant to this
Exchange Offer in exchange for Series A Notes may be offered for resale, resold
and otherwise transferred by a holder thereof (other than (i) a person that is
an affiliate of the Company within the meaning of Rule 405 under the Securities
Act or (ii) a broker-dealer that purchases such Series B Notes directly from the
Company to resell pursuant to Rule 144A or any other available exemption under
the Securities Act), without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that the holder is acquiring
the Series B Notes in the ordinary course of its business and is not
participating, and had no arrangement or understanding with any person to
participate, in the distribution of the Series B Notes. Holders of Series A
Notes wishing to accept the Exchange Offer must represent to the Company, as
required by the Registration Rights Agreement, that such conditions have been
met. The Company believes that none of the registered holders of the Series A
Notes is an affiliate (as such term is defined in Rule 405 under the Securities
Act) of the Company. Each broker-dealer that receives Series B Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Series B Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Series B Notes received in exchange for Series A Notes where
such Series A Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Company has agreed to
make this Prospectus (as it may be amended or supplemented) available to any
broker-dealer for use in connection with any such resale for a period of 120
days after the consummation of the Exchange Offer. See "Plan of Distribution"
and "The Exchange Offer--Resale of the Series B Notes."
There is no public market for the Senior Notes. The Company does not intend
to list the Series B Notes on any national securities exchange or to apply for
quotation of the Series B Notes through the National Association of Securities
Dealers Automated Quotation System. There can be no assurance that an active
public market for the Series B Notes will develop. If a market for the Series B
Notes should develop, the market value of the Series B Notes will depend on a
variety of factors and the Series B Notes could trade at a discount from their
principal amount. See "Risk Factors--Absence of a Public Market."
The Company will not receive any proceeds from this Exchange Offer. The
Company has agreed to bear the expenses of this Exchange Offer. No underwriter
is being used in connection with this Exchange Offer.
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
OR THE ACCOMPANYING LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE ACCOMPANYING
LETTER OF TRANSMITTAL, NOR ANY EXCHANGE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
The Series B Notes will be available initially only in book-entry form. The
Company expects that the Series B Notes issued pursuant to this Exchange Offer
will be issued in the form of one or more fully registered global notes which
will be deposited with, or on behalf of, DTC (as defined) and registered in its
name or in the name of Cede & Co., its nominee. Beneficial interests in the
global notes representing the Series B Notes will be shown on, and transfers
thereof will be effected only through, records maintained by DTC and its
participants. After the initial issuance of such global notes, Series B Notes in
certificated form will be issued in exchange for the global notes only as set
forth in the Indenture. See "Description of Senior Notes -- Book Entry; Delivery
and Form."
<PAGE> 4
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 (together with all amendments, exhibits, schedules and supplements thereto,
the "Registration Statement") under the Securities Act with respect to the
Series B Notes offered hereby. This Prospectus, which forms a part of the
Registration Statement, does not contain all the information set forth in the
Registration Statement, certain parts of which have been omitted in accordance
with the rules and regulations of the Commission. For further information with
respect to the Company and the Series B Notes offered hereby, reference is made
to the Registration Statement. Statements contained in this Prospectus as to the
contents of certain documents filed as exhibits to the Registration Statement
are not necessarily complete and, in each case, are qualified by reference to
the copy of the document so filed. The Registration Statement can be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
at the Commission's regional offices at Suite 1400, Northwestern Atrium Center,
500 West Madison Street, Chicago, Illinois 60661-2511 and 7 World Trade Center,
13th Floor, New York, New York 10048. Copies of such material may be obtained
from the Public Reference Section of the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Such
material also can be reviewed through the Commission's Electronic Data
Gathering, Analysis, and Retrieval System, which is publicly available through
the Commission's Web site (http://www.sec.gov).
As a result of the Exchange Offer, the Company will become subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). Pursuant to the Indenture, the Company has agreed that,
whether or not required by the rules and regulations of the Commission, so long
as any Senior Notes are outstanding, the Company shall furnish to the registered
holders of Senior Notes copies of (i) all quarterly and annual financial
information that would be required to be contained in a filing with the
Commission on Forms 10-Q and 10-K if the Company were required to file such
Forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and, with respect to the annual information only, a
report thereon by the Company's certified independent accountants and (ii) all
current reports that would be required to be filed with the Commission on Form
8-K if the Company were required to file such reports. In addition, whether or
not required by the rules and regulations of the Commission, the Company will
file a copy of all such information and reports with the Commission for public
availability (unless the Commission will not accept such a filing) within the
time periods that would have been applicable had the Company been subject to
such rules and regulations and make such information available to securities
analysts and prospective investors upon request. The Company has agreed further
that, for so long as any Senior Notes remain outstanding, it shall furnish to
the holders of the Senior Notes, to securities analysts, and to prospective
investors, upon request, the information required to be delivered pursuant to
Rule 144A(d)(4) under the Securities Act. The Company also will furnish to each
registered holder of the Senior Notes such other reports as may be required by
applicable law.
The principal executive offices of the Company are located at 438
Industrial Drive, Winfield, Alabama 35594, telephone number: (205) 487-6492.
EXCHANGE RATE DATA
The following table sets forth, for the periods indicated, certain
information concerning the closing exchange rate, the average and the high and
low exchange rates for Australian dollars expressed in United States dollars per
A$1.00. On May 20, 1997, the closing exchange rate was US$.77 per A$1.00.
<TABLE>
<CAPTION>
AT AND FOR THE AT AND FOR THE
AT AND FOR SIX MONTHS THREE MONTHS
THE YEAR ENDING ENDED ENDED
JUNE 30, DECEMBER 31, MARCH 31,
------------------ ------------------ ------------------
1995 1996 1995 1996 1996 1997
<S> <C> <C> <C> <C> <C> <C>
Exchange rate at end of period............. US$ .71 US$ .79 US$ .74 US$ .79 US$ .78 US$ .78
Average exchange rate during period(1)..... .74 .76 .74 .79 .75 .78
Highest exchange rate during period........ .78 .80 .77 .82 .78 .80
Lowest exchange rate during period......... .71 .71 .71 .77 .73 .76
</TABLE>
- ---------------
(1) The average of the daily closing exchange rates during the applicable
period.
3
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. Holders of Series A Notes are urged to read this
Prospectus in its entirety before exchanging their Series A Notes for Series B
Notes. Continental Global Group, Inc. (the "Company") is a recently-formed
holding company, the principal assets of which consist of the capital stock of
its direct subsidiaries, Continental Conveyor & Equipment Company
("Continental") and Goodman Conveyor Company ("Goodman"), and, indirectly, the
capital stock of BCE Holdings Pty. Ltd., an Australian conveyor, engineering and
materials handling equipment holding company ("BCE"). See "The Company." Unless
the context indicates or otherwise requires, references in this Prospectus to
the "Company" are to Continental Global Group, Inc. and its subsidiaries on a
consolidated basis. The sources of all factual information and forecasts
regarding the coal industry are identified under "Business--Coal Industry."
Unless otherwise indicated, references in this Prospectus to "$" or "dollars"
are to United States dollars and references to "Conveyor Equipment" mean
equipment and services of the type described in "Business-- Products and
Markets." Unless otherwise indicated, pro forma information in this Prospectus
gives effect to the Series A Notes Offering (as defined), the application of the
net proceeds therefrom, the BCE Acquisition (as defined) and the Hewitt-Robins
Acquisition (as defined).
THE COMPANY
The Company believes it is a leading international manufacturer and
supplier of Conveyor Equipment for use in the coal mining industry. Based on
1996 pro forma net sales, the Company estimates it has approximately a 40% share
of the United States market for idlers used in aboveground Conveyor Equipment
applications and a significantly higher share of the United States underground
coal mining Conveyor Equipment market. In addition, the Company believes it has
a significant share of the Australian underground coal mining Conveyor Equipment
market. The Company supplies 18 of the top 25 coal producers in the United
States with its products, which include substantially all of the components
required to transport coal by conveyor from the coalface to the surface. The
Company also provides design and engineering assistance and upgrade and
maintenance services with respect to Conveyor Equipment. Approximately 25% of
the Company's pro forma net sales in 1996 were derived from the sale of
replacement components. The Company has also utilized its technical knowledge
and engineering capabilities to expand its customer base to include producers of
rock and aggregate products, metals and minerals mining companies, tunneling
firms and other industrial concerns. Sales to such customers comprised
approximately 22% of the Company's Conveyor Equipment net sales in 1996. In
1996, the Company had pro forma net sales and Adjusted EBITDA (as defined) of
$191.1 million and $22.5 million, respectively.
The Company benefits from a reputation among its customers for high-quality
and reliable Conveyor Equipment products. The Company believes the quality and
consistent performance of its products is an important determinant of its
customers' selection of Conveyor Equipment because, although conveyors are a
relatively small part of the total cost of a mining project, a conveyor system
failure can have a disproportionately high impact on customer profitability. As
a result of, among other things, its reputation for quality, the Company has
developed preferred supplier arrangements with several of the world's largest
coal and mineral mining companies. Under these arrangements, the Company
supplies substantially all of such customers' Conveyor Equipment needs and
customers are assured of enhanced equipment availability. Sales from such
arrangements accounted for approximately $45.0 million, or 24%, of the Company's
1996 pro forma net sales.
The Company believes it is well positioned to continue to benefit from
favorable trends in the coal industry worldwide. During the last ten years, coal
consumption in the United States has generally experienced steady annual growth,
reaching a record level of 941 million tons in 1995, the most recent year for
which data are available. This steady growth in coal consumption is attributable
to similar growth in the demand for electricity over such period and to the fact
that in excess of 85% of domestic coal consumption is by the electric utility
industry. Given coal's status as a relatively inexpensive and abundant resource
for the production of electricity, domestically produced coal is expected to
continue to play a significant role in production of electricity in the future.
Historically, the volume of coal imported into the United States has not
4
<PAGE> 6
represented more than approximately 1% of domestic coal production. The Company
believes the costs of transporting coal and the abundance of domestic coal
reserves will continue to limit the level of coal imports in the future. In
addition, the Company believes it will benefit from the increasing use of
longwall mining in the coal mining industry, which accounted for 45% of domestic
underground coal production in 1995 as compared to 27% in 1983. Longwall mining
yields higher production of coal than conventional mining techniques, but also
requires the use of more efficient and reliable high-load Conveyor Equipment of
the type manufactured by the Company. The Company believes it has a significant
share of the United States Conveyor Equipment market for longwall mining due to,
among other things, its technological innovation and the reliability of its
products. See "Business--Coal Industry."
Industry sources predict that, through 2015, worldwide coal consumption
will grow at a faster rate than coal consumption in the United States. By 2015,
industry sources project worldwide coal consumption will reach 7.5 billion tons,
an increase of approximately 50% from 1993 worldwide consumption levels. This
forecasted increase is due principally to projected increases in demand for
electricity in the newly industrialized countries of the Pacific Rim as a result
of anticipated rapid economic growth in that region. Such sources forecast that
much of the increase in demand for coal will be satisfied by increased
production in Australia. Coal production in Australia is projected to grow at a
compound annual growth rate of 2.8% through 2015, due primarily to its large
coal reserves and its position as the world's largest coal exporter, with
exports principally to Japan. Australia accounted for approximately 33% of world
coal exports in 1993 and its coal exports are projected to grow from 142 million
tons in 1993 to 260 million tons in 2015. The Company's recent acquisition of
BCE significantly expands its presence in Australia and improves its ability to
serve this high-growth region.
COMPETITIVE STRENGTHS
The Company believes its strong competitive position in Conveyor Equipment
is attributable to a number of factors, including:
- - Broad Product Line Permits One-Stop Shopping. The Company's broad array of
products enables it to supply substantially all of the Conveyor Equipment
needs of its customers in the coal mining industry. Furthermore, the Company
can provide integrated system solutions for underground mining utilizing
computerized in-house "dynamic analysis" capabilities, thereby enabling it to
develop customized equipment solutions while eliminating much of the
engineering cost involved in integrating components from different vendors and
enhancing customer productivity, safety and belt maintenance. The Company
believes that its ability to provide such a range of products and services is
a critical determinant in establishing preferred supplier arrangements with
customers.
- - Significant Installed Equipment Base. The Company believes its significant
installed base of Conveyor Equipment is a key factor in obtaining orders for
higher margin replacement components, which represented approximately 25% of
1996 pro forma net sales. This is principally because, once a supplier is
established in an underground mine, it is time-consuming and expensive for a
customer to switch to a competitor's product. In addition, underground mining
customers frequently use a single vendor for all of their Conveyor Equipment
needs.
- - Technology and Quality Enhance Customer Productivity. The Company believes its
Conveyor Equipment product development has contributed to overall productivity
gains being sought by its customers. The Company employs over 70 engineers
dedicated to customer-focused, productivity-enhancing, product and application
development. Through its use of dynamic analysis and technological innovation,
the Company has developed (i) the largest and some of the most technically
demanding Conveyor Equipment applications in the United States, including an
approximately four-mile underground mine conveyor and an approximately
nine-mile tunnel-waste material conveyor and (ii) the High Angle Conveyor
(HAC(R)), which permits the use of a conveyor in applications where
higher-cost transportation alternatives, such as trucks, would otherwise be
required. In an independent study of Conveyor Equipment products conducted in
1994, the Company's products had the highest ratings for product reliability
and performance. In addition, the Company believes that the high availability
rate, or "uptime," of its products in its customers'
5
<PAGE> 7
operations promotes customer loyalty and is a substantial factor in generating
business from new and existing customers.
- - Low Cost Due to Economies of Scale. The Company believes its market share
enables it to achieve enhanced margins due to economies of scale in
manufacturing and better fixed cost absorption.
- - Experienced Management Team. The Company's senior managers, who have an
average of over 20 years of experience in the Conveyor Equipment industry,
have developed strong relationships with the Company's customers and have
introduced significant new products to increase customer productivity.
BUSINESS STRATEGY
The Company's business strategy is to continue to increase its market share
in the international Conveyor Equipment market. To implement this strategy, the
Company will:
- - Increase Market Share Through Extending Preferred Supplier Arrangements. The
Company seeks to enter into additional preferred supplier arrangements with
new and existing customers, emphasizing the benefits of (i) its broad product
range, (ii) the quality and reliability of its products, (iii) its ability to
offer productivity-enhancing engineered solutions and (iv) its ability to
serve such customers' Conveyor Equipment needs in designated geographic
regions.
- - Increase Market Share In Related Conveyor Applications. The Company seeks to
expand its existing market share in Conveyor Equipment products for
applications in specific industries, including: aggregates, such as rock,
gravel, glass and cement materials; pulp, paper and forest products;
aboveground hard rock and mineral mining; food and grains; environmental,
sewage and waste water treatment; and tunneling. The Company believes it can
continue to grow in these sectors by providing customers with products that
lower maintenance and operating costs and improve productivity.
- - Increase Market Share Through Product Line Extensions and Geographic
Expansion. The international Conveyor Equipment market remains highly
fragmented with many specialized manufacturers serving numerous market niches.
The Company believes that many of these companies lack the capital resources,
marketing network and depth of management to fully exploit their competitive
positions. The Company will continue to search for strategic acquisitions that
will allow it to fulfill substantially all of the Conveyor Equipment needs of
new and existing customers or expand its technological capabilities. In
addition, the Company seeks to expand its geographic reach through
acquisitions that allow it to (i) enter into further global preferred supplier
arrangements and (ii) exploit favorable trends in coal production and
consumption outside the United States.
ACQUISITIONS
In January 1997, the Company acquired BCE, which, through its subsidiaries,
is a major manufacturer and supplier of Conveyor Equipment in Australia (the
"BCE Acquisition"). The BCE Acquisition has further broadened the Company's
product line with large ball bearing idler rollers preferred by certain
equipment users and not previously offered by the Company. In addition, the
Company believes the BCE Acquisition will, among other things, strengthen its
competitive position in the high-growth markets of the Pacific Rim and enhance
its ability to obtain worldwide preferred supplier arrangements with
multinational mining companies. The Company believes that the BCE Acquisition
has already helped it to secure approximately $20 million of new business.
On April 1, 1997, the Company acquired substantially all of the assets of
W. S. Tyler Incorporated's Hewitt-Robins Conveyor Components Division
("Hewitt-Robins"), a United States manufacturer of idlers with net sales in 1996
of $15.1 million (the "Hewitt-Robins Acquisition"). The purchase price for the
Hewitt-Robins Acquisition was approximately $12.6 million in cash plus the
assumption of approximately $1.1 million of liabilities, subject to a negotiated
price adjustment for working capital. See "Business--Acquisitions."
In addition, the Company presently is in discussions with other potential
acquisition candidates. There can be no assurance that the Company will be able
to identify other desirable acquisition candidates or that
6
<PAGE> 8
the Company will be successful in consummating any acquisition on terms
favorable to the Company, if at all. See "Risk Factors--Risks Attendant to
Acquisition Strategy."
COMPANY ORGANIZATION
The Company is a recently-formed holding company organized under the
Delaware General Corporation Law for the purpose of owning all of the capital
stock of two operating companies, Continental and Goodman, each of which is a
Delaware corporation. The Company also owns indirectly all of the capital stock
of: (i) two Australian holding companies, Continental Conveyor & Equipment Pty.
Ltd. ("CCE Pty. Ltd.") and BCE; and (ii) five Australian operating companies,
Continental ACE Pty. Ltd., Continental ACE Services Pty. Ltd., Continental ACE
Components Pty. Ltd., A. Crane Pty. Ltd. and Continental Control Systems Pty.
Ltd. (formerly known as Ringway Pty. Ltd.) (such operating companies are
collectively, the "BCE Subsidiaries"). The Company conducts all of its
operations through Continental, Goodman and the BCE Subsidiaries.
* * *
The Company's principal executive offices are located at 438 Industrial
Drive, Winfield, Alabama 35594 and its telephone number is (205) 487-6492.
7
<PAGE> 9
THE EXCHANGE OFFER
THE EXCHANGE OFFER............ The Company is offering to exchange $1,000
principal amount of Series B Notes for each
$1,000 principal amount of Series A Notes
validly tendered pursuant to the Exchange
Offer. As of the date hereof, there is $120
million aggregate principal amount of Series A
Notes outstanding. The Company will issue the
Series B Notes to tendering holders of Series A
Notes promptly after the Expiration Date. See
"The Exchange Offer--Background" and
"--General."
REGISTRATION RIGHTS
AGREEMENT................... The Series A Notes were issued and sold by the
Company to Donaldson, Lufkin and Jenrette
Securities Corporation, the initial purchaser
of the Series A Notes (the "Initial
Purchaser"), on April 1, 1997 pursuant to a
Purchase Agreement (the "Purchase Agreement")
dated as of March 26, 1997 by and among the
Company, the Subsidiary Guarantors and the
Initial Purchaser (the "Series A Notes
Offering"). Pursuant to the Purchase Agreement,
the Company, the Subsidiary Guarantors and the
Initial Purchaser entered into a Registration
Rights Agreement dated as of April 1, 1997 (the
"Registration Rights Agreement") which grants
the holders of the Series A Notes registration
and exchange rights, certain of which terminate
upon the consummation of the Exchange Offer.
The Exchange Offer is intended to satisfy
certain obligations of the Company and the
Subsidiary Guarantors under the Registration
Rights Agreement. See "The Exchange Offer" and
"Description of Senior Notes--Registration
Rights; Liquidated Damages."
EXPIRATION DATE............... The Exchange Offer will expire at 5:00 p.m.,
New York City time, on , 1997,
unless the Exchange Offer is extended, in which
case the term "Expiration Date" means the
latest date and time to which the Exchange
Offer is extended. See "The Exchange
Offer--Expiration Date; Delay, Extension,
Amendment, and Termination."
ACCRUED INTEREST ON THE SERIES
B NOTES AND SERIES A NOTES.. The Series B Notes will bear interest from
April 1, 1997. Holders of Series A Notes whose
Series A Notes are accepted for exchange will
be deemed to have waived the right to receive
any interest accrued on such Series A Notes.
See "The Exchange Offer--Interest on the Series
B Notes."
CONDITIONS TO THE EXCHANGE
OFFER....................... The Exchange Offer is subject to certain
customary conditions which may be waived by the
Company. The conditions are limited and relate
in general to proceedings which have been
instituted or laws which have been adopted that
might impair the ability of the Company to
proceed with the Exchange Offer. As of the date
of this Prospectus, none of these events has
occurred, and the Company believes their
occurrence to be unlikely. The Exchange Offer
is not conditioned upon any minimum aggregate
principal amount of Series A Notes being
tendered for exchange. See "The Exchange
Offer--Conditions."
8
<PAGE> 10
PROCEDURES FOR TENDERING
SERIES A NOTES.............. Each holder of Series A Notes wishing to accept
the Exchange Offer must complete, sign and date
the Letter of Transmittal, or a facsimile
thereof, in accordance with the instructions
contained herein and therein, and mail or
otherwise deliver such Letter of Transmittal,
or such facsimile, together with the Series A
Notes to be exchanged and any other required
documentation to the Exchange Agent (as
defined) at the address set forth herein and
therein by 5:00 p.m., New York City time, on
the Expiration Date. See "The Exchange
Offer--Procedures for Tendering." By executing
the Letter of Transmittal, each holder will
represent to the Company that, among other
things, (i) it is not an "affiliate," as
defined under Rule 405 of the Securities Act,
of the Company, (ii) it is not engaged in, and
does not intend to engage in, and has no
arrangement or understanding with any person to
participate in, a distribution of the Series B
Notes, and (iii) it is acquiring the Series B
Notes in the ordinary course of business. See
"The Exchange Offer--Procedures for Tendering."
SPECIAL PROCEDURES FOR
BENEFICIAL OWNERS........... Any beneficial owner whose Series A Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
and who wishes to tender in the Exchange Offer
should contact such registered holder promptly
and instruct such registered holder to tender
the Series A Notes on such beneficial owner's
behalf. See "The Exchange Offer--Procedures for
Tendering."
GUARANTEED DELIVERY
PROCEDURES.................. Holders of Series A Notes who wish to tender
their Series A Notes and whose Series A Notes
are not immediately available or who cannot
deliver their Series A Notes and a properly
completed Letter of Transmittal or any other
documents required by the Letter of Transmittal
to the Exchange Agent prior to the Expiration
Date may tender their Series A Notes according
to the guaranteed delivery procedures set forth
in "The Exchange Offer--Guaranteed Delivery
Procedures."
ACCEPTANCE OF SERIES A NOTES
AND DELIVERY OF SERIES B
NOTES....................... Subject to the satisfaction or waiver of the
conditions of the Exchange Offer, the Company
will accept for exchange any and all Series A
Notes which are properly tendered in the
Exchange Offer prior to 5:00 p.m., New York
City time, on the Expiration Date. The Series B
Notes issued pursuant to the Exchange Offer
will be delivered on the earliest practicable
date after the Expiration Date. See "The
Exchange Offer--General."
WITHDRAWAL RIGHTS............. Tenders of Series A Notes may be withdrawn at
any time prior to 5:00 p.m., New York City
time, on the Expiration Date. See "The Exchange
Offer--Withdrawal of Tenders."
CERTAIN FEDERAL INCOME TAX
CONSIDERATIONS.............. For a discussion of certain federal income tax
considerations relating to the exchange of the
Series B Notes for the Series A Notes, see
"Certain Federal Income Tax Considerations."
9
<PAGE> 11
EXCHANGE AGENT................ Norwest Bank Minnesota, National Association is
serving as the exchange agent (the "Exchange
Agent") in connection with the Exchange Offer.
See "The Exchange Offer--Exchange Agent."
THE SERIES B NOTES
The Series B Notes will be obligations of the Company evidencing the same
indebtedness as the Series A Notes for which they are exchanged, and will be
entitled to the benefit of the same Indenture. The form and terms of the Series
B Notes are the same as the form and terms of the Series A Notes, except that
the Series B Notes have been registered under the Securities Act and the holders
of the Series B Notes will not be entitled to the benefit of certain
registration and exchange rights granted to the holders of the Series A Notes
under the Registration Rights Agreement, which rights will terminate upon the
consummation of the Exchange Offer. See "The Exchange Offer" and "Description of
Senior Notes."
MATURITY DATE................. April 1, 2007.
INTEREST...................... The Series B Notes will bear interest at a rate
of 11% per annum, payable semiannually in cash
in arrears on each April 1 and October 1,
commencing October 1, 1997. See "The Exchange
Offer--Interest on the Series B Notes" and
"Description of Senior Notes--Principal,
Maturity and Interest."
OPTIONAL REDEMPTION........... At any time on or after April 1, 2002, the
Series B Notes will be redeemable at the option
of the Company, in whole or in part, at the
redemption prices set forth herein, plus
accrued and unpaid interest and Liquidated
Damages, if any, to the date of redemption.
Notwithstanding the foregoing, at any time
prior to April 1, 2000, the Company may redeem
up to 33 1/3% of the original aggregate
principal amount of the Senior Notes with the
net proceeds of one or more offerings of common
stock of the Company at a redemption price
equal to 110% of the principal amount thereof,
plus accrued and unpaid interest and Liquidated
Damages, if any, to the date of redemption;
provided, that, after any such redemption, 66
2/3% of the original aggregate principal amount
of the Senior Notes remains outstanding. See
"Description of Senior Notes--Optional
Redemption."
CHANGE OF CONTROL............. Upon the occurrence of a Change of Control (as
defined), the Company will be required to offer
to purchase the Series B Notes at a purchase
price in cash equal to 101% of the aggregate
principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages, if any,
to the date of purchase. See "Description of
Senior Notes--Repurchase at the Option of
Holders--Change of Control."
SUBSIDIARY GUARANTEES......... The Series B Notes will be jointly and
severally guaranteed (the "Subsidiary
Guarantees"), by each direct and indirect
Subsidiary of the Company (other than Foreign
Subsidiaries) existing on the closing date of
the Exchange Offer and by certain other
Subsidiaries of the Company formed or acquired
thereafter (the "Subsidiary Guarantors"). The
Subsidiary Guarantors' liability under the
Subsidiary Guarantees will be limited as
described herein and the Subsidiary Guarantees
will be automatically released in connection
10
<PAGE> 12
with certain asset sales and dispositions. See
"Description of Senior Notes--Subsidiary
Guarantees."
RANKING....................... The Series B Notes will be senior unsecured
obligations of the Company, and will rank pari
passu in right of payment with all current and
future unsecured senior indebtedness of the
Company and senior to all subordinated
indebtedness of the Company. The Subsidiary
Guarantees will be senior unsecured obligations
of the Subsidiary Guarantors and will rank pari
passu in right of payment with all current and
future unsecured senior indebtedness of the
Subsidiary Guarantors and senior to all
subordinated indebtedness of the Subsidiary
Guarantors. Certain of the Company's
Subsidiaries are parties to the Revolving
Credit Facility and all obligations thereunder
are secured by a first priority lien on
substantially all of the assets of such
Subsidiaries. BCE is a party to the Australian
Revolving Credit Facility and all obligations
thereunder are secured by a first priority lien
on substantially all of the assets of the BCE
Subsidiaries. On a pro forma basis, as of March
31, 1997, after giving effect to (i) the Series
A Notes Offering, (ii) the application of the
net proceeds therefrom, (iii) the BCE
Acquisition and (iv) the Hewitt-Robins
Acquisition, the aggregate principal amount of
secured indebtedness of the Company, secured
indebtedness of the Subsidiary Guarantors and
indebtedness of the Company's Foreign
Subsidiaries which would have effectively
ranked senior to the Series B Notes would have
been approximately $5.9 million. In addition,
on a pro forma basis as of March 31, 1997 the
Company would have had an aggregate undrawn
availability under the Revolving Credit
Facility and the Australian Revolving Credit
Facility of approximately $34.1 million which,
if drawn, would effectively rank senior to the
Series B Notes. The Indenture will permit the
Company and its Subsidiaries to incur
additional indebtedness, including secured
indebtedness, subject to certain limitations.
See "Description of Senior Notes--General."
CERTAIN COVENANTS............. The Indenture contains certain covenants that,
among other things, limit the ability of the
Company and its Subsidiaries (i) to pay
dividends and make other Restricted Payments
(as defined) or investments, (ii) to incur
additional indebtedness, (iii) to enter into
transactions with Affiliates (as defined), (iv)
to merge or consolidate with any other entity,
(v) to transfer all or substantially all of
their assets and (vi) to incur certain liens.
In addition, under certain circumstances, the
Company will be required to offer to purchase
Series B Notes at a price equal to 100% of the
principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages, if any,
to the date of purchase with the proceeds of
certain Asset Sales (as defined). See
"Description of Senior Notes--Certain
Covenants."
RESALES....................... Based on an interpretation by the staff of the
Commission set forth in no-action letters
issued to third parties, the Company believes
that the Series B Notes issued pursuant to this
Exchange Offer in exchange for Series A Notes
may be offered for resale, resold and otherwise
transferred by a holder thereof (other than (i)
a broker-dealer that purchases such Series B
Notes directly from the Company to resell
pursuant to Rule 144A or any other available
exemption under the Securities Act or (ii) a
person that is an affiliate of the Company
within the meaning of Rule 405 under the
Securities Act), without compliance with the
registration and
11
<PAGE> 13
prospectus delivery provisions of the
Securities Act, provided that the holder is
acquiring the Series B Notes in the ordinary
course of its business and is not
participating, and had no arrangement or
understanding with any person to participate,
in the distribution of the Series B Notes. Each
broker-dealer that receives the Series B Notes
for its own account in exchange for the Series
A Notes, where such Series A Notes were
acquired by such broker-dealer as a result of
market-making activities or other trading
activities, must acknowledge that it will
deliver a prospectus in connection with any
resale of such Series B Notes. The Company has
agreed to make this Prospectus (as it may be
amended or supplemented) available to any
broker-dealer for use in connection with any
such resale for a period of 120 days after
consummation of the Exchange Offer. See "The
Exchange Offer--Resale of the Series B Notes"
and "Plan of Distribution."
RISK FACTORS
For a discussion of certain factors that should be considered by holders of
the Series A Notes and by prospective investors in connection with an investment
in the Series B Notes, see "Risk Factors."
12
<PAGE> 14
SUMMARY UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following table presents summary unaudited pro forma consolidated
financial data of the Company. The unaudited pro forma consolidated financial
data give effect to the Series A Notes Offering on April 1, 1997, the
application of the net proceeds therefrom, the BCE Acquisition on January 7,
1997 and the Hewitt-Robins Acquisition on April 1, 1997, as if such transactions
had taken place on January 1, 1996, with respect to the Income Statement Data
and Other Data for the year ended December 31, 1996; as if the Series A Notes
Offering and the application of the net proceeds therefrom and the Hewitt-Robins
Acquisition had occurred on January 1, 1997, with respect to the Income
Statement Data and Other Data for the three months ended March 31, 1997, and
March 31, 1997, with respect to the Balance Sheet Data. The pro forma data do
not purport to represent what the consolidated results of operations or
consolidated financial position of the Company would have been had the Series A
Notes Offering, the application of the net proceeds therefrom, the BCE
Acquisition and the Hewitt-Robins Acquisition actually occurred at the beginning
of the relevant period, and do not purport to project the consolidated financial
position or the consolidated results of operations of the Company for the
current year or any future date or period. The summary financial data set forth
below should be read in conjunction with "Selected Historical and Pro Forma
Financial Data," "Unaudited Pro Forma Consolidated Financial Statements,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Financial Statements of the Company, the Consolidated
Financial Statements of BCE and the Financial Statements of Hewitt-Robins and
the related notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
1996 1997
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
INCOME STATEMENT DATA:
Net sales.................................................... $191,143 $ 50,809
Gross profit................................................. 42,462 10,553
Operating income............................................. 19,697 4,605
Total interest expense....................................... 14,111 3,527
Income before income taxes and extraordinary item............ 5,376 1,029
OTHER DATA:
Adjusted EBITDA(1)........................................... $ 22,497 $ 5,356
Depreciation and amortization................................ 2,800 751
Capital expenditures......................................... 1,549 2,654
Cash interest expense(2)..................................... 13,627 3,407
Ratio of Adjusted EBITDA to cash interest expense(1)......... 1.7x 1.6x
Ratio of net debt to Adjusted EBITDA(1)(3)................... 4.4 4.6
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31,
1997
---------------------------
<S> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................................... $ 27,780
Total assets................................................. 118,250
Long-term debt, including current portion.................... 125,909
Stockholder's equity (deficit)............................... (37,371)
</TABLE>
- ---------------
(1) Adjusted EBITDA represents earnings before interest, taxes, depreciation,
amortization and miscellaneous expense (income) and gives effect, on a pro
forma basis, to $1,184 and $282 in management fees for the year ended
December 31, 1996 and the three months ended March 31, 1997, respectively,
to be paid pursuant to the Management Agreement (as defined). See "Related
Transactions--Management Agreement." Adjusted EBITDA should not be
considered as an alternative to cash provided by operating activities as a
measure of liquidity, or to net income as a measure of profitability.
Adjusted EBITDA and related ratios have been included because the Company
uses them as one means of analyzing its ability to service its debt, the
Company's lenders use them for the purpose of analyzing the Company's
performance with respect to the credit agreement and the Indenture and the
Company understands that they are used by certain investors as measures of a
Company's historical ability to service debt. Not all companies calculate
Adjusted EBITDA in the same fashion and therefore Adjusted EBITDA as
presented may not be comparable to other similarly titled measures of other
companies.
(2) Cash interest expense excludes non-cash amortization of financing fees.
(3) Net debt represents total long-term debt, including current portion, net of
cash.
13
<PAGE> 15
RISK FACTORS
Holders of Series A Notes should consider carefully the risk factors set
forth below, as well as the other information set forth in this Prospectus.
This Prospectus contains statements which constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Those statements appear in a number of places in this Prospectus and
include statements regarding the intent, belief or current expectations of the
Company, primarily with respect to the future operating performance of the
Company or related industry developments. Holders of Series A Notes are
cautioned that any such forward-looking statements are not guarantees of future
performance and involve risks and uncertainties, and that actual results may
differ from those described in the forward-looking statements as a result of
various factors, many of which are beyond the control of the Company. The
information contained in this Prospectus, including without limitation the
information set forth below and the information under the heading "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
identifies important factors that could cause such differences.
LEVERAGE AND DEBT SERVICE REQUIREMENTS
The Company has substantial indebtedness and significant debt service
obligations. As of March 31, 1997, on a pro forma basis after giving effect to
the Series A Notes Offering, the application of the net proceeds therefrom, the
BCE Acquisition and the Hewitt-Robins Acquisition, the Company would have had
total long-term indebtedness, including current maturities, of $125.9 million
and a stockholder's deficit of $37.4 million. The Indenture permits the Company
and its Subsidiaries to incur additional indebtedness, including secured
indebtedness, subject to certain limitations. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Capitalization" and
"Description of Senior Notes--Certain Covenants." As of December 31, 1996, on a
pro forma basis, after giving effect to the Series A Notes Offering, the
application of the net proceeds therefrom, the BCE Acquisition and the
Hewitt-Robins Acquisition, the Company would have had a ratio of earnings to
fixed charges of 1.4.
The Company's high degree of leverage could have important consequences to
the holders of the Series B Notes including, without limitation, (i) a
substantial portion of the Company's cash provided from operations will be
committed to the payment of debt service and will not be available to the
Company for other purposes, (ii) the Company's ability to obtain additional
financing in the future for working capital, capital expenditures or
acquisitions may be limited and (iii) the Company's levels of indebtedness may
limit the Company's flexibility in reacting to changes in its business
environment. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources," "Description of
Certain Indebtedness" and "Description of Senior Notes."
The Company's ability to pay principal and interest on the Series B Notes
and to satisfy its other debt obligations will depend upon the future operating
performance of its Subsidiaries, which will be affected by prevailing economic
conditions in the markets they serve and financial, business and other factors,
certain of which are beyond their control, as well as the availability of
borrowings under the Revolving Credit Facility, the Australian Revolving Credit
Facility or successor facilities. The Company may be required to refinance all
or a portion of its existing indebtedness at or prior to maturity, including the
Series B Notes, or sell assets or seek to raise additional equity capital. No
assurance can be given that any such debt or equity financing will be available
to the Company on acceptable terms, if at all.
HOLDING COMPANY STRUCTURE; RANK OF SERIES B NOTES
The Company is a holding company that conducts all of its operations
exclusively through its Subsidiaries. The Company's only significant assets are
the capital stock of its wholly owned Subsidiaries, Continental and Goodman, and
indirectly the capital stock of CCE Pty. Ltd., BCE and the BCE Subsidiaries. As
a holding company, the Company is dependent on dividends or other distributions
of funds from its Subsidiaries to meet the Company's debt service and other
obligations, including its obligations under the Series B Notes. The Revolving
Credit Facility and all obligations thereunder are secured by a first priority
lien on substantially all of the assets of the Company's Subsidiaries (other
than the Company's Foreign
14
<PAGE> 16
Subsidiaries) and thus the Series B Notes will be effectively subordinated to
all indebtedness under the Revolving Credit Facility. The Australian Revolving
Credit Facility is secured by a first priority lien on substantially all of the
assets of the BCE Subsidiaries and thus the Series B Notes will be effectively
subordinated to all indebtedness under the Australian Revolving Credit Facility.
See "Description of Certain Indebtedness." The Company's obligations under the
Series B Notes will be jointly and severally guaranteed by the Subsidiary
Guarantors. The Series B Notes will not, subject to certain exceptions, be
guaranteed by the Company's Foreign Subsidiaries and will be effectively
subordinated to all current and future indebtedness of such Foreign
Subsidiaries. The Indenture will restrict, but not prohibit, the incurrence of
indebtedness by Foreign Subsidiaries.
As of March 31, 1997, on a pro forma basis after giving effect to the
Series A Notes Offering, the application of the net proceeds therefrom, the BCE
Acquisition and the Hewitt-Robins Acquisition, the aggregate principal amount of
secured indebtedness of the Company, secured indebtedness of the Subsidiary
Guarantors and indebtedness of the Company's Foreign Subsidiaries which would
have effectively ranked senior to the Series B Notes would have been
approximately $5.9 million. In addition, on a pro forma basis as of March 31,
1997 the Company would have had aggregate undrawn availability under the
Revolving Credit Facility and the Australian Revolving Credit Facility of
approximately $34.1 million which, if drawn, would effectively rank senior to
the Series B Notes.
POTENTIAL FLUCTUATIONS IN OPERATING RESULTS
The Company's net sales and operating results could fluctuate significantly
from period to period. Given the relatively large sales price of the Company's
contracts, a limited number of contracts may account for a substantial portion
of net sales in any particular period. Because the Company generally recognizes
net sales upon the completion of a contract, the timing of a small number of
contracts in any particular quarter or year may adversely affect operating
results. In addition, net sales and gross profit may fluctuate due to the size
of contracts and the requirements of each contract. The Company generally
realizes a higher gross margin on sales of products under privately negotiated
agreements. As a result of these and other factors, the Company could experience
significant fluctuations in net sales and operating results in future periods.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
RELIANCE UPON SIGNIFICANT CUSTOMERS
For the calendar year 1996, the Company's pro forma net sales to A.T.
Massey Group constituted approximately 12.4% of the Company's total pro forma
net sales and pro forma net sales to the Cyprus Amax Group constituted
approximately 8.0% of total pro forma net sales. Pro forma net sales to the
Company's top five customers, including A.T. Massey and Cyprus Amax, represented
approximately 26.1% of such total pro forma net sales for 1996. A substantial
portion of the Company's sales are on a project-by-project basis and are not
governed by long-term contracts. The loss of the business from any of the top
five customers, or a significant decrease or interruption in the business from
A.T. Massey or Cyprus Amax, could have a material adverse effect upon the
results of operations and financial condition of the Company. See
"Business--Customers."
SIGNIFICANCE OF COAL MINING INDUSTRY TO THE COMPANY
A significant portion of the business of the Company is the manufacture and
sale of conveyor systems and components to companies engaged in underground and
surface mining of coal at various locations throughout the world. Accordingly,
the results of operations and financial condition of the Company may be
materially affected by regional or worldwide developments in the coal mining
industry, including the risks and hazards that are inherent in such industry.
Specific factors that may cause coal production levels to fluctuate include
operational and geological factors related to available mine reserves and the
ease or difficulty of mining such reserves, severe weather, mechanical equipment
performance, effects of compliance with environmental, occupational safety and
other applicable regulations, together with labor situations. Labor stoppages
can have a particularly significant and broad-based effect upon the coal
industry. The last significant labor stoppage in the United States occurred in
1993 and adversely affected the results of operations of the Company. The
15
<PAGE> 17
national union contract resulting from that labor stoppage is subject to
expiration in 1998 and may, by its terms, be reopened during 1997 in order to
renegotiate specific matters. In addition, a significant portion of worldwide
coal production is utilized by electric utilities and thus the demand for coal
is highly dependent upon the demand for electricity, which in turn depends to a
large extent upon the level of economic activity. The demand by electric
utilities for coal also is related to the availability and cost in any given
location of alternative sources of energy, such as natural gas, oil or nuclear
power. See "Business--Coal Industry."
INTERNATIONAL OPERATIONS
As a result of the BCE Acquisition, the Company has significant operations
in Australia and revenues derived from foreign markets are expected to increase
in the future. During the year ended December 31, 1996, $41.0 million of the
Company's pro forma net sales were generated outside the United States,
representing approximately 23.3% of the Company's total pro forma net sales
during the period, without giving effect to the Hewitt-Robins Acquisition.
The value of the Company's foreign sales and earnings varies with currency
exchange rate fluctuations. Changes in currency exchange rates could have an
adverse effect upon the Company's results of operations, which in turn could
adversely affect the Company's ability to meet its interest and principal
obligations on its indebtedness, including the Series B Notes. Furthermore,
international manufacturing and sales are subject to other inherent risks
including labor unrest, political instability, restrictions on transfer of
funds, export duties and quotas, domestic and foreign customs and tariffs,
current and changing regulatory environments, difficulty in obtaining
distribution and support and potentially adverse tax consequences. There can be
no assurance that these factors will not have a material adverse effect on the
Company's international operations or sales or upon its financial condition and
results of operations.
CONTROL BY PRINCIPAL STOCKHOLDER
The Company is a wholly owned subsidiary of NES Group, Inc., all of the
capital stock of which is beneficially owned by Robert J. Tomsich. Due to his
control of NES Group, Inc., Mr. Tomsich will be able to control the election of
the directors of the Company and to determine the corporate and management
policies of the Company, including decisions relating to any mergers or
acquisitions of the Company, sales of all or substantially all of the Company's
assets and other significant corporate transactions, which transactions may
result in a Change of Control under the Indenture. The Company's board of
directors is comprised entirely of designees of NES Group, Inc. See "Principal
Stockholder."
DEPENDENCE UPON MANAGEMENT PERSONNEL
The Company's success depends to a significant extent upon its management
personnel as well as the management personnel of its operating subsidiaries. The
loss of the services of certain of such personnel could have a material adverse
effect upon a particular operating subsidiary or the Company, or both. The
Company will be dependent on NESCO, Inc. for certain management oversight
services. NESCO, Inc. also provides management oversight services for certain
affiliates of the Company, including NES Group, Inc. See "Related Transactions."
RISKS ATTENDANT TO ACQUISITION STRATEGY
The Company regularly considers the acquisition of other companies engaged
in the manufacture and sale of Conveyor Equipment and related businesses. At any
given time, the Company may be in various stages of considering such
opportunities. Such acquisitions are subject to the negotiation of definitive
agreements and to conditions typical in acquisition transactions, certain of
which conditions may be beyond the Company's control. There is no assurance that
the Company will be able to identify desirable acquisition candidates or will be
successful in entering into any definitive agreements with respect to desirable
acquisitions. Moreover, even if definitive agreements are entered into, there is
no assurance that any future acquisition will thereafter be completed or, if
completed, that the anticipated benefits of the acquisition will be realized.
The process of integrating acquired operations into the Company's operations may
result in unforeseen operating difficulties,
16
<PAGE> 18
may absorb significant management attention and may require significant
financial resources that would otherwise be available for the ongoing
development or expansion of the Company's existing operations. Future
acquisitions by the Company could result in the incurrence of additional debt
and contingent liabilities, which could have a material adverse effect on the
Company's financial condition and results of operations.
LABOR RELATIONS
Approximately 220 of the Company's hourly employees at its production
facility in Winfield, Alabama, are covered by a collective bargaining agreement
that expires in May 1998, and approximately 100 of the Company's hourly
employees at two of its production facilities in Australia are covered by
collective bargaining agreements that expire in 1998 and 1999, respectively.
There can be no assurances that new collective bargaining agreements, with terms
satisfactory to the Company, can be reached upon expiration of the current
agreements without a work stoppage. Depending upon its magnitude, a work
stoppage could have a material adverse effect upon the Company.
COMPETITION
Most of the Company's products are sold in highly competitive markets. The
Company competes throughout the world with a significant number of companies of
varying sizes in a wide variety of markets, on the basis of quality, price,
reliability, availability and service. Competitive pressures or other factors
could cause the Company to lose market share or could result in significant
price erosion, either of which could have a material adverse effect upon the
Company's results of operations. Continental and Goodman are operated separately
and compete against each other in certain markets. Such competition could have
an adverse effect on the Company's overall margins.
PURCHASE OF SERIES B NOTES UPON A CHANGE OF CONTROL
Upon a Change of Control, the Company is required, subject to certain
conditions, to offer to purchase all outstanding Series B Notes at 101% of the
aggregate principal amount thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, to the date of purchase. The source of funds for any
such purchase would be the Company's available cash or cash generated from other
sources, including borrowings, sales of assets, sales of equity or funds
provided by a new controlling person. The Revolving Credit Facility prohibits
the payment of dividends to the Company for purposes of purchasing Series B
Notes upon a Change of Control. A Change of Control likely would constitute an
event of default under the Revolving Credit Facility that would permit the
lenders to accelerate the debt under such Revolving Credit Facility. In such
event, the Company likely would attempt to refinance the indebtedness
outstanding under the Revolving Credit Facility and the Series B Notes. There
can be no assurance that sufficient funds will be available at the time of any
Change of Control to make any required purchases of Series B Notes tendered and
to repay indebtedness under the Revolving Credit Facility. See "Description of
Certain Indebtedness--Revolving Credit Facility" and "Description of Senior
Notes--Repurchase at the Option of the Holders--Change of Control."
ABSENCE OF A PUBLIC MARKET
There is no public market for the Series A Notes. The Series B Notes will
be new securities for which there is also no public market. The Company does not
intend to list the Series B Notes on any national securities exchange or to seek
the admission thereof to trading in the National Association of Securities
Dealers Automated Quotation System. Although the Initial Purchaser has advised
the Company that it currently intends to make a market in the Series B Notes, it
is not obligated to do so and may discontinue such market making activity at any
time without notice. Accordingly, there can be no assurance as to the
development or liquidity of any market for the Series B Notes, the ability of
the holders of the Series B Notes to sell their Series B Notes, or the price at
which such holders would be able to sell their Series B Notes. Future trading
prices of the Series B Notes will depend on many factors, including prevailing
interest rates, the Company's operating results and the market for similar
securities.
17
<PAGE> 19
To the extent that Series A Notes are tendered and accepted in the Exchange
Offer, the trading market for untendered and tendered but unaccepted Series A
Notes could be adversely affected.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Series A Notes were sold pursuant to an exemption from the registration
requirements of the Securities Act and their transfer is subject to certain
restrictions under the Securities Act. In general, Series A Notes may not be
offered or sold, unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. Holders of Series A Notes who do not exchange
their Series A Notes for Series B Notes pursuant to the Exchange Offer will
continue to be subject to such restrictions on transfer of the Series A Notes.
The Company currently does not anticipate that it will register the Series A
Notes under the Securities Act.
The Series B Notes will be issued in exchange for Series A Notes only after
timely receipt by the Exchange Agent of such Series A Notes, a properly
completed and duly executed Letter of Transmittal and all other required
documents. Therefore, holders of Series A Notes desiring to tender such Series A
Notes in exchange for Series B Notes should allow sufficient time to ensure
timely delivery. Neither the Exchange Agent nor the Company is under any duty to
give notification of defects or irregularities with respect to tenders of Series
A Notes for exchange. Series A Notes that are not tendered or are tendered but
not accepted will, following consummation of the Exchange Offer, continue to be
subject to the existing restrictions upon transfer thereof. In addition, any
holder of Series A Notes who tenders in the Exchange Offer for the purpose of
participating in a distribution of the Series B Notes will be required to comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any resale transaction. Each broker-dealer that receives
Series B Notes for its own account in exchange for Series A Notes, where such
Series A Notes were acquired by such broker-dealer as a result of market-making
activities or any other trading activities, must acknowledge that it will
deliver a prospectus in connection with any resale of such Series B Notes. See
"Plan of Distribution." To the extent that Series A Notes are tendered and
accepted in the Exchange Offer, the trading market for untendered and tendered
but unaccepted Series A Notes could be adversely affected. See "The Exchange
Offer--Consequences of Failure to Exchange."
FRAUDULENT TRANSFER CONSIDERATIONS
Under federal or state fraudulent transfer laws, if a court were to find
that at the time any of the Senior Notes or Subsidiary Guarantees were issued,
the Company or a Subsidiary Guarantor, as the case may be, (i) issued such
Senior Notes or Subsidiary Guarantee with the intent of hindering, delaying or
defrauding current or future creditors or (ii)(A) received less than fair
consideration or reasonably equivalent value for incurring the indebtedness
represented by such Senior Notes or Subsidiary Guarantee, and (B)(1) was
insolvent or was rendered insolvent by reason of the issuance of such Senior
Notes or Subsidiary Guarantee, (2) was engaged, or about to engage, in a
business or transaction for which its assets were unreasonably small or (3)
intended to incur, or believed (or should have believed) it would incur, debts
beyond its ability to pay as such debts mature (as all of the foregoing terms
are defined in or interpreted under such fraudulent transfer statutes), such
court could avoid all or a portion of the Company's or a Subsidiary Guarantor's
obligations to the holders of Senior Notes, subordinate the Company's or a
Subsidiary Guarantor's obligations to the holders of the Senior Notes to other
existing and future indebtedness of the Company or such Subsidiary Guarantor, as
the case may be, the effect of which would be to entitle such other creditors to
be paid in full before any payment could be made on the Senior Notes, and take
other action detrimental to the holders of the Senior Notes, including in
certain circumstances, invalidating the Senior Notes. In that event, there would
be no assurance that any repayment on the Senior Notes would ever be recovered
by the holders of the Senior Notes.
The definition of insolvency for purposes of the foregoing considerations
varies among jurisdictions depending upon the federal or state law that is being
applied in any such proceeding. However, the Company or a Subsidiary Guarantor
generally would be considered insolvent at the time it incurs the indebtedness
constituting any of the Senior Notes or any Subsidiary Guarantee, as the case
may be, if (i) the fair market value (or fair saleable value) of its assets is
less than the amount required to pay its total existing debts and
18
<PAGE> 20
liabilities (including the probable liability on contingent liabilities) as they
become absolute or matured or (ii) it is incurring debts beyond its ability to
pay as such debts mature. There can be no assurance as to what standard a court
would apply in order to determine whether the Company or a Subsidiary Guarantor
was "insolvent" as of the date a Senior Note or Subsidiary Guarantee was issued,
or that, regardless of the method of valuation, a court would not determine that
the Company or a Subsidiary Guarantor was insolvent on that date. Nor can there
be any assurance that a court would not determine, regardless of whether the
Company or a Subsidiary Guarantor was insolvent on the date a Senior Note or
Subsidiary Guarantee was issued, that the payments constituted fraudulent
transfers on another ground. To the extent that proceeds from the sale of Senior
Notes are used to repay indebtedness under the Revolving Credit Facility or
Australian Revolving Credit Facility, or to make a distribution to a stockholder
on account of the ownership of capital stock, a court may find that the Company
or a Subsidiary Guarantor did not receive fair consideration or reasonably
equivalent value for the incurrence of the indebtedness represented by such
Senior Notes or any related Subsidiary Guarantee, as the case may be.
19
<PAGE> 21
THE COMPANY
The Company is a recently-formed holding company organized under the
Delaware General Corporation Law for the purpose of owning all of the capital
stock of Continental and Goodman, each of which is also a Delaware corporation.
Prior to the formation of the Company, all of the assets and businesses of the
Company were owned and operated by Continental Conveyor and Equipment Co. L.P.
("CCEC") and Goodman Conveyor Co. L.P. ("GCC"). CCEC and GCC were both Delaware
limited partnerships with NES Group, Inc. as their sole limited partner and
Continental Conveyor & Equipment Company and Goodman Conveyor Company (referred
to herein as Continental and Goodman, respectively) as their respective general
partners. After acquiring all of the capital stock of Continental and Goodman
from one of its affiliates, NES Group, Inc. transferred its entire interest in
CCEC and GCC to Continental and Goodman, respectively, resulting in the
dissolution of the partnerships and the transfer of all assets and liabilities
of the partnerships to Continental and Goodman, respectively. NES Group, Inc.
then transferred its entire interest in Continental and Goodman to the Company.
On April 1, 1997, the Company acquired substantially all of the assets of
Hewitt-Robins, a United States manufacturer of idlers with net sales in 1996 of
$15.1 million. The purchase price for the Hewitt-Robins Acquisition was
approximately $12.6 million in cash plus the assumption of approximately $1.1
million of liabilities, subject to a negotiated price adjustment for working
capital. See "Business -- Acquisitions."
In January 1997, through CCE Pty. Ltd., Continental acquired all of the
capital stock of BCE. BCE is an Australian holding company that owns 100% of the
capital stock of four Australian operating companies: Continental ACE Pty. Ltd.,
Continental ACE Services Pty. Ltd., Continental ACE Components Pty. Ltd. and A.
Crane Pty. Ltd.; and a majority of the capital stock of a fifth Australian
operating company, Continental Control Systems Pty. Ltd. (formerly known as
Ringway Pty. Ltd.). The remainder of the capital stock of Continental Control
Systems Pty. Ltd. was acquired by CCE Pty. Ltd. after the BCE Acquisition.
In October 1993, the Company acquired substantially all of the assets of
Buck Moore Axle Company, a recycled mobile homes axle products business located
in Eatonton, Georgia.
NES Group, Inc., the sole stockholder of the Company, is a Cleveland,
Ohio-based holding company with subsidiaries engaged in the manufacture and sale
of industrial products, equipment and machinery, the provision of engineering,
industrial and computer personnel services and the development and management of
real estate.
The Company's principal executive offices are located at 438 Industrial
Drive, Winfield, Alabama 35594 and its telephone number is (205) 487-6492.
20
<PAGE> 22
THE EXCHANGE OFFER
BACKGROUND
Upon the respective terms and conditions of the Indenture and the Purchase
Agreement, the Series A Notes were issued and sold by the Company to the Initial
Purchaser on April 1, 1997 (the "Series A Issue Date"). Thereafter, the Series A
Notes were resold by the Initial Purchaser to certain purchasers in reliance
upon one or more exemptions from the registration requirements of the Securities
Act. Pursuant to the Registration Rights Agreement entered into by the Company,
the Subsidiary Guarantors and the Initial Purchaser as a condition to the
obligations of the Initial Purchaser under the Purchase Agreement, the Company
and the Subsidiary Guarantors agreed that, unless the Exchange Offer is not
permitted by applicable law, they would (i) cause to be filed with the
Commission, on or prior to 60 days after the Series A Issue Date, a Registration
Statement under the Securities Act relating to the Series B Notes, (ii) use
their reasonable best efforts to cause the Registration Statement to become
effective at the earliest possible time, but in no event later than 150 days
after the Series A Issue Date and (iii) upon effectiveness of the Registration
Statement, commence the Exchange Offer, maintain the effectiveness of the
Registration Statement for at least 20 business days (or a longer period if
required by law) and deliver to the Exchange Agent Series B Notes in the same
aggregate principal amount as the Series A Notes that were tendered by the
holders thereof pursuant to the Exchange Offer. A copy of the Registration
Rights Agreement has been filed as an exhibit to the Registration Statement of
which this Prospectus is a part. The Registration Statement of which this
Prospectus is a part is intended to satisfy certain of the obligations of the
Company and the Subsidiary Guarantors under the Registration Rights Agreement
and the Purchase Agreement.
GENERAL
This Prospectus, together with the Letter of Transmittal, is being sent to
all beneficial owners of Series A Notes who are known to the Company as of the
date hereof. Upon the terms and subject to the conditions set forth in this
Prospectus and in the accompanying Letter of Transmittal, the Company will
accept all Series A Notes properly tendered and not withdrawn prior to 5:00
p.m., New York City time, on the Expiration Date. The Company will issue $1,000
principal amount of Series B Notes in exchange for each $1,000 principal amount
of outstanding Series A Notes accepted in the Exchange Offer. Holders may tender
some or all of their Series A Notes pursuant to the Exchange Offer, but Series A
Notes may be tendered only in integral multiples of $1,000.
The form and terms of the Series B Notes are the same as the form and terms
of the Series A Notes, except that the Series B Notes have been registered under
the Securities Act and holders of the Series B Notes will not be entitled to
certain registration and exchange rights granted to the holders of the Series A
Notes under the Registration Rights Agreement, which rights will terminate upon
the consummation of the Exchange Offer. The Series B Notes will evidence the
same debt as the Series A Notes for which they are exchanged and will be issued
under, and be entitled to the benefits of, the Indenture, which also authorized
the issuance of the Series A Notes, such that both series will be treated as a
single class of debt securities under the Indenture.
As of the date of this Prospectus, $120 million aggregate principal amount
of the Series A Notes are outstanding and registered in the name of Cede & Co.,
as nominee for the Depository Trust Company ("DTC"). Only a registered holder of
the Series A Notes, as reflected on the records of the Trustee under the
Indenture, or such holder's legal representative or attorney-in-fact (including
any beneficial owner of Series A Notes that obtains a properly completed bond
power and proxy from the registered holder of such Series A Notes), may
participate in the Exchange Offer. There will be no fixed record date for
determining registered holders of the Series A Notes entitled to participate in
the Exchange Offer.
Holders of the Series A Notes do not have any appraisal or dissenters'
rights under the Indenture in connection with the Exchange Offer. The Company
intends to conduct the Exchange Offer in accordance with the provisions of the
Registration Rights Agreement and the applicable requirements of the Securities
Act, the Exchange Act and the rules and regulations of the Commission
thereunder.
21
<PAGE> 23
The Company shall be deemed to have accepted validly tendered Series A
Notes when, as and if the Company has given oral or written notice thereof to
the Exchange Agent. The Exchange Agent will act as agent for the tendering
holders of Series A Notes for the purposes of receiving the Series B Notes from
the Company and delivering Series B Notes to such holders. If any tendered
Series A Notes are not accepted for any reason set forth in the terms and
conditions of the Exchange Offer or if Series A Notes are withdrawn or are
submitted for a greater principal amount than the holders desire to exchange,
such unaccepted, withdrawn or non-exchanged Series A Notes will be returned
without expense to the tendering holder thereof (or, in the case of Series A
Notes tendered by book-entry transfer into the Exchange Agent's account at DTC
pursuant to the book-entry transfer procedures described below, such Series A
Notes will be credited to an account maintained with DTC) as promptly as
practicable after the Expiration Date.
Holders of Series A Notes who tender in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the Letter of Transmittal, transfer taxes with respect to the exchange of Series
A Notes pursuant to the Exchange Offer. The Company will pay all charges and
expenses, other than certain applicable taxes described below in connection with
the Exchange Offer. See "--Fees and Expenses."
The Company will not receive any proceeds from the Exchange Offer. The
Company has agreed to bear the expenses of the Exchange Offer pursuant to the
Registration Rights Agreement. No underwriter is being used in connection with
the Exchange Offer.
EXPIRATION DATE; DELAY, EXTENSION, AMENDMENT AND TERMINATION
The term "Expiration Date" shall mean the expiration date set forth on the
cover page of this Prospectus, unless the Company, in its sole discretion,
extends the Exchange Offer, in which case the term "Expiration Date" shall mean
the latest date to which the Exchange Offer is extended.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Series A Notes, (ii) to extend the Exchange Offer, (iii) to amend
the terms of the Exchange Offer or (iv) to terminate the Exchange Offer. Any
delay, extension, amendment or termination will be followed as promptly as
practicable by oral or written notice to the Exchange Agent and a public
announcement thereof. In the case of an extension, such public announcement
shall include disclosure of the approximate number of Series A Notes deposited
to date and shall be made prior to 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date. Without limiting
the manner in which the Company may choose to make a public announcement of any
extension, amendment or termination of the Exchange Offer, the Company shall
have no obligation to publish, advertise, or otherwise communicate any such
public announcement, other than by making a timely release to the Dow Jones News
Service.
INTEREST ON THE SERIES B NOTES
The Series B Notes will bear interest from April 1, 1997, payable
semiannually on April 1 and October 1 of each year, commencing October 1, 1997,
at the rate of 11% per annum. Holders of Series A Notes whose Series A Notes are
accepted for exchange will receive interest, as interest on the Series B Notes,
accrued from the Series A Issue Date and will be deemed to have waived the right
to receive interest accrued on the Series A Notes.
PROCEDURES FOR TENDERING
To tender in the Exchange Offer, a holder of Series A Notes must properly
complete, sign and date the Letter of Transmittal, or a facsimile thereof, have
the signatures thereon guaranteed if required by the Letter of Transmittal, and
mail or otherwise deliver such Letter of Transmittal or such facsimile to the
Exchange Agent. In addition, either (i) certificates for such Series A Notes
must be received by the Exchange Agent along with the Letter of Transmittal, or
(ii) a timely confirmation of a book-entry transfer (a "Book-Entry
Confirmation") of such Series A Notes, if such procedure is available, into the
Exchange Agent's account at DTC pursuant to the procedure for book-entry
transfer described below, must be received by the Exchange
22
<PAGE> 24
Agent prior to the Expiration Date, or (iii) the holder must comply with the
guaranteed delivery procedures described below.
The tender by a holder of Series A Notes will constitute an agreement
between such holder and the Company in accordance with the terms and subject to
the conditions set forth herein and in the Letter of Transmittal.
THE METHOD OF DELIVERY OF SERIES A NOTES AND THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK
OF THE HOLDER. SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY TO
THE EXCHANGE AGENT BY 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. NO
LETTER OF TRANSMITTAL OR SERIES A NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS
MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES
OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Series A Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owner's own behalf, such owner must,
prior to completing and executing the Letter of Transmittal and delivering such
owner's Series A Notes, either make appropriate arrangements to register
ownership of the Series A Notes in such owner's name or obtain a properly
completed bond power from the registered holder and a proxy which authorizes
such owner to tender the Series A Notes on behalf of the registered holder, in
each case signed by the registered holder as the name of such registered holder
appears on the Series A Notes. The transfer of record ownership may take
considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by a member firm of a registered national
securities exchange or the National Association of Securities Dealers, Inc. or a
commercial bank or trust company having an office or correspondent in the United
States (an "Eligible Institution") unless the Series A Notes tendered pursuant
thereto are tendered (i) by a registered holder who has not completed the box
entitled "Special Issuance Instructions" or "Special Delivery Instructions" on
the Letter of Transmittal or (ii) for the account of an Eligible Institution. In
the event that signatures on a Letter of Transmittal or a notice of withdrawal,
as the case may be, are required to be guaranteed, such guarantee must be by an
Eligible Institution.
If the Letter of Transmittal or any Series A Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or other acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and unless waived by the
Company, evidence satisfactory to the Company of their authority so to act must
be submitted with the Letter of Transmittal.
The Exchange Agent and DTC have confirmed that any financial institution
that is a participant in DTC's system may utilize DTC's Automated Tender Offer
Program to tender Series A Notes.
All questions as to the validity, form, eligibility (including time of
receipt), and withdrawal of the tendered Series A Notes will be determined by
the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Series A
Notes not properly tendered or any Series A Notes the Company's acceptance of
which would, in the opinion of counsel for the Company, be unlawful. The Company
also reserves the right to waive any defects, irregularities or conditions of
tender as to particular Series A Notes. The Company's interpretation of the
terms and conditions of the Exchange Offer (including the instructions in the
Letter of Transmittal) will be final and binding on all parties. Unless waived,
any defects or irregularities in connection with tenders of Series A Notes must
be cured within such time as the Company shall determine. Although the Company
presently intends to notify holders of defects or irregularities with respect to
tenders of Series A Notes, neither the Company, the Exchange Agent nor any other
person shall be under any duty to give such notification, nor shall any of them
incur any liability for failure to give such notification. Tenders of Series A
Notes will not be deemed to have been made until such irregularities have been
cured or waived. Any Series A Notes received by the Exchange
23
<PAGE> 25
Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned without cost to
such holder by the Exchange Agent to the tendering holders of Series A Notes,
unless otherwise provided in the Letter of Transmittal, as soon as practicable
following the Expiration Date.
While the Company has no present plan to acquire any Series A Notes which
have not been tendered in the Exchange Offer or to file a registration statement
to permit resales of Series A Notes which are not tendered pursuant to the
Exchange Offer, subject to the terms of the Indenture, the Company reserves the
right in its sole discretion to (i) purchase or make offers for any Series A
Notes that remain outstanding subsequent to the Expiration Date and (ii) to the
extent permitted by applicable law, terminate the Exchange Offer and purchase
Series A Notes in the open market, in privately negotiated transactions or
otherwise. The term of any such purchases or offers will differ from the terms
of the Exchange Offer.
By tendering, each holder will represent to the Company that, among other
things, (i) it is not an "affiliate," as defined under Rule 405 of the
Securities Act, of the Company, (ii) it is not engaged in, and does not intend
to engage in, and has no arrangement or understanding with any person to
participate in, a distribution of the Series B Notes, and (iii) it is acquiring
the Series B Notes in the ordinary course of business.
Each broker-dealer that receives Series B Notes for its own account in
exchange for Series A Notes, where such Series A Notes were acquired by such
broker-dealer as a result of market-making or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any resale of
such Series B Notes. The Letter of Transmittal states that by so acknowledging
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Series B Notes received in
exchange for Series A Notes where such Series A Notes were acquired by such
broker-dealer as result of market-making activities or other trading activities.
The Company has agreed that, for a period of 120 days after the consummation of
the Exchange Offer, it will make this Prospectus, as it may be amended or
supplemented from time to time, available to any broker-dealer for use in
connection with any such resale. See "Plan of Distribution."
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Series A Notes and (a) whose Series A
Notes are not immediately available or (b) who cannot deliver their Series A
Notes, the Letter of Transmittal or any other required documents to the Exchange
Agent prior to the Expiration Date, may effect a tender if:
(i) the tender is made through an Eligible Institution;
(ii) prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder of the Series A Notes, the
certificate number or numbers of such Series A Notes and the principal
amount of Series A Notes tendered, stating that the tender is being made
thereby, and guaranteeing that, within three business days after the
Expiration Date, the Letter of Transmittal (or facsimile thereof) together
with the certificate(s) representing the Series A Notes to be tendered in
proper form for transfer or a Book-Entry Confirmation, as the case may be,
and any other documents required by the Letter of Transmittal will be
deposited by the Eligible Institution with the Exchange Agent; and
(iii) such properly completed and executed Letter of Transmittal (or
facsimile thereof) together with the certificate(s) representing all
tendered Series A Notes in proper form for transfer and all other documents
required by the Letter of Transmittal are received by the Exchange Agent
within three business days after the Expiration Date.
24
<PAGE> 26
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Series A Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date, unless previously accepted for exchange.
To withdraw a tender of Series A Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the Expiration Date. Any such notice of withdrawal must (i) specify the name of
the person having deposited the Series A Notes to be withdrawn (the
"Depositor"), (ii) identify the Series A Notes to be withdrawn (including the
certificate number or numbers and principal amount of such Series A Notes),
(iii) be signed by the Depositor in the same manner as the original signature on
the Letter of Transmittal by which such Series A Notes were tendered (including
any required signature guarantees) or be accompanied by documents of transfer
sufficient to have the Trustee with respect to the Series A Notes register the
transfer of such Series A Notes into the name of the Depositor withdrawing the
tender and (iv) specify the name in which any such Series A Notes are to be
registered, if different from that of the Depositor. All questions as to the
validity, form and eligibility (including time of receipt) of such withdrawal
notices will be determined by the Company, whose determination shall be final
and binding on all parties. Any Series A Notes so withdrawn will be deemed not
to have been validly tendered for purposes of the Exchange Offer and no Series B
Notes will be issued with respect thereto unless the Series A Notes so withdrawn
are validly retendered. Properly withdrawn Series A Notes may be retendered by
following one of the procedures described above under "--Procedures for
Tendering" at any time prior to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, if the Exchange Offer
violates applicable law, rule or regulation or an applicable interpretation of
the staff of the Commission, (i) the Company will not be required to accept for
exchange, or exchange Series B Notes for, any Series A Notes not theretofore
accepted for exchange and (ii) the Company may delay accepting any Series A
Notes, amend the terms of the Exchange Offer, or extend or terminate the
Exchange Offer, as provided herein. See "Expiration Date; Delay, Extension,
Amendment and Termination."
EXCHANGE AGENT
Norwest Bank Minnesota, National Association has been appointed as Exchange
Agent for the Exchange Offer. Questions and requests for assistance and requests
for additional copies of this Prospectus or the Letter of Transmittal and
deliveries of completed Letters of Transmittal with tendered Series A Notes
should be directed to the Exchange Agent addressed as follows:
<TABLE>
<S> <C>
By Registered or Certified Mail: By Overnight Courier:
Norwest Bank Minnesota, National Norwest Bank Minnesota, National
Association Association
Corporate Trust Operations Corporate Trust Operations
P.O. Box 1517 Norwest Center
Minneapolis, MN 55480-1517 Sixth and Marquette
Minneapolis, MN 55479-0069
By Hand: By Facsimile:
Norwest Bank Minnesota, National Norwest Bank Minnesota, National
Association Association
Corporate Trust Operations Corporate Trust Operations
Northstar East, 12th Floor (612) 667-4927
608 2nd Avenue Confirm by telephone:
Minneapolis, MN 55479-0113 (612) 667-9764
</TABLE>
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Company. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail. Additional
25
<PAGE> 27
solicitations may be made by officers and regular employees of the Company and
its affiliates in person, by telephone or facsimile.
The Company will not make any payments to brokers, dealers, or other
persons soliciting acceptances of the Exchange Offer. The Company, however, will
pay the Exchange Agent reasonable and customary fees for its services and will
reimburse the Exchange Agent for its reasonable out-of-pocket expenses in
connection therewith. The Company may also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of this Prospectus, Letters of Transmittal
and related documents to the beneficial owners of the Series A Notes, and in
handling or forwarding tenders for exchange.
The expenses to be incurred in connection with the Exchange Offer,
including registration fees, fees and expenses of the Exchange Agent and
Trustee, accounting and legal fees and expenses, and printing costs, will be
paid by the Company and are estimated in the aggregate to be approximately
$175,000.
The Company will pay all transfer taxes, if any, applicable to the exchange
of the Series A Notes pursuant to the Exchange Offer. If, however, a transfer
tax is imposed for any reason other than the exchange of Series A Notes pursuant
to the Exchange Offer, then the amount of any such transfer taxes (whether
imposed on the registered holder or any other persons) will be payable by the
tendering holder. If satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted with the Letter of Transmittal, the amount of such
transfer taxes will be billed directly to such tendering holder.
CONSEQUENCE OF FAILURE TO EXCHANGE
Participation in the Exchange Offer is voluntary. Holders of the Series A
Notes are urged to consult their financial and tax advisors prior to determining
whether or not to tender their Series A Notes.
Series A Notes which are not exchanged for the Series B Notes pursuant to
the Exchange Offer will remain restricted securities. Accordingly, such Series A
Notes may be resold only (i) to a person whom the seller reasonably believes is
a qualified institutional buyer (as defined in Rule 144A under the Securities
Act) in a transaction meeting the requirements of Rule 144A, (ii) in a
transaction meeting the requirements of Rule 144 under the Securities Act, (iii)
outside the United States to a foreign person in a transaction meeting the
requirements of Rule 904 under the Securities Act, (iv) in accordance with
another exemption from the registration requirements of the Securities Act (and
based upon an opinion of counsel if the Company so requests), (v) to the Company
or (vi) pursuant to an effective registration statement and, in each case, in
accordance with any applicable securities laws of any state of the United States
or any other applicable jurisdiction.
RESALE OF THE SERIES B NOTES
With respect to the Series B Notes, based upon an interpretation by the
staff of the Commission set forth in certain no-action letters issued to third
parties, the Company believes that a holder (other than (i) a broker-dealer that
purchases such Series B Notes directly from the Company to resell pursuant to
Rule 144A or any other available exemption under the Securities Act or (ii) a
person that is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act) who exchanges the Series A Notes for the Series B
Notes in the ordinary course of business and who is not participating, does not
intend to participate, and has no arrangement with any person to participate, in
the distribution of the Series B Notes, will be allowed to resell the Series B
Notes to the public without further registration under the Securities Act and
without delivering to the purchasers of the Series B Notes a prospectus that
satisfies the requirements of Section 10 of the Securities Act. However, if any
holder acquires the Series B Notes in the Exchange Offer for the purpose of
distributing or participating in the distribution of the Series B Notes or is a
broker-dealer, such holder cannot rely on the position of the staff of the
Commission enumerated in certain no-action letters issued to third parties and
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction, unless an exemption
from registration is otherwise available. Each broker-dealer that receives
Series B Notes for its own account in exchange for Series A Notes, where such
Series A Notes were acquired by such broker-dealer as a result of market-making
activities or other
26
<PAGE> 28
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such Series B Notes. The Letter of Transmittal
states that by so acknowledging and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales of
Series B Notes received in exchange for Series A Notes where such Series A Notes
were acquired by such broker-dealer as a result of market-making or other
trading activities. Pursuant to the Registration Rights Agreement, the Company
has agreed to make this Prospectus, as it may be amended or supplemented from
time to time, available to broker-dealers for use in connection with any resale
for a period of 120 days after consummation of the Exchange Offer. See "Plan of
Distribution."
ACCOUNTING TREATMENT
The Company will not recognize any gain or loss for accounting purposes
upon the consummation of the Exchange Offer. The expenses of the Exchange Offer
will be amortized by the Company over the term of the Series B Notes.
27
<PAGE> 29
CAPITALIZATION
The following table sets forth the (i) actual consolidated cash and
capitalization of the Company at March 31, 1997 and (ii) the consolidated cash
and capitalization of the Company at March 31, 1997 as adjusted to give effect
to the Series A Notes Offering, the application of the net proceeds therefrom,
and the Hewitt-Robins Acquisition as if the same had occurred as of such date.
The table should be read in conjunction with the Unaudited Pro Forma
Consolidated Financial Statements of the Company and the related notes thereto
and the Financial Statements of the Company, the Consolidated Financial
Statements of BCE and the Financial Statements of Hewitt-Robins and related
notes thereto included elsewhere in this Prospectus. See "Selected Historical
and Pro Forma Financial Data," "Unaudited Pro Forma Consolidated Financial
Statements" and the Financial Statements of the Company, the Consolidated
Financial Statements of BCE and the Financial Statements of Hewitt-Robins and
the related notes thereto, included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1997
-------------------------
(IN THOUSANDS)
ACTUAL AS ADJUSTED
<S> <C> <C>
Cash and cash equivalents.......................................... $ 1,207 $ 27,780
======= ========
Short term obligations:
Existing credit facility(1)...................................... $18,877 $ --
======= ========
Long term obligations (including current portion):
Series A Notes................................................... $ -- $120,000
Existing credit facility(1)...................................... 16,459 --
Revolving Credit Facility(2)..................................... -- --
Capital lease obligations........................................ 1,367 1,367
Australian Seller Notes(3)....................................... 4,542 4,542
Subordinated secured promissory note............................. 300 --
Subordinated note payable to affiliate........................... 350 --
------- --------
Total long-term obligations................................... $23,018 $125,909
Total stockholder's equity (deficit).......................... 2,967 (37,371)
------- --------
Total capitalization............................................... $25,985 $ 88,538
======= ========
</TABLE>
- -----------------------------
(1) In connection with the Series A Notes Offering, the outstanding balances of
the existing credit facility were repaid in full. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
(2) As of the closing date of the Series A Notes Offering, $30 million is
available for borrowing under this Revolving Credit Facility.
(3) The Australian Seller Notes were issued to the sellers of BCE in connection
with the Company's acquisition of BCE. The notes bear interest at a variable
rate which was approximately 7% at March 31, 1997. See "Description of
Certain Indebtedness."
28
<PAGE> 30
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
The following table presents: (i) historical financial data of the Company
and its predecessor companies, Continental and Goodman, on a combined basis for
each of the five years during the period ended December 31, 1996, which have
been derived from the audited financial statements; (ii) historical financial
data of the Company and its predecessor companies, Continental and Goodman, on a
combined basis for the three months ended March 31, 1996 and 1997; (iii)
historical financial data of BCE for each of the three fiscal years during the
period ended June 30, 1996 and for the six-month period ended December 31, 1996,
which have been derived from the audited Consolidated Financial Statements of
BCE, which are in Australian dollars and presented in Australian GAAP; (iv)
unaudited historical financial data of BCE for the six-month period ended
December 31, 1995, which have been derived from unaudited financial statements
of BCE which are in Australian dollars and presented in Australian GAAP; and (v)
unaudited pro forma financial data of the Company giving effect to (1) the
Series A Notes Offering on April 1, 1997, (2) the application of the net
proceeds therefrom, (3) the BCE Acquisition on January 7, 1997 and (4) the
Hewitt-Robins Acquisition on April 1, 1997, as if such transactions had occurred
on January 1, 1996, with respect to the Statement of Operating Data and Other
Data for the year ended December 31, 1996; as if the Series A Notes Offering and
the application of the net proceeds therefrom and the Hewitt-Robins Acquisition
had occurred on January 1, 1997, with respect to the Statement of Operating Data
and Other Data for the three months ended March 31, 1997, and March 31, 1997
with respect to the Balance Sheet Data. The pro forma data do not purport to
represent what the consolidated results of operations or consolidated financial
position of the Company would have been had the Series A Notes Offering, the
application of the net proceeds therefrom, the BCE Acquisition and the
Hewitt-Robins Acquisition actually occurred at the beginning of the relevant
periods, and do not purport to project the consolidated financial position or
the consolidated results of operations of the Company for the current year or
any date or future period. The summary financial data set forth below should be
read in conjunction with "Unaudited Pro Forma Consolidated Financial Statements"
and the Financial Statements of the Company, the Consolidated Financial
Statements of BCE and the Financial Statements of Hewitt-Robins and the notes
related thereto as described elsewhere herein.
29
<PAGE> 31
<TABLE>
<CAPTION>
CONTINENTAL GLOBAL GROUP, INC.
----------------------------------------------------------------------------------------------------
PRO FORMA
THREE MONTHS PRO FORMA THREE MONTHS
ENDED YEAR ENDED ENDED
YEARS ENDED DECEMBER 31, MARCH 31, DECEMBER 31, MARCH 31,
-------------------------------------------------- ----------------- ------------ ------------
1992 1993(1) 1994 1995 1996 1996 1997 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATING DATA:
Net sales................. $80,422 $84,778 $114,025 $153,230 $143,524 $40,025 $47,076 $191,143 $ 50,809
Cost of products sold..... 63,413 68,308 94,285 124,948 114,716 32,282 37,697 148,681 40,256
------- ------- -------- -------- -------- ------- ------- -------- --------
Gross profit............. 17,009 16,470 19,740 28,282 28,808 7,743 9,379 42,462 10,553
Selling, general and
administrative
expenses................ 9,345 9,693 13,062(2) 11,670 13,473 3,349 5,442 21,581 5,666
Management fee............ 1,565 1,747 1,736 2,102 3,187 849 776 1,184 282
------- ------- -------- -------- -------- ------- ------- -------- --------
Operating income......... 6,099 5,030 4,942 14,510 12,148 3,545 3,161 19,697 4,605
Interest expense.......... 590 1,214 1,493 2,506 2,889 785 1,187 14,111 3,527
Other (income) expense.... (109) 85 (166) 219 319 101 49 210 49
------- ------- -------- -------- -------- ------- ------- -------- --------
Income before income taxes
and extraordinary
item.................... 5,618 3,731 3,615 11,785 8,940 2,659 1,925 5,376 1,029
Foreign income tax
credit.................. -- -- -- -- -- -- (250) -- --
Pro forma income taxes.... -- -- -- -- -- -- -- 2,204 509
------- ------- -------- -------- -------- ------- ------- -------- --------
Income before
extraordinary item...... 5,618 3,731 3,615 11,785 8,940 2,659 2,175 3,172 520
Extraordinary item (3).... 932 932 --
------- ------- -------- -------- -------- ------- ------- -------- --------
Net income................ $ 5,618 $3,731 $ 3,615 $ 11,785 $ 9,872 $ 3,591 $ 2,175 $ 3,172 $ 520
======= ======= ======== ======== ======== ======= ======== ======== ========
Ratio of earnings to fixed
charges (4)............. 7.5x 3.5x 3.0x 5.0x 3.7x 4.2x 2.5x 1.4x 1.3x
TAX ADJUSTED DATA (5):
Income before income taxes
and extraordinary
item.................... $ 5,618 $3,731 $ 3,615 $ 11,785 $ 8,940 $ 2,659 $ 1,925
Pro forma income taxes.... 2,069 1,388 1,447 4,680 3,749 1,096 936
------- ------- -------- -------- -------- ------- -------
Income before
extraordinary item...... 3,549 2,343 2,168 7,105 5,191 1,563 989
Extraordinary item, net of
pro forma income
taxes................... -- -- -- -- 559 559 --
------- ------- -------- -------- -------- ------- -------
Net income................ $ 3,549 $2,343 $ 2,168 $ 7,105 $ 5,750 $ 2,122 $ 989
======= ======= ======== ======== ======== ======= ========
OTHER DATA:
Adjusted EBITDA (6)....... $ 8,169 $7,371 $ 7,444 $ 17,506 $ 16,347 4,643 4,526 $ 22,497 $ 5,356
Net cash provided by (used
in) operating
activities.............. 7,668 3,562 (1,797) 10,550 9,873 3,835 856 -- --
Depreciation and
amortization............ 505 594 766 894 1,012 249 589 2,800 751
Capital expenditures...... 629 1,237 1,181 794 618 190 539 1,549 2,654
</TABLE>
<TABLE>
<CAPTION>
CONTINENTAL GLOBAL GROUP, INC.
---------------------------------------------------------------------------------
PRO FORMA
AS OF AS OF
AS OF DECEMBER 31, MARCH 31, MARCH 31,
------------------------------------------------------ --------- ---------
1992 1993 1994 1995 1996 1997 1997
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................... $ 6,273 $ 7,405 $ 1,856 $ 295 $ 1,022 $ 1,207 $ 27,780
Total assets................................ 31,049 35,543 40,870 46,195 46,499 72,132 118,250
Long-term debt, including current portion... 12,313 11,616 10,605 16,837 14,143 23,018 125,909
Stockholder's equity (deficit).............. 3,836 6,448 8,877 (3,862) 1,994 2,967 (37,371)
</TABLE>
- -----------------------------
(1) In October 1993, the Company acquired substantially all of the assets of
Buck Moore Axle Company, a recycled mobile homes axle business. See "The
Company."
(2) Includes net contract settlement costs of $2,338.
(3) Reflects gain on early extinguishment of debt.
(4) Earnings consist of income before taxes plus fixed charges. Fixed charges
consist of interest expense, amortization of deferred financing costs and
the portion of rental expense that is representative of interest expense.
(5) Represents pro forma tax adjustments of Continental and Goodman on a
combined basis pursuant to the terms of the Tax Payment Agreement with the
parent company, NES Group, Inc., as if such agreement had been in effect for
each of the years presented. See "Related Transactions--Tax Payment
Agreement."
(6) Adjusted EBITDA represents earnings before interest, taxes, depreciation,
amortization and miscellaneous expense (income) and gives effect on a pro
forma basis to $1,184 and $282 in management fees for the year ended
December 31, 1996 and the three months ended March 31, 1997 respectively to
be paid pursuant to the Management Agreement. On a historical basis,
Adjusted EBITDA excludes management fees for the years ended December 31,
1992, 1993, 1994, 1995 and 1996 in the amounts of $1,565, $1,747, $1,736,
$2,102 and $3,187, respectively, and for the three months ended March 31,
1996 and 1997 in the amounts of $849 and $766, respectively, because such
amounts were paid pursuant to an agreement that was terminated in connection
with the Series A Notes Offering and replaced with the Management Agreement.
See "Related Transactions -- Management Agreement." Adjusted EBITDA should
not be considered as an alternative to cash provided by operating activities
as a measure of liquidity, or to net income as a measure of profitability.
Adjusted EBITDA and net cash provided by (used in) operating activities have
been included because the Company uses them to analyze its ability to
service its debt, the Company's lenders use them for the purpose of
analyzing the Company's performance with respect to the credit agreement and
the Indenture and the Company understands that they are used by certain
investors as measures of a Company's historical ability to service debt. Not
all companies calculate Adjusted EBITDA in the same fashion and therefore
Adjusted EBITDA as presented may not be comparable to other similarly titled
measures of other companies.
30
<PAGE> 32
<TABLE>
<CAPTION>
BCE
-----------------------------------------------------
YEARS ENDED SIX MONTHS ENDED
JUNE 30, DECEMBER 31,
--------------------------- ---------------------
1994 1995 1996 1995 1996
(UNAUDITED)
(AUSTRALIAN DOLLARS IN THOUSANDS)
(AUSTRALIAN GAAP)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATING DATA:
Total revenue........................... $17,777 $38,096 $50,940 $28,269 $19,734
Operating and other costs............... 17,041 36,014 43,661 23,624 19,083
Depreciation............................ 461 615 897 387 486
Interest expense........................ 207 235 179 164 72
------ ------ ------ ------- -------
Operating profit before abnormal items
and income tax........................ 68 1,232 6,203 4,094 93
Abnormal items before income tax........ -- -- (1,105) -- 137
------ ------ ------ ------- -------
Operating profit before income tax...... 68 1,232 5,098 4,094 230
Income tax attributable to operating
profit................................ 114 26 1,840 1,474 91
------ ------ ------ ------- -------
Operating profit after income tax....... $ (46) $ 1,206 $ 3,258 $ 2,620 $ 139
====== ====== ====== ======= =======
Ratio of earnings to fixed charges(1)... 1.3x 5.3x 23.6x 22.4x 1.9x
OTHER DATA:
Adjusted EBITDA(2)...................... $ 736 $ 2,082 $ 7,279 $ 4,645 $ 651
Net cash provided by (used in) operating
activities............................ (539) 2,349 2,281 609 841
Depreciation and amortization........... 461 615 897 387 486
Capital expenditures.................... -- 1,189 1,449 698 324
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF DECEMBER 31,
----------------------------- ---------------------
1994 1995 1996 1995 1996
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash.................................. $ 22 $ 776 $ 208 $ 616 $ 11
Total assets.......................... 11,973 17,320 19,585 20,656 18,561
Long-term debt, including current
portion............................. 2,527 2,541 603 629 557
Total stockholders' equity............ 2,636 3,808 6,319 6,429 2,706
</TABLE>
- -----------------------------
(1) Earnings consist of income before taxes plus fixed charges. Fixed charges
consist of interest expense, amortization of deferred financing costs and
the portion of rental expense that is representative of interest expense.
(2) Adjusted EBITDA, with respect to BCE only, is earnings before interest,
taxes, depreciation, amortization and abnormal items. Adjusted EBITDA should
not be considered as an alternative to cash provided by operating activities
as a measure of liquidity, or to net income as a measure of profitability.
Adjusted EBITDA and net cash provided by (used in) operating activities have
been included because the Company uses them to analyze its ability to
service its debt, the Company's lenders use them for the purpose of
analyzing the Company's performance with respect to the credit agreement and
the Indenture and the Company understands that they are used by certain
investors as measures of a Company's historical ability to service debt. Not
all companies calculate Adjusted EBITDA in the same fashion and therefore
Adjusted EBITDA as presented may not be comparable to other similarly titled
measures of other companies.
31
<PAGE> 33
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Consolidated Financial Statements are
based upon the historical Financial Statements of the Company, the Consolidated
Financial Statements of BCE and the Financial Statements of Hewitt-Robins
included elsewhere in this Prospectus.
The Unaudited Pro Forma Consolidated Financial Statements are adjusted to
give effect to (i) the Series A Notes Offering on April 1, 1997, (ii) the
application of the net proceeds therefrom, (iii) the BCE Acquisition on January
7, 1997 and (iv) the Hewitt-Robins Acquisition on April 1, 1997, as if such
transactions had occurred as of January 1, 1996, with respect to the Unaudited
Pro Forma Consolidated Statement of Income for the year ended December 31, 1996;
as if the Series A Notes Offering and the application of the net proceeds
therefrom and the Hewitt-Robins Acquisition had occurred on January 1, 1997,
with respect to the Unaudited Pro Forma Statement of Income for the three months
ended March 31, 1997, and March 31, 1997, with respect to the Unaudited Pro
Forma Consolidated Balance Sheet.
The unaudited pro forma adjustments are based upon available information
and certain assumptions which management believes are factually supportable. The
Unaudited Pro Forma Consolidated Financial Statements do not purport to
represent what the Company's consolidated results of operations or consolidated
financial position would have been had the transactions described above actually
occurred at the beginning of the relevant period. In addition, the Unaudited Pro
Forma Consolidated Financial Statements do not purport to project the Company's
consolidated results of operations or consolidated financial position for the
current year or any future date or period. Historical data for BCE are presented
in U.S. dollars and were prepared in accordance with U.S. Generally Accepted
Accounting Principles.
The Unaudited Pro Forma Consolidated Financial Statements should be read in
conjunction with the Financial Statements of the Company, the Consolidated
Financial Statements of BCE and the Financial Statements of Hewitt-Robins and
the related notes thereto included elsewhere in this Prospectus.
32
<PAGE> 34
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
AS OF MARCH 31, 1997
---------------------------------------------------------------------------------
CONTINENTAL PURCHASE
GLOBAL ACCOUNTING OFFERING
GROUP, INC. HEWITT-ROBINS ADJUSTMENTS(1) ADJUSTMENTS(2) AS ADJUSTED
------------ ------------- -------------- -------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents.......... $ 1,208 $ 104 $ (104)(a) $ 26,572(a) $ 27,780
Accounts receivable..... 25,457 2,223 (2,223)(a) 25,457
Inventories............. 22,687 2,490 25,177
Other current assets.... 1,293 64 1,357
------- ------ ------- -------- --------
Total current
assets............. 50,645 4,881 (2,327) 26,572 79,771
Property, plant and
equipment, net.......... 10,765 1,601 (1,000)(a) 11,866
500(b)
Goodwill.................. 10,295 11,429(b) 21,724
Other assets.............. 427 4,800(b) 4,889
(338)(c)
------- ------ ------- -------- --------
$ 72,132 $ 6,482 $ 8,602 $ 31,034 $ 118,250
======= ====== ======= ======== ========
LIABILITIES AND OWNER'S
EQUITY
Current liabilities:
Note payable............ $ 18,877 $ -- $ -- $(18,877)(d) $ --
Trade accounts
payable.............. 18,844 788 19,632
Accrued compensation and
employee benefits.... 2,630 343 (262)(c) 2,711
Other accrued
liabilities.......... 5,795 274 1,300(d) 7,369
Current maturities of
long-term
obligations.......... 3,166 (2,332)(d) 834
------- ------ ------- -------- --------
Total current
liabilities........ 49,312 1,405 1,038 (21,209) 30,546
Long-term obligations,
less current maturities
Series A Notes.......... 12,641(e) 107,359(e) 120,000
Existing credit
facility............. 14,128 (14,128)(d)
Australian Seller
Notes................ 4,278 4,278
Subordinated notes...... 650 (650)(d)
Other................... 797 797
------- ------ ------- -------- --------
19,853 12,641 92,581 125,075
Owner's equity
(deficit)............... 2,967 5,077 (5,077)(f) (40,000)(f) (37,371)
(338)(c)
------- ------ ------- -------- --------
$ 72,132 $ 6,482 $ 8,602 $ 31,034 $ 118,250
======= ====== ======= ======== ========
</TABLE>
33
<PAGE> 35
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1997
(IN THOUSANDS)
(1) Purchase accounting adjustments to reflect the Hewitt-Robins Acquisition:
(a) Represents the elimination of assets which will not be acquired in the
Hewitt-Robins Acquisition.
(b) Represents the excess of purchase price over net assets acquired in
connection with the Hewitt-Robins Acquisition in the amount of $11,429.
The purchase price includes a net write up of $500 to property, plant
and equipment. The final purchase price is subject to a negotiated price
adjustment for working capital.
(c) Certain selected liabilities will be paid by W.S. Tyler, Incorporated in
connection with the acquisition of Hewitt-Robins.
(d) Represents accruals for costs to be incurred by the Company related to
the termination of certain employees in connection with the closure of
Hewitt-Robins' West Caldwell facility in the amount of $270 and the
assumption and cancellation of the computer lease and the West Caldwell
building lease in the amount of $1,030.
(e) Represents the issuance of the Series A Notes to the extent used in
connection with the financing of the Hewitt-Robins Acquisition.
(f) Represents the elimination of the owners' equity related to
Hewitt-Robins.
(2) Adjustments to reflect the issuance on April 1, 1997 of 11% Series A Notes
due 2007.
(a) Represents the excess of the cash proceeds received from the Series A
Notes Offering.
(b) Represents capitalized financing costs associated with the Series A
Notes Offering.
(c) Represents write-off of capitalized financing costs associated with the
repayment of certain existing indebtedness.
(d) Represents repayment of existing indebtedness with a portion of the
proceeds of the Series A Notes Offering.
(e) Represents the Series A Notes Offering as follows:
<TABLE>
<S> <C>
Gross Proceeds................................... $120,000
Portion of Series A Notes recognized in the
Hewitt-Robins Acquisition...................... (12,641)
--------
$107,359
========
</TABLE>
(f) Represents payment of a dividend to the sole stockholder of the Company.
34
<PAGE> 36
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1997
-----------------------------------------------------------------------------
CONTINENTAL PURCHASE
GLOBAL ACCOUNTING OFFERING
GROUP, INC. HEWITT-ROBINS ADJUSTMENTS(1) ADJUSTMENTS(2) PRO FORMA
----------- ------------- -------------- -------------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATING DATA:
Net sales..................... $47,076 $ 3,733 $ -- $ -- $50,809
Costs of products sold........ 37,697 2,628 14(a) 40,256
(83)(b)
------- ------ ----- ------- -------
Gross profit........ 9,379 1,105 69 10,553
Operating expenses:
Selling and
engineering............ 2,509 245 (162)(b) 2,592
General and
administrative......... 2,933 258 2(a) 3,074
(190)(b)
71(c)
Management fee........... 776 (494)(a) 282
------- ------ ----- ------- -------
Total operating
expenses.......... 6,218 503 (279) (494) 5,948
------- ------ ----- ------- -------
Operating Income.... 3,161 602 348 494 4,605
Other expenses (income):
Interest expense......... 1,187 348(d) 1,992(b) 3,527
Miscellaneous, net....... 49 49
------- ------ ----- ------- -------
Total other
expenses.......... 1,236 348 1,992 3,576
------- ------ ----- ------- -------
Income before income taxes.... 1,925 602 0 (1,498) 1,029
Pro forma income taxes........ 936 247 (674)(c) 509
------- ------ ----- ------- -------
Net income.......... $ 989 $ 355 $ 0 $ (824) $ 520
======= ====== ===== ======= =======
OTHER DATA:
Adjusted EBITDA(3)....... $ 4,525 $ 678 $ 435 $ (282) $ 5,356
Depreciation and
amortization........... 588 76 87 751
Capital expenditure...... 2,639 15 2,654
Total interest expense... 3,527
Cash interest
expense(4)............. 3,407
Ratio of Adjusted EBITDA
to cash interest
expense(3)............. 1.6x
Ratio of net debt to
Adjusted EBITDA(3)..... 4.6
Ratio of earnings to
fixed charges(5)....... 1.3
</TABLE>
35
<PAGE> 37
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(IN THOUSANDS)
(1) Adjustments to reflect the Hewitt-Robins Acquisition.
(a) Represents the increased depreciation expense related to the write-up in
property, plant and equipment acquired in the Hewitt-Robins Acquisition.
(b) Represents net cost savings resulting from the closure of the
Hewitt-Robins, West Caldwell facility. Includes field sales, accounting,
warehousing, order processing, production control and engineering costs
that are redundant and will be provided at other Company locations at an
incremental cost of $600 annually and $150 quarterly.
<TABLE>
<CAPTION>
WEST CALDWELL WEST CALDWELL
ANNUAL COST QUARTERLY
SAVINGS COST SAVINGS
------------- -------------
<S> <C> <C>
Warehouse costs............................ $ 333 $ 83
Selling costs.............................. 650 162
Administrative costs....................... 758 190
---------- ---------
Net costs savings related to closure of
West Caldwell............................ $ 1,741 $ 435
========== ==========
</TABLE>
(c) Represents the amortization expense related to goodwill incurred
pursuant to the Hewitt-Robins Acquisition, amortized over a period of 40
years.
(d) Represents the change in interest expense related to the Hewitt-Robins
Acquisition calculated as follows:
<TABLE>
<CAPTION>
PRINCIPAL ANNUAL QUARTERLY
AMOUNT INTEREST INTEREST
OF DEBT EXPENSE EXPENSE
--------- ------- ---------
<S> <C> <C> <C>
Series A Notes issued April 1, 1997 due 2007..... $ 12,641 $1,391 $ 348
</TABLE>
(2) Adjustments to reflect the issuance on April 1, 1997 of 11% Series A Notes
due 2007.
(a) To reflect the reduction in the management fees owed to NESCO, Inc.
Management fees are limited to 5% of earnings before interest, taxes,
depreciation, amortization and miscellaneous expense (income) based upon
the terms of the Indenture governing the Series A Notes issued on April
1, 1997.
(b) To reflect the interest expense on a pro forma basis at the following
rates:
<TABLE>
<CAPTION>
PRINCIPAL ANNUAL QUARTERLY
AMOUNT INTEREST INTEREST
OF DEBT EXPENSE EXPENSE
--------- ------- ---------
<S> <C> <C> <C>
Series A Notes issued on April 1, 1997......... $ 120,000 $13,200 $ 3,300
Australian Seller Notes, at a rate of 7%....... 4,542 318 79
Other, at a blended rate of 8%................. 1,367 109 28
------- ------
Cash interest expense.......................... 13,627 $ 3,407
Amortization of financing fees................. 480 120
------- ------
Total pro forma interest expense............... $14,107 $ 3,527
------- ------
Required pro forma interest adjustment......... $ 7,968 $ 1,992
======= ======
</TABLE>
(c) Represents the income tax effect related to the net Offering Adjustments
assuming an effective tax rate of 45%.
36
<PAGE> 38
(3) Adjusted EBITDA represents earnings before interest, taxes, depreciation,
amortization and miscellaneous expense (income) and gives effect on a pro
forma basis to $282 in management fees to be paid pursuant to the Management
Agreement (as defined). See "Related Transactions -- Management Agreement."
On a historical basis, Adjusted EBITDA for Continental and Goodman excludes
management fees of $776. Adjusted EBITDA should not be considered as an
alternative to cash provided by operating activities as a measure of
liquidity, or to net income as a measure of profitability. Adjusted EBITDA,
and related ratios have been included because the Company uses them as one
means of analyzing its ability to service its debt, the Company's lenders
use them for the purpose of analyzing the Company's performance with respect
to the credit agreement and the Indenture and the Company understands that
they are used by certain investors as measures of a company's historical
ability to service debt. Not all companies calculate Adjusted EBITDA in the
same fashion and therefore Adjusted EBITDA as presented may not be
comparable to other similarly titled measures of other companies.
(4) Cash interest expense excludes non-cash amortization of financing fees.
(5) Earnings consist of income before taxes plus fixed charges. Fixed charges
consist of interest expense, amortization of deferred financing costs and
the portion of rental expense that is representative of interest expense.
37
<PAGE> 39
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-----------------------------------------------------------------------------------------------------------
HISTORICAL PRO FORMA
CONTINENTAL AND HISTORICAL HISTORICAL ACQUISITION FOR OFFERING
GOODMAN BCE HEWITT-ROBINS ADJUSTMENTS(1) ACQUISITIONS ADJUSTMENTS(2) PRO FORMA
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATING DATA:
Net sales.......... $ 143,524 $ 32,559 $15,060 $ -- $191,143 $ -- $ 191,143
Cost of products
sold............. 114,716 23,319 10,693 286(a) 148,681 148,681
(333)(b)
-------- ------- ------- ------- -------- ------ --------
Gross profit..... 28,808 9,240 4,367 47 42,462 42,462
Operating expenses:
Selling and
engineering.... 9,666 505 940 (650)(b) 10,461 10,461
General and
administrative... 3,807 6,953 1,069 (758)(b) 11,120 11,120
495(c)
39(a)
(485)(d)
Management
fees........... 3,187 3,187 (2,003)(a) 1,184
-------- ------- ------- ------- -------- ------ --------
Total operating
expenses..... 16,660 7,458 2,009 (1,359) 24,768 (2,003) 22,765
-------- ------- ------- ------- -------- ------ --------
Operating
income....... 12,148 1,782 2,358 1,406 17,694 2,003 19,697
Other expenses:
Interest
expense........ 2,889 100 2,803(e) 5,792 8,319(b) 14,111
Miscellaneous,
net............ 319 (109) 210 210
Superannuation
payment........ 628 (628)(f)
Legal and
consulting
fees........... 127 (127)(g)
-------- ------- ------- ------- -------- ------ --------
Total other
expenses..... 3,208 746 2,048 6,002 8,319 14,321
-------- ------- ------- ------- -------- ------ --------
Income before
income taxes
and
extraordinary
item......... 8,940 1,036 2,358 (642) 11,692 (6,316) 5,376
Pro forma income
tax.............. 3,749 375 967 (297)(h) 4,794 (2,590)(c) 2,204
-------- ------- ------- ------- -------- ------ --------
Income before
extraordinary
item......... $ 5,191 $ 661 $ 1,391 $ (345) $ 6,898 $(3,726) $ 3,172
======== ======= ======= ======= ======== ====== ========
OTHER DATA:
Adjusted
EBITDA(3)...... $ 16,347 $ 2,505 $ 2,603 $ 2,226 $ 23,681 $(1,184) $ 22,497
Depreciation and
amortization... 1,012 723 245 820 2,800 2,800
Capital
expenditures... 618 850 81 1,549 1,549
Total interest
expense........ 14,111
Cash interest
expense(4)..... 13,631
Ratio of Adjusted
EBITDA to cash
interest
expense(3)..... 1.7x
Ratio of net debt
to Adjusted
EBITDA(3)...... 4.4
Ratio of earnings
to fixed
charges(5)..... 1.4
</TABLE>
38
<PAGE> 40
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
(1) Adjustments to reflect the BCE Acquisition and the Hewitt-Robins Acquisition
(the final purchase price allocation will be based upon a final determination of
the fair values of the net assets acquired):
(a) Represents increased depreciation expense related to the write-up of
$2,100 and $500 in property, plant and equipment acquired in the BCE
Acquisition and the Hewitt-Robins Acquisition, respectively.
(b) Represents net cost savings resulting from the closure of the
Hewitt-Robins, West Caldwell facility. Includes field sales, accounting,
warehousing, order processing, production control and engineering costs
that are redundant and will be provided at other Company locations at an
incremental cost of $600.
<TABLE>
<CAPTION>
WEST CALDWELL
COST SAVINGS
<S> <C>
Warehouse costs.................................. $ 333
Selling costs.................................... 650
Administrative costs............................. 758
------
Net cost savings related to closure of West
Caldwell....................................... $1,741
======
</TABLE>
(c) Represents the amortization expense related to goodwill incurred of
$9,635 and $11,429 pursuant to the BCE Acquisition and the Hewitt-Robins
Acquisition, respectively, amortized over a period of 40 years.
(d) Represents cost savings resulting from work force reductions and
realignments related to the closure of the CCE Pty. Ltd. operations. The
Company will close the CCE Pty. Ltd. facility during 1997 pursuant to
the BCE Acquisition. The following costs are duplicative and certain
sales force and technical personnel are redundant:
<TABLE>
<CAPTION>
CCE PTY. LTD.
OPERATING COST
<S> <C>
Workforce reductions............................. $ 68
Elimination of office and sales rental and other
office expenses................................ 172
Elimination of joint venture costs............... 110
Elimination of redundant consulting, legal,
technical and accounting fees.................. 135
----
Net cost savings related to closure of CCE Pty.
Ltd. operations................................ $485
====
</TABLE>
(e) Represents the change in interest expense related to the BCE Acquisition
and the Hewitt-Robins Acquisition calculated as follows:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT INTEREST
OF DEBT EXPENSE
<S> <C> <C>
The BCE Acquisition:
Note payable, interest rate of 9.25%.................... $ 6,800 $ 629
Existing credit facility, interest rate of 10%.......... 4,500 450
Australian Seller Notes, interest rate of 7%............ 4,757 333
-------- ------
$1,412
The Hewitt-Robins Acquisition:
Series A Notes offered at a rate of 11%................. $ 12,641 $1,391
------
$2,803
======
</TABLE>
39
<PAGE> 41
(f) Represents the elimination, pursuant to the terms of the BCE Acquisition
and subsequent employment agreements, of a one time superannuation
benefit payment made to the former stockholders of BCE in the amount of
$628.
(g) Represents the related legal and consulting fees in connection with the
BCE Acquisition in the amount of $127.
(h) Represents adjustment to reconcile income taxes to an effective income
tax rate of 41%.
(2) Adjustments to reflect the Series A Notes Offering:
(a) To reflect the reduction in the management fees owed to NESCO, Inc.
Management fees are limited to 5% of earnings before interest, taxes,
depreciation, amortization and miscellaneous expense (income) based upon
the terms of the Indenture governing the Series A Notes.
(b) To reflect the interest expense on a pro forma basis at the following
rates:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT INTEREST
OF DEBT EXPENSE
<S> <C> <C>
Historical interest expense............................. $ 27,232 $ 2,989
Acquisitions interest expense at a weighted average rate
of approximately 9.8%................................. 28,698 2,803
-------
Pro forma interest expense for Acquisitions............. $ 5,792
=======
Series A Notes offered at a rate of 11%................. $ 120,000 $13,200
Australian Seller Notes, at a rate of 7%................ 4,757 333
Other, at a blended rate of 8%.......................... 1,226 98
-------
Cash interest expense................................... 13,631
Amortization of financing fees.......................... 480
=======
Total pro forma interest expense........................ $14,111
=======
Pro forma interest adjustment........................... $ 8,319
=======
</TABLE>
(c) Represents adjustment to reconcile income taxes to an effective income
tax rate of 41%.
(3) Adjusted EBITDA represents earnings before interest, taxes, depreciation,
amortization and miscellaneous expense (income) and gives effect on a pro
forma basis to $1,184 in management fees to be paid pursuant to the
Management Agreement (as defined). See "Related Transactions--Management
Agreement." On a historical basis, Adjusted EBITDA for Continental and
Goodman excludes management fees of $3,187. Adjusted EBITDA should not be
considered as an alternative to cash provided by operating activities as a
measure of liquidity, or to net income as a measure of profitability.
Adjusted EBITDA and related ratios have been included because the Company
uses them as one means of analyzing its ability to service its debt, the
Company's lenders use them for the purpose of analyzing the Company's
performance with respect to the credit agreement and the Indenture and the
Company understands that they are used by certain investors as measures of a
company's historical ability to service debt. Not all companies calculate
Adjusted EBITDA in the same fashion and therefore Adjusted EBITDA as
presented may not be comparable to other similarly titled measures of other
companies.
(4) Cash interest expense excludes non-cash amortization of financing fees.
(5) Earnings consist of income before taxes plus fixed charges. Fixed charges
consist of interest expense, amortization of deferred financing costs and
the portion of rental expense that is representative of interest expense.
40
<PAGE> 42
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company believes it is a leading international manufacturer and
supplier of Conveyor Equipment for use in the coal mining industry. Based on
1996 pro forma net sales, the Company estimates it has approximately a 40% share
of the United States market for idlers used in aboveground Conveyor Equipment
and a significantly higher share of the United States underground coal mining
Conveyor Equipment market. In addition, the Company believes it has a
significant share of the Australian underground coal Conveyor Equipment market.
The Company supplies 18 of the top 25 coal producers in the United States
with its products, which include substantially all of the components required to
transport coal by conveyor from the coalface to the surface. The Company also
provides design and engineering assistance and upgrade and maintenance services.
The Company has developed preferred supplier arrangements with several of the
world's largest coal mining companies. Under these arrangements, the Company
supplies substantially all of such customers' Conveyor Equipment needs and
customers are assured of enhanced equipment availability. Sales from such
arrangements accounted for approximately $45 million, or 24%, of the Company's
1996 pro forma net sales.
The Company's Conveyor Equipment business is divided into four main
business areas. The Mining Equipment business area is principally engaged in the
design, manufacture and testing (and, outside the United States, installation,
monitoring and maintenance) of complete belt conveyor systems and components for
mining applications in the coal industry. The Conveyor Components business area
manufactures and sells components for Conveyor Equipment systems. The Engineered
Systems business area uses specialized project management and engineering skills
to combine mining equipment products, purchased equipment, steel fabrication and
other outside services into complete Conveyor Equipment systems that meet
specific customer requirements. The Bulk Conveyor Equipment business area
designs and manufactures a complete range of Conveyor Equipment used to
transport bulk materials, such as cement, lime, food products and industrial
waste.
A significant portion of the Company's sales are derived from the coal
mining, minerals and aggregates industries. The complexity of these projects
render them subject to delays due to operational or logistical reasons, which
impact the timing of orders for the Company's products. Because the Company
generally recognizes revenue from sales at the time of shipment rather than at
the time a contract is awarded, these delays have caused, and are expected to
continue to cause, material fluctuations in the Company's operating results on a
quarterly and annual basis.
In addition to its core business, the Company engages in two noncore
businesses, the manufacturing of (i) axle components for mobile homes and (ii)
air filtration equipment for use in enclosed environments, principally in the
textile industry. The manufacturing requirements for these products are
generally compatible with conveyor component production and thus maximize
utilization of the Company's manufacturing facilities for its primary products.
The terms of the Indenture restrict, on a going forward basis, the
Company's ability to pay management fees pursuant to the Management Agreement
(as defined). See "Related Transactions" and "Description of Senior
Notes--Certain Covenants--Restricted Payments."
ACQUISITIONS
Pursuant to its business strategy, in January 1997, the Company consummated
the acquisition of BCE, a group of Conveyor Equipment companies in Australia,
and on April 1, 1997, the Company consummated the acquisition of Hewitt-Robins,
a United States manufacturer of idlers. See "Business -- Acquisitions."
The Company will continue to search for strategic acquisitions that add
complementary product lines, expand its technological capabilities, broaden its
geographic reach or otherwise support its business strategy and presently is in
discussions with other potential acquisition candidates. There can be no
assurance that the
41
<PAGE> 43
Company will be able to identify other desirable acquisition candidates or that
the Company will be successful in consummating any acquisition on terms
favorable to the Company, if at all. See "Risk Factors--Risks Attendant to
Acquisition Strategy."
THE FOLLOWING DISCUSSION OF RESULTS OF OPERATIONS AND BACKLOG REFLECTS THE
RESULTS OF CONTINENTAL (INCLUDING BCE) AND GOODMAN ON A COMBINED BASIS,
EXCLUDING THE HEWITT-ROBINS ACQUISITION. PRIOR TO THE FORMATION OF THE COMPANY,
CONTINENTAL AND GOODMAN WERE OPERATED SEPARATELY BUT WERE UNDER THE COMMON
CONTROL OF NES GROUP, INC. SEE "THE COMPANY." A DISCUSSION OF THE RESULTS OF
OPERATIONS AND BACKLOG OF BCE FOLLOWS THE DISCUSSION OF CONTINENTAL AND GOODMAN
COMBINED.
THE COMPANY AND ITS PREDECESSOR COMPANIES,
CONTINENTAL AND GOODMAN COMBINED
RESULTS OF OPERATIONS
The following table sets forth, on a comparative basis, certain income
statement data as a percentage of net sales for the last three fiscal years
ended December 31 and the three-month periods ended March 31, 1996 and March 31,
1997.
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED ENDED
DECEMBER 31, MARCH 31,
------------------------ ---------------
1994 1995 1996 1996 1997
<S> <C> <C> <C> <C> <C>
Net sales......................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of products sold............................. 82.7 81.5 79.9 80.7 80.1
Gross profit...................................... 17.3 18.5 20.1 19.3 19.9
SG&A expenses..................................... 11.5 7.6 9.4 8.4 11.6
Management fee.................................... 1.5 1.4 2.2 2.1 1.6
Operating income.................................. 4.3 9.5 8.5 8.9 6.7
Adjusted EBITDA(1)................................ 6.5 11.4 11.4 11.6 9.6
</TABLE>
- ---------------
(1) Adjusted EBITDA represents earnings before interest, taxes, depreciation,
amortization and miscellaneous expense (income). On a historical basis,
Adjusted EBITDA excludes management fees.
THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31, 1996
Net Sales. Net sales increased $7.1 million, or 17.8%, from $40.0 million
in 1996 to $47.1 million in 1997. Of the increase, $6.5 million was due to the
acquisition of BCE and the balance of the increase of $0.6 million was due to
increases of $2.6 million in the Company's Mining Equipment business due to a
major mining project and $1.4 million in Conveyor Components, partially offset
by decreases of $2.1 million in the Engineered Systems relating to completion of
two international projects and a decrease of $1.3 million in Other Products,
primarily Mobile Home axles.
Gross Profit. Gross profit increased $1.7 million, or 22.1%, from $7.7
million in 1996 to $9.4 million in 1997 due to the BCE acquisition for $1.6
million and $0.1 million of the net sales increase from Mining Equipment,
Conveyor Components, Engineered Systems and Other Products.
SG&A Expenses. Selling, General and Administrative expenses, not including
management fees ("SG&A Expenses"), increased $2.1 million, or 63.6%, from $3.3
million in 1996 to $5.4 million in 1997. This increase results from $2.0 million
of expenses for BCE which includes redundancies of $0.2 million for staffing and
office expenses which are in the process of being eliminated and will be
reflected in future periods and $0.1 million of increased expenses for customer
sales support and marketing for the domestic subsidiaries of the Company.
Operating Income. Operating income decreased $0.3 million, or 8.6%, from
$3.5 million in 1996 to $3.2 million in 1997 due to the increase in SG&A
Expenses of $2.1 million which was partially offset by the
42
<PAGE> 44
increase in gross profit of $1.7 million and a decrease in management fee of
$0.1 million. As a result of these factors, operating income from the Company's
U.S. operations increased $0.1 million from 1996 to 1997. This increase was
offset by a $0.5 million operating loss from BCE in the first quarter of 1997
due to delays in receipt of major contracts anticipated early in the quarter,
which were recently awarded to BCE.
Adjusted EBITDA. Adjusted EBITDA decreased $0.1 million, or 2.2%, from $4.6
million in 1996 to $4.5 million in 1997 due to the decrease in operating income
partially offset by an increase in depreciation and amortization expenses from
BCE.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Net Sales. Net sales decreased $9.7 million, or 6.3%, from $153.2 million
in 1995 to $143.5 million in 1996. This decrease was primarily due to a
reduction of $13.4 million attributable to lower sales in the Engineered Systems
and Mining Equipment business areas. Engineered Systems sales in 1995 included
sales related to a major dam project which were not repeated in 1996. The
balance of the decrease primarily occurred in the Conveyor Components business
area. The aggregate decrease was partially offset by a $0.6 million increase in
Bulk Conveyor Equipment sales and a $4.0 million increase attributable to the
consolidation of sales from the Company's Australian joint venture upon
consummation of the acquisition by the Company of the interest in such joint
venture it did not previously own. Net sales pursuant to preferred supplier
arrangements were $45.0 million, or approximately 31.4% of 1996 net sales
compared to $45.0 million, or 29.4% of net sales, in 1995.
Gross Profit. Gross profit increased $0.5 million, or 1.9%, from $28.3
million in 1995 to $28.8 million in 1996 due to an increase in the Company's
gross profit margin (expressed as a percentage of net sales) from 18.5% in 1995
to 20.1% in 1996. The increase in gross profit margin resulted from reduced
warranty expenses and margin improvements in the Mining Equipment, Bulk Conveyor
Equipment, Engineered Systems and Other Products business areas.
SG&A Expenses. SG&A expenses, which do not include management fees ("SG&A
Expenses"), increased $1.8 million, or 15.4%, from $11.7 million in 1995 to
$13.5 million in 1996. This increase consisted primarily of $0.8 million of
expenses related to the Company's Australian Subsidiary, and expenses related to
the BCE Acquisition and the Company's Australian subsidiary, increased travel
expenses for United States-based salespeople, and increased research and
development and sales support services.
Operating Income. Operating income decreased $2.4 million, or 16.3%, from
$14.5 million in 1995 to $12.1 million in 1996 due to the increase in SG&A
Expenses of $1.8 million and an increase in management fees of $1.1 million,
which was partially offset by the increase in gross profit of $0.5 million.
Adjusted EBITDA. Adjusted EBITDA decreased $1.2 million, or 6.6%, from
$17.5 million in 1995 to $16.3 million in 1996, primarily due to the factors
discussed above.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Net Sales. Net sales increased $39.2 million, or 34.4%, from $114.0 million
in 1994 to $153.2 million in 1995. The Company's underground Mining Equipment
and Engineered Systems business areas accounted for $31.9 million, or 81.4%, of
this increase due to increases in orders primarily from the Company's major coal
customers pursuant to preferred supplier arrangements and due to new orders
received in connection with a major civil engineering project. The balance of
$7.3 million is comprised of $4.9 million from the Other Products area and $2.4
million from Bulk Conveyor Equipment net sales due to increased emphasis by the
Company on the Bulk Conveyor Equipment market. Sales pursuant to preferred
supplier arrangements in 1995 were $45.0 million, or approximately 29.4% of 1995
net sales, as compared to $11.5 million, or 10.1% of 1994 net sales.
Gross Profit. Gross profit increased $8.5 million, or 43.3%, from $19.7
million in 1994 to $28.3 million in 1995. Of the increase, $5.9 million, or
68.8%, resulted from the increase in net sales discussed above. The
43
<PAGE> 45
balance of $2.7 million, or 31.2%, of the increase was a result of improved
manufacturing utilization in Conveyor Components due to an increase in
manufacturing volume from year to year. As a result, the gross profit margin
increased from 17.3% in 1994 to 18.5% in 1995.
SG&A Expenses. SG&A Expenses decreased $1.4 million, or 10.7%, from $13.1
million in 1994 to $11.7 million in 1995. The decrease was attributable to $2.3
million in net contract settlement costs in 1994. The Company is currently
pursuing reimbursement of a portion of this contract settlement cost amount.
This decrease was partially offset by an increase of $0.9 million of costs in
support of the increased 1995 net sales. As a percentage of net sales, excluding
net contract settlement costs in 1994, SG&A Expenses as a percentage of net
sales decreased from 11.5% in 1994 to 7.6% in 1995, primarily attributable to an
increase in net sales and the fixed nature of a portion of costs.
Operating Income. Operating income increased $9.6 million, or 193.6%, from
$4.9 million in 1994 to $14.5 million in 1995. Of this increase, $8.6 million,
or 88.5%, was attributable to the increased net sales and improved manufacturing
utilization discussed above and $1.4 million was attributable to the reduction
in SG&A Expenses partially offset by a $0.4 million increase in the management
fee.
Adjusted EBITDA. Adjusted EBITDA increased $10.1 million, or 135.2%, from
$7.4 million in 1994 to $17.5 million in 1995 due primarily to the factors
discussed above.
BACKLOG
Backlog at March 31, 1997 increased $15.4 million, or 59.2%, from $26.0
million at March 31, 1996 to $41.4 million at March 31, 1997 primarily due to
the BCE acquisition. During April 1997, the Company's backlog increased to $56.0
million, primarily due to additional customer orders received by BCE.
Approximately 85% of the backlog is expected to be shipped in 1997. Through
April 1997, BCE received approximately $20.0 million in customer orders which
require the expenditure of sales, marketing and other costs during this period
for realization of sales in future periods.
BCE
(Australian Dollars)
(Australian GAAP)
The following table sets forth, on a comparative basis, certain income
statement data as a percentage of revenues for the two six-month periods ended
December 31, 1996 and 1995, respectively, and for the fiscal years ended June
30, 1996 and 1995.
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED ENDED
JUNE 30, DECEMBER 31,
------------------------ ---------------
1994 1995 1996 1995 1996
<S> <C> <C> <C> <C> <C>
Total revenue................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Operating profit before abnormal items and
income tax.................................... 0.4 3.2 12.2 14.5 0.5
Abnormal items before income tax................ -- -- (2.2) -- 0.7
Adjusted EBITDA(1).............................. 4.1 5.5 14.3 16.4 3.3
Net cash provided by (used in) operating
activities.................................... (3.0) 6.2 4.5 2.2 4.3
</TABLE>
- ---------------
(1) Adjusted EBITDA, with respect to BCE only, is earnings before interest,
taxes, depreciation, amortization and abnormal items. Adjusted EBITDA should
not be considered as an alternative to cash provided by operations as a
measure of liquidity, or to net income as a measure of profitability.
Adjusted EBITDA and net cash provided by (used in) operating activities have
been included because the Company uses them to analyze its ability to
service its debt, the Company's lenders use them for the purpose of
analyzing the Company's performance with respect to the credit agreement and
the Indenture and the Company understands that they are used by certain
investors as measures of a Company's historical ability to service debt. Not
all companies calculate Adjusted EBITDA in the same fashion and therefore
Adjusted EBITDA as presented may not be comparable to other similarly titled
measures of other companies.
44
<PAGE> 46
SIX MONTHS ENDED DECEMBER 31, 1996 COMPARED TO SIX MONTHS ENDED DECEMBER 31,
1995
Total Revenue. Total revenue decreased $8.5 million, or 30.2%, from $28.3
million in the 1995 period to $19.7 million in the 1996 period. This decrease
was attributable to a lower level of projects in the 1996 period compared to the
1995 period. Four major projects, all of which were originally scheduled to be
undertaken in the second half of 1996, were awarded to the Company in January
1997.
Operating Profit Before Abnormal Items and Income Tax. Operating profit
before abnormal items and income tax decreased $4.0 million, or 97.7%, from $4.1
million in the 1995 period to $0.1 million in the 1996 period. The operating
profit before abnormal items and income tax margin declined from 14.5% in the
1995 period to 0.5% in the 1996 period. The decrease was due to (i) the lower
sales volume discussed above and (ii) an increase in lower-margin, competitively
bid projects in the 1996 period compared to the 1995 period, which was
characterized by a greater percentage of higher-margin, privately negotiated
projects.
Abnormal Items Before Income Tax. Abnormal items before income tax in the
1996 period reflect a net refund of $0.1 million in consulting fees.
Adjusted EBITDA. Adjusted EBITDA decreased $4.0 million, or 86.0%, from
$4.6 million in the 1995 period to $0.7 million in the 1996 period. This
decrease was attributable to the factors discussed above.
FISCAL YEAR ENDED JUNE 30, 1996 COMPARED TO FISCAL YEAR ENDED JUNE 30, 1995
Total Revenue. Total revenue increased $12.8 million, or 33.7%, from $38.1
million in the 1995 period to $50.9 million in the 1996 period. Approximately
$8.0 million of this increase was attributable to higher levels of installation,
maintenance and repair of conveyor equipment in Australia. The balance of the
revenue increase, or $4.8 million, was principally due to a $1.3 million
increase in sales of conveyor control equipment and a $3.0 million increase in
conveyor products revenue.
Operating Profit Before Abnormal Items and Income Tax. Operating profit
before abnormal items and income tax increased $5.0 million from $1.2 million in
the 1995 period to $6.2 million in the 1996 period. This increase was due to the
$4.7 million increase in gross profit reflecting (i) the higher revenue
discussed above, and (ii) an increase in margin attributable to a more favorable
product mix between privately negotiated and competitively bid projects
partially offset by a $2.3 million increase in expenses related to the increase
in Total Revenue. Depreciation expenses increased by $0.3 million, or 46%, due
principally to higher depreciation expense associated with purchases of new
plant and equipment.
Abnormal Items Before Income Tax. Abnormal items before income tax in the
1996 period reflect one-time superannuation benefit of $0.8 million pursuant to
the terms of the BCE Acquisition and $0.3 million of related legal and
consulting fees.
Adjusted EBITDA. Adjusted EBITDA increased $5.2 million to $7.3 million in
the 1996 period from $2.1 million in the 1995 period. This increase was
attributable to the growth in revenue and operating profit discussed above.
FISCAL YEAR ENDED JUNE 30, 1995 COMPARED TO FISCAL YEAR ENDED JUNE 30, 1994
Total Revenue. Total revenue increased $20.3 million from $17.8 million in
the 1994 period to $38.1 million in the 1995 period. This increase was due to
(i) new mining projects of $15.6 million, (ii) an increase of $3.4 million in
engineered services contracts and (iii) the inclusion of a full year of the
sales of the conveyor controls business acquired in May 1994, which contributed
$1.3 million to the increase in revenues.
Operating Profit Before Abnormal Items and Income Tax. Operating profit
before abnormal items and income tax increased $1.2 million from $0.1 million in
the 1994 period to $1.2 million in the 1995 period. This increase was due to an
increase in operating profitability, partially offset by an increase in selling
expenses associated with the higher level of Total Revenue.
45
<PAGE> 47
Adjusted EBITDA. Adjusted EBITDA increased $1.4 million from $0.7 million
in the 1994 period to $2.1 million in the 1995 period. This increase was due to
the factors discussed above.
BACKLOG
Backlog at December 31, 1996 was $29.9 million as compared to $16.1 million
and $14.7 million at December 31, 1995 and 1994, respectively.
THE COMPANY
(U.S. Dollars)
(U.S. GAAP)
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by (used in) operating activities for the three months
ending March 31, 1997 and 1996 was $(0.9) million and $3.8 million,
respectively. Net cash used in operating activities in 1997 primarily was due to
an increase in working capital employed to support a higher level of sales. Net
cash provided in 1996 was primarily due to higher operating profits partially
offset by changes in working capital.
Net cash used in investing activities for the three months ending March 31,
1997 and 1996 was $7.7 million and $0.2 million, respectively. The expenditures
in 1997 represented primarily the acquisition of BCE for $7.2 million. The
balance of expenditures in 1997 and for 1996 represented the purchase of
property, plant and equipment.
Net cash used in financing activities for the three months ending March 31,
1997 and 1996 was $8.8 million and $(2.9) million, respectively. Cash used for
financing in 1997 was due to an increase in borrowing obligations for the BCE
acquisition and retirement of principal payments on long term obligations. Net
cash used for financing in 1996 consisted principally of the repayment of notes
payable and retirement of long term obligations. Distributions for income taxes
of $1.2 million in 1997 and $1.1 million in 1996 were made pursuant to the Tax
Sharing Agreement.
Net cash provided by (used in) operating activities for the years ended
December 31, 1996, 1995, and 1994 was $9.9 million, $10.6 million and ($1.8)
million, respectively. Net cash provided in 1996 was primarily due to operating
profit offset by minor changes in working capital. Net cash provided in 1995 was
primarily due to higher operating profits due to increased net sales, partially
offset by an increase in working capital employed to support the higher sales
level.
Net cash used in investing activities for the years ended December 31,
1996, 1995 and 1994 was $0.6 million, $0.8 million and $1.2 million,
respectively. These expenditures represented the acquisition of property, plant
and equipment in each period.
Net cash used in financing activities for the years ended December 31,
1996, 1995 and 1994 was $8.6 million, $11.3 million and $2.6 million,
respectively. The net cash used in financing activities during 1996 consisted
principally of the repayment of notes payable and retirement of long-term
obligations. The net cash used in financing activities during 1995 consisted of
the funding of a $20 million partnership distribution net of a $9.9 million
increase in notes payable and long-term obligations. Partnership distributions
of $4.1 million in 1996, $4.7 million in 1995 and $1.4 million in 1994 were made
to provide funds to the partners for payment of income taxes.
The net proceeds of the Series A Notes Offering were approximately $115.2
million. The Company utilized a portion of the net proceeds of the Series A
Notes Offering (i) to refinance certain indebtedness in the aggregate principal
amount of approximately $37.0 million, including indebtedness in the amount of
$11.3 million incurred in connection with the BCE Acquisition, indebtedness
under the Existing Credit Facility and certain other indebtedness; (ii) to fund
the Hewitt-Robins Acquisition in the amount of $13.1 million; (which amount was
subsequently reduced to approximately $12.6 million, subject to a negotiated
price adjustment for working capital); (iii) to pay fees and expenses incurred
in connection with the Series A Notes Offering of approximately $4.8 million;
and (iv) to fund a dividend to the sole stockholder
46
<PAGE> 48
of the Company of $40.0 million. The Company expects the remaining net proceeds
of the Series A Notes Offering, in the amount of approximately $25.1 million, to
be used for general corporate purposes, including future acquisitions to the
extent permitted by the Indenture. Concurrently with the closing of the Series A
Notes Offering, the Company retired its existing credit facility and entered
into the Revolving Credit Facility. Net cash provided by the Series A Notes
Offering, along with the availability under the Revolving Credit Facility and
the Australian Revolving Credit Facility, to the extent permitted by the
Indenture, is expected to provide sufficient funds to finance the Company's
operational needs and acquisition strategy. See "Description of Certain
Indebtedness" and "Business -- Acquisitions."
The Company has substantial indebtedness and significant debt service
obligations. As of March 31, 1997, on a pro forma basis after giving effect to
the Series A Notes Offering, the application of the net proceeds therefrom, the
BCE Acquisition and the Hewitt-Robins Acquisition, the Company would have had
total long-term indebtedness, including current maturities, of $125.9 million
and a stockholder's deficit of $37.4 million. Subject to restrictions under the
Revolving Credit Facility, the Australian Revolving Credit Facility and the
Indenture, the Company and its Subsidiaries may incur additional indebtedness
from time to time. See "Capitalization," "Description of Senior Notes--Certain
Covenants" and "Description of Certain Indebtedness." On a pro forma basis,
after giving effect to the Series A Notes Offering, the application of the net
proceeds therefrom, the BCE Acquisition and the Hewitt-Robins Acquisition, the
Company would have had a ratio of earnings to fixed charges of 1.4. The
Company's high degree of leverage could have important consequences to the
holders of the Series B Notes including, without limitation, the following: (i)
a substantial portion of the Company's cash provided from operations will be
committed to the payment of debt service and will not be available to the
Company for other purposes; (ii) the Company's ability to obtain additional
financing in the future for working capital, capital expenditures or
acquisitions may be limited; and (iii) the Company's levels of indebtedness may
limit the Company's flexibility in reacting to changes in its business
environment. See "Risk Factors," "Description of Certain Indebtedness" and
"Description of Senior Notes."
In January 1997, the Company acquired BCE for $7.1 million in cash and
notes to sellers in the amount of $4.8 million. The cash portion of the purchase
price was funded under an expansion of the Company's then-existing lines of
credit.
The Company's primary capital requirements (excluding acquisitions) consist
of capital expenditures and debt service. The Company estimates that
approximately $2.0 million is required in each of 1997 and 1998 for the
maintenance and improvement of its facilities. On a pro forma basis, after
giving effect to the Series A Notes Offering, the application of the net
proceeds therefrom, the BCE Acquisition and the Hewitt-Robins Acquisition, the
Company would have had total interest expense in 1996 of approximately $14.1
million.
The Company's principal source of cash to fund debt service and capital
requirements is cash generated from operating activities. Upon consummation of
the Exchange Offer, the Company expects to have approximately $30.0 million of
availability under the Revolving Credit Facility, approximately $1.4 million of
availability under the Australian Revolving Credit Facility and approximately
$27.7 million in cash balances.
BUSINESS
The Company believes it is a leading international manufacturer and
supplier of Conveyor Equipment for use in the coal mining industry. Based on
1996 pro forma net sales, the Company estimates it has approximately a 40% share
of the United States market for idlers used in aboveground Conveyor Equipment
applications and a significantly higher share of the United States underground
coal mining Conveyor Equipment market. In addition, the Company believes it has
a significant share of the Australian underground coal mining Conveyor Equipment
market. The Company supplies 18 of the top 25 coal producers in the United
States with its products, which include substantially all of the components
required to transport coal by conveyor from the coalface to the surface. The
Company also provides design and engineering assistance and upgrade and
maintenance services with respect to Conveyor Equipment. Approximately 25% of
the Company's pro forma net sales in 1996 were derived from the sale of
replacement components. The Company has also utilized its technical knowledge
and engineering capabilities to expand its customer base to include
47
<PAGE> 49
producers of rock and aggregate products, metals and minerals mining companies,
tunneling firms and other industrial concerns. Sales to such customers comprised
approximately 22% of the Company's Conveyor Equipment net sales in 1996. In
1996, the Company had pro forma net sales and Adjusted EBITDA of $191.1 million
and $22.5 million, respectively.
The Company benefits from a reputation among its customers for high-quality
and reliable Conveyor Equipment products. The Company believes the quality and
consistent performance of its products is an important determinant of its
customers' selection of Conveyor Equipment because, although conveyors are a
relatively small part of the total cost of a mining project, a conveyor system
failure can have a disproportionately high impact on customer profitability. As
a result of its reputation for quality, among other things, the Company has
developed preferred supplier arrangements with several of the world's largest
coal and mineral mining companies. Under these arrangements, the Company
supplies substantially all of such customers' Conveyor Equipment needs and
customers are assured of enhanced equipment availability. Sales from such
arrangements accounted for approximately $45.0 million, or 24%, of the Company's
1996 pro forma net sales.
The Company believes it is well positioned to continue to benefit from
favorable trends in the coal industry worldwide. During the last ten years, coal
consumption in the United States has generally experienced steady annual growth,
reaching a record level of 941 million tons in 1995, the most recent year for
which data are available. This steady growth in coal consumption is attributable
to similar growth in the demand for electricity over such period and to the fact
that in excess of 85% of domestic coal consumption is by the electric utility
industry. Given coal's status as a relatively inexpensive and abundant resource
for the production of electricity, domestically produced coal is expected to
continue to play a significant role in production of electricity in the future.
Historically, the volume of coal imported into the United States has not
represented more than approximately 1% of domestic coal production. The Company
believes the costs of transporting coal and the abundance of domestic coal
reserves will continue to limit the level of coal imports in the future. In
addition, the Company believes it will benefit from the increasing use of
longwall mining in the coal mining industry, which accounted for 45% of domestic
underground coal production in 1995 as compared to 27% in 1983. Longwall mining
yields higher production of coal than conventional mining techniques, but also
requires the use of more efficient and reliable high-load Conveyor Equipment of
the type manufactured by the Company. The Company believes it has a significant
share of the United States Conveyor Equipment market for longwall mining due to,
among other things, its technological innovation and the reliability of its
products. See "--Coal Industry."
Industry sources predict that, through 2015, worldwide coal consumption
will grow at a faster rate than coal consumption in the United States. By 2015,
industry sources project worldwide coal consumption will reach 7.5 billion tons,
an increase of approximately 50% from 1993 worldwide consumption levels. This
forecasted increase is due principally to projected increases in demand for
electricity in the newly industrialized countries of the Pacific Rim as a result
of anticipated rapid economic growth in that region. Such sources forecast that
much of the increase in demand for coal will be satisfied by increased
production in Australia. Coal production in Australia is projected to grow at a
compound annual growth rate of 2.8% through 2015, due primarily to its large
coal reserves and its position as the world's largest coal exporter, with
exports principally to Japan. Australia accounted for approximately 33% of world
coal exports in 1993 and its coal exports are projected to grow from 142 million
tons in 1993 to 260 million tons in 2015. The Company's recent acquisition of
BCE significantly expands its presence in Australia and improves its ability to
serve this high-growth region.
COMPETITIVE STRENGTHS
The Company believes its strong competitive position in Conveyor Equipment
is attributable to a number of factors, including:
- - Broad Product Line Permits One-Stop Shopping. The Company's broad array of
products enables it to supply substantially all of the Conveyor Equipment
needs of its customers in the coal mining industry. Furthermore, the Company
can provide integrated system solutions for underground mining utilizing
computerized in-house "dynamic analysis" capabilities, thereby enabling it to
develop customized equipment solutions while eliminating much of the
engineering cost involved in integrating components from
48
<PAGE> 50
different vendors and enhancing customer productivity, safety and belt
maintenance. The Company believes that its ability to provide such a range of
products and services is a critical determinant in establishing preferred
supplier arrangements with customers.
- - Significant Installed Equipment Base. The Company believes its significant
installed base of Conveyor Equipment is a key factor in obtaining orders for
higher margin replacement components, which represented approximately 25% of
1996 pro forma net sales. This is principally because, once a supplier is
established in an underground mine, it is time-consuming and expensive for a
customer to switch to a competitor's product. In addition, underground mining
customers frequently use a single vendor for all of their Conveyor Equipment
needs.
- - Technology and Quality Enhance Customer Productivity. The Company believes its
Conveyor Equipment product development has contributed to overall productivity
gains being sought by its customers. The Company employs over 70 engineers
dedicated to customer-focused, productivity-enhancing, product and application
development. Through its use of dynamic analysis and technological innovation,
the Company has developed (i) the largest and some of the most technically
demanding Conveyor Equipment applications in the United States, including an
approximately four-mile underground mine conveyor and an approximately
nine-mile tunnel-waste material conveyor and (ii) the HAC(R), which permits
the use of a conveyor in applications where higher-cost transportation
alternatives, such as trucks, would otherwise be required. In an independent
study of Conveyor Equipment products conducted in 1994, the Company's products
had the highest ratings for product reliability and performance. In addition,
the Company believes that the high availability rate, or "uptime," of its
products in its customers' operations promotes customer loyalty and is a
substantial factor in generating business from new and existing customers.
- - Low Cost Due to Economies of Scale. The Company believes its market share
enables it to achieve enhanced margins due to economies of scale in
manufacturing and better fixed cost absorption.
- - Experienced Management Team. The Company's senior managers, who have an
average of over 20 years of experience in the Conveyor Equipment industry,
have developed strong relationships with the Company's customers and have
introduced significant new products to increase customer productivity.
BUSINESS STRATEGY
The Company's business strategy is to continue to increase its market share
in the international Conveyor Equipment market. To implement this strategy, the
Company will:
- - Increase Market Share Through Extending Preferred Supplier Arrangements. The
Company seeks to enter into additional preferred supplier arrangements with
new and existing customers, emphasizing the benefits of (i) its broad product
range, (ii) the quality and reliability of its products, (iii) its ability to
offer productivity-enhancing engineered solutions and (iv) its ability to
serve such customers' Conveyor Equipment needs in designated geographic
regions.
- - Increase Market Share In Related Conveyor Applications. The Company seeks to
expand its existing market share in Conveyor Equipment products for
applications in specific industries, including aggregates, such as rock,
gravel, glass and cement materials; pulp, paper and forest products;
aboveground hard rock and mineral mining; food and grains; environmental,
sewage and wastewater treatment; and tunneling. The Company believes it can
continue to grow in these sectors by providing customers with products that
lower maintenance and operating costs and improve productivity.
- - Increase Market Share Through Product Line Extensions and Geographic
Expansion. The international Conveyor Equipment market remains highly
fragmented with many specialized manufacturers serving numerous market niches.
The Company believes that many of these companies lack the capital resources,
marketing network and depth of management to fully exploit their competitive
positions. The Company will continue to search for strategic acquisitions that
will allow it to fulfill substantially all of the Conveyor Equipment needs of
new and existing customers or expand its technological capabilities. In
addition, the Company seeks to expand its geographic reach through
acquisitions that allow it to (i) enter into further
49
<PAGE> 51
global preferred supplier arrangements and (ii) exploit favorable trends in
coal production and consumption outside the United States.
ACQUISITIONS
In January 1997, the Company acquired BCE, which, through its subsidiaries,
is a major manufacturer and supplier of Conveyor Equipment in Australia. The BCE
Acquisition has further broadened the Company's product line with large ball
bearing idler rollers preferred by certain equipment users and not previously
offered by the Company. In addition, the Company believes the BCE Acquisition
will, among other things, strengthen its competitive position in the high-growth
markets of the Pacific Rim and enhance its ability to obtain worldwide preferred
supplier arrangements with multinational mining companies. The Company believes
that the BCE Acquisition has already helped it to secure approximately $20
million of new business.
On April 1, 1997, the Company acquired from W.S. Tyler Incorporated
("Tyler") substantially all of the assets used by Hewitt-Robins in connection
with the conveyor component manufacturing business currently conducted at
facilities in Pueblo, Colorado, and West Caldwell, New Jersey. The assets
acquired in the Hewitt-Robins Acquisition are used in the manufacture of idlers
in the United States and constitute a significant addition to the Company's
existing Conveyor Components business area. See "--Products and Markets--Mining
Equipment." Hewitt-Robins had net sales in 1996 of $15.1 million.
The purchase price for the Hewitt-Robins Acquisition was approximately
$12.6 million in cash plus the assumption of approximately $1.1 million of
liabilities, subject to a negotiated price adjustment for working capital. The
Company has entered into a one-year lease with two one-year renewal options
relating to the Pueblo, Colorado facility with Tyler and intends to move the
West Caldwell operations to the Pueblo facility and to other Company facilities.
In addition, the Company has agreed to honor certain severance obligations
relating to the termination of certain employees as a result of the
Hewitt-Robins Acquisition. The Company believes these severance obligations will
not exceed $0.3 million. Included in the assets being acquired is a two-year
license to use certain trade names and trademarks. Tyler has agreed not to
compete in the manufacturing, sale or distribution of idlers anywhere in the
world for a period of five years after the closing of the transaction.
The Company will continue to search for strategic acquisitions that add
complementary product lines, expand its technological capabilities, broaden its
geographic reach or otherwise support its business strategy and presently is in
discussions with other potential acquisition candidates. There can be no
assurance that the Company will be able to identify other desirable acquisition
candidates or that the Company will be successful in consummating any
acquisition on terms favorable to the Company, if at all. See "Risk
Factors--Risks Attendant to Acquisition Strategy."
COAL INDUSTRY
The sources of all factual and forecast information regarding coal
production, coal consumption and energy demand contained in this Prospectus are
the United States Department of Energy, Energy Information Administration. All
references in this Prospectus to "tons" mean "short tons."
Although the Company serves customers in various markets, including rock
and aggregate products, metals and minerals mining, construction and tunneling
(which industries accounted for approximately 22% of the Company's Conveyor
Equipment sales in 1996), the Company's largest end-user market is the coal
mining business. See "Risk Factors--Significance of Coal Mining Industry to the
Company."
DOMESTIC
The United States is the largest coal producer and consumer in the world.
Although final figures are not yet available, 1996 domestic coal production is
believed to have reached a record high of approximately 1.06 billion tons. Total
domestic recoverable coal reserves are estimated at 263 billion tons, or 23% of
the world's total recoverable reserves.
50
<PAGE> 52
During the last ten years, coal consumption in the United States has
generally experienced steady annual growth, reaching a record level of 941
million tons in 1995, the last year for which data are available. This steady
growth is attributable to similar growth in the demand for electricity over such
period and to the fact that in excess of 85% of domestic coal consumption is by
the electric utility industry. Given coal's status as a relatively inexpensive
and abundant resource for the production of electricity, domestically produced
coal is expected to continue to play a significant role in the production of
electricity in the future.
A key development in domestic coal production is the increasing use of
longwall mining, which accounted for 45% of total U.S. underground coal
production in 1995 as compared to 27% in 1983. Longwall mining is one of two
basic methods of underground coal mining. The other method is room-and-pillar
mining, which was historically the method used in the United States. In
room-and-pillar mining, "rooms" are excavated and pillars of coal are left in
place between the rooms to support the mine roof. In contrast, longwall mining
involves the essentially complete extraction of the coal contained in a large
rectangular block or "panel" of coal, following which the roof in the mined area
is allowed to collapse. Working under steel canopies of hydraulic, moveable roof
supports, a coal cutting machine cuts back and forth along the coal face, which
is frequently between 800 to 1,000 feet in length. The cut coal is transported
out of the mine by belt conveyors of the type made by the Company. Longwall
mining yields higher production of coal than conventional mining techniques, but
also requires the use of more efficient and reliable high-load Conveyor
Equipment of the type manufactured by the Company.
INTERNATIONAL
Total world recoverable reserves of coal are estimated at 1,145 billion
tons, sufficient to last another 230 years at current production rates. Although
coal deposits are widely distributed, 57% of the world's reserves are located in
three regions: the countries of the former Soviet Union (23%), the United States
(23%) and China (11%). Another four countries, Australia, Germany, India and
South Africa, account for an additional 28%. In 1993, these seven regions
accounted for approximately 80% of total world coal production.
Industry sources predict that, through 2015, worldwide coal consumption
will grow at a faster rate than coal consumption in the United States. By 2015,
industry sources project worldwide coal consumption will reach 7.5 billion tons,
a 50% increase from current worldwide consumption. This forecasted increase is
due principally to projected increased demand for electricity in the newly
industrialized economies of the Pacific Rim. Asian coal consumption (excluding
Japan) is projected to more than double to 3,931 million tons in 2015 from 1,777
million tons in 1993, with 1,725 million tons of the increase attributable to
China. India is also poised for a substantial increase in coal usage, with
consumption projected to rise by 320 million tons. These projected increases are
based upon an outlook for strong economic growth and the expectation that much
of the increased demand for energy will be met by coal. By 2015, coal is
projected to meet 66% of the total demand for primary energy in China and 47% of
such demand in India.
Strong growth in coal usage in Japan is also anticipated, with demand
projected to grow from 128 million tons in 1993 to 160 million tons in 2015.
Japan imports more coal than any other country in the world. In 1993, Japanese
coal imports amounted to 122 million tons, or 29% of world imports.
Coal production in Australia is projected to grow at a compound annual
growth rate of 2.8% through 2015, due primarily to Australia's large reserves
and its position as the world's largest coal exporter. Australia accounted for
approximately 33% of world coal exports in 1993 and its coal exports are
projected to grow from 142 million tons in 1993 to 260 million tons in 2015,
primarily as a result of increased coal consumption in the Pacific Rim.
Another market characterized by high growth is Indonesia. Recoverable
reserves have grown from three billion tons in 1989 to an estimated 35 billion
tons currently, making the country the ninth largest in terms of coal reserves.
Production likewise has grown, from less than one million tons in 1980 to 30
million tons in 1993.
51
<PAGE> 53
PRODUCTS AND MARKETS
The Company's Conveyor Equipment business is divided into four main
business areas: Mining Equipment, Conveyor Components, Engineered Systems and
Bulk Conveyor Equipment, as is more fully described below.
MINING EQUIPMENT (47% OF 1996 PRO FORMA NET SALES)
The Company's Mining Equipment business area is principally engaged in the
design, manufacture and testing (and, outside the United States, installation,
monitoring and maintenance) of complete belt conveyor systems and components for
underground mining applications in the coal and other mining industries.
The Company offers a full array of products and services on a worldwide
basis to customers ranging from small, single-owner mines to very large,
multi-site operations owned by large mining companies. The Company markets its
Mining Equipment products and services using a "total systems" approach that
encourages customers to maintain a close and continuing relationship with the
Company from the earliest stages of a project throughout the full operational
life of the conveyor system. Services provided by the Company as part of the
relationship include (i) consultation regarding the mine plan relative to all
conveying issues, (ii) computerized in-house "dynamic analysis" of system
operation in the context of specific situations and applications in order to
enhance productivity, safety and belt maintenance, (iii) on-site installation
and maintenance and (iv) other full-service support throughout the life of the
system.
The basic components of a belt conveyor system and the various Mining
Equipment products manufactured and sold by the Company for use in underground
systems are summarized below.
Idlers. A conveyor belt is supported by a series of idlers, each
consisting of free-moving cylindrical or disk-shaped rollers with bearing shafts
mounted on stands or suspended from wire ropes. Idlers can significantly impact
belt life and system efficiency and are usually the second most costly part of a
conveyor system, after the belt. The Company manufactures both tapered roller
bearing idlers and ball bearing idlers. The Company's idlers are highly
engineered for a variety of applications and are available in many different
sizes, configurations and roll types. The Company's H-Plus Idler Rolls are
designed for heavy duty mine applications and its SDX-Plus Idler Rolls feature
patented technology to permit service in super-duty applications with extended
service durability.
Structure. Structure is the framework that supports the working components
of a conveyor system. The Company manufactures and sells both wire rope and
rigid frame structures. The wire rope design, which has been widely used in
underground mining since the mid-1960s, uses two strands of wire rope for side
support members and provides high portability and economy. The rigid frame
design, which has gained in popularity with the growth of longwall mining,
contains structural side channel members and boltless construction to provide
extra support for high production applications.
Terminals. A typical terminal consists of the drive, discharge, take-up
and tail loading sections. The drive, which powers the conveyor system, is the
most critical terminal component. Drives are highly engineered for specific
applications and can have a significant impact on system productivity. The
Company manufactures drives for a variety of applications, including a
"low-coal" drive to deliver large-drive performance in a low-profile
configuration for use in limited space situations. The Company believes its
expertise in large-drive technology and related engineering techniques has
enabled it to gain a significant share of the market for terminals used in the
coal mining industry.
Controllers. A controller regulates the acceleration time of the conveyor
and is an interfacing device used to provide central sequencing and monitoring
of conveyor systems and related mining operations. It may be used to generate
graphic operator interfaces and reports for management to assist in the control
and monitoring process. The Company's controllers are custom-designed and
manufactured to meet the specific needs of each customer and to withstand the
rigorous conditions present in underground mining and construction environments.
52
<PAGE> 54
Related Products. Other conveyor system elements manufactured by the
Company for the Mining Equipment business area include products of a more
specialized nature, such as belt storage units, constant tension winches,
take-up units, belt winders, slider beds and scissor conveyors. These products
efficiently provide for the storage, release, proper tension protection and
handling of conveyor belts utilized in underground coal mining operations. For
instance, the Company's constant tension winch is preferred for use in longwall
mining applications, as it provides an extendible conveyor that can be advanced
easily along the face of the mine during mining operations. The Company also
manufactures and sells custom-designed impact bar assemblies, which deflect and
absorb the impact energy of heavy loads on a conveyor belt, and a standard line
of belt conveyor trippers, which can be added to a system to create intermediate
discharge points along a conveyor. The Company does not manufacture the actual
belting that is used in conveyor belt systems.
CONVEYOR COMPONENTS (25% OF 1996 PRO FORMA NET SALES)
The Company's Conveyor Components business area is principally engaged in
the manufacture and sale of components (primarily idlers) for aboveground
Conveyor Equipment systems which handle a wide variety of materials, from
lighter materials such as grains to heavy or abrasive materials such as rock,
crushed stone, iron ore and coal.
The Conveyor Components products sold by the Company consist primarily of a
wide variety of belt conveyor idlers in each of the classifications developed by
the Conveyor Equipment Manufacturers Association ("CEMA"). CEMA Series B
products are usually lower cost, light-duty products designed for materials
handling applications in the sand and gravel industries. More durable CEMA
Series C and D components are used primarily for handling coal and crushed
stone. The CEMA Series E products are heavy duty components designed for heavy
minerals (such as iron ore and copper) and large volume coal applications.
The Company's product line in this business area has traditionally been
strongest in the CEMA E Series. Based on 1996 CEMA estimates, the Company
believes it is the market leader in domestic sales of CEMA E Series idlers, with
a market share in the United States in excess of 45%. The Company's Conveyor
Components products incorporate many proprietary concepts such as a patented
end-pointed shaft and a patented lubrication system. Several new products have
been added to the Company's product line as a result of the BCE Acquisition,
including a premium ball bearing idler which had not been manufactured
previously by the Company. The addition of this product improves the Company's
competitive position in the market for CEMA B and C Series idlers and
replacement components, generally broadens the product line and increases the
range of customers with whom the Company is able to do business.
ENGINEERED SYSTEMS (5% OF 1996 PRO FORMA NET SALES)
The Company's Engineered Systems business area is principally engaged in
the utilization of specialized project management and engineering skills to
combine mining equipment products, purchased equipment, steel fabrication and
other outside services into complete Conveyor Equipment systems that meet
specific customer requirements. The scope of Engineered Systems' involvement in
a project may vary from engineering and supply services to, in appropriate
circumstances, complete projects for specialized conveying systems. The market
for engineered conveying systems spans a wide spectrum of industries worldwide,
including mining and construction (underground and surface), port and in-vessel
facilities, power plants, cement plants, grain distribution facilities,
municipal waste systems, pulp and paper mills, and synfuel and chemical plants.
An important focus of the Engineered Systems business area has been the
development of a patented high angle conveying system known as the HAC(R). The
HAC(R) employs standard conveyor components in a "sandwich belt" arrangement,
which permits more versatile and efficient handling than conventional methods of
elevation such as the higher-cost use of trucks. The HAC(R) is capable of
elevating and lowering materials on a continuous basis at up to a 90-degree
angle, and has proven to be very durable in mining operations.
Construction and tunneling projects in the United States have accounted for
a large portion of HAC(R) sales by the Engineered Systems business area in
recent years. The Company believes that power generation,
53
<PAGE> 55
municipal waste handling and minerals and metals mining projects in the United
States and abroad may create the potential for significant future Engineering
Systems business.
BULK CONVEYOR EQUIPMENT (3% OF 1996 PRO FORMA NET SALES)
The Company's Bulk Conveyor Equipment business area is principally engaged
in the design and manufacture of a complete line of Bulk Conveyor Equipment
products, including screw conveyors, multi-flo drag conveyors and bucket
elevators. The Company sells principally to the cement and lime, environmental,
sewage and waste water treatment, pulp, paper and forest products, and grains
and food processing industries. The Company markets its Bulk Conveyor Equipment
products to original equipment manufacturers, through distributors and directly
to end users.
Screw conveyors represent the primary product within the Company's Bulk
Conveyor Equipment business area, accounting for more than 80% of its Bulk
Conveyor Equipment pro forma net sales in 1996. Screw conveyors are used to move
a regulated volume of material from an inlet point to a discharge point and are
commonly used in food processing applications. They are engineered and
manufactured to CEMA standards and offer flexibility for use in a variety of
applications. The Company also manufactures screw conveyors on a "private label"
basis for various original equipment manufacturers.
In addition, the Company manufactures multi-flo drag conveyors and bucket
elevators. Multi-flo drag conveyors are a means of transporting dry bulk
materials, such as grain, in a low friction, low agitation, self-cleaning
manner, such that material degradation is reduced as compared to other conveyor
systems. Bucket elevators are used to lift material from one level to another to
be discharged into a chute or container through the utilization of buckets that
are attached to and lifted by either a belt or chain.
OTHER PRODUCTS (20% OF 1996 PRO FORMA NET SALES)
In addition to its core business, the Company engages in two noncore
businesses, the manufacturing of (i) axle components for mobile homes and (ii)
air filtration equipment for use in enclosed environments, principally in the
textile industry. The manufacturing requirements for these products are
generally compatible with conveyor component production and thus maximize
utilization of the Company's manufacturing facilities for its primary products.
Although the Other Products business area accounted for approximately 20% of the
Company's 1996 pro forma net sales, it accounted for a substantially smaller
percentage of the Company's 1996 pro forma gross profit.
The Mobile Home Products business provides a variety of components to the
manufactured housing industry. These components are used primarily in mobile
homes and include axles, steel frame parts, rims and tires for the
transportation of the home from the manufacturer to its final destination. New
axles and frame parts are manufactured in the Company's facilities in Winfield,
Alabama. Tires and rims are purchased for resale. Remanufactured axles and used
tires, which are provided to the market from the Company's Eatonton, Georgia
facility, constitute a major part of its Mobile Home Products business.
The Air Systems business primarily manufactures and sells air filtration
equipment that is designed to remove fibrous particles and other matter from
enclosed environments primarily for the textile industry and manufactures
specialized baling equipment for the paper and fiberglass industries.
CUSTOMERS
The Company markets its products worldwide through a variety of marketing
channels with different customer focuses. Sales of Mining Equipment and Bulk
Conveyor Equipment are primarily direct sales to mining companies and other
end-users, original equipment manufacturers and engineering contractors. The
Company sells its Conveyor Components products to original equipment
manufacturers, engineering contractors and replacement part distributors to a
diverse group of customers, primarily in the following industries: aggregates,
such as rock, gravel, glass and cement materials; coal processing and mining;
pulp, paper and forest products; aboveground hard rock and mineral mining; food
and grains; and environmental, sewage and waste water treatment. Engineered
Systems' sales are primarily direct sales to contractors and end users for
54
<PAGE> 56
applications in coal processing and mining, pulp and paper, composting systems,
grain handling, cement products, open-pit mining and tunneling.
On a pro forma basis, for 1996, the Company's net sales to A.T. Massey
Group constituted approximately 12.4% of the Company's total net sales and net
sales to the Cyprus Amax Group constituted approximately 8.0% of total net
sales. Pro forma net sales to the Company's top five customers, including A.T.
Massey and Cyprus Amax, represented approximately 26.1% of such total pro forma
net sales for 1996. Although the Company has preferred supplier arrangements
with A.T. Massey, Cyprus Amax and other of its major customers pursuant to which
the Company and such customers effectively operate on a long-term basis, such
arrangements may generally be terminated by the customers at any time. See "Risk
Factors--Reliance on Significant Customers."
COMPETITION
The Company faces strong competition throughout the world in all of its
product lines. The various markets in which the Company competes are fragmented
into a large number of competitors, many of which are smaller businesses that
operate in relatively specialized or niche areas. In addition, a number of the
Company's competitors have financial and other resources greater than those of
the Company. Competitive considerations vary for each business area, but
generally include quality, price, reliability, availability and service. See
"Risk Factors--Competition."
SUPPLIERS
The primary raw materials used by the Company to produce its products are
steel and miscellaneous purchased parts such as bearings, electric motors and
gear reducers. All materials are readily available in the marketplace. The
Company is not dependent upon any single supplier for any materials essential to
its business or not otherwise commercially available. The Company has been able
to obtain an adequate supply of raw materials and no shortage of raw materials
is currently anticipated.
FACILITIES
The Company conducts its operations through the following primary
facilities:
<TABLE>
<CAPTION>
APPROXIMATE
LOCATION SQUARE FOOTAGE PRINCIPAL FUNCTION OWNED/LEASED
<S> <C> <C> <C>
UNITED STATES:
Winfield, Alabama.......... 220,000 Headquarters; manufacturing Owned
Belton, South Carolina..... 191,000 Manufacturing Owned
Salyersville, Kentucky..... 111,000 Manufacturing Owned
Pueblo, Colorado........... 50,000 Manufacturing Leased(1)
Eatonton, Georgia.......... 22,000 Manufacturing Leased(2)
AUSTRALIA:
Somersby, New South
Wales................... 42,000 Manufacturing; engineering and Owned
testing; administration and
sales
MacKay, Queensland......... 32,000 Service and installation Leased(3)
support
Geelong, Victoria.......... 21,000 Manufacturing; engineering Owned
Wollongong, New South
Wales................... 4,000 Manufacturing; engineering and Leased(4)
testing
</TABLE>
- -----------------------------
(1) Expires in April, 1998. The Company holds an option to renew such lease for
two one-year terms.
(2) Expires in October, 2003. The Company holds an option to buy such property
at the end of the lease term.
(3) Expires in August, 1997. The Company holds an option to renew such lease for
a term of five years.
(4) Expires in April, 1998.
In addition to the foregoing facilities, the Company has a number of leased
warehouses and field sales offices in various locations throughout the United
States and Australia. The Company believes that
55
<PAGE> 57
substantially all of its property and equipment is in a condition appropriate
for its operations and that it has sufficient capacity to meet its current
operational needs. It is anticipated that additional capacity will be necessary
at the Geelong facility in order to accommodate expected increases in
production. Each of the Company's United States facilities is subject to a
mortgage securing payment of indebtedness under the Revolving Credit Facility.
In addition, the Company's Somersby and Geelong facilities in Australia are
subject to mortgages securing payment of certain indebtedness incurred by the
Company in connection with the BCE Acquisition and under the Australian
Revolving Credit Facility. See "Description of Certain Indebtedness."
EMPLOYEES
As of April 30, 1997, the Company had approximately 1,070 employees,
approximately 870 of whom were in the United States. In addition, the Company
employs from time to time up to 140 short-term contract or temporary employees.
Approximately 220 of the employees at the Company's Winfield facility are
represented by The Aluminum, Brick and Glass Workers International Union and are
covered by a three-year collective bargaining agreement that expires May 15,
1998. Approximately 100 of the production employees at two of the Company's
Australian facilities are covered by collective bargaining agreements which are
due to expire in 1998 and 1999, respectively. The Company believes its relations
with its employees are good.
ENVIRONMENTAL AND HEALTH AND SAFETY MATTERS
The Company is subject to a variety of environmental standards imposed by
federal, state, local and foreign environmental laws and regulations. The
Company also is subject to the federal Occupational Health and Safety Act and
similar foreign and state laws. The Company periodically reviews its procedures
and policies for compliance with environmental and health and safety laws and
regulations and believes that it is in substantial compliance with all such
material laws and regulations applicable to its operations. Historically, the
costs of compliance with environmental, health and safety requirements have not
been material to the Company's Subsidiaries.
LEGAL PROCEEDINGS
The Company is not a party to any pending legal proceeding which it
believes could have a material adverse effect upon its results of operations or
financial condition, or to any other pending legal proceedings other than
ordinary, routine litigation incidental to its business.
PRINCIPAL STOCKHOLDER
The Company is a wholly owned subsidiary of NES Group, Inc., all of the
capital stock of which is beneficially owned by Robert J. Tomsich.
56
<PAGE> 58
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding the directors
and executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
<S> <C> <C>
C. Edward Bryant, Jr............... 62 President and Chief Executive Officer
Jimmy L. Dickinson................. 54 Vice President and Chief Financial Officer
Jerry R. McGaha.................... 58 Senior Vice President of Sales and Engineering
Edward F. Crawford................. 57 Director
Donald F. Hastings................. 68 Director
Joseph L. Mandia................... 55 Director
Robert J. Tomsich.................. 66 Director
John R. Tomsich.................... 30 Director
James W. Wert...................... 50 Director
</TABLE>
Set forth below is a brief description of the business experience of each
director and executive officer of the Company.
MR. BRYANT has served as President and Chief Executive Officer of the
Company since its inception. Mr. Bryant has also served as President and Chief
Executive Officer of Continental since 1982 and as Chairman of the Board of
Directors of CCE Pty. Ltd. since 1996. In addition to the foregoing, Mr.
Bryant's 41 years of experience with the Company and its Subsidiaries has
included, among other things, 11 years as Executive Vice President of
Continental from 1971 to 1982 and three years as Vice President/Sales of
Continental from 1968 to 1971.
MR. DICKINSON has served as Vice President and Chief Financial Officer of
the Company since its inception. Mr. Dickinson has also served as Vice President
of Finance of Continental since 1973, and as a Director of CCE Pty. Ltd. since
1993. In addition to the foregoing, Mr. Dickinson's 29 years of experience with
the Company and its Subsidiaries has included four years as Controller of
Continental from 1969 to 1973 and one year as an in-house attorney for
Continental from 1968 to 1969.
MR. MCGAHA has served as Senior Vice President of Sales and Engineering of
the Company since its inception. Mr. McGaha has also served as Senior Vice
President of Sales and Engineering of Continental since 1996 and as Director of
CCE Pty. Ltd. since 1996. In addition to the foregoing, Mr. McGaha's 31 years of
experience with the Company and its Subsidiaries has included, among other
things, six years as Vice President of Sales and Engineering of Continental from
1990 to 1996, four years as Vice President of Mining and Conveyor Equipment of
Continental from 1986 to 1990 and ten years as Vice President of Sales of
Continental from 1976 to 1986.
MR. CRAWFORD has served as a Director of the Company since its inception.
In addition to his service with the Company, Mr. Crawford has served as Chairman
and Chief Executive Officer of Park-Ohio Industries, Inc. since 1992 and also as
a Director of Park-Ohio Industries, Inc. from 1989 to 1991. Mr. Crawford is also
a director of A.B. Dick, an affiliate of NES Group, Inc.
MR. HASTINGS has served as a Director of the Company since its inception.
In addition to his service with the Company, Mr. Hastings has served as Chairman
and Chief Executive Officer of Lincoln Electric Company since 1992.
MR. MANDIA has served as a Director of the Company since its inception. Mr.
Mandia has also served as Group Vice President of NESCO, Inc. since 1988.
57
<PAGE> 59
MR. ROBERT TOMSICH has served as a Director of the Company since its
inception. In addition, Mr. Robert Tomsich has served as President and Director
of NESCO, Inc. (including predecessors of NESCO, Inc.) since 1956. Mr. Robert
Tomsich is the father of Mr. John Tomsich.
MR. JOHN TOMSICH has served as a Director of the Company since its
inception. In addition, Mr. John Tomsich has served as Vice President of NESCO,
Inc. since 1995 and in various other management positions with NESCO, Inc. since
1990. Mr. John Tomsich is the son of Mr. Robert Tomsich.
MR. WERT has served as a Director of the Company since its inception. Prior
to his service with the Company, Mr. Wert held a variety of executive management
positions with KeyCorp, a financial services company based in Cleveland, Ohio,
and KeyCorp's predecessor, Society Corporation. Mr. Wert served as Senior
Executive Vice President and Chief Investment Officer of KeyCorp from 1995 to
1996. Prior to that time, he served as Senior Executive Vice President and Chief
Financial Officer of KeyCorp for two years and Vice Chairman, Director and Chief
Financial Officer of Society Corporation for four years. Since 1993, Mr. Wert
has served as an outside Director, and currently serves as Chairman of the
Executive and Compensation Committees of the Board of Directors, of Park-Ohio
Industries, Inc. Mr. Wert is also a director of A.B. Dick, an affiliate of NES
Group, Inc.
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning compensation
of the Company's Chief Executive Officer and the other most highly compensated
officers of the Company having total annual salary and bonus in excess of
$100,000.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-----------------------------------------
NAME AND OTHER ANNUAL
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1)
<S> <C> <C> <C> <C>
C. Edward Bryant, Jr., 1996 $145,008 $ 59,900(2) $ 6,512
President and Chief 1995 144,797 48,115 12,234
Executive Officer 1994 121,704 40,772 11,193
Jerry R. McGaha, 1996 $107,700 $ 25,027(2) $ 5,583
Senior Vice President of
Sales 1995 103,350 21,187 8,298
and Engineering 1994 99,150 19,043 7,046
Jimmy L. Dickinson, 1996 $109,680 $ 25,514(2) $ 5,269
Vice President and Chief 1995 105,240 21,577 7,663
Financial Officer 1994 100,800 20,654 6,703
</TABLE>
- ---------------
(1) Amounts shown reflect contributions made by the Company on behalf of the
named executives under the Continental Conveyor & Equipment Company Savings
and Profit Sharing Plan and the Continental Conveyor & Equipment Company
Retirement Plan for Salaried and Hourly (Non-Union) Employees at
Salyersville, Kentucky. No amounts shown were received by any of the named
executives.
(2) Excludes special bonuses paid by Nesco, Inc. of $250,000 to Mr. Bryant,
$100,000 to Mr. McGaha and $100,000 to Mr. Dickinson.
DIRECTOR COMPENSATION
Each director of the Company not employed by the Company or any entity
affiliated with the Company is entitled to receive $25,000 per year for serving
as a director of the Company. In addition, the Company will reimburse such
directors for their travel and other expenses incurred in connection with
attending meetings of the Board of Directors.
58
<PAGE> 60
RELATED TRANSACTIONS
COMPANY FORMATION AND PROCEEDS FROM THE SERIES A NOTES OFFERING
The Company is a Delaware corporation formed on February 4, 1997 for the
purpose of serving as a holding company for the operations conducted by
Continental (including the BCE Subsidiaries) and Goodman. All of the capital
stock of the Company has been issued to NES Group, Inc., which in turn,
transferred to the Company all of the outstanding capital stock of Continental
and Goodman. As a result, the Company is a wholly owned subsidiary of NES Group,
Inc. and each of Continental and Goodman is a wholly owned subsidiary of the
Company. See "The Company."
All of the outstanding capital stock of NES Group, Inc. is beneficially
owned by Robert J. Tomsich. Mr. Tomsich also beneficially owns all the
outstanding capital stock of NESCO, Inc., which has entered into a management
agreement with the Company as described below.
As referenced under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources"
in this Prospectus, the Company used a portion of the proceeds of the Series A
Notes Offering to fund a dividend. As the Company's sole stockholder, NES Group,
Inc. was the recipient of such dividend.
DIRECTORS AND OFFICERS INDEMNIFICATION
The Company has entered into indemnification agreements with all of its
Directors and executive officers, whereby the Company has agreed, subject to
certain exceptions, to indemnify and hold harmless such person from liabilities
incurred as a result of such person's status as a director or executive officer
of the Company. In addition, the Company has entered into indemnification
agreements with NESCO, Inc. and each director and executive officer of NESCO,
Inc., whereby the Company has agreed, subject to certain exceptions, to
indemnify and hold harmless NESCO, Inc. and each such director and executive
officer in connection with the provision of services to the Company under the
Management Agreement.
TAX PAYMENT AGREEMENT
The Company, Continental and Goodman (each, a "Subsidiary") have entered
into a tax payment agreement with NES Group, Inc. ("Tax Payment Agreement")
providing for monthly payments by each Subsidiary to NES Group, Inc. in an
amount equal to the greater of (i) the total federal, state, local and, under
certain circumstances, foreign income tax liability attributable to such
Subsidiary's operations for the monthly period, determined on an annualized
basis, and (ii) one-twelfth the total federal, state, local and, under certain
circumstances, foreign income tax liability attributable to such Subsidiary's
operations for the year. The tax rates applied to such income are to be based on
the maximum individual federal, state, local and foreign income tax rates
imposed by Section 1 of the Internal Revenue Code of 1986, as amended, and by
the equivalent provisions of state, local and foreign income tax laws. These tax
payments will not recognize any future carry-forward or carry-back tax benefits
to the Company, Continental or Goodman. Future direct and indirect Subsidiaries
of the Company shall also become parties to the Tax Payment Agreement.
MANAGEMENT AGREEMENT
The Company and NESCO, Inc. have entered into a management agreement
("Management Agreement") pursuant to which NESCO, Inc. has agreed to provide
general management oversight services for the benefit of the Company, including
tax planning, financial and borrowing planning and strategic business
development, legal, and general business evaluation. The Company has agreed to
pay NESCO, Inc. a management fee for such services equal to 5% of the Company's
earnings before interest and estimated taxes, depreciation, amortization and
other expense (income). The management fee will be payable in monthly
installments. The Management Agreement will remain in effect until terminated by
either party upon not less than 60 days' written notice prior to an anniversary
date of the Management Agreement.
59
<PAGE> 61
The Company will also separately employ, as required, independent auditors,
outside legal counsel and other consulting services. Such services will be paid
directly by the Company.
DESCRIPTION OF CERTAIN INDEBTEDNESS
The following descriptions of the Revolving Credit Facility, the Australian
Revolving Credit Facility and the Australian Seller Notes do not purport to be
complete and are qualified in their entirety by reference to the Revolving
Credit Facility, the Australian Revolving Credit Facility and the Australian
Seller Notes.
REVOLVING CREDIT FACILITY
Continental, Goodman and Bank One, Cleveland, NA ("Bank One") are parties
to a credit facility and security agreement dated September 14, 1992, as
amended, restated and consolidated through March 28, 1997 (as so amended, the
"Revolving Credit Facility") pursuant to which Bank One has provided Continental
and Goodman jointly with, among other things, a line of credit equal to the
lesser of (i) $30 million and (ii) 85% of the amount due and owing on eligible
accounts receivable plus the lesser of (A) 55% of eligible inventory and (B) $12
million. The Revolving Credit Facility is guaranteed by the Company and secured
by a lien on substantially all of the assets of Continental and Goodman. In
addition, the Revolving Credit Facility contains certain financial and other
covenants which, among other things, establish minimum debt coverage and net
working capital requirements. The Revolving Credit Facility does not contain any
restriction on the ability of the Company or any of its Subsidiaries to pay
dividends or to make other distributions; provided, that such dividends or other
distributions are not for the purpose of purchasing Series B Notes upon a Change
of Control. The Revolving Credit Facility will be fully revolving until final
maturity on March 28, 2000 and will bear interest at a fluctuating rate per
annum equal to 125 basis points above Bank One's prime rate for commercial
loans. Interest will be payable monthly.
AUSTRALIAN REVOLVING CREDIT FACILITY
National Australia Bank Limited ("NABL") has provided BCE with a
multi-option credit facility (the "Australian Revolving Credit Facility") in the
maximum aggregate amount of approximately $4.1 million ("Borrowing Cap"). The
Australian Revolving Credit Facility consists of four individual facilities
which may be utilized in any mix at the discretion of BCE, subject to the
overall Borrowing Cap. The individual facilities include: (i) a day-to-day cash
flow facility which bears interest at rate based on NABL's base rate and is
subject to an annual service fee of 0.40%; (ii) a performance guarantee facility
which is subject to an annual fee of 0.8% on the face value of any bank
guarantee and 0.375% on the face value of any documentary letter of credit;
(iii) a payroll processing facility which is subject to a nominal annual fee;
and (iv) a lease/lease purchase facility which is subject to NABL's usual terms
and conditions. The day-to-day cash flow facility expires November 30, 1997 and
all other facilities expire on November 30, 1999. The Australian Revolving
Credit Facility is guaranteed by each of the BCE Subsidiaries and secured by a
lien on substantially all of the assets of the BCE Subsidiaries. In addition,
the Australian Revolving Credit Facility contains certain financial and other
covenants which, among other things, establish a minimum interest coverage
requirement and restrict the transfer of more than a 20% interest in BCE to any
third party. The Australian Revolving Credit Facility contains no restriction on
the ability of BCE or any of its subsidiaries to pay dividends or to make other
distributions.
AUSTRALIAN SELLER NOTES
In addition to the Revolving Credit Facility and the Australian Revolving
Credit Facility, four notes, in an aggregate principal amount of approximately
$4.5 million (the "Australian Seller Notes"), will remain as outstanding
obligations of the Company following the Exchange Offer. The first three notes,
each in the principal amount of $1.37 million, and the remaining note, in the
principal amount of $.46 million, all bear interest at a rate equal to 1% over
the 90 day domestic rate for Australian commercial bank bills and mature in
January, 2002. All of the Australian Seller Notes are guaranteed by Continental
and secured by a second priority lien on substantially all of the assets of BCE
and the BCE Subsidiaries.
60
<PAGE> 62
DESCRIPTION OF SENIOR NOTES
GENERAL
The Series A Notes were, and the Series B Notes will be, issued pursuant to
the Indenture. The terms of the Senior Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). The Senior Notes
are subject to all such terms, and Holders of Senior Notes are referred to the
Indenture and the Trust Indenture Act for a statement thereof. The following
summary of the material provisions of the Indenture does not purport to be
complete and is qualified in its entirety by reference to the Indenture,
including the definitions therein of certain terms used below. The definitions
of certain terms used in the following summary are set forth below under
"--Certain Definitions." For purposes of this summary, the term "Company" refers
only to Continental Global Group, Inc. and not to any of its Subsidiaries.
The Series A Notes are, and the Series B Notes will be, senior unsecured
obligations of the Company ranking pari passu in right of payment with all
current and future unsecured senior Indebtedness of the Company and senior to
all subordinated Indebtedness of the Company. The Company is party to the
Revolving Credit Facility and all borrowings under the Revolving Credit Facility
are secured by a first priority lien on substantially all of the assets of the
Company's direct and indirect Subsidiaries (other than Foreign Subsidiaries).
BCE and its Subsidiaries are party to the Australian Revolving Credit Facility
and the Australian Seller Notes. As of December 31, 1996, on a pro forma basis
after giving effect to the Series A Notes Offering, the application of the
proceeds therefrom, the BCE Acquisition and the Hewitt-Robins Acquisition,
approximately $4.8 million would have been outstanding under the Revolving
Credit Facility, the Australian Revolving Credit Facility and the Australian
Seller Notes. All borrowings under the Australian Revolving Credit Facility are
secured by a first priority lien on substantially all of the assets of BCE and
its Subsidiaries. The Australian Seller Notes are secured by a second priority
lien on substantially all of the assets of BCE and its Subsidiaries. The
Indenture permits additional borrowings under the Revolving Credit Facility and
the Australian Revolving Credit Facility in the future.
The operations of the Company are conducted through its Subsidiaries and,
therefore, the Company is dependent upon the cash flow of its Subsidiaries to
meet its obligations, including its obligations under the Senior Notes. The
Company's obligations under the Series A Notes are, and its obligations under
the Series B Notes will be, jointly and severally guaranteed (the "Subsidiary
Guarantees") by each direct and indirect Subsidiary of the Company (other than
Foreign Subsidiaries) (each such Person, a "Subsidiary Guarantor" and,
collectively, the "Subsidiary Guarantors"). The Subsidiary Guarantees are senior
unsecured obligations of the Subsidiary Guarantors ranking pari passu in right
of payment with all current and future unsecured senior Indebtedness of the
Subsidiary Guarantors and senior to all subordinated Indebtedness of Subsidiary
Guarantors. However, the Series A Notes are, and the Series B Notes will be,
effectively subordinated to all Indebtedness and other liabilities and
commitments (including trade payables and lease obligations) of each Foreign
Subsidiary of the Company. Other than as provided by the terms of the covenant
described under the caption "-- Certain Covenants--Additional Subsidiary
Guarantees," CCE Pty. Ltd. and its Subsidiaries and any other Foreign
Subsidiary, formed or acquired after the date of the Indenture, will not
guarantee the Company's obligations under the Senior Notes. Any right of the
Company to receive assets of any such Foreign Subsidiary upon the latter's
liquidation or reorganization (and the consequent right of the Holders of the
Senior Notes to participate in those assets) will be effectively subordinated to
the claims of that Foreign Subsidiary's creditors. On a pro forma basis, as of
December 31, 1996, after giving effect to the Series A Notes Offering, the
application of the net proceeds therefrom, the BCE Acquisition and the
Hewitt-Robins Acquisition, the aggregate principal amount of secured
indebtedness of the Company, secured indebtedness of the Subsidiary Guarantors
and indebtedness of the Company's Foreign Subsidiaries which would have
effectively ranked senior to the Senior Notes would have been approximately $6.3
million. The Indenture permits the Company and its Subsidiaries to incur
additional indebtedness, including secured indebtedness, subject to certain
limitations. See "Risk Factors--Holding Company Structure; Rank of Series B
Notes."
61
<PAGE> 63
PRINCIPAL, MATURITY AND INTEREST
The Senior Notes will be limited in aggregate principal amount to $120.0
million and will mature on April 1, 2007. Interest on the Senior Notes will
accrue at the rate of 11% per annum and will be payable semiannually in arrears
on April 1 and October 1, commencing on October 1, 1997, to Holders of record on
the immediately preceding March 15 and September 15. Interest on the Senior
Notes will accrue from the most recent date to which interest has been paid or,
if no interest has been paid, from the Series A Issue Date. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
Principal, premium, if any, and interest and Liquidated Damages, if any, on the
Senior Notes will be payable at the office or agency of the Company maintained
for such purpose within the City and State of New York or, at the option of the
Company, payment of interest and Liquidated Damages, if any, may be made by
check mailed to the Holders of Senior Notes at their respective addresses set
forth in the register of Holders of Senior Notes; provided that all payments of
principal, premium, interest and Liquidated Damages, if any, with respect to
Senior Notes the Holders of which have given wire transfer instructions to the
Company will be required to be made by wire transfer of immediately available
funds to the accounts specified by the Holders thereof. Until otherwise
designated by the Company, the Company's office or agency in New York will be
the office of the Trustee maintained for such purpose. The Series B Notes will
be issued in denominations of $1,000 and integral multiples thereof.
SUBSIDIARY GUARANTEES
The Company's obligations under the Series A Notes are, and its obligations
under the Series B Notes will be, jointly and severally guaranteed on a senior
basis by each direct and indirect Subsidiary of the Company (other than Foreign
Subsidiaries). The obligations of each Subsidiary Guarantor under its Subsidiary
Guarantee are, and will be, limited so as not to constitute a fraudulent
conveyance under applicable law. See "Risk Factors--Fraudulent Transfer
Considerations."
The Indenture provides that no Subsidiary Guarantor may consolidate with or
merge with or into (whether or not such Subsidiary Guarantor is the surviving
Person), another corporation, Person or entity whether or not affiliated with
such Subsidiary Guarantor unless, other than with respect to a merger between a
Subsidiary Guarantor and another Subsidiary Guarantor or a merger between a
Subsidiary Guarantor and the Company, (i) subject to the provisions of the
following paragraph, the Person formed by or surviving any such consolidation or
merger (if other than such Subsidiary Guarantor) assumes all the obligations of
such Subsidiary Guarantor pursuant to a supplemental indenture in form and
substance reasonably satisfactory to the Trustee, under the Senior Notes and the
Indenture; (ii) immediately after giving effect to such transaction, no Default
or Event of Default exists; (iii) such Subsidiary Guarantor, or any Person
formed by or surviving any such consolidation or merger, would have Consolidated
Net Worth (immediately after giving effect to such transaction), equal to or
greater than the Consolidated Net Worth of such Subsidiary Guarantor immediately
preceding the transaction; and (iv) the Company would be permitted to incur at
least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage
Ratio test set forth in the first paragraph of the covenant described below
under the caption "--Certain Covenants--Incurrence of Indebtedness and Issuance
of Preferred Stock."
The Indenture provides that in the event of a sale or other disposition of
all of the assets of any Subsidiary Guarantor, by way of merger, consolidation
or otherwise, or a sale or other disposition of all of the capital stock of any
Subsidiary Guarantor, then such Subsidiary Guarantor (in the event of a sale or
other disposition, by way of such a merger, consolidation or otherwise, of all
of the capital stock of such Subsidiary Guarantor) or the corporation acquiring
the property (in the event of a sale or other disposition of all of the assets
of such Subsidiary Guarantor) will be released and relieved of any obligations
under its Subsidiary Guarantee; provided that the Net Proceeds of such sale or
other disposition are applied in accordance with the applicable provisions of
the Indenture. See "-- Repurchase at Option of Holders--Asset Sales."
62
<PAGE> 64
OPTIONAL REDEMPTION
The Senior Notes will not be redeemable at the Company's option prior to
April 1, 2002. Thereafter, the Senior Notes will be subject to redemption at any
time at the option of the Company, in whole or in part, upon not less than 30
nor more than 60 days' notice, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the applicable redemption
date, if redeemed during the twelve-month period beginning on April 1 of the
years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
<S> <C>
2002........................................................... 105.500%
2003........................................................... 103.667%
2004........................................................... 101.833%
2005 and thereafter............................................ 100.000%
</TABLE>
Notwithstanding the foregoing, prior to April 1, 2000, the Company may on
any one or more occasions redeem up to an aggregate of 33 1/3% of the original
aggregate principal amount of Senior Notes at a redemption price of 110% of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, to the redemption date, with the net cash proceeds of an
offering of common stock of the Company; provided that at least 66 2/3% of the
aggregate principal amount of Senior Notes originally issued remain outstanding
immediately after the occurrence of such redemption; and provided, further, that
such redemption shall occur within 60 days of the date of the closing of such
offering.
SELECTION AND NOTICE
If less than all of the Senior Notes are to be redeemed at any time,
selection of Senior Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which the Senior Notes are listed, or, if the Senior Notes are not so
listed, on a pro rata basis, by lot or by such method as the Trustee shall deem
fair and appropriate; provided that no Senior Notes of $1,000 or less shall be
redeemed in part. Notices of redemption shall be mailed by first class mail at
least 30 but not more than 60 days before the redemption date to each Holder of
Senior Notes to be redeemed at its registered address. Notices of redemption may
not be conditional. If any Senior Note is to be redeemed in part only, the
notice of redemption that relates to such Note shall state the portion of the
principal amount thereof to be redeemed. A new Senior Note in principal amount
equal to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Senior Note. Senior Notes called for
redemption become due on the date fixed for redemption. On and after the
redemption date, interest ceases to accrue on Senior Notes or portions of them
called for redemption.
MANDATORY REDEMPTION
Except as set forth below under "Repurchase at the Option of Holders," the
Company will not be required to make mandatory redemption or sinking fund
payments with respect to the Senior Notes.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of Senior Notes
will have the right to require the Company to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of such Holder's Senior Notes
pursuant to the offer described below (the "Change of Control Offer") at an
offer price in cash equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest and Liquidated Damages, if any, to the date of
purchase (the "Change of Control Payment"). Within ten days following any Change
of Control, the Company will mail a notice to each Holder describing the
transaction or transactions that constitute the Change of Control and offering
to repurchase Senior Notes on the date specified in such notice, which date
shall be no earlier than 30 days and no later than 60 days from the date such
notice is mailed (the "Change of Control Payment Date"), pursuant to the
procedures required by the Indenture and described in such notice. The Company
will comply with the requirements of Rule 14e-1 under the Exchange
63
<PAGE> 65
Act and any other securities laws and regulations thereunder to the extent such
laws and regulations are applicable in connection with the repurchase of the
Senior Notes as a result of a Change of Control.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (1) accept for payment all Senior Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Senior
Notes or portions thereof so tendered and (3) deliver or cause to be delivered
to the Trustee the Senior Notes so accepted together with an Officers'
Certificate stating the aggregate principal amount of Senior Notes or portions
thereof being purchased by the Company. The Paying Agent will promptly mail to
each Holder of Senior Notes so tendered the Change of Control Payment for such
Senior Notes, and the Trustee will promptly authenticate and mail (or cause to
be transferred by book entry) to each Holder a Series B Note equal in principal
amount to any unpurchased portion of the Senior Notes surrendered, if any;
provided that each such Series B Note will be in a principal amount of $1,000 or
an integral multiple thereof. The Company will publicly announce the results of
the Change of Control Offer on or as soon as practicable after the Change of
Control Payment Date.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as described
above with respect to a Change of Control, the Indenture does not contain
provisions that permit the Holders of the Senior Notes to require that the
Company repurchase or redeem the Senior Notes in the event of a takeover,
recapitalization or similar transaction.
The Company's other senior indebtedness contains prohibitions of certain
events that would constitute a Change of Control. In addition, the exercise by
the Holders of Senior Notes of their right to require the Company to repurchase
the Senior Notes could cause a default under such present or future senior
indebtedness, even if the Change of Control itself does not, due to the
financial effect of such repurchases on the Company. Finally, the Company's
ability to pay cash to the Holders of Senior Notes upon a repurchase may be
limited by the Company's then existing financial resources. See "Risk
Factors--Purchase of Series B Notes Upon a Change of Control."
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Company and
purchases all Senior Notes validly tendered and not withdrawn under such Change
of Control Offer.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Subsidiaries taken as a
whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange
Act) other than the Principal or his Related Parties (as defined below), (ii)
the adoption of a plan relating to the liquidation or dissolution of the
Company, (iii) the consummation of the first transaction (including, without
limitation, any merger or consolidation) the result of which is that any
"person" (as defined above) becomes the "beneficial owner" (as defined above),
directly or indirectly, of more of the Voting Stock of the Company (measured by
voting power rather than number of shares) than is at the time "beneficially
owned" (as defined above) by the Principal and his Related Parties in the
aggregate or (iv) the first day on which a majority of the members of the Board
of Directors of the Company are not Continuing Directors.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Subsidiaries taken as a whole. Although
there is a developing body of case law interpreting the phrase "substantially
all," there is no precise established definition of the phrase under applicable
law. Accordingly, the ability of a Holder of Senior Notes to require the Company
to repurchase such Senior Notes as a result of a sale, lease, transfer,
conveyance or other disposition of less than all of the assets of the Company
and its Subsidiaries taken as a whole to another Person or group may be
uncertain.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of the Indenture or (ii) was
64
<PAGE> 66
nominated for election or elected to such Board of Directors with the approval
of the Principal or a majority of the Continuing Directors who were members of
such Board at the time of such nomination or election.
"Principal" means Robert J. Tomsich.
"Related Party" with respect to the Principal means (A) any 80% (or more)
owned Subsidiary, or spouse or immediate family member (in the case of an
individual) of the Principal; or (B) any trust, corporation, partnership or
other entity, the beneficiaries, stockholders, partners, owners or Persons
beneficially holding an 80% or more controlling interest of which consist of the
Principal and/or such other Persons referred to in the immediately preceding
clause (A); or (C) the estate of the Principal until such estate is distributed
pursuant to his will or applicable state law.
The Revolving Credit Facility currently prohibits the Company from
repurchasing any Senior Notes, and also provides that certain change of control
events with respect to the Company would constitute a default thereunder. Any
future credit agreements or other agreements relating to Indebtedness to which
the Company becomes a party may contain similar restrictions and provisions. In
the event a Change of Control occurs at a time when the Company is prohibited
from purchasing Senior Notes, the Company could seek the consent of the lenders
under the Revolving Credit Facility or such future agreements relating to
Indebtedness to the purchase of Senior Notes or could attempt to refinance the
borrowings that contain such prohibition. If the Company did not obtain such a
consent or repay such borrowings, the Company would remain prohibited from
purchasing the Senior Notes. In such case, the Company's failure to purchase
tendered Senior Notes would constitute an Event of Default under the Indenture.
ASSET SALES
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, consummate an Asset Sale unless (i) the Company (or the
Subsidiary, as the case may be) receives consideration at the time of such Asset
Sale at least equal to the fair market value (evidenced by a resolution of the
Board of Directors set forth in an Officers' Certificate delivered to the
Trustee) of the assets or Equity Interests issued or sold or otherwise disposed
of and (ii) at least 75% of the consideration therefor received by the Company
or such Subsidiary is in the form of cash; provided that the amount of (x) any
liabilities (as shown on the Company's or such Subsidiary's most recent balance
sheet), of the Company or any Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Senior Notes or such
Subsidiary's Subsidiary Guarantee thereof) that are assumed by the transferee of
any such assets pursuant to a customary novation agreement that releases the
Company or such Subsidiary from further liability and (y) any securities, notes
or other obligations received by the Company or any such Subsidiary from such
transferee that are immediately converted by the Company or such Subsidiary into
cash, shall be deemed to be cash (to the extent of the cash received) for
purposes of this clause (ii).
Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
the Company may apply such Net Proceeds, at its option, (a) to repay
Indebtedness under the Revolving Credit Facility or the Australian Revolving
Credit Facility or (b) to an investment in a Permitted Business through the
making of a capital expenditure or the acquisition of other assets. Pending the
final application of any such Net Proceeds, the Company may invest such Net
Proceeds in any manner that is not prohibited by the Indenture. Any Net Proceeds
from Asset Sales that are not applied or invested as provided in the first
sentence of this paragraph will be deemed to constitute "Excess Proceeds." When
the aggregate amount of Excess Proceeds exceeds $5.0 million, the Company will
be required to make an offer to all Holders of Senior Notes (an "Asset Sale
Offer") to purchase the maximum principal amount of Senior Notes that may be
purchased out of the Excess Proceeds, at an offer price in cash in an amount
equal to 100% of the principal amount thereof plus accrued and unpaid interest
and Liquidated Damages thereon, if any, to the date of purchase, in accordance
with the procedures set forth in the Indenture. To the extent that the aggregate
amount of Senior Notes tendered pursuant to an Asset Sale Offer is less than the
Excess Proceeds, the Company may use any remaining Excess Proceeds for general
corporate purposes. If the aggregate principal amount of Senior Notes
surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Senior
65
<PAGE> 67
Notes to be purchased on a pro rata basis. Upon completion of such offer to
purchase, the amount of Excess Proceeds shall be reset at zero.
The Revolving Credit Facility currently prohibits the Company from
repurchasing any Senior Notes. Any future credit agreements or other agreements
relating to Indebtedness to which the Company becomes a party may contain
similar restrictions and provisions. In the event an Asset Sale Offer is
required to be made at a time when the Company is prohibited from purchasing
Senior Notes, the Company could seek the consent of the lenders under the
Revolving Credit Facility or such future agreements relating to Indebtedness to
the purchase of Senior Notes or could attempt to refinance the borrowings that
contain such prohibition. If the Company did not obtain such a consent or repay
such borrowings, the Company would remain prohibited from purchasing the Senior
Notes. In such case, the Company's failure to purchase tendered Senior Notes
would constitute an Event of Default under the Indenture.
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly: (i) declare or pay any dividend
or make any other payment or distribution on account of the Company's or any of
its Subsidiaries' Equity Interests (including, without limitation, any payment
in connection with any merger or consolidation involving the Company) or to the
direct or indirect holders of the Company's or any of its Subsidiaries' Equity
Interests in their capacity as such (other than dividends or distributions
payable in Equity Interests (other than Disqualified Stock) of the Company);
(ii) purchase, redeem or otherwise acquire or retire for value (including
without limitation, in connection with any merger or consolidation involving the
Company) any Equity Interests of the Company or any direct or indirect parent of
the Company; (iii) make any payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness that is
subordinated to the Senior Notes or the Subsidiary Guarantees, except a payment
of interest or principal at Stated Maturity; (iv) pay fees pursuant to, or make
any other distribution in respect of, the Management Agreement; or (v) make any
Restricted Investment (all such payments and other actions set forth in clauses
(i) through (v) above being collectively referred to as "Restricted Payments"),
unless, at the time of and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant to
the Fixed Charge Coverage Ratio test set forth in the first paragraph of
the covenant described below under caption "--Incurrence of Indebtedness
and Issuance of Preferred Stock;" and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Subsidiaries on or
after the date of the Indenture (excluding Restricted Payments permitted by
clause (ii), (iii), (v) or (vi) of the next succeeding paragraph and
excluding any Restricted Payment made on the date of the Indenture directly
by the Company with the proceeds of the Series A Notes Offering is less
than the sum of (i) 50% of the Consolidated Net Income of the Company for
the period (taken as one accounting period) from the beginning of the first
fiscal quarter commencing after the date of the Indenture to the end of the
Company's most recently ended fiscal quarter for which internal financial
statements are available at the time of such Restricted Payment (or, if
such Consolidated Net Income for such period is a deficit, less 100% of
such deficit), plus (ii) 100% of the aggregate net cash proceeds received
by the Company from the issue or sale since the date of the Indenture of
Equity Interests of the Company (other than Disqualified Stock) or of
Disqualified Stock or debt securities of the Company that have been
converted into such Equity Interests (other than Equity Interests (or
Disqualified Stock or convertible debt securities) sold to a Subsidiary of
the Company and other than Disqualified Stock or convertible debt
securities that have been converted into Disqualified Stock), plus (iii) to
the extent that any Restricted Investment that was made after the date of
the
66
<PAGE> 68
Indenture is sold for cash or otherwise liquidated or repaid for cash, the
lesser of (A) the cash return of capital with respect to such Restricted
Investment (less the cost of disposition, if any) and (B) the initial
amount of such Restricted Investment.
The foregoing provisions will not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness or Equity Interests of the Company
in exchange for, or out of the net cash proceeds of the substantially concurrent
sale (other than to a Subsidiary of the Company) of, other Equity Interests of
the Company (other than any Disqualified Stock); provided that the amount of any
such net cash proceeds that are utilized for any such redemption, repurchase,
retirement, defeasance or other acquisition shall be excluded from clause (c)
(ii) of the preceding paragraph; (iii) the defeasance, redemption, repurchase or
other acquisition of subordinated Indebtedness with the net cash proceeds from
an incurrence of Permitted Refinancing Indebtedness; (iv) the payment of any
dividend by a Subsidiary of the Company to the holders of its common Equity
Interests on a pro rata basis; and (v) payments by the Company or any Subsidiary
of the Company, directly or indirectly, to NES Group, Inc. to satisfy tax
obligations, in accordance with the Tax Payment Agreement as in effect on the
date of the Indenture; provided that such amounts do not exceed the amounts
that, without recognizing any tax loss carry forwards or carry backs, would
otherwise be due and owing if the Company and its Subsidiaries were an
independent, individual taxpayer; and (vi) so long as no Default or Event of
Default has occurred and is continuing or would occur as a result thereof, the
payment of fees pursuant to the Management Agreement, as in effect on the date
of the Indenture; provided that the amount of fees paid pursuant to the
Management Agreement in any calendar year shall not exceed an amount equal to
five percent of the Company's earnings before interest, taxes, depreciation,
amortization and miscellaneous expense (income).
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by the Company or such Subsidiary, as the
case may be, pursuant to the Restricted Payment. The fair market value of any
non-cash Restricted Payment shall be determined by the Board of Directors whose
resolution with respect thereto shall be delivered to the Trustee, such
determination to be based upon an opinion or appraisal issued by an accounting,
appraisal or investment banking firm of national standing if such fair market
value exceeds $5.0 million. Not later than the date of making any Restricted
Payment, the Company shall deliver to the Trustee an Officers' Certificate
stating that such Restricted Payment is permitted and setting forth the basis
upon which the calculations required by the covenant "Restricted Payments" were
computed, together with a copy of any fairness opinion or appraisal required by
the Indenture.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") any Indebtedness (including
Acquired Debt) and that the Company will not issue any Disqualified Stock and
will not permit any of its Subsidiaries to issue any shares of preferred stock;
provided, however, that the Company or a Subsidiary Guarantor may incur
Indebtedness (including Acquired Debt) or issue shares of Disqualified Stock if
the Fixed Charge Coverage Ratio for the Company's most recently ended four full
fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness is incurred
or such Disqualified Stock is issued would have been at least 2 to 1, determined
on a pro forma basis (including a pro forma application of the net proceeds
therefrom), as if the additional Indebtedness had been incurred, or the
Disqualified Stock had been issued, as the case may be, at the beginning of such
four-quarter period.
The Indenture also provides that the Company and any Subsidiary Guarantor
will not incur any Indebtedness (other than Existing Indebtedness) that is
contractually subordinated to any other Indebtedness of the Company or such
Subsidiary Guarantor, respectively, unless such Indebtedness is also
contractually subordinated to the Senior Notes or the Subsidiary Guarantee of
such Subsidiary Guarantor, respectively, on substantially identical terms;
provided, however, that no Indebtedness of the Company or any Subsidiary
67
<PAGE> 69
Guarantor shall be deemed to be contractually subordinated to any other
Indebtedness of the Company or such Subsidiary Guarantor, respectively, solely
by virtue of being unsecured.
The provisions of the first paragraph of this covenant will not apply to
the incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the incurrence by the Company or any Subsidiary Guarantor of
Indebtedness under Credit Facilities; provided that the aggregate principal
amount of all Indebtedness (with letters of credit being deemed to have a
principal amount equal to the maximum potential liability of the Company
and its Subsidiaries thereunder) outstanding under all Credit Facilities
after giving effect to such incurrence, including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any other
Indebtedness incurred pursuant to this clause (i), does not exceed an
amount equal to the greater of (x) $30.0 million and (y) the Borrowing
Base;
(ii) the incurrence by any Foreign Subsidiary of Indebtedness under
Foreign Credit Facilities; provided that the aggregate principal amount of
all Indebtedness (with letters of credit being deemed to have a principal
amount equal to the maximum potential liability of Foreign Subsidiaries
thereunder) outstanding under all Foreign Credit Facilities after giving
effect to such incurrence, including all Permitted Refinancing Indebtedness
incurred to refund, refinance or replace any other Indebtedness incurred
pursuant to this clause (ii), does not exceed an amount equal to the
greater of (x) $5.0 million and (y) the Foreign Borrowing Base;
(iii) the incurrence by the Company and its Subsidiaries of the
Existing Indebtedness;
(iv) the incurrence by the Company and the Subsidiary Guarantors of
Indebtedness represented by the Senior Notes and the Subsidiary Guarantees,
respectively;
(v) the incurrence by the Company or any of its Subsidiaries of
Indebtedness represented by Capital Lease Obligations, sale and leaseback
transactions, mortgage financings, purchase money obligations, capital
expenditures or similar financing transactions, in each case with respect
to (A) the respective properties, assets and rights of the Company or such
Subsidiary as of the date of the Indenture, in an aggregate principal
amount (or accreted value, as applicable) at any time outstanding,
including all Permitted Refinancing Indebtedness incurred to refund,
refinance or replace any other Indebtedness incurred pursuant to this
clause (v), not to exceed $10.0 million or (B) any properties, assets or
rights of the Company or such Subsidiary acquired after the date of the
Indenture, provided that the aggregate principal amount of such
Indebtedness under this clause (v)(B) does not exceed 100% of the cost of
such properties, assets or rights;
(vi) the incurrence by the Company or any of its Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to refund, refinance or replace any Indebtedness that was
permitted by the Indenture to be incurred;
(vii) the incurrence by the Company or any of the Subsidiary
Guarantors of intercompany Indebtedness between or among the Company and
any Subsidiaries that are Subsidiary Guarantors; provided, however, that
(i) if the Company or a Subsidiary Guarantor is the obligor on such
Indebtedness, such Indebtedness is expressly subordinated to the prior
payment in full in cash of all Obligations with respect to the Senior Notes
and the Subsidiary Guarantees, respectively, and (ii)(A) any subsequent
issuance or transfer of Equity Interests that results in any such
Indebtedness being held by a Person other than the Company or a Subsidiary
Guarantor and (B) any sale or other transfer of any such Indebtedness to a
Person that is not either the Company or a Subsidiary Guarantor shall be
deemed, in each case, to constitute an incurrence of such Indebtedness by
the Company or such Subsidiary, as the case may be, that was not permitted
by this clause (vii);
(viii) the incurrence by the Company or any of its Subsidiaries of
Hedging Obligations in the ordinary course of business of the Company or
any of its Subsidiaries; and
(ix) the incurrence by the Company or any of its Subsidiaries of
additional Indebtedness in an aggregate principal amount (or accreted
value, as applicable) at any time outstanding, including all
68
<PAGE> 70
Permitted Refinancing Indebtedness incurred to refund, refinance or replace
any other Indebtedness incurred pursuant to this clause (ix), not to exceed
$10.0 million.
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (ix) above or is
entitled to be incurred pursuant to the first paragraph of this covenant, the
Company shall, in its sole discretion, classify such item of Indebtedness in any
manner that complies with this covenant and such item of Indebtedness will be
treated as having been incurred pursuant to only one of such clauses or pursuant
to the first paragraph hereof. Accrual of interest, the accretion of accreted
value and the payment of interest in the form of additional Indebtedness will
not be deemed to be an incurrence of Indebtedness for purposes of this covenant.
SALE AND LEASEBACK TRANSACTIONS
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, enter into any sale and leaseback transaction; provided
that the Company and any Subsidiary Guarantor may enter into a sale and
leaseback transaction if (i) the Company or such Subsidiary Guarantor could have
(a) (1) incurred Indebtedness in an amount equal to the Attributable Debt
relating to such sale and leaseback transaction pursuant to the Fixed Charge
Coverage Ratio test set forth in clause (i) of the covenant described above
under the caption "--Incurrence of Indebtedness and Issuance of Preferred
Stock," or (2) incurred Indebtedness pursuant to clause (v) of the second
paragraph of the covenant described above under the caption "--Incurrence of
Indebtedness and Issuance of Preferred Stock;" and (b) incurred a Lien to secure
such Indebtedness pursuant to the covenant described above under the caption
"--Liens," (ii) the gross cash proceeds of such sale and leaseback transaction
are at least equal to the fair market value (as determined in good faith by the
Board of Directors and set forth in an Officers' Certificate delivered to the
Trustee) of the property that is the subject of such sale and leaseback
transaction and (iii) the transfer of assets in such sale and leaseback
transaction is permitted by, and the Company or the applicable Subsidiary
Guarantor applies the proceeds of such transaction in compliance with, the
covenant described above under the caption "--Asset Sales."
LIENS
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, create, incur, assume or suffer
to exist any Lien on any asset now owned or hereafter acquired, or any income or
profits therefrom or assign or convey any right to receive income therefrom,
except for Permitted Liens, unless the Senior Notes and the Subsidiary
Guarantees are secured on an equal and ratable basis with the obligations so
secured until such time as such obligations are no longer secured by a Lien.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any encumbrance or restriction on the
ability of any Subsidiary to (i)(a) pay dividends or make any other
distributions to the Company or any of its Subsidiaries (1) on its Capital Stock
or (2) with respect to any other interest or participation in, or measured by,
its profits, or (b) pay any indebtedness owed to the Company or any of its
Subsidiaries, (ii) make loans or advances to the Company or any of its
Subsidiaries or (iii) transfer any of its properties or assets to the Company or
any of its Subsidiaries, except for such encumbrances or restrictions existing
under or by reason of (a) Existing Indebtedness as in effect on the date of the
Indenture, (b) the Indenture, the Senior Notes and the Subsidiary Guarantees,
(c) applicable law, (d) any instrument governing Indebtedness or Capital Stock
of a Person acquired by the Company or any of its Subsidiaries as in effect at
the time of such acquisition (except to the extent such Indebtedness was
incurred in connection with or in contemplation of such acquisition), which
encumbrance or restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person, or the property or assets of the
Person, so acquired; provided that, in the case of Indebtedness, such
Indebtedness was permitted by the terms of the Indenture to be incurred, (e) by
reason of customary non-assignment provisions in leases or contracts entered
into in the ordinary course of
69
<PAGE> 71
business and consistent with past practices, (f) mortgages or other purchase
money obligations for property acquired in the ordinary course of business that
impose restrictions of the nature described in clause (iii) above on the
property so acquired, or (g) Permitted Refinancing Indebtedness; provided that
the restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive than those contained in the
agreements governing the Indebtedness being refinanced.
MERGER, CONSOLIDATION, OR SALE OF ASSETS
The Indenture provides that the Company may not consolidate or merge with
or into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its properties or assets in one or more related transactions, to another
corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia; (ii) the entity or Person formed
by or surviving any such consolidation or merger (if other than the Company) or
the entity or Person to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made assumes all the obligations of the
Company under the Senior Notes and the Indenture pursuant to a supplemental
indenture in a form reasonably satisfactory to the Trustee; (iii) immediately
after such transaction no Default or Event of Default exists; (iv) except in the
case of a merger of the Company with or into a Wholly Owned Subsidiary of the
Company, the Company or the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company), or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made (A) will have Consolidated Net Worth immediately after the transaction
equal to or greater than the Consolidated Net Worth of the Company immediately
preceding the transaction and (B) will, at the time of such transaction and
after giving pro forma effect thereto as if such transaction had occurred at the
beginning of the applicable four-quarter period, be permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio
test set forth in the first paragraph of the covenant described above under the
caption "--Incurrence of Indebtedness and Issuance of Preferred Stock;" and (v)
each Subsidiary Guarantor, unless it is the other party to the transactions
described above, shall have by supplemental indenture confirmed that its
Subsidiary Guarantee shall apply to the Company's or the surviving Person's
obligations under the Indenture and the Senior Notes.
TRANSACTIONS WITH AFFILIATES
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, make any payment to, or sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"),
unless (i) such Affiliate Transaction is on terms that are no less favorable to
the Company or the relevant Subsidiary than those that would have been obtained
in a comparable transaction by the Company or such Subsidiary with an unrelated
Person and (ii) the Company delivers to the Trustee (a) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $1.0 million, a resolution of the Board of
Directors set forth in an Officers' Certificate certifying that such Affiliate
Transaction complies with clause (i) above and that such Affiliate Transaction
has been approved by a majority of the disinterested members of the Board of
Directors and (b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of $5.0
million, an opinion as to the fairness to the Holders of such Affiliate
Transaction from a financial point of view issued by an accounting, appraisal or
investment banking firm of national standing; provided that (A) any employment
agreement entered into by the Company or any of its Subsidiaries in the ordinary
course of business and consistent with the past practice of the Company or such
Subsidiary, (B) transactions between or among the Company and/or its
Subsidiaries, (C) Restricted Payments that are permitted by the provisions of
the Indenture described above under the caption "-- Restricted Payments" and (D)
the payment by the Company or its Subsidiaries of reasonable and customary fees
to members of their respective Boards of Directors, in each case, shall not be
deemed Affiliate Transactions.
70
<PAGE> 72
LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF WHOLLY OWNED
SUBSIDIARIES
The Indenture provides that the Company (i) will not, and will not permit
any Wholly Owned Subsidiary of the Company to, transfer, convey, sell, lease or
otherwise dispose of any Capital Stock of any Wholly Owned Subsidiary of the
Company to any Person (other than the Company or a Wholly Owned Subsidiary of
the Company), unless (a) such transfer, conveyance, sale, lease or other
disposition is of all the Capital Stock of such Wholly Owned Subsidiary and (b)
the cash Net Proceeds from such transfer, conveyance, sale, lease or other
disposition are applied in accordance with the covenant described above under
the caption "--Repurchase at Option of Holders--Asset Sales," and (ii) will not
permit any Wholly Owned Subsidiary of the Company to issue any of its Equity
Interests (other than, if necessary, shares of its Capital Stock constituting
directors' qualifying shares) to any Person other than to the Company or a
Wholly Owned Subsidiary of the Company.
ADDITIONAL SUBSIDIARY GUARANTEES
The Indenture provides that if the Company or any of its Subsidiaries shall
after the date of the Indenture, (i) transfer or cause to be transferred in one
or a series of transactions (whether or not related), any assets, businesses,
divisions, real property or equipment having an aggregate fair market value (as
determined in good faith by the Board of Directors) in excess of $1.0 million to
any Subsidiary (other than a Foreign Subsidiary) that is not a Subsidiary
Guarantor; (ii) acquire or create another Subsidiary (other than a Foreign
Subsidiary); or (iii) any Subsidiary of the Company, that is not a Subsidiary
Guarantor, guarantees any Indebtedness of the Company other than the Senior
Notes, or pledges any of its assets to secure any Indebtedness of the Company
other than the Senior Notes, then the Company will cause such Subsidiary to (A)
execute and deliver to the Trustee a supplemental indenture in form and
substance reasonably satisfactory to the Trustee pursuant to which such
Subsidiary shall unconditionally Guarantee all of the Company's obligations
under the Senior Notes on the terms set forth in such supplemental indenture and
(B) deliver to the Trustee an opinion of counsel reasonably satisfactory to the
Trustee that such supplemental indenture has been duly executed and delivered by
such Subsidiary.
BUSINESS ACTIVITIES
The Company will not, and will not permit any Subsidiary to, engage in any
business other than Permitted Businesses, except to such extent as would not be
material to the Company and its Subsidiaries taken as a whole.
PAYMENTS FOR CONSENT
The Indenture provides that neither the Company nor any of its Subsidiaries
will, directly or indirectly, pay or cause to be paid any consideration, whether
by way of interest, fee or otherwise, to any Holder of any Senior Notes for or
as an inducement to any consent, waiver or amendment of any of the terms or
provisions of the Indenture or the Senior Notes unless such consideration is
offered to be paid or is paid to all Holders of the Senior Notes that consent,
waive or agree to amend in the time frame set forth in the solicitation
documents relating to such consent, waiver or agreement.
REPORTS
The Indenture provides that, from and after the earlier of the effective
date of the Exchange Offer Registration Statement and the effective date of the
Shelf Registration Statement, whether or not required by the rules and
regulations of the Commission, so long as any Senior Notes are outstanding, the
Company will furnish to the Holders of Senior Notes (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Forms 10-Q and 10-K if the Company were required to file such
Forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and, with respect to the annual information only, a
report thereon by the Company's certified independent accountants and (ii) all
current reports that would be required to be filed with the Commission on Form
8-K if the Company were required to file such reports. In addition, whether or
not
71
<PAGE> 73
required by the rules and regulations of the Commission, the Company will file a
copy of all such information and reports with the Commission for public
availability (unless the Commission will not accept such a filing) and make such
information available to securities analysts and prospective investors upon
request. In addition, the Company has agreed that, for so long as any Senior
Notes remain outstanding, it will furnish to the Holders, to securities analysts
and prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages, if any, with respect to, the Senior Notes; (ii) default in
payment when due of the principal of or premium, if any, on the Senior Notes;
(iii) failure by the Company or any Subsidiary to comply with the provisions
described under the captions "--Repurchase at the Option of Holders--Change of
Control;" "--Repurchase at Option of Holders--Asset Sales;" "--Certain
Covenants--Restricted Payments;" "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock;" or "--Certain Covenants--Merger,
Consolidation, or Sale of Assets;" (iv) failure by the Company or any Subsidiary
for 60 days after notice to comply with any of its other agreements in the
Indenture or the Senior Notes; (v) default under any mortgage, indenture or
instrument under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company or any of its
Subsidiaries (or the payment of which is guaranteed by the Company or any of its
Subsidiaries) whether such Indebtedness or guarantee now exists, or is created
after the date of the Indenture, which default (A)(i) is caused by a failure to
pay when due at final stated maturity (giving effect to any grace period related
thereto) any principal of or premium, if any, or interest on such Indebtedness
(a "Payment Default") or (ii) results in the acceleration of such Indebtedness
prior to its express maturity and (B) in each case, the principal amount of any
such Indebtedness as to which a Payment Default shall have occurred, together
with the principal amount of any other such Indebtedness under which there has
been a Payment Default or the maturity of which has been so accelerated,
aggregates $5.0 million or more; (vi) failure by the Company or any of its
Subsidiaries to pay final judgments aggregating in excess of $5.0 million, which
judgments are not paid, discharged or stayed within 60 days after their entry;
(vii) certain events of bankruptcy or insolvency with respect to the Company,
any of its Significant Subsidiaries or any group of Subsidiaries that, taken
together, would constitute a Significant Subsidiary; and (viii) the termination
of the Subsidiary Guarantee of any Subsidiary Guarantor for any reason not
permitted by the Indenture or the denial of any Person acting on behalf of any
Subsidiary Guarantor of its obligations under any such Subsidiary Guarantee.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Senior Notes
may declare all the Senior Notes to be due and payable immediately.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, with respect to the Company, any
Significant Subsidiary or any group of Subsidiaries that, taken together, would
constitute a Significant Subsidiary, all outstanding Senior Notes will become
due and payable without further action or notice. Holders of the Senior Notes
may not enforce the Indenture or the Senior Notes except as provided in the
Indenture. Subject to certain limitations, Holders of a majority in principal
amount of the then outstanding Senior Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of the
Senior Notes notice of any continuing Default or Event of Default (except a
Default or Event of Default relating to the payment of principal or interest) if
it determines that withholding notice is in their interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Senior Notes pursuant to
the optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Senior Notes. If an Event of Default occurs prior
to April 1, 2002 by reason of any willful action (or inaction) taken (or not
taken) by or on behalf of the Company with the intention of avoiding the
prohibition on redemption of the Senior Notes prior
72
<PAGE> 74
to April 1, 2002, then the premium specified in the Indenture shall also become
immediately due and payable to the extent permitted by law upon the acceleration
of the Senior Notes.
The Holders of a majority in aggregate principal amount of the Senior Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the Senior Notes waive any existing Default or Event of Default and its
consequences under the Indenture except a continuing Default or Event of Default
in the payment of interest on, or the principal of, the Senior Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company
or any Subsidiary Guarantor, as such, shall have any liability for any
obligations of the Company or any Subsidiary Guarantor under the Senior Notes,
the Indenture, the Subsidiary Guarantees or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each Holder of Senior
Notes by accepting a Senior Note waives and releases all such liability. The
waiver and release are part of the consideration for issuance of the Senior
Notes and the Subsidiary Guarantees. Such waiver may not be effective to waive
liabilities under the federal securities laws and it is the view of the
Commission that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company and the Subsidiary Guarantors may, at the option of their
respective Boards of Directors and at any time, elect to have all of their
respective obligations discharged with respect to the outstanding Senior Notes
and Subsidiary Guarantees ("Legal Defeasance") except for (i) the rights of
Holders of outstanding Senior Notes to receive payments in respect of the
principal of, premium, if any, and interest and Liquidated Damages on such
Senior Notes when such payments are due from the trust referred to below, (ii)
the Company's obligations with respect to the Senior Notes concerning issuing
temporary Senior Notes, registration of Senior Notes, mutilated, destroyed, lost
or stolen Senior Notes and the maintenance of an office or agency for payment
and money for security payments held in trust, (iii) the rights, powers, trusts,
duties and immunities of the Trustee, and the Company's obligations in
connection therewith and (iv) the Legal Defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to have the
obligations of the Company and the obligations of the Subsidiary Guarantors
released with respect to certain covenants that are described in the Indenture
("Covenant Defeasance") and thereafter any omission to comply with such
obligations shall not constitute a Default or Event of Default with respect to
the Senior Notes. In the event Covenant Defeasance occurs, certain events (not
including non-payment, bankruptcy, receivership, rehabilitation and insolvency
events) described under "Events of Default" will no longer constitute an Event
of Default with respect to the Senior Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders of the Senior Notes, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and interest and
Liquidated Damages on the outstanding Notes on the stated maturity or on the
applicable redemption date, as the case may be, and the Company must specify
whether the Senior Notes are being defeased to maturity or to a particular
redemption date; (ii) in the case of Legal Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that (A) the Company has received from, or
there has been published by, the Internal Revenue Service a ruling or (B) since
the date of the Indenture, there has been a change in the applicable federal
income tax law, in either case to the effect that, and based thereon such
opinion of counsel shall confirm that, the Holders of the outstanding Senior
Notes will not recognize income, gain or loss for federal income tax purposes as
a result of such Legal Defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have been
the case if such Legal
73
<PAGE> 75
Defeasance had not occurred; (iii) in the case of Covenant Defeasance, the
Company shall have delivered to the Trustee an opinion of counsel in the United
States reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Senior Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Covenant Defeasance and will be subject
to federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not occurred;
(iv) no Default or Event of Default shall have occurred and be continuing on the
date of such deposit (other than a Default or Event of Default resulting from
the borrowing of funds to be applied to such deposit) or insofar as Events of
Default from bankruptcy or insolvency events are concerned, at any time in the
period ending on the 91st day after the date of deposit; (v) such Legal
Defeasance or Covenant Defeasance will not result in a breach or violation of,
or constitute a default under any material agreement or instrument (other than
the Indenture) to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries is bound; (vi) the Company must
have delivered to the Trustee an opinion of counsel to the effect that after the
91st day following the deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally; (vii) the Company must deliver to the
Trustee an Officers' Certificate stating that the deposit was not made by the
Company with the intent of preferring the Holders of Senior Notes over the other
creditors of the Company with the intent of defeating, hindering, delaying or
defrauding creditors of the Company or others; and (viii) the Company must
deliver to the Trustee an Officers' Certificate and an opinion of counsel, each
stating that all conditions precedent provided for relating to the Legal
Defeasance or the Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Senior Notes in accordance with the
Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company is not required to transfer or exchange
any Senior Note selected for redemption. Also, the Company is not required to
transfer or exchange any Senior Note for a period of 15 days before a selection
of Senior Notes to be redeemed.
The registered Holder of a Senior Note will be treated as the owner of it
for all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture,
the Senior Notes or the Subsidiary Guarantees may be amended or supplemented
with the consent of the Holders of at least a majority in principal amount of
the Senior Notes then outstanding (including, without limitation, consents
obtained in connection with a purchase of, or tender offer or exchange offer
for, Senior Notes), and any existing default or compliance with any provision of
the Indenture, the Senior Notes or the Subsidiary Guarantees may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Senior Notes (including consents obtained in connection with a
tender offer or exchange offer for Senior Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Senior Notes held by a non-consenting Holder): (i) reduce
the principal amount of Senior Notes whose Holders must consent to an amendment,
supplement or waiver, (ii) reduce the principal of or change the fixed maturity
of any Senior Note or alter the provisions with respect to the redemption of the
Senior Notes (other than provisions relating to the covenants described above
under the caption "--Repurchase at the Option of Holders"), (iii) reduce the
rate of or change the time for payment of interest on any Senior Note, (iv)
waive a Default or Event of Default in the payment of principal of or premium or
Liquidated Damages, if any, or interest on the Senior Notes (except a rescission
of acceleration of the Senior Notes by the Holders of at least a majority in
aggregate principal amount of the Senior Notes and a waiver of the payment
default that resulted from such acceleration), (v) make any Senior Note payable
in money other than that stated in the Senior Notes, (vi) make any change in the
provisions of the Indenture relating to waivers of past Defaults or the rights
of Holders of Senior Notes to receive payments of principal of or premium or
Liquidated Damages, if
74
<PAGE> 76
any, or interest on the Senior Notes, (vii) waive a redemption payment with
respect to any Senior Note (other than a payment required by one of the
covenants described above under the caption "--Repurchase at the Option of
Holders") or (viii) make any change in the foregoing amendment and waiver
provisions.
Notwithstanding the foregoing, without the consent of any Holder of Senior
Notes, the Company and the Trustee may amend or supplement the Indenture, the
Senior Notes or the Subsidiary Guarantees to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Senior Notes in addition to or in
place of certificated Senior Notes, to provide for the assumption of the
Company's obligations to Holders of Senior Notes in the case of a merger or
consolidation, to make any change that would provide any additional rights or
benefits to the Holders of Senior Notes or that does not adversely affect the
legal rights under the Indenture of any such Holder, or to comply with
requirements of the Commission in order to effect or maintain the qualification
of the Indenture under the Trust Indenture Act or to allow any Subsidiary
Guarantor to guarantee the Senior Notes.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company or any Subsidiary Guarantor, to
obtain payment of claims in certain cases, or to realize on certain property
received in respect of any such claim as security or otherwise. The Trustee will
be permitted to engage in other transactions; however, if it acquires any
conflicting interest it must eliminate such conflict within 90 days, apply to
the Commission for permission to continue or resign.
The Holders of a majority in principal amount of the then outstanding
Senior Notes will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Trustee,
subject to certain exceptions. The Indenture provides that in case an Event of
Default shall occur (which shall not be cured), the Trustee will be required, in
the exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the request of any Holder of Senior Notes, unless such Holder shall have
offered to the Trustee security and indemnity satisfactory to it against any
loss, liability or expense.
BOOK-ENTRY; DELIVERY AND FORM
The Series A Notes initially have been, and the Series B Notes initially
will be, represented by one or more Senior Notes in registered, global form
without interest coupons (collectively, the "Global Note"). The Global Note will
be deposited upon issuance with the Trustee as custodian for DTC, in New York,
New York, and registered in the name of DTC or its nominee, in each case for
credit to an account of a direct or indirect participant as described below.
Except as set forth below, the Global Note may be transferred, in whole and
not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the Global Note may not be exchanged for Senior
Notes in certificated form except in the limited circumstances described below.
See "--Exchange of Book-Entry Notes for Certificated Notes."
The Senior Notes may be presented for registration of transfer and exchange
at the offices of the Registrar.
DEPOSITORY PROCEDURES
DTC has advised the Company that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between Participants through electronic
book-entry changes in accounts of Participants. The Participants include
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations. Access to DTC's system is also available to
other entities such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a Participant, either directly
or indirectly (collectively, the "Indirect Participants"). Persons
75
<PAGE> 77
who are not Participants may beneficially own securities held by or on behalf of
DTC only through the Participants or Indirect Participants. The ownership
interest and transfer of ownership interest of each actual purchaser of each
security held by or on behalf of DTC are recorded on the records of the
Participants and Indirect Participants.
DTC has also advised the Company that pursuant to procedures established by
it, (i) upon deposit of the Global Note, DTC will credit the accounts of
Participants designated by the Trustee with portions of the principal amount of
the Global Note and (ii) ownership of such interests in the Global Note will be
shown on, and the transfer ownership thereof will be effected only through,
records maintained by DTC (with respect to Participants) or by Participants and
the Indirect Participants (with respect to other owners of beneficial interests
in the Global Note).
The laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer beneficial interest in the Global Note to such persons may be limited
to that extent. Because DTC can act only on behalf of Participants, which in
turn act on behalf of Indirect Participants and certain banks, the ability of a
person having a beneficial interest in the Global Note to pledge such interest
to persons or entities that do not participate in the DTC system, or otherwise
take actions in respect of such interests, may be affected by the lack of
physical certificate evidencing such interests. For certain other restrictions
on the transferability of the Senior Notes, see "--Exchange of Book-Entry Notes
for Certificated Notes."
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL NOTE WILL NOT
HAVE SENIOR NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY
OF SENIOR NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED
OWNERS OR HOLDERS THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
Payments in respect of the principal and premium and Liquidated Damages, if
any, and interest on the Global Note registered in the name of DTC or its
nominee will be payable by the Trustee to DTC or its nominee in its capacity as
the registered holder under the Indenture. Under the terms of the Indenture, the
Company and the Trustee have treated, and will continue to treat, the persons in
whose names the Senior Notes, including the Global Note, are registered as the
owners thereof for the purpose of receiving such payments and for any and all
other purposes whatsoever. Consequently, neither the Company, the Trustee nor
any agent of the Company or the Trustee has or will have any responsibility or
liability for (i) any aspect of DTC's records or any Participant's or Indirect
Participant's records relating to or payments made on account of beneficial
ownership interests in the Global Note, or for maintaining, supervising or
reviewing any of DTC's records or any Participant's or Indirect Participant's
records relating to the beneficial ownership interests in the Global Note or
(ii) any other matter relating to the actions and practices of DTC or any of its
Participants or Indirect Participants.
DTC has advised the Company that its current practices, upon receipt of any
payment in respect of securities such as the Senior Notes (including principal
and interest), is to credit the accounts of the relevant Participants with the
payment on the payment date, in amounts proportionate to their respective
holdings in principal amount of beneficial interests in the relevant security
such as the Global Note as shown on the records of DTC. Payments by Participants
and the Indirect Participants to the beneficial owners of Senior Notes will be
governed by standing instructions and customary practices and will not be the
responsibility of DTC, the Trustee or the Company. Neither the Company nor the
Trustee will be liable for any delay by DTC or its Participants in identifying
the beneficial owners of the Senior Notes, and the Company and the Trustee may
conclusively rely on and will be protected in relying on instructions from DTC
or its nominee as the registered owner of the Senior Notes for all purposes.
Interests in the Global Note will trade in DTC's Same-Day Funds Settlement
System and secondary market trading activity in such interests will therefore
settle in immediately available funds, subject in all cases to the rules and
procedures of DTC and its participants. Transfers between Participants in DTC
will be effected in accordance with DTC's procedures, and will be settled in
same-day funds.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Senior Notes only at the direction of one or more
Participants to whose account DTC interests in the Global Note are
76
<PAGE> 78
credited and only in respect of such portion of the aggregate principal amount
of the Senior Notes as to which such Participant or Participants has or have
given direction. However, if there is an Event of Default under the Senior
Notes, DTC reserves the right to exchange the Global Note for legended Senior
Notes in certificated form, and to distribute such Senior Notes to its
Participants.
The information in this section concerning DTC and its book-entry systems
has been obtained from sources that the Company believes to be reliable, but the
Company takes no responsibility for the accuracy thereof.
Although DTC has agreed to the foregoing procedures to facilitate transfers
of interests in the Global Note among participants in DTC, it is under no
obligation to perform or to continue to perform such procedures, and such
procedures may be discontinued at any time. Neither the Company nor the Trustee
will have any responsibility for the performance by DTC or its participants or
indirect participants of their respective obligations under the rules and
procedures governing their operations.
EXCHANGE OF BOOK-ENTRY NOTES FOR CERTIFICATED NOTES
The Global Note is exchangeable for definitive Senior Notes in registered
certificated form if (i) DTC (x) notifies the Company that it is unwilling or
unable to continue as depositary for the Global Note and the Company thereupon
fails to appoint a successor depositary or (y) has ceased to be a clearing
agency registered under the Exchange Act, (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of the
Senior Notes in certificated form or (iii) there shall have occurred and be
continuing to occur a Default or an Event of Default with respect to the Senior
Notes. In addition, beneficial interests in a Global Note may be exchanged for
certificated Senior Notes upon request but only upon at least 20 days' prior
written notice given to the Trustee by or on behalf of DTC in accordance with
customary procedures. In all cases, certificated Senior Notes delivered in
exchange for the Global Note or beneficial interest therein will be registered
in the names, and issued in any approved denominations, requested by or on
behalf of the depositary (in accordance with its customary procedures).
CERTIFICATED SECURITIES
Subject to certain conditions, any person having a beneficial interest in
the Global Note may, upon request to the Trustee, exchange such beneficial
interest for Senior Notes in the form of Certificated Securities. Upon any such
issuance, the Trustee is required to register such Certificated Securities in
the name of, and cause the same to be delivered to, such person or persons (or
the nominee of any thereof). In addition, if (i) the Company notifies the
Trustee in writing that DTC is no longer willing or able to act as a depositary
and the Company is unable to locate a qualified successor within 90 days or (ii)
the Company, at its option, notifies the Trustee in writing that it elects to
cause the issuance of Senior Notes in the form of Certificated Securities under
the Indenture, then, upon surrender by the Global Note Holder of its Global
Note, Senior Notes in such form will be issued to each person that the Global
Note Holder and DTC identify as being the beneficial owner of the related Senior
Notes.
Neither the Company nor the Trustee will be liable for any delay by the
Global Note Holder or DTC in identifying the beneficial owners of Senior Notes
and the Company and the Trustee may conclusively rely on, and will be protected
in relying on, instructions from the Global Note Holder or DTC for all purposes.
NEXT DAY SETTLEMENT AND PAYMENT
The Indenture requires that payments in respect of the Senior Notes
represented by the Global Note (including principal, premium, if any, interest
and Liquidated Damages, if any) be made by wire transfer of immediately
available next day funds to the accounts specified by the Global Note Holder.
With respect to Certificated Securities, the Company will make all payments of
principal, premium, if any, interest and Liquidated Damages, if any, by wire
transfer of immediately available next day funds to the accounts specified by
the Holders thereof or, if no such account is specified, by mailing a check to
each such Holder's registered address. The Company expects that secondary
trading in the Certificated Securities will also be settled in immediately
available funds.
77
<PAGE> 79
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
In connection with the Series A Notes Offering, the Company, the Subsidiary
Guarantors and the Initial Purchaser entered into the Registration Rights
Agreement. Pursuant to the Registration Rights Agreement, the Company and the
Subsidiary Guarantors agreed to file with the Commission the Registration
Statement of which this Prospectus is a part under the Securities Act with
respect to the Series B Notes. The Registration Rights Agreement provides that
if (i) the Company is not permitted to consummate the Exchange Offer because the
Exchange Offer is not permitted by applicable law or Commission policy or (ii)
any Holder of Transfer Restricted Securities (as defined) notifies the Company
prior to the 20th day following consummation of the Exchange Offer that (A) it
is prohibited by law or Commission policy from participating in the Exchange
Offer or (B) that it may not resell the Series B Notes acquired by it in the
Exchange Offer to the public without delivering a prospectus and the prospectus
contained in the Registration Statement is not appropriate or available for such
resales or (C) that it is a broker-dealer and owns Series A Notes acquired
directly from the Company or an affiliate of the Company, the Company and the
Subsidiary Guarantors will file with the Commission a shelf registration
statement (the "Shelf Registration Statement") to cover resales of Transfer
Restricted Securities by the Holders thereof who satisfy certain conditions
relating to the provision of information in connection with such Shelf
Registration Statement. The Company and the Subsidiary Guarantors will use their
reasonable best efforts to cause the applicable registration statement to be
declared effective as promptly as possible by the Commission. For purposes of
the foregoing, "Transfer Restricted Securities" means each Senior Note, until
the earliest to occur of (i) the date on which such Senior Note has been
exchanged by a person other than a broker-dealer for a Series B Note in the
Exchange Offer, (ii) following the exchange by a broker-dealer in the Exchange
Offer of a Series A Note for a Series B Note, the date on which such Series B
Note is sold to a purchaser who receives from such broker-dealer on or prior to
the date of such sale a copy of the prospectus contained in the Registration
Statement, (iii) the date on which such Senior Note has been effectively
registered under the Securities Act and disposed of in accordance with the Shelf
Registration Statement or (iv) the date on which such Senior Note is distributed
to the public pursuant to Rule 144 under the Act.
The Registration Rights Agreement provides that (i) the Company and the
Subsidiary Guarantors will file the Registration Statement with the Commission
on or prior to 60 days after the Series A Issue Date, (ii) the Company and the
Subsidiary Guarantors will use their reasonable best efforts to have the
Registration Statement declared effective by the Commission on or prior to 150
days after the Series A Issue Date, (iii) unless the Exchange Offer would not be
permitted by applicable law or Commission policy, the Company will commence the
Exchange Offer and use its reasonable best efforts to issue on or prior to 30
business days after the date on which the Registration Statement is declared
effective by the Commission, Series B Notes in exchange for all Series A Notes
tendered prior thereto in the Exchange Offer and (iv) if obligated to file the
Shelf Registration Statement, the Company and the Subsidiary Guarantors will use
their reasonable best efforts to file the Shelf Registration Statement with the
Commission on or prior to 30 days after such filing obligation arises and to
cause the Shelf Registration to be declared effective by the Commission on or
prior to 150 days after such obligation arises. The Registration Rights
Agreement further provides that if (a) the Company and the Subsidiary Guarantors
fail to file any of the Registration Statements required by the Registration
Rights Agreement on or before the date specified for such filing, (b) any of
such Registration Statements is not declared effective by the Commission on or
prior to the date specified for such effectiveness (the "Effectiveness Target
Date"), or (c) the Company and the Subsidiary Guarantors fail to consummate the
Exchange Offer within 30 business days of the Effectiveness Target Date with
respect to the Registration Statement, or (d) the Shelf Registration Statement
or the Registration Statement is declared effective but thereafter ceases to be
effective or usable in connection with resales of Transfer Restricted Securities
during the periods specified in the Registration Rights Agreement (each such
event referred to in clauses (a) through (d) above a "Registration Default"),
then the Company will pay Liquidated Damages to each Holder of Senior Notes,
with respect to the first 90-day period immediately following the occurrence of
the first Registration Default in an amount equal to $.05 per week per $1,000
principal amount of Senior Notes held by such Holder. The amount of the
Liquidated Damages will increase by an additional $.05 per week per $1,000
principal amount of Senior Notes with respect to each subsequent 90-day period
until all Registration Defaults have been cured, up to a maximum amount of
Liquidated Damages of $.50 per week per $1,000 principal
78
<PAGE> 80
amount of Senior Notes. All accrued Liquidated Damages will be paid by the
Company on each Damages Payment Date to the Global Note Holder by wire transfer
of immediately available funds or by federal funds check and to Holders of
Certificated Securities by wire transfer to the accounts specified by them or by
mailing checks to their registered addresses if no such accounts have been
specified. Following the cure of all Registration Defaults, the accrual of
Liquidated Damages will cease.
Holders of Series A Notes will be required to make certain representations
to the Company and the Subsidiary Guarantors (as described in the Registration
Rights Agreement) in order to participate in the Exchange Offer and will be
required to deliver information to be used in connection with the Shelf
Registration Statement and to provide comments on the Shelf Registration
Statement within the time periods set forth in the Registration Rights Agreement
in order to have their Series A Notes included in the Shelf Registration
Statement and benefit from the provisions regarding Liquidated Damages set forth
above.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that,
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control; provided, further, that in the case of a joint venture,
partnership, association or other business arrangement with any Person entered
into in the ordinary course of business, neither such Person nor the joint
venture, partnership, association or business arrangement shall be deemed to be
an Affiliate by reason of the preceding proviso.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback) other than sales of inventory in the ordinary course of business
consistent with past practices (provided that the sale, lease, conveyance or
other disposition of all or substantially all of the assets of the Company and
its Subsidiaries taken as a whole will be governed by the provisions of the
Indenture described above under the caption "-- Repurchase at the Option of
Holders--Change of Control" and/or the provisions described above under the
caption "--Certain Covenants--Merger, Consolidation or Sale of Assets" and not
by the provisions of the Asset Sale covenant), and (ii) the issue or sale by the
Company or any of its Subsidiaries of Equity Interests of any of the Company's
Subsidiaries, in the case of either clause (i) or (ii), whether in a single
transaction or a series of related transactions (a) that have a fair market
value in excess of $1.0 million or (b) for net proceeds in excess of $1.0
million. Notwithstanding the foregoing: (i) a transfer of assets by the Company
to a Wholly Owned Subsidiary or by a Wholly Owned Subsidiary to the Company or
to another Wholly Owned Subsidiary, (ii) an issuance of Equity Interests by a
Wholly Owned Subsidiary to the Company or to another Wholly Owned Subsidiary,
(iii) a Restricted Payment that is permitted by the covenant described above
under the caption "--Certain Covenants--Restricted Payments" and (iv)
dispositions of obsolete equipment in the ordinary course of business and
consistent with past practice, in each case, will not be deemed to be Asset
Sales.
"Attributable Debt" in respect of a sale and leaseback transaction means,
at the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease
79
<PAGE> 81
included in such sale and leaseback transaction (including any period for which
such lease has been extended or may, at the option of the lessor, be extended).
"Australian Revolving Credit Facility" means that certain Credit Facility,
dated as of February 10, 1997, by and among BCE and its Subsidiaries and the
lenders party thereto, including any related notes, guarantees, collateral
documents, instruments and agreements executed in connection therewith, and in
each case, as amended, modified, renewed, refunded, replaced or refinanced from
time to time (together with any amendment, modification, renewal, refunding,
replacement or refinancing to or of any of the foregoing, including, without
limitation, any agreement modifying the maturity or amortization schedule of or
refinancing or refunding all or any portion of Indebtedness thereunder or
increasing the amount that may be borrowed under such agreement or any successor
agreement, whether or not among the same parties.
"Borrowing Base" means, as of any date, an amount equal to the sum of (a)
85% of the face amount of all accounts receivable owned by the Company and its
Subsidiaries (other than Foreign Subsidiaries) as of such date that are not more
than 60 days past due, and (b) 65% of the book value of all inventory owned by
the Company and its Subsidiaries (other than Foreign Subsidiaries) as of such
date, all calculated on a consolidated basis and in accordance with GAAP. To the
extent that information is not available as to the amount of accounts receivable
or inventory as of a specific date, the Company may utilize the most recent
available information for purposes of calculating the Borrowing Base.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than six
months from the date of acquisition, (iii) certificates of deposit and
eurodollar time deposits with maturities of six months or less from the date of
acquisition, bankers' acceptances with maturities not exceeding six months and
overnight bank deposits, in each case, with any lender party to the Revolving
Credit Facility or with any domestic commercial bank having capital and surplus
in excess of $500 million and a Thompson Bank Watch Rating of "B" or better,
(iv) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (ii) and (iii) above
entered into with any financial institution meeting the qualifications specified
in clause (iii) above and (v) commercial paper having the highest rating
obtainable from Moody's Investors Service, Inc. or Standard & Poor's Corporation
and in each case maturing within six months after the date of acquisition.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) an amount
equal to any extraordinary loss plus any net loss realized in connection with an
Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income), plus (ii) provision for taxes based on income or
profits of such Person and its Subsidiaries for such period, to the extent that
such provision for taxes was included in computing such Consolidated Net Income,
plus (iii) consolidated interest expense of such Person and its Subsidiaries for
such period, whether paid or accrued and whether or not capitalized (including,
without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, imputed interest with respect to Attributable Debt,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net payments (if any) pursuant
to Hedging Obligations), to the extent that any such expense was deducted in
computing such Consolidated Net Income, plus (iv) depreciation, amortization
(including amortization of goodwill and other intangibles but excluding
amortization of prepaid cash expenses that were paid in a prior period) and
other
80
<PAGE> 82
non-cash expenses (excluding any such non-cash expense to the extent that it
represents an accrual of or reserve for cash expenses in any future period or
amortization of a prepaid cash expense that was paid in a prior period) of such
Person and its Subsidiaries for such period to the extent that such
depreciation, amortization and other non-cash expenses were deducted in
computing such Consolidated Net Income, less (v) non-cash items increasing such
Consolidated Net Income for such period, in each case, on a consolidated basis
and determined in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP; provided
that (i) the Net Income (but not loss) of any Person that is not a Subsidiary or
that is accounted for by the equity method of accounting shall be included only
to the extent of the amount of dividends or distributions paid in cash to the
referent Person or a Wholly Owned Subsidiary thereof, (ii) the Net Income of any
Subsidiary shall be excluded to the extent that the declaration or payment of
dividends or similar distributions by that Subsidiary of that Net Income is not
at the date of determination permitted without any prior governmental approval
(that has not been obtained) or, directly or indirectly, by operation of the
terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Subsidiary or its
stockholders, (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition shall
be excluded and (iv) the cumulative effect of a change in accounting principles
shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such Person
and its consolidated Subsidiaries as of such date plus (ii) the respective
amounts reported on such Person's balance sheet as of such date with respect to
any series of preferred stock (other than Disqualified Stock) that by its terms
is not entitled to the payment of dividends unless such dividends may be
declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date of the Indenture in the book value of
any asset owned by such Person or a consolidated Subsidiary of such Person, (y)
all investments as of such date in unconsolidated Subsidiaries and in Persons
that are not Subsidiaries (except, in each case, Permitted Investments), and (z)
all unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"Credit Facilities" means, with respect to the Company or any of its
Subsidiaries (other than Foreign Subsidiaries), one or more debt facilities
(including, without limitation, the Revolving Credit Facility) or other debt
securities or commercial paper facilities with banks or other institutional
lenders providing for revolving credit loans or letters of credit, in each case,
as amended, restated, modified, renewed, refunded, replaced or refinanced in
whole or in part from time to time.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the Holder thereof, in whole or in part, on or prior to the date
that is 91 days after the date on which the Senior Notes mature.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Existing Indebtedness" means up to $6.3 million in aggregate principal
amount of Indebtedness of the Company and its Subsidiaries (other than
Indebtedness under the Revolving Credit Facility and the Australian Revolving
Credit Facility) in existence on the date of the Indenture, until such amounts
are repaid.
81
<PAGE> 83
"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense of such Person and
its Subsidiaries for such period, whether paid or accrued (including, without
limitation, amortization of debt issuance costs and original issue discount,
non-cash interest payments, the interest component of any deferred payment
obligations, the interest component of all payments associated with Capital
Lease Obligations, imputed interest with respect to Attributable Debt,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net payments (if any) pursuant
to Hedging Obligations) and (ii) the consolidated interest expense of such
Person and its Subsidiaries that was capitalized during such period, and (iii)
any interest expense on Indebtedness of another Person that is Guaranteed by
such Person or one of its Subsidiaries or secured by a Lien on assets of such
Person or one of its Subsidiaries (whether or not such Guarantee or Lien is
called upon) and (iv) the product of (a) all dividend payments, whether or not
in cash, on any series of preferred stock of such Person or any of its
Subsidiaries, other than dividend payments on Equity Interests payable solely in
Equity Interests of the Company, times (b) a fraction, the numerator of which is
one and the denominator of which is one minus the then current combined federal,
state and local statutory tax rate of such Person, expressed as a decimal, in
each case, on a consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
Company or any of its Subsidiaries incurs, assumes, Guarantees or redeems any
Indebtedness (other than revolving credit borrowings) or issues preferred stock
subsequent to the commencement of the period for which the Fixed Charge Coverage
Ratio is being calculated but prior to the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"),
then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect
to such incurrence, assumption, Guarantee or redemption of Indebtedness, or such
issuance or redemption of preferred stock, as if the same had occurred at the
beginning of the applicable four-quarter reference period. In addition, for
purposes of making the computation referred to above, (i) acquisitions that have
been made by the Company or any of its Subsidiaries, including through mergers
or consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date shall be deemed to have occurred on the first day
of the four-quarter reference period and Consolidated Cash Flow for such
reference period shall be calculated without giving effect to clause (iii) of
the proviso set forth in the definition of Consolidated Net Income, and (ii) the
Consolidated Cash Flow attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, and (iii) the Fixed Charges attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded, but
only to the extent that the obligations giving rise to such Fixed Charges will
not be obligations of the referent Person or any of its Subsidiaries following
the Calculation Date.
"Foreign Borrowing Base" means, as of any date, an amount equal to the sum
of (a) 85% of the face amount of all accounts receivable owned by Foreign
Subsidiaries of the Company as of such date that are not more than 60 days past
due, and (b) 65% of the book value of all inventory owned by Foreign
Subsidiaries of the Company as of such date, all calculated on a consolidated
basis and in accordance with generally accepted accounting principles. To the
extent that information is not available as to the amount of accounts receivable
or inventory as of a specific date, the Company may utilize the most recent
available information for purposes of calculating the Foreign Borrowing Base.
"Foreign Credit Facilities" means, with respect to any Foreign Subsidiary
of the Company, one or more debt facilities (including, without limitation, the
Australian Revolving Credit Facility) or other debt securities or commercial
paper facilities with banks or other institutional lenders providing for
revolving credit loans or letters of credit, in each case, as amended, restated,
modified, renewed, refunded, replaced or refinanced in whole or in part from
time to time.
82
<PAGE> 84
"Foreign Subsidiary" means any Subsidiary of the Company, more than 80% of
the sales, earnings or assets (determined on a consolidated basis) of which are
located or derived from operations outside the United States.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the Indenture.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements, (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates and (iii) agreements entered into for the purpose of fixing or hedging the
risks associated with fluctuations in foreign currency exchange rates.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing indebtedness (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, as well as all indebtedness of others
secured by a Lien on any asset of such Person (whether or not such indebtedness
is assumed by such Person) and, to the extent not otherwise included, the
Guarantee by such Person of any indebtedness of any other Person. The amount of
any Indebtedness outstanding as of any date shall be (i) the accreted value
thereof, in the case of any Indebtedness that does not require current payments
of interest, and (ii) the principal amount thereof, together with any interest
thereon that is more than 30 days past due, in the case of any other
Indebtedness.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Subsidiary of the Company sells or otherwise disposes of
any Equity Interests of any direct or indirect Subsidiary of the Company such
that, after giving effect to any such sale or disposition, such Person is no
longer a Subsidiary of the Company, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Equity Interests of such Subsidiary not sold or disposed of in an
amount determined as provided in the final paragraph of the covenant described
above under the caption "--Certain Covenants--Restricted Payments."
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Management Agreement" means that certain Management Agreement between
NESCO, Inc. and the Company dated as of April 1, 1997.
83
<PAGE> 85
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Subsidiaries and
(ii) any extraordinary or nonrecurring gain (but not loss), together with any
related provision for taxes on such extraordinary or nonrecurring gain (but not
loss).
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Subsidiaries in respect of any Asset Sale (including, without
limitation, any cash received upon the sale or other disposition of any non-cash
consideration received in any Asset Sale), net of the direct costs relating to
such Asset Sale (including, without limitation, legal, accounting and investment
banking fees, and sales commissions) and any relocation expenses incurred as a
result thereof, taxes paid or payable as a result thereof (after taking into
account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
secured by a Lien on the asset or assets that were the subject of such Asset
Sale and any reserve for adjustment in respect of the sale price of such asset
or assets established in accordance with GAAP.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Permitted Businesses" means (i) the materials handling and processing
businesses and other businesses conducted by the Company and its Subsidiaries on
the date of the Indenture, (ii) businesses whose manufacturing, production,
sales or distribution requirements are complementary to such businesses and
(iii) any businesses reasonably related or similar thereto.
"Permitted Investments" means (a) any Investment in the Company or in a
Wholly Owned Subsidiary of the Company that is a Subsidiary Guarantor that is
engaged in a Permitted Business; (b) any Investment in Cash Equivalents; (c) any
Investment by the Company or any Subsidiary of the Company in a Person, if as a
result of such Investment (i) such Person becomes a Wholly Owned Subsidiary of
the Company that is a Subsidiary Guarantor that is engaged in a Permitted
Business or (ii) such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Wholly Owned Subsidiary of the Company that is
a Subsidiary Guarantor; (d) any Restricted Investment made as a result of the
receipt of non-cash consideration from an Asset Sale that was made pursuant to
and in compliance with the covenant described above under the caption
"--Repurchase at the Option of Holders--Asset Sales;" (e) any acquisition of
assets solely in exchange for the issuance of Equity Interests (other than
Disqualified Stock) of the Company; (f) any Investment by a Foreign Subsidiary
of the Company in any other Foreign Subsidiary of the Company; (g) any
Investment in any Person principally engaged in the manufacture, sale, provision
or distribution of Conveyor Equipment having an aggregate fair market value
(measured on the date each such Investment was made and without giving effect to
subsequent changes in value), when taken together with all other Investments
made pursuant to this clause (g) that are at the time outstanding, not to exceed
$6.5 million; and (h) other Investments in any Person principally engaged in a
Permitted Business having an aggregate fair market value (measured on the date
each such Investment was made and without giving effect to subsequent changes in
value), when taken together with all other Investments made pursuant to this
clause (h) that are at the time outstanding, not to exceed $7.5 million.
"Permitted Liens" means (i) Liens on assets securing Indebtedness under
Credit Facilities and Foreign Credit Facilities that was permitted by the terms
of the Indenture to be incurred; (ii) Liens securing Indebtedness incurred
pursuant to (A) the Fixed Charge Coverage Ratio test set forth under the first
paragraph of the covenant described under the caption "--Certain
Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock" or (B)
paragraph (ix) of the covenant described under the caption "--Certain
Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock" provided
that, in either case, such Indebtedness ranks, by its terms, pari passu with the
Senior Notes; (iii) Liens in favor of the Company; (iv) Liens on property of a
Person existing at the time such Person is merged into or consolidated
84
<PAGE> 86
with the Company or any Subsidiary of the Company; provided that such Liens were
in existence prior to the contemplation of such merger or consolidation and do
not extend to any assets other than those of the Person merged into or
consolidated with the Company; (v) Liens on property existing at the time of
acquisition thereof by the Company or any Subsidiary of the Company, provided
that such Liens were in existence prior to the contemplation of such
acquisition; (vi) Liens to secure the performance of statutory obligations,
surety or appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business; (vii) Liens to secure Indebtedness
(including Capital Lease Obligations) permitted by clause (iv) of the second
paragraph of the covenant entitled "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock" covering only the assets acquired
with such Indebtedness; (viii) Liens existing on the date of the Indenture; (ix)
Liens for taxes, assessments or governmental charges or claims that are not yet
delinquent or that are being contested in good faith by appropriate proceedings
promptly instituted and diligently concluded, provided that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall have
been made therefor; (x) Liens incurred in the ordinary course of business of the
Company or any Subsidiary of the Company with respect to obligations that do not
exceed $5.0 million at any one time outstanding and that (a) are not incurred in
connection with the borrowing of money or the obtaining of advances or credit
(other than trade credit in the ordinary course of business) and (b) do not in
the aggregate materially detract from the value of the property or materially
impair the use thereof in the operation of business by the Company or such
Subsidiary; and (xi) Liens arising by reason of (1) any attachment, judgment,
decree or order of any court, so long as such Lien is being contested in good
faith and is either adequately bonded or execution thereon has been stayed
pending appeal or review, and any appropriate legal proceedings which may have
been duly initiated for the review of such attachment, judgment, decree or order
shall not have been fully terminated or the period within which such proceedings
may be initiated shall not have expired; (2) security for payment of workers'
compensation or other insurance; (3) security for the performance of tenders,
bids, leases and contracts (other than contracts for the payment of money); (4)
operation of law in favor of carriers, warehousemen, landlords, mechanics,
materialmen, laborers, employees or suppliers, incurred in the ordinary course
of business for sums which are not yet delinquent or are being contested in good
faith by negotiations or by appropriate proceedings which suspend the collection
thereof; (5) any interest or title of a lessor under any lease; and (6)
easements, rights-of-way, zoning and similar covenants and restrictions and
other similar encumbrances or title defects which, in the aggregate, are not
substantial in amount and which do not in any case materially interfere with the
ordinary course of business of the Company or any of its Subsidiaries.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Subsidiaries issued in exchange for, or the net proceeds of which
are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of the Company or any of its Subsidiaries; provided that: (i) the
principal amount (or accreted value, if applicable) of such Permitted
Refinancing Indebtedness does not exceed the principal amount of (or accreted
value, if applicable), plus accrued interest on, the Indebtedness so extended,
refinanced, renewed, replaced, defeased or refunded (plus the amount of
reasonable expenses incurred in connection therewith); (ii) such Permitted
Refinancing Indebtedness has a final maturity date later than the final maturity
date of, and has a Weighted Average Life to Maturity equal to or greater than
the Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Senior Notes, such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and is subordinated in right of payment to, the Senior Notes on terms at least
as favorable to the Holders of Senior Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and (iv) such Indebtedness is incurred either by
the Company or by the Subsidiary who is the obligor on the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded.
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
"Restricted Investment" means an Investment other than a Permitted
Investment.
85
<PAGE> 87
"Revolving Credit Facility" means that certain Revolving Credit Facility,
dated as of March 28, 1997, by and among the Company, Continental and Goodman
and the lenders party thereto, including any related notes, guarantees,
collateral documents, instruments and agreements executed in connection
therewith, and in each case, as amended, modified, renewed, refunded, replaced
or refinanced from time to time (together with any amendment, modification,
renewal, refunding, replacement or refinancing to or of any of the foregoing,
including, without limitation, any agreement modifying the maturity or
amortization schedule of or refinancing or refunding all or any portion of
Indebtedness thereunder or increasing the amount that may be borrowed under such
agreement or any successor agreement, whether or not among the same parties.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date of
the Indenture.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Subsidiary Guarantor" means each of (i) Continental and Goodman and (ii)
any other Subsidiary that executes a Subsidiary Guarantee in accordance with the
provisions of the Indenture, and their respective successors and assigns.
"Tax Payment Agreement" means that certain Tax Payment Agreement among NES
Group, Inc., the Company, Continental and Goodman, dated as of April 1, 1997, as
in effect on the date of the Indenture.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person and one or
more Wholly Owned Subsidiaries of such Person.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following summary is based on the tax laws of the United States in
effect on the date of this Prospectus, as well as judicial and administrative
interpretations thereof (in final or proposed form) available on or before such
date. There can be no assurance that the Internal Revenue Service ("Service")
will not take a contrary view, and no ruling from the Service has been or will
be sought. The laws and interpretations thereof on which this summary is based
are subject to change, which could apply retroactively.
86
<PAGE> 88
The exchange of Series A Notes for Series B Notes pursuant to the Exchange
Offer will not be a taxable event for federal income tax purposes. A holder's
holding period for Series B Notes will include the holding period for Series A
Notes. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE FEDERAL,
STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF EXCHANGING SERIES A NOTES FOR
SERIES B NOTES.
PLAN OF DISTRIBUTION
A broker-dealer that is the holder of Series A Notes that were acquired for
the account of such broker-dealer as a result of market-making or other trading
activities (other than Series A Notes acquired directly from the Company or any
affiliate of the Company) may exchange such Series A Notes for Series B Notes
pursuant to the Exchange Offer; provided, that each broker-dealer that receives
Series B Notes for its own account in exchange for Series A Notes, where such
Series A Notes were acquired by such broker-dealer as a result of market-making
or other trading activities, must acknowledge that it will deliver a prospectus
in connection with any resale of such Series B Notes. This Prospectus, as it may
be amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of Series B Notes received in exchange for Series A
Notes where such Series A Notes were acquired as a result of market-making
activities or other trading activities. The Company has agreed that for a period
of 120 days after consummation of the Exchange Offer, it will make this
Prospectus, as it may be amended or supplemented from time to time, available to
any broker-dealer for use in connection with any such resale. The Company will
not receive any proceeds from any sale of Series B Notes by broker-dealers or
any other holder of Series B Notes.
Series B Notes received by broker-dealers for their own account pursuant to
the Exchange Offer may be sold from time to time in one or more transactions in
the over-the-counter market, in negotiated transactions, through the writing of
options on the Series B Notes or a combination of such methods of resale, at
market prices prevailing at the time of resale, at prices related to such
prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such Series B Notes. Any
broker-dealer that resells Series B Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Series B Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Series B Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that by acknowledging that it will deliver
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.
For a period of 120 days after consummation of the Exchange Offer, the
Company will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal. The Company has agreed to pay all
expenses incident to the Exchange Offer and to the Company's performance of, or
compliance with, the Registration Rights Agreement (other than commissions or
concessions of any brokers or dealers) and will indemnify the holders of the
Senior Notes (including any broker-dealers) against certain liabilities,
including liabilities under the Securities Act.
LEGAL MATTERS
Certain matters will be passed upon for the Company by Squire, Sanders &
Dempsey L.L.P., Cleveland, Ohio.
EXPERTS
The financial statements of Continental Global Group, Inc. at December 31,
1995 and 1996, and for each of the three years in the period ended December 31,
1996 and the financial statements of Hewitt-Robins as of and for the year ended
December 31, 1996, appearing in this Prospectus and Registration Statement have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
reports thereon appearing
87
<PAGE> 89
elsewhere herein, and are included in reliance upon such reports given upon the
authority of such firms as experts in accounting and auditing.
The consolidated financial statements of BCE Holdings Pty. Limited at June
30, 1995 and 1996 and December 31, 1996, and for each of the three years in the
period ended June 30, 1996 and for the six-month period ended December 31, 1996,
appearing in this Prospectus and Registration Statement have been audited by
Coopers & Lybrand, chartered accountants, as set forth in their report thereon
appearing elsewhere herein, and are included in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
88
<PAGE> 90
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
CONTINENTAL GLOBAL GROUP, INC.
Report of Independent Auditors........................................................ F-2
Balance Sheets as of December 31, 1995 and, 1996, and as of March 31, 1997
(unaudited)......................................................................... F-3
Statements of Income for each of the three years in the period ended
December 31, 1996, and for the three-month periods ended March 31, 1996 and 1997
(unaudited)......................................................................... F-4
Statements of Owner's Equity for each of the three years in the period ended December
31, 1996, and for the three-month period ended March 31, 1997 (unaudited)........... F-5
Statements of Cash Flows for each of the three years in the period ended December 31,
1996, and for the three-month periods ended March 31, 1996 and 1997 (unaudited)..... F-6
Notes to Financial Statements......................................................... F-7
BCE HOLDINGS PTY. LTD. ("BCE")
Report of Independent Accountant of BCE Holdings Pty. Limited......................... F-13
Consolidated Balance Sheets as of June 30, 1995, June 30, 1996, December 31, 1995
(unaudited) and December 31, 1996................................................... F-14
Consolidated Profit and Loss Statements for each of the three years in the period
ended June 30, 1996 and for the six-month periods ended December 31, 1995
(unaudited) and December 31, 1996................................................... F-15
Consolidated Statements of Changes in Shareholders' Equity for each of three years in
the period ended June 30, 1996 and for the six-month periods ended December 31, 1995
(unaudited) and December 31, 1996................................................... F-16
Consolidated Statements of Cash Flows for each of the three years in the period ended
June 30, 1996 and for the six-month periods ended December 31, 1995 (unaudited) and
December 31, 1996................................................................... F-17
Notes to and Forming Part of the Consolidated Financial Statements.................... F-18
HEWITT-ROBINS CONVEYOR COMPONENTS
Report of Independent Auditors........................................................ F-36
Balance Sheets as of December 31, 1996 and as of March 31, 1997 (unaudited)........... F-37
Statements of Income for the year ended December 31, 1996 and for the three-month
periods ended March 31, 1996 and 1997 (unaudited)................................... F-38
Statements of Division Equity for each of the three years in the period ended December
31, 1996 and for the three-month period ended March 31, 1997 (unaudited)............ F-39
Statements of Cash Flows for the year ended December 31, 1996, and for the three month
periods ended March 31, 1996 and 1997 (unaudited)................................... F-40
Notes to Financial Statements......................................................... F-41
</TABLE>
F-1
<PAGE> 91
REPORT OF INDEPENDENT AUDITORS
To the Stockholder
Continental Global Group, Inc.
We have audited the accompanying balance sheets of Continental Global Group,
Inc. and subsidiaries (see Note A) as of December 31, 1995 and 1996, and the
related statements of income, owner's equity and cash flows for each of the
three years in the period ended December 31, 1996. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Continental Global Group, Inc.
and subsidiaries at December 31, 1995 and 1996 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
Ernst & Young LLP
March 7, 1997
Cleveland, Ohio
F-2
<PAGE> 92
CONTINENTAL GLOBAL GROUP, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF
AS OF DECEMBER 31, MARCH 31,
-------------------------- -----------
1995 1996 1997
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................... $ 294,697 $ 1,022,033 $ 1,207,498
Accounts receivable, less allowance for doubtful
accounts of $425,000 in 1995, $529,540 in 1996
and $141,718 in 1997............................ 19,037,284 17,789,662 25,456,543
Inventories........................................ 20,250,165 20,536,315 22,687,245
Other current assets............................... 1,007,512 1,097,211 1,293,241
----------- ----------- -----------
Total current assets............................ 40,589,658 40,445,221 50,644,527
Property, plant and equipment:
Land and improvements.............................. 83,624 91,865 250,865
Buildings and improvements......................... 3,101,465 3,132,320 4,272,216
Machinery and equipment............................ 5,578,751 6,262,091 12,480,112
Autos and trucks................................... 364,232 358,232 1,204,682
----------- ----------- -----------
9,128,072 9,844,508 18,207,875
Less accumulated depreciation...................... 4,030,495 4,944,877 7,442,790
----------- ----------- -----------
5,097,577 4,899,631 10,765,085
Goodwill............................................. 202,679 735,548 10,294,648
Other assets......................................... 304,869 418,484 427,370
----------- ----------- -----------
$46,194,783 $46,498,884 $72,131,630
=========== =========== ===========
LIABILITIES AND OWNER'S EQUITY
Current liabilities:
Note payable....................................... $14,302,279 $12,394,541 $18,876,684
Trade accounts payable............................. 11,195,750 10,942,282 18,844,471
Accrued compensation and employee benefits......... 3,476,691 3,927,214 2,630,478
Other accrued liabilities.......................... 4,244,675 3,098,074 5,795,207
Current maturities of long-term obligations........ 2,328,493 2,557,771 3,165,440
----------- ----------- -----------
Total current liabilities....................... 35,547,888 32,919,882 49,312,280
Long-term obligations, less current maturities....... 14,508,980 11,585,314 19,852,678
Owner's equity:
Partners' (deficiency) capital..................... (3,862,085) 1,993,688 --
Stockholder's equity:
Common stock, no par value, authorized 1,500
shares, issued and outstanding 100 shares at
stated value of $5 per share.................. -- -- 500
Paid in capital................................. -- -- 1,993,188
Retained earnings............................... -- -- 972,984
----------- ----------- -----------
(3,862,085) 1,993,688 2,966,672
----------- ----------- -----------
$46,194,783 $46,498,884 $72,131,630
=========== =========== ===========
</TABLE>
See Notes to Financial Statements
F-3
<PAGE> 93
CONTINENTAL GLOBAL GROUP, INC.
INCOME STATEMENTS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
-------------------------------------------- --------------------------
1994 1995 1996 1996 1997
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales................ $114,024,939 $153,230,968 $143,524,007 $40,025,591 $47,075,637
Cost of products sold.... 94,284,684 124,948,185 114,716,416 32,282,433 37,697,172
------------ ------------ ------------ ----------- -----------
Gross profit........ 19,740,255 28,282,783 28,807,591 7,743,158 9,378,465
Operating expenses:
Selling and
engineering......... 7,316,577 8,248,260 9,666,060 2,265,186 2,508,337
General and
administrative...... 3,407,079 3,421,735 3,807,465 1,083,618 2,933,232
Management fee......... 1,736,332 2,102,412 3,186,751 849,311 775,966
Contract dispute
costs............... 2,338,021
------------ ------------ ------------ ----------- -----------
Total operating
expenses.......... 14,798,009 13,772,407 16,660,276 4,198,115 6,217,535
------------ ------------ ------------ ----------- -----------
Operating income.... 4,942,246 14,510,376 12,147,315 3,545,043 3,160,930
Other expenses (income):
Interest expense....... 1,492,709 2,506,060 2,889,398 785,125 1,186,863
Miscellaneous, net..... (166,273) 219,032 318,173 101,126 49,486
------------ ------------ ------------ ----------- -----------
Total other
expenses.......... 1,326,436 2,725,092 3,207,571 886,251 1,236,349
------------ ------------ ------------ ----------- -----------
Income before
extraordinary item and
foreign income taxes... 3,615,810 11,785,284 8,939,744 2,658,792 1,924,581
Foreign income tax
credit.............. (250,000)
------------ ------------ ------------ ----------- -----------
Income before
extraordinary item..... 3,615,810 11,785,284 8,939,744 2,658,792 2,174,581
Extraordinary item-gain
on extinguishment of
debt................... 932,145 932,145
------------ ------------ ------------ ----------- -----------
Net income.......... $ 3,615,810 $ 11,785,284 $ 9,871,889 $ 3,590,937 $ 2,174,581
============ ============ ============ =========== ===========
Tax adjusted pro forma
data:
Income before income
taxes and extraordinary
item................... $ 3,615,810 $ 11,785,284 $ 8,939,744 $ 2,658,792 $ 1,924,581
Income taxes -- Note B... 1,447,403 4,680,460 3,748,702 1,095,660 935,998
------------ ------------ ------------ ----------- -----------
Income before
extraordinary item..... 2,168,407 7,104,824 5,191,042 1,563,132 988,583
Extraordinary
item -- gain on
extinguishment of debt,
net of income taxes.... 559,288 559,288
------------ ------------ ------------ ----------- -----------
Net income.......... $ 2,168,407 $ 7,104,824 $ 5,750,330 $ 2,122,420 $ 988,583
============ ============ ============ =========== ===========
</TABLE>
See Notes to Financial Statements
F-4
<PAGE> 94
CONTINENTAL GLOBAL GROUP, INC.
STATEMENT OF OWNER'S EQUITY
<TABLE>
<CAPTION>
PARTNERS'
CAPITAL COMMON PAID-IN RETAINED
(DEFICIENCY) STOCK CAPITAL EARNINGS TOTAL
------------ ------ ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1994......... $ 6,447,922 $ 6,447,922
Net income......................... 3,615,810 3,615,810
Contributions...................... 261,140 261,140
Distributions...................... (1,447,403) (1,447,403)
------------ ---- ---------- ----------- ------------
Balance at December 31, 1994....... 8,877,469 8,877,469
Net income......................... 11,785,284 11,785,284
Contributions...................... 155,622 155,622
Distributions...................... (24,680,460) (24,680,460)
------------ ---- ---------- ----------- ------------
Balance (deficiency) at December
31, 1995......................... (3,862,085) (3,862,085)
Net income......................... 9,871,889 9,871,889
Distributions...................... (4,121,559) (4,121,559)
Equity adjustment for foreign
currency translation............. 105,443 105,443
------------ ---- ---------- ----------- ------------
Balance at December 31, 1996....... 1,993,688 1,993,688
Transfer of Partners' Capital and
formation of Continental Global
Group, Inc....................... (1,993,688) $500 $1,993,188 $ 0
Net income (unaudited)............. $ 2,174,581 2,174,581
Distributions (unaudited).......... (1,185,998) (1,185,998)
Equity adjustment for foreign
currency translation
(unaudited)...................... (15,599) (15,599)
------------ ---- ---------- ----------- ------------
Balance at March 31, 1997
(unaudited)...................... $ 0 $500 $1,993,188 $ 972,984 $ 2,966,672
============ ==== ========== =========== ============
</TABLE>
See Notes to Financial Statements
F-5
<PAGE> 95
CONTINENTAL GLOBAL GROUP, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
------------------------------------- -----------------------
1994 1995 1996 1996 1997
<S> <C> <C> <C> <C> <C>
Operating activities:
Net income....................... $3,615,810 $11,785,284 $9,871,889 $3,590,937 $2,174,581
Adjustments to reconcile net
income to net cash provided by
(used in) operating
activities:
Deferred foreign income tax
credit...................... (250,000)
Extraordinary gain on
extinguishment of debt...... (932,145) (932,145)
Provision for depreciation and
amortization................ 766,349 893,852 1,012,154 249,490 588,598
Changes in operating assets
and liabilities:
(Increase) decrease in
accounts receivable...... (5,413,981) (4,276,665) 657,816 884,274 31,119
(Increase) decrease in
inventory................ (4,460,752) (2,660,009) (59,156) 1,593,187 (72,930)
(Increase) decrease in other
assets................... (585,771) 5,443 (224,311) 34,615 173,424
Increase (decrease) in trade
accounts payable and
other current
liabilities.............. 4,280,950 4,802,188 (453,670) (1,585,029) (3,500,414)
---------- ----------- ---------- ---------- ----------
Net cash provided by
(used in) operating
activities.......... (1,797,395) 10,550,093 9,872,577 3,835,329 (855,622)
Investing activities:
Purchase of property, plant and
equipment (net)............... (1,181,292) (793,731) (617,981) (189,597) (539,367)
Purchase of BCE, net of notes to
seller........................ (7,189,125)
Purchase of CCE Pty., less cash
acquired...................... 20,153 20,153
---------- ----------- ---------- ---------- ----------
Net cash used in
investing activities... (1,181,292) (793,731) (597,828) (169,444) (7,728,492)
Financing activities:
Net (decrease) increase in
borrowings on note payable.... (372,191) 6,974,533 (1,907,738) (786,533) 6,482,143
Increase in long-term
obligations................... 6,412,507 4,117,703
Principal payments on long-term
obligations................... (1,011,212) (180,097) (2,556,702) (712,780) (628,670)
Partnership contributions........ 261,140 155,622
Distributions for income taxes... (1,447,403) (4,680,460) (4,121,559) (1,468,517) (1,185,998)
Other distributions.............. (20,000,000)
---------- ----------- ---------- ---------- ----------
Net cash used in
financing activities... (2,569,666) (11,317,895) (8,585,999) (2,967,830) 8,785,178
Effect of exchange rate on cash.... 38,586 1,358 (15,599)
---------- ----------- ---------- ---------- ----------
(Decrease) increase in cash and
cash equivalents................. (5,548,353) (1,561,533) 727,336 699,413 185,465
Cash and cash equivalents at
beginning of year................ 7,404,583 1,856,230 294,697 294,697 1,022,033
---------- ----------- ---------- ---------- ----------
Cash and cash equivalents at end of
year............................. $1,856,230 $ 294,697 $1,022,033 $ 994,110 $1,207,498
========== =========== ========== ========== ==========
</TABLE>
See Notes to Financial Statements
F-6
<PAGE> 96
CONTINENTAL GLOBAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
A. ORGANIZATION AND BUSINESS
Continental Global Group, Inc. (the "Company") was formed on February 4,
1997, for the purpose of owning all of the stock of Continental Conveyor &
Equipment Company ("CCE") and Goodman Conveyor Company ("GCC"). The Company is a
Subchapter S Corporation owned 100% by NES Group, Inc.
Prior to January 1, 1997, CCE and GCC were limited partnerships under
common control by NES Group, Inc., the 99% limited partner. Both entities
manufacture and distribute bulk material handling and replacement equipment,
primarily for use in the mining industry.
Effective January 1, 1997, NES Group, Inc., transferred its interest in the
limited partnerships to CCE and GCC. Effective February 1977, NES Group, Inc.
transferred to Continental Global Group, Inc. all of the outstanding capital
stock of CCE and GCC.
B. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF COMBINATION
The financial statements include the accounts of CCE and its wholly-owned
subsidiaries and GCC. All significant intercompany accounts and transactions
have been eliminated.
BASIS OF PRESENTATION
The accompanying unaudited financial statements of the Company as of March
31, 1997, and for the three-month periods ended March 31, 1996 and 1997 have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three-months ended March 31, 1997 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1997.
REVENUE RECOGNITION
The Company generally recognizes revenue from sales at the time of shipment
rather than at the time a contract is awarded.
CASH EQUIVALENTS
The Company considers all highly liquid investments with maturities of
three months or less when purchased to be cash equivalents.
INVENTORIES
Inventories, which consist of raw materials, manufactured and purchased
parts, and work in process (it is not practical to segregate inventories into
their major classes), are stated at the lower of cost or market. The cost for
approximately 88% of inventories is determined using the last-in, first-out
("LIFO") method with the remainder determined using the first-in, first-out
("FIFO") method. Had the FIFO method of inventory (which approximates
replacement cost) been used to cost all inventories, inventories would have
increased by approximately $2,220,000 at both December 31, 1995 and December 31,
1996.
F-7
<PAGE> 97
CONTINENTAL GLOBAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation is computed
using the straight-line method based on the expected useful lives of the assets,
which are as follows:
<TABLE>
<S> <C>
Buildings and improvements................ 31.5 years
Machinery and equipment................... 7 years
Autos and trucks.......................... 5 years
</TABLE>
GOODWILL
Goodwill is being amortized on a straight-line basis, primarily over 40
years. The ongoing value and remaining useful life of goodwill are subject to
periodic evaluation and the Company currently expects the carrying amounts to be
fully recoverable. If events and circumstances indicate that goodwill might be
impaired, an undiscounted cash flow methodology would be used to determine
whether an impairment loss should be recognized.
INCOME TAXES
The Company's United States operations are not subject to income tax as
separate entities. The Company's United States income is included in the income
tax returns of the stockholder. A charge in lieu of income taxes has been
included for pro forma purposes only. The pro forma income taxes approximate an
amount based on applicable rates adjusted for permanent differences which are
not taxable or deductible for income tax purposes, except that no recognition is
given for a net operating loss.
The Company's Australian subsidiary (BCE--See Note H) is subject to
Australian income taxes. During the first quarter of 1997 a foreign income tax
credit was recorded of $250,000 due to a net operating loss by BCE of $729,000.
BCE has historically been a profitable company and the Company anticipates that
BCE will be profitable for the year ending December 31, 1997.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
At December 31, 1995 and 1996, and as of March 31, 1997, the carrying value
of cash equivalents, accounts receivable and long-term debt approximated fair
value.
F-8
<PAGE> 98
CONTINENTAL GLOBAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
C. FINANCING ARRANGEMENTS
Long-term obligations consist of the following:
<TABLE>
<CAPTION>
AS OF
AS OF DECEMBER 31, MARCH 31,
-------------------------- -----------
1995 1996 1997
<S> <C> <C> <C>
Term loan to bank amended in 1996 and refinanced
during 1995, payable in monthly installments of
$185,714 plus interest at 10.00%.................... $14,857,144 $12,628,576 $16,459,711
Australian Seller Notes, interest at 7%, payable
monthly, due February 2002.......................... 4,542,000
Subordinated secured promissory note, renegotiated in
1996, interest at 7.00%............................. 1,027,511 300,000 300,000
Subordinated note payable to an affiliate, interest at
prime rate plus 1.00%, payable annually in
arrears............................................. 350,000 350,000 350,000
Note payable by CCE Pty Ltd........................... 267,398 67,000
Obligations under capital leases...................... 602,818 597,111 1,299,407
----------- ----------- -----------
16,837,473 14,143,085 23,018,118
Less current maturities............................... 2,328,493 2,557,771 3,165,440
----------- ----------- -----------
$14,508,980 $11,585,314 $19,852,678
=========== =========== ===========
</TABLE>
Maturities of long-term obligations are as follows:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------------
1995 1996
<S> <C> <C>
1997................... $ 3,714,749 $ 2,557,771
1998................... 2,346,757 2,917,291
1999................... 2,309,428 2,529,997
2000................... 2,281,361 2,281,361
2001 and thereafter.... 6,185,178 3,856,665
----------- -----------
$16,837,473 $14,143,085
=========== ===========
</TABLE>
Effective December 13, 1996, the Company amended the Credit Facility and
Security Agreement to increase and extend the payment terms on the Term Loan, to
change the rate of interest on the Revolving Credit Agreement and the Term Loan
and modify and replace certain financial covenants and definitions contained in
the Loan Agreement. All borrowings under the Revolving Credit Agreement and Term
Loan were repaid on April 1, 1997 with the proceeds of the Series A Notes -- See
Note H.
Under the terms of the revolving credit agreement, the Company has a
maximum credit limit of $25,000,000 with approximately $10,698,000 and
$12,605,000 available for use at December 31, 1995 and 1996, respectively, with
interest at prime (8.50% plus 75% and 8.25% plus 1.00% at December 31, 1995 and
1996, respectively). This note is secured by the assets of the Company and
limits certain transactions with affiliates.
During 1996, GCC negotiated an early extinguishment of the subordinated
secured promissory note that resulted in an extraordinary gain of $932,145. A
new, $500,000 subordinated secured promissory note was issued in full settlement
of previous obligations. The amount outstanding on this note at December 31,
1996 is $300,000. This note is secured by a letter of credit.
During 1995 and 1996 the Company paid interest of $2,384,514 and
$2,844,422, respectively.
F-9
<PAGE> 99
CONTINENTAL GLOBAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
D. CAPITAL LEASES
A subsidiary of CCE has a capital lease for land and building with a lease
term of ten years which contains a purchase option exercisable at any time. The
land and building are recorded on the books at $400,000 and the building is
depreciated using the straight-line method over 31.5 years. Monthly payments of
$5,000 (includes principal and interest at 9.00%) will be made over the life of
the lease or until CCE exercises the purchase option.
CCE has a capital lease for computer equipment with a lease term of 5 years
at a monthly payment of $3,934. The computer equipment, originally capitalized
at $199,308, is being amortized over 5 years.
GCC has several capital lease agreements for certain manufacturing
equipment with aggregate capitalized cost of $161,875, which is being amortized
over 5 years.
E. EMPLOYEE BENEFIT PLANS
CCE maintains a defined benefit plan covering all union hourly-paid
employees at the Winfield plant. The contributions of CCE are made in amounts
sufficient to fund the plan's service cost on a current basis and meet the
minimum funding requirements of the Employee Retirement Income Security Act of
1974, as amended. Actuarial gains and losses are amortized over a 15 year
period, and funding of the initial past service costs plus interest therein is
over a 30 year period. The actuarial computations use the "projected unit credit
cost method," which assumed a discount rate on benefit obligations of 8.50% in
1995 and 8.00% in 1996 and an expected long-term rate of return on plan assets
of 8.00% in both 1995 and 1996.
The net pension cost is comprised of:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1995 1996
<S> <C> <C>
Service cost benefits earned during the period...................... $ 70,898 $ 87,021
Interest cost on projected benefit obligation....................... 197,599 221,332
Actual return on plan assets........................................ (419,008) (401,594)
Net amortization and deferral....................................... 544,352 267,702
---------- ----------
Total net periodic pension cost..................................... $ 393,841 $ 174,461
========== ==========
</TABLE>
The actuarial computed benefit obligations and trusteed net assets are
presented below as of December 31, 1995 and 1996. Plan assets are stated at fair
value and are composed primarily of common stocks and money market funds.
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------------
1995 1996
<S> <C> <C>
Plan assets at fair value........................................... $2,706,729 $3,470,702
Actuarial present value of accumulated and projected benefit
obligations, including vested benefits of $2,685,943 and
$2,956,576 in 1995 and 1996, respectively......................... 2,758,990 3,037,552
---------- ----------
Excess (deficiency) of plan assets over projected benefit
obligations....................................................... (52,261) 433,150
Unrecognized prior service costs.................................... 293,160 175,896
Unrecognized net (gain)............................................. (417,116) (565,010)
Unrecognized net asset.............................................. (16,236) (13,530)
---------- ----------
Pension (liability) assets.......................................... $ (192,453) $ 30,506
========== ==========
</TABLE>
CCE also maintains a defined contribution plan covering substantially all
salaried and non-union hourly employees. CCE makes annual contributions
($443,346 and $400,000 in 1995 and 1996, respectively) which fully fund
retirement benefits. No participant contributions to the plan are permitted. CCE
also maintains a
F-10
<PAGE> 100
CONTINENTAL GLOBAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
defined contribution savings and profit sharing plan which covers substantially
all salaried and non-union hourly employees. Employees may elect to contribute
up to 16.00% of their compensation. CCE will match ($227,421 and $266,437 in
1995 and 1996, respectively) a percentage of employee contributions up to 6.00%
of each employee's compensation.
GCC has a retirement savings plan covering all employees meeting certain
eligibility requirements. Under the terms of the plan, GCC voluntarily makes
annual cash contributions based on eligible employees' compensation. Expense for
the years ended December 31, 1995 and 1996 were $144,244 and $158,407,
respectively, which was equal to 3.00% of eligible employees compensation.
F. RELATED PARTY TRANSACTIONS
Management fees are charged by Nesco, Inc. to provide general management
oversight services, including legal, financial, strategic planning and business
development evaluation for the benefit of the Company.
G. CONCENTRATION OF RISK
Accounts receivable from customers in the coal mining industry were
approximately 56% at both December 31, 1995 and 1996, and sales to the coal
mining industry during 1995 and 1996 totaled approximately 47% and 45% of net
sales. The Partnerships perform periodic credit evaluations of their customers'
financial condition and generally do not require collateral. Credit losses
relating to customers in the coal mining industry have consistently been within
management's expectations and are comparable to losses for the portfolio as a
whole.
H. ACQUISITION AND DEBT ISSUANCE
In February 1996, CCE purchased the remaining 50% interest in CCE Pty.
Ltd., a joint venture in Australia at a cost of approximately $670,000, and
currently owns 100%. The acquisition was accounted for as a purchase. The net
assets of CCE Pty. Ltd. as of December 31, 1996 are $222,000.
On January 7, 1997, the Company purchased the assets of BCE Holding Company
Pty Ltd. in Australia (BCE), a major manufacturer and supplier of conveyor
equipment with net sales in 1996 of $32.6 million (U.S. Dollars). The purchase
price was $11,946,000 (U.S. dollars). In addition, the Company contributed
$3,512,000 in capital to BCE after the acquisition. Financing consisted of an
advance on the revolving credit line of approximately $6,800,000, an addition to
the existing term loan of approximately $4,500,000, and approximately $4,800,000
in seller financing. The transaction was accounted for as a purchase. The final
purchase price allocation will be based upon a final determination of the fair
values of the net assets acquired. The table below reflects the current value of
the net assets acquired of BCE:
<TABLE>
<S> <C>
Accounts receivable............................... $ 7,698,000
Inventory......................................... 2,078,000
Property, plant and equipment..................... 5,832,000
Goodwill.......................................... 9,635,000
Other assets...................................... 385,000
Accounts payable.................................. (5,954,000)
Other liabilities................................. (7,099,000)
Notes payable..................................... (629,000)
-----------
Acquisition cost.................................. $ 11,946,000
===========
</TABLE>
F-11
<PAGE> 101
CONTINENTAL GLOBAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Summarized results of operations for BCE for the three months ended March
31, 1997 are as follows:
<TABLE>
<S> <C>
Net sales.............................................. $6,834
Cost of products sold.................................. 5,212
------
Gross profit........................................... 1,622
Operating costs........................................ 2,218
------
Operating (loss)....................................... (596)
Interest expense....................................... 164
Miscellaneous, net..................................... (31)
------
Loss before income taxes............................... (729)
Income tax credit...................................... 250
------
Net loss............................................. $ 479
======
</TABLE>
On April 1, 1997, the Company acquired substantially all of the assets of
the Hewitt-Robins Conveyor Components Division of W. S. Tyler, Incorporated, a
manufacturer of idlers with net sales in 1996 of $15.1 million (the
"Hewitt-Robins Acquisition"). The purchase price for the Hewitt-Robins
Acquisition was approximately $12.6 million in cash plus assumption of
approximately $1.1 million of liabilities, subject to a negotiated price
adjustment for working capital.
On April 1, 1997, the Company issued $120 million in Series A Notes due
2007. Interest on the notes is payable semi-annually in cash in arrears. The
Senior Notes are redeemable at the option of the Company, in whole or in part,
any time on or after 2002. The proceeds of the Notes were utilized as follows:
<TABLE>
<S> <C>
Gross proceeds of Series A Notes.................. $120,000,000
Dividend to stockholder........................... (40,000,000)
Repayment of note payable......................... (18,876,684)
Repayment of term loan............................ (16,459,711)
Repayment of subordinated notes................... (650,000)
Acquisition of Hewitt-Robins...................... (12,641,000)
Fees.............................................. (4,800,000)
-----------
Excess cash from proceeds......................... $ 26,572,605
===========
</TABLE>
F-12
<PAGE> 102
REPORT OF INDEPENDENT ACCOUNTANT OF BCE HOLDINGS PTY. LIMITED
SCOPE
We have audited the consolidated special purpose balance sheets of BCE
Holdings Pty Limited as of 31 December 1996, 30 June 1996 and 30 June 1995 and
the related consolidated statements of profit and loss, changes in shareholders'
equity and cash flows for the six months period ended 31 December 1996 and for
each of the three years in the period ended 30 June 1996. The company's
directors are responsible for the financial statements and the information they
contain. We have conducted an independent audit of these financial statements in
order to express an opinion on them.
Our audit has been conducted in accordance with Australian Auditing
Standards which are generally accepted in Australia and are substantially the
same as auditing standards generally accepted in the United States. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. Our procedures included examination, on a test basis, of evidence
supporting the amounts and other disclosures in the financial statements and the
evaluation of significant accounting estimates.
AUDIT OPINION
In our opinion, the consolidated financial statements of BCE Holdings Pty
Limited present fairly in all material respects the financial position of BCE
Holdings Pty Limited as of 31 December 1996, 30 June 1996 and 1995 and the
results of its operations and cash flows for the six month period ended 31
December 1996 and for each of the years ended 30 June 1996, 1995 and 1994 in
conformity with accounting principles generally accepted in Australia.
Accounting principles generally accepted in Australia differ in certain
respects from those followed in the United States. Application of United States
generally accepted accounting principles would have affected shareholders'
equity and net profit to the extent summarised in Note 29 to the consolidated
financial statements.
COOPERS & LYBRAND
Chartered Accountants
J A Gordon
Partner
Newcastle
March 11, 1997
F-13
<PAGE> 103
BCE HOLDINGS PTY LIMITED AND
CONTROLLED ENTITIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF DECEMBER 31,
------------------- ----------------------
NOTES 1995 1996 1995 1996
(UNAUDITED)
(AUSTRALIAN DOLLARS IN THOUSANDS)
(AUSTRALIAN GAAP)
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash..................................... 6 $ 776 $ 208 $ 616 $ 11
Receivables.............................. 7 7,388 9,271 9,672 9,725
Inventories.............................. 8 3,522 3,801 4,330 2,626
Other.................................... 9 7 59 104 102
------- ------- ------- -------
Total current assets.................. 11,693 13,339 14,722 12,464
------- ------- ------- -------
Non current assets:
Property, plant and equipment............ 10 5,339 5,882 5,646 5,713
Other.................................... 11 286 362 286 382
Intangibles.............................. 12 2 2 2 2
------- ------- ------- -------
Total non current assets.............. 5,627 6,246 5,934 6,097
------- ------- ------- -------
Total assets.......................... $17,320 $19,585 $20,656 $18,561
======= ======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Creditors and borrowings................. 13 $10,801 $10,039 $11,447 $12,510
Provisions............................... 14 881 2,687 2,249 2,832
------- ------- ------- -------
Total current liabilities............. 11,682 12,726 13,696 15,342
------- ------- ------- -------
Non current liabilities:
Creditors and borrowings................. 15 1,727 347 374 281
Provisions............................... 16 103 193 157 232
------- ------- ------- -------
Total non current liabilities......... 1,830 540 531 513
------- ------- ------- -------
Total liabilities..................... 13,512 13,266 14,227 15,855
------- ------- ------- -------
Net assets............................ 3,808 6,319 6,429 2,706
======= ======= ======= =======
Shareholders' equity:
Share capital............................ 17 3 3 3 3
Reserves................................. 18 1,336 1,336 1,336 1,336
Retained profits......................... 2,378 4,493 4,661 1,361
------- ------- ------- -------
Total interest of parent's
shareholding.......................... 3,717 5,832 6,000 2,700
Outside equity interests in controlled
entities:
Share capital............................ 2 3 3 3
Reserves................................. -- -- -- --
Retained profits......................... 89 484 426 3
------- ------- ------- -------
Total outside equity interests in
controlled entities................... 91 487 429 6
------- ------- ------- -------
Total shareholders' equity............ $ 3,808 $ 6,319 $ 6,429 $ 2,706
======= ======= ======= =======
Contingent liabilities..................... 20
Commitments for expenditure................ 26
</TABLE>
The above consolidated balance sheets should be read in
conjunction with the accompanying notes.
F-14
<PAGE> 104
BCE HOLDINGS PTY LIMITED AND
CONTROLLED ENTITIES
CONSOLIDATED PROFIT AND LOSS STATEMENTS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED JUNE 30, DECEMBER 31,
------------------------------- ----------------------
NOTES 1994 1995 1996 1995 1996
(UNAUDITED)
(AUSTRALIAN DOLLARS IN THOUSANDS)
(AUSTRALIAN GAAP)
<S> <C> <C> <C> <C> <C> <C>
Trading revenue.................. $17,475 $37,773 $50,459 $28,220 $19,479
Non-trading revenue.............. 302 323 481 49 255
------- ------- ------- ------- -------
Total revenue............... 17,777 38,096 50,940 28,269 19,734
------- ------- ------- ------- -------
Operating profit before abnormal
items and income tax........... 2(a) 68 1,232 6,203 4,094 93
Abnormal items before income
tax............................ 2(c) -- -- (1,105) -- 137
------- ------- ------- ------- -------
Operating profit before income
tax............................ 68 1,232 5,098 4,094 230
------- ------- ------- ------- -------
Income tax attributable to
operating profit............... 4 114 26 1,840 1,474 91
------- ------- ------- ------- -------
Operating profit (loss) after
income tax..................... (46) 1,206 3,258 2,620 139
------- ------- ------- ------- -------
Outside equity interest in
operating profit after income
tax............................ -- (57) (413) (337) 20
Retained profits at the beginning
of the financial period........ 1,325 1,279 2,378 2,378 4,493
Adjustment to retained profits... 3 -- (50) -- -- --
------- ------- ------- ------- -------
Total available for
appropriation............. 1,279 2,378 5,223 4,661 4,652
Dividends provided for or paid... 5 -- -- 730 -- 3,291
------- ------- ------- ------- -------
Retained profits at the end
of the financial period... $ 1,279 $ 2,378 $ 4,493 $ 4,661 $ 1,361
======= ======= ======= ======= =======
</TABLE>
The above consolidated profit and loss statements should be
read in conjunction with the accompanying notes.
F-15
<PAGE> 105
BCE HOLDINGS PTY LIMITED AND
CONTROLLED ENTITIES
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED JUNE 30, DECEMBER 31,
------------------------------- ----------------------
NOTES 1994 1995 1996 1995 1996
(UNAUDITED)
(AUSTRALIAN DOLLARS IN THOUSANDS)
(AUSTRALIAN GAAP)
<S> <C> <C> <C> <C> <C> <C>
Authorised capital
Ordinary shares of $1 each..... 17 $ 100 $ 100 $ 100 $ 100 $ 100
======= ======= ======= ======= =======
Issued and paid-up capital
Balance at the beginning of the
financial period............ 3 3 3 3 3
Movement for the period........ -- -- -- -- --
------- ------- ------- ------- -------
Balance at the end of the
financial period............ 17 3 3 3 3 3
======= ======= ======= ======= =======
Retained profits
Balance at the beginning of the
financial period............ 1,325 1,279 2,378 2,378 4,493
Operating profit/(loss) after
income tax attributable to
members of BCE.............. (46) 1,149 2,845 2,283 159
------- ------- ------- ------- -------
Total available for
appropriation............... 1,279 2,428 5,223 4,661 4,652
Adjustment to retained
profits..................... 3 -- (50) -- -- --
Dividends provided for or
paid........................ 5 -- -- 730 -- 3,291
------- ------- ------- ------- -------
Balance at the end of the
financial period............ 1,279 2,378 4,493 4,661 1,361
======= ======= ======= ======= =======
Earnings per share............. 1(r) $(15.33) $383.00 $948.33 $761.00 $ 53.00
Asset revaluation reserve
Balance at the beginning of the
financial period............ 1,336 1,336 1,336 1,336 1,336
Movement for the period........ -- -- -- -- --
------- ------- ------- ------- -------
Balance at the end of the
financial period............ 18 $ 1,336 $ 1,336 $ 1,336 $ 1,336 $ 1,336
======= ======= ======= ======= =======
</TABLE>
The above consolidated statements of changes in shareholders'
equity should be read in conjunction with the accompanying notes.
F-16
<PAGE> 106
BCE HOLDINGS PTY LIMITED AND
CONTROLLED ENTITIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED JUNE 30, DECEMBER 31,
------------------------------- ----------------------
NOTES 1994 1995 1996 1995 1996
(UNAUDITED)
(AUSTRALIAN DOLLARS IN THOUSANDS)
(AUSTRALIAN GAAP)
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Receipts from customers........ $16,213 $34,405 $49,064 $25,740 $18,445
Payments to suppliers and
employees................... (16,787) (32,067) (47,589) (24,978) (17,614)
Government subsidies and other
receipts.................... 231 235 258 11 67
Dividends received............. -- -- 727 -- --
Interest received.............. 11 11 41 -- 15
Interest paid.................. (207) (235) (220) (164) (72)
------- ------- ------- ------- -------
Net cash provided by/(used
in) operating
activities................ 24 (539) 2,349 2,281 609 841
------- ------- ------- ------- -------
Cash flows from investing
activities:
Payment for property, plant &
equipment................... -- (1,189) (1,449) (698) (324)
Proceeds from sale of
equipment................... 82 178 182 8 8
------- ------- ------- ------- -------
Net cash provided by/(used
in) investing
activities................ 82 (1,011) (1,267) (690) (316)
------- ------- ------- ------- -------
Cash flows from financing
activities:
Repayment of borrowings........ -- -- (1,050) (1,050) (450)
Proceeds from borrowings....... 550 -- -- -- --
Dividends paid................. -- -- (747) -- --
Repayment of hire purchases.... (238) (277) (219) (122) (46)
------- ------- ------- ------- -------
Net cash provided by/(used
in) financing
activities................ 312 (277) (2,016) (1,172) (496)
------- ------- ------- ------- -------
Net increase/(decrease) in cash
held........................... (145) 1,061 (1,002) (1,253) 29
Cash at the beginning of the
financial period............ (489) (634) 427 427 (575)
------- ------- ------- ------- -------
Cash at the end of the financial
period......................... 6 $ (634) $ 427 $ (575) $ (826) $ (546)
======= ======= ======= ======= =======
</TABLE>
The above consolidated statements of cash flows should be read
in conjunction with the accompanying notes.
F-17
<PAGE> 107
BCE HOLDINGS PTY LIMITED AND
CONTROLLED ENTITIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These consolidated financial statements have been prepared in accordance
with Australian Accounting Standards and other mandatory professional reporting
requirements (Urgent Issues Group Consensus Views). They are prepared in
accordance with the historical cost convention, except for certain assets which,
as noted, are at valuation. The accounting policies adopted are consistent with
those of the prior years. Comparative information is reclassified where
appropriate to enhance comparability.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(a) Financial Statements Period
The financial statements have been prepared for the six month period ended
31 December 1996. Comparative financial information is for the twelve months
ended 30 June 1996, 1995 and 1994 respectively.
The six month period ended 31 December 1995 is unaudited and have been
included as comparatives for the balance sheet, profit & loss, statement of
changes in shareholders equity, statement of cash flow, notes 2(a) and 2(b), and
note 29 only.
(b) Nature of Operations
BCE Holdings Pty Limited and controlled entities is a manufacturer of
conveyor belts and components servicing the domestic and international market.
The principal activities of the group are in respect of the design, manufacture
and installation of conveyor systems and components.
(c) Principles of Consolidation
The consolidated financial statements incorporate the assets and
liabilities of all entities controlled by BCE Holdings Pty Limited ("parent
entity") and the results of all controlled entities. BCE Holdings Pty Limited
and its controlled entities together are referred to in this financial report as
the economic entity. The effects of all transactions between entities in the
economic entity are eliminated in full. Outside equity interests in the results
and equity of controlled entities are shown separately in the consolidated
profit and loss account and balance sheet respectively.
(d) Income Tax
Tax effect accounting procedures are followed whereby the income tax
expense in the profit and loss statement is matched with the accounting profit
after allowing for permanent differences. The future tax benefit relating to tax
losses is not carried forward as an asset unless the benefit is virtually
certain of realisation. Income tax on cumulative timing differences is set aside
to the deferred income tax or the future income tax benefit accounts at the
rates which are expected to apply when those timing differences reverse.
(e) Foreign Currency Translation
Foreign currency transactions are initially translated into Australian
currency at the rate of exchange at the date of the transaction. Amounts payable
and receivable in foreign currencies are translated into Australian dollars at
rates of exchange current at the end of each period. Resulting exchange
differences are brought to account in determining the profit or loss for the
year.
F-18
<PAGE> 108
BCE HOLDINGS PTY LIMITED AND
CONTROLLED ENTITIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(f) Acquisitions of Assets
The cost method of accounting is used for all acquisitions of assets
regardless of whether shares or other assets are acquired. Cost is determined as
the fair value of the assets given up at the date of acquisition plus costs
incidental to the acquisition. Where shares are issued in an acquisition, the
value of the shares is determined by reference to the fair value of the assets
acquired.
(g) Inventories
(i) Raw Materials and Stores, Work in Progress and Finished Goods
Raw materials and stores, work in progress and finished goods are
stated at the lower of cost and recoverable amount (that is, net realisable
value). Cost comprises direct materials, direct labour and an appropriate
proportion of variable and fixed overhead expenditure, the latter being
allocated on the basis of normal operating capacity.
(ii) Construction Work in Progress & Revenue Recognition
Construction work in progress is stated at cost plus attributable
profit to date less progress billings. Profit is determined on the basis of
percentage of completion of the contract. Cost includes all costs directly
related to specific contracts and an allocation of overhead expenses
incurred in connection with the economic entity's contract operations.
Indicative contract terms vary between three and thirty months depending on
the nature and extent of work involved. There are no standard terms or
conditions in respect of contracts.
Where a loss is indicated on completion, the work in progress is
reduced to the level of recoverability less progress billings. Where
billings are in excess of the cost of the job, the credit balance is
disclosed in trade creditors.
(h) Recoverable Amount of Non-current Assets
The recoverable amount of an asset is the net amount expected to be
recovered through the net cash inflows arising from its continued use and
subsequent disposal.
Where the carrying amount of a non-current asset is greater than its
recoverable amount the asset is revalued to its recoverable amount. Where net
cash inflows are derived from a group of assets working together, recoverable
amount is determined on the basis of the relevant group of assets. To the extent
that a revaluation decrement reverses a revaluation increment previously
credited to, and still included in the balance of, the asset revaluation
reserve, the decrement is debited directly to that reserve. Otherwise the
decrement is recognised as an expense in the profit and loss account.
The expected net cash flows included in determining recoverable amounts of
non-current assets are discounted to their present values using a nominal value.
(i) Revaluations of Non-current Assets
Revaluations of non-current assets reflect directors' valuations based on
independent assessments of the fair market value of the assets based on existing
use. Revaluation increments are credited directly to the asset revaluation
reserve.
Potential capital gains tax is not taken into account in determining
revaluation amounts unless there is an intention to sell the assets concerned.
Revaluations do not result in the carrying value of plant & equipment, land
or buildings exceeding recoverable amount.
F-19
<PAGE> 109
BCE HOLDINGS PTY LIMITED AND
CONTROLLED ENTITIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(j) Depreciation of Property, Plant and Equipment
Depreciation is calculated on a straight line basis to write off the net
cost or revalued amount of each item of property, plant and equipment (excluding
land) over its expected useful life. Estimates of remaining useful lives are
made on a regular basis for all assets.
Major spares purchased specifically for particular plant are included in
the cost of plant and depreciated.
The average useful lives in respect of property, plant and equipment are as
follows:
<TABLE>
<S> <C>
Buildings.......................................................... 40 years
Plant and Equipment................................................ 5 years
Motor Vehicles..................................................... 6 years
Office Equipment................................................... 3 years
Furniture and Fittings............................................. 5 years
</TABLE>
(k) Accounting Pronouncements
In March 1995, SFAS No. 121 "Accounting For the Impairment of Long-Lived
Assets and For Long-Lived Assets To Be Disposed Of" was issued. SFAS No. 121
requires that long-lived assets and identifiable intangibles to be held and used
by an entity shall be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of the assets may not be
recoverable. Measurement of the impairment loss is based on the fair value of
the asset. The Statement requires long-lived assets and certain intangible
assets to be disposed of to be reported at the lower of carrying value or fair
value (less costs to sell). The entity has implemented SFAS No. 121 effective 1
January 1996. The effect on the financial statements as a result of the adoption
was not significant.
(l) Maintenance and Repairs
Maintenance, repair costs and minor renewals are charged as expenses as
incurred.
(m) Employee Entitlements
(i) Wages and Salaries, Annual Leave and Sick Leave
Liabilities for wages and salaries, annual leave and sick leave are
recognised, and are measured as the amount unpaid at the reporting date at
current pay rates in respect of employees' services up to that date.
(ii) Long Service Leave
A liability for long service leave is recognised, and is measured as
the present value of expected future payments to be made in respect of
services provided by employees up to the reporting date. Consideration is
given to expected future wage and salary levels, experience of employee
departures and periods of service.
(n) Hire Purchase Non-Current Assets
Hire purchase assets are capitalised. The asset and liability are
established at the present value of minimum payments. Payments are allocated
between the principal component and the interest expense. The asset is
depreciated on a straight line basis over the life of the asset.
F-20
<PAGE> 110
BCE HOLDINGS PTY LIMITED AND
CONTROLLED ENTITIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(o) Service Warranties
A general warranty period of twelve months in respect of faulty products,
design, labour and materials is provided. However, by negotiation, extended
terms may be offered on individual contracts. Provisions for rectification are
based on specific assessment at balance date.
(p) Cash
For purposes of the statement of cash flows, cash includes deposits at call
which are readily convertible to cash on hand and which are used in the cash
management function on a day-to-day basis, net of outstanding bank overdrafts.
Unpresented cheques are included in trade creditors.
(q) Treatment of Period Expenses
(i) Research and Development
Costs incurred on research and development projects are expensed in
the year in which the expenditure is incurred.
(ii) Advertising
All advertising costs are treated as a period expense and expended in
the year in which they are incurred.
(r) Earnings per share
Earnings per share are determined by dividing the operating profit after
income tax attributable to members of BCE Holdings Pty Limited by the shares
outstanding during the financial year. There have been no movements in the
shares.
F-21
<PAGE> 111
BCE HOLDINGS PTY LIMITED AND
CONTROLLED ENTITIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. OPERATING PROFIT
(a) Operating profit before abnormal items and income tax is arrived at as
follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED JUNE 30, DECEMBER 31,
----------------------------------- -----------------------
1994 1995 1996 1995 1996
(UNAUDITED)
(AUSTRALIAN DOLLARS IN THOUSANDS)
(AUSTRALIAN GAAP)
<S> <C> <C> <C> <C> <C>
Trading revenue............ $17,475 $37,773 $50,459 $28,220 $19,479
Other revenue.............. 291 312 440 49 240
Interest income............ 11 11 41 -- 15
------- ------- ------- ------- -------
Total revenue.............. 17,777 38,096 50,940 28,269 19,734
Operating costs............ 17,056 36,027 43,829 23,636 19,081
Depreciation............... 461 615 897 387 486
------- ------- ------- ------- -------
Trading profit............. 260 1,454 6,214 4,246 167
Profit on sale of
non-current assets....... 15 9 103 2 1
------- ------- ------- ------- -------
Operating profit before net
interest foreign exchange
and income tax........... 275 1,463 6,317 4,248 168
------- ------- ------- ------- -------
Interest expense........... (207) (235) (179) (164) (72)
Net foreign exchange
gain/(loss).............. -- 4 65 10 (3)
------- ------- ------- ------- -------
Operating profit before
abnormal items and income
tax...................... $ 68 $ 1,232 $ 6,203 $ 4,094 $ 93
======= ======= ======= ======= =======
</TABLE>
F-22
<PAGE> 112
BCE HOLDINGS PTY LIMITED AND
CONTROLLED ENTITIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(b) Operating profit before abnormal items and income tax is also arrived
at after crediting and charging the following specific items:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED JUNE 30, DECEMBER 31,
------------------------------- --------------------
1994 1995 1996 1995 1996
(UNAUDITED)
(AUSTRALIAN DOLLARS IN THOUSANDS)
(AUSTRALIAN GAAP)
<S> <C> <C> <C> <C> <C>
Credits:
Interest income.......................... $ 11 $ 11 $ 41 $ -- $ 15
Foreign exchange gain.................... -- 4 67 11 --
Other income............................. 231 231 191 47 67
Charges:
Repairs and maintenance.................. 109 268 706 357 349
Contributions to employee
superannuation funds..................... 236 301 591 276 271
Research and development................. 287 79 109 40 72
Depreciation of property plant and
equipment................................ 461 615 897 387 486
Transfers to/(from) provisions for:
Doubtful trade debts..................... -- -- 5 -- --
Employee entitlements.................... 140 190 356 156 324
Fringe benefits tax...................... 23 44 65 24 31
Warranty................................. 12 13 (137) (137) 18
Interest paid/payable on short term debt... 115 125 116 110 46
Hire purchase contracts.................... 92 110 63 54 26
---- ---- ----- ---- ----
Interest paid to other persons............. 207 235 179 164 72
---- ---- ----- ---- ----
Amortization of capitalized leases......... 7 -- -- -- --
Bad debts.................................. -- -- 5 -- --
Provision for warranty..................... 12 13 (137) (137) 18
Foreign exchange losses.................... -- -- 2 1 3
</TABLE>
F-23
<PAGE> 113
BCE HOLDINGS PTY LIMITED AND
CONTROLLED ENTITIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(c) Operating profit after income tax is also arrived at after crediting
and charging the following abnormal items:
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED JUNE 30, ENDED
------------------------- DECEMBER 31,
1994 1995 1996 1996
(AUSTRALIAN DOLLARS IN THOUSANDS)
(AUSTRALIAN GAAP)
<S> <C> <C> <C> <C>
Credit
Refund of consulting fees................ $ -- $ -- $ -- $162
Payment of consulting fees............... -- -- -- (25)
Charge
Payment of consulting fees............... -- -- (300) --
Payments to superfund for directors under
S82AAC(2D) of the Income Tax
Assessment Act........................ -- -- (805) --
--- --- ---- ---
Abnormal items before income tax........... -- -- (1,105) 137
Applicable income tax on abnormal items.... -- -- 398 (49)
--- --- ---- ---
Abnormal items after income tax............ $ -- $ -- $ (707) $ 88
=== === ==== ===
</TABLE>
3. ADJUSTMENT TO RETAINED PROFITS
The Australian Accounting Standard 1028 "Accounting for Employee
Entitlements" was adopted for the first time during the year ended 30 June 1995.
This accounting standard prescribes a change in the accounting method applied in
the economic entity in respect of the recognition of the liability for employee
entitlements.
The financial effect of the increased liability through application of the
standard at the commencement of the 1995 financial year of $50,000 has been
adjusted against retained profits at the beginning of the year to recognise this
change in accounting policy.
4. INCOME TAX
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED JUNE 30, ENDED
---------------------- DECEMBER 31,
1994 1995 1996 1996
(AUSTRALIAN DOLLARS IN THOUSANDS)
(AUSTRALIAN GAAP)
<S> <C> <C> <C> <C>
The aggregate amount of income tax attributable to the
financial year differs from the amount calculated on
the operating profit. The differences are reconciled as
follows:
Prima facie income tax on the operating profit......... $ 22 $407 $1,836 $ 83
Tax effect of permanent differences:
Investment allowance................................... -- (17) -- --
Fringe benefits tax.................................... 11 -- -- --
Non-allowance expenses................................. 187 (142) 28 8
Research and development allowance..................... (67) (190) (24) --
--- --- ----- ---
Income tax adjusted for permanent differences............ 153 58 1,840 91
Effect of increase in tax rates.......................... -- (27) -- --
Over provision of income tax in previous year............ (39) (5) -- --
--- --- ----- ---
Income tax expense....................................... $114 $ 26 $1,840 $ 91
=== === ===== ===
</TABLE>
There exists within the future income tax benefit at Note 11 an amount of
$36,619 attributable to tax losses to be carried forward by the economic entity.
F-24
<PAGE> 114
BCE HOLDINGS PTY LIMITED AND
CONTROLLED ENTITIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. DIVIDENDS PAID AND PROPOSED
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED JUNE 30, ENDED
------------------------ DECEMBER 31,
1994 1995 1996 1996
(AUSTRALIAN DOLLARS IN THOUSANDS)
(AUSTRALIAN GAAP)
<S> <C> <C> <C> <C>
Dividends paid by the Directors of the subsidiary and
holding entities...................................... $ -- $ -- $730 $3,291
==== ====== ==== ======
Retained profits and reserves that could be distributed
as franked dividends using franking credits already in
existence or which will arise from income tax payments
in the following period, and after deducting Class C
franking credits to be used in payment of the above
dividend.............................................. $764 $1,712 $718 $ 451
==== ====== ==== ======
</TABLE>
6. CURRENT ASSETS -- CASH
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF
----------------- DECEMBER 31,
1995 1996 1996
(AUSTRALIAN DOLLARS IN THOUSANDS)
(AUSTRALIAN GAAP)
<S> <C> <C> <C>
Cash on hand.......................................... $ 3 $ 5 $ 11
Cash at bank.......................................... 773 203 --
Cash on deposit....................................... -- -- --
------ ------ ------
$ 776 $ 208 $ 11
====== ====== ======
The above figures are reconciled to cash at the end of
the financial year as shown in the statement of cash
flows as follows:
Balances as above................................... $ 776 $ 208 $ 11
Less: bank overdrafts............................... (349) (783) (557)
------ ------ ------
Balances per statement of cash flows................ $ 427 $ (575) $ (546)
====== ====== ======
</TABLE>
7. CURRENT ASSETS -- RECEIVABLES
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF
----------------- DECEMBER 31,
1995 1996 1996
(AUSTRALIAN DOLLARS IN THOUSANDS)
(AUSTRALIAN GAAP)
<S> <C> <C> <C>
Trade debtors......................................... $7,280 $8,681 $ 8,418
Less provision for doubtful debts..................... (22) (22) (22)
------ ------ ------
7,258 8,659 8,396
Other debtors......................................... 38 32 1,329
Unsecured loans....................................... 92 580 --
------ ------ ------
$7,388 $9,271 $ 9,725
====== ====== ======
</TABLE>
F-25
<PAGE> 115
BCE HOLDINGS PTY LIMITED AND
CONTROLLED ENTITIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. CURRENT ASSETS -- INVENTORIES
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF
----------------- DECEMBER 31,
1995 1996 1996
(AUSTRALIAN DOLLARS IN THOUSANDS)
(AUSTRALIAN GAAP)
<S> <C> <C> <C>
Stock on hand and in transit.......................... $1,058 $1,065 $ 634
Less provision for obsolescence....................... (5) (5) (5)
------ ------ ------
1,053 1,060 629
Construction work in progress
Gross amount.......................................... 4,759 11,004 6,133
Less progress billings................................ (2,290) (8,263) (4,086)
Less write down to recoverable amount................. -- -- (50)
------ ------ ------
$3,522 $3,801 $ 2,626
====== ====== ======
</TABLE>
9. CURRENT ASSETS -- OTHER
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF
----------------- DECEMBER 31,
1995 1996 1996
(AUSTRALIAN DOLLARS IN THOUSANDS)
(AUSTRALIAN GAAP)
<S> <C> <C> <C>
Other................................................. $ 7 $ 59 $ --
Future income tax benefit............................. -- -- 102
------ ------ ------
$ 7 $ 59 $ 102
====== ====== ======
</TABLE>
F-26
<PAGE> 116
BCE HOLDINGS PTY LIMITED AND
CONTROLLED ENTITIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. NON-CURRENT ASSETS -- PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF
----------------- DECEMBER 31,
1995 1996 1996
(AUSTRALIAN DOLLARS IN THOUSANDS)
(AUSTRALIAN GAAP)
<S> <C> <C> <C>
Land at Directors valuation 1991.............................. $ 550 $ 550 $ 550
------ ------ -------
Buildings at Directors valuation 1991......................... 1,099 1,099 1,099
Less accumulated depreciation................................. (96) (123) (138)
------ ------ -------
1,003 976 961
------ ------ -------
Land and buildings at cost.................................... 609 594 585
Less accumulated depreciation................................. (36) (60) (72)
------ ------ -------
573 534 513
------ ------ -------
Plant and equipment at Directors valuation 1991............... 1,713 1,536 1,172
Less accumulated depreciation................................. (855) (845) (649)
------ ------ -------
858 691 523
------ ------ -------
Plant and equipment at cost................................... 1,924 3,214 3,318
Less accumulated depreciation................................. (302) (827) (1,016)
------ ------ -------
1,622 2,387 2,302
------ ------ -------
Motor vehicles at Directors valuation 1991.................... 112 112 112
Less accumulated depreciation................................. (93) (76) (81)
------ ------ -------
19 36 31
------ ------ -------
Motor vehicles at cost........................................ 769 899 960
Less accumulated depreciation................................. (156) (284) (335)
------ ------ -------
613 615 625
------ ------ -------
Office equipment at Directors valuation 1991.................. 88 88 441
Less: accumulated depreciation................................ (83) (84) (378)
------ ------ -------
5 4 63
------ ------ -------
Office equipment at cost...................................... 176 230 332
Less: accumulated depreciation................................ (86) (149) (217)
------ ------ -------
90 81 115
------ ------ -------
Furniture and fittings at Directors valuation................. -- -- --
Less: accumulated depreciation................................ -- -- --
------ ------ -------
-- -- --
------ ------ -------
Furniture and fittings at cost................................ 7 11 50
Less: accumulated depreciation................................ (1) (3) (20)
------ ------ -------
6 8 30
------ ------ -------
$5,339 $5,882 $ 5,713
====== ====== =======
</TABLE>
The directors revalued property, plant and equipment at 31st December, 1991
on the basis of an independent valuation of land and buildings by Robertson &
Robertson, Consulting Valuers, and the market value of plant and equipment and
office equipment.
F-27
<PAGE> 117
BCE HOLDINGS PTY LIMITED AND
CONTROLLED ENTITIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. NON-CURRENT ASSETS -- OTHER
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF
-------------------- DECEMBER 31,
1995 1996 1996
(AUSTRALIAN DOLLARS IN THOUSANDS)
(AUSTRALIAN GAAP)
<S> <C> <C> <C>
Future income tax benefit......................... $ 286 $ 362 $ 382
==== ==== ====
</TABLE>
12. NON-CURRENT ASSETS -- INTANGIBLE ASSETS
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF
-------------------- DECEMBER 31,
1995 1996 1996
(AUSTRALIAN DOLLARS IN THOUSANDS)
(AUSTRALIAN GAAP)
<S> <C> <C> <C>
Formation expenses................................ $ 2 $ 2 $ 2
==== ==== ====
</TABLE>
13. CURRENT LIABILITIES -- CREDITORS & BORROWINGS
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF
-------------------- DECEMBER 31,
1995 1996 1996
(AUSTRALIAN DOLLARS IN THOUSANDS)
(AUSTRALIAN GAAP)
<S> <C> <C> <C>
Bank overdraft secured............................ $ 349 $ 783 $ 557
Trade creditors................................... 8,093 7,461 6,459
WIP billed in advance............................. 1,297 871 506
Accrued expenses.................................. 248 218 345
Hire purchase commitments......................... 365 301 319
Less unexpired hiring charges..................... (51) (45) (43)
Bill facility secured............................. 500 450 --
Other............................................. -- -- 112
Unsecured loans................................... -- -- 502
Amounts due to related entities................... -- -- 3,753
------ ------ ------
$10,801 $10,039 $ 12,510
====== ====== ======
</TABLE>
Security over the entity's bank facilities comprises registered equitable
mortgages over the entity's real property around Australia, the entity's assets
and guarantees from the entity's directors.
14. CURRENT LIABILITIES -- PROVISIONS
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF
-------------------- DECEMBER 31,
1995 1996 1996
(AUSTRALIAN DOLLARS IN THOUSANDS)
(AUSTRALIAN GAAP)
<S> <C> <C> <C>
Income tax........................................ $ 225 $ 1,902 $ 2,031
Employee entitlements............................. 452 718 710
Warranty.......................................... 204 67 91
------- ------- -------
$ 881 $ 2,687 $ 2,832
======= ======= =======
</TABLE>
F-28
<PAGE> 118
BCE HOLDINGS PTY LIMITED AND
CONTROLLED ENTITIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. NON-CURRENT LIABILITIES -- CREDITORS AND BORROWINGS
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF
-------------------- DECEMBER 31,
1995 1996 1996
(AUSTRALIAN DOLLARS IN THOUSANDS)
(AUSTRALIAN GAAP)
<S> <C> <C> <C>
Bill facility..................................... $ 1,000 $ -- $ --
Secured loan...................................... 289 -- --
Hire purchase commitments......................... 483 372 316
Less: unexpired hiring charges.................... (45) (25) (35)
------- ------- -------
$ 1,727 $ 347 $ 281
======= ======= =======
</TABLE>
16. NON-CURRENT LIABILITIES -- PROVISIONS
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF
-------------------- DECEMBER 31,
1995 1996 1996
(AUSTRALIAN DOLLARS IN THOUSANDS)
(AUSTRALIAN GAAP)
<S> <C> <C> <C>
Employee entitlements............................. $ 103 $ 193 $ 232
======= ======= =======
</TABLE>
17. SHARE CAPITAL
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF
-------------------- DECEMBER 31,
1995 1996 1996
(AUSTRALIAN DOLLARS IN THOUSANDS)
(AUSTRALIAN GAAP)
<S> <C> <C> <C>
Authorized share capital
100,000 ordinary shares of $1 each................ $ 100 $ 100 $ 100
======= ======= =======
Issued share capital
3,000 ordinary shares of $1 each fully paid....... $ 3 $ 3 $ 3
======= ======= =======
</TABLE>
18. RESERVES
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF
-------------------- DECEMBER 31,
1995 1996 1996
(AUSTRALIAN DOLLARS IN THOUSANDS)
(AUSTRALIAN GAAP)
<S> <C> <C> <C>
Asset revaluation reserve......................... $ 1,336 $ 1,336 $ 1,336
======= ======= =======
</TABLE>
19. PARTICULARS OF CONTROLLED ENTITIES
<TABLE>
<CAPTION>
CONTRIBUTION TO ENTITY
PROFIT
AFTER TAX
-------------------------
INTEREST HELD AS OF JUNE 30,
CLASS OF -------------------- -------------------------
SHARE 1994 1995 1996 1994 1995 1996
(AUSTRALIAN DOLLARS IN THOUSANDS)
(AUSTRALIAN GAAP)
<S> <C> <C> <C> <C> <C> <C> <C>
A. Crane Pty Limited........... Ord 100% 100% 100% $ (10) $ (10) $ (10)
Australian Conveyor Engineering
Pty Limited.................. Ord 100% 100% 100% (240) 825 1,600
ACE Conveyor Components Pty
Limited...................... Ord 100% 100% 100% 203 172 38
ACE Conveyor Services Pty
Limited...................... Ord -- 75% 75% -- 168 1,594
Ringway Pty Limited............ Ord 70% 70% 60% 1 51 36
----- ----- -----
$ (46) $1,206 $3,258
===== ===== =====
</TABLE>
F-29
<PAGE> 119
BCE HOLDINGS PTY LIMITED AND
CONTROLLED ENTITIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
20. CONTINGENT LIABILITIES
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF
---------------------------- DECEMBER 31,
1994 1995 1996 1996
(AUSTRALIAN DOLLARS IN THOUSANDS)
(AUSTRALIAN GAAP)
<S> <C> <C> <C> <C>
In respect of subsidiary companies:
Guarantees and letters of credit to third
parties arising in the normal course of
business in relation to contracts
(unsecured)................................ $1,941 $2,180 $2,354 $2,810
====== ====== ====== ==========
</TABLE>
21. SEGMENTAL REPORTING
The group entities operate predominantly in the engineering industry in
Australia and South East Asia.
22. AUDITORS REMUNERATION
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED JUNE 30, ENDED
-------------------------- DECEMBER 31,
1994 1995 1996 1996
(AUSTRALIAN DOLLARS IN THOUSANDS)
(AUSTRALIAN GAAP)
<S> <C> <C> <C> <C>
Auditors remuneration
Auditing the accounts...................... $ 15 $ 35 $ 41 $ --
Other services............................. 37 12 35 --
-- -- -- --
$ 52 $ 47 $ 76 $
== == == ==
</TABLE>
The auditors received no other benefits
No audit fees have been accrued for the six months ended 31 December 1996
as costs associated with the Senior Notes will be paid from the proceeds of the
Senior Notes offering.
23. DIRECTORS REMUNERATION
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF
-------------------------- DECEMBER 31,
1994 1995 1996 1996
<S> <C> <C> <C> <C>
DIRECTORS REMUNERATION
The number of Directors of the entity whose
income from the entity and related bodies
corporate falls within the following
bands.
$60,000 - $69,000.......................... 3 3 -- --
$90,000 - $99,000.......................... -- -- 3 --
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED JUNE 30, ENDED
-------------------------- DECEMBER 31,
1994 1995 1996 1996
(AUSTRALIAN DOLLARS IN THOUSANDS)
(AUSTRALIAN GAAP)
<S> <C> <C> <C> <C>
Total income received or due and receivable
by all directors of the entity or related
bodies corporate......................... $204 $204 $270 $ --
==== ==== ==== ==========
</TABLE>
The directors have received no remuneration, other than salaries in the
usual course of business, during the 6 months ended 31 December 1996.
F-30
<PAGE> 120
BCE HOLDINGS PTY LIMITED AND
CONTROLLED ENTITIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
24. RECONCILIATION OF OPERATING PROFIT/(LOSS) AFTER INCOME TAX TO NET CASH
INFLOW FROM OPERATING ACTIVITIES
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED JUNE 30, ENDED
------------------------------- DECEMBER 31,
1994 1995 1996 1996
(AUSTRALIAN DOLLARS IN THOUSANDS)
(AUSTRALIAN GAAP)
<S> <C> <C> <C> <C>
Operating profit/(loss) after income
tax.................................... $ (46) $ 1,206 $ 3,258 $ 139
Provision for doubtful debts............. (126) -- -- --
Provision for obsolescence............... -- (15) -- --
Depreciation............................. 461 615 897 486
Net (profit)/loss on sale of non-current
assets................................. (15) (31) (103) 3
Changes in operating assets and
liabilities
(Increase)/decrease in receivables..... (782) (3,851) (1,401) 263
(Increase)/decrease in other debtors... (480) 483 6 (1,297)
(Increase)/decrease in inventories..... (1,027) (473) (279) 1,172
(Increase)/decrease in other assets.... 120 (1) (52) 59
(Increase)/decrease in FITB............ 147 (213) (76) (122)
(Increase)/decrease in loan asset...... (63) 145 (488) 580
Increase/(decrease) in trade
creditors........................... 664 4,252 (1,058) (1,367)
Increase/(decrease) in provisions...... (9) 245 219 55
Increase/(decrease) in provision for
tax................................. (119) 209 1,677 129
Increase/(decrease) in other
creditors........................... -- -- -- 112
Increase/(decrease) in accrued
expenses............................ 358 (133) (30) 127
Increase/(decrease) in loan
liability........................... 378 (89) (289) 502
------- ------- ------- -------
Net cash provided by/(used in) operating
activities............................. $ (539) $ 2,349 $ 2,281 $ 841
======= ======= ======= =======
</TABLE>
25. NON-CASH FINANCING AND INVESTING ACTIVITIES
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED JUNE 30, ENDED
------------------------------- DECEMBER 31,
1994 1995 1996 1996
(AUSTRALIAN DOLLARS IN THOUSANDS)
(AUSTRALIAN GAAP)
<S> <C> <C> <C> <C>
Acquisition of plant and equipment by hire
purchase................................ $ 468 $ 361 $ 70 $ 69
======= ======= ======= =======
</TABLE>
F-31
<PAGE> 121
BCE HOLDINGS PTY LIMITED AND
CONTROLLED ENTITIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
26. COMMITMENTS FOR EXPENDITURE
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED JUNE 30, ENDED
-------------------------- DECEMBER 31,
1994 1995 1996 1996
(AUSTRALIAN DOLLARS IN THOUSANDS)
(AUSTRALIAN GAAP)
<S> <C> <C> <C> <C>
HIRE PURCHASE COMMITMENTS
Total hire purchase expenditure contracted
for at balance date payable:
Not later than one year.................. $352 $314 $256 $276
Later than one year but not later
than 2 years..................... 64 113 278 159
Later than two years but not later
than 5 years..................... 252 325 68 43
---- ---- ---- ----
$668 $752 $602 $478
==== ==== ==== ====
</TABLE>
27. RELATED PARTIES
DIRECTORS
The name of persons who were directors of BCE Holdings Pty Limited at any
time during the financial period are as follows: P. Baird; J. Clack; and M.
Elliott.
REMUNERATION
Information on remuneration of directors is disclosed in note 23.
TRANSACTIONS WITH DIRECTORS AND DIRECTOR RELATED ENTITIES
Amounts payable to directors and their director-related entities at balance
date:
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF
------------------------------ DECEMBER 31,
1994 1995 1996 1996
(AUSTRALIAN DOLLARS IN THOUSANDS)
(AUSTRALIAN GAAP)
<S> <C> <C> <C> <C>
Current receivables..................... $ -- $ -- $170 $1,329
Current liabilities..................... -- -- -- 4,255
</TABLE>
GROUP
The group consists of BCE Holdings Pty Limited and the entities it
controlled during the financial period. Ownership interest in these entities are
set out in note 19.
Transactions between BCE Holdings Pty Limited and related parties in the
group consisted of:
(a) payment of dividends to BCE Holdings
(b) sale of materials and labour between group companies at prevailing
market rates.
Aggregate amount of transactions with entities within the group are as
follows:
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED JUNE 30, ENDED
-------------------------------- DECEMBER 31,
1994 1995 1996 1996
(AUSTRALIAN DOLLARS IN THOUSANDS)
(AUSTRALIAN GAAP)
<S> <C> <C> <C> <C>
Purchase/Sales of materials and
labour............................... $2,637 $1,418 $6,065 $833
</TABLE>
F-32
<PAGE> 122
BCE HOLDINGS PTY LIMITED AND
CONTROLLED ENTITIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
28. POST BALANCE DATE EVENTS
Since the 31 December 1996, BCE Holdings Pty Limited acquired the remaining
shares in ACE Conveyor Services Pty Limited. In addition, the group was sold in
January 1997 to Continental Conveyor & Equipment Pty Limited a company
incorporated in Australia and whose ultimate parent entity is NES Group, Inc.
The directors have entered into service agreements for a period of six years
from the date of the sale. The financial effects of these transactions have not
been brought to account.
29. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
(US GAAP) INFORMATION
Financial statements in the United States are prepared in accordance with
accounting principles generally accepted in the United States (US GAAP). In
Australia, financial statements are prepared in accordance with applicable
accounting standards issued by the Australian Accounting Standards Board and
codified in the Australian Corporations Law, and other mandatory reporting
requirements (Urgent Issues Consensus Views).
Provided below is a summary of the differences between net profit and
shareholders' equity disclosed in these financial statements and which would be
reported if the financial statements were prepared in accordance with US GAAP.
This summary is not intended to be a comprehensive US GAAP report.
(i) Revaluation of Non-Current Assets
In accordance with Australian GAAP, the company revalued freehold property,
plant and equipment with the revaluation increases being recorded to the asset
revaluation reserve included in shareholders' equity. US GAAP does not permit
the revaluation of assets in excess of cost.
The following US GAAP adjustments are required to be made in respect of the
revaluations:
(a) revaluation increases credited to the asset revaluation reserve
and debited to the relevant non-current asset accounts would be reversed;
(b) depreciation on the net revaluation increases of property would be
reversed; and
(c) reported gains and losses on disposal of non-current assets would
be adjusted where material to reflect US GAAP adjustments to carrying
values.
(ii) Accounting Changes
Effective 1 July 1994, the economic entity amended its measurement of
employee entitlement liabilities to comply with Australian Accounting Standard
AASB 1028 "Accounting for Employee Entitlements". The financial effect of the
above changes in accounting policy was adjusted against retained profits at the
beginning of the financial year in accordance with Australian GAAP. For US GAAP
purposes this adjustment was effected through the reconciliation of Australian
GAAP net income to US GAAP net income through a change of $7,000 to income for
the year ended 30 June 1994, and the balance of $43,000 being adjusted to
opening retained earnings at 1 July 1993.
(iii) Changes in Income Tax Rates
Australian GAAP requires the translation of deferred tax assets and
liabilities arising from timing differences to be recorded in the balance sheet
using the income tax rates that are expected to be applicable at the time those
timing differences reverse. For US GAAP the deferred tax assets and liabilities
are only restated in the period that the tax rate becomes applicable.
F-33
<PAGE> 123
BCE HOLDINGS PTY LIMITED AND
CONTROLLED ENTITIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(iv) Statement of Cashflows
In accordance with Australian GAAP, bank overdrafts are considered to be
part of the net cash equivalents. For US GAAP purposes the overdraft facilities
are not included in cash but disclosed in trade creditors. For US GAAP purposes
unpresented cheques are required to be included in the bank balance, the current
group policy in Australia is to include unpresented cheques in trade creditors.
RECONCILIATION OF NET INCOME
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEARS ENDED JUNE 30, DECEMBER 31,
-------------------------- --------------------
1994 1995 1996 1995 1996
(UNAUDITED)
(AUSTRALIAN DOLLARS IN THOUSANDS)
(AUSTRALIAN GAAP)
<S> <C> <C> <C> <C> <C>
Consolidated net income after tax as
reported for Australian statutory
purposes................................ $(46) $1,149 $2,845 $ 2,283 $ 159
Depreciation reversal on revalued assets
(Note i)
- pre tax............................... 61 61 61 30 30
Depreciation reversal on revalued assets
(Note i)
- tax applicable........................ (20) (20) (22) (11) (11)
Change in income tax rate (Note iii)...... -- (27) 27 27 --
Adoption of Australian Accounting Standard
AASB1028 "Accounting for Employee
Entitlements" (Note ii)................. (7) -- -- -- --
---- ------ ------ ---- ----
Net income after income tax under US
GAAP.................................... $(12) $1,163 $2,911 $ 2,329 $ 178
==== ====== ====== ==== ====
</TABLE>
RECONCILIATION OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF DECEMBER 31,
------------------- -----------------------
1995 1996 1995 1996
(UNAUDITED)
(AUSTRALIAN DOLLARS IN THOUSANDS)
(AUSTRALIAN GAAP)
<S> <C> <C> <C> <C>
Consolidated shareholders' equity
attributable to members of the parent
entity as reported for Australian
statutory purposes........................ $ 3,717 $ 5,832 $ 6,000 $ 2,700
Revaluation of non-current assets........... (1,336) (1,336) (1,336) (1,336)
Depreciation adjustment for revalued
non-current assets pre tax
-- Current year........................... 61 61 30 30
-- Prior years............................ 186 247 247 308
Depreciation adjustment for revalued
non-current assets tax applicable
-- Current year........................... (20) (22) (11) (11)
-- Prior years............................ (69) (89) (89) (111)
Change in income tax rate................... (27) -- -- --
------ ------ ------ ------
Adjusted shareholders' equity under US
GAAP...................................... $ 2,512 $ 4,693 $ 4,841 $ 1,580
====== ====== ====== ======
</TABLE>
F-34
<PAGE> 124
BCE HOLDINGS PTY LIMITED AND
CONTROLLED ENTITIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
US GAAP BALANCE SHEET
The following is a summary of certain balance sheet items and the amounts
reported in the consolidated balance sheets with the related amounts after
adjustments to conform to US GAAP.
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF DECEMBER 31,
------------------ -----------------------
1995 1996 1995 1996
(UNAUDITED)
(AUSTRALIAN DOLLARS IN THOUSANDS)
(AUSTRALIAN GAAP)
<S> <C> <C> <C> <C>
Property, plant and equipment.............. $4,250 $4,854 $ 4,587 $4,715
Provision for tax.......................... 314 2,013 2,002 2,153
Reserves................................... -- -- -- --
Retained profits........................... 2,509 4,690 4,838 1,577
</TABLE>
F-35
<PAGE> 125
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
Hewitt-Robins Conveyor Components
We have audited the accompanying balance sheet of Hewitt-Robins Conveyor
Components (an operating division of W.S. Tyler, Inc., a wholly owned subsidiary
of Process Technology Holdings, Inc.) as of December 31, 1996, and the related
statements of income, division equity and cash flows for the year then ended.
These financial statements are the responsibility of Division management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Hewitt-Robins Conveyor
Components at December 31, 1996, and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted accounting
principles.
Ernst & Young LLP
February 20, 1997
Cleveland, Ohio
F-36
<PAGE> 126
HEWITT-ROBINS CONVEYOR COMPONENTS
BALANCE SHEET
<TABLE>
<CAPTION>
AS OF AS OF
DECEMBER 31, MARCH 31,
1996 1997
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................ $ 43,081 $ 104,293
Accounts receivable (net of allowance for doubtful accounts of
$43,280 in 1996 and $37,280 in 1997).......................... 2,084,211 2,223,103
Inventories...................................................... 2,801,440 2,490,208
Other............................................................ 29,902 63,847
---------- ----------
Total current assets..................................... 4,958,634 4,881,451
Property, plant and equipment:
Land and buildings............................................... 1,460,175 1,460,175
Machinery and equipment.......................................... 1,376,034 1,377,757
---------- ----------
2,836,209 2,837,932
Less accumulated depreciation.................................... 1,174,759 1,237,457
---------- ----------
1,661,450 1,600,475
---------- ----------
$6,620,084 $6,481,926
========== ==========
LIABILITIES AND DIVISION EQUITY
Current liabilities:
Accounts payable................................................. $ 801,858 $ 787,936
Salaries, wages and related liabilities.......................... 238,438 342,431
Other accrued expenses........................................... 281,432 274,326
---------- ----------
Total current liabilities................................ 1,321,728 1,404,693
Division equity.................................................... 5,298,356 5,077,233
---------- ----------
$6,620,084 $6,481,926
========== ==========
</TABLE>
See Notes to Financial Statements
F-37
<PAGE> 127
HEWITT-ROBINS CONVEYOR COMPONENTS
STATEMENT OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, -------------------------
1996 1996 1997
(UNAUDITED)
<S> <C> <C> <C>
Net sales............................................. $ 15,060,030 $3,092,311 $3,733,871
Cost of products sold................................. 10,692,848 2,782,592 2,628,451
----------- ---------- ----------
4,367,182 1,119,719 1,105,420
Selling expenses...................................... 940,013 228,225 244,736
General and administrative expenses................... 1,068,981 271,109 258,632
----------- ---------- ----------
Income before income taxes....................... 2,358,188 620,385 602,052
Income taxes.......................................... 966,857 254,358 246,841
----------- ---------- ----------
Net income....................................... $ 1,391,331 $ 366,027 $ 355,211
=========== ========== ==========
</TABLE>
See Notes to Financial Statements
F-38
<PAGE> 128
HEWITT-ROBINS CONVEYOR COMPONENTS
STATEMENT OF DIVISION EQUITY
<TABLE>
<S> <C>
Division equity at January 1, 1996.............................................. $4,602,049
Net income...................................................................... 1,391,331
Transfer to parent.............................................................. (695,024)
----------
Division equity at December 31, 1996............................................ $5,298,356
Net income (unaudited).......................................................... 355,211
Transfer to parent (unaudited).................................................. (576,334)
----------
Division equity at March 31, 1997 (unaudited)................................... $5,077,233
==========
</TABLE>
See Notes to Financial Statements
F-39
<PAGE> 129
HEWITT-ROBINS CONVEYOR COMPONENTS
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED MARCH 31
DECEMBER 31, -------------------------
1996 1996 1997
<S> <C> <C> <C>
Operating activities:
Net income........................................... $ 1,391,331 $ 366,027 $ 355,211
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization...................... 245,067 75,852 75,948
Changes in operating assets and liabilities
Increase in accounts receivable.................... (453,296) (1,027,800) (138,892)
(Increase) decrease in inventory................... (540,036) (217,121) 311,232
Increase in other assets........................... (768) (15,723) (33,945)
Increase (decrease) in accounts payable............ 235,773 552,843 (13,922)
Increase (decrease) in other liabilities........... (61,862) 41,774 96,887
----------- ----------- ---------
Net cash provided by (used in) operating
activities............................... 816,209 (224,148) 652,519
Investing activities:
Purchase of property, plant and equipment............ (97,400) (3,067) (14,973)
----------- ----------- ---------
Net cash used in investing activities...... (97,400) (3,067) (14,973)
Financing activities:
Transfer (to) from parent............................ (695,024) 233,953 (576,334)
----------- ----------- ---------
Net cash provided by (used in) financing
activities............................... (695,024) 233,953 (576,334)
----------- ----------- ---------
Increase in cash and cash equivalents................ 23,785 6,738 61,212
Cash and cash equivalents at beginning of year....... 19,296 19,296 43,081
----------- ----------- ---------
Cash and cash equivalents at end of year... $ 43,081 $ 26,034 $ 104,293
=========== =========== =========
</TABLE>
See Notes to Financial Statements
F-40
<PAGE> 130
HEWITT-ROBINS CONVEYOR COMPONENTS
NOTES TO FINANCIAL STATEMENTS
A. ORGANIZATION AND BUSINESS
Hewitt-Robins Conveyor Components (the "Company") manufactures and sells
conveyor components, primarily idlers, for usage in the aggregate, mining,
utility and industrial sectors. The Company is an operating division of W.S.
Tyler, Inc. a wholly owned subsidiary of Process Technologies Holding, Inc. (the
"Parent Company").
B. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying unaudited financial statements of the Company as of March
31, 1997, and for the three-month periods ended March 31, 1996 and 1997 have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three-months ended March 31, 1997 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1997.
INVENTORIES
Inventories are stated at lower of cost or market. Cost is determined
principally by the first-in, first-out method.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost. Depreciation, is provided
by the straight-line method over the estimated useful life of the assets. Useful
lives are as follows: building and land improvements, 29.5 years; and machinery
and equipment, 3 to 10 years.
INCOME TAXES
Income is included in the Federal and state income tax returns of the
Parent Company. For financial reporting purposes, income tax expense is
allocated to the Company by the Parent Company on a separate return basis giving
effect to permanent differences which are not taxable or deductible for Federal
income tax purposes. All deferred income taxes are recorded by the Parent
Company, as it is the Parent Company's policy not to allocate deferred income
taxes to operating divisions.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
F-41
<PAGE> 131
HEWITT-ROBINS CONVEYOR COMPONENTS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
C. INVENTORIES
Inventories are classified as follows:
<TABLE>
<S> <C>
Raw materials.......................................................... $1,361,756
Work in process........................................................ 44,603
Finished goods......................................................... 1,529,459
Allowance for obsolescence............................................. (134,378)
----------
$2,801,440
==========
</TABLE>
D. OPERATING LEASES
The Company has certain operating leases related to its West Caldwell
facility. The building lease agreement has a monthly rent expense of $11,125 and
the computer lease agreement has a monthly rent expense of $5,619.
Future minimum lease payments required under operating leases that have
remaining noncancellable lease terms in excess of one year at December 31, 1996
are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31
<S> <C>
1997........................................... $200,928
1998........................................... 200,928
1999........................................... 200,928
2000........................................... 167,556
--------
Total minimum lease payments.............. $770,340
========
</TABLE>
E. EMPLOYEE BENEFIT PLAN
The Company has a defined contribution plan covering all non-union
employees who have completed three months or more of service. Under the terms of
the plan, employees may elect to contribute up to 3% of their compensation which
is matched 100% by the Company. In addition, the Company may contribute up to an
additional 3% as a profit sharing contribution. Expense for the year ended
December 31, 1996 was $222,152.
F. CONCENTRATION OF RISK
As of and for the year ended December 31, 1996, approximately 20% of
accounts receivable and approximately 17% of net sales were related to three
customers in the aggregate industry. Generally no collateral for accounts
receivable is required. The Company performs periodic credit evaluations of
their customers' financial condition and generally does not require collateral.
Credit losses relating to customers in the aggregate industry have consistently
been within management's expectations and are comparable to losses for the
portfolio as a whole.
G. SUBSEQUENT EVENT
On April 1, 1997, the Parent Company sold certain assets and liabilities of
the Company to Continental Global Group, Inc. for a purchase price of
approximately $12.6 million in cash plus assumption of approximately $1.1
million of liabilities, subject to a negotiated price adjustment for working
capital.
F-42
<PAGE> 132
======================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON
IN ANY JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN
IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Available Information..................... 3
Exchange Rate Data........................ 3
Prospectus Summary........................ 4
Risk Factors.............................. 14
The Company............................... 20
The Exchange Offer........................ 21
Capitalization............................ 28
Selected Historical and Pro Forma
Financial Data.......................... 29
Unaudited Pro Forma Consolidated Financial
Statements.............................. 32
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.............................. 41
Business.................................. 47
Principal Stockholder..................... 56
Management................................ 57
Related Transactions...................... 59
Description of Certain Indebtedness....... 60
Description of Senior Notes............... 61
Certain Federal Income Tax
Considerations........................ 86
Plan of Distribution...................... 87
Legal Matters............................. 87
Experts................................... 87
Index to Financial Statements............. F-1
</TABLE>
======================================================
======================================================
$120,000,000
CONTINENTAL GLOBAL
GROUP, INC.
OFFER TO EXCHANGE
11% SERIES B SENIOR NOTES DUE 2007
FOR ANY AND ALL OUTSTANDING
11% SERIES A SENIOR NOTES DUE 2007
------------------------
PROSPECTUS
------------------------
, 1997
======================================================
<PAGE> 133
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article VII, Section 7 of the Bylaws of the Company provides: "The
corporation shall indemnify its officers, directors, employees and agents to the
extent permitted by the General Corporation Law of Delaware."
Section 145 of the Delaware General Corporation Law ("DGCL") provides that
a corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the corporation) by reason of the fact that he
is or was a director, officer, employee, or agent of the corporation, or is or
was serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit, or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon
plea of nolo contendere or its equivalent, shall not, in and of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
Section 145 of the DGCL also provides that a corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the corporation unless and only to the extent that
the Court of Chancery of Delaware or the court in which such action or suit was
brought shall determine upon adjudication that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery of Delaware or such other court shall deem proper.
To the extent that a director, officer, employee or agent of the
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to above, or in defense of any claim, issue,
or matter therein, such person shall be indemnified against expenses (including
attorney's fees) actually and reasonably incurred by such person in connection
therewith.
Any such indemnification (unless ordered by a court) shall be made by the
corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in
circumstances because such person has met the applicable standard of conduct set
forth above. Such determination shall be made (i) by the board of directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding; or (ii) if such a quorum is not obtainable, or, even
if obtainable a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion; or (iii) by the stockholders.
Section 145 of the DGCL permits a Delaware business corporation to purchase
and maintain insurance on behalf of any person who is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation,
II-1
<PAGE> 134
partnership, joint venture, trust, or other enterprise against any liability
asserted against such person and incurred by such person in any such capacity,
or arising out of his status as such, whether or not the corporation would have
the power to indemnify such person against such liability.
The above discussion of Section 145 of the DGCL is not intended to be
exhaustive and is qualified in its entirety by the DGCL.
DIRECTORS AND OFFICERS INDEMNIFICATION
The Company has entered into indemnification agreements with all of its
Directors and executive officers, whereby the Company has agreed, subject to
certain exceptions, to indemnify and hold harmless such person from liabilities
incurred as a result of such person's status as a director or executive officer
of the Company. In addition, the Company has entered into indemnification
agreements with NESCO, Inc. and each director and executive officer of NESCO,
Inc., whereby the Company has agreed, subject to certain exceptions, to
indemnify and hold harmless NESCO, Inc. and each such director and executive
officer in connection with the provision of services to the Company under the
Management Agreement.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- --------------- ---------------------------------------------------------------------------
<S> <C>
3.1 Certificate of Incorporation of Continental Global Group, Inc., as
currently in effect.
3.2 By-Laws of Continental Global Group, Inc., as currently in effect.
3.3 Certificate of Incorporation of Continental Conveyor & Equipment Company,
as currently in effect.
3.4 By-Laws of Continental Conveyor & Equipment Company, as currently in
effect.
3.5 Certificate of Incorporation of Goodman Conveyor Company, as currently in
effect.
3.6 By-Laws of Goodman Conveyor Company, as currently in effect.
4.1 Indenture, dated as of April 1, 1997, among Continental Global Group, Inc.,
Continental Conveyor & Equipment Company, Goodman Conveyor Company and the
Trustee (containing, as exhibits, specimens of the Series A Notes and the
Series B Notes).
4.2 Purchase Agreement, dated as of March 26, 1997, among Continental Global
Group, Inc., Continental Conveyor & Equipment Company, Goodman Conveyor
Company and Donaldson, Lufkin & Jenrette Securities Corporation, as Initial
Purchaser, relating to the Series A Notes.
4.3 Registration Rights Agreement, dated as of April 1, 1997, among Continental
Global Group, Inc., Continental Conveyor & Equipment Company, Goodman
Conveyor Company and Donaldson, Lufkin & Jenrette Securities Corporation,
as Initial Purchaser.
4.4 Revolving Credit Facility, dated as of September 14, 1992, as amended by
Amendments I, II & III, among Continental Conveyor & Equipment Company,
Goodman Conveyor Company and Bank One, Cleveland, NA.
5 Opinion of Squire, Sanders & Dempsey L.L.P.
8 Opinion of Squire, Sanders & Dempsey L.L.P. (included in opinion filed as
Exhibit 5).
10.1 Share Sale Agreement, dated as of November 8, 1996, as amended by First and
Second Supplementary Deeds, among Continental Pty. Ltd. and various
Australian sellers, relating to the BCE Acquisition.
10.2 Asset Purchase Agreement, dated as of March 3, 1997, among Continental
Conveyor & Equipment Company, Process Technology Holdings, Inc. and W.S.
Tyler Incorporated, relating to the Hewitt-Robins Acquisition.
</TABLE>
II-2
<PAGE> 135
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- --------------- ---------------------------------------------------------------------------
<S> <C>
10.3 Management Agreement, dated as of April 1, 1997, between Continental Global
Group, Inc. and NESCO, Inc.
10.4 Tax Payment Agreement, dated as of April 1, 1997, among Continental Global
Group, Inc., Continental Conveyor & Equipment Company, Goodman Conveyor
Company and NES Group, Inc.
12 Statement regarding computation of ratio of earnings to fixed charges.
21 List of subsidiaries of the Company.
23.1 Consent of Squire, Sanders & Dempsey L.L.P. (included in opinion filed as
Exhibit 5).
23.2 Consent of Ernst & Young LLP.
23.3 Consent of Coopers & Lybrand, independent chartered accountants.
25 Statement of Eligibility and Qualification on Form T-1 of Trustee.
27 Financial Data Schedule.
27.2 Financial Data Schedule.
99 Form of Letter of Transmittal and related documents.
</TABLE>
(b) Financial Statement Schedules
No Financial Statement Schedules are required.
ITEM 22. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or otherwise, the Registrant has
been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first-class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-3
<PAGE> 136
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Winfield, State of
Alabama, on the 22nd day of May, 1997.
CONTINENTAL GLOBAL GROUP, INC.
By /s/ C. EDWARD BRYANT, JR.
------------------------------------
Name: C. Edward Bryant, Jr.
Title: President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ----------------------------------- -------------
<S> <C> <C>
/s/ C. EDWARD BRYANT, JR. President and Chief Executive May 22, 1997
- ------------------------------------------ Officer (Principal Executive
C. Edward Bryant, Jr. Officer)
/s/ JIMMY L. DICKINSON Vice President and Chief Financial May 22, 1997
- ------------------------------------------ (Principal Financial Officer and
Jimmy L. Dickinson Principal Accounting Officer)
/s/ EDWARD F. CRAWFORD Director May 22, 1997
- ------------------------------------------
Edward F. Crawford
/s/ DONALD F. HASTINGS Director May 22, 1997
- ------------------------------------------
Donald F. Hastings
/s/ JOSEPH L. MANDIA Director May 22, 1997
- ------------------------------------------
Joseph L. Mandia
/s/ ROBERT J. TOMSICH Director May 22, 1997
- ------------------------------------------
Robert J. Tomsich
/s/ JOHN R. TOMSICH Director May 22, 1997
- ------------------------------------------
John R. Tomsich
/s/ JAMES W. WERT Director May 22, 1997
- ------------------------------------------
James W. Wert
</TABLE>
II-4
<PAGE> 137
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Winfield, State of
Alabama, on the 22nd day of May, 1997.
CONTINENTAL CONVEYOR & EQUIPMENT
COMPANY
By /s/ C. EDWARD BRYANT, JR.
------------------------------------
Name: C. Edward Bryant, Jr.
Title: President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ----------------------------------- -------------
<S> <C> <C>
/s/ C. EDWARD BRYANT, JR. President and Chief Executive May 22, 1997
- ------------------------------------------ Officer (Principal Executive
C. Edward Bryant, Jr. Officer)
/s/ JIMMY L. DICKINSON Vice President of Finance May 22, 1997
- ------------------------------------------ (Principal Financial Officer and
Jimmy L. Dickinson Principal Accounting Officer)
/s/ ROBERT J. TOMSICH Director May 22, 1997
- ------------------------------------------
Robert J. Tomsich
/s/ JOHN R. TOMSICH Director May 22, 1997
- ------------------------------------------
John R. Tomsich
</TABLE>
II-5
<PAGE> 138
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Belton, State of South
Carolina, on the 22nd day of May, 1997.
GOODMAN CONVEYOR COMPANY
By /s/ RICHARD M. SICKINGER
------------------------------------
Name: Richard M. Sickinger
Title: President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ----------------------------------- -------------
<S> <C> <C>
/s/ RICHARD M. SICKINGER President May 22, 1997
- ------------------------------------------ (Principal Executive Officer)
Richard M. Sickinger
/s/ LAWRENCE KUKULSKI Vice President - Finance and May 22, 1997
- ------------------------------------------ Administration (Principal Financial
Lawrence Kukulski Officer and Principal Accounting
Officer)
/s/ ROBERT J. TOMSICH Director May 22, 1997
- ------------------------------------------
Robert J. Tomsich
/s/ JOHN R. TOMSICH Director May 22, 1997
- ------------------------------------------
John R. Tomsich
</TABLE>
II-6
<PAGE> 139
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
<S> <C> <C>
Exhibit Number Description Page
- -------------- ----------- ----
3.1 Certificate of Incorporation of Continental Global Group,
Inc., as currently in effect.
3.2 By-Laws of Continental Global Group, Inc., as currently
in effect.
3.3 Certificate of Incorporation of Continental Conveyor
& Equipment Company, as currently in effect.
3.4 By-Laws of Continental Conveyor & Equipment
Company, as currently in effect.
3.5 Certificate of Incorporation of Goodman Conveyor
Company, as currently in effect.
3.6 By-Laws of Goodman Conveyor Company, as
currently in effect.
4.1 Indenture, dated as of April 1, 1997, among Continental
Global Group, Inc., Continental Conveyor & Equipment
Company, Goodman Conveyor Company and the Trustee
(containing, as exhibits, specimens of the Series A Notes
and the Series B Notes).
4.2 Purchase Agreement, dated as of March 26, 1997,
among Continental Global Group, Inc. Continental Conveyor
and Equipment Company, Goodman Conveyor Company and
Donaldson, Lufkin & Jenrette Securities Corporation, as
Initial Purchaser, relating to the Series A Notes.
4.3 Registration Rights Agreement, dated as April 1,
1997, among Continental Global Group, Inc., Continental
Conveyor and Equipment Company, Goodman Conveyor Company
and Donaldson, Lufkin & Jenrette Securities Corporation,
as Initial Purchaser.
4.4 Revolving Credit Facility, dated as of September 14,
1992, as amended by Amendments I, II & III,
among Continental Conveyor & Equipment Company,
Goodman Conveyor Company and Bank One, Cleveland, NA.
5 Opinion of Squire, Sanders & Dempsey L.L.P.
</TABLE>
II - 10
<PAGE> 140
8 Opinion of Squire, Sanders & Dempsey L.L.P. (included
in opinion filed as Exhibit 5).
10.1 Share Sale Agreement, dated as of November 8,
1996, as amended by First and Second Supplementary
Deeds, among Continental Pty. Ltd. and various
Australian sellers, relating to the BCE Acquisition.
10.2 Asset Purchase Agreement, dated as of March 3,
1997, among Continental Conveyor & Equipment
Company, Process Technology Holdings, Inc. and W.S.
Tyler Incorporated, relating to the Hewitt-Robins
Acquisition.
10.3 Management Agreement, dated as of April 1, 1997,
between Continental Global Group, Inc. and NESCO,
Inc.
10.4 Tax Payment Agreement, dated as of April 1, 1997,
among Continental Global Group, Inc., Continental
Conveyor & Equipment Company, Goodman
Conveyor Company and NES Group, Inc.
12 Statement regarding computation of ratio of earnings
to fixed charges.
21 List of subsidiaries of the Company.
23.1 Consent of Squire, Sanders & Dempsey L.L.P. (included in
opinion filed as Exhibit 5).
23.2 Consent of Ernst & Young LLP.
23.3 Consent of Coopers & Lybrand, independent
chartered accountants.
25 Statement of Eligibility and Qualification on Form
T-1 of Trustee.
27 Financial Data Schedule.
27.2 Financial Data Schedule.
99 Form of Letter of Transmittal and related documents.
II - 11
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
Continental Global Group, Inc.
* * * * * * *
1. The name of the corporation is Continental Global Group, Inc.
2. The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
3. The nature of the business or purposes to be conducted or promoted is
to engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
4. The total number of shares of stock which the corporation shall have
authority to issue is One Thousand Five Hundred (1500), Common Shares: all of
such shares shall be without par value.
5. The board of directors is authorized to make, alter or repeal the
bylaws of the corporation. Election of directors need not be by written ballot.
6. The name and mailing address of the sole incorporator is;
A.S. Gardner
Corporation Trust Center
1209 Orange St.
Wilmington, Delaware 19801
7. The corporation shall indemnify its officers, directors, employees
and agents to the extent permitted by the General Corporation Law of Delaware.
I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State Of Delaware, do make this certificate, hereby declaring and certifying
that this is my act and deed and the facts herein stated are true, and
accordingly have hereunto set my hand this 4th day of February, 1997.
/s/ A.S. Gardner
--------------------------------
Sole Incorporator
A.S. Gardner
<PAGE> 1
EXHIBIT 3.2
CONTINENTAL GLOBAL GROUP, INC.
* * * * *
BY-LAWS
* * * * *
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of Wilmington,
County of New Castle, State of Delaware.
Section 2. The corporation may also have offices at such other places
both within and without the State of Delaware as the board of directors may from
time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of
directors shall be held in the City of Mayfield Hts., State of Ohio, at such
place as may be fixed from time to time by the board of directors, or at such
other place either within or without the State of Delaware as shall be
designated from time to time by the board of directors and stated in the notice
of the meeting. Meetings of stockholders for any other purpose may be held at
such time and place, within or without the State of Delaware, as shall be stated
in the notice of the meeting or in a duly executed waiver of notice thereof.
<PAGE> 2
Section 2. Annual meetings of stockholders, commencing with the year
1997, shall be held, at such other date and time as shall be designated from
time to time by the board of directors and stated in the notice of the meeting,
at which they shall elect by a majority, a board of directors, and transact such
other business as may properly be brought before the meeting.
Section 3. Written notice of the annual meeting stating the place, date
and hour of the meeting shall be given to each stockholder entitled to vote at
such meeting not less than 1 nor more than 5 days before the date of the
meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting,, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 5. Special meetings of the stockholders, for any
<PAGE> 3
purpose or purposes, unless otherwise prescribed by statute or by the
certificate of incorporation, may be called by the president and shall be called
by the president or secretary at the request in writing of a majority of the
board of directors, or at the request in writing of stockholders owning a
majority in amount of the entire capital stock of the corporation issued and
outstanding and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting.
Section 6. Written notice of a special meeting stating the place, date
and hour of the meeting and the purpose or purposes for which the meeting is
called, shall be given not less than 10 nor more than 60 days before the date of
the meeting, to each stockholder entitled to vote at such meeting.
Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and outstanding
and entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum shall not be present or represented at
any meeting of the stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such adjourned
<PAGE> 4
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the certificate of incorporation, a different vote is required in which case
such express provision shall govern and control the decision of such question.
Section 10. Unless otherwise provided in the certificate of
incorporation each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on
after three years from its date, unless the proxy provides for a longer period.
At all elections of directors of the corporation each stockholder having
voting power shall be entitled to exercise the right of cumulative voting as
provided in the certificate of incorporation.
Section 11. Unless otherwise provided in the certificate of
incorporation, any action required to be taken at any annual or
<PAGE> 5
special meeting of stockholders of the corporation, or any action which may be
taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole
board shall be not less than 1 nor more than 5. The first board shall consist of
1 directors. Thereafter, within the limits above specified, the number of
directors shall be determined by resolution of the board of directors or by the
stockholders at the annual meeting. The directors shall be elected at the annual
meeting of the stockholders, except as provided in Section 2 of this Article,
and each director elected shall hold office until his successor is elected and
qualified. Directors need not be stockholders.
Section 2. Vacancies and newly created directorships resulting from any
increase in the authorized number of directors may be filled by a majority of
the directors then in office,
<PAGE> 6
though less than a quorum, or by a sole remaining director, and the directors so
chosen shall hold office until the next annual election and until their
successors are duly elected and shall qualify, unless sooner displaced. If there
are no directors in office, then an election of directors may be held in the
manner provided by statute. If, at the time of filling any vacancy or any newly
created directorship, the directors then in office shall constitute less than a
majority of the whole board (as constituted immediately prior to any such
increase), the Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent of the total number of the shares at
the time outstanding having the right to vote for such directors, summarily
order an election to be held to fill any such vacancies or newly created
directorships, or to replace the directors chosen by the directors then in
office.
Section 3. The business of the corporation shall be managed by or under
the direction of its board of directors which may exercise all such powers of
the corporation and do all such lawful acts and things as are not by statute or
by the certificate of incorporation or by these by-laws directed or required to
be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The board of directors of the corporation may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 5. The first meeting of each newly elected board of
<PAGE> 7
directors shall be held at such time and place as shall be fixed by the vote of
the stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly elected
board of directors, or in the event such meeting is not held at the time and
place so fixed by the stockholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the board of directors, or as shall be specified in a
written waiver signed by all of the directors.
Section 6. Regular meetings of the board of directors may be held
without notice at such time and at such place as shall from time to time be
determined by the board.
Section 7. Special meetings of the board may be called by the president
on 1 days' notice to each director, either personally or by mail or by facsimile
communication; special meetings shall be called by the president or secretary in
like manner and on like notice on the written request of two directors unless
the board consists of only one director; in which case special meetings shall be
called by the president or secretary in like manner and on like notice on the
written request of the sole director.
Section 8. At all meetings of a majority of the board of directors shall
constitute a quorum for the transaction of business and the act of a majority of
the directors present at
<PAGE> 8
any meeting at which there is a quorum shall be the act of the board of
directors, except as may be otherwise specifically provided by statute or by the
certificate of incorporation. If a quorum shall not be present at any meeting of
the board of directors the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum shall be present.
Section 9. Unless otherwise restricted by the certificate of
incorporation or these by-laws, any action required or permitted to be taken at
any meeting of the board of directors or of any committee thereof may be taken
without a meeting, if all members of the board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
Section 10. Unless otherwise restricted by the certificate of
incorporation or these by-laws, members of the board of directors, or any
committee designated by the board of directors, may participate in a meeting of
the board of directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
COMMITTEES OF DIRECTORS
Section 11. The board of directors may, by resolution passed by a
majority of the whole board, designate one or more committees, each committee to
consist of one or more of the
<PAGE> 9
directors of the corporation. The board may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee.
In the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the board of directors to act at the meeting in the place of
any such absent or disqualified member.
Any such committee, to the extent provided in the resolution of the
board of directors, shall have and may exercise all the powers and authority of
the board of directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the certificate of incorporation, (except
that a committee may, to the extent authorized in the resolution or resolutions
providing for the issuance of shares of stock adopted by the board of directors
as provided in Section 151(a) fix any of the preferences or rights of such
shares relating to dividends, redemption, dissolution, any distribution of
assets of the corporation or the conversion into, or the exchange of such shares
for, shares of any other class or classes or any other series of the same or any
other class or classes of stock of the corporation) adopting an
<PAGE> 10
agreement of merger or consolidation, recommending to the stockholders the sale,
lease or exchange of all or substantially all of the corporation's property and
assets, recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the by-laws of the corporation; and,
unless the resolution or the certificate of incorporation expressly so provide,
no such committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock or to adopt a certificate of ownership and
merger. Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the board of directors.
Section 12. Each committee shall keep regular minutes of its meetings
and report the same to the board of directors when required.
COMPENSATION OF DIRECTORS
Section 13. Unless otherwise restricted by the certificate of
incorporation or these by-laws, the board of directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the board of directors and may be paid
a fixed sum for attendance at each meeting of the board of directors or a stated
salary as director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
<PAGE> 11
committee meetings.
REMOVAL OF DIRECTORS
Section 14. Unless otherwise restricted by the certificate of
incorporation or by law, any director or the entire board of directors may be
removed, with or without cause, by the holders of a majority of shares entitled
to vote at an election of directors.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these by-laws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by facsimile telecommunication.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
by-laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
<PAGE> 12
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the board
of directors and shall be a president, a vice-president, a secretary and a
treasurer. The board of directors may also choose additional vice-presidents,
and one or more assistant secretaries and assistant treasurers. Any number of
offices may be held by the same person, unless the certificate of incorporation
or these by-laws otherwise provide.
Section 2. The board of directors at its first meeting after each annual
meeting of stockholders shall choose a president, one or more vice-presidents, a
secretary and a treasurer.
Section 3. The board of directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the board.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the board of directors.
Section 5. The officers of the corporation shall hold office until their
successors are chosen and qualify. Any officer elected or appointed by the board
of directors may be removed at any time by the affirmative vote of a majority of
the board of directors. Any vacancy occurring in any office of the corporation
shall be filled by the board of directors.
<PAGE> 13
THE PRESIDENT
Section 6. The president shall be the chief executive officer of the
corporation, shall preside at all meetings of the stockholders and the board of
directors, shall have general and active management of the business of the
corporation and shall see that all orders and resolutions of the board of
directors are carried into effect.
Section 7. He shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the board of
directors to some other officer or agent of the corporation.
THE VICE-PRESIDENTS
Section 8. In the absence of the president or in the event of his
inability or refusal to act, the vice-president (or in the event there be more
than one vice-president, the vice-presidents in the order designated by the
directors, or in the absence of any designation, then in the order of their
election) shall perform the duties of the president, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
president. The vice-presidents shall perform such other duties and have such
other powers as the board of directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
<PAGE> 14
Section 9. The secretary shall attend all meetings of the board of
directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and of the board of directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the board of directors, and shall
perform such other duties as may be prescribed by the board of directors or
president, under whose supervision he shall be. He shall have custody of the
corporate seal of the corporation and he, or an assistant secretary, shall have
authority to affix the same to any instrument requiring it and when so affixed,
it may be attested by his signature or by the signature of such assistant
secretary. The board of directors may give general authority to any other
officer to affix the seal of the corporation and to attest the affixing by his
signature.
Section 10. The assistant secretary, or if there be more than one, the
assistant secretaries in the order determined by the board of directors (or if
there be no such determination, then in the order of their election) shall, in
the absence of the secretary or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the secretary and shall perform
such other duties and have such other powers as the board of directors may from
time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
<PAGE> 15
Section 11. The treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the board of directors.
Section 12. He shall disburse the funds of the corporation as may be
ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the president and the board of directors, at
its regular meetings, or when the board of directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.
Section 13. If required by the board of directors, he shall give the
corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the board of directors for
the faithful performance of the duties of his office and for the restoration to
the corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
Section 14. The assistant treasurer, or if there shall be more than one,
the assistant treasurers in the order determined by the board of directors (or
if there be no such determination, then in the order of their election) shall,
in the absence of the
<PAGE> 16
treasurer or in the event of his inability or refusal to act, perform the duties
and exercise the powers of the treasurer and shall perform such other duties and
have such other powers as the board of directors may from time to time
prescribe.
ARTICLE VI
CERTIFICATES FOR SHARES
Section 1. The shares of the corporation shall be represented by a
certificate or shall be uncertificated. Certificates shall be signed by, or in
the name of the corporation by, the chairman or vice-chairman of the board of
directors, or the president or a vice-president, and by the treasurer or an
assistant treasurer, or the secretary or an assistant secretary of the
corporation.
Section 2. Any of or all the signatures on a certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The board of directors may direct a new certificate or
certificates or uncertificated shares to be issued
<PAGE> 17
in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate or
certificates or uncertificated shares, the board of directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or to give the corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
TRANSFER OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent of
the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, it shall be
the duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Upon receipt of proper transfer instructions from the registered owner of
uncertificated shares such uncertificated shares shall be cancelled and issuance
of new equivalent uncertificated shares or certificated shares shall be made to
the person entitled thereto and the transaction shall be
<PAGE> 18
recorded upon the books of the corporation.
FIXING RECORD DATE
Section 5. In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting: provided,
however, that the board of directors may fix a new record date for the adjourned
meeting.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the Owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not
<PAGE> 19
it shall have express or other notice thereof, except as otherwise provided by
the laws of Delaware.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation, subject
to the provisions of the certificate of incorporation, if any, may be declared
by the board of directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside out of
any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
ANNUAL STATEMENT
Section 3. The board of directors shall present at each annual meeting,
and at any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.
<PAGE> 20
CHECKS
Section 4. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the board of directors may from time to time designate.
FISCAL YEAR
Section 5. The fiscal year of the corporation shall be fixed by
resolution of the board of directors.
SEAL
Section 6. The corporate seal shall have inscribed thereon the name of
the corporation, the year of its organization and the words "Corporate Seal,
Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
INDEMNIFICATION
Section 7. The corporation shall indemnify its officers, directors,
employees and agents to the extent permitted by the General Corporation Law of
Delaware.
ARTICLE VIII
AMENDMENTS
Section 1. These by-laws may be altered, amended or repealed or new
by-laws may be adopted by the stockholders or by the board of directors, when
such power is conferred upon the
<PAGE> 21
board of directors by the certificate of incorporation at any regular meeting of
the stockholders or of the board of directors or at any special meeting of the
stockholders or of the board of directors if notice of such alteration,
amendment, repeal or adoption of new by-laws be contained in the notice of such
special meeting. If the power to adopt, amend or repeal by-laws is conferred
upon the board of directors by the certificate of incorporation it shall not
divest or limit the power of the stockholders to adopt, amend or repeal by-laws.
<PAGE> 1
EXHIBIT 3.3
CERTIFICATE OF INCORPORATION
----------------------------
OF
--
CC&E CORP.
----------
FIRST: The name of the Corporation is CC&E Corp.
SECOND: The address of the Corporation's registered office in the State
of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle 19801. The name of its registered agent at such
address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is One Thousand (1,000) all of which shall be shares of
Common Stock, $.0l par value.
FIFTH: The name and mailing address of the incorporator is as follows:
NAME MAILING ADDRESS
---- ---------------
Brendan Ford 3200 National City Center
Cleveland, Ohio 44114
SIXTH: The number of directors which shall constitute the whole board
shall be fixed by, or in the manner provided in, the By-laws of the Corporation.
Meetings of stockholders shall be held at such place, within or without the
State of Delaware, as may be designated by or in the manner provided in the
By-laws,
<PAGE> 2
or, if not so designated, at the registered office of the Corporation in the
State of Delaware. Election of directors need not be by written ballot unless
and to the extent that the Bylaws of the Corporation so provide.
SEVENTH: In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, alter or repeal
the By-laws of the Corporation except that any by-law adopted by the
stockholders may be altered or repealed only by the stockholders if such by-law
specifically so provides.
EIGHTH: Any one or more directors may be removed, with or without cause,
by the vote oar written consent of the holders of a majority of the issued and
outstanding shares of stock of the Corporation.
NINTH: Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them, and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under the
provisions of Section 291 of Title 8 of the Delaware Code or on the application
of trustees in dissolution or of any receiver or receivers appointed for the
Corporation under the provisions of Section 279 of Title 8 of the Delaware Code
order a meeting of the creditors or class of
-2-
<PAGE> 3
creditors, and/or of the stockholders or class of stockholders of the
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of the Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of the Corporation as a consequence of
such compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of the Corporation, as the case
may be, and also on the Corporation.
TENTH: In the event any provision (or portion thereof) of this
Certificate of Incorporation shall be found to be invalid, prohibited, or
unenforceable for any reason, the remaining provisions (or portions thereof) of
this Certificate shall be deemed to remain in full force and effect, and shall
be construed as if such invalid, prohibited, or unenforceable provision had been
stricken herefrom or otherwise rendered inapplicable, it being the intent of the
Corporation and its stockholders that each such remaining provision (or portion
thereof) of this Certificate remain, to the fullest extent permitted by law,
applicable and enforceable as to all stockholders, notwithstanding any such
finding.
-3-
<PAGE> 4
ELEVENTH: To the fullest extent permitted by the General Corporation Law
of the State of Delaware, as the same exists or may hereafter be amended, a
director of the Corporation shall not be liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
TWELFTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute and all rights conferred upon
stockholders herein are granted subject to this reservation.
THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, does make this certificate, hereby declaring and certifying
that this is my act and deed and the facts herein stated are true, and
accordingly I hereunto set my hand this day of December, 1988.
/s/ Brendan Ford
------------------------------
Brendan Ford
Sole Incorporator
-4-
<PAGE> 5
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
* * * * *
CC&E Corp., a corporation organized and existing under and by virtue of the
General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the Board Of Directors of said corporation, by the unanimous
written consent of its shareholders made effective as of January 2, 1997 with
the minutes of the Board, adopted a resolution proposing and declaring
advisable the following amendment to the Certificate of Incorporation of said
corporation:
RESOLVED, that the Certificate of Incorporation of CC&B Corp. be
amended by changing the First Article thereof so that, as amended, said
Article shall be and read as follows:
"FIRST: The name of the Corporation is Continental Conveyor & Equipment
Company."
SECOND: That in lieu of a meeting arid vote of stockholders, the
stockholders have: given unanimous Written consent to said amendment in
accordance with the provisions of Section 22S of the General Corporation Law of
the State of Delaware.
THIRD: That the aforesaid amendment was duly adopted in accordance with
the applicable provisions of Sections 242 and 228 of the General Corporation
Law of the State of Delaware.
IN WITNESS WHEREOF, said CC&E Corp. has caused this certificate to be
signed by Ralph L. Nehrig, its Vice President, this 6th day of January 1997.
CC&E CORP.
By: /s/ Ralph L. Nehrig
-------------------------------
Ralph L. Nehrig, Vice President
ATTEST
/s/ F. J. Rzicznek
- ------------------------------------
By: F. J. Rzicznek, Secretary
<PAGE> 1
EXHIBIT 3.4
BY-LAWS
OF
CC&E CORP.
ARTICLE I
---------
Meetings of Stockholders
------------------------
Section 1. ANNUAL MEETINGS. The annual meeting of stockholders shall be
held at such time and place and on such date in each year as may be fixed by the
board of directors and stated in the notice of the meeting, for the election of
directors, the consideration of reports to be laid before such meeting and the
transaction of such other business as may properly come before the meeting.
Section 2. SPECIAL MEETINGS. Special meetings of the stockholders shall
be called upon the written request of the chairman of the board of directors,
the president, the directors by action at a meeting, a majority of the directors
acting without a meeting, or of the holders of shares entitling them to exercise
a majority of the voting power of the Corporation entitled to vote thereat.
Calls for such meetings shall specify the purposes thereof. No business other
than that specified in the call shall be considered at any special meeting.
Section 3. NOTICES OF MEETINGS. Unless waived, and except as provided in
Section 230 of the General Corporation Law of the State of Delaware, written
notice of each annual or special meeting stating the date, time, place and
purposes thereof shall be given by personal delivery or by mail to each
stockholder of record entitled to vote at or entitled to notice of the meeting,
not more than sixty days nor less than ten days before any such meeting. If
mailed, such notice shall be directed to the stockholder at his address as the
same appears upon the records of the Corporation. Any stockholder, either before
or after any meeting, may waive any notice required to be given by law or under
these By-Laws.
Section 4. PLACE OF MEETINGS. Meetings of stockholders shall be held at
the principal office of the Corporation unless the board of directors determines
that a meeting shall be held at some other place within or without the State of
Delaware and causes the notice thereof to so state.
Section 5. QUORUM. The holders of shares entitling them to exercise a
majority of the voting power of the Corporation entitled to vote at any
meeting, present in person or by
<PAGE> 2
proxy, shall constitute a quorum for the transaction of business to be
considered at such meeting; provided, however, that no action required by law or
by the Certificate of Incorporation or these By-Laws to be authorized or taken
by the holders of a designated proportion of the shares of any particular class
or of each class may be authorized or taken by a lesser proportion; and
provided, further, that if a separate class vote is required with respect to any
matter, the holders of a majority of the outstanding shares of such class,
present in person or by proxy, shall constitute a quorum of such class, and the
affirmative vote of the majority of shares of such class so present shall be the
act of such class. The holders of a majority of the voting shares represented at
a meeting, whether or not a quorum is present, may adjourn such meeting from
time to time, until a quorum shall be present.
Section 6. RECORD DATE. The board of directors may fix a record date for
any lawful purpose, including, without limiting the generality of the foregoing,
the determination of stockholders entitled to (i) receive notice of or to vote
at any meeting of stockholders or any adjournment thereof or to express consent
to corporate action in writing without a meeting, (ii) receive payment of any
dividend or other distribution or allotment of any rights, or (iii) exercise any
rights in respect of any change, conversion or exchange of stock. Such record
date shall not precede the date on which the resolution fixing the record date
is adopted by the board of directors. Such record date shall not be more than
sixty days nor less than ten days before the date of such meeting, nor more than
sixty days before the date fixed for the payment of any dividend or distribution
or the date fixed for the receipt or the exercise of rights, nor more than ten
days after the date on which the resolution fixing the record date for such
written consent is adopted by the board of directors, as the case may be.
If a record date shall not be fixed in respect of any such matter, the
record date shall be determined in accordance with the General Corporation Law
of the State of Delaware.
Section 7. PROXIES. A person who is entitled to attend a stockholders'
meeting, to vote thereat, or to execute consents, waivers or releases, may be
represented at such meeting or vote thereat, and execute consents, waivers and
releases, and exercise any of his other rights, by proxy or proxies appointed by
a writing signed by such person.
-2-
<PAGE> 3
ARTICLE II
----------
Directors
---------
Section 1. NUMBER OF DIRECTORS. Until changed in accordance with the
provisions of this section, the number of directors of the Corporation, none of
whom need be stockholders, shall be one (1). The number of directors may be
fixed or changed by amendment of these By-Laws or by resolution of the board of
directors.
Section 2. ELECTION OF DIRECTORS. Directors shall be elected at the
annual meeting of stockholders, but when the annual meeting is not held or
directors are not elected thereat, they may be elected at a special meeting
called and held for that purpose. Such election shall be by ballot whenever
requested by any stockholder entitled to vote at such election, but unless such
request is made the election may be conducted in any manner approved at such
meeting.
At each meeting of stockholders for the election of directors, the
persons receiving the greatest number of votes shall be directors.
Section 3. TERM OF OFFICE. Each director shall hold office until the
annual meeting next succeeding his election and until his successor is elected
and qualified, or until his earlier resignation, removal from office or death.
Section 4. REMOVAL. All the directors, or all the directors of a
particular class, or any individual director may be removed from office, without
assigning any cause, by the vote of the holders of a majority of the voting
power entitling them to elect directors in place of those to be removed.
Section 5. VACANCIES. Vacancies in the board of directors may be filled
by a majority vote of the remaining directors until an election to fill such
vacancies is held. Stockholders entitled to elect directors shall have the right
to fill any vacancy in the board (whether the same has been temporarily filled
by the remaining directors or not) at any meeting of the stockholders called for
that purpose, and any directors elected at any such meeting of stockholders
shall serve until the next annual election of directors and until their
successors are elected and qualified.
Section 6. QUORUM AND TRANSACTION OF BUSINESS. A majority of the whole
authorized number of directors shall constitute a quorum for the transaction of
business, except that a majority of the directors in office shall constitute a
quorum for filling a vacancy on the board. Whenever less than a quorum is
present at the time and place appointed for any meeting of the
-3-
<PAGE> 4
board, a majority of those present may adjourn the meeting from time to time,
until a quorum shall be present. The act of a majority of the directors present
at a meeting at which a quorum is present shall be the act of the board.
Section 7. ANNUAL MEETING. Annual meetings of the board of directors
shall be held immediately following annual meetings of the stockholders, or as
soon thereafter as is practicable. If no annual meeting of the stockholders is
held, or if directors are not elected thereat, then the annual meeting of the
board of directors shall be held immediately following any special meeting of
the stockholders at which directors are elected, or as soon thereafter as is
practicable. If such annual meeting of directors is held immediately following a
meeting of the stockholders, it shall be held at the same place at which such
stockholders' meeting was held.
Section 8. REGULAR MEETINGS. Regular meetings of the board of directors
shall be held at such times and places, within or without the State of Delaware,
as the board of directors may, by resolution, from time to time determine. The
secretary shall give notice of each such resolution to any director who was not
present at the time the same was adopted, but no further notice of such regular
meeting need be given.
Section 9. SPECIAL MEETINGS. Special meetings of the board of directors
may be called by the chairman of the board, the president, any vice president or
any two members of the board of directors, and shall be held at such times and
places, within or without the State of Delaware, as may be specified in such
call.
Section 10. NOTICE OF ANNUAL OR SPECIAL MEETINGS. Notice of the time and
place of each annual or special meeting shall be given to each director by the
secretary or by the person or persons calling such meeting. Such notice need not
specify the purpose or purposes of the meeting and may be given in any manner or
method and at such time so that the director receiving it may have reasonable
opportunity to attend the meeting. Such notice shall, in all events, be deemed
to have been properly and duly given if mailed at least forty-eight hours prior
to the meeting and directed to the residence of each director as shown upon the
secretary's records. The giving of notice shall be deemed to have been waived by
any director who shall attend and participate in such meeting and may be waived,
in a writing, by any director either before or after such meeting.
Section 11. COMPENSATION. The directors, as such, shall be entitled to
receive such reasonable compensation, if any, for their services as may be fixed
from time to time by resolution of the board, and expenses of attendance, if
any, may be allowed for attendance at each annual, regular or special
-4-
<PAGE> 5
meeting of the board. Nothing herein contained shall be construed to preclude
any director from serving the Corporation in any other capacity and receiving
compensation therefor. Members of the executive committee or of any standing or
special committee may by resolution of the board be allowed such compensation
for their services as the board may deem reasonable, and additional compensation
may be allowed to directors for special services rendered.
ARTICLE III
-----------
Committees
----------
Section 1. EXECUTIVE COMMITTEE. The board of directors may from time to
time, by resolution passed by a majority of the whole board, create an executive
committee of three or more directors, the members of which shall be elected by
the board of directors to serve during the pleasure of the board. If the board
of directors does not designate a chairman of the executive committee, the
executive committee shall elect a chairman from its own number. Except as
otherwise provided herein and in the resolution creating an executive committee,
such committee shall, during the intervals between the meetings of the board of
directors, possess and may exercise all of the powers of the board of directors
in the management of the business and affairs of the Corporation, other than
that of filling vacancies among the directors or in any committee of the
directors or except as provided by law. The executive committee shall keep full
records and accounts of its proceedings and transactions. All action by the
executive committee shall be reported to the board of directors at its meeting
next succeeding such action and shall be subject to control, revision and
alteration by the board of directors, provided that no rights of third persons
shall be prejudicially affected thereby. Vacancies in the executive committee
shall be filled by the directors, and the directors may appoint one or more
directors as alternate members of the committee who may take the place of any
absent member or members at any meeting.
Section 2. MEETINGS OF EXECUTIVE COMMITTEE. Subject to the provisions of
these By-Laws, the executive committee shall fix its own rules of procedure and
shall meet as provided by such rules or by resolutions of the board of
directors, and it shall also meet at the call of the chairman of the board, the
president, the chairman of the executive committee or any two members of the
committee. Unless otherwise provided by such rules or by such resolutions, the
provisions of Section 10 of Article II relating to the notice required to be
given of meetings of the board of directors shall also apply to meetings of the
members of the executive committee. A majority of the executive committee
-5-
<PAGE> 6
shall be necessary to constitute a quorum. The executive committee may act in a
writing without a meeting, but no such action of the executive committee shall
be effective unless concurred in by all members of the committee.
Section 3. OTHER COMMITTEES. The board of directors may by resolution
provide for such other standing or special committees as it deems desirable, and
discontinue the same at its pleasure. Each such committee shall have such powers
and perform such duties, not inconsistent with law, as may be delegated to it by
the board of directors. The provisions of Section 1 and Section 2 of this
Article shall govern the appointment and action of such committees so far as
consistent, unless otherwise provided by the board of directors. Vacancies in
such committees shall be filled by the board of directors or as the board of
directors may provide.
ARTICLE IV
----------
Officers
--------
Section 1. GENERAL PROVISIONS. The board of directors shall elect a
president, such number of vice presidents, if any, as the board may from time to
time determine, a secretary and a treasurer. The board of directors may also
elect a chairman of the board of directors and may from time to time create such
offices and appoint such other officers, subordinate officers and assistant
officers as it may determine. The chairman of the board, if one be elected,
shall be, but the other officers need not be, chosen from among the members of
the board of directors. Any two or more of such offices, other than those of
president and vice president, may be held by the same person, but no officer
shall execute, acknowledge or verify any instrument in more than one capacity.
Section 2. TERM OF OFFICE. The officers of the Corporation shall hold
office during the pleasure of the board of directors, and, unless sooner removed
by the board of directors, until the annual meeting of the board of directors
following the date of their election and until their successors are chosen and
qualified. The board of directors may remove any officer at any time, with or
without cause. Subject to the provisions of Section 6 of Article V of these
By-Laws, a vacancy in any office, however created, shall be filled by the board
of directors.
-6-
<PAGE> 7
ARTICLE V
---------
Duties of Officers
------------------
Section 1. CHAIRMAN OF THE BOARD. The chairman of the board, if one be
elected, shall be the chief executive officer of the Corporation, shall preside
at all meetings of the board of directors and meetings of stockholders and shall
have such other powers and duties as may be prescribed by the board of
directors.
Section 2. PRESIDENT. The president shall be the chief operating officer
of the Corporation and shall exercise supervision over the business of the
Corporation and over its several officers, subject, however, to the control of
the board of directors. If no chairman of the board be elected, the president
shall be the chief executive officer of the Corporation. In the absence of the
chairman of the board, or if none be elected, the president shall preside at
meetings of stockholders. The president shall have authority to sign all
certificates for shares and all deeds, mortgages, bonds, agreements, notes, and
other instruments requiring his signature; and shall have all the powers and
duties prescribed by the General Corporation Law of the State of Delaware and
such others as the board of directors may from time to time assign to him.
Section 3. VICE PRESIDENTS. The vice presidents shall have such powers
and duties as may from time to time be assigned to them by the board of
directors, the chairman of the board or the president. At the request of the
president, or in the case of his absence or disability, the vice president
designated by the president (or in the absence of such designation, the vice
president designated by the board) shall perform all the duties of the president
and, when so acting, shall have all the powers of the president. The authority
of vice presidents to sign in the name of the Corporation certificates for
shares and deeds, mortgages, bonds, agreements, notes and other instruments
shall be coordinate with like authority of the president.
Section 4. SECRETARY. The secretary shall keep minutes of all the
proceedings of the stockholders and the board of directors and shall make proper
record of the same, which shall be attested by him; shall have authority to
execute and deliver certificates as to any of such proceedings and any other
records of the Corporation; shall have authority to sign all certificates for
shares and all deeds, mortgages, bonds, agreements, notes and other instruments
to be executed by the Corporation which require his signature; shall give notice
of meetings of stockholders and directors; shall produce on request at each
meeting of stockholders a certified list of stockholders arranged in
alphabetical order; shall keep such books and records as may be required by law
or by the board of directors; and, in general,
-7-
<PAGE> 8
shall perform all duties incident to the office of secretary and such other
duties as may from time to time be assigned to him by the board of directors,
the chairman of the board or the president.
Section 5. TREASURER. The treasurer shall have general supervision of
all finances; he shall have in charge all money, bills, notes, deeds, leases,
mortgages and similar property belonging to the Corporation, and shall do with
the same as may from time to time be required by the board of directors. He
shall cause to be kept adequate and correct accounts of the business
transactions of the Corporation, including accounts of its assets, liabilities,
receipts, disbursements, gains, losses, stated capital and shares, together with
such other accounts as may be required; and he shall have such other powers and
duties as may from time to time be assigned to him by the board of directors,
the chairman of the board or the president.
Section 6. ASSISTANT AND SUBORDINATE OFFICERS. Each other officer shall
perform such duties as the board of directors, the chairman of the board or the
president may prescribe. The board of directors may, from time to time,
authorize any officer to appoint and remove subordinate officers, to prescribe
their authority and duties, and to fix their compensation.
Section 7. DUTIES OF OFFICERS MAY BE DELEGATED. In the absence of any
officer of the Corporation, or for any other reason the board of directors may
deem sufficient, the board of directors may delegate, for the time being, the
powers or duties, or any of them, of such officers to any other officer or to
any director.
ARTICLE VI
----------
Indemnification and Insurance
-----------------------------
Section 1 INDEMNIFICATION IN NON-DERIVATIVE ACTIONS. The Corporation
shall indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the Corporation) by reason of the fact that he is or was a
director or officer of the Corporation, or is or was serving at the request of
the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best
-8-
<PAGE> 9
interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
Section 2. INDEMNIFICATION IN DERIVATIVE ACTIONS. The Corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he is
or was a director or officer of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Corporation unless and only to the extent that
the Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.
Section 3. INDEMNIFICATION AS A MATTER OF RIGHT. To the extent that a
director, officer, employee or agent of the Corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred to
in Sections 1 and 2 of this Article VI, or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith.
Section 4. DETERMINATION OF CONDUCT. Any indemnification under Sections
1 and 2 of this Article VI (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth in
Sections 1 and 2 of this Article VI. Such determination shall be made (1) by the
board of directors by a majority vote of a quorum consisting of directors
-9-
<PAGE> 10
who were not parties to such action, suit or proceeding, or (2) if such a quorum
is not obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (3) by the
stockholders.
Section 5. ADVANCE PAYMENT OF EXPENSES. Expenses incurred in defending a
civil or criminal action, suit or proceeding may be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of the director, officer, employee or agent to
repay such amount if it shall ultimately be determined that he is not entitled
to be indemnified by the Corporation as authorized in this section.
Section 6. NONEXCLUSIVITY. The indemnification and advancement of
expenses provided by, or granted pursuant to, this Article VI shall not be
deemed exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any by-law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
Section 7. LIABILITY INSURANCE. The Corporation shall have the power to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against such liability under the
provisions of this section.
Section 8. CORPORATION. For purposes of this Article VI, references to
"the Corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and employees
or agents, so that any person who is or was a director, officer, employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under the provisions of this Article VI with
respect to the resulting or surviving corporation as he would have with respect
to such constituent corporation if its separate existence had continued.
-10-
<PAGE> 11
Section 9. EMPLOYEE BENEFIT PLANS. For purposes of this Article VI,
references to any "other enterprise" shall include employee benefit plans;
references to "fines" shall include any excise taxes assessed on a person with
respect to an employee benefit plan; and references to "serving at the request
of the Corporation" shall include any service as a director, officer, employee
or agent of the Corporation which imposes duties on, or involves services by,
such director, officer, employee or agent with respect to an employee benefit
plan, its participants, or beneficiaries; and a person who acted in good faith
and in a manner he reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to in
this Article VI.
Section 10. CONTINUATION. The indemnification and advancement of
expenses provided by, or granted pursuant to, this Article VI shall, unless
otherwise provided when authorized or ratified, continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a person.
ARTICLE VII
-----------
Certificates for Shares
-----------------------
Section 1. FORM AND EXECUTION. Certificates for shares, certifying the
number of full-paid shares owned, shall be issued to each stockholder in such
form as shall be approved by the board of directors. Such certificates shall be
signed by the chairman or vice-chairman of the board of directors or the
president or a vice president and by the secretary or an assistant secretary or
the treasurer or an assistant treasurer; provided, however, that the signatures
of any of such officers and the seal of the Corporation upon such certificates
may be facsimiles, engraved, stamped or printed. If any officer or officers who
shall have signed, or whose facsimile signature shall have been used, printed or
stamped on any certificate or certificates for shares, shall cease to be such
officer or officers, because of death, resignation or otherwise, before such
certificate or certificates shall have been delivered by the Corporation, such
certificate or certificates shall nevertheless be as effective in all respects
as though signed by a duly elected, qualified and authorized officer or
officers, and as though the person or persons who signed such certificate or
certificates, or whose facsimile signature or signatures shall have been used
thereon, had not ceased to be an officer or officers of the Corporation.
-11-
<PAGE> 12
Section 2. REGISTRATION OF TRANSFER. Any certificate for shares of the
Corporation shall be transferable in person or by attorney upon the surrender
thereof to the Corporation or any transfer agent therefor (for the class of
shares represented by the certificate surrendered) properly endorsed for
transfer and accompanied by such assurances as the Corporation or such transfer
agent may require as to the genuineness and effectiveness of each necessary
endorsement.
Section 3. LOST, DESTROYED OR STOLEN CERTIFICATES. A new share
certificate or certificates may be issued in place of any certificate
theretofore issued by the Corporation which is alleged to have been lost,
destroyed or wrongfully taken upon (i) the execution and delivery to the
Corporation by the person claiming the certificate to have been lost, destroyed
or wrongfully taken of an affidavit of that fact, specifying whether or not, at
the time of such alleged loss, destruction or taking, the certificate was
endorsed, and (ii) the furnishing to the Corporation of indemnity and other
assurances, if any, satisfactory to the Corporation and to all transfer agents
and registrars of the class of shares represented by the certificate against any
and all losses, damages, costs, expenses or liabilities to which they or any of
them may be subjected by reason of the issue and delivery of such new
certificate or certificates or in respect of the original certificate.
Section 4. REGISTERED STOCKHOLDERS. A person in whose name shares are of
record on the books of the Corporation shall conclusively be deemed the
unqualified owner and holder thereof for all purposes and to have capacity to
exercise all rights of ownership. Neither the Corporation nor any transfer agent
of the Corporation shall be bound to recognize any equitable interest in or
claim to such shares on the part of any other person, whether disclosed upon
such certificate or otherwise, nor shall they be obliged to see to the execution
of any trust or obligation.
ARTICLE VIII
------------
Fiscal Year
-----------
The fiscal year of the Corporation shall commence on such date in each
year as shall be designated from time to time by the board of directors. In the
absence of such designation, the fiscal year of the Corporation shall commence
on January 1 in each year.
-12-
<PAGE> 13
ARTICLE IX
----------
Seal
----
The board of directors may provide a suitable seal containing the name
of the Corporation. If deemed advisable by the board of directors, duplicate
seals may be provided and kept for the purposes of the Corporation.
ARTICLE X
---------
Amendments
----------
These By-Laws shall be subject to alteration, amendment, repeal, or the
adoption of new By-Laws either by the affirmative vote or written consent of a
majority of the whole board of directors, or by the affirmative vote or written
consent of the holders of record of a majority of the outstanding stock of the
Corporation, present in person or represented by proxy and entitled to vote in
respect thereof, given at an annual meeting or at any special meeting at which a
quorum shall be present.
-13-
<PAGE> 1
EXHIBIT 3.5
CERTIFICATE OF INCORPORATION
----------------------------
OF
--
NEW GOODMAN CORP.
-----------------
FIRST: The name of the Corporation is New Goodman Corp.
SECOND: The address of the Corporation's registered office in the State
of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle 19801. The name of its registered agent at such
address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is One Thousand (1,000) all of which shall be shares of
Common Stock, $.0l par value.
FIFTH: The name and mailing address of the incorporator is as follows:
NAME MAILING ADDRESS
---- ---------------
Brendan Ford 3200 National City Center
Cleveland, Ohio 44114
SIXTH: The number of directors which shall constitute the whole board
shall be fixed by, or in the manner provided in, the By-laws of the Corporation.
Meetings of stockholders shall be held at such place, within or without the
State of Delaware, as may be designated by or in the manner provided in the
By-laws,
<PAGE> 2
or, if not so designated, at the registered office of the Corporation in the
State of Delaware. Election of directors need not be by written ballot unless
and to the extent that the By-laws of the Corporation so provide.
SEVENTH: In furtherance and not in limitation of the powers
conferred by statute, the Board of Directors is expressly authorized to make,
alter or repeal the By-laws of the Corporation except that any by-law adopted
by the stockholders may be altered or repealed only by the stockholders if such
by-law specifically so provides.
EIGHTH: Any one or more directors may be removed, with or
without cause, by the vote or written consent of the holders of a majority of
the issued and outstanding shares of stock of the Corporation.
NINTH: Whenever a compromise or arrangement is proposed between
the Corporation and its creditors or any class of them, and/or between the
Corporation and its stockholders or any class or them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way or the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under the
provisions of Section 291 of Title 8 of the Delaware Code or on the application
of trustees in dissolution or of any receiver or receivers appointed for the
Corporation under the provisions of Section 279 of Title 8 of the Delaware Code
order a meeting of the creditors or class of
-2-
<PAGE> 3
creditors, and/or of the stockholders or class of stockholders of the
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of the Corporation, as the case nay be, agree to any compromise or
arrangement arid to any reorganization of the Corporation as a consequence of
such compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of the Corporation, as the case
may be, and also on the Corporation.
TENTH: In the event any provision (or portion thereof) of this
certificate of Incorporation shall be found to be invalid, prohibited, or
unenforceable for any reason, the remaining provisions (or portions thereof) of
this Certificate shall be deemed to remain in full force and effect, and shall
be construed as if such invalid, prohibited, or unenforceable provision had been
stricken herefrom or otherwise rendered inapplicable, it being the intent of the
corporation and its stockholders that each such remaining provision (or portion
thereof) of this Certificate remain, to the fullest extent permitted by law,
applicable and enforceable as to all stockholders, notwithstanding any such
finding.
-3-
<PAGE> 4
ELEVENTH: To the fullest extent permitted by the General
Corporation Law of the State of Delaware, as the same exists or may hereafter be
amended, a director of the Corporation shall not be liable to the Corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director.
TWELFTH: The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this certificate of Incorporation,
in the manner now or hereafter prescribed by statute and all rights conferred
upon stockholders herein are granted subject to this reservation.
THE UNDERSIGNED, being the incorporator hereinbefore named, for
the purpose of forming a corporation pursuant to the General Corporation Law of
the State of Delaware, does make this certificate, hereby declaring and
certifying that this is my act and deed and the facts herein stated are true,
and accordingly I hereunto set my hand this 16th day of December, 1988.
----
/s/ Brendan Ford
-------------------------------
Brendan Ford
Sole Incorporator
-4-
<PAGE> 5
NEW GOODMAN CORP.
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
* * * * *
New Goodman Corp., a corporation organized and existing under and by virtue of
the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said corporation, by the unanimous
written consent of its shareholders made effective as of January 2, 1997 with
the minutes of the Board, adopted a resolution proposing and declaring
advisable the following amendment to the Certificate of Incorporation of said
corporation:
RESOLVED, that the Certificate of Incorporation of New Goodman
Corp. be amended by changing the First Article thereof so that, as
amended, said Article shall be and read as follows:
"FIRST: The name of the Corporation is "Goodman Conveyor Company."
SECOND: That in lieu of a meeting and vote of stockholders, the
stockholders have given unanimous written consent to said amendment in
accordance with the provisions of Section 228 of the General Corporation Law of
the State of Delaware.
THIRD: That the aforesaid amendment was duly adopted in accordance with
the applicable provisions of Sections 242 and 228 of the General Corporation Law
of the State of Delaware.
IN WITNESS WHEREOF, said New Goodman Corp. has caused this certificate
to be signed by Ralph L. Nehrig, its Vice President, this 6th day of January
1997.
NEW GOODMAN CORP.
By: /s/ Frank J. Rzicznek
------------------------------------
Frank J. Rzicznek, Vice President
ATTEST:
/s/ Ralph L. Nehrig
- ------------------------------
By: Ralph L. Nehrig, Secretary
<PAGE> 1
EXHIBIT 3.6
BY-LAWS
OF
NEW GOODMAN CORP.
ARTICLE I
---------
Meetings of Stockholders
------------------------
Section 1. ANNUAL MEETINGS. The annual meeting of stockholders shall be
held at such time and place and on such date in each year as may be fixed by the
board of directors and stated in the notice of the meeting, for the election of
directors, the consideration of reports to be laid before such meeting and the
transaction of such other business as may properly come before the meeting.
Section 2. SPECIAL MEETINGS. Special meetings of the stockholders shall
be called upon the written request of the chairman of the board of directors,
the president, the directors by action at a meeting, a majority of the directors
acting without a meeting, or of the holders of shares entitling them to exercise
a majority of the voting power of the Corporation entitled to vote thereat.
Calls for such meetings shall specify the purposes thereof. No business other
than that specified in the call shall be considered at any special meeting.
Section 3. NOTICES OF MEETINGS. Unless waived, and except as provided in
Section 230 of the General Corporation Law of the State of Delaware, written
notice of each annual or special meeting stating the date, time, place and
purposes thereof shall be given by personal delivery or by mail to each
stockholder of record entitled to vote at or entitled to notice of the meeting,
not more than sixty days nor less than ten days before any such meeting. If
mailed, such notice shall be directed to the stockholder at his address as the
same appears upon the records of the Corporation. Any stockholder, either before
or after any meeting, may waive any notice required to be given by law or under
these By-Laws.
Section 4. PLACE OF MEETINGS. Meetings of stockholders shall be held at
the principal office of the Corporation unless the board of directors determines
that a meeting shall be held at some other place within or without the State of
Delaware and causes the notice thereof to so state.
Section 5. QUORUM. The holders of shares entitling them to exercise a
majority of the voting power of the Corporation entitled to vote at any meeting,
present in person or by
<PAGE> 2
proxy, shall constitute a quorum for the transaction of business to be
considered at such meeting; provided, however, that no action required by law or
by the Certificate of Incorporation or these By-Laws to be authorized or taken
by the holders of a designated proportion of the shares of any particular class
or of each class may be authorized or taken by a lesser proportion; and
provided, further, that if a separate class vote is required with respect to any
matter, the holders of a majority of the outstanding shares of such class,
present in person or by proxy, shall constitute a quorum of such class, and the
affirmative vote of the majority of shares of such class so present shall be the
act of such class. The holders of a majority of the voting shares represented at
a meeting, whether or not a quorum is present, may adjourn such meeting from
time to time, until a quorum shall be present.
Section 6. RECORD DATE. The board of directors may fix a record date for
any lawful purpose, including, without limiting the generality of the foregoing,
the determination of stockholders entitled to (i) receive notice of or to vote
at any meeting of stockholders or any adjournment thereof or to express consent
to corporate action in writing without a meeting, (ii) receive payment of any
dividend or other distribution or allotment of any rights, or (iii) exercise any
rights in respect of any change, conversion or exchange of stock. Such record
date shall not precede the date on which the resolution fixing the record date
is adopted by the board of directors. Such record date shall not be more than
sixty days nor less than ten days before the date of such meeting, nor more than
sixty days before the date fixed for the payment of any dividend or distribution
or the date fixed for the receipt or the exercise of rights, nor more than ten
days after the date on which the resolution fixing the record date for such
written consent is adopted by the board of directors, as the case may be.
If a record date shall not be fixed in respect of any such matter, the
record date shall be determined in accordance with the General Corporation Law
of the State of Delaware.
Section 7. PROXIES. A person who is entitled to attend a stockholders'
meeting, to vote thereat, or to execute consents, waivers or releases, may be
represented at such meeting or vote thereat, and execute consents, waivers and
releases, and exercise. any of his other rights, by proxy or proxies appointed
by a writing signed by such person.
-2-
<PAGE> 3
ARTICLE II
----------
Directors
---------
Section 1. NUMBER OF DIRECTORS. Until changed in accordance with the
provisions of this section, the number of directors of the Corporation, none of
whom need be stockholders, shall be one (1). The number of directors may be
fixed or changed by amendment of these By-Laws or by resolution of the board of
directors.
Section 2. ELECTION OF DIRECTORS. Directors shall be elected at the
annual meeting of stockholders, but when the annual meeting is not held or
directors are not elected thereat, they may be elected at a special meeting
called and held for that purpose. Such election shall be by ballot whenever
requested by any stockholder entitled to vote at such election, but unless such
request is made the election may be conducted in any manner approved at such
meeting.
At each meeting of stockholders for the election of directors, the
persons receiving the greatest number of votes shall be directors.
Section 3. TERM OF OFFICE. Each director shall hold office until the
annual meeting next succeeding his election and until his successor is elected
and qualified, or until his earlier resignation, removal from office or death.
Section 4. REMOVAL. All the directors, or all the directors of a
particular class, or any individual director may be removed from office, without
assigning any cause, by the vote of the holders of a majority of the voting
power entitling them to elect directors in place of those to be removed.
Section 5. VACANCIES. Vacancies in the board of directors may be filled
by a majority vote of the remaining directors until an election to fill such
vacancies is held. Stockholders entitled to elect directors shall have the right
to fill any vacancy in the board (whether the same has been temporarily filled
by the remaining directors or not) at any meeting of the stockholders called for
that purpose, and any directors elected at any such meeting of stockholders
shall serve until the next annual election of directors and until their
successors are elected and qualified.
Section 6. QUORUM AND TRANSACTION OF BUSINESS. A majority of the whole
authorized number of directors shall constitute a quorum for the transaction of
business, except that a majority of the directors in office shall constitute a
quorum for filling a vacancy on the board. Whenever less than a quorum is
present at the time and place appointed for any meeting of the
-3-
<PAGE> 4
board, a majority of those present may adjourn the meeting from time to time,
until a quorum shall be present. The act of a majority of the directors present
at a meeting at which a quorum is present shall be the act of the board.
Section 7. ANNUAL MEETING. Annual meetings of the board of directors
shall be held immediately following annual meetings of the stockholders, or as
soon thereafter as is practicable. If no annual meeting of the stockholders is
held, or if directors are not elected thereat, then the annual meeting of the
board of directors shall be held immediately following any special meeting of
the stockholders at which directors are elected, or as soon thereafter as is
practicable. If such annual meeting of directors is held immediately following a
meeting of the stockholders, it shall be held at the same place at which such
stockholders' meeting was held.
Section 8. REGULAR MEETINGS. Regular meetings of the board of directors
shall be held at such times and places, within or without the State of Delaware,
as the board of directors may, by resolution, from time to time determine. The
secretary shall give notice of each such resolution to any director who was not
present at the time the same was adopted, but no further notice of such regular
meeting need be given.
Section 9. SPECIAL MEETINGS. Special meetings of the board of directors
may be called by the chairman of the board, the president, any vice president or
any two members of the board of directors, and shall be held at such times
and places, within or without the State of Delaware, as may be specified in
such call.
Section 10. NOTICE OF ANNUAL OR SPECIAL MEETINGS. Notice of the time and
place of each annual or special meeting shall be given to each director by the
secretary or by the person or persons calling such meeting. Such notice need not
specify the purpose or purposes of the meeting and may be given in any manner or
method and at such time so that the director receiving it may have reasonable
opportunity to attend the meeting. Such notice shall, in all events, be deemed
to have been properly and duly given if mailed at least forty-eight hours prior
to the meeting and directed to the residence of each director as shown upon the
secretary's records. The giving of notice shall be deemed to have been waived by
any director who shall attend and participate in such meeting and may be waived,
in a writing, by any director either before or after such meeting.
Section 11. COMPENSATION. The directors, as such, shall be entitled to
receive such reasonable compensation, if any, for their services as may be fixed
from time to time by resolution of the board, and expenses of attendance, if
any, may be allowed for attendance at each annual, regular or special
-4-
<PAGE> 5
meeting of the board. Nothing herein contained shall be construed to preclude
any director from serving the Corporation in any other capacity and receiving
compensation therefor. Members of the executive committee or of any standing or
special committee may by resolution of the board be allowed such compensation
for their services as the board may deem reasonable, and additional compensation
may be allowed to directors for special services rendered.
ARTICLE III
-----------
Committees
----------
Section 1. EXECUTIVE COMMITTEE. The board of directors may from time to
time, by resolution passed by a majority of the whole board, create an executive
committee of three or more directors, the members of which shall be elected by
the board of directors to serve during the pleasure of the board. If the board
of directors does not designate a chairman of the executive committee, the
executive committee shall elect a chairman from its own number. Except as
otherwise provided herein and in the resolution creating an executive committee,
such committee shall, during the intervals between the meetings of the board of
directors, possess and may exercise all of the powers of the board of directors
in the management of the business and affairs of the Corporation, other than
that of filling vacancies among the directors or in any committee of the
directors or except as provided by law. The executive committee shall keep full
records and accounts of its proceedings and transactions. All action by the
executive committee shall be reported to the board of directors at its meeting
next succeeding such action and shall be subject to control, revision and
alteration by the board of directors, provided that no rights of third persons
shall be prejudicially affected thereby. Vacancies in the executive committee
shall be filled by the directors, and the directors may appoint one or more
directors as alternate members of the committee who may take the place of any
absent member or members at any meeting.
Section 2. MEETINGS OF EXECUTIVE COMMITTEE. Subject to the provisions of
these By-Laws, the executive committee shall fix its own rules of procedure and
shall meet as provided by such rules or by resolutions of the board of
directors, and it shall also meet at the call of the chairman of the board, the
president, the chairman of the executive committee or any two members of the
committee. Unless otherwise provided by such rules or by such resolutions, the
provisions of Section 10 of Article II relating to the notice required to be
given of meetings of the board of directors shall also apply to meetings of the
members of the executive committee. A majority of the executive committee
-5-
<PAGE> 6
shall be necessary to constitute a quorum. The executive committee may act in a
writing without a meeting, but no such action of the executive committee shall
be effective unless concurred in by all members of the committee.
Section 3. OTHER COMMITTEES. The board of directors may by resolution
provide for such other standing or special committees as it deems desirable, and
discontinue the same at its pleasure. Each such committee shall have such powers
and perform such duties, not inconsistent with law, as may be delegated to it by
the board of directors. The provisions of Section 1 and Section 2 of this
Article shall govern the appointment and action of such committees so far as
consistent, unless otherwise provided by the board of directors. Vacancies in
such committees shall be filled by the board of directors or as the board of
directors may provide.
ARTICLE IV
----------
Officers
--------
Section 1. General Provisions. The board of directors shall elect a
president, such number of vice presidents, if any, as the board may from time to
time determine, a secretary and a treasurer. The board of directors may also
elect a chairman of the board of directors and may from time to time create such
offices and appoint such other officers, subordinate officers and assistant
officers as it may determine. The chairman of the board, if one be elected,
shall be, but the other officers need not be, chosen from among the members of
the board of directors. Any two or more of such offices, other than those of
president and vice president, may be held by the same person, but no officer
shall execute, acknowledge or verify any instrument in more than one capacity.
Section 2. TERM OF OFFICE. The officers of the Corporation shall hold
office during the pleasure of the board of directors, and, unless sooner removed
by the board of directors, until the annual meeting of the board of directors
following the date of their election and until their successors are chosen and
qualified. The board of directors may remove any officer at any time, with or
without cause. Subject to the provisions of Section 6 of Article V of these
By-Laws, a vacancy in any office, however created, shall be filled by the board
of directors.
-6-
<PAGE> 7
ARTICLE V
---------
Duties of Officers
------------------
Section 1. CHAIRMAN OF THE BOARD. The chairman of the board, if one be
elected, shall be the chief executive officer of the Corporation, shall preside
at all meetings of the board of directors and meetings of stockholders and shall
have such other powers and duties as may be prescribed by the board of
directors.
Section 2. PRESIDENT. The president shall be the chief operating officer
of the Corporation and shall exercise supervision over the business of the
Corporation and over its several officers, subject, however, to the control of
the board of directors. If no chairman of the board be elected, the president
shall be the chief executive officer of the Corporation. In the absence of the
chairman of the board, or if none be elected, the president shall preside at
meetings of stockholders. The president shall have authority to sign all
certificates for shares and all deeds, mortgages, bonds, agreements, notes, and
other instruments requiring his signature; and shall have all the powers and
duties prescribed by the General Corporation Law of the State of Delaware and
such others as the board of directors may from time to time assign to him.
Section 3. VICE PRESIDENTS. The vice presidents shall have such powers
and duties as may from time to time be assigned to them by the board of
directors, the chairman of the board or the president. At the request of the
president, or in the case of his absence or disability, the vice president
designated by the president (or in the absence of such designation, the vice
president designated by the board) shall perform all the duties of the president
and, when so acting, shall have all the powers of the president. The authority
of vice presidents to sign in the name of the Corporation certificates for
shares and deeds, mortgages, bonds, agreements, notes and other instruments
shall be coordinate with like authority of the president.
Section 4. SECRETARY. The secretary shall keep minutes of all the
proceedings of the stockholders and the board of directors and shall make proper
record of the same, which shall be attested by him; shall have authority to
execute and deliver certificates as to any of such proceedings and any other
records of the Corporation; shall have authority to sign all certificates for
shares and all deeds, mortgages, bonds, agreements, notes and other instruments
to be executed by the Corporation which require his signature; shall give notice
of meetings of stockholders and directors; shall produce on request at each
meeting of stockholders a certified list of stockholders arranged in
alphabetical order; shall keep such books and records as may be required by law
or by the board of directors; and, in general,
-7-
<PAGE> 8
shall perform all duties incident to the office of secretary and such other
duties as may from time to time be assigned to him by the board of directors,
the chairman of the board or the president.
Section 5. TREASURER. The treasurer shall have general supervision of
all finances; he shall have in charge all money, bills, notes, deeds, leases,
mortgages and similar property belonging to the Corporation, and shall do with
the same as may from time to time be required by the board of directors. He
shall cause to be kept adequate and correct accounts of the business
transactions of the Corporation, including accounts of its assets, liabilities,
receipts, disbursements, gains, losses, stated capital and shares, together with
such other accounts as may be required; and he shall have such other powers and
duties as may from time to time be assigned to him by the board of directors,
the chairman of the board or the president.
Section 6. ASSISTANT AND SUBORDINATE OFFICERS. Each other officer shall
perform such duties as the board of directors, the chairman of the board or the
president may prescribe. The board of directors may, from time to time,
authorize any officer to appoint and remove subordinate officers, to prescribe
their authority and duties, and to fix their compensation.
Section 7. DUTIES OF OFFICERS MAY BE DELEGATED. In the absence of any
officer of the Corporation, or for any other reason the board of directors may
deem sufficient, the board of directors may delegate, for the time being, the
powers or duties, or any of them, of such officers to any other officer or to
any director.
ARTICLE VI
----------
Indemnification and Insurance
-----------------------------
Section 1 INDEMNIFICATION IN NON-DERIVATIVE ACTIONS. The Corporation
shall indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the Corporation) by reason of the fact that he is or was a
director or officer of the Corporation, or is or was serving at the request of
the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best
-8-
<PAGE> 9
interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
Section 2. INDEMNIFICATION IN DERIVATIVE ACTIONS. The Corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he is
or was a director or officer of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Corporation unless and only to the extent that
the Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.
Section 3. INDEMNIFICATION AS A MATTER OF RIGHT. To the extent that a
director, officer, employee or agent of the Corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred to
in Sections 1 and 2 of this Article VI, or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith.
Section 4. DETERMINATION OF CONDUCT. Any indemnification under Sections
1 and 2 of this Article VI (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth in
Sections 1 and 2 of this Article VI. Such determination shall be made (1) by the
board of directors by a majority vote of a quorum consisting of directors
-9-
<PAGE> 10
who were not parties to such action, suit or proceeding, or (2) if such a quorum
is not obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (3) by the
stockholders.
Section 5. ADVANCE PAYMENT OF EXPENSES. Expenses incurred in defending a
civil or criminal action, suit or proceeding may be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of the director, officer, employee or agent to
repay such amount if it shall ultimately be determined that he is not entitled
to be indemnified by the Corporation as authorized in this section.
Section 6. NONEXCLUSIVITY. The indemnification and advancement of
expenses provided by, or granted pursuant to, this Article VI shall not be
deemed exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any by-law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
Section 7. LIABILITY INSURANCE. The Corporation shall have the power to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against such liability under the
provisions of this section.
Section 8. CORPORATION. For purposes of this Article VI, references to
"the Corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and employees
or agents, so that any person who is or was a director, officer, employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under the provisions of this Article VI with
respect to the resulting or surviving corporation as he would have with respect
to such constituent corporation if its separate existence had continued.
-10-
<PAGE> 11
Section 9. EMPLOYEE BENEFIT PLANS. For purposes of this Article VI,
references to any "other enterprise" shall include employee benefit plans;
references to "fines" shall include any excise taxes assessed on a person with
respect to an employee benefit plan; and references to "serving at the request
of the corporation" shall include any service as a director, officer, employee
or agent of the Corporation which imposes duties on, or involves services by,
such director, officer, employee or agent with respect to an employee benefit
plan, its participants, or beneficiaries; and a person who acted in good faith
and in a manner he reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to in
this Article VI.
Section 10. CONTINUATION. The indemnification and advancement of
expenses provided by, or granted pursuant to, this Article VI shall, unless
otherwise provided when authorized or ratified, continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a person.
ARTICLE VII
-----------
Certificates for Shares
-----------------------
Section 1. FORM AND EXECUTION. Certificates for shares, certifying the
number of full-paid shares owned, shall be issued to each stockholder in such
form as shall be approved by the board of directors. Such certificates shall be
signed by the chairman or vice-chairman of the board of directors or the
president or a vice president and by the secretary or an assistant secretary or
the treasurer or an assistant treasurer; provided, however, that the signatures
of any of such officers and the seal of the Corporation upon such certificates
may be facsimiles, engraved, stamped or printed. If any officer or officers who
shall have signed, or whose facsimile signature shall have been used, printed or
stamped on any certificate or certificates for shares, shall cease to be such
officer or officers, because of death, resignation or otherwise, before such
certificate or certificates shall have been delivered by the Corporation, such
certificate or certificates shall nevertheless be as effective in all respects
as though signed by a duly elected, qualified and authorized officer or
officers, and as though the person or persons who signed such certificate or
certificates, or whose facsimile signature or signatures shall have been used
thereon, had not ceased to be an officer or officers of the Corporation.
-11-
<PAGE> 12
Section 2. REGISTRATION OF TRANSFER. Any certificate for shares of the
Corporation shall be transferable in person or by attorney upon the surrender
thereof to the Corporation or any transfer agent therefor (for the class of
shares represented by the certificate surrendered) properly endorsed for
transfer and accompanied by such assurances as the Corporation or such transfer
agent may require as to the genuineness and effectiveness of each necessary
endorsement.
Section 3. LOST, DESTROYED OR STOLEN CERTIFICATES. A new share
certificate or certificates may be issued in place of any certificate
theretofore issued by the Corporation which is alleged to have been lost,
destroyed or wrongfully taken upon (i) the execution and delivery to the
Corporation by the person claiming the certificate to have been lost, destroyed
or wrongfully taken of an affidavit of that fact, specifying whether or not, at
the time of such alleged loss, destruction or taking, the certificate was
endorsed, and (ii) the furnishing to the Corporation of indemnity and other
assurances, if any, satisfactory to the Corporation and to all transfer agents
and registrars of the class of shares represented by the certificate against any
and all losses, damages, costs, expenses or liabilities to which they or any of
them may be subjected by reason of the issue and delivery of such new
certificate or certificates or in respect of the original certificate.
Section 4. REGISTERED STOCKHOLDERS. A person in whose name shares are of
record on the books of the Corporation shall conclusively be deemed the
unqualified owner and holder thereof for all purposes and to have capacity to
exercise all rights of ownership. Neither the Corporation nor any transfer agent
of the Corporation shall be bound to recognize any equitable interest in or
claim to such shares on the part of any other person, whether disclosed upon
such certificate or otherwise, nor shall they be obliged to see to the execution
of any trust or obligation.
ARTICLE VIII
------------
Fiscal Year
-----------
The fiscal year of the Corporation shall commence on such date in each
year as shall be designated from time to time by the board of directors. In the
absence of such designation, the fiscal year of the Corporation shall commence
on January 1 in each year.
-12-
<PAGE> 13
ARTICLE IX
----------
Seal
----
The board of directors may provide a suitable seal containing the name
of the Corporation. If deemed advisable by the board of directors, duplicate
seals may be provided and kept for the purposes of the Corporation.
ARTICLE X
---------
Amendments
----------
These By-Laws shall be subject to alteration, amendment, repeal, or the
adoption of new By-Laws either by the affirmative vote or written consent of a
majority of the whole board of directors, or by the affirmative vote or written
consent of the holders of record of a majority of the outstanding stock of the
Corporation, present in person or represented by proxy and entitled to vote in
respect thereof, given at an annual meeting or at any special meeting at which a
quorum shall be present.
-13-
<PAGE> 1
Exhibit 4.1
================================================================================
CONTINENTAL GLOBAL GROUP, INC.
----------------------------------------
SERIES A AND SERIES B
$120,000,000
11% SENIOR NOTES DUE 2007
----------------------------------------
-------------------
INDENTURE
DATED AS OF APRIL 1, 1997
-------------------
NORWEST BANK MINNESOTA, National Association
Trustee
================================================================================
<PAGE> 2
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Trust Indenture
Act Section Indenture Section
<S> <C>
310 (a)(1).................................................................... 7.10
(a)(2).................................................................... 7.10
(a)(3) ................................................................... N.A.
(a)(4).................................................................... N.A.
(a)(5).................................................................... 7.10
(b) ...................................................................... 7.03; 7.10
(c) ...................................................................... N.A.
311 (a) ...................................................................... 7.11
(b) ...................................................................... 7.11
(c) ...................................................................... N.A.
312 (a)....................................................................... 2.05
(b)....................................................................... 11.03
(c) ...................................................................... 11.03
313 (a) ...................................................................... 7.06
(b)(1) ................................................................... N.A.
(b)(2) ................................................................... 7.06; 7.07
(c) ...................................................................... 7.06;11.02
(d)....................................................................... 7.06
314 (a) ...................................................................... 4.03;11.05
(b) ...................................................................... N.A.
(c)(1) ................................................................... 11.04
(c)(2) ................................................................... 11.04
(c)(3) ................................................................... N.A.
(d)....................................................................... N.A.
(e) ...................................................................... 11.05
(f)....................................................................... N.A.
315 (a)....................................................................... 7.01
(b)....................................................................... 7.05,11.02
(c) ...................................................................... 7.01
(d)....................................................................... 7.01
(e)....................................................................... 6.11
316 (a)(last sentence)........................................................ 2.09
(a)(1)(A)................................................................. 6.05
(a)(1)(B) ................................................................ 6.04
(a)(2) ................................................................... N.A.
(b) ...................................................................... 6.07
(c) ...................................................................... N.A.
317 (a)(1).................................................................... 6.08
(a)(2).................................................................... 6.09
(b) ...................................................................... 2.04
318 (a)....................................................................... 11.01
(b)....................................................................... N.A.
(c)....................................................................... 11.01
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
</TABLE>
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
<S> <C> <C>
Section 1.01. Definitions............................................... 1
Section 1.02. Other Definitions......................................... 13
Section 1.03. Incorporation by Reference of Trust Indenture Act......... 14
Section 1.04. Rules of Construction..................................... 14
ARTICLE 2
THE SENIOR NOTES
Section 2.01. Form and Dating........................................... 15
Section 2.02. Execution and Authentication.............................. 16
Section 2.03. Registrar and Paying Agent................................ 17
Section 2.04. Paying Agent to Hold Money in Trust....................... 17
Section 2.05. Holder Lists.............................................. 18
Section 2.06. Transfer and Exchange..................................... 18
Section 2.07. Replacement Senior Notes.................................. 26
Section 2.08. Outstanding Senior Notes.................................. 26
Section 2.09. Treasury Senior Notes..................................... 26
Section 2.10. Temporary Senior Notes.................................... 27
Section 2.11. Cancellation.............................................. 27
Section 2.12. Defaulted Interest........................................ 27
Section 2.13. Record Date............................................... 27
Section 2.14. Computation of Interest................................... 27
Section 2.15. CUSIP Number.............................................. 28
ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee........................................ 28
Section 3.02. Selection of Senior Notes to be Redeemed or
Purchased................................................. 28
Section 3.03. Notice of Redemption...................................... 29
Section 3.04. Effect of Notice of Redemption............................ 29
Section 3.05. Deposit of Redemption or Purchase Price................... 30
Section 3.06. Senior Notes Redeemed in Part............................. 30
Section 3.07. Optional Redemption....................................... 30
Section 3.08. Mandatory Redemption...................................... 31
Section 3.09. Repurchase Offers......................................... 31
</TABLE>
i
<PAGE> 4
<TABLE>
<CAPTION>
ARTICLE 4
COVENANTS
<S> <C> <C>
Section 4.01. Payment of Senior Notes................................... 33
Section 4.02. Maintenance of Office or Agency........................... 33
Section 4.03. SEC Reports............................................... 34
Section 4.04. Compliance Certificate.................................... 34
Section 4.05. Taxes..................................................... 35
Section 4.06. Stay, Extension and Usury Laws............................ 35
Section 4.07. Restricted Payments....................................... 35
Section 4.08. Dividends and Other Payment Restrictions Affecting
Subsidiaries.............................................. 37
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred
Stock..................................................... 37
Section 4.10. Assets Sales.............................................. 39
Section 4.11. Transactions With Affiliates.............................. 40
Section 4.12. Liens..................................................... 40
Section 4.13. Sale and Leaseback Transactions........................... 41
Section 4.14. Offer to Purchase Upon Change of Control.................. 41
Section 4.15. Corporate Existence....................................... 42
Section 4.16. Limitation on Issuances of Capital Stock of Wholly
Owned Subsidiaries........................................ 42
Section 4.17. Business Activities....................................... 42
Section 4.18. Additional Subsidiary Guarantees.......................... 42
Section 4.19. Payment for Consents...................................... 43
ARTICLE 5
SUCCESSORS
Section 5.01. Merger, Consolidation of Sale of Assets................... 43
Section 5.02. Successor Corporation Substituted......................... 44
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default......................................... 44
Section 6.02. Acceleration.............................................. 46
Section 6.03. Other Remedies............................................ 46
Section 6.04. Waiver of Past Defaults................................... 47
Section 6.05. Control by Majority....................................... 47
Section 6.06. Limitation on Suits....................................... 47
Section 6.07. Rights of Holders of Senior Notes to Receive
Payment................................................... 47
Section 6.08. Collection Suit by Trustee................................ 48
Section 6.09. Trustee May File Proofs of Claim.......................... 48
Section 6.10. Priorities................................................ 48
Section 6.11. Undertaking for Costs..................................... 49
</TABLE>
ii
<PAGE> 5
<TABLE>
<CAPTION>
ARTICLE 7
TRUSTEE
<S> <C> <C>
Section 7.01. Duties of Trustee......................................... 49
Section 7.02. Rights of Trustee......................................... 50
Section 7.03. Individual Rights of Trustee.............................. 51
Section 7.04. Trustee's Disclaimer...................................... 51
Section 7.05. Notice of Defaults........................................ 51
Section 7.06. Reports by Trustee to Holders of the Senior Notes......... 51
Section 7.07. Compensation and Indemnity................................ 51
Section 7.08. Replacement of Trustee.................................... 52
Section 7.09. Successor Trustee by Merger, etc.......................... 53
Section 7.10. Eligibility; Disqualification............................. 53
Section 7.11. Preferential Collection of Claims Against The
Company................................................... 53
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant
Defeasance................................................ 54
Section 8.02. Legal Defeasance and Discharge............................ 54
Section 8.03. Covenant Defeasance....................................... 54
Section 8.04. Conditions to Legal or Covenant Defeasance................ 55
Section 8.05. Deposited Money and Government Securities to be
Held in Trust; Other Miscellaneous Provisions............. 56
Section 8.06. Repayment to The Company.................................. 57
Section 8.07. Reinstatement............................................. 57
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of the Senior Notes............ 57
Section 9.02. With Consent of Holders of Senior Notes................... 58
Section 9.03. Compliance with Trust Indenture Act....................... 59
Section 9.04. Revocation and Effect of Consents......................... 59
Section 9.05. Notation on or Exchange of Senior Notes................... 60
Section 9.06. Trustee to Sign Amendments, etc........................... 60
ARTICLE 10
GUARANTEE OF SENIOR NOTES
Section 10.01. Subsidiary Guarantee...................................... 60
Section 10.02. Execution and Delivery of Subsidiary Guarantee............ 61
Section 10.03. Subsidiary Guarantors May Consolidate, etc., on
Certain Terms............................................. 61
</TABLE>
iii
<PAGE> 6
<TABLE>
<CAPTION>
<S> <C> <C>
Section 10.04. Releases Following Sale of Assets......................... 62
Section 10.05. Limitation on Subsidiary Guarantor Liability.............. 63
Section 10.06. "Trustee" to Include Paying Agent......................... 63
ARTICLE 11
MISCELLANEOUS
Section 11.01. Trust Indenture Act Controls.............................. 63
Section 11.02. Notices................................................... 63
Section 11.03. Communication by Holders of Senior Notes with
Other Holders of Senior Notes............................. 65
Section 11.04. Certificate and Opinion as to Conditions Precedent........ 65
Section 11.05. Statements Required in Certificate or Opinion............. 65
Section 11.06. Rules by Trustee and Agents............................... 65
Section 11.07. No Personal Liability of Directors, Officers,
Employees and Stockholders................................ 65
Section 11.08. Governing Law............................................. 66
Section 11.09. No Adverse Interpretation of Other Agreements............. 66
Section 11.10. Successors................................................ 66
Section 11.11. Severability.............................................. 66
Section 11.12. Counterpart Originals..................................... 66
Section 11.13. Table of Contents, Headings, etc.......................... 66
</TABLE>
iv
<PAGE> 7
Indenture, dated as of April 1, 1997, among Continental Global Group,
Inc., a Delaware corporation (the "Company"), Continental Conveyor & Equipment
Company, a Delaware corporation ("Continental"), Goodman Conveyor Company, a
Delaware corporation ("Goodman") (each of Continental and Goodman a "Subsidiary
Guarantor" and together, the "Subsidiary Guarantors") and Norwest Bank
Minnesota, National Association, as trustee (the "Trustee").
The Company, the Subsidiary Guarantors and the Trustee agree as follows
for the benefit of each other and for the equal and ratable benefit of the
holders of the Company's 11% Series A Senior Notes due 2007 (the "Series A
Senior Notes") and the Company's 11% Series B Senior Notes due 2007 (the "Series
B Senior Notes" and, together with the Series A Senior Notes, the "Senior
Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.01. DEFINITIONS.
"144A Global Note" means a permanent global senior note that contains
the paragraph referred to in footnote 1 and the additional schedule referred to
in footnote 3 to the form of the Senior Note attached hereto as EXHIBIT A-1, and
that is deposited with the Senior Note Custodian and registered in the name of
the Depository, representing a series of Senior Notes sold to U.S. Persons in
reliance on Rule 144A and to Institutional Accredited Investors or another
exemption from the registration requirements of the Securities Act.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control; provided further, that in the case of a joint venture,
partnership, association or other business arrangement with any Person entered
into in the ordinary course of business, neither such Person nor the joint
venture, partnership, association or business arrangement shall be deemed to be
an affiliate by reason of the proceeding proviso.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer or exchange
of beneficial interests in a Global Note, the rules and procedures of the
Depository that apply to such transfer and exchange.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition
of any assets or rights (including, without limitation, by way of a sale and
leaseback) other than sales of inventory in the ordinary course of business
consistent with past practices (provided that the sale, lease, conveyance or
other disposition of all or substantially all of the assets of the Company and
its Subsidiaries taken as a whole will be governed by the provisions of Section
4.14 hereof, and/or the provisions of Section 5.01
1
<PAGE> 8
hereof and not by the provisions of Section 4.10 hereof), and (ii) the issue or
sale by the Company or any of its Subsidiaries of Equity Interests of any of the
Company's Subsidiaries, in the case of either clause (i) or (ii), whether in a
single transaction or a series of related transactions (a) that have a fair
market value in excess of $1.0 million or (b) for net proceeds in excess of $1.0
million. Notwithstanding the foregoing: (i) a transfer of assets by the Company
to a Wholly Owned Subsidiary or by a Wholly Owned Subsidiary to the Company or
to another Wholly Owned Subsidiary, (ii) an issuance of Equity Interests by a
Wholly Owned Subsidiary to the Company or to another Wholly Owned Subsidiary,
(iii) a Restricted Payment that is permitted by Section 4.07 hereof and (iv)
dispositions of obsolete equipment in the ordinary course of business and
consistent with past practice, in each case, will not be deemed to be Asset
Sales.
"Attributable Debt" in respect of a sale and leaseback transaction
means, at the time of determination, the present value (discounted at the rate
of interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Australian Revolving Credit Facility" means that certain Credit
Facility, dated as of February 10, 1997, by and among BCE and its Subsidiaries
and the lenders party thereto, including any related notes, guarantees,
collateral documents, instruments and agreements executed in connection
therewith, and in each case, as amended, modified, renewed, refunded, replaced
or refinanced from time to time (together with any amendment, modification,
renewal, refunding, replacement or refinancing to or of any of the foregoing,
including, without limitation, any agreement modifying the maturity or
amortization schedule of or refinancing or refunding all or any portion of
Indebtedness thereunder or increasing the amount that may be borrowed under such
agreement or any successor agreement, whether or not among the same parties.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or
state law for the relief of debtors.
"BCE" means BCE Holdings Pty. Ltd., an Australian holding company.
"Board of Directors" means the board of directors of the Company or any
authorized committee of such board of directors.
"Business Day" means any day other than a Legal Holiday.
"Borrowing Base" means, as of any date, an amount equal to the sum of
(a) 85% of the face amount of all accounts receivable owned by the Company and
its Subsidiaries (other than Foreign Subsidiaries) as of such date that are not
more than 60 days past due, and (b) 65% of the book value of all inventory owned
by the Company and its Subsidiaries (other than Foreign Subsidiaries) as of such
date, all calculated on a consolidated basis and in accordance with GAAP. To the
extent that information is not available as to the amount of accounts receivable
or inventory as of a specific date, the Company shall utilize the most recent
available information for purposes of calculating the Borrowing Base.
"Capital Lease Obligation" means, at the time any determination thereof
is to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
2
<PAGE> 9
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership or limited
liability company, partnership or membership interests (whether general or
limited) and (iv) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof having maturities of not
more than six months from the date of acquisition, (iii) certificates of deposit
and eurodollar time deposits with maturities of six months or less from the date
of acquisition, bankers' acceptances with maturities not exceeding six months
and overnight bank deposits, in each case, with any lender party to the
Revolving Credit Facility or with any domestic commercial bank having capital
and surplus in excess of $500 million and a Thompson Bank Watch Rating of "B" or
better, (iv) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (ii) and (iii) above
entered into with any financial institution meeting the qualifications specified
in clause (iii) above and (v) commercial paper having the highest rating
obtainable from Moody's Investors Service, Inc. or Standard & Poor's Corporation
and in each case maturing within six months after the date of acquisition.
"Cedel" means Cedel bank, societe anonyme.
"Change of Control" means the occurrence of any of the following: (i)
the sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Subsidiaries taken as a
whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange
Act) other than the Principal or his Related Parties (as defined below), (ii)
the adoption of a plan relating to the liquidation or dissolution of the
Company, (iii) the consummation of the first transaction (including, without
limitation, any merger or consolidation) the result of which is that any
"person" (as defined above) becomes the "beneficial owner" (as defined above),
directly or indirectly, of more of the Voting Stock of the Company (measured by
voting power rather than number of shares) than is at the time "beneficially
owned" (as defined above) by the Principal and his Related Parties in the
aggregate or (iv) the first day on which a majority of the members of the Board
of Directors of the Company are not Continuing Directors.
"Commission" means the Securities and Exchange Commission.
"Company" means Continental Global Group, Inc., a Delaware Corporation.
"Consolidated Cash Flow" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period plus (i) an
amount equal to any extraordinary loss plus any net loss realized in connection
with an Asset Sale to the extent such losses were deducted in computing such
Consolidated Net Income, plus (ii) provision for taxes based on income or
profits of such Person and its Subsidiaries for such period to the extent that
such provision for taxes was included in computing such Consolidated Net Income,
plus (iii) consolidated interest expense of such Person and its Subsidiaries for
such period, whether paid or accrued and whether or not capitalized (including,
without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, imputed interest with respect to Attributable Debt,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net
3
<PAGE> 10
payments (if any) pursuant to Hedging Obligations) to the extent that any such
expense was deducted in computing such Consolidated Net Income, plus (iv)
depreciation, amortization (including amortization of goodwill and other
intangibles but excluding amortization of prepaid cash expenses that were paid
in a prior period) and other non-cash expenses (excluding any such non-cash
expense to the extent that it represents an accrual of or reserve for cash
expenses in any future period or amortization of a prepaid cash expense that was
paid in a prior period) of such Person and its Subsidiaries for such period to
the extent that such depreciation, amortization and other non-cash expenses were
deducted in computing such Consolidated Net Income, less (v) non-cash items
increasing such Consolidated Net Income for such period, in each case, on a
consolidated basis and determined in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP;
provided that (i) the Net Income (but not loss) of any Person that is not a
Subsidiary or that is accounted for by the equity method of accounting shall be
included only to the extent of the amount of dividends or distributions paid in
cash to the referent Person or a Wholly Owned Subsidiary thereof, (ii) the Net
Income of any Subsidiary shall be excluded to the extent that the declaration or
payment of dividends or similar distributions by that Subsidiary of that Net
Income is not at the date of determination permitted without any prior
governmental approval (that has not been obtained) or, directly or indirectly,
by operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Subsidiary or its stockholders, (iii) the Net Income of any Person acquired in a
pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded and (iv) the cumulative effect of a change in
accounting principles shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any
date, the sum of (i) the consolidated equity of the common stockholders of such
Person and its consolidated Subsidiaries as of such date, plus (ii) the
respective amounts reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than Disqualified Stock) that by
its terms is not entitled to the payment of dividends unless such dividends may
be declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date hereof in the book value of any asset
owned by such Person or a consolidated Subsidiary of such Person, (y) all
investments as of such date in unconsolidated Subsidiaries and in Persons that
are not Subsidiaries (except, in each case, Permitted Investments), and (z) all
unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the date hereof or (ii) was nominated for election or
elected to such Board of Directors with the approval of the Principal or a
majority of the Continuing Directors who were members of such Board at the time
of such nomination or election.
"Credit Facilities" means, with respect to the Company or any of its
Subsidiaries (other than Foreign Subsidiaries), one or more debt facilities
(including, without limitation, the Revolving Credit Facility) or other debt
securities or commercial paper facilities with banks or other institutional
lenders providing for revolving credit loans or letters of credit, in each case,
as amended, restated, modified, renewed, refunded, replaced or refinanced in
whole or in part from time to time.
4
<PAGE> 11
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Definitive Senior Notes" means Senior Notes that are in the form of
EXHIBIT A-1 attached hereto (but without including the text referred to in
footnotes 1 and 3 thereto).
"Depository" means, with respect to the Senior Notes issuable or issued
in whole or in part in global form, the Person specified in Section 2.03 hereof
as the Depository with respect to the Senior Notes, until a successor shall have
been appointed and become such pursuant to Section 2.06 of this Indenture, and,
thereafter, "Depository" shall mean or include such successor.
"Disqualified Stock" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the holder thereof, in whole or in part, on or prior to the date
that is 91 days after the date on which the Senior Notes mature.
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Euroclear" means Morgan Guaranty Trust Company of New York, the
Brussels office, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Offer" means the offer by the Company to Holders to exchange
Series B Senior Notes for Series A Senior Notes.
"Exchange Offer Registration Statement" has the meaning set forth in
the Registration Rights Agreement.
"Existing Indebtedness" means up to $6.3 million in aggregate principal
amount of Indebtedness of the Company and its Subsidiaries (other than
Indebtedness under the Revolving Credit Facility and the Australian Revolving
Credit Facility) in existence on the date hereof, until such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any period, the
sum, without duplication, of (i) the consolidated interest expense of such
Person and its Subsidiaries for such period, whether paid or accrued (including,
without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, imputed interest with respect to Attributable Debt,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net payments (if any) pursuant
to Hedging Obligations) and (ii) the consolidated interest expense of such
Person and its Subsidiaries that was capitalized during such period, and (iii)
any interest expense on Indebtedness of another Person that is Guaranteed by
such Person or one of its Subsidiaries or secured by a Lien on assets of such
Person or one of its Subsidiaries (whether or not such Guarantee or Lien is
called upon) and (iv) the product of (a) all dividend payments, whether or not
in cash, on any series of preferred stock of such Person or any of its
Subsidiaries, other than dividend payments on Equity Interests payable solely in
Equity Interests of the Company, times (b) a fraction, the numerator of which is
one and the denominator of which is one minus the then current
5
<PAGE> 12
combined federal, state and local statutory tax rate of such Person, expressed
as a decimal, in each case, on a consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
Company or any of its Subsidiaries incurs, assumes, Guarantees or redeems any
Indebtedness (other than revolving credit borrowings) or issues preferred stock
subsequent to the commencement of the period for which the Fixed Charge Coverage
Ratio is being calculated but prior to the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"),
then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect
to such incurrence, assumption, Guarantee or redemption of Indebtedness, or such
issuance or redemption of preferred stock, as if the same had occurred at the
beginning of the applicable four-quarter reference period. In addition, for
purposes of making the computation referred to above, (i) acquisitions that have
been made by the Company or any of its Subsidiaries, including through mergers
or consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date shall be deemed to have occurred on the first day
of the four-quarter reference period and Consolidated Cash Flow for such
reference period shall be calculated without giving effect to clause (iii) of
the proviso set forth in the definition of Consolidated Net Income, and (ii) the
Consolidated Cash Flow attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, and (iii) the Fixed Charges attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded, but
only to the extent that the obligations giving rise to such Fixed Charges will
not be obligations of the referent Person or any of its Subsidiaries following
the Calculation Date.
"Foreign Borrowing Base" means, as of any date, an amount equal to the
sum of (a) 85% of the face amount of all accounts receivable owned by Foreign
Subsidiaries of the Company as of such date that are not more than 60 days past
due, and (b) 65% of the book value of all inventory owned by Foreign
Subsidiaries of the Company as of such date, all calculated on a consolidated
basis and in accordance with GAAP. To the extent that information is not
available as to the amount of accounts receivable or inventory as of a specific
date, the Company shall utilize the most recent available information for
purposes of calculating the Foreign Borrowing Base.
"Foreign Credit Facilities" means, with respect to any Foreign
Subsidiary of the Company, one or more debt facilities (including, without
limitation, the Australian Revolving Credit Facility) or other debt securities
or commercial paper facilities with banks or other institutional lenders
providing for revolving credit loans or letters of credit, in each case, as
amended, restated, modified, renewed, refunded, replaced or refinanced in whole
or in part from time to time.
"Foreign Subsidiary" means any Subsidiary of the Company, more than 80%
of the sales, earnings or assets (determined on a consolidated basis) of which
are located or derived from operations outside the United States.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date hereof.
6
<PAGE> 13
"Global Note" means, individually and collectively, the Regulation S
Temporary Global Note, the Regulation S Permanent Global Note and the 144A
Global Note.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements, (ii) other agreements
or arrangements designed to protect such Person against fluctuations in interest
rates and (iii) agreements entered into for the purpose of fixing or hedging the
risks associated with fluctuations in foreign currency exchange rates.
"Holder" means a Person in whose name a Senior Note is registered.
"Indebtedness" means, with respect to any Person, any indebtedness of
such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or banker's acceptances
or representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade payable, if
and to the extent any of the foregoing indebtedness (other than letters of
credit and Hedging Obligations) would appear as a liability upon a balance sheet
of such Person prepared in accordance with GAAP, as well as all indebtedness of
others secured by a Lien on any asset of such Person (whether or not such
indebtedness is assumed by such Person) and, to the extent not otherwise
included, the Guarantee by such Person of any indebtedness of any other Person.
The amount of any Indebtedness outstanding as of any date shall be (i) the
accreted value thereof, in the case of any Indebtedness that does not require
current payments of interest, and (ii) the principal amount thereof, together
with any interest thereon that is more than 30 days past due, in the case of any
other Indebtedness.
"Indenture" means this Indenture, as amended or supplemented from time
to time.
"Indirect Participant" means a Person who holds an interest through a
Participant.
"Initial Purchaser" means Donaldson, Lufkin & Jenrette Securities
Corporation.
"Institutional Accredited Investor" means an "accredited investor" as
defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Subsidiary of the Company sells or otherwise disposes of
any Equity Interests of any direct or indirect Subsidiary of the Company such
that, after giving effect to any such sale or disposition, such Person is no
longer a Subsidiary of the Company, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Equity
7
<PAGE> 14
Interests of such Subsidiary not sold or disposed of in an amount determined as
provided in the final paragraph of Section 4.07 hereof.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York, the city in which the principal corporate
trust office of the Trustee is located or at a place of payment are authorized
by law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment shall be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Liquidated Damages" means all liquidated damages then owing pursuant
to Section 5 of the Registration Rights Agreement.
"Management Agreement" means that certain Management Agreement between
NESCO, Inc. and the Company dated as of April 1, 1997.
"Net Income" means, with respect to any Person, the net income (loss)
of such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Subsidiaries and
(ii) any extraordinary or nonrecurring gain (but not loss), together with any
related provision for taxes on such extraordinary or nonrecurring gain (but not
loss).
"Net Proceeds" means the aggregate cash proceeds received by the
Company or any of its Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
secured by a Lien on the asset or assets that were the subject of such Asset
Sale and any reserve for adjustment in respect of the sale price of such asset
or assets established in accordance with GAAP.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering" means the offer and sale of the Senior Notes as contemplated
by the Offering Memorandum.
"Offering Memorandum" means the Offering Memorandum, dated March 26,
1997, relating to the Company's offering and placement of the Senior Notes.
8
<PAGE> 15
"Officer" means, with respect to any Person, the Chairman of the Board,
the Chief Executive Officer, the President, the Chief Operating Officer, the
Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller,
the Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf of the
Company by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company, that meets the requirements of
Section 10.04 hereof.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Section
11.05 hereof. The counsel may be an employee of or counsel to the Company, any
Subsidiary of the Company or the Trustee.
"Participant" means, with respect to DTC, Euroclear or Cedel, a Person
who has an account with DTC, Euroclear or Cedel, respectively (and, with respect
to DTC, shall include Euroclear and Cedel).
"Permitted Businesses" means (i) the materials handling and processing
businesses and other businesses conducted by the Company and its Subsidiaries on
the date hereof, (ii) businesses whose manufacturing, production, sales or
distribution requirements are complementary to such businesses and (iii) any
businesses reasonably related or similar thereto.
"Permitted Investments" means (a) any Investment in the Company or in a
Wholly Owned Subsidiary of the Company that is a Subsidiary Guarantor that is
engaged in a Permitted Business; (b) any Investment in Cash Equivalents; (c) any
Investment by the Company or any Subsidiary of the Company in a Person, if as a
result of such Investment (i) such Person becomes a Wholly Owned Subsidiary of
the Company that is a Subsidiary Guarantor that is engaged in a Permitted
Business or (ii) such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Wholly Owned Subsidiary of the Company that is
a Subsidiary Guarantor; (d) any Restricted Investment made as a result of the
receipt of non-cash consideration from an Asset Sale that was made pursuant to
and in compliance with Section 4.10 hereof; (e) any acquisition of assets solely
in exchange for the issuance of Equity Interests (other than Disqualified Stock)
of the Company; (f) any Investment by a Foreign Subsidiary of the Company in any
other Foreign Subsidiary of the Company; (g) any Investment in any Person
principally engaged in the manufacture, sale, provision or distribution of
Conveyor Equipment having an aggregate fair market value (measured on the date
each such Investment was made and without giving effect to subsequent changes in
value), when taken together with all other Investments made pursuant to this
clause (g) that are at the time outstanding, not to exceed $6.5 million; and (h)
other Investments in any Person principally engaged in a Permitted Business
having an aggregate fair market value (measured on the date each such Investment
was made and without giving effect to subsequent changes in value), which when
taken together with all other Investments made pursuant to this clause (h) that
are at the time outstanding, do not exceed $7.5 million.
"Permitted Liens" means (i) Liens on assets securing Indebtedness under
Credit Facilities and Foreign Credit Facilities that was permitted by the terms
of this Indenture to be incurred; (ii) Liens securing Indebtedness incurred
pursuant to (A) the Fixed Charge Coverage Ratio test set forth under the first
paragraph of Section 4.09 hereof or (B) clause (ix) of the second paragraph of
Section 4.09 hereof, provided that, in either case, such Indebtedness ranks, by
its terms, pari passu with the Senior Notes; (iii) Liens in favor of the
Company; (iv) Liens on property of a Person existing at the time such Person is
merged into or consolidated with the Company or any Subsidiary of the Company,
provided that such Liens were in existence prior to the contemplation of such
merger or consolidation and do not extend to
9
<PAGE> 16
any assets other than those of the Person merged into or consolidated with the
Company; (v) Liens on property existing at the time of acquisition thereof by
the Company or any Subsidiary of the Company, provided that such Liens were in
existence prior to the contemplation of such acquisition; (vi) Liens to secure
the performance of statutory obligations, surety or appeal bonds, performance
bonds or other obligations of a like nature incurred in the ordinary course of
business; (vii) Liens to secure Indebtedness (including Capital Lease
Obligations) permitted by clause (iv) of the second paragraph of Section 4.09
hereof covering only the assets acquired with such Indebtedness; (viii) Liens
existing on the date hereof; (ix) Liens for taxes, assessments or governmental
charges or claims that are not yet delinquent or that are being contested in
good faith by appropriate proceedings promptly instituted and diligently
concluded, provided that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefor; (x) Liens
incurred in the ordinary course of business of the Company or any Subsidiary of
the Company with respect to obligations that do not exceed $5.0 million at any
one time outstanding and that (a) are not incurred in connection with the
borrowing of money or the obtaining of advances or credit (other than trade
credit in the ordinary course of business) and (b) do not in the aggregate
materially detract from the value of the property or materially impair the use
thereof in the operation of business by the Company or such Subsidiary; and (xi)
Liens arising by reason of (1) any attachment, judgment, decree or order of any
court, so long as such Lien is being contested in good faith and is either
adequately bonded or execution thereon has been stayed pending appeal or review,
and any appropriate legal proceedings which may have been duly initiated for the
review of such attachment, judgment, decree or order shall not have been fully
terminated or the period within which such proceedings may be initiated shall
not have expired, (2) security for payment of workers' compensation or other
insurance, (3) security for the performance of tenders, bids, leases and
contracts (other than contracts for the payment of money), (4) operation of law
in favor of carriers, warehousemen, landlords, mechanics, materialmen, laborers,
employees or suppliers, incurred in the ordinary course of business for sums
which are not yet delinquent or are being contested in good faith by
negotiations or by appropriate proceedings which suspend the collection thereof,
(5) any interest or title of a lessor under any lease and (6) easements,
rights-of-way, zoning and similar covenants and restrictions and other similar
encumbrances or title defects which, in the aggregate, are not substantial in
amount and which do not in any case materially interfere with the ordinary
course of business of the Company or any of its Subsidiaries.
"Permitted Refinancing Indebtedness" means any Indebtedness of the
Company or any of its Subsidiaries issued in exchange for, or the net proceeds
of which are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of the Company or any of its Subsidiaries; provided that, (i) the
principal amount (or accreted value, if applicable) of such Permitted
Refinancing Indebtedness does not exceed the principal amount of (or accreted
value, if applicable), plus accrued interest on, the Indebtedness so extended,
refinanced, renewed, replaced, defeased or refunded (plus the amount of
reasonable expenses incurred in connection therewith); (ii) such Permitted
Refinancing Indebtedness has a final maturity date later than the final maturity
date of, and has a Weighted Average Life to Maturity equal to or greater than
the Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Senior Notes, such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and is subordinated in right of payment to, the Senior Notes on terms at least
as favorable to the Holders of Senior Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and (iv) such Indebtedness is incurred either by
the Company or by the Subsidiary who is the obligor on the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded.
10
<PAGE> 17
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
"Principal" means Robert J. Tomsich.
"Private Placement Legend" means the legend initially set forth on the
Senior Notes in the form set forth in Section 2.06(f) hereof.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A
under the Securities Act.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date hereof, by and among the Company, the Subsidiary
Guarantors and the Initial Purchaser.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Global Note" means a Regulation S Temporary Global Note
or Regulation S Permanent Global Note, as appropriate.
"Regulation S Permanent Global Note" means a permanent global senior
note that contains the paragraph referred to in footnote 1 and the additional
schedule referred to in footnote 3 to the form of the Senior Note attached
hereto as EXHIBIT A-1, and that is deposited with the Senior Note Custodian and
registered in the name of the Depository, representing a series of Senior Notes
sold in reliance on Regulation S.
"Regulation S Temporary Global Note" means a single temporary global
senior note in the form of the Senior Note attached hereto as EXHIBIT A-2 that
is deposited with the Senior Note Custodian and registered in the name of the
Depository, representing a series of Senior Notes sold in reliance on Regulation
S.
"Related Party" with respect to the Principal means (A) any 80% (or
more) owned Subsidiary, or spouse or immediate family member (in the case of an
individual) of the Principal; or (B) any trust, corporation, partnership or
other entity, the beneficiaries, stockholders, partners, owners or Persons
beneficially holding an 80% or more controlling interest of which consist of the
Principal and/or such other Persons referred to in the immediately preceding
clause (A); or (C) the estate of the Principal until such estate is distributed
pursuant to his will or applicable state law.
"Responsible Officer" when used with respect to the Trustee, means any
officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restricted Beneficial Interest" means any beneficial interest of a
Participant or Indirect Participant in the 144A Global Note or the Regulation S
Global Note.
"Restricted Broker Dealer" has the meaning set forth in the
Registration Rights Agreement.
"Restricted Global Notes" means the 144A Global Note and the Regulation
S Global Note, each of which shall bear the Private Placement Legend.
11
<PAGE> 18
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Revolving Credit Facility" means that certain Revolving Credit
Facility, dated as of March 28, 1997, by and among the Company, Continental
Conveyor & Equipment Company, Goodman Conveyor Company and the lenders party
thereto, including any related notes, guarantees, collateral documents,
instruments and agreements executed in connection therewith, and in each case,
as amended, modified, renewed, refunded, replaced or refinanced from time to
time (together with any amendment, modification, renewal, refunding, replacement
or refinancing to or of any of the foregoing, including, without limitation, any
agreement modifying the maturity or amortization schedule of or refinancing or
refunding all or any portion of Indebtedness thereunder or increasing the amount
that may be borrowed under such agreement or any successor agreement, whether or
not among the same parties.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Notes" means the Series A Senior Notes and the Series B Senior
Notes.
"Senior Note Custodian" means the Trustee, as custodian for the
Depository with respect to the Senior Notes in global form, or any successor
entity thereto.
"Series A Senior Notes" means the Company's 11% Series A Senior Notes
due 2007.
"Series B Senior Notes" means the Company's 11% Series B Senior Notes
due 2007.
"Shelf Registration Statement" means the Shelf Registration Statement
as defined in the Registration Rights Agreement.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date hereof.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
12
<PAGE> 19
"Subsidiary Guarantor" means each of (i) Continental and Goodman and
(ii) any other Subsidiary that executes a Subsidiary Guarantee in accordance
with the provisions of Section 4.18 hereof, and their respective successors and
assigns.
"Tax Payment Agreement" means that certain Tax Payment Agreement among
NES Group, Inc., the Company, Continental and Goodman, dated as of April 1,
1997, as in effect on the date hereof.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Sections
77aaa-77bbbb), as amended, as in effect on the date hereof.
"Transfer Restricted Securities" means Senior Notes or beneficial
interests therein that bear or are required to bear the Private Placement
Legend.
"Trustee" means Norwest Bank of Minnesota, National Association until a
successor replaces it in accordance with the applicable provisions of this
Indenture, and thereafter means the successor.
"Unrestricted Global Notes" means one or more Global Notes that do not
and are not required to bear the Private Placement Legend.
"Voting Stock" of any Person as of any date means the Capital Stock of
such Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such
Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly Owned Subsidiaries of such Person and one
or more Wholly Owned Subsidiaries of such Person.
SECTION 1.02. OTHER DEFINITIONS.
<TABLE>
<CAPTION>
Defined in
Term Section
<S> <C>
"Acceleration Notice".................................................................................6.02
"Affiliate Transaction"...............................................................................4.11
"Asset Sale Offer"....................................................................................4.10
"Change of Control Offer".............................................................................4.14
"Change of Control Payment"...........................................................................4.14
"Change of Control Payment Date"......................................................................4.14
"Covenant Defeasance".................................................................................8.03
"Event of Default"....................................................................................6.01
"Excess Proceeds".....................................................................................4.10
"Excess Proceeds Offer Triggering Event"..............................................................4.10
"Legal Defeasance"....................................................................................8.02
</TABLE>
13
<PAGE> 20
<TABLE>
<CAPTION>
<S> <C>
"Offer Amount"........................................................................................3.09
"Offer Period"........................................................................................3.09
"Paying Agent"........................................................................................2.03
"Payment Default".....................................................................................6.01
"Permitted Debt"......................................................................................4.09
"Purchase Date".......................................................................................3.09
"Registrar"...........................................................................................2.03
"Repurchase Offer"....................................................................................3.09
"Restricted Payments".................................................................................4.07
</TABLE>
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the provision
is incorporated by reference in, and made a part of, this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Senior Notes;
"indenture security holder" means a Holder of a Senior Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the
Trustee;
"obligor" on the Senior Notes means the Company, each
Subsidiary Guarantor and any successor obligor upon the Senior Notes.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them therein.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it herein;
(2) an accounting term not otherwise defined herein has the
meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular;
(5) provisions apply to successive events and transactions; and
(6) references to sections of or rules under the Securities Act
shall be deemed to include substitute, replacement or
successor sections or rules adopted by the Commission from
time to time.
14
<PAGE> 21
ARTICLE 2
THE SENIOR NOTES
SECTION 2.01. FORM AND DATING.
The Senior Notes and the Trustee's certificate of authentication shall
be substantially in the form of EXHIBIT A-1 or EXHIBIT A-2 attached hereto. The
Senior Notes may have notations, legends or endorsements required by law, stock
exchange rule or usage. Each Senior Note shall be dated the date of its
authentication. The Senior Notes initially shall be issued in denominations of
$1,000 and integral multiples thereof.
The terms and provisions contained in the Senior Notes shall
constitute, and are hereby expressly made, a part of this Indenture and the
Company, the Subsidiary Guarantors and the Trustee, by their execution and
delivery of this Indenture, expressly agree to such terms and provisions and to
be bound thereby.
(a) Global Notes. Senior Notes offered and sold to (i) QIBs in
reliance on Rule 144A and (ii) Institutional Accredited Investors who are not
QIBs, shall be issued initially in the form of 144A Global Notes, which shall be
deposited on behalf of the purchasers of the Senior Notes represented thereby
with a custodian of the Depository, and registered in the name of the Depository
or a nominee of the Depository, duly executed by the Company and authenticated
by the Trustee as hereinafter provided. The aggregate principal amount of the
144A Global Notes may from time to time be increased or decreased by adjustments
made on the records of the Trustee and the Depository or its nominee as
hereinafter provided.
Senior Notes offered and sold in reliance on Regulation S
shall be issued initially in the form of the Regulation S Temporary Global Note,
which shall be deposited on behalf of the purchasers of the Senior Notes
represented thereby with the Trustee, as custodian for the Depository, and
registered in the name of the Depository or the nominee of the Depository for
the accounts of designated agents holding on behalf of Euroclear or Cedel, duly
executed by the Company and authenticated by the Trustee as hereinafter
provided. The "40-day restricted period" (as defined in Regulation S) shall be
terminated upon the receipt by the Trustee of (i) a written certificate from the
Depository, together with copies of certificates from Euroclear and Cedel
certifying that they have received certification of non-United States beneficial
ownership of 100% of the aggregate principal amount of the Regulation S
Temporary Global Note (except to the extent of any beneficial owners thereof who
acquired an interest therein pursuant to another exemption from registration
under the Securities Act and who will take delivery of a beneficial ownership
interest in a 144A Global Note, all as contemplated by Section 2.06(a)(ii)
hereof), and (ii) an Officers' Certificate from the Company. Following the
termination of the 40-day restricted period, beneficial interests in the
Regulation S Temporary Global Note shall be exchanged for beneficial interests
in Regulation S Permanent Global Notes pursuant to the Applicable Procedures.
Simultaneously with the authentication of Regulation S Permanent Global Notes,
the Trustee shall cancel the Regulation S Temporary Global Note. The aggregate
principal amount of the Regulation S Temporary Global Note and the Regulation S
Permanent Global Notes may from time to time be increased or decreased by
adjustments made on the records of the Trustee and the Depository or its
nominee, as the case may be, in connection with transfers of interest as
hereinafter provided.
Each Global Note shall represent such of the outstanding
Senior Notes as shall be specified therein and each shall provide that it shall
represent the aggregate amount of outstanding Senior
15
<PAGE> 22
Notes from time to time endorsed thereon and that the aggregate amount of
outstanding Senior Notes represented thereby may from time to time be reduced or
increased, as appropriate, to reflect exchanges, redemptions and transfers of
interests. Any endorsement of a Global Note to reflect the amount of any
increase or decrease in the amount of outstanding Senior Notes represented
thereby shall be made by the Trustee or the Senior Note Custodian, at the
direction of the Trustee, in accordance with instructions given by the Holder
thereof as required by Section 2.06 hereof.
The provisions of the "Operating Procedures of the Euroclear
System" and "Terms and Conditions Governing Use of Euroclear" and the
"Management Regulations" and "Instructions to Participants" of Cedel shall be
applicable to interests in the Regulation S Temporary Global Note and the
Regulation S Permanent Global Notes that are held by Participants through
Euroclear or Cedel. The Trustee shall have no obligation to notify Holders of
any such procedures or to monitor or enforce compliance with the same.
Except as set forth in Section 2.06 hereof, the Global Notes
may be transferred, in whole and not in part, only to another nominee of the
Depository or to a successor of the Depository or its nominee.
(b) Book-Entry Provisions. This Section 2.01(b) shall apply
only to 144A Global Notes and Regulation S Permanent Global Notes deposited with
or on behalf of the Depository.
The Company shall execute and the Trustee shall, in accordance
with this Section 2.01(b), authenticate and deliver the Global Notes that (i)
shall be registered in the name of the Depository or the nominee of the
Depository and (ii) shall be delivered by the Trustee to the Depository or
pursuant to the Depository's instructions or held by the Trustee as custodian
for the Depository.
Participants shall have no rights either under this Indenture
with respect to any Global Note held on their behalf by the Depository or by the
Senior Note Custodian as custodian for the Depository or under such Global Note,
and the Depository may be treated by the Company, the Trustee and any agent of
the Company or the Trustee as the absolute owner of such Global Note for all
purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent
the Company, the Trustee or any agent of the Company or the Trustee from giving
effect to any written certification, proxy or other authorization furnished by
the Depository or impair, as between the Depository and its Participants, the
operation of customary practices of such Depository governing the exercise of
the rights of an owner of a beneficial interest in any Global Note.
(c) Definitive Senior Notes. Senior Notes issued in
certificated form shall be substantially in the form of EXHIBIT A-1 attached
hereto (but without including the text referred to in footnotes 1 and 3
thereto).
SECTION 2.02. EXECUTION AND AUTHENTICATION.
Two Officers shall sign the Senior Notes for the Company by
manual or facsimile signature.
If an Officer whose signature is on a Senior Note no longer
holds that office at the time a Senior Note is authenticated, the Senior Note
shall nevertheless be valid.
A Senior Note shall not be valid until authenticated by the
manual signature of the Trustee. The signature shall be conclusive evidence that
the Senior Note has been authenticated under
16
<PAGE> 23
this Indenture. The form of Trustee's certificate of authentication to be borne
by the Senior Notes shall be substantially as set forth in EXHIBIT A-1 or
EXHIBIT A-2 hereto.
The Trustee shall, upon a written order of the Company signed
by two Officers directing the Trustee to authenticate the Senior Notes and
certifying that all conditions precedent to the issuance of the Senior Notes
contained herein have been complied with, authenticate Senior Notes for original
issue up to the aggregate principal amount stated in paragraph 4 of the Senior
Notes. The Trustee shall, upon written order of the Company signed by two
Officers, authenticate Series B Senior Notes for original issuance in exchange
for a like principal amount of Series A Senior Notes exchanged in the Exchange
Offer or otherwise exchanged for Series A Senior Notes pursuant to the terms of
the Registration Rights Agreement. The aggregate principal amount of Senior
Notes outstanding at any time may not exceed such amount except as provided in
Section 2.07 hereof.
The Trustee may (at the Company's expense) appoint an
authenticating agent acceptable to the Company to authenticate Senior Notes. An
authenticating agent may authenticate Senior Notes whenever the Trustee may do
so. Each reference in this Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the same rights as an
Agent to deal with the Company or an Affiliate of the Company.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain (i) an office or agency where Senior Notes
may be presented for registration of transfer or for exchange ("Registrar") and
(ii) an office or agency where Senior Notes may be presented for payment
("Paying Agent"). The Registrar shall keep a register of the Senior Notes and of
their transfer and exchange. The Company may appoint one or more additional
paying agents. The term "Paying Agent" includes any additional paying agent. The
Company may change any Paying Agent or Registrar without notice to any Holder.
The Company shall notify the Trustee in writing of the name and address of any
Agent not a party to this Indenture. If the Company fails to appoint or maintain
another entity as Registrar or Paying Agent, the Trustee shall act as such. The
Company or any of its Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company
("DTC") to act as Depository with respect to the Global Notes.
The Company initially appoints the Trustee to act as the
Registrar and Paying Agent and to act as Senior Note Custodian with respect to
the Global Notes.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent shall hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium, if any, interest or Liquidated Damages, if any, on the
Senior Notes, and shall notify the Trustee of any default by the Company in
making any such payment. While any such default continues, the Trustee may
require a Paying Agent to pay all money held by it to the Trustee. The Company
at any time may require a Paying Agent to pay all money held by it to the
Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the
Company or a Subsidiary) shall have no further liability for the money. If the
Company or a Subsidiary acts as Paying Agent, it shall segregate and hold in a
separate trust fund for the benefit of the Holders all money held
17
<PAGE> 24
by it as Paying Agent. Upon the occurrence of events specified in Section
6.01(vii) and 6.01(viii) hereof, the Trustee shall serve as Paying Agent for the
Senior Notes.
SECTION 2.05. HOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA Section 312(a). If the Trustee
is not the Registrar, the Company and/or the Subsidiary Guarantors shall
furnish to the Trustee at least seven (7) Business Days before each interest
payment date and at such other times as the Trustee may request in writing, a
list in such form and as of such date as the Trustee may reasonably require of
the names and addresses of the Holders of Senior Notes and the Company and the
Subsidiary Guarantors shall otherwise comply with TIA Section 312(a).
SECTION 2.06. TRANSFER AND EXCHANGE.
(a) Transfer and Exchange of Global Notes. The transfer and exchange of
Global Notes or beneficial interests therein shall be effected through the
Depository, in accordance with this Indenture and the procedures of the
Depository therefor, which shall include restrictions on transfer comparable to
those set forth herein to the extent required by the Securities Act. Beneficial
interests in a Global Note may be transferred to Persons who take delivery
thereof in the form of a beneficial interest in the same Global Note in
accordance with the transfer restrictions set forth in the legend in subsection
(g) of this Section 2.06. Transfers of beneficial interests in the Global Notes
to Persons required to take delivery thereof in the form of an interest in
another Global Note shall be permitted as follows:
(i) 144A Global Note to Regulation S Global Note. If, at
any time, an owner of a beneficial interest in a 144A
Global Note deposited with the Depository (or the
Trustee as custodian for the Depository) wishes to
transfer its beneficial interest in such 144A Global
Note to a Person who is required or permitted to take
delivery thereof in the form of an interest in a
Regulation S Global Note, such owner shall, subject
to the Applicable Procedures, exchange or cause the
exchange of such interest for an equivalent
beneficial interest in a Regulation S Global Note as
provided in this Section 2.06(a)(i). Upon receipt by
the Trustee of (1) instructions given in accordance
with the Applicable Procedures from a Participant
directing the Trustee to credit or cause to be
credited a beneficial interest in the Regulation S
Global Note in an amount equal to the beneficial
interest in the 144A Global Note to be exchanged, (2)
a written order given in accordance with the
Applicable Procedures containing information
regarding the Participant account of the Depository
and the Euroclear or Cedel account to be credited
with such increase, and (3) a certificate in the form
of EXHIBIT B-1 hereto given by the owner of such
beneficial interest stating that the transfer of such
interest has been made in compliance with the
transfer restrictions applicable to the Global Notes
and pursuant to and in accordance with Rule 903 or
Rule 904 of Regulation S, then the Trustee, as
Registrar, shall instruct the Depository to reduce or
cause to be reduced the aggregate principal amount at
maturity of the applicable 144A Global Note and to
increase or cause to be increased the aggregate
principal amount at maturity of the applicable
Regulation S Global Note by the principal amount at
maturity of the beneficial interest in the 144A
Global Note to be exchanged or transferred, to credit
or cause to be credited to the account of the Person
specified in such instructions, a beneficial interest
in the Regulation S Global Note equal to the
reduction in the aggregate principal
18
<PAGE> 25
amount at maturity of the 144A Global Note, and to
debit, or cause to be debited, from the account of
the Person making such exchange or transfer the
beneficial interest in the 144A Global Note that is
being exchanged or transferred.
(ii) Regulation S Global Note to 144A Global Note. If, at
any time, after the expiration of the 40-day
restricted period, an owner of a beneficial interest
in a Regulation S Global Note deposited with the
Depository or with the Trustee as custodian for the
Depository wishes to transfer its beneficial interest
in such Regulation S Global Note to a Person who is
required or permitted to take delivery thereof in the
form of an interest in a 144A Global Note, such owner
shall, subject to the Applicable Procedures, exchange
or cause the exchange of such interest for an
equivalent beneficial interest in a 144A Global Note
as provided in this Section 2.06(a)(ii). Upon receipt
by the Trustee of (1) instructions from Euroclear or
Cedel, if applicable, and the Depository, directing
the Trustee, as Registrar, to credit or cause to be
credited a beneficial interest in the 144A Global
Note equal to the beneficial interest in the
Regulation S Global Note to be exchanged, such
instructions to contain information regarding the
Participant account with the Depository to be
credited with such increase, (2) a written order
given in accordance with the Applicable Procedures
containing information regarding the participant
account of the Depository and (3) a certificate in
the form of EXHIBIT B-2 attached hereto given by the
owner of such beneficial interest stating (A) if the
transfer is pursuant to Rule 144A, that the Person
transferring such interest in a Regulation S Global
Note reasonably believes that the Person acquiring
such interest in a 144A Global Note is a QIB and is
obtaining such beneficial interest in a transaction
meeting the requirements of Rule 144A and any
applicable blue sky or securities laws of any state
of the United States, (B) that the transfer complies
with the requirements of Rule 144 under the
Securities Act, (C) if the transfer is to an
Institutional Accredited Investor that such transfer
is in compliance with the Securities Act and a
certificate in the form of Exhibit C attached hereto
and, if such transfer is in respect of an aggregate
principal amount of less than $100,000, an Opinion of
Counsel acceptable to the Company that such transfer
is in compliance with the Securities Act or (D) if
the transfer is pursuant to any other exemption from
the registration requirements of the Securities Act,
that the transfer of such interest has been made in
compliance with the transfer restrictions applicable
to the Global Notes and pursuant to and in accordance
with the requirements of the exemption claimed, such
statement to be supported by an Opinion of Counsel
from the transferee or the transferor in form
reasonably acceptable to the Company and to the
Registrar and in each case, in accordance with any
applicable securities laws of any state of the United
States or any other applicable jurisdiction, then the
Trustee, as Registrar, shall instruct the Depository
to reduce or cause to be reduced the aggregate
principal amount at maturity of such Regulation S
Global Note and to increase or cause to be increased
the aggregate principal amount at maturity of the
applicable 144A Global Note by the principal amount
at maturity of the beneficial interest in the
Regulation S Global Note to be exchanged or
transferred, and the Trustee, as Registrar, shall
instruct the Depository, concurrently with such
reduction, to credit or cause to be credited to the
account of the Person specified in such instructions
a beneficial interest in the applicable 144A Global
Note equal to the reduction in the aggregate
principal
19
<PAGE> 26
amount at maturity of such Regulation S Global Note
and to debit or cause to be debited from the account
of the Person making such transfer the beneficial
interest in the Regulation S Global Note that is
being exchanged or transferred.
(b) Transfer and Exchange of Definitive Senior Notes. When Definitive
Senior Notes are presented by a Holder to the Registrar with a request to
register the transfer of the Definitive Senior Notes or to exchange such
Definitive Senior Notes for an equal principal amount of Definitive Senior Notes
of other authorized denominations, the Registrar shall register the transfer or
make the exchange as requested only if the Definitive Senior Notes are presented
or surrendered for registration of transfer or exchange, are endorsed and
contain a signature guarantee or accompanied by a written instrument of transfer
in form satisfactory to the Registrar duly executed by such Holder or by his
attorney and contains a signature guarantee, duly authorized in writing and the
Registrar received the following documentation (all of which may be submitted by
facsimile):
(i) in the case of Definitive Senior Notes that are
Transfer Restricted Securities, such request shall be
accompanied by the following additional information
and documents, as applicable:
(A) if such Transfer Restricted Security is
being delivered to the Registrar by a Holder
for registration in the name of such Holder,
without transfer, or such Transfer
Restricted Security is being transferred to
the Company or any of its Subsidiaries, a
certification to that effect from such
Holder (in substantially the form of EXHIBIT
B-3 hereto); or
(B) if such Transfer Restricted Security is
being transferred to a QIB in accordance
with Rule 144A under the Securities Act or
pursuant to an exemption from registration
in accordance with Rule 144 under the
Securities Act or pursuant to an effective
registration statement under the Securities
Act, a certification to that effect from
such Holder (in substantially the form of
EXHIBIT B-3 hereto); or
(C) if such Transfer Restricted Security is
being transferred to a Non-U.S. Person in an
offshore transaction in accordance with Rule
904 under the Securities Act, a
certification to that effect from such
Holder (in substantially the form of EXHIBIT
B-3 hereto); or
(D) if such Transfer Restricted Security is
being transferred to an Institutional
Accredited Investor in reliance on an
exemption from the registration requirements
of the Securities Act other than those
listed in subparagraphs (B) or (C) above, a
certification to that effect from such
Holder (in substantially the form of EXHIBIT
B-3 hereto), a certification substantially
in the form of EXHIBIT C hereto, and, if
such transfer is in respect of an aggregate
principal amount of Senior Notes of less
than $100,000, an Opinion of Counsel
acceptable to the Company that such transfer
is in compliance with the Securities Act; or
(E) if such Transfer Restricted Security is
being transferred in reliance on any other
exemption from the registration requirements
of the Securities Act, a certification to
that effect from such Holder (in
substantially the form of EXHIBIT B-3
hereto) and an Opinion of Counsel from such
20
<PAGE> 27
Holder or the transferee reasonably
acceptable to the Company and to the
Registrar to the effect that such transfer
is in compliance with the Securities Act.
(c) Transfer of a Beneficial Interest in a 144A Global Note or
Regulation S Permanent Global Note for a Definitive Senior
Note.
(i) Any Person having a beneficial interest in a 144A
Global Note or Regulation S Permanent Global Note may
upon request, subject to the Applicable Procedures,
exchange such beneficial interest for a Definitive
Senior Note. Upon receipt by the Trustee of written
instructions or such other form of instructions as is
customary for the Depository (or Euroclear or Cedel,
if applicable), from the Depository or its nominee on
behalf of any Person having a beneficial interest in
a 144A Global Note or Regulation S Permanent Global
Note, and, in the case of a Transfer Restricted
Security, the following additional information and
documents (all of which may be submitted by
facsimile):
(A) if such beneficial interest is being
transferred to the Person designated by the
Depository as being the beneficial owner, a
certification to that effect from such
Person (in substantially the form of EXHIBIT
B-4 hereto);
(B) if such beneficial interest is being
transferred to a QIB in accordance with Rule
144A under the Securities Act or pursuant to
an exemption from registration in accordance
with Rule 144 under the Securities Act or
pursuant to an effective registration
statement under the Securities Act, a
certification to that effect from the
transferor (in substantially the form of
EXHIBIT B-4 hereto);
(C) if such beneficial interest is being
transferred to an Institutional Accredited
Investor, pursuant to a private placement
exemption from the registration requirements
of the Securities Act (and based on an
opinion of counsel if the Company so
requests), a certification to that effect
from such Holder (in substantially the form
of EXHIBIT B-4 hereto) and a certification
from the applicable transferee (in
substantially the form of EXHIBIT C hereto)
or
(D) if such beneficial interest is being
transferred in reliance on any other
exemption from the registration requirements
of the Securities Act, a certification to
that effect from the transferor (in
substantially the form of EXHIBIT B-4
hereto) and an Opinion of Counsel from the
transferee or the transferor reasonably
acceptable to the Company and to the
Registrar to the effect that such transfer
is in compliance with the Securities Act, in
which case the Trustee or the Senior Note
Custodian, at the direction of the Trustee,
shall, in accordance with the standing
instructions and procedures existing between
the Depository and the Senior Note
Custodian, cause the aggregate principal
amount of 144A Global Notes or Regulation S
Permanent Global Notes, as applicable, to be
reduced accordingly and, following such
reduction, the Company shall execute and,
the Trustee shall authenticate and deliver
to the transferee a Definitive Senior Note
in the appropriate principal amount.
21
<PAGE> 28
(ii) Definitive Senior Notes issued in exchange for a
beneficial interest in a 144A Global Note or
Regulation S Permanent Global Note, as applicable,
pursuant to this Section 2.06(c) shall be registered
in such names and in such authorized denominations as
the Depository, pursuant to instructions from its
direct or Indirect Participants or otherwise, shall
instruct the Trustee. The Trustee shall deliver such
Definitive Senior Notes to the Persons in whose names
such Senior Notes are so registered. Following any
such issuance of Definitive Senior Notes, the
Trustee, as Registrar, shall instruct the Depository
to reduce or cause to be reduced the aggregate
principal amount at maturity of the applicable Global
Note to reflect the transfer.
(d) Restrictions on Transfer and Exchange of Global Notes.
Notwithstanding any other provision of this Indenture (other than the provisions
set forth in subsection (f) of this Section 2.06), a Global Note may not be
transferred as a whole except by the Depository to a nominee of the Depository
or by a nominee of the Depository to the Depository or another nominee of the
Depository or by the Depository or any such nominee to a successor Depository or
a nominee of such successor Depository.
(e) Authentication of Definitive Senior Notes in Absence of Depository.
If at any time:
(i) the Depository for the Senior Notes notifies
the Company that the Depository is unwilling
or unable to continue as Depository for the
Global Notes and a successor Depository for
the Global Notes is not appointed by the
Company within 90 days after delivery of
such notice; or
(ii) the Company, at its sole discretion,
notifies the Trustee in writing that it
elects to cause the issuance of Definitive
Senior Notes under this Indenture,
then the Company shall execute, and the Trustee shall, upon receipt of an
authentication order in accordance with Section 2.02 hereof, authenticate and
deliver, Definitive Senior Notes in an aggregate principal amount equal to the
principal amount of the Global Notes in exchange for such Global Notes.
(f) Legends.
(i) Except as permitted by the following
paragraphs (ii), (iii) and (iv), each Senior
Note certificate evidencing Global Notes and
Definitive Senior Notes (and all Senior
Notes issued in exchange therefor or
substitution thereof) shall bear the legend
(the "Private Placement Legend") in
substantially the following form:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED
HEREBY WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER
SECTION 5 OF THE UNITED STATES SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND THE SECURITY EVIDENCED HEREBY MAY
NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THE SECURITY
EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE
SELLER MAY BE RELYING ON THE EXEMPTION FROM
THE PROVISIONS OF SECTION 5 OF THE
22
<PAGE> 29
SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER. THE HOLDER OF THE SECURITY
EVIDENCED HEREBY AGREES FOR THE BENEFIT OF
THE COMPANY THAT (A) SUCH SECURITY MAY BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED,
ONLY (1)(a) INSIDE THE UNITED STATES TO A
PERSON WHO THE SELLER REASONABLY BELIEVES IS
A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED
IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (b) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, (c) OUTSIDE THE UNITED
STATES TO A FOREIGN PERSON IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 904 UNDER
THE SECURITIES ACT, (d) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(A)(1), (2), (3) OR (7) OF THE SECURITIES
ACT (AN "INSTITUTIONAL ACCREDITED
INVESTOR"), THAT PRIOR TO SUCH TRANSFER,
FURNISHED THE TRUSTEE A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS (THE FORM OF WHICH CAN BE
OBTAINED FROM THE TRUSTEE) AND, IF SUCH
TRANSFER IS IN RESPECT OF AN AGGREGATE
PRINCIPAL AMOUNT OF SENIOR NOTES LESS THAN
$100,000, AN OPINION OF COUNSEL ACCEPTABLE
TO THE COMPANY THAT SUCH TRANSFER IS IN
COMPLIANCE WITH THE SECURITIES ACT, OR (e)
IN ACCORDANCE WITH ANOTHER EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF
COUNSEL IF THE COMPANY SO REQUESTS), (2) TO
THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES OR
ANY OTHER APPLICABLE JURISDICTION AND (B)
THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER
IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT
OF THE SECURITY EVIDENCED HEREBY OF THE
RESALE RESTRICTIONS SET FORTH IN (A) ABOVE."
(ii) Upon any sale or transfer of a Transfer Restricted
Security (including any Transfer Restricted Security
represented by a Global Note) pursuant to Rule 144
under the Securities Act or pursuant to an effective
registration statement under the Securities Act:
(A) in the case of any Transfer Restricted
Security that is a Definitive Senior Note,
the Registrar shall permit the Holder
thereof to exchange such Transfer Restricted
Security for a Definitive Senior Note that
does not bear the legend set forth in (i)
above and rescind any restriction on the
transfer of such Transfer Restricted
Security upon receipt of a certification
from the transferring holder substantially
in the form of EXHIBIT B-4 hereto; and
(B) in the case of any Transfer Restricted
Security represented by a Global Note, such
Transfer Restricted Security shall not be
required to bear the legend set forth in (i)
above, but shall continue to be subject to
the provisions of Section 2.06(a) and (b)
hereof; provided, however, that with respect
to any request for an exchange of a Transfer
Restricted Security that is represented by a
Global Note for a Definitive Senior
23
<PAGE> 30
Note that does not bear the legend set forth
in (i) above, which request is made in
reliance upon Rule 144, the Holder thereof
shall certify in writing to the Registrar
that such request is being made pursuant to
Rule 144 (such certification to be
substantially in the form of EXHIBIT B-4
hereto).
(iii) Upon any sale or transfer of a Transfer Restricted
Security (including any Transfer Restricted Security
represented by a Global Note) in reliance on any
exemption from the registration requirements of the
Securities Act (other than exemptions pursuant to
Rule 144A or Rule 144 under the Securities Act) in
which the Holder or the transferee provides an
Opinion of Counsel to the Company and the Registrar
in form and substance reasonably acceptable to the
Company and the Registrar (which Opinion of Counsel
shall also state that the transfer restrictions
contained in the legend are no longer applicable):
(A) in the case of any Transfer Restricted
Security that is a Definitive Senior Note,
the Registrar shall permit the Holder
thereof to exchange such Transfer Restricted
Security for a Definitive Senior Note that
does not bear the legend set forth in (i)
above and rescind any restriction on the
transfer of such Transfer Restricted
Security; and
(B) in the case of any Transfer Restricted
Security represented by a Global Note, such
Transfer Restricted Security shall not be
required to bear the legend set forth in (i)
above, but shall continue to be subject to
the provisions of Section 2.06(a) and (b)
hereof.
(iv) Notwithstanding the foregoing, upon the occurrence of
the Exchange Offer in accordance with the
Registration Rights Agreement, the Company shall
issue and, upon receipt of an authentication order in
accordance with Section 2.02 hereof, the Trustee
shall authenticate (i) one or more Unrestricted
Global Notes in aggregate principal amount equal to
the principal amount of the Restricted Beneficial
Interests tendered for acceptance by persons that are
not (x) broker-dealers, (y) Persons participating in
the distribution of the Series B Senior Notes or (z)
Persons who are affiliates (as defined in Rule 144)
of the Company and accepted for exchange in the
Exchange Offer and (ii) Definitive Senior Notes that
do not bear the Private Placement Legend in an
aggregate principal amount equal to the principal
amount of the Restricted Definitive Senior Notes
accepted for exchange in the Exchange Offer.
Concurrently with the issuance of such Senior Notes,
the Trustee shall cause the aggregate principal
amount of the applicable Restricted Global Notes to
be reduced accordingly and the Company shall execute
and the Trustee shall authenticate and deliver to the
Persons designated by the Holders of Definitive
Senior Notes so accepted Definitive Senior Notes in
the appropriate principal amount.
(g) Cancellation and/or Adjustment of Global Notes. At such
time as all beneficial interests in Global Notes have been exchanged for
Definitive Senior Notes, redeemed, repurchased or cancelled, all Global Notes
shall be returned to or retained and cancelled by the Trustee in accordance with
Section 2.11 hereof. At any time prior to such cancellation, if any beneficial
interest in a Global Note is exchanged for Definitive Senior Notes, redeemed,
repurchased or cancelled, the principal amount
24
<PAGE> 31
of Senior Notes represented by such Global Note shall be reduced accordingly and
an endorsement shall be made on such Global Note, by the Trustee or the Senior
Notes Custodian, at the direction of the Trustee, to reflect such reduction.
(h) General Provisions Relating to Transfers and
Exchanges.
(i) To permit registrations of
transfers and exchanges, the
Company shall execute and the
Trustee shall authenticate Global
Notes and Definitive Senior Notes
at the Registrar's request.
(ii) No service charge shall be made to
a Holder for any registration of
transfer or exchange, but the
Company may require payment of a
sum sufficient to cover any stamp
or transfer tax or similar
governmental charge payable in
connection therewith (other than
any such stamp or transfer taxes or
similar governmental charge payable
upon exchange or transfer pursuant
to Sections 2.10, 3.06, 4.10, 4.14
and 9.05 hereto).
(iii) All Global Notes and Definitive
Senior Notes issued upon any
registration of transfer or
exchange of Global Notes or
Definitive Senior Notes shall be
the valid obligations of the
Company, evidencing the same debt,
and entitled to the same benefits
under this Indenture, as the Global
Notes or Definitive Senior Notes
surrendered upon such registration
of transfer or exchange.
(iv) The Registrar shall not be
required:(A) to issue, to register
the transfer of or to exchange
Senior Notes during a period
beginning at the opening of fifteen
(15) Business Days before the day
of any selection of Senior Notes
for redemption under Section 3.02
hereof and ending at the close of
business on the day of selection,
(B) to register the transfer of or
to exchange any Senior Note so
selected for redemption in whole or
in part, except the unredeemed
portion of any Senior Note being
redeemed in part, or (C) to
register the transfer of or to
exchange a Senior Note between a
record date and the next succeeding
interest payment date.
(v) Prior to due presentment for the
registration of a transfer of any
Senior Note, the Trustee, any Agent
and the Company may deem and treat
the Person in whose name any Senior
Note is registered as the absolute
owner of such Senior Note for the
purpose of receiving payment of
principal of and interest on such
Senior Notes and for all other
purposes, and neither the Trustee,
any Agent nor the Company shall be
affected by notice to the contrary.
(vii) The Trustee shall authenticate
Global Notes and Definitive Senior
Notes in accordance with the
provisions of Section 2.02 hereof.
25
<PAGE> 32
SECTION 2.07. REPLACEMENT SENIOR NOTES.
If any mutilated Senior Note is surrendered to the Trustee, or the
Company and the Trustee receives evidence to their satisfaction of the
destruction, loss or theft of any Senior Note, the Company shall issue and the
Trustee, upon the written order of the Company signed by two Officers of the
Company, shall authenticate a replacement Senior Note if the Trustee's
requirements are met. If required by the Trustee or the Company, an indemnity
bond must be supplied by the Holder that is sufficient in the judgment of the
Trustee and the Company to protect the Company, the Trustee, any Agent and any
authenticating agent from any loss that any of them may suffer if a Senior Note
is replaced. The Company and the Trustee may charge for their expenses in
replacing a Senior Note.
Every replacement Senior Note is an additional obligation of the
Company and shall be entitled to all of the benefits of this Indenture equally
and proportionately with all other Senior Notes duly issued hereunder.
SECTION 2.08. OUTSTANDING SENIOR NOTES.
The Senior Notes outstanding at any time are all the Senior Notes
authenticated by the Trustee except for those cancelled by it, those delivered
to it for cancellation, those reductions in the interest in a Global Note
effected by the Trustee in accordance with the provisions hereof, and those
described in this Section 2.08 as not outstanding. Except as set forth in
Section 2.09 hereof, a Senior Note does not cease to be outstanding because the
Company or any Subsidiary Guarantor or an Affiliate of the Company or any
Subsidiary Guarantor holds the Senior Note.
If a Senior Note is replaced pursuant to Section 2.07 hereof, it ceases
to be outstanding unless the Trustee receives proof satisfactory to it that the
replaced Senior Note is held by a bona fide purchaser.
If the principal amount of any Senior Note is considered paid under
Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to
accrue.
If the Paying Agent (other than the Company, a Subsidiary or an
Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Senior Notes payable on that date, then on and after that date
such Senior Notes shall be deemed to be no longer outstanding and shall cease to
accrue interest.
SECTION 2.09. TREASURY SENIOR NOTES.
In determining whether the Holders of the required principal amount of
Senior Notes have concurred in any direction, waiver or consent, Senior Notes
owned by the Company or any Subsidiary Guarantor, or by any Affiliate of the
Company or any Subsidiary Guarantor shall be considered as though not
outstanding, except that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Senior Notes as to which a Responsible Officer of the Trustee has received
written notice are so owned shall be so considered. Notwithstanding the
foregoing, Senior Notes that are to be acquired by the Company or any Subsidiary
Guarantor or an Affiliate of the Company or any Subsidiary Guarantor pursuant to
an exchange offer, tender offer or other agreement shall not be deemed to be
owned by such entity until legal title to such Senior Notes passes to such
entity.
26
<PAGE> 33
SECTION 2.10. TEMPORARY SENIOR NOTES.
Until Definitive Senior Notes are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Senior Notes upon a written
order of the Company signed by two Officers of the Company. Temporary Senior
Notes shall be substantially in the form of Definitive Senior Notes but may have
variations that the Company considers appropriate for temporary Senior Notes.
Without unreasonable delay, the Company shall prepare and the Trustee shall upon
receipt of a written order of the Company signed by two Officers authenticate
Definitive Senior Notes in exchange for temporary Senior Notes.
Holders of temporary Senior Notes shall be entitled to all of the
benefits of this Indenture.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver to the Trustee for cancellation any
Senior Notes previously authenticated and delivered hereunder or which the
Company may have acquired in any manner whatsoever, and all Senior Notes so
delivered shall be promptly cancelled by the Trustee. All Senior Notes
surrendered for registration of transfer, exchange or payment, if surrendered to
any Person other than the Trustee, shall be delivered to the Trustee. The
Trustee and no one else shall cancel all Senior Notes surrendered for
registration of transfer, exchange, payment, replacement or cancellation.
Subject to Section 2.07 hereof, the Company may not issue new Senior Notes to
replace Senior Notes that it has redeemed or paid or that have been delivered to
the Trustee for cancellation. All cancelled Senior Notes held by the Trustee
shall be destroyed and certification of their destruction delivered to the
Company, unless by a written order, signed by two Officers of the Company, the
Company shall direct that cancelled Senior Notes be returned to it.
SECTION 2.12. DEFAULTED INTEREST.
If the Company or any Subsidiary Guarantor defaults in a payment of
interest on the Senior Notes, it shall pay the defaulted interest in any lawful
manner plus, to the extent lawful, interest payable on the defaulted interest,
to the Persons who are Holders on a subsequent special record date, which date
shall be at the earliest practicable date but in all events at least five (5)
Business Days prior to the payment date, in each case at the rate provided in
the Senior Notes and in Section 4.01 hereof. The Company shall fix or cause to
be fixed each such special record date and payment date, and shall promptly
thereafter, notify the Trustee of any such date. At least fifteen (15) days
before the special record date, the Company (or the Trustee, in the name and at
the expense of the Company) shall mail or cause to be mailed to Holders a notice
that states the special record date, the related payment date and the amount of
such interest to be paid.
SECTION 2.13. RECORD DATE.
The record date for purposes of determining the identity of Holders of
the Senior Notes entitled to vote or consent to any action by vote or consent
authorized or permitted under this Indenture shall be determined as provided for
in TIA Section 316 (c).
SECTION 2.14. COMPUTATION OF INTEREST.
Interest on the Senior Notes shall be computed on the basis of a
360-day year comprised of twelve 30-day months.
27
<PAGE> 34
SECTION 2.15. CUSIP NUMBER.
The Company in issuing the Senior Notes may use a "CUSIP" number, and
if it does so, the Trustee shall use the CUSIP number in notices of redemption
or exchange as a convenience to Holders; provided that any such notice may state
that no representation is made as to the correctness or accuracy of the CUSIP
number printed in the notice or on the Senior Notes and that reliance may be
placed only on the other identification numbers printed on the Senior Notes. The
Company shall promptly notify the Trustee of any change in the CUSIP number.
ARTICLE 3
REDEMPTION AND PREPAYMENT
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company elects to redeem Senior Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 45 days but not more than 60 days before a redemption date (unless a
shorter period is acceptable to the Trustee) an Officers' Certificate setting
forth (i) the Section of this Indenture pursuant to which the redemption shall
occur, (ii) the redemption date, (iii) the principal amount of Senior Notes to
be redeemed and (iv) the redemption price.
If the Company is required to make an offer to purchase Senior Notes
pursuant to Section 4.10 or 4.14 hereof, it shall furnish to the Trustee, at
least 45 days before the scheduled purchase date, an Officers' Certificate
setting forth (i) the section of this Indenture pursuant to which the offer to
purchase shall occur, (ii) the terms of the offer, (iii) the principal amount of
Senior Notes to be purchased, (iv) the purchase price, (v) the purchase date and
(vi) and further setting forth a statement to the effect that (a) the Company or
one its Subsidiaries has affected an Asset Sale and there are Excess Proceeds
aggregating more than $5.0 million or (b) a Change of Control has occurred, as
applicable.
SECTION 3.02. SELECTION OF SENIOR NOTES TO BE REDEEMED OR PURCHASED.
If less than all of the Senior Notes are to be redeemed at any time,
selection of the Senior Notes for redemption shall be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which the Senior Notes are listed, or, if the Senior Notes are not so
listed, on a pro rata basis, by lot or by such other method as the Trustee deems
fair and appropriate; provided that no Senior Notes with a principal amount of
1,000 or less shall be redeemed in part.
The Trustee shall promptly notify the Company in writing of the Senior
Notes selected for redemption and, in the case of any Senior Note selected for
partial purchase or redemption, the principal amount thereof to be redeemed.
Senior Notes and portions of Senior Notes selected shall be in amounts of $1,000
or whole multiples of $1,000; except that if all of the Senior Notes of a Holder
are to be purchased or redeemed, the entire outstanding amount of Senior Notes
held by such Holder, even if not a multiple of $1,000, shall be redeemed. Except
as provided in the preceding sentence, provisions of this Indenture that apply
to Senior Notes called for redemption also apply to portions of Senior Notes
called for redemption.
28
<PAGE> 35
SECTION 3.03. NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a redemption date,
the Company shall mail or cause to be mailed by first class mail, a notice of
redemption to each Holder whose Senior Notes are to be redeemed.
The notice shall identify the Senior Notes to be redeemed and shall
state:
(1) the redemption date;
(2) the redemption price for the Senior Notes and accrued
interest, and Liquidated Damages, if any;
(3) if any Senior Note is being redeemed in part, the
portion of the principal amount of such Senior Notes
to be redeemed and that, after the redemption date,
upon surrender of such Senior Note, a new Senior Note
or Senior Notes in principal amount equal to the
unredeemed portion shall be issued upon surrender of
the original Senior Note;
(4) the name and address of the Paying Agent;
(5) that Senior Notes called for redemption must be
surrendered to the Paying Agent to collect the
redemption price;
(6) that, unless the Company defaults in making such
redemption payment, interest and Liquidated Damages,
if any, on Senior Notes called for redemption ceases
to accrue on and after the redemption date;
(7) the paragraph of the Senior Notes and/or Section of
this Indenture pursuant to which the Senior Notes
called for redemption are being redeemed; and
(8) that no representation is made as to the correctness
or accuracy of the CUSIP number, if any, listed in
such notice or printed on the Senior Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense; provided,
however, that the Company shall have delivered to the Trustee, at least 45 days
prior to the redemption date (or such shorter period as shall be acceptable to
the Trustee), an Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in the notice as provided
in the preceding paragraph. The notice mailed in the manner herein provided
shall be conclusively presumed to have been duly given whether or not the Holder
receives such notice. In any case, failure to give such notice by mail or any
defect in the notice to the Holder of any Senior Note shall not affect the
validity of the proceeding for the redemption of any other Senior Note.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.03
hereof, Senior Notes called for redemption become irrevocably due and payable on
the redemption date at the redemption price plus accrued and unpaid interest and
Liquidated Damages, if any, to such date. A notice of redemption may not be
conditional.
29
<PAGE> 36
SECTION 3.05. DEPOSIT OF REDEMPTION OR PURCHASE PRICE.
On or before 10:00 a.m. (New York City time) on each redemption date or
the date on which Senior Notes must be accepted for purchase pursuant to Section
4.10 or 4.14, the Company shall deposit with the Trustee or with the Paying
Agent money sufficient to pay the redemption price of and accrued and unpaid
interest and Liquidated Damages, if any, on all Senior Notes to be redeemed or
purchased on that date. The Trustee or the Paying Agent shall promptly return to
the Company upon its written request any money deposited with the Trustee or the
Paying Agent by the Company in excess of the amounts necessary to pay the
redemption price of (including any applicable premium), accrued interest and
Liquidated Damages, if any, on all Senior Notes to be redeemed or purchased.
If Senior Notes called for redemption or tendered in an Asset Sale
Offer or Change of Control Offer are paid or if the Company has deposited with
the Trustee or Paying Agent money sufficient to pay the redemption or purchase
price of, unpaid and accrued interest and Liquidated Damages, if any, on all
Senior Notes to be redeemed or purchased, on and after the redemption or
purchase date interest and Liquidated Damages, if any, shall cease to accrue on
the Senior Notes or the portions of Senior Notes called for redemption or
tendered and not withdrawn in an Asset Sale Offer or Change of Control Offer
(regardless of whether certificates for such securities are actually
surrendered). If a Senior Note is redeemed or purchased on or after an interest
record date but on or prior to the related interest payment date, then any
accrued and unpaid interest and Liquidated Damages, if any, shall be paid to the
Person in whose name such Senior Note was registered at the close of business on
such record date. If any Senior Note called for redemption shall not be so paid
upon surrender for redemption because of the failure of the Company to comply
with the preceding paragraph, interest shall be paid on the unpaid principal and
Liquidated Damages, if any, from the redemption or purchase date until such
principal and Liquidated Dames, if any, is paid, and to the extent lawful on any
interest not paid on such unpaid principal, in each case, at the rate provided
in the Senior Notes and in Section 4.01 hereof.
SECTION 3.06. SENIOR NOTES REDEEMED IN PART.
Upon surrender of a Senior Note that is redeemed in part, the Company
shall issue and, upon the Company's written request, the Trustee shall
authenticate for the Holder at the expense of the Company a new Senior Note
equal in principal amount to the unredeemed portion of the Senior Note
surrendered.
SECTION 3.07. OPTIONAL REDEMPTION.
(a) Except as set forth in the next paragraph, Senior Notes shall not
be redeemable at the Company's option prior to April 1, 2002. Thereafter, the
Senior Notes shall be subject to redemption at any time at the option of the
Company, in whole or in part, at the redemption prices (expressed as percentages
of principal amount) set forth below, plus any accrued and unpaid interest and
Liquidated Damages, if any, thereon to the applicable redemption date, if
redeemed during the twelve-month period beginning on April 1 of the years
indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002....................................................................................105.500%
2003....................................................................................103.667%
2004....................................................................................101.833%
2005 and thereafter.....................................................................100.000%
</TABLE>
30
<PAGE> 37
(b) Notwithstanding the foregoing, at any time prior to April 1, 2000,
the Company may on any one or more occasions redeem up to 33 1/3% of the
original aggregate principal amount of Senior Notes at a redemption price of
110% of the principal amount thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, to the redemption date, with the net proceeds of an
offering of common stock of the Company; provided that at least 66 2/3% of the
aggregate principal amount of Senior Notes originally issued remain outstanding
immediately after the occurrence of any such redemption; and provided, further,
that such redemption shall occur within 60 days of the date of the closing of
any such offering.
SECTION 3.08. MANDATORY REDEMPTION.
Except as set forth under Sections 3.09, 4.10 and 4.14 hereof, the
Company shall not be required to make mandatory redemption or sinking fund
payments with respect to the Senior Notes.
SECTION 3.09. REPURCHASE OFFERS.
In the event that the Company shall be required to commence an offer to
all Holders to repurchase Senior Notes (a "Repurchase Offer") pursuant to
Section 4.10 hereof, an "Excess Proceeds Offer," or pursuant to Section 4.15
hereof, a "Change of Control Offer," the Company shall follow the procedures
specified below.
A Repurchase Offer shall commence no later than ten (10) Business Days
after a Change of Control (unless the Company is not required to make such offer
pursuant to Section 4.15(c) hereof) or an Excess Proceeds Offer Triggering Event
(as defined below), as the case may be, and remain open for a period of twenty
(20) Business Days following its commencement and no longer, except to the
extent that a longer period is required by applicable law (the "Offer Period").
No later than five (5) Business Days after the termination of the Offer Period
(the "Purchase Date"), the Company shall purchase the principal amount of Senior
Notes required to be purchased pursuant to Section 4.10 hereof, in the case of
an Excess Proceeds Offer, or 4.15 hereof, in the case of a Change of Control
Offer (the "Offer Amount") or, if less than the Offer Amount has been tendered,
all Senior Notes tendered in response to the Repurchase Offer. Payment for any
Senior Notes so purchased shall be made in the same manner as interest payments
are made.
If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest and
Liquidated Damages, if any, shall be paid to the Person in whose name a Senior
Note is registered at the close of business on such record date, and no
additional interest or Liquidated Damages, if any, shall be payable to Holders
who tender Senior Notes pursuant to the Repurchase Offer.
Upon the commencement of a Repurchase Offer, the Company shall send, by
first class mail, a notice to the Trustee and each of the Holders, with a copy
to the Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Senior Notes pursuant to such
Repurchase Offer. The Repurchase Offer shall be made to all Holders. The notice,
which shall govern the terms of the Repurchase Offer, shall describe the
transaction or transactions that constitute the Change of Control or Excess
Proceeds Offer Triggering Event, as the case may be and shall state:
(a) that the Repurchase Offer is being made pursuant to this Section
3.09 and Section 4.10 or 4.15 hereof, as the case may be, and the
length of time the Repurchase Offer shall remain open;
31
<PAGE> 38
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Senior Note not tendered or accepted for payment shall
continue to accrue interest;
(d) that, unless the Company defaults in making such payment, any
Senior Note accepted for payment pursuant to the Repurchase Offer shall
cease to accrue interest and Liquidated Damages, if any, after the
Purchase Date;
(e) that Holders electing to have a Senior Note purchased pursuant to a
Repurchase Offer shall be required to surrender the Senior Note, with
the form entitled "Option of Holder to Elect Purchase" on the reverse
of the Senior Note, duly completed, or transfer by book-entry transfer,
to the Company, the Depository, or the Paying Agent at the address
specified in the notice not later than the close of business on the
last day of the Offer Period;
(f) that Holders shall be entitled to withdraw their election if the
Company, the Depository or the Paying Agent, as the case may be,
receives, not later than the expiration of the Offer Period, a
telegram, telex, facsimile transmission or letter setting forth the
name of the Holder, the principal amount of the Senior Note the Holder
delivered for purchase and a statement that such Holder is withdrawing
his election to have such Senior Note purchased;
(g) that, if the aggregate principal amount of Senior Notes surrendered
by Holders exceeds the Offer Amount, the Company shall select the
Senior Notes to be purchased on a pro rata basis (with such adjustments
as may be deemed appropriate by the Company so that only Senior Notes
in denominations of $1,000, or integral multiples thereof, shall be
purchased); and
(h) that Holders whose Senior Notes were purchased only in part shall
be issued new Senior Notes equal in principal amount to the unpurchased
portion of the Senior Notes surrendered (or transferred by book-entry
transfer).
On or before 10:00 a.m. (New York City time) on each Purchase Date, the
Company shall irrevocably deposit with the Trustee or Paying Agent in
immediately available funds the aggregate purchase price with respect to a
principal amount of Senior Notes equal to the Offer Amount, together with
accrued and unpaid interest and Liquidated Damages, if any, thereon, to be held
for payment in accordance with the terms of this Section 3.09. On the Purchase
Date, the Company shall, to the extent lawful, (i) accept for payment, on a pro
rata basis to the extent necessary, the Offer Amount of Senior Notes or portions
thereof tendered pursuant to the Repurchase Offer, or if less than the Offer
Amount has been tendered, all Senior Notes tendered, (ii) deliver or cause the
Paying Agent or depository, as the case may be, to deliver to the Trustee Senior
Notes so accepted and (iii) deliver to the Trustee an Officers' Certificate
stating that such Senior Notes or portions thereof were accepted for payment by
the Company in accordance with the terms of this Section 3.09. The Company, the
Depository or the Paying Agent, as the case may be, shall promptly (but in any
case not later than three (3) Business Days after the Purchase Date) mail or
deliver to each tendering Holder an amount equal to the purchase price of the
Senior Notes tendered by such Holder and accepted by the Company for purchase,
plus any accrued and unpaid interest and Liquidated Damages, if any, thereon,
and the Company shall promptly issue a new Senior Note, and the Trustee, shall
authenticate and mail or deliver such new Senior Note, to such Holder, equal in
principal amount to any unpurchased portion of such Holder's Senior Notes
surrendered. Any Senior Note not so accepted shall be promptly mailed or
delivered by the Company to the Holder thereof. The Company shall publicly
announce in a newspaper of general circulation or in a press release
32
<PAGE> 39
provided to a nationally recognized financial wire service the results of the
Repurchase Offer on the Purchase Date.
Other than as specifically provided in this Section 3.09, any purchase
pursuant to this Section 3.09 shall be made pursuant to the provisions of
Sections 3.01, 3.02, 3.05 and 3.06 hereof.
ARTICLE 4
COVENANTS
SECTION 4.01. PAYMENT OF SENIOR NOTES.
The Company shall pay or cause to be paid the principal of, premium, if
any, and interest on the Senior Notes on the dates and in the manner provided in
the Senior Notes. The Company shall pay all Liquidated Damages, if any, in the
same manner on the dates and in the amounts set forth in the Registration Rights
Agreement. Principal, premium, if any, interest, and Liquidated Damages, if any,
shall be considered paid for all purposes hereunder on the date the Paying Agent
if other than the Company or a Subsidiary thereof holds, as of 10:00 a.m. (New
York City time) money deposited by the Company in immediately available funds
and designated for and sufficient to pay all such principal, premium, if any,
interest and Liquidated Damages, if any, then due.
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate equal to
1% per annum in excess of the then applicable interest rate on the Senior Notes
to the extent lawful; it shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace period) at the same
rate to the extent lawful.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, the City of New
York an office or agency (which may be an office of the Trustee or an affiliate
of the Trustee or Registrar) where Senior Notes may be surrendered for
registration of transfer or for exchange and where notices and demands to or
upon the Company in respect of the Senior Notes and this Indenture may be
served. The Company shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee.
The Company may also from time to time designate one or more other
offices or agencies where the Senior Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, the City of New York for such purposes. The Company shall
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the Trustee
as one such office or agency of the Company in accordance with Section 2.03
hereof.
33
<PAGE> 40
SECTION 4.03. SEC REPORTS.
From and after the earlier of the effective date of the Exchange Offer
Registration Statement or the effective date of the Shelf Registration
Statement, whether or not required by the rules and regulations of the
Commission, so long as any Senior Notes are outstanding, the Company shall
furnish to the Holders of Senior Notes (i) all quarterly and annual financial
information that would be required to be contained in a filing with the
Commission on Forms 10-Q and 10-K if the Company were required to file such
Forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and, with respect to the annual information only, a
report thereon by the Company's certified independent accountants and (ii) all
current reports that would be required to be filed with the Commission on Form
8-K if the Company were required to file such reports. In addition, whether or
not required by the rules and regulations of the Commission, the Company shall
file a copy of all such information and reports with the Commission for public
availability (unless the Commission will not accept such a filing) within the
time periods that would have been applicable had the Company been subject to
such rules and regulations and make such information available to securities
analysts and prospective investors upon request. In addition, the Company has
agreed that, for so long as any Senior Notes remain outstanding, it shall
furnish to the Holders, to securities analysts and prospective investors, upon
their request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act. The Company shall at all times comply with
TIA Section 314(a).
The financial information to be distributed to Holders of Senior Notes
shall be filed with the Trustee and mailed to the Holders at their addresses
appearing in the register of Senior Notes maintained by the Registrar, within 90
days after the end of the Company's fiscal years and within 45 days after the
end of each of the first three quarters of each such fiscal year.
The Company shall provide the Trustee with a sufficient number of
copies of all reports and other documents and information and, if requested by
the Company, the Trustee will deliver such reports to the Holders under this
Section 4.03.
SECTION 4.04. COMPLIANCE CERTIFICATE.
The Company shall deliver to the Trustee, within 90 days after the end
of each fiscal year, an Officers' Certificate stating that a review of the
activities of the Company and its Subsidiaries during the preceding fiscal year
has been made under the supervision of the signing Officers with a view to
determining whether each has kept, observed, performed and fulfilled its
obligations under this Indenture (including, with respect to any Restricted
Payments made during such year, the basis upon which the calculations required
by Section 4.07 hereof were computed, which calculations may be based on the
Company's latest available financial statements), and further stating, as to
each such Officer signing such certificate, that, to the best of his or her
knowledge, each entity has kept, observed, performed and fulfilled each and
every covenant contained in this Indenture and is not in default in the
performance or observance of any of the terms, provisions and conditions of this
Indenture (or, if a Default or Event of Default shall have occurred, describing
all such Defaults or Events of Default of which he or she may have knowledge and
what action the Company is taking or proposes to take with respect thereto) and
that, to the best of his or her knowledge, no event has occurred and remains in
existence by reason of which payments on account of the principal of, interest
or Liquidated Damages, if any, on the Senior Notes is prohibited or if such
event has occurred, a description of the event and what action the Company is
taking or proposes to take with respect thereto.
34
<PAGE> 41
So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, in connection with the
year-end financial statements delivered pursuant to Section 4.03 hereof, the
Company shall use its best efforts to deliver a written statement of the
Company's independent public accountants (who shall be a firm of established
national reputation reasonably satisfactory to the Trustee) that in making the
examination necessary for certification of such financial statements, nothing
has come to their attention that would lead them to believe that the Company has
violated any provisions of Article Four or Section 5.01 hereof or, if any such
violation has occurred, specifying the nature and period of existence thereof,
it being understood that such accountants shall not be liable directly or
indirectly to any Person for any failure to obtain knowledge of any such
violation. In the event that such written statement of the Company's independent
public accountants cannot be obtained, the Company shall deliver an Officers'
Certificate certifying that it has used its best efforts to obtain such
statements and was unable to do so.
The Company shall, so long as any of the Senior Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action the Company is taking or proposes to take with
respect thereto.
SECTION 4.05. TAXES.
The Company shall pay, and shall cause each of its Subsidiaries to pay,
prior to delinquency all material taxes, assessments and governmental levies,
except such as are contested in good faith and by appropriate proceedings and
with respect to which appropriate reserves have been taken in accordance with
GAAP.
SECTION 4.06. STAY, EXTENSION AND USURY LAWS.
The Company and each Subsidiary Guarantor covenants (to the extent that
it may lawfully do so) that it shall not at any time insist upon, plead, or in
any manner whatsoever claim or take the benefit or advantage of, any stay,
extension or usury law wherever enacted, now or at any time hereafter in force,
that may affect the covenants or the performance of this Indenture; and the
Company and each Subsidiary Guarantor (to the extent that it may lawfully do so)
hereby expressly waives all benefit or advantage of any such law, and covenants
that it shall not, by resort to any such law, hinder, delay or impede the
execution of any power herein granted to the Trustee, but shall suffer and
permit the execution of every such power as though no such law has been enacted.
SECTION 4.07. RESTRICTED PAYMENTS.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly: (i) declare or pay any dividend or make any other
payment or distribution on account of the Company's or any of its Subsidiaries'
Equity Interests (including, without limitation, any payment in connection with
any merger or consolidation involving the Company) or to the direct or indirect
holders of the Company's or any of its Subsidiaries' Equity Interests in their
capacity as such (other than dividends or distributions payable in Equity
Interests (other than Disqualified Stock) of the Company); (ii) purchase, redeem
or otherwise acquire or retire for value (including without limitation, in
connection with any merger or consolidation involving the Company) any Equity
Interests of the Company or any direct or indirect parent of the Company; (iii)
make any payment on or with respect to, or purchase, redeem, defease or
otherwise acquire or retire for value any Indebtedness that is subordinated to
the Senior Notes or the Subsidiary Guarantees, except a payment of interest or
principal at Stated Maturity; (iv) pay fees pursuant to, or make any other
distribution in respect of, the Management Agreement; or (v) make any Restricted
35
<PAGE> 42
Investment (all such payments and other actions set forth in clauses (i) through
(v) above being collectively referred to as "Restricted Payments"), unless, at
the time of and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been
made at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant
to the Fixed Charge Coverage Ratio test set forth in the first
paragraph of Section 4.09 hereof; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Subsidiaries on
or after the date hereof (excluding Restricted Payments permitted by
clause (ii), (iii), (v) or (vi) of the next succeeding paragraph and
excluding any Restricted Payment made on the date hereof directly by
the Company with the proceeds of the Offering in an amount not to
exceed the amount set forth in the Offering Memorandum under the
caption "Use of Proceeds"), is less than the sum of (i) 50% of the
Consolidated Net Income of the Company for the period (taken as one
accounting period) from the beginning of the first fiscal quarter
commencing after the date hereof to the end of the Company's most
recently ended fiscal quarter for which internal financial statements
are available at the time of such Restricted Payment (or, if such
Consolidated Net Income for such period is a deficit, less 100% of such
deficit), plus (ii) 100% of the aggregate net cash proceeds received by
the Company from the issue or sale since the date hereof of Equity
Interests of the Company (other than Disqualified Stock) or of
Disqualified Stock or debt securities of the Company that have been
converted into such Equity Interests (other than Equity Interests (or
Disqualified Stock or convertible debt securities) sold to a Subsidiary
of the Company and other than Disqualified Stock or convertible debt
securities that have been converted into Disqualified Stock), plus
(iii) to the extent that any Restricted Investment that was made after
the date hereof is sold for cash or otherwise liquidated or repaid for
cash, the lesser of (A) the cash return of capital with respect to such
Restricted Investment (less the cost of disposition, if any) and (B)
the initial amount of such Restricted Investment.
The foregoing provisions shall not prohibit (i) the payment of any
dividend within 60 days after the date of declaration thereof, if at said date
of declaration such payment would have complied with the provisions hereof; (ii)
the redemption, repurchase, retirement, defeasance or other acquisition of any
subordinated Indebtedness or Equity Interests of the Company in exchange for, or
out of the net cash proceeds of the substantially concurrent sale (other than to
a Subsidiary of the Company) of, other Equity Interests of the Company (other
than any Disqualified Stock); provided that the amount of any such net cash
proceeds that are utilized for any such redemption, repurchase, retirement,
defeasance or other acquisition shall be excluded from clause (c) (ii) of the
preceding paragraph; (iii) the defeasance, redemption, repurchase or other
acquisition of subordinated Indebtedness with the net cash proceeds from an
incurrence of Permitted Refinancing Indebtedness; (iv) the payment of any
dividend by a Subsidiary of the Company to the holders of its common Equity
Interests on a pro rata basis; (v) payments by the Company or any Subsidiary of
the Company, directly or indirectly, to NES Group, Inc. to satisfy tax
obligations, in accordance with the Tax Payment Agreement as in effect on the
date hereof; provided that such amounts do not exceed the amounts that, without
recognizing any tax loss carry forwards or carry backs, would otherwise be due
and owing if the Company and its Subsidiaries were an independent, individual
taxpayer; and (vi) so long as no Default or Event of Default has occurred and is
continuing
36
<PAGE> 43
or would occur as a result thereof, the payment of fees pursuant to the
Management Agreement, as in effect on the date hereof; provided that the amount
of fees paid pursuant to the Management Agreement in any calendar year shall not
exceed an amount equal to five percent of the Company's earnings before,
interest, taxes, depreciation, amortization and miscellaneous expenses (income).
The amount of all Restricted Payments (other than cash) shall be the
fair market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or such
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any non-cash Restricted Payment shall be determined by the Board
of Directors of the Company whose resolution with respect thereto shall be
delivered to the Trustee, such determination to be based upon an opinion or
appraisal issued by an accounting, appraisal or investment banking firm of
national standing if such fair market value exceeds $5.0 million. Not later than
the date of making any Restricted Payment, the Company shall deliver to the
Trustee an Officers' Certificate stating that such Restricted Payment is
permitted and setting forth the basis upon which the calculations required by
this Section 4.07 were computed, together with a copy of any fairness opinion or
appraisal required by this Indenture.
SECTION 4.08. DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any encumbrance or restriction on the ability of any Subsidiary to
(i)(a) pay dividends or make any other distributions to the Company or any of
its Subsidiaries (1) on its Capital Stock or (2) with respect to any other
interest or participation in, or measured by, its profits, or (b) pay any
indebtedness owed to the Company or any of its Subsidiaries, (ii) make loans or
advances to the Company or any of its Subsidiaries or (iii) transfer any of its
properties or assets to the Company or any of its Subsidiaries, except for such
encumbrances or restrictions existing under or by reason of (a) Existing
Indebtedness as in effect on the date hereof, (b) this Indenture, the Senior
Notes and the Subsidiary Guarantees, (c) applicable law, (d) any instrument
governing Indebtedness or Capital Stock of a Person acquired by the Company or
any of its Subsidiaries as in effect at the time of such acquisition (except to
the extent such Indebtedness was incurred in connection with or in contemplation
of such acquisition), which encumbrance or restriction is not applicable to any
Person, or the properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired; provided that, in the case of
Indebtedness, such Indebtedness was permitted by the terms hereof to be
incurred, (e) by reason of customary non-assignment provisions in leases or
contracts entered into in the ordinary course of business and consistent with
past practices, (f) mortgages or other purchase money obligations for property
acquired in the ordinary course of business that impose restrictions of the
nature described in clause (iii) above on the property so acquired, or (g)
Permitted Refinancing Indebtedness; provided that the restrictions contained in
the agreements governing such Permitted Refinancing Indebtedness are no more
restrictive than those contained in the agreements governing the Indebtedness
being refinanced.
SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness (including Acquired Debt) and that the
Company shall not issue any Disqualified Stock and shall not permit any of its
Subsidiaries to issue any shares of Disqualified Stock; provided, however, that
the Company or a Subsidiary Guarantor may incur Indebtedness (including Acquired
Debt) or issue shares of Disqualified Stock if the Fixed Charge Coverage Ratio
for the Company's most recently ended four full fiscal quarters for which
internal financial statements are available immediately preceding the date on
which such additional Indebtedness
37
<PAGE> 44
is incurred or such Disqualified Stock is issued would have been at least 2 to
1, determined on a pro forma basis (including a pro forma application of the net
proceeds therefrom), as if the additional Indebtedness had been incurred, or the
preferred stock had been issued, as the case may be, at the beginning of such
four-quarter period.
The Company and any Subsidiary Guarantor shall not incur any
Indebtedness (other than Existing Indebtedness) that is contractually
subordinated to any other Indebtedness of the Company or such Subsidiary
Guarantor, respectively, unless such Indebtedness is also contractually
subordinated to the Senior Notes or the Subsidiary Guarantee of such Subsidiary
Guarantor, respectively, on substantially identical terms; provided, however,
that no Indebtedness of the Company or any Subsidiary Guarantor shall be deemed
to be contractually subordinated to any other Indebtedness of the Company or
such Subsidiary Guarantor, respectively, solely by virtue of being unsecured.
The provisions of the first paragraph of this covenant shall not apply
to the incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the incurrence by the Company or any Subsidiary Guarantor of
Indebtedness under Credit Facilities; provided that the aggregate principal
amount of all Indebtedness (with letters of credit being deemed to have a
principal amount equal to the maximum potential liability of the Company and its
Subsidiaries thereunder) outstanding under all Credit Facilities after giving
effect to such incurrence, including all Permitted Refinancing Indebtedness
incurred to refund, refinance or replace any other Indebtedness incurred
pursuant to this clause (i), does not exceed an amount equal to the greater of
(x) $30.0 million and (y) the Borrowing Base;
(ii) the incurrence by any Foreign Subsidiary of Indebtedness under
Foreign Credit Facilities; provided that the aggregate principal amount of all
Indebtedness (with letters of credit being deemed to have a principal amount
equal to the maximum potential liability of Foreign Subsidiaries thereunder)
outstanding under all Foreign Credit Facilities after giving effect to such
incurrence, including all Permitted Refinancing Indebtedness incurred to refund,
refinance or replace any other Indebtedness incurred pursuant to this clause
(ii), does not exceed an amount equal to the greater of (x) $5.0 million and (y)
the Foreign Borrowing Base;
(iii) the incurrence by the Company and its Subsidiaries of the
Existing Indebtedness;
(iv) the incurrence by the Company and the Subsidiary Guarantors of
Indebtedness represented by the Senior Notes and the Subsidiary Guarantees,
respectively;
(v) the incurrence by the Company or any of its Subsidiaries of
Indebtedness represented by Capital Lease Obligations, sale and leaseback
transactions, mortgage financings, purchase money obligations, capital
expenditures or similar financing transactions, in each case, with respect to
(A) the respective properties, assets and rights of the Company or such
Subsidiary as of the date hereof, in an aggregate principal amount (or accreted
value, as applicable) at any time outstanding, including all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace any other
Indebtedness incurred pursuant to this clause (v), not to exceed $10.0 million
or (B) any properties, assets or rights of the Company or such Subsidiary
acquired after the date hereof, provided that the aggregate principal amount of
such Indebtedness under this clause (v)(B) does not exceed 100% of the cost of
such properties, assets or rights;
38
<PAGE> 45
(vi) the incurrence by the Company or any of its Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which
are used to refund, refinance or replace any Indebtedness that was permitted by
this Indenture to be incurred;
(vii) the incurrence by the Company or any of the Subsidiary Guarantors
of intercompany Indebtedness between or among the Company and any Subsidiaries
that are Subsidiary Guarantors; provided, however, that (i) if the Company or a
Subsidiary Guarantor is the obligor on such Indebtedness, such Indebtedness is
expressly subordinated to the prior payment in full in cash of all Obligations
with respect to the Senior Notes and the Subsidiary Guarantees, respectively,
and (ii)(A) any subsequent issuance or transfer of Equity Interests that results
in any such Indebtedness being held by a Person other than the Company or a
Subsidiary Guarantor and (B) any sale or other transfer of any such Indebtedness
to a Person that is not either the Company or a Subsidiary Guarantor shall be
deemed, in each case, to constitute an incurrence of such Indebtedness by the
Company or such Subsidiary, as the case may be, that was not permitted by this
clause (vii);
(viii) the incurrence by the Company or any of its Subsidiaries of
Hedging Obligations in the ordinary course of business of the Company or any of
its Subsidiaries; and
(ix) the incurrence by the Company or any of its Subsidiaries of
additional Indebtedness in an aggregate principal amount (or accreted value, as
applicable) at any time outstanding, including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any other Indebtedness
incurred pursuant to this clause (ix), not to exceed $10.0 million.
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (ix) above or is
entitled to be incurred pursuant to the first paragraph of this Section 4.09,
the Company shall, in its sole discretion, classify such item of Indebtedness in
any manner that complies with this Section 4.09 and such item of Indebtedness
will be treated as having been incurred pursuant to only one of such clauses or
pursuant to the first paragraph hereof. Accrual of interest, the accretion of
accreted value and the payment of interest in the form of additional
Indebtedness will not be deemed to be an incurrence of Indebtedness for purposes
of this Section 4.09.
SECTION 4.10. ASSETS SALES.
The Company shall not, and shall not permit any of its Subsidiaries to,
consummate an Asset Sale unless (i) the Company (or the Subsidiary, as the case
may be) receives consideration at the time of such Asset Sale at least equal to
the fair market value (evidenced by a resolution of the Board of Directors of
the Company set forth in an Officers' Certificate delivered to the Trustee) of
the assets or Equity Interests issued or sold or otherwise disposed of and (ii)
at least 75% of the consideration therefor received by the Company or such
Subsidiary is in the form of cash; provided that the amount of (x) any
liabilities (as shown on the Company's or such Subsidiary's most recent balance
sheet), of the Company or any Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Senior Notes or such
Subsidiary's Subsidiary Guarantee thereof) that are assumed by the transferee of
any such assets pursuant to a customary novation agreement that releases the
Company or such Subsidiary from further liability and (y) any securities, notes
or other obligations received by the Company or any such Subsidiary from such
transferee that are immediately converted by the Company or such Subsidiary into
cash, shall be deemed to be cash (to the extent of the cash received) for
purposes of this clause (ii).
39
<PAGE> 46
Within 365 days after the receipt of any Net Proceeds from an Asset
Sale, the Company may apply such Net Proceeds, at its option, (a) to repay
Indebtedness under the Revolving Credit Facility or the Australian Revolving
Credit Facility or (b) to an investment in a Permitted Business through the
making of a capital expenditure or the acquisition of other assets. Pending the
final application of any such Net Proceeds, the Company may invest such Net
Proceeds in any manner that is not prohibited by this Indenture. Any Net
Proceeds from Asset Sales that are not applied or invested as provided in the
first sentence of this paragraph will be deemed to constitute "Excess Proceeds."
When the aggregate amount of Excess Proceeds exceeds $5.0 million (the "Excess
Proceeds Offer Triggering Event"), the Company will be required to make an offer
to all Holders of Senior Notes (an "Asset Sale Offer") to purchase the maximum
principal amount of Senior Notes that may be purchased out of the Excess
Proceeds, at an offer price in cash in an amount equal to 100% of the principal
amount thereof plus accrued and unpaid interest and Liquidated Damages thereon,
if any, to the date of purchase, in accordance with the procedures set forth in
Section 3.09 hereof. The Company shall comply with the requirements of Rule
14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the repurchase of the Senior Notes in any Asset Sales Offer. To the extent
that the aggregate amount of Senior Notes tendered pursuant to an Asset Sale
Offer is less than the Excess Proceeds, the Company may use any remaining Excess
Proceeds for general corporate purposes. If the aggregate principal amount of
Senior Notes surrendered by Holders thereof exceeds the amount of Excess
Proceeds, the Trustee shall select the Senior Notes to be purchased on a pro
rata basis. Upon completion of such offer to purchase, the amount of Excess
Proceeds shall be reset at zero.
SECTION 4.11. TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its Subsidiaries to,
make any payment to, or sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
or make or amend any transaction, contract, agreement, understanding, loan,
advance or guarantee with, or for the benefit of, any Affiliate (each of the
foregoing, an "Affiliate Transaction"), unless (i) such Affiliate Transaction is
on terms that are no less favorable to the Company or the relevant Subsidiary
than those that would have been obtained in a comparable transaction by the
Company or such Subsidiary with an unrelated Person and (ii) the Company
delivers to the Trustee (a) with respect to any Affiliate Transaction or series
of related Affiliate Transactions involving aggregate consideration in excess of
$1.0 million, a resolution of the Board of Directors of the Company set forth in
an Officers' Certificate certifying that such Affiliate Transaction complies
with clause (i) above and that such Affiliate Transaction has been approved by a
majority of the disinterested members of the Board of Directors of the Company
and (b) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $5.0 million, an
opinion as to the fairness to the Holders of such Affiliate Transaction from a
financial point of view issued by an accounting, appraisal or investment banking
firm of national standing; provided that (A) any employment agreement entered
into by the Company or any of its Subsidiaries in the ordinary course of
business and consistent with the past practice of the Company or such
Subsidiary, (B) transactions between or among the Company and/or its
Subsidiaries, (C) Restricted Payments that are permitted by the provisions of
Section 4.07 hereof and (D) the payment by the Company or its Subsidiaries of
reasonable and customary fees to members of their respective Boards of
Directors, in each case, shall not be deemed Affiliate Transactions.
SECTION 4.12. LIENS.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, assume or suffer to exist any Lien on any
asset now owned or hereafter acquired, or any
40
<PAGE> 47
income or profits therefrom or assign or convey any right to receive income
therefrom, except for Permitted Liens, unless the Senior Notes and the
Subsidiary Guarantees are secured on an equal and ratable basis with the
obligations so secured until such time as such obligations are no longer secured
by a Lien.
SECTION 4.13. SALE AND LEASEBACK TRANSACTIONS.
The Company shall not, and shall not permit any of its Subsidiaries to,
enter into any sale and leaseback transaction; provided that the Company and any
Subsidiary Guarantor may enter into a sale and leaseback transaction if: (i) the
Company or such Subsidiary Guarantor could have (1)(a) incurred Indebtedness in
an amount equal to the Attributable Debt relating to such sale and leaseback
transaction pursuant to the Fixed Charge Coverage Ratio test set forth in the
first paragraph of Section 4.09 hereof or (b) incurred Indebtedness pursuant to
clause (v) of the second paragraph of Section 4.09 hereof, and (2) incurred a
Lien to secure such Indebtedness pursuant to Section 4.12 hereof; (ii) the gross
cash proceeds of such sale and leaseback transaction are at least equal to the
fair market value (as determined in good faith by the Board of Directors of the
Company and set forth in an Officers' Certificate delivered to the Trustee) of
the property that is the subject of such sale and leaseback transaction; and
(iii) the transfer of assets in such sale and leaseback transaction is permitted
by, and the Company or the applicable Subsidiary Guarantor applies the proceeds
of such transaction in compliance with, Section 4.10 hereof.
SECTION 4.14. OFFER TO PURCHASE UPON CHANGE OF CONTROL.
Upon the occurrence of a Change of Control, each Holder of Senior Notes
will have the right to require the Company to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of such Holder's Senior Notes
pursuant to the offer described below (the "Change of Control Offer") at an
offer price in cash equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest and Liquidated Damages, if any, thereon to the date
of purchase (the "Change of Control Payment"). Within ten days following any
Change of Control, the Company shall mail a notice to each Holder describing the
transaction or transactions that constitute the Change of Control and offering
to repurchase Senior Notes on the date specified in such notice, which date
shall be no earlier than 30 days and no later than 60 days from the date such
notice is mailed (the "Change of Control Payment Date"), pursuant to the
procedures required by Section 3.09 hereof and described in such notice. The
Company shall comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such laws
and regulations are applicable in connection with the repurchase of the Senior
Notes as a result of a Change of Control.
The Change of Control Offer shall remain open from the time of mailing
until the Business Day preceding the Change of Control Payment Date.
On the Change of Control Payment Date, the Company shall, to the extent
lawful, (1) accept for payment all Senior Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Senior
Notes or portions thereof so tendered and (3) deliver or cause to be delivered
to the Trustee the Senior Notes so accepted together with an Officers'
Certificate stating the aggregate principal amount of Senior Notes or portions
thereof being purchased by the Company. The Paying Agent will promptly mail to
each Holder of Senior Notes so tendered the Change of Control Payment for such
Senior Notes, and the Trustee will promptly authenticate and mail (or cause to
be transferred by book entry) to each Holder a new Senior Note equal in
principal amount to any unpurchased portion of the Senior Notes surrendered, if
any; provided that each such new Senior Note will be in a principal amount of
$1,000 or an integral
41
<PAGE> 48
multiple thereof. The Company shall publicly announce the results of the Change
of Control Offer on or as soon as practicable after the Change of Control
Payment Date.
The Company shall not be required to make a Change of Control Offer
upon a Change of Control if a third party makes the Change of Control Offer in
the manner, at the times and otherwise in compliance with the requirements set
forth herein applicable to a Change of Control Offer made by the Company and
purchases all Senior Notes validly tendered and not withdrawn under such Change
of Control Offer.
SECTION 4.15. CORPORATE EXISTENCE.
Subject to Section 4.14 and Article 5 hereof, as the case may be, the
Company and each Subsidiary Guarantor shall do or cause to be done all things
necessary to preserve and keep in full force and effect its corporate existence
and the corporate, partnership or other existence of each of its Subsidiaries in
accordance with the respective organizational documents (as the same may be
amended from time to time) of the Company or any such Subsidiary and the rights
(charter and statutory), licenses and franchises of the Company and its
Subsidiaries; provided that the Company shall not be required to preserve any
such right, license or franchise, or the corporate, partnership or other
existence of any of its Subsidiaries, if the Board of Directors of the Company
shall determine that the preservation thereof is no longer desirable in the
conduct of the business of the Company and its Subsidiaries, taken as a whole,
and that the loss thereof is not adverse in any material respect to the Holders
of the Senior Notes.
SECTION 4.16. LIMITATION ON ISSUANCES OF CAPITAL STOCK OF WHOLLY OWNED
SUBSIDIARIES.
The Company (i) shall not, and shall not permit any Wholly Owned
Subsidiary of the Company to, transfer, convey, sell, lease or otherwise dispose
of any Capital Stock of any Wholly Owned Subsidiary of the Company to any Person
(other than the Company or a Wholly Owned Subsidiary of the Company), unless (a)
such transfer, conveyance, sale, lease or other disposition is of all the
Capital Stock of such Wholly Owned Subsidiary and (b) the cash Net Proceeds from
such transfer, conveyance, sale, lease or other disposition are applied in
accordance with Section 4.10 hereof; and (ii) will not permit any Wholly Owned
Subsidiary of the Company to issue any of its Equity Interests (other than, if
necessary, shares of its Capital Stock constituting directors' qualifying
shares) to any Person other than to the Company or a Wholly Owned Subsidiary of
the Company.
SECTION 4.17. BUSINESS ACTIVITIES.
The Company shall not, and shall not permit any Subsidiary to, engage
in any business other than Permitted Businesses, except to such extent as would
not be material to the Company and its Subsidiaries, taken as a whole.
SECTION 4.18. ADDITIONAL SUBSIDIARY GUARANTEES.
If the Company or any of its Subsidiaries shall after the date hereof,
(i) transfer or cause to be transferred in one or a series of transactions
(whether or not related), any assets, businesses, divisions, real property or
equipment having an aggregate fair market value (as determined in good faith by
the Board of Directors of the Company) in excess of $1.0 million to any
Subsidiary (other than a Foreign Subsidiary) that is not a Subsidiary Guarantor;
(ii) acquire or create another Subsidiary (other than a Foreign Subsidiary); or
(iii) any Subsidiary of the Company, that is not a Subsidiary Guarantor,
guarantees any Indebtedness of the Company other than the Senior Notes, or
pledges any of its assets to secure any Indebtedness of the Company other than
the Senior Notes, then the Company shall cause such
42
<PAGE> 49
Subsidiary to (A) execute and deliver to the Trustee a supplemental indenture in
form and substance substantially similar to EXHIBIT F hereto pursuant to which
such Subsidiary shall unconditionally Guarantee all of the Company's obligations
under the Senior Notes on the terms set forth in such supplemental indenture and
(B) deliver to the Trustee an opinion of counsel reasonably satisfactory to the
Trustee that such supplemental indenture has been duly executed and delivered by
such Subsidiary.
SECTION 4.19. PAYMENT FOR CONSENTS.
Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder of any Senior Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
hereof or the Senior Notes unless such consideration is offered to be paid or is
paid to all Holders of the Senior Notes that consent, waive or agree to amend in
the time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
ARTICLE 5
SUCCESSORS
SECTION 5.01. MERGER, CONSOLIDATION OF SALE OF ASSETS.
The Company shall not consolidate or merge with or into (whether or not
the Company is the surviving corporation), or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions, to another corporation, Person or
entity unless (i) the Company is the surviving corporation or the entity or the
Person formed by or surviving any such consolidation or merger (if other than
the Company) or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made is a corporation organized or existing
under the laws of the United States, any state thereof or the District of
Columbia; (ii) the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company) or the entity or Person to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made assumes all the obligations of the Company under the Senior
Notes and this Indenture pursuant to a supplemental indenture in a form
substantially similar to EXHIBIT F hereto; (iii) immediately after such
transaction no Default or Event of Default exists; (iv) except in the case of a
merger of the Company with or into a Wholly Owned Subsidiary of the Company, the
Company or the entity or Person formed by or surviving any such consolidation or
merger (if other than the Company), or to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made (A) will have
Consolidated Net Worth immediately after the transaction equal to or greater
than the Consolidated Net Worth of the Company immediately preceding the
transaction and (B) will, at the time of such transaction and after giving pro
forma effect thereto as if such transaction had occurred at the beginning of the
applicable four-quarter period, be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in the first paragraph of Section 4.09 hereof; and (v) each Subsidiary
Guarantor, unless it is the other party to the transactions described above,
shall have by supplemental indenture in a form substantially similar to EXHIBIT
F hereto confirmed that its Subsidiary Guarantee shall apply to the Company's or
the surviving Person's obligations under this Indenture and the Senior Notes.
43
<PAGE> 50
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the assets
of the Company in accordance with Section 5.01 hereof, the successor corporation
formed by such consolidation or into or with which the Company is merged or to
which such sale, assignment, transfer, lease, conveyance or other disposition is
made shall succeed to, and be substituted for (so that from and after the date
of such consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the "Company" shall refer instead to
the successor corporation and not to the Company), and shall exercise every
right and power of the Company under this Indenture with the same effect as if
such successor Person had been named as the Company herein; provided, that, (i)
solely for the purposes of computing Consolidated Net Income for purposes of
clause (b) of the first paragraph of Section 4.07 hereof, the Consolidated Net
Income of any person other than the Company and its Subsidiaries shall be
included only for periods subsequent to the effective time of such merger,
consolidation, combination or transfer of assets; and (ii) in the case of any
sale, assignment, transfer, lease, conveyance, or other disposition of less than
all of the assets of the predecessor Company, the predecessor Company shall not
be released or discharged from the obligation to pay the principal of or
interest and Liquidated Damages, if any, on the Senior Notes.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
Each of the following constitutes an "Event of Default":
(i) default for 30 days in the payment when due of interest on, or
Liquidated Damages, if any, with respect to the Senior Notes;
(ii) default in payment when due of principal of or premium, if
any, on the Senior Notes;
(iii) failure by the Company or any Subsidiary to comply with the
provisions described under Sections 3.09, 4.07, 4.09, 4.10 or
4.14 or Article 5 hereof;
(iv) failure by the Company or any Subsidiary for 60 days after
notice to comply with its other agreements in this Indenture
or the Senior Notes;
(v) default under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company
or any of its Subsidiaries (or the payment of which is
guaranteed by the Company or any of its Subsidiaries) whether
such Indebtedness or guarantee now exists, or is created after
the date hereof, which default (A) (i) is caused by a failure
to pay when due at final stated maturity (giving effect to any
grace period related thereto) any principal of or premium, if
any, or interest on such Indebtedness (a "Payment Default") or
(ii) results in the acceleration of such Indebtedness prior to
its express maturity and (B) in each case, the principal
amount of any such Indebtedness as to which a Payment Default
shall have occurred, together with the principal amount of any
other such Indebtedness under which there has been a Payment
Default or the maturity of which has been so accelerated,
aggregates $5.0 million or more;
44
<PAGE> 51
(vi) failure by the Company or any of its Subsidiaries to pay final
judgments aggregating in excess of $5.0 million, which
judgments are not paid, discharged or stayed within 60 days
after their entry;
(vii) the Company, any of its Significant Subsidiaries or any group
of Subsidiaries that, taken together, would constitute a
Significant Subsidiary, pursuant to or within the meaning of
any Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it
in an involuntary case in which it is the debtor,
(iii) consents to the appointment of a Custodian of it or for
all or substantially all of its property,
(iv) makes a general assignment for the benefit of its
creditors, or
(v) admits in writing its inability generally to pay its debts
as the same become due;
(viii) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(i) is for relief against the Company, any of its Significant
Subsidiaries or any group of Subsidiaries that, taken
together, would constitute a Significant Subsidiary, in an
involuntary case in which it is the debtor,
(ii) appoints a Custodian of the Company, any of its
Significant Subsidiaries or any group of Subsidiaries that,
taken together, would constitute a Significant Subsidiary, or
for all or substantially all of the property of the Company,
any of its Significant Subsidiaries or any group of
Subsidiaries that taken, taken together, would constitute a
Significant Subsidiary, or
(iii) orders the liquidation of the Company or any of its
Subsidiaries,
and the order or decree contemplated in clauses (i), (ii) or
(iii), remains unstayed and in effect for 60 consecutive days;
or
(ix) the termination of the Subsidiary Guarantee of any Subsidiary
Guarantor for any reason not permitted by this Indenture, or
the denial of any Person acting on behalf of any such
Subsidiary Guarantor of its Obligations under any such
Subsidiary Guarantee.
To the extent that the last day of the period referred to in clauses (i),
(iii), (iv) or (vi) of the immediately preceding paragraph is not a Business
Day, then the first Business Day following such day shall be deemed to be the
last day of the period referred to in such clauses. Any "day" will be deemed to
end as of 11:59 p.m., New York City time.
45
<PAGE> 52
SECTION 6.02. ACCELERATION.
If an Event of Default (other than an Event of Default with respect to the
Company specified in clauses (vii) and (viii) of Section 6.01 hereof) occurs and
is continuing, the Trustee or the Holders of at least 25% in principal amount of
the then outstanding Senior Notes may declare the unpaid principal of, premium,
if any, interest and Liquidated Damages, if any, on all the Senior Notes to be
due and payable by notice in writing to the Company (and the Trustee, if given
by the Holders) specifying the respective Event of Default and that it is a
"notice of acceleration" (the "Acceleration Notice"), and the same shall become
immediately due and payable. If an Event of Default with respect to the Company,
any Significant Subsidiary or any group of Subsidiaries that, taken together,
would constitute a Significant Subsidiary specified in clauses (vii) or (viii)
of Section 6.01 hereof occurs, all outstanding Senior Notes shall ipso facto
become and be immediately due and payable without any declaration or other act
on the part of the Trustee or any Holder. The Holders of a majority in principal
amount of the then outstanding Senior Notes by written notice to the Trustee may
rescind an acceleration and its consequences if the rescission would not
conflict with any judgment or decree and if all existing Events of Default
(except nonpayment of principal or interest that has become due solely because
of the acceleration) have been cured or waived.
In the case of any Event of Default occurring by reason of any
willful action (or inaction) taken (or not taken) by or on behalf of the Company
with the intention of avoiding payment of the premium that the Company would
have had to pay if the Company then had elected to redeem the Senior Notes
pursuant to the optional redemption provisions of Section 3.07(a) hereof, an
equivalent premium shall also become and be immediately due and payable to the
extent permitted by law upon the acceleration of the Senior Notes. If an Event
of Default occurs prior to April 1, 2002 by reason of any willful action (or
inaction) taken (or not taken) by or on behalf of the Company with the intention
of avoiding the prohibition on redemption of the Senior Notes prior to April 1,
2002, then the amount payable in respect of such Senior Notes for purposes of
this paragraph for each of the twelve-month periods beginning on April 1 of the
years indicated below shall be as set forth below, expressed as percentages of
the principal amount that would otherwise be due but for the provisions of this
sentence, plus accrued and unpaid interest and Liquidated Damages, if any, to
the date of payment:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
1997.......................................................................................114.667%
1998.......................................................................................112.833%
1999.......................................................................................111.000%
2000.......................................................................................109.167%
2001.......................................................................................107.333%
</TABLE>
SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy to collect the payment of principal, premium, if any,
interest and Liquidated Damages, if any, on the Senior Notes or to enforce the
performance of any provision of the Senior Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Senior Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of a Senior Note in exercising any right
or remedy accruing upon an Event of Default shall not impair the
46
<PAGE> 53
right or remedy or constitute a waiver of or acquiescence in the Event of
Default. All remedies are cumulative to the extent permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
Holders of at least a majority in principal amount of the Senior Notes
then outstanding (including consents obtained in connection with a tender offer
or exchange for Senior Notes) by notice to the Trustee may on behalf of the
Holders of all of the Senior Notes waive an existing Default or Event of Default
and its consequences hereunder, except a continuing Default or Event of Default
in the payment of principal of or premium, if any, or interest or Liquidated
Damages, if any, on the Senior Notes. Upon any such waiver, such Default shall
cease to exist, and any Event of Default arising therefrom shall be deemed to
have been cured for every purpose of this Indenture; but no such waiver shall
extend to any subsequent or other Default or impair any right consequent
thereon.
SECTION 6.05. CONTROL BY MAJORITY.
Holders of a majority in principal amount of the then outstanding Senior
Notes may direct the time, method and place of conducting any proceeding for
exercising any remedy available to the Trustee or exercising any trust or power
conferred on it. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture that the Trustee determines may be unduly
prejudicial to the rights of other Holders of Senior Notes or that may involve
the Trustee in personal liability. The Trustee may take any other action which
it deems proper which is not inconsistent with any such direction.
SECTION 6.06. LIMITATION ON SUITS.
A Holder of a Senior Note may pursue a remedy with respect to this
Indenture, the Subsidiary Guarantees or the Senior Notes only if:
(a) the Holder of a Senior Note gives to the Trustee written notice of a
continuing Event of Default or the Trustee receives such notice from
the Company;
(b) the Holders of at least 25% in principal amount of the then
outstanding Senior Notes make a written request to the Trustee to
pursue the remedy;
(c) such Holder of a Senior Note or Holders of Senior Notes offer and, if
requested, provide to the Trustee indemnity satisfactory to the
Trustee against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the
provision of indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Senior Notes do not give the Trustee a
direction inconsistent with the request.
A Holder of a Senior Note may not use this Indenture to prejudice the
rights of another Holder of a Senior Note or to obtain a preference or priority
over another Holder of a Senior Note.
SECTION 6.07. RIGHTS OF HOLDERS OF SENIOR NOTES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Senior Note to receive payment of principal, premium, if any,
interest, and Liquidated Damages, if any, on the Senior
47
<PAGE> 54
Note, on or after the respective due dates expressed in the Senior Note
(including in connection with an offer to purchase), or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(i) or (ii) hereof occurs
and is continuing, the Trustee is authorized to recover judgment in its own name
and as trustee of an express trust against the Company for the whole amount of
principal of, premium and Liquidated Damages, if any, and interest remaining
unpaid on the Senior Notes and interest on overdue principal and, to the extent
lawful, interest and such further amount as shall be sufficient to cover the
costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Senior Notes allowed in any judicial proceedings relative to the
Company (or any other obligor upon the Senior Notes), its creditors or its
property and shall be entitled and empowered to collect, receive and distribute
any money or other securities or property payable or deliverable upon the
conversion or exchange of the Senior Notes or on any such claims and any
custodian in any such judicial proceeding is hereby authorized by each Holder to
make such payments to the Trustee, and in the event that the Trustee shall
consent to the making of such payments directly to the Holders, to pay to the
Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 7.07 hereof. To the extent that the
payment of any such compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof out of the estate in any such proceeding, shall be denied
for any reason, payment of the same shall be secured by a Lien on, and shall be
paid out of, any and all distributions, dividends, money, securities and other
properties that the Holders may be entitled to receive in such proceeding
whether in liquidation or under any plan of reorganization or arrangement or
otherwise. Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Senior
Notes or the rights of any Holder, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article 6, it shall pay
out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due
under Section 7.07 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
Second: to Holders of Senior Notes for amounts due and unpaid on the
Senior Notes for principal, premium, if any, interest, and Liquidated Damages,
if any, ratably, without preference or priority of any kind, according to the
amounts due and payable on the Senior Notes for principal, premium, if any,
interest, and Liquidated Damages, if any, respectively;
48
<PAGE> 55
Third: without duplication, to the Holders for any other
Obligations owing to the Holders under this Indenture and the Senior Notes; and
Fourth: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Senior Notes pursuant to this Section 6.10.
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder of
a Senior Note pursuant to Section 6.07 hereof, or a suit by Holders of more than
10% in principal amount of the then outstanding Senior Notes.
ARTICLE 7
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing of which it has
knowledge, the Trustee shall exercise such of the rights and powers
vested in it by this Indenture and use the same degree of care and
skill in its exercise, as a prudent man would exercise or use under
the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the
express provisions of this Indenture or the TIA and the Trustee
need perform only those duties that are specifically set forth
in this Indenture or the TIA and no others, and no implied
covenants or obligations shall be read into this Indenture
against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates
or opinions furnished to the Trustee and conforming to the
requirements of this Indenture. However, the Trustee shall
examine the certificates and opinions to determine whether or
not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own
willful misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section 7.01;
49
<PAGE> 56
(ii) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer,
unless it is proved that the Trustee was negligent in
ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in
accordance with a direction received by it pursuant
to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision
of this Indenture that in any way relates to the Trustee is
subject to paragraphs (a), (b) and (c) of this Section 7.01.
(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The
Trustee shall be under no obligation to exercise any of its
rights and powers under this Indenture at the request of any
Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss,
liability or expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with
the Company. Money held in trust by the Trustee need not be
segregated from other funds except to the extent required by
law.
SECTION 7.02. RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely on the truth of the
statements and correctness of the opinions contained in, and
shall be protected from acting or refraining from acting upon,
any document believed by it to be genuine and to have been
signed or presented by the proper Person. The Trustee need not
investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel or
both. The Trustee shall not be liable for any action it takes
or omits to take in good faith in reliance on such Officers'
Certificate or Opinion of Counsel. Prior to taking, suffering
or admitting any action, the Trustee may consult with counsel
of the Trustee's own choosing and the written advice of such
counsel or any Opinion of Counsel shall be full and complete
authorization and protection from liability in respect of any
action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any
agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith that it believes to be authorized
or within the rights or powers conferred upon it by this
Indenture.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company or any
Subsidiary Guarantor shall be sufficient if signed by an
Officer of the Company or Subsidiary Guarantor, as applicable.
(f) The Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the
request or direction of any of the Holders unless such Holders
shall have offered to the Trustee reasonable security or
indemnity satisfactory to the Trustee against the costs,
expenses and liabilities that might be incurred by it in
compliance with such request or direction.
50
<PAGE> 57
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the owner
of Senior Notes and may otherwise deal with the Company, the Subsidiary
Guarantors or any Affiliate of the Company or any Subsidiary Guarantor with the
same rights it would have if it were not Trustee. However, in the event that the
Trustee acquires any conflicting interest it must eliminate such conflict within
90 days, apply to the Commission for permission to continue as Trustee or
resign. Any Agent may do the same with like rights and duties. The Trustee is
also subject to Sections 7.10 and 7.11 hereof.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no representation as to
the validity or adequacy of this Indenture, the Subsidiary Guarantees or the
Senior Notes, it shall not be accountable for the Company's use of the proceeds
from the Senior Notes or any money paid to the Company or upon the Company's
direction under any provision of this Indenture, it shall not be responsible for
the use or application of any money received by any Paying Agent other than the
Trustee, and it shall not be responsible for any statement or recital herein or
any statement in the Senior Notes or any other document in connection with the
sale of the Senior Notes or pursuant to this Indenture other than its
certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it is
known to a Responsible Officer of the Trustee, the Trustee shall mail to Holders
of Senior Notes a notice of the Default or Event of Default within 90 days after
it occurs. Except in the case of a Default or Event of Default in payment on any
Senior Note pursuant to Section 6.01(i) or (ii) hereof, the Trustee may withhold
the notice if and so long as a committee of its Responsible Officers in good
faith determines that withholding the notice is in the interests of the Holders
of the Senior Notes.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE SENIOR NOTES.
Within 60 days after each March 15 beginning with the March 15 following
the date of this Indenture, and for so long as Senior Notes remain outstanding,
the Trustee shall mail to the Holders of the Senior Notes a brief report dated
as of such reporting date that complies with TIA Section 313(a) (but if no event
described in TIA Section 313(a) has occurred within the twelve months
preceding the reporting date, no report need be transmitted). The Trustee also
shall comply with TIA Section 313(b). The Trustee shall also transmit by mail
all reports as required by TIA Section 313(c).
A copy of each report at the time of its mailing to the Holders of Senior
Notes shall be mailed to the Company and filed with the Commission and each
stock exchange on which the Company has informed the Trustee in writing the
Senior Notes are listed in accordance with TIA Section 313(d). The Company shall
promptly notify the Trustee when the Senior Notes are listed on any stock
exchange and of any delisting thereof.
SECTION 7.07. COMPENSATION AND INDEMNITY.
The Company and the Subsidiary Guarantors shall pay to the Trustee from
time to time reasonable compensation for its acceptance of this Indenture and
services hereunder. To the extent permitted by law, the Trustee's compensation
shall not be limited by any law on compensation of a trustee of an express
trust. The Company shall reimburse the Trustee promptly upon request for all
reasonable disbursements,
51
<PAGE> 58
advances and expenses incurred or made by it in addition to the compensation for
its services. Such expenses shall include the reasonable compensation,
disbursements and expenses of the Trustee's agents and counsel.
The Company and the Subsidiary Guarantors shall indemnify the Trustee
against any and all losses, liabilities or expenses incurred by it arising out
of or in connection with the acceptance or administration of its duties under
this Indenture, including the costs and expenses of enforcing this Indenture
against the Company and the Subsidiary Guarantors (including this Section 7.07)
and defending itself against any claim (whether asserted by the Company, the
Subsidiary Guarantors or any Holder or any other person) or liability in
connection with the exercise or performance of any of its powers or duties
hereunder except to the extent any such loss, liability or expense may be
attributable to its negligence or bad faith. The Trustee shall notify the
Company and the Subsidiary Guarantors promptly of any claim for which it may
seek indemnity. Failure by the Trustee to so notify the Company and the
Subsidiary Guarantors shall not relieve the Company and the Subsidiary
Guarantors of its obligations hereunder. The Company and the Subsidiary
Guarantors shall defend the claim and the Trustee shall cooperate in the
defense. The Trustee may have separate counsel and the Company and the
Subsidiary Guarantors shall pay the reasonable fees and expenses of such
counsel. The Company and the Subsidiary Guarantors need not pay for any
settlement made without its consent, which consent shall not be unreasonably
withheld.
The obligations of the Company and the Subsidiary Guarantors under this
Section 7.07 shall survive the satisfaction and discharge of this Indenture.
To secure the Company's and the Subsidiary Guarantors' payment obligations
in this Section 7.07, the Trustee shall have a Lien prior to the Senior Notes on
all money or property held or collected by the Trustee, except that held in
trust to pay principal, interest and Liquidated Damages, if any, on particular
Senior Notes. Such Lien shall survive the satisfaction and discharge of this
Indenture and the resignation or removal of the Trustee.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(vii) or (viii) hereof occurs, the expenses and
the compensation for the services (including the fees and expenses of its agents
and counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA Section 313(b)(2) to
the extent applicable.
SECTION 7.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section 7.08.
The Trustee may resign in writing at any time and be discharged from the
trust hereby created by so notifying the Company. The Holders of a majority in
principal amount of the then outstanding Senior Notes may remove the Trustee by
so notifying the Trustee and the Company in writing. The Company may remove the
Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy
Law;
52
<PAGE> 59
(c) a Custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
appoint a successor Trustee to replace the successor Trustee appointed by the
Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of at least 10% in principal amount of the then outstanding Senior
Notes may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee, after written request by any Holder of a Senior Note who
has been a Holder of a Senior Note for at least six months, fails to comply with
Section 7.10 hereof, such Holder of a Senior Note may petition any court of
competent jurisdiction for the removal of the Trustee and the appointment of a
successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Thereupon, the resignation or
removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and the duties of the Trustee under
this Indenture. The successor Trustee shall mail a notice of its succession to
the Holders of the Senior Notes. The retiring Trustee shall promptly transfer
all property held by it as Trustee to the successor Trustee, provided that all
sums owing to the Trustee hereunder have been paid and subject to the Lien
provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee
pursuant to this Section 7.08, the Company's obligations under Section 7.07
hereof shall continue for the benefit of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee or any Agent consolidates, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee or any Agent, as applicable.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities. The Trustee and its direct parent shall at all times have a
combined capital surplus of at least $50.0 million as set forth in its most
recent annual report of condition.
This Indenture shall always have a Trustee who satisfies the requirements
of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to TIA Section
310(b).
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE COMPANY.
The Trustee is subject to TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated therein.
53
<PAGE> 60
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Company and the Subsidiary Guarantors may, at the option of their
respective Boards of Directors evidenced by a resolution set forth in an
Officers' Certificate, at any time, elect to have either Section 8.02 or 8.03
hereof be applied to all outstanding Senior Notes and Subsidiary Guarantees upon
compliance with the conditions set forth below in this Article 8.
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Company and each Subsidiary Guarantor
shall, subject to the satisfaction of the conditions set forth in Section 8.04
hereof, be deemed to have been discharged from their respective obligations with
respect to all outstanding Senior Notes and Subsidiary Guarantees on the date
the conditions set forth below are satisfied (hereinafter, "Legal Defeasance").
For this purpose, Legal Defeasance means that the Company and each Subsidiary
Guarantor shall be deemed to have paid and discharged the entire Indebtedness
represented by the outstanding Senior Notes and Subsidiary Guarantees, which
shall thereafter be deemed to be "outstanding" only for the purposes of Section
8.05 hereof and the other Sections of this Indenture referred to in (a) and (b)
below, and to have satisfied all their respective other obligations under such
Senior Notes and Subsidiary Guarantees and this Indenture (and the Trustee, on
demand of and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions which shall survive
until otherwise terminated or discharged hereunder: (a) the rights of Holders of
outstanding Senior Notes to receive payments in respect of the principal of,
premium, if any, and interest and Liquidated Damages, if any, on such Senior
Notes when such payments are due from the trust referred to in Section 8.04(a);
(b) the Company's obligations with respect to such Senior Notes under Sections
2.02, 2.03, 2.04, 2.05, 2.06, 2.07, 2.10 and 4.02 hereof; (c) the rights,
powers, trusts, duties and immunities of the Trustee including without
limitation thereunder Section 7.07, 8.05 and 8.07 hereof and the Company's
obligations in connection therewith and (d) the provisions of this Article 8.
Subject to compliance with this Article 8, the Company may exercise its option
under this Section 8.02 notwithstanding the prior exercise of its option under
Section 8.03 hereof.
SECTION 8.03. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company and each Subsidiary Guarantor
shall, subject to the satisfaction of the conditions set forth in Section 8.04
hereof, be released from its obligations under the covenants contained in
Sections 3.09, 4.05, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16,
4.17, 4.18, 5.01 and 11.01 hereof with respect to the outstanding Senior Notes
and Subsidiary Guarantees on and after the date the conditions set forth below
are satisfied (hereinafter, "Covenant Defeasance"), and the Senior Notes and
Subsidiary Guarantees shall thereafter be deemed not "outstanding" for the
purposes of any direction, waiver, consent or declaration or act of Holders (and
the consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder (it being
understood that such Senior Notes and Subsidiary Guarantees shall not be deemed
outstanding for accounting purposes). For this purpose, Covenant Defeasance
means that, with respect to the outstanding Senior Notes and Subsidiary
Guarantees, the Company or any of its Subsidiaries may omit to comply with and
shall have no liability in respect of any term, condition or limitation set
forth in any such covenant, whether directly or indirectly, by reason of any
reference elsewhere herein to any such covenant or by
54
<PAGE> 61
reason of any reference in any such covenant to any other provision herein or in
any other document and such omission to comply shall not constitute a Default or
an Event of Default under Section 6.01 hereof, but, except as specified above,
the remainder of this Indenture and such Senior Notes and Subsidiary Guarantees
shall be unaffected thereby. In addition, upon the Company's exercise under
Section 8.01 hereof of the option applicable to this Section 8.03, subject to
the satisfaction of the conditions set forth in Section 8.04 hereof, Sections
6.01(i) through 6.01(vi) and Section 6.01(ix) hereof shall not constitute Events
of Default.
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of either Section
8.02 or 8.03 hereof to the outstanding Senior Notes and Subsidiary Guarantees:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in trust, for
the benefit of the Holders of the Senior Notes, (i) cash in United
States dollars, (ii) non-callable Government Securities which
through the scheduled payment of principal, premium, if any,
interest and Liquidated Damages, if any, in respect thereof in
accordance with their terms will provide, not later than one day
before the due date of payment, cash in United States dollars in an
amount, or (iii) a combination thereof, in such amounts as shall be
sufficient, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification
thereof delivered to the Trustee, to pay and discharge the principal
of, premium, if any, interest and Liquidated Damages, if any, on the
outstanding Senior Notes on the stated maturity or on the applicable
redemption date, as the case may be, and the Company must specify
whether the Senior Notes are being defeased to maturity or to a
particular redemption date;
(b) in the case of an election under Section 8.02 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the
United States reasonably acceptable to the Trustee confirming that
(A) the Company has received from, or there has been published by,
the Internal Revenue Service a ruling or (B) since the date hereof,
there has been a change in the applicable federal income tax law, in
either case to the effect that, and based thereon such Opinion of
Counsel shall confirm that, the Holders of the outstanding Senior
Notes shall not recognize income, gain or loss for federal income
tax purposes as a result of such Legal Defeasance and shall be
subject to federal income tax on the same amounts, in the same
manner and at the same time as would have been the case if such
Legal Defeasance had not occurred;
(c) in the case of an election under Section 8.03 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the
United States reasonably acceptable to the Trustee confirming that
the Holders of the outstanding Senior Notes shall not recognize
income, gain or loss for federal income tax purposes as a result of
such Covenant Defeasance and shall be subject to federal income tax
on the same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not
occurred;
(d) no Default or Event of Default shall have occurred and be continuing
on the date of such deposit (other than a Default of Event or
Default resulting from the borrowing of funds to be applied to such
deposit) or insofar as Sections 6.01(vii) and (viii) hereof are
concerned, at any time in the period ending on the 91st day after
the date of deposit (it being understood that this condition shall
not be deemed satisfied until the expiration of such period);
55
<PAGE> 62
(e) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under any material
agreement or instrument (other than this Indenture) to which the
Company or any of its Subsidiaries is a party or by which the
Company or any of its Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that after the 91st day following the deposit,
the trust funds shall not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally;
(g) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company
with the intent of preferring the Holders of Senior Notes over the
other creditors of the Company with the intent of defeating,
hindering, delaying or defrauding any other creditors of the Company
or others;
(h) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for relating to the Legal Defeasance
or the Covenant Defeasance have been complied with; and
(i) the Trustee shall have received such other documents and assurances
as the Trustee shall have reasonably required.
SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Senior
Notes shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Senior Notes and this Indenture, to the payment, either
directly or through any Paying Agent (including the Company acting as Paying
Agent) as the Trustee may determine, to the Holders of such Senior Notes of all
sums due and to become due thereon in respect of principal, premium, if any,
interest and Liquidated Damages, if any, but such money need not be segregated
from other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the cash or non-callable Government
Securities deposited pursuant to Section 8.04 hereof or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Senior
Notes.
Anything in this Article 8 to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon the written request
of the Company and be relieved of all liability with respect to any money or
non-callable Government Securities held by it as provided in Section 8.04 hereof
which, in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to the
Trustee (which may be the opinion delivered under Section 8.04(a) hereof), are
in excess of the amount thereof that would then be required to be deposited to
effect an equivalent Legal Defeasance or Covenant Defeasance.
56
<PAGE> 63
SECTION 8.06. REPAYMENT TO THE COMPANY.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of, premium, if any,
interest or Liquidated Damages, if any, on any Senior Note and remaining
unclaimed for one year after such principal, and premium, if any, or interest or
Liquidated Damages, if any, has become due and payable shall be paid to the
Company on its written request or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Senior Note shall thereafter,
as an unsecured general creditor, look only to the Company for payment thereof,
and all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company cause to
be published once, in the New York Times and The Wall Street Journal (national
edition), notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
notification or publication, any unclaimed balance of such money then remaining
shall be repaid to the Company.
SECTION 8.07. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 8.02 or
8.03 hereof, as the case may be, by reason of any order or judgment of any court
or governmental authority enjoining, restraining or otherwise prohibiting such
application, then the obligations of the Company and the Subsidiary Guarantors
under this Indenture, the Senior Notes and the Subsidiary Guarantees shall be
revived and reinstated as though no deposit had occurred pursuant to Section
8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is permitted
to apply all such money in accordance with Section 8.02 or 8.03 hereof, as the
case may be; provided, however, that, if the Company makes any payment of
principal of, premium, if any, interest or Liquidated Damages, if any, on any
Senior Note following the reinstatement of its obligations, the Company shall be
subrogated to the rights of the Holders of such Senior Notes to receive such
payment from the money held by the Trustee or Paying Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF THE SENIOR NOTES.
Notwithstanding Section 9.02 of this Indenture, without the consent of any
Holder of Senior Notes the Company and the Trustee may amend or supplement this
Indenture, the Senior Notes or the Subsidiary Guarantees:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Senior Notes in addition to or in
place of certificated Senior Notes;
(c) to provide for the assumption of the Company's or a Subsidiary
Guarantor's obligations to the Holders of the Senior Notes in the
case of a merger, or consolidation pursuant to Article 5 or Article
10 hereof, as applicable;
57
<PAGE> 64
(d) to make any change that would provide any additional rights or
benefits to the Holders of the Senior Notes or that does not
adversely affect the legal rights hereunder of any Holder of the
Senior Notes;
(e) to comply with requirements of the Commission in order to effect or
maintain the qualification of this Indenture under the TIA; or
(f) to allow any Subsidiary Guarantor to guarantee the Senior Notes.
Upon the written request of the Company accompanied by a resolution of its
Board of Directors of the Company authorizing the execution of any such amended
or supplemental Indenture, and upon receipt by the Trustee of the documents
described in Section 9.06 hereof, the Trustee shall join with the Company and
the Subsidiary Guarantors in the execution of any amended or supplemental
Indenture authorized or permitted by the terms of this Indenture and to make any
further appropriate agreements and stipulations that may be therein contained,
but the Trustee shall not be obligated to enter into such amended or
supplemental Indenture that affects its own rights, duties or immunities under
this Indenture or otherwise.
SECTION 9.02. WITH CONSENT OF HOLDERS OF SENIOR NOTES.
Except as provided below in this Section 9.02, this Indenture, the
Senior Notes or the Subsidiary Guarantees may be amended or supplemented with
the consent of the Holders of at least a majority in principal amount of the
Senior Notes then outstanding (including, without limitation, consents obtained
in connection with a purchase of, or tender offer or exchange offer, for Senior
Notes), and, subject to any existing Default or Event of Default (other than a
Default or Event of Default in the payment of the principal of, or premium, if
any, or interest or Liquidated Damages, if any, on the Senior Notes (except a
payment default resulting from an acceleration that has been rescinded) or
compliance with any provision of this Indenture, the Senior Notes or the
Subsidiary Guarantees may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Senior Notes (including
consents obtained in connection with or a tender offer or exchange offer for the
Senior Notes).
Upon the request of the Company accompanied by a resolution of its Board
of Directors of the Company authorizing the execution of any such amended or
supplemental indenture, and upon the filing with the Trustee of evidence
satisfactory to the Trustee of the consent of the Holders of Senior Notes as
aforesaid, and upon receipt by the Trustee of the documents described in Section
9.06 hereof, the Trustee shall join with the Company and the Subsidiary
Guarantors in the execution of such amended or supplemental Indenture unless
such amended or supplemental indenture affects the Trustee's own rights, duties
or immunities under this Indenture or otherwise, in which case the Trustee may,
but shall not be obligated to, enter into such amended or supplemental
indenture.
It shall not be necessary for the consent of the Holders of Senior Notes
under this Section 9.02 to approve the particular form of any proposed amendment
or waiver, but it shall be sufficient if such consent approves the substance
thereof. After an amendment, supplement or waiver under this Section 9.02
becomes effective, the Company shall mail to the Holders of each Senior Note
affected thereby a notice briefly describing the amendment, supplement or
waiver. Any failure of the Company to mail such notice, or any defect therein,
shall not, however, in any way impair or affect the validity of any such amended
or supplemental Indenture or waiver.
Subject to Sections 6.02, 6.04 and 6.07 hereof, the Holders of a majority
in aggregate principal amount of the Senior Notes then outstanding may waive
compliance in a particular instance by the
58
<PAGE> 65
Company or the Subsidiary Guarantors with any provision of this Indenture, the
Senior Notes or the Subsidiary Guarantees. However, without the consent of each
Holder affected, an amendment, or waiver may not (with respect to any Senior
Note or Subsidiary Guarantee held by a non-consenting Holder):
(a) reduce the principal amount of Senior Notes whose Holders must
consent to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any Senior
Note or alter the provisions with respect to the redemption of the
Senior Notes (other than provisions relating to Sections 3.09, 4.10
and 4.14 hereof);
(c) reduce the rate of or change the time for payment of interest or
Liquidated Damages, if any, on any Senior Note;
(d) waive a Default or Event of Default in the payment of principal of
or premium, if any, or interest or Liquidated Damages, if any, on
the Senior Notes (except a rescission of acceleration of the Senior
Notes by the Holders of at least a majority in aggregate principal
amount of the Senior Notes and a waiver of the payment default that
resulted from such acceleration);
(e) make any Senior Note payable in money other than that stated in the
Senior Notes;
(f) make any change in Section 6.04 or 6.07 hereof;
(g) waive a redemption or repurchase payment with respect to any Senior
Note (other than a payment required by Section 4.10 or 4.14 hereof);
(h) make any change in the amendment and waiver provisions of this
Article 9; or
(i) except as provided in Sections 8.02, 8.03 and 10.04 hereof, release
any of the Subsidiary Guarantors from their obligations under the
Subsidiary Guarantees or make any change in the Subsidiary
Guarantees that would adversely affect the Holders.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture, the Subsidiary Guarantees
or the Senior Notes shall be set forth in a amended or supplemental Indenture
that complies with the TIA as then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a consent to
it by a Holder of a Senior Note is a continuing consent by the Holder and every
subsequent Holder of a Senior Note or portion of a Senior Note that evidences
the same debt as the consenting Holder's Senior Note, even if notation of the
consent is not made on any Senior Note. However, any such Holder or subsequent
Holder of a Senior Note may revoke the consent as to its Senior Note if the
Trustee receives written notice of revocation before the date the waiver,
supplement or amendment becomes effective. An amendment, supplement or waiver
becomes effective in accordance with its terms and thereafter binds every
Holder.
The Company may, but shall not be obligated to, fix a record date for
determining which Holders of the Senior Notes must consent to such amendment,
supplement or waiver. If the Company fixes a record date, the record date shall
be fixed at (i) the later of 30 days prior to the first solicitation of such
59
<PAGE> 66
consent or the date of the most recent list of Holders of Senior Notes furnished
for the Trustee prior to such solicitation pursuant to Section 2.05 hereof or
(ii) such other date as the Company shall designate.
SECTION 9.05. NOTATION ON OR EXCHANGE OF SENIOR NOTES.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Senior Note thereafter authenticated. The Company in
exchange for all Senior Notes may issue and the Trustee shall authenticate new
Senior Notes that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Senior Note shall
not affect the validity and effect of such amendment, supplement or waiver.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental Indenture authorized
pursuant to this Article 9 if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. The Company
and the Subsidiary Guarantors may not sign an amendment or supplemental
Indenture until their respective Boards of Directors approve it. In signing or
refusing to sign any amended or supplemental indenture the Trustee shall be
entitled to receive and (subject to Section 7.01 hereof) shall be fully
protected in relying upon, in addition to the documents required by Section
11.04 hereof, an Officers' Certificate and an Opinion of Counsel stating that
the execution of such amended or supplemental indenture is authorized or
permitted by this Indenture, that it is not inconsistent herewith, and that it
will be valid and binding upon the Company and the Subsidiary Guarantors in
accordance with its terms.
ARTICLE 10
GUARANTEE OF SENIOR NOTES
SECTION 10.01. SUBSIDIARY GUARANTEE.
Subject to Section 10.06 hereof, each of the Subsidiary Guarantors hereby,
jointly and severally, unconditionally guarantees to each Holder of a Senior
Note authenticated and delivered by the Trustee and to the Trustee and its
successors and assigns, irrespective of the validity and enforceability of this
Indenture, the Senior Notes and the Obligations of the Company hereunder and
thereunder, that: (a) the principal of, premium, if any, interest and Liquidated
Damages, if any, on the Senior Notes will be promptly paid in full when due,
subject to any applicable grace period, whether at maturity, by acceleration,
redemption or otherwise, and interest on the overdue principal, premium, if any,
(to the extent permitted by law) interest on any interest, if any, and
Liquidated Damages, if any, on the Senior Notes, and all other payment
Obligations of the Company to the Holders or the Trustee hereunder or thereunder
will be promptly paid in full and performed, all in accordance with the terms
hereof and thereof; and (b) in case of any extension of time of payment or
renewal of any Senior Notes or any of such other Obligations, the same will be
promptly paid in full when due or performed in accordance with the terms of the
extension or renewal, subject to any applicable grace period, whether at stated
maturity, by acceleration, redemption or otherwise. Failing payment when so due
of any amount so guaranteed or any performance so guaranteed for whatever reason
the Subsidiary Guarantors will be jointly and severally obligated to pay the
same immediately. An Event of Default under this Indenture or the Senior Notes
shall constitute an event of default under the Subsidiary Guarantees, and shall
entitle the Holders to accelerate the Obligations of the Subsidiary Guarantors
hereunder in the same manner and to the same extent as the Obligations of the
Company. The Subsidiary Guarantors hereby agree that their Obligations
60
<PAGE> 67
hereunder shall be unconditional, irrespective of the validity, regularity or
enforceability of the Senior Notes or this Indenture, the absence of any action
to enforce the same, any waiver or consent by any Holder with respect to any
provisions hereof or thereof, the recovery of any judgment against the Company,
any action to enforce the same or any other circumstance which might otherwise
constitute a legal or equitable discharge or defense of a Subsidiary Guarantor.
Each Subsidiary Guarantor hereby waives diligence, presentment, demand of
payment, filing of claims with a court in the event of insolvency or bankruptcy
of the Company, any right to require a proceeding first against the Company,
protest, notice and all demands whatsoever and covenants that this Subsidiary
Guarantee will not be discharged except by complete performance of the
Obligations contained in the Senior Notes and this Indenture. If any Holder or
the Trustee is required by any court or otherwise to return to the Company, the
Subsidiary Guarantors, or any Senior Note Custodian, Trustee, liquidator or
other similar official acting in relation to either the Company or the
Subsidiary Guarantors, any amount paid by the Company or any Subsidiary
Guarantor to the Trustee or such Holder, this Subsidiary Guarantee, to the
extent theretofore discharged, shall be reinstated in full force and effect.
Each Subsidiary Guarantor agrees that it shall not be entitled to, and hereby
waives, any right of subrogation in relation to the Holders in respect of any
Obligations guaranteed hereby. Each Subsidiary Guarantor further agrees that, as
between the Subsidiary Guarantors, on the one hand, and the Holders and the
Trustee, on the other hand, (x) the maturity of the Obligations guaranteed
hereby may be accelerated as provided in Article 6 hereof for the purposes of
its Subsidiary Guarantee, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the Obligations
guaranteed thereby, and (y) in the event of any declaration of acceleration of
such Obligations as provided in Article 6 hereof, such Obligations (whether or
not due and payable) shall forthwith become due and payable by the Subsidiary
Guarantor for the purpose of its Subsidiary Guarantee. The Subsidiary Guarantors
shall have the right to seek contribution from any non-paying Subsidiary
Guarantor so long as the exercise of such right does not impair the rights of
the Holders under the Subsidiary Guarantees.
SECTION 10.02. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEE.
To evidence its Subsidiary Guarantee set forth in Section 10.01 hereof,
each Subsidiary Guarantor hereby agrees that a notation of such Subsidiary
Guarantee substantially in the form of EXHIBIT E hereto shall be endorsed by
manual or facsimile signature by an Officer of such Subsidiary Guarantor on each
Senior Note authenticated and delivered by the Trustee and that this Indenture
shall be executed on behalf of such Subsidiary Guarantor, by manual or facsimile
signature, by an Officer of such Subsidiary Guarantor.
Each Subsidiary Guarantor hereby agrees that its Subsidiary Guarantee set
forth in Section 10.01 hereof shall remain in full force and effect
notwithstanding any failure to endorse on each Senior Note a notation of such
Subsidiary Guarantee.
If an Officer whose signature is on this Indenture or on the Subsidiary
Guarantee no longer holds that office at the time the Trustee authenticates the
Senior Note on which a Subsidiary Guarantee is endorsed, the Subsidiary
Guarantee shall be valid nevertheless.
The delivery of any Senior Note by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Subsidiary Guarantee set
forth in this Indenture on behalf of the Subsidiary Guarantors.
61
<PAGE> 68
SECTION 10.03. SUBSIDIARY GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS
(a) Except as set forth in Articles 4 and 5 hereof, nothing contained in
this Indenture shall prohibit a merger between a Subsidiary Guarantor and
another Subsidiary Guarantor or a merger between a Subsidiary Guarantor and the
Company.
(b) No Subsidiary Guarantor shall consolidate with or merge with or into
(whether or not such Subsidiary Guarantor is the surviving Person), another
corporation, Person or entity whether or not affiliated with such Subsidiary
Guarantor unless, other than with respect to a merger between a Subsidiary
Guarantor and another Subsidiary Guarantor or a merger between a Subsidiary
Guarantor and the Company, (i) subject to the provisions of Section 10.04
hereof, the Person formed by or surviving any such consolidation or merger (if
other than such Subsidiary Guarantor) assumes all the obligations of such
Subsidiary Guarantor pursuant to a supplemental indenture substantially in the
form of EXHIBIT F hereto, under the Senior Notes and this Indenture; (ii)
immediately after giving effect to such transaction, no Default or Event of
Default exists; (iii) such Subsidiary Guarantor, or any Person formed by or
surviving any such consolidation or merger, would have Consolidated Net Worth
(immediately after giving effect to such transaction), equal to or greater than
the Consolidated Net Worth of such Subsidiary Guarantor immediately preceding
the transaction; and (iv) the Company would be permitted to incur at least $1.00
of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in the first paragraph of Section 4.09 hereof.
(c) In the case of any such consolidation, merger, sale or conveyance and
upon the assumption by the successor Person, by supplemental indenture, executed
and delivered to the Trustee and substantially in the form of EXHIBIT F hereto,
of the Subsidiary Guarantee endorsed upon the Senior Notes and the due and
punctual performance of all of the covenants and conditions of this Indenture to
be performed by the Subsidiary Guarantor, such successor Person shall succeed to
and be substituted for the Subsidiary Guarantor with the same effect as if it
had been named herein as a Subsidiary Guarantor; provided that, solely for
purposes of computing Consolidated Net Income for purposes of clause (b) of the
first paragraph of Section 4.07 hereof, the Consolidated Net Income of any
Person other than the Company and its Subsidiaries shall only be included for
periods subsequent to the effective time of such merger, consolidation,
combination or transfer of assets. Such successor Person thereupon may cause to
be signed any or all of the Subsidiary Guarantees to be endorsed upon all of the
Senior Notes issuable hereunder which theretofore shall not have been signed by
the Company and delivered to the Trustee. All of the Subsidiary Guarantees so
issued shall in all respects have the same legal rank and benefit under this
Indenture as the Subsidiary Guarantees theretofore and thereafter issued in
accordance with the terms of this Indenture as though all of such Subsidiary
Guarantees had been issued at the date of the execution hereof.
SECTION 10.04. RELEASES FOLLOWING SALE OF ASSETS.
In the event of a sale or other disposition of all of the assets of any
Subsidiary Guarantor, by way of merger, consolidation or otherwise, or a sale or
other disposition of all of the capital stock of any Subsidiary Guarantor, then
such Subsidiary Guarantor (in the event of a sale or other disposition, by way
of such a merger, consolidation or otherwise, of all of the capital stock of
such Subsidiary Guarantor) or the corporation acquiring the property (in the
event of a sale or other disposition of all of the assets of such Subsidiary
Guarantor) shall be released and relieved of any obligations under its
Subsidiary Guarantee; provided that (i) in the event of an Asset Sale, the Net
Proceeds from such sale or other dispositions are treated in accordance with the
provisions of Section 4.10 hereof and (ii) the Company
62
<PAGE> 69
is in compliance with all other provisions of this Indenture applicable to such
disposition. Upon delivery by the Company to the Trustee of an Officers'
Certificate to the effect of the foregoing, the Trustee shall execute any
documents reasonably required in order to evidence the release of any Subsidiary
Guarantor from its Obligation under its Subsidiary Guarantee. Any Subsidiary
Guarantor not released from its Obligations under its Subsidiary Guarantee shall
remain liable for the full amount of principal of, premium, if any, interest and
Liquidated Damages, if any, on the Senior Notes and for the other Obligations of
such Subsidiary Guarantor under this Indenture as provided in this Article 10.
SECTION 10.05. LIMITATION ON SUBSIDIARY GUARANTOR LIABILITY.
For purposes hereof, each Subsidiary Guarantor's liability shall be
limited to the lesser of (i) the aggregate amount of the Obligations of the
Company under the Senior Notes and this Indenture and (ii) the amount, if any,
which would not have (A) rendered such Subsidiary Guarantor "insolvent" (as such
term is defined in the Bankruptcy Law and in the Debtor and Creditor Law of the
State of New York) or (B) left such Subsidiary Guarantor with unreasonably small
capital at the time its Subsidiary Guarantee of the Senior Notes was entered
into; provided that, it will be a presumption in any lawsuit or other proceeding
in which a Subsidiary Guarantor is a party that the amount guaranteed pursuant
to the Subsidiary Guarantee is the amount set forth in clause (i) above unless
any creditor, or representative of creditors of such Subsidiary Guarantor, or
debtor in possession or trustee in bankruptcy of the Subsidiary Guarantor,
otherwise proves in such a lawsuit that the aggregate liability of the
Subsidiary Guarantor is the amount set forth in clause (ii) above. In making any
determination as to solvency or sufficiency of capital of a Subsidiary Guarantor
in accordance with the previous sentence, the right of such Subsidiary Guarantor
to contribution from other Subsidiary Guarantors, and any other rights such
Subsidiary Guarantor may have, contractual or otherwise, shall be taken into
account.
SECTION 10.06. "TRUSTEE" TO INCLUDE PAYING AGENT.
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "Trustee"
as used in this Article 10 shall in each case (unless the context shall
otherwise require) be construed as extending to and including such Paying Agent
within its meaning as fully and for all intents and purposes as if such Paying
Agent were named in this Article 10 in place of the Trustee.
ARTICLE 11
MISCELLANEOUS
SECTION 11.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by TIA Section 318(c), the imposed duties shall control.
SECTION 11.02. NOTICES.
Any notice or communication by the Company, any Subsidiary Guarantor or
the Trustee to the others is duly given if in writing and delivered in Person or
mailed by first class mail (registered or certified, return receipt requested),
telecopier or overnight air courier guaranteeing next day delivery, to the
others' address:
If to the Company or any Subsidiary Guarantor:
63
<PAGE> 70
Continental Global Group, Inc.
438 Industrial Drive
Winfield, Alabama, 35594
Telecopy: (205) 487-4233
Attention: Chief Financial Officer
With a copy to:
Squire & Sanders, Dempsey, L.L.P.
4900 Key Tower
127 Public Square
Cleveland, Ohio 44114-1304
Attention: Jeffrey J. Margulies
If to the Trustee:
Norwest Bank Minnesota, National Association
Corporate Trust
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479-0069
Telecopier No.: (612) 667-9825
Attention: Raymond S. Haverstock, Vice President
The Company, any Subsidiary Guarantor or the Trustee, by notice to the
others may designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to Holders) shall be
deemed to have been duly given: at the time delivered by hand, if personally
delivered; five (5) Business Days after being deposited in the mail, postage
prepaid, if mailed; when receipt acknowledged, if telecopied; and the next
Business Day after timely delivery to the courier, if sent by overnight air
courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first class
mail to its address shown on the register kept by the Registrar. Any notice or
communication shall also be so mailed to any Person described in TIA Section
313(c), to the extent required by the TIA. Failure to mail a notice or
communication to a Holder or any defect in it shall not affect its sufficiency
with respect to other Holders.
If a notice or communication is mailed in the manner provided above within
the time prescribed, it is duly given, whether or not the addressee receives it.
If the Company mails a notice or communication to Holders, it shall mail a
copy to the Trustee and each Agent at the same time.
64
<PAGE> 71
SECTION 11.03. COMMUNICATION BY HOLDERS OF SENIOR NOTES WITH OTHER HOLDERS OF
SENIOR NOTES.
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Senior Notes.
The Company, the Trustee, the Registrar and anyone else shall have the
protection of TIA Section 312(c).
SECTION 11.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company or any Subsidiary Guarantor
to the Trustee to take any action under this Indenture, the Company or such
Subsidiary Guarantor shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set
forth in Section 11.05 hereof) stating that, in the opinion of the
signers, all conditions precedent and covenants, if any, provided for
in this Indenture relating to the proposed action have been
satisfied; and
(b) an Opinion of Counsel in form and substance reasonably satisfactory
to the Trustee (which shall include the statements set forth in
Section 11.05 hereof) stating that, in the opinion of such counsel,
all such conditions precedent and covenants have been satisfied.
SECTION 11.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA Section 314(a)(4)) shall comply with the provisions of TIA
Section 314(e) and shall include:
(a) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in
such certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has made
such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been satisfied; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied.
SECTION 11.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 11.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS.
No director, officer, employee, incorporator or stockholder of the Company
or any Subsidiary Guarantor, as such, shall have any liability for any
obligations of the Company under the Senior Notes, any Subsidiary Guarantee,
this Indenture or for any claim based on, in respect of, or by reason of, such
65
<PAGE> 72
obligations or their creation. Each Holder of Senior Notes by accepting a Senior
Note waives and releases all such liability. The waiver and release are part of
the consideration for issuance of the Senior Notes and the Subsidiary
Guarantees.
SECTION 11.08. GOVERNING LAW.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE, THE SUBSIDIARY GUARANTEES AND THE SENIOR NOTES.
SECTION 11.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other indenture, loan or
debt agreement of the Company or its Subsidiaries or of any other Person. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture.
SECTION 11.10. SUCCESSORS.
All agreements of the Company and the Subsidiaries Guarantors in this
Indenture, the Senior Notes and the Subsidiary Guarantees shall bind their
respective successors and assigns. All agreements of the Trustee in this
Indenture shall bind its successors and assigns.
SECTION 11.11. SEVERABILITY.
In case any provision in this Indenture, the Senior Notes or in the
Subsidiary Guarantees shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
SECTION 11.12. COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement.
SECTION 11.13. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part of this Indenture and shall in no way
modify or restrict any of the terms or provisions hereof.
[signature page follows]
66
<PAGE> 73
SIGNATURES
Dated as of April 1, 1997 CONTINENTAL GLOBAL GROUP, INC.
By: /s/ C. Edward Bryant, Jr.
---------------------------------
Name: C. Edward Bryant, Jr.
Title: President
Dated as of April 1, 1997 CONTINENTAL CONVEYOR & EQUIPMENT COMPANY
By: /s/ C. Edward Bryant, Jr.
---------------------------------
Name: C. Edward Bryant, Jr.
Title: President
Dated as of April 1, 1997 GOODMAN CONVEYOR COMPANY
By: /s/ Richard M. Sickinger
---------------------------------
Name: Richard M. Sickinger
Title: President
TRUSTEE Dated as of April 1, 1997
By: /s/ Curtis D. Schwegman
---------------------------
Name: Curtis D. Schwegman
Title: Assistant Vice President
<PAGE> 74
EXHIBIT A
(Face of Senior Note)
11% Series A Senior Notes due 2007
No. 1 $_______________
CUSIP NO. 21144Y AA 6
CONTINENTAL GLOBAL GROUP, INC.
promises to pay to Cede & Co. or registered assigns, the principal sum of
___________ Dollars on April 1, 2007.
Interest Payment Dates: April 1 and October 1
Record Dates: March 15 and September 15
Dated: April 1, 1997
CONTINENTAL GLOBAL GROUP, INC.
By:
--------------------------------
Name:
Title:
This is one of the
Senior Notes referred to in the
within-mentioned Indenture:
Dated: April 1, 1997
Norwest Bank Minnesota, National Association
as Trustee
By:
----------------------------------
A-1-1
<PAGE> 75
(Back of Senior Note)
11% Series [A/B] Senior Notes due 2007
[Unless and until it is exchanged in whole or in part for Senior
Notes in definitive form, this Senior Note may not be transferred except as a
whole by the Depository to a nominee of the Depository or by a nominee of the
Depository to the Depository or another nominee of the Depository or by the
Depository or any such nominee to a successor Depository or a nominee of such
successor Depository. Unless this certificate is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New York, New
York) ("DTC"), to the issuer or its agent for registration of transfer, exchange
or payment, and any certificate issued is registered in the name of Cede & Co.
or such other name as may be requested by an authorized representative of DTC
(and any payment is made to Cede & Co. or such other entity as may be requested
by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL in as much as the
registered owner hereof, Cede & Co., has an interest herein.]1
[THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION
5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS
HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE
BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED, ONLY (1) (a) INSIDE THE UNITED STATES TO A PERSON
WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED
STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 904 OF THE SECURITIES ACT, (d) TO AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) or (7) OF THE SECURITIES
ACT (AN "INSTITUTIONAL ACCREDITED INVESTOR") THAT, PRIOR TO SUCH TRANSFER,
FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS
AND AGREEMENTS (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND,
IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF SENIOR
NOTES LESS THAN $100,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY
THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT OR (e) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO
REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY
OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE.]2
- --------
1 This paragraph should be included only if the Senior Note is issued in
global form.
2 This paragraph should be removed upon the exchange of Series A Notes for
Series B Notes in the Exchange Offer or upon the registration of the Series A
Notes pursuant to the terms of the Registration Rights Agreement
A-1-2
<PAGE> 76
Capitalized terms used herein shall have the meanings assigned to
them in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Continental Global Group, Inc., a Delaware corporation, or
its successor (the "Company"), promises to pay interest on the
principal amount of this Senior Note at the rate of 11% per annum
and shall pay the Liquidated Damages, if any, payable pursuant to
Section 5 of the Registration Rights Agreement referred to below.
The Company will pay interest and Liquidated Damages, if any, in
United States dollars (except as otherwise provided herein)
semi-annually in arrears on April 1 and October 1, commencing on
October 1, 1997, or if any such day is not a Business Day, on the
next succeeding Business Day (each an "Interest Payment Date").
Interest on the Senior Notes shall accrue from the most recent date
to which interest has been paid or, if no interest has been paid,
from the date of issuance; provided that if there is no existing
Default or Event of Default in the payment of interest, and if this
Senior Note is authenticated between a record date referred to on
the face hereof and the next succeeding Interest Payment Date,
interest shall accrue from such next succeeding Interest Payment
Date, except in the case of the original issuance of Senior Notes,
in which case interest shall accrue from the date of authentication.
The Company shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue principal at the
rate equal to 1% per annum in excess of the then applicable interest
rate on the Senior Notes to the extent lawful; it shall pay interest
(including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Liquidated
Damages (without regard to any applicable grace period) at the same
rate to the extent lawful. Interest shall be computed on the basis
of a 360-day year comprised of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the Senior Notes
(except defaulted interest) and Liquidated Damages, if any, to the
Persons who are registered Holders of Senior Notes at the close of
business on the March 15 or September 15 next preceding the Interest
Payment Date, even if such Senior Notes are cancelled after such
record date and on or before such Interest Payment Date, except as
provided in Section 2.13 of the Indenture with respect to defaulted
interest. The Senior Notes shall be payable as to principal,
premium, if any, interest and Liquidated Damages, if any, at the
office or agency of the Company maintained for such purpose within
or without the City and State of New York, or, at the option of the
Company, payment of interest and Liquidated Damages, if any, may be
made by check mailed to the Holders at their addresses set forth in
the register of Holders; provided that payment by wire transfer of
immediately available funds shall be required with respect to
principal of, and interest, premium and Liquidated Damages, if any,
on, all Global Notes and all other Senior Notes the Holders of which
shall have provided written wire transfer instructions to the
Company or the Paying Agent. Such payment shall be in such coin or
currency of the United States of America as at the time of payment
is legal tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, Norwest Bank Minnesota,
National Association, the Trustee under the Indenture, shall act as
Paying Agent and Registrar. The Company may change any Paying Agent
or Registrar without notice to any Holder. The Company or any of its
Subsidiaries may act in any such capacity.
4. INDENTURE. The Company issued the Senior Notes under an Indenture
dated as of April 1, 1997 ("Indenture") among the Company, the
Subsidiary Guarantors and the Trustee. The terms of the Senior Notes
include those stated in the Indenture and those made a part of the
Indenture by reference to the Trust Indenture Act of 1939, as
amended (15 U.S. Code Sections 77aaa-77bbbb)
A-1-3
<PAGE> 77
(the "TIA"). The Senior Notes are subject to all such terms, and Holders
are referred to the Indenture and such Act for a statement of such terms.
The Senior Notes are general unsecured Obligations of the Company limited
to $120,000,000 in aggregate principal amount, plus amounts, if any,
sufficient to pay premium, if any, interest or Liquidated Damages, if any,
on outstanding Senior Notes as set forth in Paragraph 2 hereof.
5. OPTIONAL REDEMPTION.
Except as set forth in the next paragraph, the Senior Notes shall
not be redeemable at the Company's option prior to April 1, 2002.
Thereafter, the Senior Notes shall be subject to redemption at the option
of the Company, in whole or in part, upon not less than 30 nor more than
60 days' notice, at the redemption prices (expressed as percentages of
principal amount) set forth below together with accrued and unpaid
interest and any Liquidated Damages, if any, thereon to the applicable
redemption date, if redeemed during the twelve-month period beginning on
April 1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002.....................................................................................105.500%
2003.....................................................................................103.667%
2004.....................................................................................101.833%
2005 and thereafter......................................................................100.000%
</TABLE>
Notwithstanding the foregoing, at any time prior to April 1, 2000,
the Company may on any one or more occasions redeem up to 33 1/3% of the
original aggregate principal amount of Senior Notes at a redemption price
of 110% of the principal amount thereof, plus accrued and unpaid interest
and Liquidated Damages, if any, to the redemption date with the net
proceeds of an offering of common stock of the Company; provided that at
least 66 2/3% of the original aggregate principal amount of the Senior
Notes originally issued remain outstanding immediately after the
occurrence of any such redemption; and provided, further, that such
redemption shall occur within 60 days of the date of the closing of any
such.
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company shall not be
required to make mandatory redemption or sinking fund payments with
respect to the Senior Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) Upon the occurrence of a Change of Control, each Holder of Senior
Notes will have the right to require the Company to repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of such Holder's
Senior Notes pursuant to the offer described below (the "Change of Control
Offer") at an offer price in cash equal to 101% of the aggregate principal
amount thereof plus accrued and unpaid interest and Liquidated Damages, if
any, thereon, to the date of purchase. Within 10 days following any Change
of Control, the Company will mail a notice to each Holder describing the
transaction or transactions that constitute the Change of Control setting
forth the procedures governing the Change of Control Offer required by the
Indenture.
A-1-4
<PAGE> 78
(b) When the aggregate amount of Excess Proceeds exceeds $5.0 million, the
Company shall offer to all Holders of Senior Notes (an "Asset Sale Offer")
to purchase the maximum principal amount of Senior Notes that may be
purchased out of the Excess Proceeds at an offer price in cash equal to
100% of principal amount thereof, plus accrued and unpaid interest, and
Liquidated Damages thereon, if any, to the date of purchase in accordance
with the procedures set forth in the Indenture. To the extent that the
aggregate amount of Senior Notes tendered pursuant to an Asset Sale Offer
is less than the Excess Proceeds, the Company may use any remaining Excess
Proceeds for any general corporate purposes. If the aggregate principal
amount of Senior Notes surrendered by Holders thereof exceeds the amount
of Excess Proceeds, the Trustee shall select the Senior Notes to be
purchased on a pro rata basis.
(c) Holders of the Senior Notes that are the subject of an offer to
purchase will receive a Change of Control Offer or Asset Sale Offer from
the Company prior to any related purchase date and may elect to have such
Senior Notes purchased by completing the form titled "Option of Holder to
Elect Purchase" appearing below.
8. NOTICE OF REDEMPTION. Notice of redemption shall be mailed at least 30
days but not more than 60 days before the redemption date to each Holder
whose Senior Notes are to be redeemed at its registered address. Senior
Notes in denominations larger than $1,000 may be redeemed in part but only
in whole multiples of $1,000, unless all of the Senior Notes held by a
Holder are to be redeemed. On and after the redemption date, interest and
Liquidated Damages, if any, ceases to accrue on the Senior Notes or
portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Senior Notes are in registered form
without coupons in initial denominations of $1,000 and integral multiples
of $1,000. The transfer of the Senior Notes may be registered and the
Senior Notes may be exchanged as provided in the Indenture. The Registrar
and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and the Company may
require a Holder to pay any taxes and fees required by law or permitted by
the Indenture. The Company need not exchange or register the transfer of
any Senior Note or portion of a Senior Note selected for redemption,
except for the unredeemed portion of any Senior Note being redeemed in
part. Also, it need not exchange or register the transfer of any Senior
Notes for a period of 15 days before a selection of Senior Notes to be
redeemed or during the period between a record date and the corresponding
Interest Payment Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Senior Note may be
treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to the following paragraphs, the
Indenture, the Senior Notes and the Subsidiary Guarantees may be amended
or supplemented with the consent of the Holders of at least a majority in
principal amount of the Senior Notes then outstanding (including, without
limitation, consents obtained in connection with a purchase of or, tender
offer or exchange offer for Senior Notes), and any existing Default or
Event of Default (other than a Default or Event of Default in the payment
of the principal of, premium, if any, interest or Liquidated Damages, if
any, on the Senior Notes, except a payment default resulting from an
acceleration that has been rescinded) or compliance with any provision of
the Indenture, the Senior Notes or the Subsidiary Guarantees may be waived
with the consent of the Holders of a majority in principal amount of the
then outstanding Senior Notes (including consents obtained in connection
with a tender offer or exchange offer for Senior Notes).
A-1-5
<PAGE> 79
Without the consent of any Holder of Senior Notes, the Company and
the Trustee may amend or supplement the Indenture, the Subsidiary
Guarantees or the Senior Notes to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Senior Notes in addition to
or in place of certificated Senior Notes, to provide for the assumption of
the Company's or a Subsidiary Guarantor's obligations to Holders of Senior
Notes in the case of a merger or consolidation, to make any change that
would provide any additional rights or benefits to the Holders of Senior
Notes or that does not adversely affect the legal rights under the
Indenture of any such Holder, to comply with the requirements of the
Commission in order to effect or maintain the qualification of the
Indenture under the Trust Indenture Act or to allow any Subsidiary
Guarantor to guarantee the Senior Notes.
13. DEFAULTS AND REMEDIES. Events of Default include: (i) default for 30 days
in the payment when due of interest on or Liquidated Damages, if any, with
respect to the Senior Notes; (ii) default in payment when due of the
principal of or premium, if any, on the Senior Notes; (iii) failure by the
Company or any Subsidiary to comply with the provisions described in
Sections 3.09, 4.07, 4.09, 4.10, 4.13, 4.14, 4.18 or 5.01 of the
Indenture; (iv) failure by the Company or any Subsidiary for 60 days after
notice from the Trustee or the Holders of at least 25% in principal amount
of the Senior Notes then outstanding to comply with its other agreements
in the Indenture or the Senior Notes; (v) default under any mortgage,
indenture or instrument under which there may be issued or by which there
may be secured or evidenced any Indebtedness for money borrowed by the
Company or any of their its Subsidiaries (or the payment of which is
guaranteed by the Company or any of its Subsidiaries) whether such
Indebtedness or guarantee now exists, or is created after the date of the
Indenture, which default (A) (i) is caused by a failure to pay when due at
final stated maturity (giving effect to any grace period related thereto)
any principal of or premium, if any, or interest on such Indebtedness (a
"Payment Default") or (ii) results in the acceleration of such
Indebtedness prior to its express maturity and (B) in each case, the
principal amount of any such Indebtedness as to which a Payment Default
shall have occurred, together with the principal amount of any other such
Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $5.0 million or more; (vi)
failure by the Company or any of its Subsidiaries to pay final judgments
aggregating in excess of $5.0 million, which judgments are not paid
discharged or stayed within 60 days after their entry; (vii) certain
events of bankruptcy or insolvency with respect to the Company, any of its
Significant Subsidiaries or any group of Subsidiaries that, taken
together, would constitute a Significant Subsidiary; and (viii) the
termination of the Subsidiary Guarantee of any Subsidiary Guarantor for
any reason not permitted by the Indenture, or the denial of any Person
acting on behalf of any Subsidiary Guarantor of its Obligations under any
such Subsidiary Guarantee.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Senior
Notes may declare all the Senior Notes to be due and payable by notice in
writing to the Company and the Trustee specifying the respective Event of
Default and that it is a "notice of acceleration" and the same shall
become immediately due and payable. Notwithstanding the foregoing, in the
case of an Event of Default arising from certain events of bankruptcy or
insolvency with respect to the Company, any Significant Subsidiary or any
group of Subsidiaries that, taken together, would constitute a Significant
Subsidiary, all outstanding Senior Notes will become due and payable
without further action or notice. Holders of the Senior Notes may not
enforce the Indenture or the Senior Notes except as provided in the
Indenture. Subject to certain limitations, Holders of a majority in
principal amount of the then outstanding Senior Notes may direct the
Trustee in its exercise of any trust or power. The Holders of a majority
in aggregate principal amount of the
A-1-6
<PAGE> 80
Senior Notes then outstanding, by notice to the Trustee, may on behalf of
the Holders of all of the Senior Notes waive any existing Default or Event
of Default and its consequences under the Indenture, except a continuing
Default or Event of Default in the payment of interest or Liquidated
Damages, if any, on, or principal of, the Senior Notes. The Trustee may
withhold from Holders of the Senior Notes notice of any continuing Default
or Event of Default (except a Default or Event of Default relating to the
payment of principal, interest or Liquidated Damages, if any) if it
determines that withholding notice is in such Holders' interest. The
Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default to deliver to the
Trustee a statement specifying such Default or Event of Default.
14. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or any other
capacity, may make loans to, accept deposits from, and perform services
for the Company, the Subsidiary Guarantors or their respective Affiliates,
and may otherwise deal with the Company, the Subsidiary Guarantors or
their respective Affiliates, as if it were not the Trustee.
15. NO RECOURSE AGAINST OTHERS. No director, officer, employee, incorporator
or stockholder, of the Company or any Subsidiary Guarantor, as such, shall
have any liability for any obligations of the Company or any Subsidiary
Guarantor under the Senior Notes, the Indenture or the Subsidiary
Guarantees or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of Senior Notes by accepting a
Senior Note waives and releases all such liability. The waiver and release
are part of the consideration for the issuance of the Senior Notes and any
Subsidiary Guarantee.
16. AUTHENTICATION. This Senior Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
17. ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder
or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants
by the entireties), JT TEN (= joint tenants with right of survivorship and
not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform
Gifts to Minors Act).
18. ADDITIONAL RIGHTS OF HOLDERS OF TRANSFER RESTRICTED SECURITIES. In
addition to the rights provided to Holders of the Senior Notes under the
Indenture, Holders of Transferred Restricted Securities (as defined in the
Registration Rights Agreement) shall have all the rights set forth in the
Registration Rights Agreement, dated as of the date hereof, among the
Company, the Subsidiary Guarantors and the Initial Purchaser (the
"Registration Rights Agreement").
19. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee
on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Senior Notes and the Trustee may use
CUSIP numbers in notices of redemption as a convenience to the Holders. No
representation is made as to the accuracy of such numbers either as
printed on the Senior Notes or as contained in any notice of redemption
and reliance may be placed only on the other identification numbers placed
thereon.
A-1-7
<PAGE> 81
The Company shall furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Continental Global Group, Inc.
438 Industrial Drive
Winfield, Alabama 35594
Telecopy: (205) 487-4233
Attention: Chief Financial Officer
A-1-8
<PAGE> 82
ASSIGNMENT FORM
To assign this Senior Note, fill in the form below: (I) or (we) assign and
transfer this Senior Note to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
---------------------------------------------------------
to transfer this Senior Note on the books of the Company. The agent may
substitute another to act for him.
Date:
---------------
Your Signature:
--------------------------
(Sign exactly as your name appears on the
face of this Senior Note)
Signature Guarantee:
A-1-9
<PAGE> 83
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Senior Note purchased by the
Company pursuant to Section 4.10 or 4.14 of the Indenture, check the box below:
[ ] Section 4.10 [ ] Section 4.14
If you want to elect to have only part of the Senior Note purchased
by the Company pursuant to Section 4.10 or Section 4.14 of the Indenture, state
the amount you elect to have purchased: $
----------
Date:
---------------
Your Signature:
--------------------------
(Sign exactly as your name appears on the
face of this Senior Note)
Signature Guarantee:
A-1-10
<PAGE> 84
SCHEDULE OF EXCHANGES OF SENIOR NOTES(3)
THE FOLLOWING EXCHANGES OF A PART OF THIS GLOBAL NOTE FOR OTHER SENIOR NOTES
HAVE BEEN MADE:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Principal Amount of
Amount of decrease in Amount of increase in this Global Note Signature of authorized
Principal Amount of Principal Amount of following such decrease officer of Trustee or
Date of Exchange this Global Note this Global Note (or increase) Senior Note Custodian
- ---------------- --------------------- ---------------------- ----------------------- -----------------------
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
3 This should be included only if the Senior Note is issued in global form.
A-1-11
<PAGE> 85
EXHIBIT A-2
-------
(Face of Regulation S Temporary Global Note)
11% Series A Senior Notes due 2007
No. 1 $_______________
ISIP NO. USU21140 AA 32
SIMS. U21140AA3
CONTINENTAL GLOBAL GROUP, INC.
promises to pay to Cede & Co. or registered assigns, the principal sum of No
Dollars on April 1, 2007.
Interest Payment Dates: April 1 and October 1
Record Dates: March 15 and September 15
Dated: April 1, 1997
CONTINENTAL GLOBAL GROUP, INC.
By:______________________________
Name:
Title:
This is one of the
Senior Notes referred to in the
within-mentioned Indenture:
Dated: April 1, 1997
Norwest Bank Minnesota, National Association
as Trustee
By:__________________________________
A-2-1
<PAGE> 86
(Back of Regulation S Temporary Global Note)
11% Series [A/B] Senior Note due 2007
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SENIOR NOTES
IN DEFINITIVE FORM, THIS SENIOR NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY
THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY
TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY OR BY THE DEPOSITORY OR
ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"),TO
THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND
ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER
NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN
A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY
EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY
EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY
MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) (a) INSIDE THE UNITED
STATES TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED
STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904
OF THE SECURITIES ACT, (d) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED
IN RULE 501(a)(1), (2), (3) or (7) OF THE SECURITIES ACT (AN "INSTITUTIONAL
ACCREDITED INVESTOR") THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A
SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS (THE FORM OF
WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF
AN AGGREGATE PRINCIPAL AMOUNT OF SENIOR NOTES LESS THAN $100,000, AN OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE
SECURITIES ACT OR (e) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE
COMPANY SO REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO,
NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (A) ABOVE.
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND
THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR DEFINITIVE SENIOR
NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN).
A-2-2
<PAGE> 87
NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S
TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON
PRIOR TO THE EXCHANGE OF THIS SENIOR NOTE FOR A REGULATION S TEMPORARY GLOBAL
NOTE AS CONTEMPLATED BY THE INDENTURE.
Continental Global Group, Inc., a Delaware corporation, or its
successor (the "Company"), promises to pay interest on the principal amount of
this Senior Note at the rate of 11% per annum and shall pay the Liquidated
Damages, if any, payable pursuant to Section 5 of the Registration Rights
Agreement referred to below. The Company will pay interest and Liquidated
Damages, if any, in United States dollars semi-annually in arrears on April 1
and October 1, commencing on October 1, 1997, or if any such day is not a
Business Day, on the next succeeding Business Day (each an "Interest Payment
Date"). Interest on the Senior Notes shall accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from the date of
issuance; provided that if there is no existing Default or Event of Default in
the payment of interest, and if this Senior Note is authenticated between a
record date referred to on the face hereof and the next succeeding Interest
Payment Date, interest shall accrue from such next succeeding Interest Payment
Date, except in the case of the original issuance of Senior Notes, in which case
interest shall accrue from the date of authentication. The Company shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal at the rate equal to 1% per annum in excess
of the then applicable interest rate on the Senior Notes to the extent lawful;
it shall pay interest (including post-petition interest in any proceeding under
any Bankruptcy Law) on overdue installments of interest and Liquidated Damages
(without regard to any applicable grace period) at the same rate to the extent
lawful. Interest shall be computed on the basis of a 360-day year comprised of
twelve 30-day months.
This Regulation S Temporary Global Note is issued in respect of an
issue of 11% Senior Notes due 2007 (the "Senior Notes") of the Company, limited
to $120,000,000 in aggregate principal amount, plus amounts, if any, sufficient
to pay premium, if any, interest or Liquidated Damages, if any on outstanding
Senior Notes. The Company issued Senior Notes under an Indenture (the
"Indenture") dated as of April 1, 1997, among the Company, the Subsidiary
Guarantors and Norwest Bank Minnesota, National Association, as trustee (the
"Trustee"). This Regulation S Temporary Global Note is governed by the terms and
conditions of the Indenture governing the Senior Notes, which terms and
conditions are incorporated herein by reference and, except as otherwise
provided herein, shall be binding on the Company and the Holder hereof as if
fully set forth herein. Unless the context otherwise requires, the terms used
herein shall have the meanings specified in the Indenture.
Until this Regulation S Temporary Global Note is exchanged for
Regulation S Permanent Global Notes, the Holder hereof shall not be entitled to
receive payments of interest or Liquidated Dames, if any, hereon although
interest and Liquidated Damages, if any, will continue to accrue; until so
exchanged in full, this Regulation S Temporary Global Note shall in all other
respects be entitled to the same benefits as other Senior Notes under the
Indenture.
This Regulation S Temporary Global Note is exchangeable in whole or in
part for one or more Regulation S Permanent Global Notes or 144A Global Notes
only (i) on or after the termination of the 40-day restricted period (as defined
in Regulation S) and (ii) upon presentation of certificates (accompanied by an
Opinion of Counsel, if applicable) required by Article 2 of the Indenture. Upon
exchange of this Regulation S Temporary Global Note for one or more Regulation S
Permanent Global Notes or 144A Global Notes, the Trustee shall cancel this
Regulation S Temporary Global Note.
This Regulation S Temporary Global Note shall not become valid or
obligatory until the certificate of authentication hereon shall have been duly
manually signed by the Trustee in accordance with the Indenture. This Regulation
S Temporary Global Note shall be governed by and construed in
A-2-3
<PAGE> 88
accordance with the laws of the State of the New York. All references to "$,"
"Dollars," "dollars" or "U.S. $" are to such coin or currency of the United
States of America as at the time shall be legal tender for the payment of public
and private debts therein.
A-2-4
<PAGE> 89
SCHEDULE OF EXCHANGES FOR GLOBAL NOTES
The following exchanges of a part of this Regulation S Temporary Global
Note for other Global Notes have been made:
<TABLE>
<CAPTION>
Amount of decrease in Amount of increase in Principal Amount of this Signature of
Principal Amount Principal Amount Global Note authorized officer of
of this Global of this Global following such decrease Trustee or Senior Note
Date of Exchange Note Note (or increase) Custodian
---------------- ---- ---- ------------- ---------
<S> <C> <C> <C> <C>
</TABLE>
A-2-5
<PAGE> 90
EXHIBIT B-1
-------
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM 144A GLOBAL NOTE TO REGULATION S GLOBAL NOTE
(Pursuant to Section 2.06(a)(1) of the Indenture)
Norwest Bank Minnesota, National Association
Corporate Trust
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479-0069
Re: 11% Senior Notes due 2007 of Continental Global Group, Inc.
Reference is hereby made to the Indenture, dated as of April 1, 1997
(the "Indenture"), among Continental Global Group, Inc. (the "Company"),
Continental Conveyor & Equipment Company ("Continental"), Goodman Conveyor
Company, ("Goodman" and, together with Continental the "Subsidiary Guarantors")
and Norwest Bank Minnesota, National Association, as trustee (the "Trustee").
Capitalized terms used but not defined herein shall have the meanings given to
them in the Indenture.
This letter relates to $ _______________ principal amount of Senior
Notes which are evidenced by one or more 144A Global Notes and held with the
Depository in the name of(the "Transferor"). The Transferor has requested a
transfer of such beneficial interest in the Senior Notes to a Person who will
take delivery thereof in the form of an equal principal amount of Senior Notes
evidenced by one or more Regulation S Global Notes, which amount, immediately
after such transfer, is to be held with the Depository through Euroclear or
Cedel or both.
In connection with such request and in respect of such Senior Notes,
the Transferor hereby certifies that such transfer has been effected in
compliance with the transfer restrictions applicable to the Global Notes and
pursuant to and in accordance with Rule 903 or Rule 904 under the United States
Securities Act of 1933, as amended (the "Securities Act"), and accordingly the
Transferor hereby further certifies that:
(1) The offer of the Senior Notes was not made to a person in the United
States;
(2) either:
(a) at the time the buy order was originated, the transferee was
outside the United States or the Transferor and any person
acting on its behalf reasonably believed and believes that the
transferee was outside the United States; or
(b) the transaction was executed in, on or through the facilities
of a designated offshore securities market and neither the
Transferor nor any person acting on its behalf knows that the
transaction was prearranged with a buyer in the United States;
(3) no directed selling efforts have been made in contravention of the
requirements of Rule 904(b) of Regulation S;
B-1-1
<PAGE> 91
(4) the transaction is not part of a plan or scheme to evade the
registration provisions of the Securities Act; and
(5) upon completion of the transaction, the beneficial interest being
transferred as described above is to be held with the Depository
through Euroclear or Cedel or both.
Upon giving effect to this request to exchange a beneficial interest in a
144A Global Note for a beneficial interest in a Regulation S Global Note, the
resulting beneficial interest shall be subject to the restrictions on transfer
applicable to Regulation S Global Notes pursuant to the Indenture and the
Securities Act and, if such transfer occurs prior to the end of the 40-day
restricted period associated with the initial offering of Senior Notes, the
additional restrictions applicable to transfers of interest in the Regulation S
Temporary Global Note.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company, the Subsidiary Guarantors and Donaldson,
Lufkin & Jenrette Securities Corporation, the initial purchaser of such Senior
Notes being transferred. Terms used in this certificate and not otherwise
defined in the Indenture have the meanings set forth in Regulation S under the
Securities Act.
[Insert Name of Transferor]
By:
---------------------------
Name:
Title:
Dated:
cc: Continental Global Group, Inc.
Donaldson, Lufkin & Jenrette Securities Corporation
B-1-2
<PAGE> 92
EXHIBIT B-2
-------
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM REGULATION S GLOBAL NOTE TO 144A GLOBAL NOTE
(Pursuant to Section 2.06(a)(ii) of the Indenture)
Norwest Bank Minnesota, National Association
Corporate Trust
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479-0069
Re: 11% Senior Notes due 2007 of Continental Global Group, Inc.
Reference is hereby made to the Indenture dated as of April 1, 1997
(the "Indenture"), among Continental Global Group, Inc. (the "Company"),
Continental Conveyor & Equipment Company ("Continental"), Goodman Conveyor
Company, ("Goodman" and, together with Continental the "Subsidiary Guarantors")
and Norwest Bank Minnesota, National Association, as trustee (the "Trustee").
Capitalized terms used but not defined herein shall have the meanings given to
them in the Indenture.
This letter relates to $_________ principal amount of Senior Notes
which are evidenced by one or more Regulation S Global Notes and held with the
Depository through Euroclear or Cedel in the name of (the "Transferor"). The
Transferor has requested a transfer of such beneficial interest in the Senior
Notes to a Person who will take delivery thereof in the form of an equal
principal amount of Senior Notes evidenced by one or more 144A Global Notes, to
be held with the Depository.
In connection with such request and in respect of such Senior Notes,
the Transferor hereby certifies that:
[CHECK ONE]
[ ] such transfer is being effected pursuant to and in accordance with Rule
144A under the United States Securities Act of 1933, as amended (the
"Securities Act"), and, accordingly, the Transferor hereby further
certifies that the Senior Notes are being transferred to a Person that the
Transferor reasonably believes is purchasing the Senior Notes for its own
account, or for one or more accounts with respect to which such Person
exercises sole investment discretion, and such Person and each such
account is a "qualified institutional buyer" within the meaning of Rule
144A in a transaction meeting the requirements of Rule 144A;
or
[ ] such transfer is being effected pursuant to and in accordance with Rule
144 under the Securities Act;
or
[ ] such transfer is being effected pursuant to an exemption under the
Securities Act other than Rule 144A, Rule 144 or Rule 904 and the
Transferor further certifies that the Transfer complies with the
B-2-1
<PAGE> 93
transfer restrictions applicable to beneficial interests in Global Notes
and Definitive Senior Notes bearing the Private Placement Legend and the
requirements of the exemption claimed, which certification is supported by
(x) if such transfer is in respect of a principal amount of Senior Notes
at the time of Transfer of $100,000 or more, a certificate executed by the
Transferee in the form of EXHIBIT C to the Indenture, or (y) if such
Transfer is in respect of a principal amount of Senior Notes at the time
of transfer of less than $100,000, (1) a certificate executed in the form
of EXHIBIT C to the Indenture and (2) an Opinion of Counsel provided by
the Transferor or the Transferee (a copy of which the Transferor has
attached to this certification), to the effect that (1) such Transfer is
in compliance with the Securities Act and (2) such Transfer complies with
any applicable blue sky securities laws of any state of the United States;
or
[ ] such transfer is being effected pursuant to an effective registration
statement under the Securities Act;
or
[ ] such transfer is being effected pursuant to an exemption from the
registration requirements of the Securities Act other than Rule 144A or
Rule 144, and the Transferor hereby further certifies that the Senior
Notes are being transferred in compliance with the transfer restrictions
applicable to the Global Notes and in accordance with the requirements of
the exemption claimed, which certification is supported by an Opinion of
Counsel, provided by the transferor or the transferee (a copy of which the
Transferor has attached to this certification) in form reasonably
acceptable to the Company and to the Registrar, to the effect that such
transfer is in compliance with the Securities Act;
and such Senior Notes are being transferred in compliance with any applicable
blue sky securities laws of any state of the United States.
Upon giving effect to this request to exchange a beneficial interest
in Regulation S Global Notes for a beneficial interest in 144A Global Senior
Notes, the resulting beneficial interest shall be subject to the restrictions on
transfer applicable to 144A Global Notes pursuant to the Indenture and the
Securities Act.
This certificate and the statements contained herein are made for
your benefit and the benefit of the Company, the Subsidiary Guarantors and
Donaldson, Lufkin & Jenrette Securities Corporation, the initial purchaser of
such Senior Notes being transferred. Terms used in this certificate and not
otherwise defined in the Indenture have the meanings set forth in Regulation S
under the Securities Act.
[Insert Name of Transferor]
By:
----------------------
Name:
Title:
Dated:
cc: Continental Global Group, Inc.
Donaldson, Lufkin & Jenrette Securities Corporation
B-2-2
<PAGE> 94
EXHIBIT B-3
-------
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
OF DEFINITIVE SENIOR NOTES
(Pursuant to Section 2.06(b) of the Indenture)
Norwest Bank Minnesota, National Association
Corporate Trust
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479-0069
Re: 11% Senior Notes due 2007 of Continental Global Group, Inc.
Reference is hereby made to the Indenture dated as of April 1, 1997
(the "Indenture"), among Continental Global Group, Inc. (the "Company"),
Continental Conveyor & Equipment Company ("Continental"), Goodman Conveyor
Company, ("Goodman" and, together with Continental the "Subsidiary Guarantors")
and Norwest Bank Minnesota, National Association, as trustee (the "Trustee").
Capitalized terms used but not defined herein shall have the meanings given to
them in the Indenture.
This relates to $_____ principal amount of Senior Notes which are
evidenced by one or more Definitive Senior Notes in the name of _______ (the
"Transferor"). The Transferor has requested an exchange or transfer of such
Definitive Senior Note(s) in the form of an equal principal amount of Senior
Notes evidenced by one or more Definitive Senior Notes, to be delivered to the
Transferor or, in the case of a transfer of such Senior Notes, to such Person as
the Transferor instructs the Trustee.
In connection with such request and in respect of the Senior Notes
surrendered to the Trustee herewith for exchange (the "Surrendered Senior
Notes"), the Holder of such Surrendered Senior Notes hereby certifies that:
[CHECK ONE]
[ ] the Surrendered Senior Notes are being acquired for the Transferor's
own account, without transfer;
or
[ ] the Surrendered Senior Notes are being transferred to the Company;
or
[ ] the Surrendered Senior Notes are being transferred pursuant to and in
accordance with Rule 144A under the United States Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, the
Transferor hereby further certifies that the Surrendered Senior Notes
are being transferred to a Person that the Transferor reasonably
believes is purchasing the Surrendered Senior Notes for its own
account, or for one or more accounts with respect to which such
Person exercises sole investment discretion, and such Person and each
such account is a
B-3-1
<PAGE> 95
"qualified institutional buyer" within the meaning of Rule 144A, in
each case in a transaction meeting the requirements of Rule 144A;
or
[ ] the Surrendered Senior Notes are being transferred in a transaction
permitted by Rule 144 under the Securities Act;
or
[ ] the Surrendered Senior Notes are being transferred pursuant to an
exemption under the Securities Act other than Rule 144A, Rule 144 or
Rule 904 and the Transferor further certifies that the Transfer
complies with the transfer restrictions applicable to beneficial
interests in Global Notes and Definitive Senior Notes bearing the
Private Placement Legend and the requirements of the exemption
claimed, which certification is supported by (x) if such transfer is
in respect of a principal amount of Senior Notes at the time of
Transfer of $100,000 or more, a certificate executed by the
Transferee in the form of EXHIBIT C to the Indenture, or (y) if such
Transfer is in respect of a principal amount of Senior Notes at the
time of transfer of less than $100,000, (1) a certificate executed
in the form of EXHIBIT C to the Indenture and (2) an Opinion of
Counsel provided by the Transferor or the Transferee (a copy of
which the Transferor has attached to this certification), to the
effect that (1) such Transfer is in compliance with the Securities
Act and (2) such Transfer complies with any applicable blue sky
securities laws of any state of the United States;
or
[ ] the Surrendered Senior Notes are being transferred pursuant to an
effective registration statement under the Securities Act;
or
[ ] such transfer is being effected pursuant to an exemption from the
registration requirements of the Securities Act other than Rule 144A
or Rule 144, and the Transferor hereby further certifies that the
Senior Notes are being transferred in compliance with the transfer
restrictions applicable to the Global Notes and in accordance with
the requirements of the exemption claimed, which certification is
supported by an Opinion of Counsel, provided by the transferor or
the transferee (a copy of which the Transferor has attached to this
certification) in form reasonably acceptable to the Company and to
the Registrar, to the effect that such transfer is in compliance
with the Securities Act;
and the Surrendered Senior Notes are being transferred in compliance with any
applicable blue sky securities laws of any state of the United States.
This certificate and the statements contained herein are made for
your benefit and the benefit of the Company, the Subsidiary Guarantors and
Donaldson, Lufkin & Jenrette Securities Corporation, the initial purchaser of
such Senior Notes being transferred. Terms used in this certificate and not
otherwise defined in the Indenture have the meanings set forth in Regulation S
under the Securities Act.
[Insert Name of Transferor]
B-3-2
<PAGE> 96
By:
-----------------------
Name:
Title:
Dated:
cc: Continental Global Group, Inc.
Donaldson, Lufkin & Jenrette Securities Corporation
B-3-3
<PAGE> 97
EXHIBIT B-4
-------
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM 144A GLOBAL NOTE OR REGULATION S
PERMANENT GLOBAL NOTE
TO DEFINITIVE SENIOR NOTE
(Pursuant to Section 2.06(c) of the Indenture)
Norwest Bank Minnesota, National Association
Corporate Trust
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479-0069
Re: 11% Senior Notes due 2007 of Continental Global Group, Inc.
Reference is hereby made to the Indenture dated as of April 1, 1997
(the "Indenture"), among Continental Global Group, Inc. (the "Company"),
Continental Conveyor & Equipment Company ("Continental"), Goodman Conveyor
Company, ("Goodman" and, together with Continental the "Subsidiary Guarantors")
and Norwest Bank Minnesota, National Association, as trustee (the "Trustee").
Capitalized terms used but not defined herein shall have the meanings given to
them in the Indenture.
This letter relates to $__________ principal amount of Senior Notes
which are evidenced by a beneficial interest in one or more 144A Global Notes or
Regulation S Permanent Global Notes in the name of _____ (the "Transferor"). The
Transferor has requested an exchange or transfer of such beneficial interest in
the form of an equal principal amount of Senior Notes evidenced by one or more
Definitive Senior Notes, to be delivered to the Transferor or, in the case of a
transfer of such Senior Notes, to such Person as the Transferor instructs the
Trustee.
In connection with such request and in respect of the Senior Notes
surrendered to the Trustee herewith for exchange (the "Surrendered Senior
Notes"), the Holder of such Surrendered Senior Notes hereby certifies that:
[CHECK ONE]
[ ] the Surrendered Senior Notes are being transferred to the
beneficial owner of such Senior Notes;
or
[ ] the Surrendered Senior Notes are being transferred pursuant to and
in accordance with Rule 144A under the United States Securities Act
of 1933, as amended (the "Securities Act"), and, accordingly, the
Transferor hereby further certifies that the Surrendered Senior
Notes are being transferred to a Person that the Transferor
reasonably believes is purchasing the Surrendered Senior Notes for
its own account, or for one or more accounts with respect to which
such Person exercises sole investment discretion, and such Person
and each such account is a "qualified institutional buyer" within
the meaning of Rule 144A, in each case in a transaction meeting they
requirements of Rule 144A;
or
B-4-1
<PAGE> 98
[ ] the Surrendered Senior Notes are being transferred in a transaction
permitted by Rule 144 under the Securities Act;
or
[ ] the Surrendered Senior Notes are being transferred pursuant to an
effective registration statement under the Securities Act;
or
[ ] the Surrendered Senior Notes are being transferred pursuant to an
exemption under the Securities Act other than Rule 144A, Rule 144 or
Rule 904 and the Transferor further certifies that the Transfer
complies with the transfer restrictions applicable to beneficial
interests in Global Notes and Definitive Senior Notes bearing the
Private Placement Legend and the requirements of the exemption
claimed, which certification is supported by (x) if such transfer is
in respect of a principal amount of Senior Notes at the time of
Transfer of $100,000 or more, a certificate executed by the
Transferee in the form of EXHIBIT C to the Indenture, or (y) if such
Transfer is in respect of a principal amount of Senior Notes at the
time of transfer of less than $100,000, (1) a certificate executed
in the form of EXHIBIT C to the Indenture and (2) an Opinion of
Counsel provided by the Transferor or the Transferee (a copy of
which the Transferor has attached to this certification), to the
effect that (1) such Transfer is in compliance with the Securities
Act and (2) such Transfer complies with any applicable blue sky
securities laws of any state of the United States;
or
[ ] such transfer is being effected pursuant to an exemption from the
registration requirements of the Securities Act other than Rule 144A or
Rule 144, and the Transferor hereby further certifies that the Senior
Notes are being transferred in compliance with the transfer restrictions
applicable to the Global Notes and in accordance with the requirements of
the exemption claimed, which certification is supported by an Opinion of
Counsel, provided by the transferor or the transferee (a copy of which the
Transferor has attached to this certification) in form reasonably
acceptable to the Company and to the Registrar, to the effect that such
transfer is in compliance with the Securities Act;
and the Surrendered Senior Notes are being transferred in compliance with any
applicable blue sky securities laws of any state of the United States.
This certificate and the statements contained herein are made for
your benefit and the benefit of the Company, the Subsidiary Guarantors and
Donaldson, Lufkin & Jenrette Securities Corporation, the initial purchaser of
such Senior Notes being transferred. Terms used in this certificate and not
otherwise defined in the Indenture have the meanings set forth in Regulation S
under the Securities Act.
[Insert Name of Transferor]
By:
------------------------------
Name:
Title:
Dated:
cc:Continental Global Group, Inc.
Donaldson, Lufkin & Jenrette Securities Corporation
B-4-2
<PAGE> 99
EXHIBIT C
---------
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Norwest Bank Minnesota, National Association
Corporate Trust
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479-0069
Attention: Corporate Trust Administration
Reference is hereby made to the Indenture, dated as of April
1, 1997 (the "INDENTURE"), among Continental Global Group, Inc., as issuer,
Continental Conveyor & Equipment Company, Goodman Conveyer Company and Norwest
Bank Minnesota, National Association, as trustee. Capitalized terms used but not
defined herein shall have the meanings given to them in the Indenture.
In connection with our proposed purchase of $__________
aggregate principal amount of:
(a) [ ] Beneficial interests, or
(b) [ ] Definitive Senior Notes,
we confirm that:
1. We understand that any subsequent transfer of the Senior
Notes of any interest therein is subject to certain restrictions and conditions
set forth in the Indenture and the undersigned agrees to be bound by, and not to
resell, pledge or otherwise transfer the Senior Notes or any interest therein
except in compliance with, such restrictions and conditions and the Securities
Act of 1933, as amended (the "SECURITIES ACT").
2. We understand that the offer and sale of the Senior Notes
have not been registered under the Securities Act, and that the Senior Notes and
any interest therein may not be offered or sold except as permitted in the
following sentence. We agree, on our own behalf and on behalf of any accounts
for which we are acting as hereinafter stated, that if we should sell the Senior
Notes or any interest therein, (A) we will do so only (1)(a) to a person who the
Seller reasonably believes is a qualified institutional buyer (as defined in
Rule 144A under the Securities Act) in a transaction meeting the requirements of
144A, (b) in a transaction meeting the requirements of Rule 144 under the
Securities Act, (c) outside the United States to a foreign person in a
transaction meeting the requirements of Rule 904 of the Securities Act, (d) to
an institutional `Accredited Investor' (as defined in Rule 501(a)(1), (2), (3)
or (7) of the Securities Act (an `Institutional Accredited Investor')) that,
prior to such transfer, furnishes the Trustee a signed letter to the effect set
forth herein and, if such transfer is in respect of an aggregate principal
amount of Senior Notes less than $100,000, an opinion of counsel acceptable to
the Company
C-1
<PAGE> 100
that such transfer is in compliance with the Securities Act or (e) in accordance
with another exemption from the registration requirements of the Securities Act
(and based upon an opinion of counsel), (2) to the Company or any of its
subsidiaries or (3) pursuant to an effective registration statement and, in each
case, in accordance with any applicable securities laws of any State of the
United States or any other applicable jurisdiction and (B) we will, and each
subsequent holder will be required to, notify any purchaser from it of the
security evidenced hereby of the resale restrictions set forth in (A) above."
3. We understand that, on any proposed resale of the Senior
Notes or beneficial interests, we will be required to furnish to you and the
Company such certifications, legal opinions and other information as you and the
Company may reasonably require to confirm that the proposed sale complies with
the foregoing restrictions. We further understand that the Senior Notes
purchased by us will bear a legend to the foregoing effect.
4. We are an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in the Senior
Notes, and we and any accounts for which we are acting are each able to bear the
economic risk of our or its investment.
5. We are acquiring the Senior Notes or beneficial interests
therein purchased by us for our own account or for one or more accounts (each of
which is an institutional "accredited investor") as to each of which we exercise
sole investment discretion.
6. We are not acquiring the Senior Notes with a view to any
distribution thereof that would violate the Securities Act or the securities
laws of any State of the United States.
C-2
<PAGE> 101
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby.
------------------------------
[Insert Name of Accredited
Investor]
By:___________________________
Name:
Title:
Dated: ______________, ____
C-3
<PAGE> 102
EXHIBIT D
-------
SUBSIDIARY GUARANTEE
Subject to Section 10.06 of the Indenture, each Subsidiary Guarantor
hereby, jointly and severally, unconditionally guarantees to each Holder of a
Senior Note authenticated and delivered by the Trustee and to the Trustee and
its successors and assigns, irrespective of the validity and enforceability of
the Indenture, the Senior Notes and the Obligations of the Company under the
Senior Notes or under the Indenture, that: (a) the principal of, premium, if
any, interest and Liquidated Damages, if any, on the Senior Notes will be
promptly paid in full when due, subject to any applicable grace period, whether
at maturity, by acceleration, redemption or otherwise, and interest on overdue
principal, premium, if any, (to the extent permitted by law) interest on any
interest, if any, and Liquidated Damages, if any, on the Senior Notes and all
other payment Obligations of the Company to the Holders or the Trustee under the
Indenture or under the Senior Notes will be promptly paid in full and performed,
all in accordance with the terms thereof; and (b) in case of any extension of
time of payment or renewal of any Senior Notes or any of such other payment
Obligations, the same will be promptly paid in full when due or performed in
accordance with the terms of the extension or renewal, subject to any applicable
grace period, whether at stated maturity, by acceleration, redemption or
otherwise. Failing payment when so due of any amount so guaranteed or any
performance so guaranteed for whatever reason, the Subsidiary Guarantors will be
jointly and severally obligated to pay the same immediately.
The obligations of the Subsidiary Guarantor to the Holders and to the
Trustee pursuant to this Subsidiary Guarantee and the Indenture are expressly
set forth in Article 10 of the Indenture, and reference is hereby made to such
Indenture for the precise terms of this Subsidiary Guarantee. The terms of
Articles 10 of the Indenture are incorporated herein by reference. This
Subsidiary Guarantee is subject to release as and to the extent provided in
Section 10.04 of the Indenture.
This is a continuing Guarantee and shall remain in full force and
effect and shall be binding upon each Subsidiary Guarantor and its respective
successors and assigns to the extent set forth in the Indenture until full and
final payment of all of the Company's Obligations under the Senior Notes and the
Indenture and shall inure to the benefit of the successors and assigns of the
Trustee and the Holders and, in the event of any transfer or assignment of
rights by any Holder or the Trustee, the rights and privileges herein conferred
upon that party shall automatically extend to and be vested in such transferee
or assignee, all subject to the terms and conditions hereof. This is a
Subsidiary Guarantee of payment and not a guarantee of collection.
This Subsidiary Guarantee shall not be valid or obligatory for any
purpose until the certificate of authentication on the Senior Note upon which
this Subsidiary Guarantee is noted shall have been executed by the Trustee under
the Indenture by the manual signature of one of its authorized officers.
For purposes hereof, each Subsidiary Guarantor's liability shall be
limited to the lesser of (i) the aggregate amount of the Obligations of the
Company under the Senior Notes and the Indenture and (ii) the amount, if any,
which would not have (A) rendered such Subsidiary Guarantor "insolvent" (as such
term is defined in the Bankruptcy Law and in the Debtor and Creditor Law of the
State of New York) or (B) left such Subsidiary Guarantor with unreasonably small
capital at the time its Subsidiary Guarantee of the Senior Notes was entered
into; provided that, it will be a presumption in any lawsuit or other proceeding
in which a Subsidiary Guarantor is a party that the amount guaranteed pursuant
to the Subsidiary Guarantee is the amount set forth in clause (i) above unless
any creditor, or representative of creditors of such Subsidiary Guarantor, or
debtor in possession or trustee in bankruptcy of such
D-1
<PAGE> 103
Subsidiary Guarantor, otherwise proves in such a lawsuit that the aggregate
liability of the Subsidiary Guarantor is limited to the amount set forth in
clause (ii) above. The Indenture provides that, in making any determination as
to the solvency or sufficiency of capital of a Subsidiary Guarantor in
accordance with the previous sentence, the right of such Subsidiary Guarantors
to contribution from other Subsidiary Guarantors and any other rights such
Subsidiary Guarantors may have, contractual or otherwise, shall be taken into
account.
Capitalized terms used herein have the same meanings given in the
Indenture unless otherwise indicated.
Dated as of , 1997 CONTINENTAL CONVEYOR & EQUIPMENT COMPANY
-----------
By:
------------------------------------
Name:
Title:
Dated as of , 1997 GOODMAN CONVEYOR COMPANY
-----------
By:
------------------------------------
Name:
Title:
D-2
<PAGE> 104
Exhibit E
FORM OF SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
___________, 1997 between Subsidiary Guarantor (the "New Subsidiary Guarantor"),
a subsidiary of Continental Global Group, Inc., a Delaware corporation (the
"Company"), and Norwest Bank Minnesota, National Association, as trustee under
the indenture referred to below (the "Trustee"). Capitalized terms used herein
and not defined herein shall have the meaning ascribed to them in the Indenture
(as defined below).
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to the
Trustee an indenture (the "Indenture"), dated as of April 1, 1997, providing for
the issuance of an aggregate principal amount of $120,000,000 of 11% Senior
Notes due 2007 (the "Senior Notes");
WHEREAS, Section 10.05 of the Indenture provides that under certain
circumstances the Company may cause, and Section 10.03 of the Indenture provides
that under certain circumstances the Company must cause, certain of its
subsidiaries to execute and deliver to the Trustee a supplemental indenture
pursuant to which such subsidiaries shall unconditionally guarantee all of the
Company's Obligations under the Senior Notes pursuant to a Subsidiary Guarantee
on the terms and conditions set forth herein; and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the New
Subsidiary Guarantor and the Trustee mutually covenant and agree for the equal
and ratable benefit of the Holders of the Senior Notes as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.
2. AGREEMENT TO SUBSIDIARY GUARANTEE. The New Subsidiary Guarantor
hereby agrees, jointly and severally with all other Subsidiary Guarantors, to
guarantee the Company's Obligations under the Senior Notes and the Indenture on
the terms and subject to the conditions set forth in Article 10 of the Indenture
and to be bound by all other applicable provisions of the Indenture.
E-1
<PAGE> 105
3. NO RECOURSE AGAINST OTHERS. No past, present or future director,
officer, employee, incorporator, shareholder or agent of any Subsidiary
Guarantor, as such, shall have any liability for any obligations of the Company
or any Subsidiary Guarantor under the Senior Notes, any Subsidiary Guarantees,
the Indenture or this Supplemental Indenture or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each Holder by
accepting a Senior Note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Senior Notes.
4. NEW YORK LAW TO GOVERN. The internal law of the State of New York
shall govern and be used to construe this Supplemental Indenture.
5. COUNTERPARTS The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
6. EFFECT OF HEADINGS. The Section headings herein are for convenience
only and shall not affect the construction hereof.
7. THE TRUSTEE. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplemental
Indenture or for or in respect of the correctness of the recitals of fact
contained herein, all of which recitals are made solely by the New Subsidiary
Guarantor.
E-2
<PAGE> 106
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture
to be duly executed and attested, all as of the date first above written.
Dated: [NAME OF NEW SUBSIDIARY GUARANTOR]
----------------
By:
---------------------------------
Name:
Title:
Dated: NORWEST BANK MINNESOTA,
---------------- NATIONAL ASSOCIATION
as Trustee
By:
---------------------------------
Name:
Title:
E-3
<PAGE> 1
Exhibit 4.2
================================================================================
CONTINENTAL GLOBAL GROUP, INC.
----------------------------------------
$120,000,000
11% SERIES A SENIOR NOTES DUE 2007
----------------------------------------
-------------------
PURCHASE AGREEMENT
DATED AS OF MARCH 26, 1997
-------------------
DONALDSON, LUFKIN & JENRETTE
Securities Corporation
================================================================================
<PAGE> 2
March 26, 1997
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
277 Park Avenue
New York, New York 10172
Dear Sirs:
Continental Global Group, Inc., a Delaware corporation (the "COMPANY"),
proposes to issue and sell an aggregate of $120,000,000 in principal amount of
its 11% Series A Senior Notes due 2007 (the "Series A Senior Notes") to
Donaldson, Lufkin & Jenrette Securities Corporation (the "INITIAL PURCHASER"),
subject to the terms and conditions set forth herein. The Series A Senior Notes
will be issued pursuant to the provisions of an indenture (the "INDENTURE") to
be dated as of April 1, 1997 among the Company, the Subsidiary Guarantors (as
defined below) and Norwest Bank Minnesota, N.A., as trustee (the "TRUSTEE"). The
Series A Senior Notes and the Series B Senior Notes (as defined below) issuable
in exchange therefor are collectively referred to herein as the "SENIOR NOTES."
The Senior Notes will be, jointly and severally, guaranteed on a senior
unsecured basis by each of the entities listed on Schedule I hereto (each a
"SUBSIDIARY GUARANTOR" and together, the "SUBSIDIARY GUARANTORS"), being the
Company's only domestic subsidiaries as of the Closing Date (as defined below).
Capitalized terms used but not defined herein shall have the meanings given to
such terms in the Indenture.
The proceeds to the Company from the sale to the Initial Purchaser of
the Senior Notes (the "PROCEEDS") will be used (i) to refinance certain
indebtedness of the Company, including indebtedness incurred in connection with
the acquisition of an affiliated group of conveyor equipment companies in
Australia (the "BCE ACQUISITION") and outstanding indebtedness under the
Existing Credit Facility; (ii) to fund the Hewitt-Robins Acquisition (as defined
below); (iii) for general corporate purposes, including to fund future
acquisitions to the extent permitted by the Indenture; (iv) to pay fees and
expenses incurred in connection with the offering of the Series A Senior Notes;
and (v) to fund a dividend to the sole stockholder of the Company.
On or prior to the Closing Date, each of Continental Conveyor &
Equipment Company, a Delaware corporation ("CONTINENTAL"), and Goodman Conveyor
Company, a Delaware corporation will enter into a revolving credit facility (the
"REVOLVING CREDIT FACILITY") with Bank One Cleveland, N.A., as lender
thereunder. The Revolving Credit Facility will be secured by liens on
substantially all of the assets of the Company's subsidiaries (other than
Foreign Subsidiaries (as defined)) and will be guaranteed by the Company.
Concurrent with the closing of the sale of the Series A Senior Notes by
the Company to the Initial Purchaser pursuant to this Purchase Agreement (this
"AGREEMENT") Continental will acquire (the "HEWITT-ROBINS ACQUISITION")
substantially all of the assets of W. S. Tyler Incorporated's ("TYLER")
Hewitt-Robins Conveyor Components Division, a United States manufacturer of
idlers ("HEWITT-ROBINS"), pursuant to the Hewitt-Robins Purchase Agreement (the
"HEWITT-ROBINS ACQUISITION AGREEMENT".)
1
<PAGE> 3
1. ISSUANCE OF SECURITIES. The Series A Senior Notes will be offered
and sold to the Initial Purchaser pursuant to an exemption from the registration
requirements under the Securities Act of 1933, as amended (the "SECURITIES
ACT"). The Company has prepared a preliminary offering memorandum, dated March
11, 1997 (the "PRELIMINARY OFFERING MEMORANDUM"), and a final offering
memorandum, dated March 26, 1997 (the "OFFERING MEMORANDUM") relating to the
Series A Senior Notes.
Upon original issuance thereof, and until such time as the same is no
longer required under the applicable requirements of the Securities Act, the
Series A Senior Notes (and all securities issued in exchange therefor or in
substitution thereof) shall bear the following legend:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY
EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON
THE EXEMPTION PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE
SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT
(A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY
(1) (a) INSIDE THE UNITED STATES TO A PERSON WHO THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144
UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN
PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE
SECURITIES ACT, (d) TO AN INSTITUTIONAL `ACCREDITED INVESTOR' (AS
DEFINED IN RULE 501(a)(1), (2), (3) or (7) OF THE SECURITIES ACT (AN
"INSTITUTIONAL ACCREDITED INVESTOR") THAT, PRIOR TO SUCH TRANSFER,
FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS (THE FORM OF WHICH CAN BE OBTAINED FROM
THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE
PRINCIPAL AMOUNT OF SENIOR NOTES LESS THAN $100,000, AN OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE
WITH THE SECURITIES ACT OR (e) IN ACCORDANCE WITH ANOTHER EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED
UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE
COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN
EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B)
THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (A) ABOVE."
2. AGREEMENTS TO SELL AND PURCHASE. On the basis of the representations
and warranties contained in, and subject to the terms and conditions of, this
Agreement, the Company agrees to issue and sell the Series A Senior Notes to the
Initial Purchaser, and the Initial Purchaser agrees to purchase all of the
Series A Senior Notes from the Company, at a price equal to 97% of the principal
amount of the Series A Senior Notes (the "PURCHASE PRICE").
2
<PAGE> 4
3. TERMS OF OFFERING. The Initial Purchaser has advised the Company
that the Initial Purchaser will make offers (the "EXEMPT RESALES") of the Series
A Senior Notes purchased by the Initial Purchaser hereunder on the terms set
forth in the Offering Memorandum, as amended or supplemented, solely to (i)
persons whom the Initial Purchaser reasonably believes to be "qualified
institutional buyers" as defined in Rule 144A under the Securities Act ("QIBs"),
(ii) a limited number of other institutional "accredited investors," as defined
in Rule 501(a) (1), (2), (3) or (7) under the Securities Act, that make certain
representations and agreements to the Company (each, an "ACCREDITED
INSTITUTION") and (iii) to non-U.S. persons outside the United States in
reliance upon Regulation S under the Securities Act (each, a "REGULATION S
PURCHASER") (such persons specified in clauses (i), (ii) and (iii) being
referred to herein as the "ELIGIBLE PURCHASERS"). The Initial Purchaser will
offer the Series A Senior Notes to Eligible Purchasers initially at a price
equal to 100% of the principal amount thereof. Such price may be changed at any
time without notice.
Holders (including subsequent transferees) of the Series A Senior Notes
will have the registration rights set forth in the registration rights agreement
(the "REGISTRATION RIGHTS AGREEMENT"), to be dated the Closing Date, in the form
of Exhibit A hereto, for so long as such Series A Senior Notes constitute
"TRANSFER RESTRICTED SECURITIES" (as defined in the Registration Rights
Agreement). Pursuant to the Registration Rights Agreement, the Company and the
Subsidiary Guarantors will agree to file with the Securities and Exchange
Commission (the "COMMISSION") under the circumstances set forth therein, (i) a
registration statement under the Securities Act (the "EXCHANGE OFFER
REGISTRATION STATEMENT") relating to (A) the Company's 11% Series B Senior Notes
due 2007 (the "SERIES B SENIOR NOTES") to be offered in exchange for the Series
A Senior Notes (such offer to exchange being referred to as the "REGISTERED
EXCHANGE OFFER") and/or (ii) a shelf registration statement pursuant to Rule 415
under the Securities Act (the "SHELF REGISTRATION STATEMENT" and, together with
the Exchange Offer Registration Statement, the "REGISTRATION STATEMENTS")
relating to the resale by certain holders of the Series A Senior Notes, and to
use their reasonable best efforts to cause such Registration Statements to be
declared effective and consummate the Registered Exchange Offer. This Agreement,
the Indenture, the Senior Notes, the Subsidiary Guarantees and the Registration
Rights Agreement are hereinafter referred to collectively as the "OPERATIVE
DOCUMENTS."
4. DELIVERY AND PAYMENT. Delivery to the Initial Purchaser by the
Company of, and payment by the Initial Purchaser for, the Series A Senior Notes
shall be made at 10:00 A.M., New York City time, on April 1, 1997 (the "CLOSING
DATE") (or such other date as the Company and the Initial Purchaser may agree),
at the offices of Latham & Watkins, 885 Third Avenue, New York, New York 10022.
One or more Series A Senior Notes in definitive form (collectively, the
"DEFINITIVE NOTES"), registered in the name of Cede & Co., as nominee of the
Depository Trust Company ("DTC"), or such other names as the Initial Purchaser
may request upon at least one business days' notice to the Company, having an
aggregate principal amount corresponding to the aggregate principal amount of
Series A Senior Notes sold pursuant to Exempt Resales to Eligible Purchasers,
shall be delivered by the Company to the Initial Purchaser, against payment by
the Initial Purchaser of the purchase price thereof by wire transfer of
immediately available Federal funds to the order of the Company or as the
Company may direct. The Definitive Notes shall be made available to the Initial
Purchaser for inspection not later than 9:30 a.m. on the business day
immediately preceding the Closing Date.
3
<PAGE> 5
5. AGREEMENTS OF THE COMPANY AND THE SUBSIDIARY GUARANTORS. Each of the
Company and the Subsidiary Guarantors hereby agrees with the Initial Purchaser
as follows:
(a) To advise the Initial Purchaser promptly and, if requested
by the Initial Purchaser, to confirm such advice in writing, (i) of
receipt of any notification with respect to the issuance by any state
securities commission of any stop order suspending the qualification or
exemption from qualification of any of the Series A Senior Notes or the
Subsidiary Guarantees for offering or sale in any jurisdiction
designated by the Initial Purchaser pursuant to Section 5(f) hereof, or
the initiation of any proceeding for such purpose by any state
securities commission or other regulatory authority and (ii) of the
happening of any event that makes any statement of a material fact made
in the Preliminary Offering Memorandum or the Offering Memorandum (or
any amendment or supplement thereto) untrue or that requires the making
of any additions to or changes in the Preliminary Offering Memorandum
or the Offering Memorandum (or any amendment or supplement thereto) in
order to make the statements therein, in the light of the circumstances
under which they are made, not misleading. The Company shall use its
reasonable best efforts to prevent the issuance of any stop order or
order suspending the qualification or exemption from qualification of
any Series A Senior Notes under any state securities or Blue Sky laws,
and, if at any time any state securities commission or other regulatory
authority shall issue any stop order or order suspending the
qualification or exemption from qualification of any Series A Senior
Notes under any state securities or Blue Sky laws, the Company shall
use its reasonable best efforts to obtain the withdrawal or lifting of
such order at the earliest possible time.
(b) Subject to paragraph (e) below, to furnish to the Initial
Purchaser and those persons identified by the Initial Purchaser to the
Company, without charge, as many copies of the Preliminary Offering
Memorandum and the Offering Memorandum, and any amendments or
supplements thereto, as the Initial Purchaser may reasonably request.
The Company consents to the lawful use of the Preliminary Offering
Memorandum and the Offering Memorandum, and any amendments or
supplements thereto, by the Initial Purchaser in connection with Exempt
Resales.
(c) Not to amend or supplement the Offering Memorandum,
whether before or after the Closing Date, unless (i) the Initial
Purchaser has been previously advised thereof and (ii) the Initial
Purchaser has not reasonably objected thereto (unless in the reasonable
judgment of counsel to the Company such amendment or supplement is
necessary to make the statements made in the Offering Memorandum not
misleading); and to prepare, promptly upon the Initial Purchaser's
request, any amendment or supplement to the Offering Memorandum that
may be reasonably deemed to be necessary or advisable in connection
with Exempt Resales (except to the extent any such amendment or
supplement requested would, in the judgment of counsel to the Company,
render the statements made in the Offering Memorandum, as proposed to
be amended or supplemented, misleading).
(d) Subject to paragraph (e) below, if, after the date hereof
and prior to the completion of Exempt Resales of the Series A Senior
Notes by the Initial Purchaser, any event shall occur as a result of
which, in the reasonable judgment of the Company or the Initial
Purchaser, it becomes necessary to amend or supplement the Offering
Memorandum to comply with any law, statute, rule or regulation or to
make the statements therein, in the light of the circumstances at the
time that the Offering Memorandum is delivered to an Eligible Purchaser
which is a prospective purchaser, not misleading, to promptly prepare
an appropriate amendment or supplement to the Offering Memorandum so
that the statements in the Offering Memorandum,
4
<PAGE> 6
as so amended or supplemented, will comply with all applicable laws,
statutes, rules and regulations and will not, in the light of the
circumstances at the time it is so delivered, be misleading.
(e) Prior to the consummation of the Registered Exchange Offer
or the effectiveness of an applicable Shelf Registration Statement if,
in the reasonable judgment of the Initial Purchaser, the Initial
Purchaser or any of its affiliates (as such term is defined in the
rules and regulations under the Securities Act) are required to deliver
a prospectus or an offering memorandum in connection with sales of, or
market-making activities with respect to, the Senior Notes, (A) to
periodically amend or supplement the Offering Memorandum so that the
information contained in the Offering Memorandum complies with the
requirements of Rule 144A of the Securities Act, (B) to amend or
supplement the Offering Memorandum when necessary to reflect any
material changes in the information provided therein so that the
Offering Memorandum will not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances existing as of the
date the Offering Memorandum is so delivered, not misleading and (C) to
provide the Initial Purchaser with copies of each such amended or
supplemented Offering Memorandum as the Initial Purchaser may
reasonably request.
Subject to the terms of the Registration Rights Agreement,
following the consummation of the Registered Exchange Offer or the
effectiveness of an applicable Shelf Registration Statement and for so
long as the Senior Notes are outstanding, if, in the reasonable
judgment of the Initial Purchaser, the Initial Purchaser or any of its
affiliates (as such term is defined in the rules and regulations under
the Securities Act) are required to deliver a prospectus in connection
with sales of, or market-making activities with respect to, such
securities, (A) to periodically amend the applicable Registration
Statement so that the information contained therein complies with the
requirements of Section 10(a) of the Securities Act, (B) to amend the
applicable Registration Statement or supplement the related prospectus
or the documents incorporated therein when necessary to reflect any
material changes in the information provided therein so that the
Registration Statement and the prospectus will not contain any untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in light of the
circumstances existing as of the date the prospectus is so delivered,
not misleading and (C) to provide the Initial Purchaser with copies of
each amendment or supplement filed and such other documents as the
Initial Purchaser may reasonably request.
The Company hereby expressly acknowledges that the
indemnification and contribution provisions of Section 8 hereof are
specifically applicable and relate to each Offering Memorandum,
Registration Statement, prospectus, amendment or supplement referred to
in this Section 5(e).
(f) To (i) cooperate with the Initial Purchaser and counsel
for the Initial Purchaser in connection with the registration or
qualification of the Series A Senior Notes and the Subsidiary
Guarantees for offer and sale by the Initial Purchaser under the state
securities or Blue Sky laws of such jurisdictions as the Initial
Purchaser may reasonably request, (ii) continue such qualification in
effect so long as required for Exempt Resales of the Series A Senior
Notes and the Subsidiary Guarantees and (iii) file such consents to
service of process or other documents as may be necessary in order to
effect such qualification; provided that in no event shall the Company
or any Subsidiary Guarantor be obligated to qualify to do business in
any jurisdiction where it is not now so qualified, or take any action
which would subject it to general consent to
5
<PAGE> 7
service of process or taxation, other than as to matters and
transactions relating to the Preliminary Offering Memorandum and the
Offering Memorandum or Exempt Resales, in any jurisdiction where it is
not now so subject.
(g) From and after the effective date of the Exchange Offer
Registration Statement or the applicable Shelf Registration Statement
and as long as any of the Senior Notes are outstanding, to file
reports pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934, as amended (the "EXCHANGE ACT"), and, during the period of
three years following the date of this Agreement, to deliver without
charge to the Initial Purchaser, promptly upon their becoming
available, (i) all reports or other publicly available information
that the Company shall mail or otherwise make available to its
stockholders and (ii) all reports, financial statements and proxy or
information statements filed by the Company or the Subsidiary
Guarantors with the Commission or any national securities exchange.
(h) To use the Proceeds from the sale of the Series A Senior
Notes in the manner specified in the Offering Memorandum (and any
amendments or supplements thereto) under the caption "Use of
Proceeds."
(i) Not to voluntarily claim, and to resist actively any
attempts to claim, the benefit of any usury laws against the holders
of any Senior Notes.
(j) To pay and be responsible for all costs, expenses, fees
and taxes in connection with, incident to or in respect of:
(1) the preparation, printing, filing and
distribution of the Preliminary Offering Memorandum and the
Offering Memorandum (including, without limitation,
financial statements and exhibits) and all amendments and
supplements to any of them;
(2) the preparation, printing and delivery of the
Operative Documents, all preliminary and final Blue Sky
memoranda and all other agreements, memoranda,
correspondence and other documents printed and delivered in
connection herewith and with the Exempt Resales (including
in each case any disbursements of counsel to the Initial
Purchaser relating to such printing and delivery; provided
that such fees and disbursements, together with any
disbursements of counsel to the Initial Purchaser reimbursed
pursuant to clause (4) below, shall not exceed $20,000);
(3) the issuance, transfer and delivery by the
Company and the Subsidiary Guarantors of the Senior Notes
and the Subsidiary Guarantees to the Initial Purchaser;
(4) the registration or qualification of the
Senior Notes and Subsidiary Guarantees for offer and sale
under the securities or Blue Sky laws of the jurisdictions
referred to in Section 5(f) hereof (including in each case,
the reasonable fees and disbursements of counsel to the
Initial Purchaser relating to such registration or
qualification and memoranda relating thereto; provided that
such fees and disbursements, together with any disbursements
of counsel to the Initial Purchaser reimbursed pursuant to
clause (2) above, shall not exceed $20,000);
(5) furnishing such copies of the Preliminary
Offering Memorandum and the Offering Memorandum and all
amendments and supplements thereto as may be
6
<PAGE> 8
reasonably requested for use in connection with the Exempt
Resales;
(6) the preparation of certificates for the Senior
Notes (including, without limitation, printing and engraving
thereof);
(7) the fees, disbursements and expenses of the
Company's counsel and accountants;
(8) the rating of the Senior Notes by investment
rating agencies, if any;
(9) all expenses and listing fees in connection
with the application for quotation of the Series A Senior
Notes in the National Association of Securities Dealers,
Inc. ("NASD") Automated Quotation System - PORTAL
("PORTAL");
(10) all fees and expenses of the Company in
connection with approval of the Senior Notes by DTC for
"book-entry" transfer;
(11) the fees and expenses of the Trustee and the
Trustee's counsel in connection with the Indenture and the
Senior Notes;
(12) the performance by the Company of its other
obligations under this Agreement and the other Operative
Documents; and
(13) all out-of-pocket expenses incurred by the
Initial Purchaser (including reasonable fees and expenses of
counsel to the Initial Purchaser); provided that such fees
and expenses (which shall not include any fees and expenses
payable pursuant to clauses (2) or (4) of this Section 5(j))
shall not exceed $350,000.
(k) If this Agreement shall be terminated pursuant to any of
the provisions hereof (other than a default by the Initial Purchaser)
or if for any reason the Company and the Subsidiary Guarantors shall
be unable or unwilling to perform their obligations hereunder, the
Company and the Subsidiary Guarantors shall, except as otherwise
agreed by the parties hereto, reimburse the Initial Purchaser for the
fees and expenses to be paid or reimbursed pursuant to Section 5(j)
above, and reimburse the Initial Purchaser for all out-of-pocket
expenses (including the reasonable fees and expenses of counsel to the
Initial Purchaser) reasonably incurred by the Initial Purchaser in
connection with the transactions contemplated by this Agreement;
provided that such fees and expenses (which shall not include any fees
and expenses payable pursuant to clauses (2) or (4) of this Section
5(j) above) shall not exceed $350,000.
(l) During the period set forth in 5(o) hereof, to furnish
to the Initial Purchaser, as soon as they have been prepared by the
Company, a copy of any consolidated financial statements of the
Company for any period subsequent to the period covered by the
financial statements appearing in the Offering Memorandum.
(m) Not to distribute prior to the Closing Date any offering
material in connection with the offering and sale of the Series A
Senior Notes other than the Preliminary Offering Memorandum and the
Offering Memorandum.
(n) Not to sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect
7
<PAGE> 9
of any security (as defined in the Securities Act) that would be
integrated with the sale of the Series A Senior Notes in a manner that
would require the registration under the Securities Act of the sale to
the Initial Purchaser or the Eligible Purchasers of Series A Senior
Notes.
(o) For so long as any of the Senior Notes remain outstanding
and during any period in which the Company is not subject to Section 13
or 15(d) of the Exchange Act, to make available to any holder of Series
A Senior Notes in connection with any sale thereof and any prospective
purchaser of such Series A Senior Notes from such holder, the
information (the "RULE 144A INFORMATION") required by Rule 144A(d)(4)
under the Securities Act.
(p) To cause the Registered Exchange Offer to be made on the
appropriate form to permit registered Series B Senior Notes to be
offered in exchange for the Series A Senior Notes and to comply in all
material respects with all applicable federal and state securities laws
in connection with the Registered Exchange Offer.
(q) To comply with its agreements set forth in the
Registration Rights Agreement and all agreements set forth in the
representation letters of the Company to DTC relating to the approval
of the Senior Notes by DTC for "book-entry" transfer.
(r) To use its reasonable best efforts to effect the inclusion
of the Series A Senior Notes in PORTAL and to obtain approval of the
Senior Notes by DTC for "book-entry" transfer.
(s) Not to, and to cause its affiliates not to, offer, sell,
contract to sell or grant any option to purchase or otherwise transfer
or dispose of any Senior Notes or any other debt security issued by the
Company or any of its subsidiaries (other than a private loan, credit
or financing agreement with a bank or similar financing institution) or
any security convertible into or exchangeable or exercisable for any
such debt security, for a period of 180 days after the Closing Date,
without the Initial Purchaser's prior written consent, except for (i)
sales or transfers between affiliates of the Company and the Company or
any of its subsidiaries and (ii) the issue and exchange of Series B
Senior Notes for Series A Senior Notes in the Registered Exchange
Offer.
(t) To do and perform all things required or necessary to be
done and performed under this Agreement by the Company that are within
its control prior to the Closing Date and to satisfy all conditions on
its part precedent to the delivery of the Series A Senior Notes that
are within its control.
6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SUBSIDIARY
GUARANTORS. Each of the Company, and as regards itself only, each of the
Subsidiary Guarantors, represents and warrants to the Initial Purchaser that:
(a) The Preliminary Offering Memorandum and the Offering
Memorandum have been prepared in connection with the Exempt Resales.
The Preliminary Offering Memorandum as of its date did not, and the
Offering Memorandum as of its date does not and as of the Closing Date
will not, and any amendment or supplement thereto will not, contain any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that
the representations and warranties contained in this paragraph (a)
shall not apply to statements or
8
<PAGE> 10
omissions in the Preliminary Offering Memorandum or the Offering
Memorandum (or any amendment or supplement thereto) made in reliance
upon or in conformity with information relating to the Initial
Purchaser furnished to the Company in writing by the Initial Purchaser
expressly for use therein. The Company and the Subsidiary Guarantors
acknowledge for all purposes under this Agreement that the statements
set forth in the fourth paragraph on the cover page and under the
caption "Plan of Distribution" in the Offering Memorandum constitute
the only written information furnished to the Company by the Initial
Purchaser expressly for use in the Preliminary Offering Memorandum and
the Offering Memorandum (or any amendment or supplement thereto). The
Company has no knowledge of, and has not received any notifications
with respect, to the issuance of any stop order preventing the use of
any of the Preliminary Offering Memorandum or the Offering Memorandum,
or any amendment or supplement thereto, or any order asserting that any
of the transactions contemplated by this Agreement are subject to the
registration requirements of the Securities Act.
(b) The Company and each of its direct and indirect
subsidiaries (1) is and, immediately after giving effect to the
Hewitt-Robins Acquisition, will be, duly organized, validly existing
and in good standing under the laws of its respective jurisdiction of
incorporation, (2) has, and immediately after giving effect to the
Hewitt-Robins Acquisition, will have, requisite corporate power and
authority to carry on its respective business as it is currently being
conducted and to own, lease and operate its respective properties, and
(3) is and, immediately after giving effect to the Hewitt-Robins
Acquisition, will be, duly qualified and in good standing as a foreign
corporation registered to do business in each jurisdiction in which the
nature of its business or its ownership or leasing of property requires
such qualification, except where the failure to be so qualified would
not, singly or in the aggregate, have a Material Adverse Effect. As
used herein, "MATERIAL ADVERSE EFFECT" shall mean any effect or group
of related or unrelated effects that (i) would be reasonably expected,
individually or in the aggregate, to result in a material adverse
effect on the assets, properties, business, results of operations,
condition (financial or otherwise) or prospects of the Company and its
subsidiaries, taken as a whole, immediately after giving effect to the
Hewitt-Robins Acquisition, or (ii) would interfere with, adversely
affect or question the validity of (A) the execution, delivery and
performance of any of the Operative Documents, the issuance of the
Senior Notes and the Subsidiary Guarantees or the consummation of this
Agreement and the transactions contemplated hereby, (B) the performance
by the Company and each of its subsidiaries of its respective
agreements and obligations under this Agreement or the consummation of
the transactions contemplated thereby or (C) the consummation of the
Hewitt-Robins Acquisition.
(c) All of the outstanding shares of capital stock of or other
ownership interests in the Company and each of its subsidiaries has
been duly authorized and validly issued, is fully paid and
nonassessable; the outstanding shares of capital stock of or other
ownership interests in each of the Company's subsidiaries have not been
issued in violation of any preemptive or similar rights and are owned
free and clear of any security interest, mortgage, pledge, claim, lien,
limitation on voting rights or encumbrance (each a "Lien") except for
Liens granted pursuant to the Revolving Credit Facility and the
Australian Revolving Credit Facility. There are no outstanding
subscriptions, rights, warrants or options to acquire, or instruments
convertible into or exchangeable for, any shares of capital stock or
other equity interest in the Company or any of its subsidiaries.
(d) The Company has all necessary corporate power and
authority to execute, deliver
9
<PAGE> 11
and perform its obligations under each of the Operative Documents and
the Revolving Credit Facility and to consummate the transactions
contemplated by the Operative Documents and the Revolving Credit
Facility and to issue, sell and deliver the Series A Senior Notes
pursuant to this Agreement. Each of the Subsidiary Guarantors has all
necessary corporate power and authority to execute, deliver and perform
its obligations under the Operative Documents and the Revolving Credit
Facility and to consummate the transactions contemplated by the
Operative Documents and Revolving Credit Facility and to issue and
deliver the Subsidiary Guarantees pursuant to this Agreement.
Continental has all necessary corporate power and authority to execute,
deliver and perform its obligations under the Hewitt-Robins Acquisition
Agreement. On December 31, 1996, as adjusted to reflect the Offering
and the application of the net proceeds therefrom, the BCE Acquisition
and the Hewitt-Robins Acquisition, the Company would have had an
authorized and outstanding consolidated cash and capitalization as set
forth in the Offering Memorandum under the caption "Capitalization."
(e) The Company has no direct or indirect subsidiaries,
immediately after giving effect to the Hewitt-Robins Acquisition, other
than those listed on Schedule II hereto.
(f) None of the Company or any of its subsidiaries is (1) in
violation of its respective charter or bylaws or (2) in default in the
performance of any term, provision, obligation, agreement or condition
contained in any bond, debenture, note or any other evidence of
indebtedness or any indenture, mortgage, deed of trust or other
contract, lease or other instrument to which the Company or any of its
subsidiaries is a party or to which any of them or their respective
properties may be subject or bound, except, in the cause of clause (2)
above, for such defaults as would not, singly or in the aggregate, have
a Material Adverse Effect.
(g) None of (A) the execution, delivery or performance by the
Company and the Subsidiary Guarantors of this Agreement, the Revolving
Credit Facility and the other Operative Documents, (B) the performance
by Continental of the Hewitt-Robins Acquisition Agreement and
consummation of the Hewitt-Robins Acquisition, (C) the issuance and
sale of the Series A Senior Notes by the Company, (D) the issuance of
the Subsidiary Guarantees by the Subsidiary Guarantors and (E) the
consummation by the Company and the Subsidiary Guarantors of the
transactions described in the Offering Memorandum under the caption
"Use of Proceeds," will conflict with or constitute a breach of any of
the terms or provisions of, or a default under, or result in the
imposition of a Lien on any properties of the Company or any of its
subsidiaries, or an acceleration of indebtedness pursuant to, (1) the
charter or bylaws of the Company or any of its subsidiaries, (2) any
bond, debenture, note, or any other evidence of indebtedness, or any
indenture, mortgage, deed of trust or other contract, lease or other
instrument to which the Company or any of its subsidiaries is a party
or by which any of them or their property is bound, or (3) any law or
administrative regulation applicable to the Company, any of its
subsidiaries or any of their assets or properties, or any judgment,
order or decree of any court or governmental agency or authority
entered in any proceeding to which the Company or any of its
subsidiaries was or is now a party or to which any of them or their
respective properties may be subject or bound. No consent, approval,
authorization or order of, or filing or registration with, any
regulatory body, administrative agency, or other governmental agency
(except as securities or Blue Sky laws of the various states may
require) that has not been made or obtained is required for (1) the
execution, delivery and performance of the Operative Documents, the
Revolving Credit Facility and the valid issuance and sale of the Series
A Senior Notes and the Subsidiary Guarantees or (2) the performance by
the Company of the Hewitt-Robins Acquisition Agreement and all
documents or agreements related thereto and the transactions
contemplated hereby and
10
<PAGE> 12
thereby, except (i) such consents, approvals, authorizations or orders
that are not specifically required pursuant to the terms of the
Hewitt-Robins Acquisition Agreement or (ii) where the failure to obtain
such consents, approvals, authorizations or orders would not have a
Material Adverse Effect. No consents or waivers from any person are
required to consummate the transactions contemplated by the Operative
Documents or the Offering Memorandum, other than such consents and
waivers as have been or will be obtained prior to the Closing Date or,
in the case of the Registration Rights Agreement and the transactions
contemplated thereby, will be obtained and made under the Securities
Act, the Trust Indenture Act of 1939, as amended (the "TIA"), and state
securities or Blue Sky laws and regulations.
(h) This Agreement has been duly authorized, executed and
delivered by the Company and the Subsidiary Guarantors.
(i) The Indenture has been duly authorized by the Company and
the Subsidiary Guarantors and when executed and delivered by the
Company (assuming the due execution and delivery thereof by the
Trustee) will be a legally valid and binding obligation of the Company
and the Subsidiary Guarantors, enforceable against the Company and the
Subsidiary Guarantors in accordance with its terms, except as the
enforceability thereof may be (i) subject to applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws in effect which
affect the enforcement of creditors rights generally and (ii) limited
by general principles of equity (whether considered in a proceeding at
law or in equity). The Offering Memorandum contains an accurate
summary, in all material respects, of the terms of the Indenture.
(j) The Series A Senior Notes have been duly authorized by the
Company and, when issued and authenticated in accordance with the terms
of the Indenture and delivered to and paid for by the Initial Purchaser
in accordance with the terms of this Agreement, will be the legally
valid and binding obligations of the Company, enforceable against the
Company in accordance with their terms, except as the enforceability
thereof may be (i) subject to applicable bankruptcy, insolvency,
moratorium, reorganization or similar laws in effect which affect the
enforcement of creditors rights generally and (ii) limited by general
principles of equity (whether considered in a proceeding at law or in
equity). The Offering Memorandum contains an accurate summary, in all
material respects, of the terms of the Series A Senior Notes.
(k) The Series B Senior Notes have been duly authorized by the
Company and, when issued and authenticated in accordance with the terms
of the Registered Exchange Offer and the Indenture, will be the legally
valid and binding obligations of the Company, enforceable against the
Company in accordance with their terms, except as the enforceability
thereof may be (i) subject to applicable bankruptcy, insolvency,
moratorium, reorganization or similar laws in effect which affect the
enforcement of creditors rights generally and (ii) limited by general
principles of equity (whether considered in a proceeding at law or in
equity). The Offering Memorandum contains an accurate summary, in all
material respects, of the terms of the Series B Senior Notes.
(l) The Subsidiary Guarantees to be endorsed on the Series A
Senior Notes by the Subsidiary Guarantors have been duly authorized by
the Subsidiary Guarantors and when executed and delivered by the
Subsidiary Guarantors and when the Series A Senior Notes are issued and
authenticated in accordance with the Indenture and delivered to and
paid for by the Initial Purchaser in accordance with the terms of this
Agreement, the Subsidiary Guarantees will be the legally valid and
binding obligations of the Subsidiary Guarantors, enforceable against
the Subsidiary Guarantors in accordance with their terms and entitled
to the benefits of the Indenture,
11
<PAGE> 13
except as the enforceability thereof may be (i) subject to applicable
bankruptcy, insolvency, moratorium, reorganization or similar laws in
effect which affect the enforcement of creditors rights generally and
(ii) limited by general principles of equity (whether considered in a
proceeding at law or in equity). The Offering Memorandum contains an
accurate summary, in all material respects, of the terms of the
Subsidiary Guarantees to be endorsed on the Series A Senior Notes.
(m) The Subsidiary Guarantees to be endorsed on the Series B
Senior Notes by the Subsidiary Guarantors have been duly authorized and
when executed and delivered by the Subsidiary Guarantors and when the
Series B Senior Notes have been issued and authenticated in accordance
with the terms of the Registered Exchange Offer and the Indenture, the
Subsidiary Guarantees to be endorsed on the Series B Senior Notes will
be the legally valid and binding obligations of the Subsidiary
Guarantors, enforceable against the Subsidiary Guarantors in accordance
with their terms, except as the enforceability thereof may be (i)
subject to applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws in effect which affect the enforcement
of creditors rights generally and (ii) limited by general principles of
equity (whether considered in a proceeding at law or in equity). The
Offering Memorandum contains an accurate summary, in all material
respects, of the terms of the Subsidiary Guarantees to be endorsed on
the Series B Senior Notes.
(n) The Registration Rights Agreement has been duly authorized
by the Company and the Subsidiary Guarantors and when executed and
delivered by the Company and the Subsidiary Guarantors (assuming the
due execution and delivery thereof by the Initial Purchaser), will be a
legally valid and binding obligation of the Company and the Subsidiary
Guarantors, enforceable against the Company and the Subsidiary
Guarantors in accordance with its terms, except as the enforceability
thereof may be (i) subject to applicable bankruptcy, insolvency,
moratorium, reorganization or similar laws in effect which affect the
enforcement of creditors rights generally, (ii) limited by general
principles of equity (whether considered in a proceeding at law or in
equity) and (iii) limited by securities laws prohibiting or limiting
the availability of, and public policy against, indemnification or
contribution. The Offering Memorandum contains an accurate summary, in
all material respects, of the principal terms of Registration Rights
Agreement.
(o) The Revolving Credit Facility has been duly authorized and
when executed and delivered by the Company and the Subsidiary
Guarantors and (assuming the due execution and delivery thereof by the
other parties thereto) will be a legally valid and binding obligation
of the Company and the Subsidiary Guarantors, enforceable against the
Company and the Subsidiary Guarantors in accordance with its terms,
except as the enforceability thereof may be (i) subject to applicable
bankruptcy, insolvency, moratorium, reorganization or similar laws in
effect which affect the enforcement of creditors rights generally and
(ii) limited by general principles of equity (whether considered in a
proceeding at law or in equity). The Offering Memorandum contains an
accurate summary, in all material respects, of the principal terms of
the Revolving Credit Facility.
(p) The Tax Payment Agreement has been duly authorized and
when executed and delivered by the Company and its subsidiaries and
will be a legally valid and binding obligation of the Company and its
subsidiaries, enforceable against the Company and its subsidiaries in
accordance with its terms, except as the enforceability thereof may be
(i) subject to applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws in effect which affect the
12
<PAGE> 14
enforcement of creditors rights generally and (ii) limited by general
principles of equity (whether considered in a proceeding at law or in
equity). The Offering Memorandum contains an accurate summary, in all
material respects, of the principal terms of the Tax Payment Agreement.
(q) The Management Agreement has been duly authorized and when
executed and delivered by the Company will be a legally valid and
binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as the enforceability thereof may be
(i) subject to applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws in effect which affect the enforcement
of creditors rights generally, (ii) limited by general principles of
equity (whether considered in a proceeding at law or in equity) and
(iii) limited by securities laws prohibiting or limiting the
availability of, and public policy against, indemnification or
contribution. The Offering Memorandum contains an accurate summary, in
all material respects, of the principal terms of the Management
Agreement.
(r) The Hewitt-Robins Acquisition Agreement has been duly
authorized, executed and delivered by Continental and is a legally
valid and binding obligation of Continental, enforceable against
Continental in accordance with its terms, except as the enforceability
thereof may be (i) subject to applicable bankruptcy, insolvency,
moratorium, reorganization or similar laws in effect which affect the
enforcement of creditors rights generally and (ii) limited by general
principles of equity (whether considered in a proceeding at law or in
equity). The Hewitt-Robins Acquisition Agreement is in full force and
effect and, to the Company's knowledge, there has not occurred any
default or breach by any party thereto.
(s) The Company has delivered to the Initial Purchaser true
and correct executed copies of the Hewitt-Robins Acquisition Agreement
and all documents and agreements related thereto and there have been no
amendments, alterations, modifications or waivers thereto or in the
exhibits or schedules thereto, except as have been delivered to the
Initial Purchaser.
(t) Except to the extent described in the Offering Memorandum
there is (i) no action, suit, proceeding or investigation before or by
any court, arbitrator or governmental agency, body or official,
domestic or foreign, now pending or, to the knowledge of the Company or
any Subsidiary Guarantor, threatened or contemplated to which the
Company or any of its subsidiaries is or may be a party or to which the
business or property of the Company or any of its subsidiaries is or,
after giving effect to the Hewitt-Robins Acquisition, may be subject,
(ii) no law, statute, rule, regulation or order has been enacted,
adopted or issued by any governmental agency or, to the best knowledge
of the Company or any Subsidiary Guarantor, proposed by any
governmental body or (iii) no injunction, restraining order or order of
any nature by a federal or state court or other tribunal of competent
jurisdiction applicable to the Company or any of its subsidiaries has
been issued that, in the case of clauses (i), (ii) and (iii) above, (1)
is required to be disclosed in the Offering Memorandum and that is not
so disclosed, (2) might have a Material Adverse Effect, (3) would
interfere with or adversely affect the issuance of the Series A Senior
Notes and the Subsidiary Guarantees or (4) in any manner draw into
question the validity of the Operative Documents, the Hewitt-Robins
Acquisition Agreement, the Series A Senior Notes or the Subsidiary
Guarantees.
(u) No holder of any security of the Company or any of its
subsidiaries has any right or, by reason of the execution by the
Company and the Subsidiary Guarantors of this Agreement, the Revolving
Credit Facility, any other Operative Document or the Hewitt-Robins
Acquisition Agreement, the issuance and sale of the Series A Senior
Notes and the Subsidiary Guarantees by
13
<PAGE> 15
the Company and the Subsidiary Guarantors, respectively, or the
consummation of the transactions contemplated hereby and thereby, have
the right to request or demand that the Company or any of its
subsidiaries register under the Securities Act or analogous foreign
laws and regulations securities held by them.
(v) Neither the Company nor any of its subsidiaries is, or
immediately after giving effect to the Hewitt-Robins Acquisition will
be, involved in any material labor dispute nor, to the knowledge of the
Company or any Subsidiary Guarantor, is any material dispute threatened
which, if such dispute were to occur, would have a Material Adverse
Effect.
(w) The Company and its subsidiaries have not and, immediately
after giving effect to the Hewitt-Robins Acquisition will not have,
violated any applicable existing federal, state, local or foreign laws
or regulations ("LAWS") including, but not limited to (i) safety or
similar Laws applicable to its business, (ii) Laws relating to
discrimination in the hiring, promotion or pay of employees, (iii)
wages and hour Laws and (iv) provisions of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or the rules and
regulations promulgated thereunder, except for such instances of
noncompliance that, in each case, either singly or in the aggregate,
would not have a Material Adverse Effect.
(x) Except as set forth in the Offering Memorandum, the
Company and its subsidiaries are and, immediately after giving effect
to the Hewitt-Robins Acquisition will be, in compliance with all
applicable existing federal, state, local and foreign laws and
regulations (collectively, "ENVIRONMENTAL LAWS") relating to protection
of human health or the environment or imposing liability or standards
of conduct concerning any Hazardous Material (as defined below), except
for such instances of noncompliance that, either singly or in the
aggregate, would not have a Material Adverse Effect. The term
"HAZARDOUS MATERIAL" means (i) any "hazardous substance" as defined by
the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, (ii) any "hazardous waste" as defined by the
Resource Conservation and Recovery Act, as amended, (iii) any petroleum
or petroleum product, (iv) any polychlorinated biphenyl and (v) any
pollutant or contaminant or hazardous, dangerous or toxic chemical,
material, waste or substance regulated under or within the meaning of
any other Environmental Law. Except as set forth in the Offering
Memorandum, there is no alleged liability, or, to the best knowledge
and information of the Company or any Subsidiary Guarantor, potential
liability (including, without limitation, alleged or potential
liability for investigatory costs, cleanup costs, governmental response
costs, natural resources damages, property damages, personal injuries,
or penalties) of the Company or any of its subsidiaries arising out of,
based on, or resulting from (1) the presence or release into the
environment of any Hazardous Material at any location currently or
previously owned by the Company or any of its subsidiaries or at any
location currently or previously used or leased by the Company or any
of its subsidiaries, or (2) any violation or alleged violation of any
Environmental Law, except in each case with respect to clause (1) and
(2), alleged or potential liabilities that, singly or in the aggregate,
would not have a Material Adverse Effect.
(y) In connection with the Hewitt-Robins Acquisition, the
Company has reviewed the effect of Environmental Laws and the disposal
of hazardous or toxic substances or wastes, pollutants or contaminants
on the business, assets, operations and properties of Hewitt-Robins and
identified and evaluated associated costs and liabilities (including,
without limitation, all material capital and operating expenditures
required for clean-up, closure of properties and compliance with
Environmental Laws, all permits, licenses and approvals, all related
constraints on operating
14
<PAGE> 16
activities and all potential liabilities to third parties). On the
basis of such reviews, the Company has reasonably concluded that such
associated costs and liabilities would not reasonably be expected to
have a Material Adverse Effect.
(z) The Company and each of its subsidiaries owns free and
clear of all Liens or possesses or has the right to use free and clear
of any rights of third parties that adversely affects such use by the
Company and its subsidiaries and, immediately after giving effect to
the Hewitt-Robins Acquisition, will own free an clear of all Liens,
will possess or will have the right to use free and clear of any rights
of third parties that adversely affects such use by the Company and its
subsidiaries, the patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks and trade names (collectively,
"INTELLECTUAL PROPERTY") employed by it, except where the failure to
own, possess or use such Intellectual Property would not, either singly
or in the aggregate, have a Material Adverse Effect, and none of the
Company or any of its subsidiaries has received any notice that its use
of any Intellectual Property allegedly infringes upon, or conflicts
with, rights asserted by others, or any notice of an action or
proceedings seeking to limit, cancel or question the validity of any
Intellectual Property except for such instances that, singly or in the
aggregate, would not have a Material Adverse Effect if an unfavorable
decision, judgment, ruling or finding is rendered against the Company
or any of its subsidiaries. No other person is to the Company's or any
Subsidiary Guarantor's knowledge, infringing upon any of the
Intellectual Property or has notified the Company or any of its
subsidiaries that it is claiming ownership of, or the right to use any
Intellectual Property owned by the Company or its subsidiaries. The
Company and its subsidiaries have taken all reasonable steps to protect
the Intellectual Property from infringement by any other person, except
where the failure to take such steps would not, individually or in the
aggregate, have a Material Adverse Effect on the Company or its
subsidiaries.
(aa) Except as set forth in the Offering Memorandum, all tax
returns required to be filed by the Company and each of its
subsidiaries in any jurisdiction have been filed, and all material
taxes (including, but not limited to, withholding taxes, penalties and
interest, assessments, fees and other charges due or claimed to be due
from any taxing authority) have been paid other than those (i) being
contested in good faith and for which adequate reserves have been
provided or (ii) currently payable without penalty or interest.
(ab) Except as set forth in the Offering Memorandum or that,
singly or in the aggregate, would not have a Material Adverse Effect,
(i) the Company and each of its subsidiaries has and, immediately after
giving effect to the Hewitt-Robins Acquisition, will have, (1) such
permits, licenses, franchises, authorizations or approvals of
governmental or regulatory authorities ("PERMITS") and has made all
declarations and filings with and notices to, all federal, state, local
and other governmental authorities, all self-regulatory organizations
and all courts and other tribunals as are necessary to own, lease,
operate and use its respective properties and assets and to conduct
their business as presently conducted and (2) fulfilled and performed
all of their material obligations with respect to the Permits, and (ii)
no event has occurred that could allow, or after notice or lapse of
time could allow, revocation or termination of any Permit or that could
result in any other material impairment of the rights granted to the
Company or any of its subsidiaries under any Permit, and the Company
has no reason to believe that any governmental body or agency is
considering limiting, suspending or revoking any Permit.
(ac) Except as set forth in the Offering Memorandum or that,
singly or in the
15
<PAGE> 17
aggregate, would not have a Material Adverse Effect, immediately after
giving effect to the Hewitt-Robins Acquisition, (i) the Company and
each of its subsidiaries will have good and marketable title, free and
clear of all Liens except Liens for taxes not yet due and payable and
Liens granted pursuant to the Revolving Credit Facility and the
Australian Revolving Credit Facility, to all property and assets
described in the Offering Memorandum as being owned by it, (ii) each
lease to which the Company and each of its subsidiaries will be a party
will be valid and binding and no default will have occurred or will be
continuing thereunder and (iii) the Company and its subsidiaries will
enjoy peaceful and undisturbed possession under all such leases to
which it will be a party as lessee.
(ad) The Company and each of its subsidiaries maintains
insurance for their respective businesses and the value of their
respective properties (including, without limitation, public liability
insurance, third party property damage insurance and replacement value
insurance) which the Company and its subsidiaries believe is adequate
in accordance with customary industry practice to protect the Company
and its subsidiaries and their businesses, and all such insurance is
outstanding and in force as of the date hereof.
(ae) The financial statements, together with related notes
forming part of the Offering Memorandum (and any amendment or
supplement thereto), present fairly the consolidated financial
position, results of operations and changes in financial position of
the Company and its subsidiaries on the basis stated in the Offering
Memorandum at the respective dates or for the respective periods to
which they apply, and such financial statements and related schedules
and notes have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods
involved, except as disclosed therein and comply as to form in all
material respects with the requirements applicable to registration
statements on Form S-1 under the Securities Act. The pro forma
financial statements, together with related notes forming part of the
Offering Memorandum (and any amendment or supplement thereto), are, in
all material respects, accurately presented and prepared in good faith
on the basis of the assumptions described therein, and such assumptions
are reasonable and the adjustments used therein are appropriate to give
effect to the transactions and circumstances referred to therein.
(af) The Company and each of its subsidiaries maintains a
system of internal accounting controls sufficient to provide reasonable
assurance that: (1) transactions are executed in accordance with
management's general or specific authorizations; (2) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to
maintain accountability for assets; and (3) the recorded accountability
for assets is compared with the existing assets at reasonable intervals
and appropriate action is taken with respect thereto.
(ag) Subsequent to the respective dates as of which
information is given in the Preliminary Offering Memorandum and up to
the Closing Date, except as set forth in the Offering Memorandum: (1)
neither the Company nor any of its subsidiaries has incurred any
liabilities or obligations, direct or contingent, which are material,
individually or in the aggregate, to the Company and its subsidiaries,
immediately after giving effect to the Hewitt-Robins Acquisition, taken
as a whole, nor entered into any material transactions not in the
ordinary course of business; (2) there has not been any decrease in the
Company's capital stock or the capital stock of the Company's
subsidiaries or any increase in long-term indebtedness to meet working
capital requirements or any material increase in short-term
indebtedness of the Company or any of its subsidiaries, considered in
the aggregate, or any payment of or declaration to pay
16
<PAGE> 18
any dividends or any other distribution with respect to the Company's
or any of its subsidiaries' capital stock, as the case may be; and (3)
there has not been any event or series of events that would have a
Material Adverse Effect.
(ah) Immediately prior to and upon the issuance of the Series
A Senior Notes, (i) the present fair saleable value of the assets of
the Company and its subsidiaries exceeded and will exceed the amount
that will be required to be paid on, or in respect of, the debts and
other liabilities (including contingent liabilities) of the Company and
its subsidiaries as they become absolute and matured, (ii) the assets
of the Company and its subsidiaries do not constitute and will not
constitute unreasonably small capital to carry out their businesses as
conducted or as proposed to be conducted and (iii) the Company and its
subsidiaries do not intend to, or believe that they will, incur debts
or other liabilities beyond their ability to pay such debts and
liabilities as they mature. The Company does not intend to permit any
of its subsidiaries to incur debts or other liabilities beyond their
respective ability to pay such debts and liabilities as they mature.
(ai) Neither the Company nor any of its subsidiaries nor any
agent thereof acting on their behalf, has taken and none of them will
take, any action that might cause this Agreement or the issuance or
sale of the Series A Senior Notes to violate Regulation G (12 C.F.R.
Part 207), Regulation T (12 C.F.R. Part 220), Regulation U (12 C.F.R.
Part 221) or Regulation X (12 C.F.R. Part 224) of the Board of
Governors of the Federal Reserve System, in each case as in effect now
or as the same may hereafter be in effect on the Closing Date.
(aj) None of the Company or its subsidiaries are or,
immediately after giving effect to the Hewitt-Robins Acquisition, will
be, an "investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended, or (b) a "holding company" or a "subsidiary company" of a
holding company or an "affiliate" thereof within the meaning of the
Public Utility Holding Company Act of 1935, as amended or (c) subject
to regulation under the Federal Power Act, the Interstate Commerce Act
or any federal or state statute or regulation limiting its respective
ability to incur indebtedness for borrowed money.
(ak) The Company and its subsidiaries have, and immediately
after giving effect to the Hewitt-Robins Acquisition will have,
complied with all of the provisions of Florida H.B. 1771, codified as
Section 517.075 of the Florida Statutes, and all regulations
promulgated thereunder relating to issuers doing business with the
Government of Cuba or with any person or any affiliate located in Cuba.
(al) The accountants, Ernst & Young LLP, that have certified
certain financial statements and supporting schedules included in the
Offering Memorandum are independent public accountants with respect to
the Company and Hewitt-Robins as required by the Securities Act and the
Exchange Act. The historical financial statements of the Company and
Hewitt-Robins, together with related schedules and notes, set forth in
the Offering Memorandum comply as to form in all material respects with
the requirements applicable to registration statements on Form S-1
under the Securities Act.
(am) The accountants, Coopers & Lybrand, chartered
accountants, that have certified certain financial statements and
supporting schedules included in the Offering Memorandum are
independent public accountants with respect to BCE Holdings Pty. Ltd.
as required by the Securities Act and the Exchange Act. The historical
financial statements of BCE Holdings Pty.
17
<PAGE> 19
Ltd., together with related schedules and notes, set forth in the
Offering Memorandum comply as to form in all material respects with the
requirements applicable to registration statements on Form S-1 under
the Securities Act.
(an) When the Series A Senior Notes are issued and delivered
pursuant to this Agreement, such Series A Senior Notes will not be of
the same class (within the meaning of Rule 144A under the Securities
Act) as securities of the Company that are listed on a national
securities exchange registered under Section 6 of the Exchange Act or
that are quoted in a United States automated inter-dealer quotation
system.
(ao) Assuming (i) that the representations and warranties of
the Initial Purchaser in Section 7 hereof are true, (ii) that the
representations of the Accredited Institutions set forth in the
certificates of such Accredited Institutions in the form set forth in
Annex A to the Offering Memorandum are true, (iii) compliance by the
Initial Purchaser with its covenants set forth in Section 7 hereof,
(iv) that none of the Eligible Purchasers is an affiliate of the
Company and (v) that each of the Eligible Purchasers is a QIB, an
Accredited Institution or a Regulation S Purchaser, the purchase and
Exempt Resales of the Series A Senior Notes pursuant hereto are exempt
from the registration requirements of the Securities Act. No form of
general solicitation or general advertising was used by the Company or
any of its representatives in connection with the offer and sale of the
Series A Senior Notes or in connection with the Exempt Resales,
including, but not limited to, articles, notices or other
communications published in any newspaper, magazine, or similar medium
or broadcast over television or radio, or any seminar or meeting whose
attendees have been invited by any general solicitation or general
advertising. No securities of the same class as the Series A Senior
Notes have been issued and sold by the Company within the six-month
period immediately prior to the date hereof.
(ap) Set forth on Schedule III hereto is a list of each
employee pension or benefit plan with respect to which the Company or
any of its subsidiaries is a party in interest or disqualified person.
The execution and delivery of this Agreement, the other Operative
Documents and the sale of the Series A Senior Notes to be purchased by
the Eligible Purchasers will not involve any prohibited transaction
within the meaning of Section 406 of ERISA or Section 4975 of the
Internal Revenue Code of 1986, as amended. The representation made by
the Company in the preceding sentence is made in reliance upon and
subject to the accuracy of, and compliance with, the representations
and covenants made or deemed made by the Eligible Purchasers as set
forth in the Offering Memorandum under the Section entitled "Notice to
Investors."
(aq) The Company and the Subsidiary Guarantors have not (i)
taken, directly or indirectly, any action designed to cause or to
result in, or that has constituted or which might reasonably be
expected to constitute, the stabilization or manipulation of the price
of any security of the Company to facilitate the sale or resale of the
Series A Senior Notes or (ii) since the date of the Preliminary
Offering Memorandum (A) sold, bid for, purchased, or paid anyone other
than the Initial Purchaser any compensation for soliciting purchases
of, the Series A Senior Notes or (B) paid or agreed to pay to any
person any compensation for soliciting another to purchase any other
securities of the Company.
(ar) Each of the Preliminary Offering Memorandum and the
Offering Memorandum, as of its date, contains all the information
specified in, and meeting the requirements of, Rule 144A(d)(4) under
the Securities Act.
18
<PAGE> 20
(as) The Indenture conforms as to form in all material
respects with the requirements of the TIA, and the rules and
regulations of the Commission applicable to an indenture which is
qualified thereunder. The Indenture is not required to be qualified
under the Trust Indenture Act prior to the first to occur of (i) the
Registered Exchange Offer and (ii) the effectiveness of the Shelf
Registration Statement.
(at) Each certificate signed by any officer of the Company or
a Subsidiary Guarantor and delivered to the Initial Purchaser or
counsel for the Initial Purchaser shall be deemed to be a
representation and warranty by the Company or such Subsidiary Guarantor
to the Initial Purchaser as to the matters covered thereby.
(au) None of the Company, its subsidiaries or any of its or
their affiliates or any person acting on its or their behalf has
engaged or will engage in any directed selling efforts within the
meaning of Regulation S with respect to the Series A Senior Notes, and
the Company, its subsidiaries and its or their affiliates and all
persons acting on its or their behalf have complied with and will
comply with the offering restrictions requirements of Regulation S in
connection with the offering of the Series A Senior Notes outside the
United States.
(av) There is no "substantial U.S. market interest" as
defined in Rule 902(n) of Regulation S for the Series A Senior Notes
or any security of the same class as the Series A Senior Notes.
(aw) The sale of the Series A Senior Notes in offshore
transactions pursuant to Regulation S is not part of a plan or scheme
to evade the registration provisions of the Securities Act.
The Company and the Subsidiary Guarantors acknowledge that the
Initial Purchaser and, for purposes of the opinions to be delivered to the
Initial Purchaser pursuant to Section 9 hereof, counsel to the Company and the
Subsidiary Guarantors and counsel to the Initial Purchaser will rely upon the
accuracy and truth of the foregoing representations and hereby consents to such
reliance.
7. REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS OF THE
INITIAL PURCHASER.
(a) The Initial Purchaser represents and warrants to the Company and
the Subsidiary Guarantors as follows:
(1) The Initial Purchaser represents and warrants that it is
either a QIB or an Accredited Institution, in either case, with such
knowledge and experience in financial and business matters as are
necessary in order to evaluate the merits and risks of an investment in
the Series A Senior Notes.
(2) The Initial Purchaser (i) is not acquiring the Series A
Senior Notes with a view to any distribution thereof or with any
present intention of offering or selling any of the Series A Senior
Notes in a transaction that would violate the Securities Act or the
securities laws of any State of the United States or any other
applicable jurisdiction, (ii) will be reoffering and reselling the
Series A Senior Notes only to QIBs in reliance on the exemption from
the registration requirements of the Securities Act provided by Rule
144A, to a limited number of Accredited
19
<PAGE> 21
Institutions that execute and deliver a letter containing certain
representations and agreements in the form attached as Annex A to the
Offering Memorandum and to non-U.S. persons outside the United States
in offshore transactions in reliance upon Regulation S under the
Securities Act and (iii) has not solicited and, unless and until the
Series A Senior Notes are registered under the Securities Act, will not
solicit any offer to buy or offer to sell the Series A Senior Notes by
any means, including, but not limited to, articles, notices or other
communications published in any newspaper, magazine, or similar medium
or broadcast over television or radio, or any seminar or meeting whose
attendees have been invited by any general solicitation or general
advertising or in any manner involving a public offering within the
meaning of the Securities Act.
(b) The Initial Purchaser agrees that, in connection with the Exempt
Resales, the Initial Purchaser will solicit offers to buy the Series A Senior
Notes only from, and will offer to sell the Series A Senior Notes only to, the
Eligible Purchasers. The Initial Purchaser further agrees that it will offer to
sell the Series A Senior Notes only to, and will solicit offers to buy the
Series A Senior Notes only from, persons who in purchasing such Series A Senior
Notes will be deemed to have represented and agreed (1) if such Eligible
Purchaser is a QIB, that they are purchasing the Series A Senior Notes for their
own accounts or accounts with respect to which they exercise sole investment
discretion and that they or such accounts are QIBs, (2) that such Series A
Senior Notes will not have been registered under the Securities Act and may be
resold, pledged or otherwise transferred, only (A) (I) inside the United States
to a person who the seller reasonably believes is a "qualified institutional
buyer" within the meaning of Rule 144A under the Securities Act in a transaction
meeting the requirements of Rule 144A, (II) in a transaction meeting the
requirements of Rule 144 under the Securities Act, (III) outside the United
States to a foreign person in a transaction meeting the requirements of Rule 904
under the Securities Act, (IV) to an institutional accredited investor (as
defined in Rule 501(a)(1), (2) (3) or (7) of the Securities Act (an
"Institutional Accredited Investor") that, prior to such transfer, furnishes the
Trustee a signed letter containing certain representations and agreements (the
form of which can be obtained from the Trustee) and, if such transfer is in
respect of an aggregate principal amount of Series A Senior Notes less than
$100,000, an opinion of counsel acceptable to the Company that such transfer is
in compliance with the Securities Act or (V) in accordance with another
exemption from the registration requirements of the Securities Act (and based
upon an opinion of counsel if the Company so requests), (B) to the Company or
(C) pursuant to an effective registration statement under the Securities Act, in
each case, in accordance with any applicable securities laws of any state of the
United States or any other applicable jurisdiction, and (3) that the holder
will, and each subsequent holder is required to, notify any purchaser from it of
the security evidenced thereby of the resale restrictions set forth in (2)
above. Accordingly, the Initial Purchaser represents and agrees that neither it,
its affiliates nor any persons acting on its or their behalf has engaged or will
engage in any directed selling efforts within the meaning of Rule 901(b) of
Regulation S with respect to the Series A Senior Notes, and it, its affiliates
and all persons acting on its or their behalf have complied and will comply with
the offering restrictions requirements of Regulation S.
(c) The Initial Purchaser represents and agrees that the Series A
Senior Notes offered and sold in reliance on Regulation S have been and will be
offered and sold only in offshore transactions and that such securities have
been and will be represented upon issuance by a global security that may not be
exchanged for definitive securities until the expiration of the Restricted
Period and only upon certification of beneficial ownership of the securities by
a non-U.S. person or a U.S. person who purchased such securities in a
transaction that was exempt from the registration requirements of the Securities
Act, which U.S. person will acquire an interest in a Transfer Restricted
Security.
(d) The Initial Purchaser agrees that, at or prior to confirmation of a
sale of Series A Senior
20
<PAGE> 22
Notes (other than a sale pursuant to Rule 144A or to Accredited Institutional
Investors in transactions that are exempt from the registration requirements of
the Securities Act), it will have sent to each distributor, dealer or person
receiving a selling concession, fee or other remuneration that purchases Senior
Notes from it during the Restricted Period a confirmation or notice to
substantially the following effect:
"The Senior Notes covered hereby have not been registered under the
U.S. Securities Act of 1933, as amended (the "Securities Act"), and may
not be offered and sold within the United States or to, or for the
account or benefit of, U.S. persons (i) as part of their distribution
at any time or (ii) otherwise until 40 days after the later of the
commencement of the offering and the closing date, except in either
case in accordance with Regulation S (or Rule 144A if available) under
the Securities Act. Terms used above have the meanings assigned to them
in Regulation S."
The Initial Purchaser further agrees that it has not entered and will
not enter into any contractual arrangement with respect to the distribution or
delivery of the Series A Senior Notes, except with its affiliates or with the
prior written consent of the Company.
(e) The Initial Purchaser further represents and agrees that (1) it has
not offered or sold and will not offer or sell any Series A Senior Notes to
persons in the United Kingdom prior to the expiry of the period of six months
from the issue date of the Series A Senior Notes, except to persons whose
ordinary activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their business or
otherwise in circumstances which have not resulted and will not result in an
offer to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995, (ii) it has complied and will comply with
all applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the Series A Senior Notes in, from or
otherwise involving the United Kingdom and (iii) it has only issued or passed on
and will only issue or pass on in the United Kingdom any document received by it
in connection with the issuance of the Series A Senior Notes to a person who is
of a kind described in Article 11(3) of the Financial Services Act of 1986
(Investment Advertisements) (Exemptions) Order 1995 or is a person to whom the
document may otherwise lawfully be issued or passed on.
(f) The Initial Purchaser agrees that it will not offer, sell or
deliver any of the Series A Senior Notes in any jurisdiction outside the United
States except under circumstances that will result in compliance with the
applicable laws thereof, and that it will take at its own expense whatever
action is required to permit its purchase and resale of the Series A Senior
Notes in such jurisdictions. The Initial Purchaser understands that no action
has been taken to permit a public offering in any jurisdiction outside the
United States where action would be required for such purpose.
(g) The Initial Purchaser agrees not to cause any advertisement of the
Series A Senior Notes to be published in any newspaper or periodical or posted
in any public place and not to issue any circular relating to the Series A
Senior Notes, except such advertisements as include the statements required by
Regulation S.
(h) The sale of the Series A Senior Notes in offshore transactions
pursuant to Regulation S is not part of a plan or scheme to evade the
registration provisions of the Securities Act.
(i) The Initial Purchaser is not a pension or welfare plan (as defined
in Section 3 of ERISA) and is not acquiring the Series A Senior Notes on behalf
of a pension or welfare plan).
21
<PAGE> 23
Terms used in this Section 7 that have meanings assigned to them in
Regulation S are used herein as so defined.
The Initial Purchaser acknowledges that the Company and, for purposes
of the opinions to be delivered to the Initial Purchaser pursuant to Section 9
hereof, counsel to the Company and the Subsidiary Guarantors and counsel to the
Initial Purchaser will rely upon the accuracy and truth of the foregoing
representations and the Initial Purchaser hereby consents to such reliance.
8. INDEMNIFICATION.
(a) The Company and each Subsidiary Guarantor agree to,
jointly and severally, indemnify and hold harmless (i) the Initial
Purchaser, (ii) each person, if any, who controls (within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act)
the Initial Purchaser (any of the persons referred to in this clause
(ii) being hereinafter referred to as a "CONTROLLING PERSON") and (iii)
the respective officers, directors, partners, employees and agents of
the Initial Purchaser or any Controlling Person (any person referred to
in clause (i), (ii) or (iii) in such capacity may hereinafter be
referred to as an "INDEMNIFIED PERSON") to the fullest extent lawful,
from and against any and all losses, claims, damages, liabilities,
judgments, actions and expenses (including, without limitation and as
incurred, reimbursement of all reasonable costs of investigating,
preparing, pursing or defending any claim or action, or any
investigation or proceeding by any governmental agency or body,
commenced or threatened, including the reasonable fees and expenses of
counsel to any Indemnified Person) directly or indirectly caused by,
related to, based upon, arising out of or in connection with any untrue
statement or alleged untrue statement of a material fact contained in
the Preliminary Offering Memorandum or the Offering Memorandum (as
amended or supplemented if the Company shall have furnished any
amendments or supplements thereto) or any Rule 144A Information
provided by the Company or any Subsidiary Guarantor to any holder or
prospective purchaser of Series A Senior Notes pursuant to Section
5(o), or any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein in the light of the circumstances under which they were made,
not misleading, except insofar as such losses, claims, damages,
liabilities, judgments, actions or expenses are caused by any such
untrue statement or alleged untrue statement or omission or alleged
omission that is made in reliance upon and in conformity with
information relating to the Initial Purchaser furnished in writing to
the Company by the Initial Purchaser expressly for use therein;
provided, however, that the indemnification contained in this paragraph
(a) with respect to the Preliminary Offering Memorandum shall not inure
to the benefit of the Initial Purchaser (or to the benefit of any
person controlling the Initial Purchaser) on account of any such loss,
claim, damage, liability, judgment, action or expense arising from the
sale of the Series A Senior Notes by the Initial Purchaser to any
person if a copy of the Offering Memorandum, as it may be amended or
supplemented, shall not have been delivered or sent to such person, at
or prior to the written confirmation of such sale, and the untrue
statement or alleged untrue statement or omission or alleged omission
of a material fact contained in the Preliminary Offering Memorandum was
corrected in the Offering Memorandum, as it may have been amended or
supplemented; provided that the Company has delivered the Offering
Memorandum, as it may have been amended or supplemented, to the Initial
Purchaser in requisite quantity on a timely basis to permit such
delivery or sending. The Company and each Subsidiary Guarantor also
agree to, jointly and severally, reimburse each Indemnified Person for
any and all fees and expenses (including, without limitation, the fees
and expenses of counsel) as they are incurred in connection with
enforcing such Indemnified Person's rights under this Agreement
(including, without limitation,
22
<PAGE> 24
its rights under this Section 8). The Company shall notify the Initial
Purchaser promptly of the institution, threat or assertion of any
claim, proceeding (including any governmental investigation) or
litigation in connection with the matters addressed by this Agreement
which involves the Company, any Subsidiary Guarantor or an Indemnified
Person.
(b) In case any action or proceeding (including any
governmental or regulatory investigation or proceeding) shall be
brought or asserted against any of the Indemnified Persons, based upon
any Preliminary Offering Memorandum or the Offering Memorandum or any
amendment or supplement thereto and with respect to which indemnity may
be sought against the Company or any Subsidiary Guarantor, the
Indemnified Person shall promptly notify the Company in writing
(provided, that the failure to give such notice shall not relieve the
Company or any Subsidiary Guarantor of its obligations pursuant to this
Agreement, unless it shall have been determined by a court of competent
jurisdiction that such failure shall have materially adversely affected
the Company or a Subsidiary Guarantor) and the Company shall assume the
defense thereof, including the employment of counsel reasonably
satisfactory to such Indemnified Person and payment of all fees and
expenses (regardless of whether it is ultimately determined that an
Indemnified Person is not entitled to indemnification hereunder). Such
Indemnified Person shall have the right to employ separate counsel in
any such action and participate in the defense thereof, but the
reasonable fees and expenses of such counsel shall be at the expense of
such Indemnified Person unless (i) the employment of such counsel has
been specifically authorized in writing by the Company, (ii) the
Company has failed to assume the defense and employ counsel or (iii)
the named parties to any such action (including any impleaded parties)
include both such Indemnified Person and the Company or a Subsidiary
Guarantor, and such Indemnified Person shall have been advised by such
counsel that there may be one or more legal defenses available to it
which are different from or additional to those available to the
Company or the Subsidiary Guarantors (in which case the Company shall
not have the right to assume the defense of such action on behalf of
such Indemnified Person, it being understood, however, that the Company
shall not, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable
for the fees and expenses of more than one separate firm of attorneys
(in addition to any local counsel) for all such Indemnified Persons,
which firm shall be designated in writing by the Initial Purchaser, and
that all such fees and expenses shall be reimbursed as they are
incurred). Neither the Company nor any Subsidiary Guarantor shall be
liable for any settlement of any such action effected without the prior
written consent of the Company, but if settled with the Company's
written consent (which consent will not be unreasonably withheld), the
Company and each Subsidiary Guarantor agree to, jointly and severally,
indemnify and hold harmless any Indemnified Person from and against any
loss claim, damage, liability, judgment, action or expense by reason of
such settlement. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending
or threatened proceeding in respect of which any indemnified party is
or could have been a party and indemnity could have been sought
hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on
claims that are the subject matter of such proceeding.
(c) The Initial Purchaser agrees to indemnify and hold
harmless (i) the Company, (ii) the Subsidiary Guarantors, (iii) each
Controlling Person, if any, who controls (within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act) the Company
or any Subsidiary Guarantor and (iv) the respective officers,
directors, partners, employees and agents of the Company, the
Subsidiary Guarantors or any Controlling Person of the Company or the
23
<PAGE> 25
Subsidiary Guarantors (any person referred to in clause (i), (ii),
(iii) or (iv) in such capacity may hereinafter be referred to as the
"COMPANY INDEMNIFIED PARTIES"), to the same extent as the foregoing
indemnity from the Company and the Subsidiary Guarantors to each
Indemnified Person but only with respect to claims and actions based on
information relating to the Initial Purchaser furnished in writing by
the Initial Purchaser expressly for use in the Offering Memorandum;
provided however, that, in no case shall the Initial Purchaser be
liable or responsible for any amount in excess of the discounts and
commissions received by the Initial Purchaser as set forth on the cover
page of the Offering Memorandum. In case any action shall be brought
against any Company Indemnified Party in respect of which indemnity may
be sought against the Initial Purchaser, the Initial Purchaser shall
have the rights and duties given to the Company and the Subsidiary
Guarantors (except that if the Company shall have assumed the defense
thereof, the Initial Purchaser shall not be required to do so, but may
employ separate counsel therein and participate in the defense thereof
but the fees and expenses of such counsel shall be at the expense of
the Initial Purchaser), and the Company Indemnified Parties shall have
the rights and duties given to the Initial Purchaser by Section 8(b)
hereof.
(d) If the indemnification provided for in this Section 8 is
unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities, judgments, actions or expenses referred to
herein, then each indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages,
liabilities, judgments, actions or expenses (i) in such proportion as
is appropriate to reflect the relative benefits received by the
indemnifying party (or parties, as applicable) on the one hand and the
indemnified party (or parties, as applicable) on the other hand from
the offering of the Series A Senior Notes or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of
the indemnifying party (or parties, as applicable) and the indemnified
party (or parties, as applicable) as well as any other relevant
equitable considerations. The relative benefits received by the Company
and the Subsidiary Guarantors on the one hand and the Initial Purchaser
on the other hand shall be deemed to be in the same proportion as the
total proceeds from the offering of the Series A Senior Notes (net of
the Initial Purchaser's discounts and commissions but before deducting
expenses) received by the Company bear to the total discounts and
commissions received by the Initial Purchaser, in each case, as set
forth in the table on the cover page of the Offering Memorandum. The
relative fault of the Company and the Subsidiary Guarantors on the one
hand and the Initial Purchaser on the other hand shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to
state a material fact related to information supplied by the Company
and the Subsidiary Guarantors on the one hand or the Initial Purchaser
on the other hand and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or
omission.
The Company, the Subsidiary Guarantors and the Initial
Purchaser agree that it would not be just and equitable if contribution
pursuant to this Section 8(d) were determined by pro rata allocation or
by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities, judgments, actions
or expenses referred to in the immediately preceding paragraph shall be
deemed to include, subject to the limitations set forth above, any
legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim.
24
<PAGE> 26
Notwithstanding the provisions of this Section 8, the Initial Purchaser
shall not be required to contribute any amount in excess of the amount
by which the discounts and commissions applicable to the Series A
Senior Notes received by it exceeds the amount equal to (i) the amount
of any damages which the Initial Purchaser has otherwise been required
to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission plus (ii) any amount paid or contributed by the
Initial Purchaser pursuant to the Registration Rights Agreement. No
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent
misrepresentation.
(e) The indemnity and contribution agreements of the Company,
the Subsidiary Guarantors and the Initial Purchaser contained in this
Section 8 are in addition to any liability or obligation which the
Company, the Subsidiary Guarantors and the Initial Purchaser may
otherwise have to the Indemnified Persons and the Company Indemnified
Parties, respectively, referred to above.
9. CONDITIONS OF THE INITIAL PURCHASER'S OBLIGATION. The obligation of
the Initial Purchaser to purchase the Series A Senior Notes under this Agreement
is subject to the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company and
the Subsidiary Guarantors contained in this Agreement shall be true and
correct on the date hereof and on the Closing Date, immediately after
giving effect to the Hewitt-Robins Acquisition, with the same force and
effect as if made on and as of the date hereof and the Closing Date,
respectively. The Company and the Subsidiary Guarantors shall have
performed or complied with all of the agreements and satisfied all
conditions to be performed, complied with or satisfied by it on or
prior to the Closing Date.
(b)(1) The Offering Memorandum shall have been printed and
copies distributed to the Initial Purchaser not later than
9:00 a.m., New York City time, on March 28, 1997, or at such
later date and time as the Initial Purchaser may approve in
writing;
(2) no injunction, restraining order or order of any nature
by a federal or state court of competent jurisdiction shall
have been issued as of the Closing Date which would prevent
the issuance of the Series A Senior Notes; and
(3) at the Closing Date, no stop order preventing the use
of the Preliminary Offering Memorandum or the Offering
Memorandum, or any amendment or supplement thereto, or
suspending the qualification or exemption from qualification
of the Series A Senior Notes for sale in any jurisdiction
designated by the Initial Purchaser pursuant to Section 5(f)
hereof shall have been issued and no proceedings for that
purpose shall have been commenced or shall be pending before
or, to the knowledge of the Company or any Subsidiary
Guarantor, be contemplated.
(c)(1) Since the date of the latest balance sheet included in
the Offering Memorandum, except as may be set forth or
contemplated in the Offering Memorandum, there shall not have
been any event that had a Material Adverse Effect, or any
development involving a prospective change that would have a
Material Adverse Effect,
25
<PAGE> 27
whether or not arising in the ordinary course of business;
(2) since the date of the latest balance sheet
included in the Offering Memorandum, there has not been any
material change, or any development involving a prospective
change, in the capital stock or in the long-term debt or
material increase in short term debt of the Company and its
subsidiaries, considered in the aggregate, from that set forth
in the Offering Memorandum;
(3) since the date of the Offering Memorandum, there
shall not have been any material adverse change, or
development that is reasonably likely to result in a material
adverse change, in the business and assets to be acquired in
the Hewitt-Robins Acquisition;
(4) immediately after giving effect to the
Hewitt-Robins Acquisition, the Company and its subsidiaries
shall have no material liability or obligation, direct or
contingent, other than those reflected in the Offering
Memorandum; and
(5) on the Closing Date, the Initial Purchaser shall
have received certificates dated the Closing Date, signed on
behalf of the Company and the Subsidiary Guarantors by the
principal executive officer and the principal financial or
accounting officer of the Company and each Subsidiary
Guarantor, confirming as of the Closing Date, all matters set
forth in Sections 9(a), (b) and (c) hereof with respect to the
Company and the Subsidiary Guarantors, as applicable.
(d) The Initial Purchaser shall have received on the Closing
Date an opinion (satisfactory to the Initial Purchaser and counsel to
the Initial Purchaser) dated the Closing Date, of Squire, Sanders &
Dempsey L.L.P., counsel for the Company and the Subsidiary Guarantors,
to the effect that:
(1) The Company and each of the Subsidiary Guarantors
(A) is a corporation validly existing and in good standing
under the laws of its respective jurisdiction of incorporation
and (B) has requisite corporate power and authority to carry
on its respective business as it is currently being conducted
and to own, lease and operate its respective properties.
(2) The Company has all necessary corporate power and
authority to execute, deliver and perform its obligations
under each of the Operative Documents, and the Revolving
Credit Facility and to consummate the transactions
contemplated by the Operative Documents, and the Revolving
Credit Facility, and to issue, sell and deliver the Series A
Senior Notes pursuant to this Agreement. Continental has all
necessary corporate power and authority to execute, deliver
and perform its obligations under the Hewitt-Robins
Acquisition Agreement and to consummate the Hewitt-Robins
Acquisition.
(3) Each of the Subsidiary Guarantors has all
necessary corporate power and authority to execute, deliver
and perform its obligations under the Operative Documents and
the Revolving Credit Facility and to consummate the
transactions contemplated by the Operative Documents and
Revolving Credit Facility and to issue and deliver the
Subsidiary Guarantees pursuant to this Agreement.
26
<PAGE> 28
(4) None of (A) the execution, delivery or
performance by the Company and the Subsidiary Guarantors of
this Agreement, the Revolving Credit Facility and the other
Operative Documents, (B) the performance by Continental of the
Hewitt-Robins Acquisition Agreement and consummation of the
Hewitt-Robins Acquisition, (C) the issuance and sale of the
Senior Notes by the Company, (D) the issuance of the
Subsidiary Guarantees by the Subsidiary Guarantors and (E) the
consummation by the Company and the Subsidiary Guarantors of
the transactions described in the Offering Memorandum under
the caption "Use of Proceeds," will conflict with or
constitute a breach of any of the terms or provisions of, or a
default under, or result in the imposition of a Lien on any
properties of the Company or any of the Subsidiary Guarantors,
or an acceleration of indebtedness pursuant to, (1) the
charter or bylaws of any of the Company or any of the
Subsidiary Guarantors, (2) any bond, debenture, note, or other
evidence of indebtedness or any indenture, mortgage, deed of
trust or other contract, lease or other instrument set forth
on Schedule IV hereto or (3) any law or administrative
regulation applicable to the Company, any of the Subsidiary
Guarantors, or any of their assets or properties, or any
judgment, order or decree of any court or governmental agency
or authority entered in any proceeding to which the Company or
any of the Subsidiary Guarantors was or is now a party or to
which any of them or their respective properties may be
subject or bound and which is known to such counsel.
(5) No consent, approval, authorization or order of,
or filing or registration with, any regulatory body,
administrative agency, or other governmental agency (except as
securities or Blue Sky laws of the various states may require)
or pursuant to the terms of any agreement or other instrument
set forth on Schedule IV hereto, that have not been made or
obtained prior to the Closing Date or, in the case of the
Registration Rights Agreement and the transactions
contemplated thereby, will be obtained or made, is required
for (1) the execution, delivery and performance of the
Operative Documents, the Revolving Credit Facility and the
valid issuance and sale of the Series A Senior Notes and the
Subsidiary Guarantees or (2) the performance by Continental of
the Hewitt-Robins Acquisition Agreement and all documents or
agreements related thereto and the transactions contemplated
hereby and thereby, except (i) such consents, approvals,
authorizations or orders that are not specifically required
pursuant to the terms of the Hewitt-Robins Acquisition
Agreement and (ii) where the failure to obtain such consents,
approvals, authorizations or orders would not have a Material
Adverse Effect.
(6) This Agreement has been duly authorized,
executed and delivered by the Company and the Subsidiary
Guarantors.
(7) The Indenture has been duly authorized, executed
and delivered by the Company and the Subsidiary Guarantors and
(assuming the due execution and delivery thereof by the
Trustee) is a legally valid and binding obligation of the
Company and the Subsidiary Guarantors, enforceable against the
Company and the Subsidiary Guarantors in accordance with its
terms, except as the enforceability thereof may be (i) subject
to applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws in effect which affect the
enforcement of creditors rights generally and (ii) limited by
general principles of equity (whether considered in a
proceeding at law or in equity).
(8) The Series A Senior Notes have been duly
authorized, issued and authenticated in accordance with the
terms of the Indenture and are the legally valid and
27
<PAGE> 29
binding obligations of the Company, enforceable against the
Company in accordance with their terms, except as the
enforceability thereof may be (i) subject to applicable
bankruptcy, insolvency, moratorium, reorganization or similar
laws in effect which affect the enforcement of creditors
rights generally and (ii) limited by general principles of
equity (whether considered in a proceeding at law or in
equity).
(9) The Series B Senior Notes have been duly
authorized by the Company and, when issued and authenticated
in accordance with the terms of the Registered Exchange Offer
and the Indenture, will be the legally valid and binding
obligations of the Company, enforceable against the Company in
accordance with their terms, except as the enforceability
thereof may be (i) subject to applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws in
effect which affect the enforcement of creditors rights
generally and (ii) limited by general principles of equity
(whether considered in a proceeding at law or in equity).
(10) The Subsidiary Guarantees endorsed on the Series
A Senior Notes by the Subsidiary Guarantors have been duly
authorized, executed and delivered by the respective
Subsidiary Guarantors and are the legally valid and binding
obligations of such Subsidiary Guarantors, enforceable against
the Subsidiary Guarantors in accordance with their terms and
entitled to the benefits of the Indenture (assuming the due
execution and delivery of the Indenture by the Trustee),
except as the enforceability thereof may be (i) subject to
applicable bankruptcy, insolvency, moratorium, reorganization
or similar laws in effect which affect the enforcement of
creditors rights generally and (ii) limited by general
principles of equity (whether considered in a proceeding at
law or in equity).
(11) The Subsidiary Guarantees to be endorsed on the
Series B Senior Notes by the Subsidiary Guarantors have been
duly authorized and, when executed and delivered by the
respective Subsidiary Guarantors, will be the legally valid
and binding obligations of such Subsidiary Guarantors,
enforceable against the Subsidiary Guarantors in accordance
with their terms, except as the enforceability thereof may be
(i) subject to applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws in effect which affect the
enforcement of creditors rights generally and (ii) limited by
general principles of equity (whether considered in a
proceeding at law or in equity).
(12) The Registration Rights Agreement has been duly
authorized, executed and delivered by the Company and the
Subsidiary Guarantors and (assuming the due execution and
delivery thereof by the Initial Purchaser) is a legally valid
and binding obligation of the Company and the Subsidiary
Guarantors, enforceable against the Company and the Subsidiary
Guarantors in accordance with its terms, except as the
enforceability thereof may be (i) subject to applicable
bankruptcy, insolvency, moratorium, reorganization or similar
laws in effect which affect the enforcement of creditors
rights generally, (ii) limited by general principles of equity
(whether considered in a proceeding at law or in equity) and
(iii) limited by securities laws prohibiting or limiting the
availability of, and public policy against, indemnification or
contribution.
(13) The Hewitt-Robins Acquisition Agreement has been
duly authorized, executed and delivered by Continental and is
a legally valid and binding agreement of Continental,
enforceable against Continental in accordance with its terms,
except as the enforceability thereof may be (i) subject to
applicable bankruptcy, insolvency,
28
<PAGE> 30
moratorium, reorganization or similar laws in effect which
affect the enforcement of creditors rights generally, (ii)
limited by general principles of equity (whether considered in
a proceeding at law or in equity) and (iii) limited by
securities laws prohibiting or limiting the availability of,
and public policy against, indemnification or contribution.
(14) The Revolving Credit Facility has been duly
authorized, executed and delivered by the Company and the
Subsidiary Guarantors and (assuming the due execution and
delivery thereof by the other parties thereto) is a legally
valid and binding obligation of the Company and the Subsidiary
Guarantors, enforceable against the Company and the Subsidiary
Guarantors in accordance with its terms, except as the
enforceability thereof may be (i) subject to applicable
bankruptcy, insolvency, moratorium, reorganization or similar
laws in effect which affect the enforcement of creditors
rights generally and (ii) limited by general principles of
equity (whether considered in a proceeding at law or in
equity).
(15) The Tax Payment Agreement has been duly
authorized, executed and delivered by the Company and its
subsidiaries and is a legally valid and binding obligation of
the Company and its subsidiaries, enforceable against the
Company and its subsidiaries in accordance with its terms,
except as the enforceability thereof may be (i) subject to
applicable bankruptcy, insolvency, moratorium, reorganization
or similar laws in effect which affect the enforcement of
creditors rights generally and (ii) limited by general
principles of equity (whether considered in a proceeding at
law or in equity).
(16) The Management Agreement has been duly
authorized, executed and delivered by the Company and is a
legally valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms,
except as the enforceability thereof may be (i) subject to
applicable bankruptcy, insolvency, moratorium, reorganization
or similar laws in effect which affect the enforcement of
creditors rights generally, (ii) limited by general principles
of equity (whether considered in a proceeding at law or in
equity) and (iii) limited by securities laws prohibiting or
limiting the availability of, and public policy against,
indemnification or contribution.
(17) The Series A Senior Notes, the Series B Senior
Notes, the Subsidiary Guarantees to be endorsed on the Series
A Senior Notes, the Subsidiary Guarantees to be endorsed on
the Series B Senior Notes, the Indenture, the Registration
Rights Agreement, the Revolving Credit Facility, the Tax
Payment Agreement and the Management Agreement conform in all
material respects to the descriptions thereof contained in the
Offering Memorandum.
(18) None of the Company or the Subsidiary Guarantors
is (a) an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment
Company Act of 1940, as amended or (b) a "holding company" or
a "subsidiary company" of a holding company or an "affiliate"
thereof within the meaning of the Public Utility Holding
Company Act of 1935, as amended or (c) subject to regulation
under the Federal Power Act, the Interstate Commerce Act or
any federal or state statute or regulation limiting its
respective ability to incur indebtedness for borrowed money.
(19) When the Series A Senior Notes are issued and
delivered pursuant to this
29
<PAGE> 31
Agreement, such Series A Senior Notes will not be of the same
class (within the meaning of Rule 144A under the Securities
Act) as securities of the Company that are listed on a
national securities exchange registered under Section 6 of the
Exchange Act or that are quoted in a United States automated
inter-dealer quotation system.
(20) The Indenture conforms as to form in all
material respects with the requirements of the TIA, and the
rules and regulations of the Commission applicable to an
indenture which is qualified thereunder. The Indenture is not
required to be qualified under the Trust Indenture Act prior
to the first to occur of (i) the Registered Exchange Offer and
(ii) the effectiveness of the Shelf Registration Statement.
(21) No registration under the Securities Act of the
Series A Senior Notes is required for the sale of the Series A
Senior Notes to the Initial Purchaser as contemplated hereby
or for the Exempt Resales as described in the Offering
Memorandum (assuming (i) that the Eligible Purchasers who buy
the Series A Senior Notes in the Exempt Resales are QIBs,
Accredited Institutions or Regulation S Purchasers, (ii) the
accuracy of, and compliance with, the representations of the
Initial Purchaser and those of the Company contained in
Sections 6 and 7 hereof and (iii) the accuracy of the
representations made by each Accredited Institution who
purchases Series A Senior Notes pursuant to an Exempt Resale
as set forth in the letters of representation executed by such
Accredited Institutions in the form of Annex A to the Offering
Memorandum).
(22) To the best knowledge of such counsel, no
injunction, restraining order or order of any nature by a
federal or state court of competent jurisdiction shall have
been issued as of the Closing Date which would prevent the
issuance of the Series A Senior Notes and no stop order
preventing the use of the Preliminary Offering Memorandum or
the Offering Memorandum, or any amendment or supplement
thereto, or suspending the qualification or exemption from
qualification of the Series A Senior Notes for sale in any
jurisdiction designated by the Initial Purchaser pursuant to
Section 5(f) hereof shall have been issued and no proceedings
for that purpose shall have been commenced or shall be pending
before or, to the best knowledge of such counsel, be
contemplated.
In addition, such counsel shall state that it has participated
in conferences with representatives of the Company, representatives of
the Subsidiary Guarantors, representatives of the Company's and the
Subsidiary Guarantors' accountants, the Initial Purchaser's
representatives and counsel for the Initial Purchaser, at which
conferences the contents of the Offering Memorandum and related matters
were discussed, and, although such counsel has not independently
verified and is not passing upon and assumes no responsibility for the
accuracy, completeness or fairness of the statements contained in the
Offering Memorandum, lawyers of such counsel responsible for this
matter who actively participated in the preparation of the Offering
Memorandum are not presently aware of any information that came to
their attention in the course of the performance of the services
referred to herein that leads such counsel to believe that the Offering
Memorandum, on the date thereof or on the date of such opinion,
contained or contains an untrue statement of a material fact or omitted
or omits to state a material fact necessary to make the statements
contained therein, in light of the circumstances under which they were
made, not misleading (it being understood that such counsel need
express no view with respect to the financial statements, financial
information and related notes included in the Offering Memorandum).
30
<PAGE> 32
Such counsel may set forth such assumptions, qualifications
and definitions as are customary in opinions of this nature and may rely upon
certificates as to factual matters and from public officials. Such opinion may
be limited to federal, Delaware, New York and Ohio law.
(e) The Initial Purchaser shall have received on the Closing
Date an opinion (satisfactory to the Initial Purchaser and counsel to
the Initial Purchaser), dated the Closing Date, of David M. Sweeney, as
general counsel for the Company and the Subsidiary Guarantors, to the
effect that:
(1) To the best of such counsel's knowledge, the
Company and each of the Subsidiary Guarantors is duly
qualified and in good standing as a foreign corporation
registered to do business in each jurisdiction in which the
nature of its business or its ownership or leasing of property
requires such qualification, except where the failure to be so
qualified would not, singly or in the aggregate, have a
Material Adverse Effect.
(2) All of the outstanding shares of capital stock of
or other ownership interests in the Company and each of the
Subsidiary Guarantors has been duly authorized and validly
issued, is fully paid and nonassessable; the outstanding
shares of capital stock of or other ownership interests in
each of the Company's subsidiaries have not been issued in
violation of any preemptive or similar rights and to the best
of such counsel's knowledge are owned free and clear of any
Lien except for Liens granted pursuant to the Revolving Credit
Facility, the Australian Revolving Credit Facility and the
Australian seller notes as set forth in the Offering
Memorandum under the caption "Capitalization."
(3) To the best of such counsel's knowledge, except
as disclosed in the Offering Memorandum, there are not any
outstanding, subscriptions, rights, warrants or options to
acquire, or instruments convertible into or exchangeable for,
any shares of capital stock or other equity interests in the
Company or any of its subsidiaries.
(4) None of the Company or any of the Subsidiary
Guarantors is in violation of its respective charter or
bylaws, or to the best knowledge of such counsel after due
inquiry, none of the Company or any of the Subsidiary
Guarantors is in default in the performance of any material
term, provision, obligation, agreement or condition contained
in any bond, debenture, note or any other evidence of
indebtedness or any indenture, mortgage, deed of trust or
other contract, lease or other instrument, to which the
Company or any of the Subsidiary Guarantors is a party or to
which any of them or their respective properties may be
subject or bound.
(5) To the best knowledge of such counsel after due
inquiry, there is (i) no action, suit, proceeding or
investigation before or by any court, arbitrator or
governmental agency, body or official, domestic or foreign,
now pending, threatened or contemplated to which the Company
or any of its subsidiaries is or may be a party or to which
the business or property of the Company or any of its
subsidiaries is subject, (ii) no law, statute, rule,
regulation or order that has been enacted, adopted or issued
by any governmental agency or proposed by any governmental
body or (iii) no injunction, restraining order or order of any
nature by a federal or state court or other tribunal of
competent jurisdiction applicable to the Company or any of its
subsidiaries has been issued that, in the case of clauses (i),
(ii) and (iii) above in the reasonable judgment of such
counsel, (A) is required to be disclosed in the Offering
Memorandum and that is not
31
<PAGE> 33
so disclosed, (B) might have a Material Adverse Effect, (C)
would interfere with or adversely affect the issuance of the
Series A Senior Notes and the Subsidiary Guarantees, or (D) in
any manner draw into question the validity of the Operative
Documents, the Hewitt-Robins Acquisition Agreement, the Series
A Senior Notes or Subsidiary Guarantees.
Such counsel may set forth such assumptions, qualifications
and definitions as are customary in opinions of this nature and may rely upon
certificates as to factual matters and from public officials. Such opinion may
be limited to federal, Delaware and Ohio law.
(f) The Initial Purchaser shall have received on the Closing
Date an opinion (satisfactory to the Initial Purchaser and counsel to
the Initial Purchaser), dated the Closing Date, of Thompson Norrie
Solicitors, counsel for each of CCE Pty. Ltd., BCE Holdings Pty. Ltd.,
Continental Ace Pty. Ltd., Continental ACE Services Pty. Ltd.,
Continental ACE Components Pty. Ltd., A. Crane Pty. Ltd. and Ringway
Pty. Ltd. (each an "Australian Subsidiary" and collectively, the
"Australian Subsidiaries"), substantially in the form of Exhibit B
hereto:
(g) The Initial Purchaser shall have received on the Closing
Date an opinion, dated the Closing Date, of Latham & Watkins, in form
and substance satisfactory to the Initial Purchaser, and the Company
and the Subsidiary Guarantors shall have provided Latham & Watkins
such papers and information as it requests to enable it to pass upon
the matters contained in such opinion.
(h) The Initial Purchaser shall have received letters from
Ernst & Young LLP, independent public accountants with respect to the
Company and Hewitt-Robins, on the date hereof and on the Closing Date,
in form and substance satisfactory to the Initial Purchaser, with
respect to the financial statements and certain financial information
contained in the Offering Memorandum.
(i) The Initial Purchaser shall have received letters from
Coopers & Lybrand, with respect to BCE Holdings Pty. Ltd., on the date
hereof and on the Closing Date, in form and substance satisfactory to
the Initial Purchaser, with respect to the financial statements and
certain financial information contained in the Offering Memorandum.
(j) The Company, the Subsidiary Guarantors and the Trustee
shall have entered into the Indenture and the Initial Purchaser shall
have received counterparts, conformed as executed, thereof.
(k) The Company, the Subsidiary Guarantors and the Initial
Purchaser shall have entered into the Registration Rights Agreement
and the Initial Purchaser shall have received counterparts, conformed
as executed, thereof.
(l) The Company shall have entered into the Revolving Credit
Facility (the form and substance of which shall be reasonably
acceptable to the Initial Purchaser) and the Initial Purchaser shall
have received counterparts, conformed as executed, thereof and of all
other documents and agreements entered into in connection therewith.
(m) Each condition to the initial borrowing under the
Revolving Credit Facility (other than the issuance and sale of the
Series A Senior Notes pursuant hereto) shall have been satisfied
32
<PAGE> 34
or waived. There shall exist at and as of the Closing Date (after
giving effect to the transactions contemplated by this Agreement and
the Hewitt-Robins Acquisition Agreement) no conditions that would
constitute a default (or an event that with notice or the lapse of
time, or both, would constitute a default) under the Revolving Credit
Facility. At or prior to the Closing Date, the closing under the
Revolving Credit Facility shall have been consummated on terms that
conform in all material respects to the description thereof in the
Offering Memorandum and the Initial Purchaser shall have received
evidence satisfactory to the Initial Purchaser of the consummation
thereof.
(n) Each condition to the closing contemplated by the
Hewitt-Robins Acquisition Agreement (other than the issuance and sale
of the Series A Senior Notes pursuant hereto) shall have been satisfied
or waived. There shall exist at and as of the Closing Date (after
giving effect to the transactions contemplated by this Agreement) no
conditions that would constitute a default (or an event that with
notice or the lapse of time, or both, would constitute a default) under
the Hewitt-Robins Acquisition Agreement.
(o) On the Closing Date, the Company and its subsidiaries
shall have entered into the Tax Payment Agreement (the form and
substance of which shall be reasonably acceptable to the Initial
Purchaser) and the Initial Purchaser shall have received counterparts,
conformed as executed, thereof.
(p) On the Closing Date, the Company shall have entered into
the Management Agreement (the form and substance of which shall be
reasonably acceptable to the Initial Purchaser) and the Initial
Purchaser shall have received counterparts, conformed as executed,
thereof.
(q) The Company and the Subsidiary Guarantors shall have fully
performed or complied with any of the agreements herein contained and
required to be performed or complied with by the Company and the
Subsidiary Guarantors on or prior to the Closing Date.
(r) Latham & Watkins shall have been furnished with such
documents, in addition to those set forth above, as they may reasonably
require for the purpose of enabling them to review or pass upon the
matters referred to in this Section 9 and in order to evidence the
accuracy, completeness or satisfaction in all material respects of any
of the representations, warranties or conditions herein contained.
(s) Prior to the Closing Date, the Company shall have
furnished to the Initial Purchaser such further information,
certificates and documents as the Initial Purchaser may reasonably
request.
10. EFFECTIVE DATE OF AGREEMENT AND TERMINATION. This Agreement shall
become effective upon the execution and delivery of this Agreement by the
parties hereto.
The Initial Purchaser may terminate this Agreement at any time on or
prior to the Closing Date by written notice to the Company if any of the
following has occurred:
(a) Since the respective dates as of which information is
given in the Offering
33
<PAGE> 35
Memorandum, any material adverse change or development involving a
prospective material adverse change which would cause a Material
Adverse Effect, on the earnings, affairs, properties, results of
operations or business prospects of the Company or any of its
subsidiaries, whether or not arising in the ordinary course of
business, which would, in the Initial Purchaser's judgment, make it
impracticable to market the Series A Senior Notes on the terms and in
the manner contemplated in the Offering Documents or materially impairs
the investment quality of the Series A Senior Notes;
(b) Any outbreak or escalation of hostilities or other
national or international calamity, crisis or emergency or material
adverse change in economic conditions or financial markets, if the
effect of such outbreak, escalation, calamity, crisis, emergency or
change in economic conditions or financial markets of the United States
or elsewhere would, in the Initial Purchaser's judgment, be material
and adverse and make it impracticable to market the Series A Senior
Notes on the terms and in the manner contemplated in the Offering
Memorandum or to enforce the contracts for the sale of the Series A
Senior Notes;
(c) The suspension or material limitation of trading generally
in securities on the New York Stock Exchange, the American Stock
Exchange or the NASDAQ National Market System or limitation on prices
for securities on any such exchange or national market system;
(d) The enactment, publication, decree or other promulgation
of any federal or state law, statute, regulation, rule or order of any
court or other governmental authority which in the Initial Purchaser's
opinion causes or could cause a Material Adverse Effect;
(e) The declaration of a banking moratorium by either
federal or New York State authorities;
(f) The taking of any action by any federal, state or local
government or agency in respect of its monetary or fiscal affairs which
in the Initial Purchaser's opinion has a material adverse effect on the
financial markets in the United States and would in the Initial
Purchaser's judgment make it impracticable or inadvisable to market the
Series A Senior Notes or to enforce contracts for the sales of the
Series A Senior Notes; or
(g) Any of securities of the Company or any of the Company's
subsidiaries shall have been downgraded or placed on any "watch list"
for possible downgrading by any nationally recognized statistical
rating organization (as defined for purposes of Rule 436(9) under the
Securities Act).
11. AGREEMENT OF THE INITIAL PURCHASER.
The Initial Purchaser agrees that, upon its receipt of any written
notice from the Company of the existence of any fact or the happening of any
event that requires the making of any additions to or changes in any Offering
Memorandum, Registration Statement or prospectus, or amendment or supplement
thereto, referred to in Section 5(e) hereof in order that such document will not
contain any untrue statement of a material fact or omission to state any
material fact necessary in order to make the statements therein, in the light of
the circumstances existing as of the date such document was delivered, not
misleading, the Initial Purchaser shall forthwith discontinue disposition of the
applicable Senior Notes
34
<PAGE> 36
pursuant to such document until (i) the Initial Purchaser receives from the
Company copies of an amended or supplemented document that the Company states in
writing may be used by the Initial Purchaser or (ii) the Initial Purchaser is
advised in writing by the Company that the use of such document may be resumed.
12. MISCELLANEOUS.
(a) Notices given pursuant to any provision of this
Agreement shall be addressed as follows: (i) if to the Company or any
Subsidiary Guarantor, to Continental Global Group, Inc., 438
Industrial Drive, Winfield, Alabama 35594 Attention: Chief Financial
Officer, with a copy to Squire, Sanders & Dempsey L.L.P., 4900 Key
Tower, 127 Public Square, Cleveland, Ohio 44114, Attention: Jeffrey
Margulies, Esq. and (ii) if to the Initial Purchaser, Donaldson,
Lufkin & Jenrette Securities Corporation, 277 Park Avenue, New York,
New York 10172, Attention: Syndicate Department, with a copy to Latham
& Watkins, 885 Third Avenue, New York, New York 10022, Attention: Kirk
Davenport, Esq. or in any case to such other address as the person to
be notified may have requested in writing.
(b) The respective indemnities, contribution agreements,
representations, warranties and other statements set forth in or made
pursuant to this Agreement shall remain operative and in full force
and effect, and will survive delivery of and payment for the Series A
Senior Notes, regardless of (i) any investigation, or statement as to
the results thereof, made by or on behalf of any such person, (ii)
acceptance of the Series A Senior Notes and payment for them hereunder
and (iii) termination of this Agreement.
(c) Except as otherwise provided, this Agreement has been
and is made solely for the benefit of and shall be binding upon the
Company, the Subsidiary Guarantors, the Initial Purchaser, any
controlling persons referred to herein and their respective successors
and assigns, all as and to the extent provided in this Agreement, and
no other person shall acquire or have any right under or by virtue of
this Agreement. The term "successors and assigns" shall not include a
purchaser of any of the Series A Senior Notes from the Initial
Purchaser merely because of such purchase.
(d) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK AS APPLIED
TO CONTACTS MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK.
(e) This Agreement may be signed in various counterparts
which together shall constitute one and the same instrument.
[signature pages follow]
35
<PAGE> 37
Please confirm that the foregoing correctly sets forth the agreement
among the Company, the Subsidiary Guarantors and the Initial Purchaser.
Very truly yours,
CONTINENTAL GLOBAL GROUP, INC.
By: /s/ C. E. Bryant
------------------------------
Name: C. E. Bryant
Title: President
CONTINENTAL CONVEYOR & EQUIPMENT COMPANY
By: /s/ Jim Dickinson
------------------------------
Name: Jim Dickinson
Title: Vice President
GOODMAN CONVEYOR COMPANY
By: /s/ J. L. Mandia
------------------------------
Name: J. L. Mandia
Title: Vice President
<PAGE> 38
The foregoing Purchase Agreement
is hereby confirmed and accepted
as of the date first above written.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Ajay Patel
--------------------------------
Name: Ajay Patel
Title: Senior Vice President
<PAGE> 39
SCHEDULE I
----------
Subsidiary Guarantors
Continental Conveyor & Equipment Company
Goodman Conveyor Company
<PAGE> 40
SCHEDULE II
-----------
Direct and Indirect Subsidiaries of the Company
Continental Conveyor & Equipment Company
Goodman Conveyor Company
114119 Canada, Ltd.
CCE Pty. Ltd.
BCE Holdings Pty. Ltd.
Continental ACE Pty. Ltd.
Continental ACE Services Pty. Ltd.
Continental ACE Components Pty. Ltd.
A. Crane Pty. Ltd.
Ringway Pty. Ltd.
<PAGE> 41
SCHEDULE III
------------
Employee Pension and Benefit Plans of the Company
1. Continental Conveyor & Equipment Company Revised Negotiated Retirement
Plan for Hourly-Paid Employees (Winfield, AL plant).
2. Continental Conveyor & Equipment Company Savings and Profit Sharing
Plan.
3. Continental Conveyor & Equipment Company Retirement Plan for Salaried
and Hourly (Non-Union) Employees at Salyersville, KY.
4. Continental Conveyor & Equipment Company Life and AD&D for all
employees and weekly indemnity for truck drivers and all hourly
employees.
5. Continental Conveyor & Equipment Company group major medical insurance
plan for all employees.
6. Continental Conveyor & Equipment Company group long-term disability
for all salaried employees.
7. Continental Conveyor & Equipment Company group voluntary AD&D
insurance for salaried employees only.
8. Goodman Conveyor Retirement Savings Plan.
9. Goodman Conveyor Health/Dental Plan (Fully Insured).
10. Goodman Conveyor Salaried LTD Plan (Fully Insured).
11. Goodman Conveyor Hourly Life Insurance Plan (Fully Insured).
12. Goodman Conveyor Salaried Life Insurance Plan (Fully Insured).
13. Goodman Conveyor Travel & Accident Plan (Voluntary).
<PAGE> 42
SCHEDULE IV
-----------
Material Contracts of
Continental Global Group, Inc.,
Continental Conveyor & Equipment Company and
Goodman Conveyor Company
1. Revolving Credit Facility (as amended by Amendments I, II & III) by
and between Bank One Cleveland, NA and Continental Conveyor &
Equipment Company and Goodman Conveyor Company and other relative
exhibits thereto.
2. The Purchase Agreement and relative documents between Continental Pty.
Ltd. and BCE Holdings and related entities.
3. Settlement Agreement between Dresser Industries Inc. and Goodman
Conveyor Company dated March 18, 1996.
4. Purchase Agreement and relative exhibits between Continental Conveyor
& Equipment Company and Process Technologies Inc. for the purchase of
certain assets of Hewitt-Robins.
5. The Subordinated Note Payable by Goodman Conveyor Company to NES
Investments Co. L.P.
6. The Supplier Agreement between Continental Conveyor & Equipment
Company and Cyprus Amex Minerals Co.
7. Form of Supplier Agreement between Continental Conveyor & Equipment
Company and AT Massey Group (unexecuted).
8. The Union Agreement between Continental Conveyor & Equipment Company
and The Aluminum & Brick Workers Union.
9. The Management Agreement between Continental Global Group, Inc. and
Nesco Inc., dated April 1, 1997.
10. The Tax Payment Agreement between Continental Global Group, Inc.,
Continental Conveyor & Equipment Company, Goodman Conveyor Company and
NES Group Inc., dated April 1, 1997.
<PAGE> 43
EXHIBIT A
---------
Form of Registration Rights Agreement
<PAGE> 44
================================================================================
CONTINENTAL GLOBAL GROUP, INC.
----------------------------------------
$120,000,000
11% SERIES A SENIOR NOTES DUE 2007
----------------------------------------
-------------------
REGISTRATION RIGHTS AGREEMENT
DATED AS OF _______, 1997
-------------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
================================================================================
<PAGE> 45
This Registration Rights Agreement (this "AGREEMENT") is made and
entered into as of _______, 1997, by and among Continental Global Group, Inc., a
Delaware corporation (the "COMPANY"), and Continental Conveyor & Equipment
Company, a Delaware corporation ("CONTINENTAL") and Goodman Conveyor Company, a
Delaware corporation ("GOODMAN") (each, a "SUBSIDIARY GUARANTOR" and together,
the "SUBSIDIARY GUARANTORS") and Donaldson, Lufkin & Jenrette Securities
Corporation (the "INITIAL PURCHASER"), who has agreed to purchase the Company's
11% Series A Senior Notes due 2007 (the "SERIES A SENIOR NOTES") pursuant to the
Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated March
26, 1997 (the "PURCHASE AGREEMENT"), by and among the Company, the Subsidiary
Guarantors and the Initial Purchaser. In order to induce the Initial Purchaser
to purchase the Series A Senior Notes, the Company has agreed to provide the
registration rights set forth in this Agreement. The execution and delivery of
this Agreement is a condition to the obligations of the Initial Purchaser set
forth in the Purchase Agreement.
The parties hereby agree as follows:
1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the following meanings:
ACT: The Securities Act of 1933, as amended.
BUSINESS DAY: Any day except a Saturday, Sunday or other day in the
City of New York, or in the city of the corporate trust office of the Trustee,
on which banks are authorized to close.
BROKER-DEALER: Any broker or dealer registered under the Exchange Act.
BROKER-DEALER TRANSFER RESTRICTED SECURITIES: Series B Senior Notes
that are acquired by a Broker-Dealer in the Exchange Offer in exchange for
Series A Senior Notes that such Broker-Dealer acquired for its own account as a
result of market-making activities or other trading activities (other than
Series A Senior Notes acquired directly from the Company or any of its
affiliates).
CERTIFICATED SECURITIES: As defined in the Indenture.
CLOSING DATE: The date hereof.
COMMISSION: The Securities and Exchange Commission.
CONSUMMATE: An Exchange Offer shall be deemed "Consummated" for
purposes of this Agreement upon the occurrence of (a) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Series B Senior Notes to be issued in the Exchange Offer, (b)
the maintenance of such Registration Statement continuously effective and the
keeping of the Exchange Offer open for a period not less than the minimum period
required pursuant to Section 3(b) hereof and (c) the delivery by the Company to
the Registrar under the Indenture of Series B Senior Notes in the same aggregate
principal amount as the aggregate principal amount of Series A Senior Notes
tendered by Holders thereof pursuant to the Exchange Offer.
<PAGE> 46
DAMAGES PAYMENT DATE: With respect to the Transfer Restricted
Securities, each Interest Payment Date.
EFFECTIVENESS TARGET DATE: As defined in Section 5.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
EXCHANGE OFFER: The registration by the Company under the Act of the
Series B Senior Notes pursuant to the Exchange Offer Registration Statement
pursuant to which the Company shall offer the Holders of all outstanding
Transfer Restricted Securities the opportunity to exchange all such outstanding
Transfer Restricted Securities for Series B Senior Notes in an aggregate
principal amount equal to the aggregate principal amount of the Transfer
Restricted Securities tendered in such exchange offer by such Holders.
EXCHANGE OFFER REGISTRATION STATEMENT: The Registration Statement
relating to the Exchange Offer, including the related Prospectus.
EXEMPT RESALES: The transactions in which the Initial Purchaser
proposes to sell the Series A Senior Notes to certain "qualified institutional
buyers," as such term is defined in Rule 144A under the Act, to certain
"accredited investors," as such term is defined in Rule 501(a)(1), (2), (3), (5)
or (7) of Regulation D under the Act, and to non-U.S. persons outside the Untied
States in reliance upon Regulation S under the Act.
GLOBAL NOTE HOLDER: As defined in the Indenture.
HOLDERS: As defined in Section 2 hereof.
INDEMNIFIED HOLDER: As defined in Section 8(a) hereof.
INDENTURE: The Indenture, dated the Closing Date, among the Company,
the Subsidiary Guarantors and Norwest Bank Minnesota, N.A., as trustee (the
"TRUSTEE"), pursuant to which the Senior Notes are to be issued, as such
Indenture is amended or supplemented from time to time in accordance with the
terms thereof.
INTEREST PAYMENT DATE: As defined in the Indenture and the Senior
Notes.
NASD: National Association of Securities Dealers, Inc.
OFFERING MEMORANDUM: As defined in the Purchase Agreement.
PERSON: Any individual, corporation, partnership, joint venture,
association, jointstock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
PROSPECTUS: The prospectus included in a Registration Statement at the
time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.
2
<PAGE> 47
RECORD HOLDER: With respect to any Damages Payment Date, each Person
who is a Holder of Senior Notes on the record date with respect to the Interest
Payment Date on which such Damages Payment Date shall occur.
REGISTRATION DEFAULT: As defined in Section 5 hereof.
REGISTRATION STATEMENT: Any registration statement of the Company and
the Subsidiary Guarantors relating to (a) an offering of Series B Senior Notes
pursuant to an Exchange Offer or (b) the registration for resale of Transfer
Restricted Securities pursuant to the Shelf Registration Statement, in each
case, (i) which is filed pursuant to the provisions of this Agreement and (ii)
including the Prospectus included therein, all amendments and supplements
thereto (including post-effective amendments) and all exhibits and material
incorporated by reference therein.
RESTRICTED BROKER-DEALER: Any Broker-Dealer which holds Broker-Dealer
Transfer Restricted Securities.
SENIOR NOTES: The Series A Senior Notes and the Series B Senior Notes.
SERIES B SENIOR NOTES: The Company's 11% Series B Senior Notes due 2007
to be issued pursuant to the Indenture (i) in the Exchange Offer or (ii) upon
the request of any Holder of Series A Senior Notes covered by a Shelf
Registration Statement, in exchange for such Series A Senior Notes.
SHELF REGISTRATION STATEMENT: As defined in Section 4 hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb)
as in effect on the date of the Indenture.
TRANSFER RESTRICTED SECURITIES: Each Senior Note, until the earliest to
occur of (a) the date on which such Senior Note is exchanged in the Exchange
Offer and entitled to be resold to the public by the Holder thereof without
complying with the prospectus delivery requirements of the Act, (b) the date on
which such Senior Note has been disposed of in accordance with a Shelf
Registration Statement, (c) the date on which such Senior Note is disposed of by
a Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the
Exchange Offer Registration Statement (including delivery of the Prospectus
contained therein) or (d) the date on which such Senior Note is distributed to
the public pursuant to Rule 144 under the Act.
UNDERWRITTEN REGISTRATION or UNDERWRITTEN OFFERING: A registration in
which securities of the Company are sold to an underwriter for reoffering to the
public.
2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities
(each, a "HOLDER") whenever such Person owns Transfer Restricted Securities.
3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable
federal law (after the procedures set forth in Section 6(a)(i) below have been
complied with), the Company and the Subsidiary
3
<PAGE> 48
Guarantors shall (i) cause to be filed with the Commission, on or prior to 60
days after the Closing Date, the Exchange Offer Registration Statement, (ii) use
their reasonable best efforts to cause such Exchange Offer Registration
Statement to become effective at the earliest possible time, but in no event
later than 150 days after the Closing Date, (iii) in connection with the
foregoing, (A) file all pre-effective amendments to such Exchange Offer
Registration Statement as may be necessary in order to cause such Exchange Offer
Registration Statement to become effective, (B) file, if applicable, a
post-effective amendment to such Exchange Offer Registration Statement pursuant
to Rule 430A under the Act and (C) cause all necessary filings, if any, in
connection with the registration and qualification of the Series B Senior Notes
to be made under the Blue Sky laws of such jurisdictions as are necessary to
permit Consummation of the Exchange Offer and (iv) upon the effectiveness of
such Exchange Offer Registration Statement, commence and Consummate the Exchange
Offer. The Exchange Offer shall be on the appropriate form permitting
registration of the Series B Senior Notes to be offered in exchange for the
Series A Senior Notes that are Transfer Restricted Securities and to permit
sales of Broker-Dealer Transfer Restricted Securities by Restricted
Broker-Dealers as contemplated by Section 3(c) below.
(b) The Company and the Subsidiary Guarantors shall use their
reasonable best efforts to cause the Exchange Offer Registration Statement to be
effective continuously, and shall keep the Exchange Offer open, for a period of
not less than the minimum period required under applicable federal and state
securities laws to Consummate the Exchange Offer; provided, however, that in no
event shall such period be less than 20 Business Days. The Company and the
Subsidiary Guarantors shall cause the Exchange Offer to comply with all
applicable federal and state securities laws. No securities other than the
Senior Notes shall be included in the Exchange Offer Registration Statement. The
Company and the Subsidiary Guarantors shall use their reasonable best efforts to
cause the Exchange Offer to be Consummated on the earliest practicable date
after the Exchange Offer Registration Statement has become effective, but in no
event later than 30 Business Days thereafter.
(c) The Company shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and indicate
therein that any Restricted Broker-Dealer who holds Series A Senior Notes that
are Transfer Restricted Securities and that were acquired for the account of
such Broker-Dealer as a result of market-making activities or other trading
activities, may exchange such Series A Senior Notes (other than Transfer
Restricted Securities acquired directly from the Company or any Affiliate of the
Company) pursuant to the Exchange Offer; however, such Broker-Dealer may be
deemed to be an "underwriter" within the meaning of the Act and must, therefore,
deliver a prospectus meeting the requirements of the Act in connection with its
initial sale of each Series B Senior Note received by such Broker-Dealer in the
Exchange Offer, which prospectus delivery requirement may be satisfied by the
delivery by such Broker-Dealer of the Prospectus contained in the Exchange Offer
Registration Statement. Such "Plan of Distribution" section shall also contain
all other information with respect to such sales of Broker-Dealer Transfer
Restricted Securities by Restricted Broker-Dealers that the Commission may
require in order to permit such sales pursuant thereto, but such "Plan of
Distribution" shall not name any such Broker-Dealer or disclose the amount of
Senior Notes held by any such Broker-Dealer except to the extent required by the
Commission as a result of a change in policy after the date of this Agreement.
The Company and the Subsidiary Guarantors shall use their reasonable
best efforts to keep the Exchange Offer Registration Statement continuously
effective, supplemented and amended as required by the provisions of Section
6(c) below to the extent necessary to ensure that it is available for sales of
Broker-Dealer Transfer Restricted Securities by Restricted Broker-Dealers, and
to ensure that such Registration Statement conforms with the requirements of
this Agreement, the Act and the policies, rules
4
<PAGE> 49
and regulations of the Commission as announced from time to time, for a period
of 120 days from the date on which the Exchange Offer is Consummated.
The Company and the Subsidiary Guarantors shall provide sufficient
copies of the latest version of such Prospectus to such Restricted
Broker-Dealers promptly upon request, and in no event later than two days after
such request, at any time during such 120-day period in order to facilitate such
sales.
4. SHELF REGISTRATION
(a) SHELF REGISTRATION. If (i) the Company is not required to file an
Exchange Offer Registration Statement with respect to the Series B Senior Notes
because the Exchange Offer is not permitted by applicable law (after the
procedures set forth in Section 6(a)(i) below have been complied with) or (ii)
if any Holder of Transfer Restricted Securities shall notify the Company within
20 Business Days following the Consummation of the Exchange Offer that (A) such
Holder is prohibited by law or Commission policy from participating in the
Exchange Offer or (B) such Holder may not resell the Series B Senior Notes
acquired by it in the Exchange Offer to the public without delivering a
prospectus and the Prospectus contained in the Exchange Offer Registration
Statement is not appropriate or available for such resales by such Holder or (C)
such Holder is a Broker-Dealer and holds Series A Senior Notes acquired directly
from the Company or one of its affiliates, then the Company and the Subsidiary
Guarantors shall (x) cause to be filed on or prior to the earliest of (1) 30
days after the date on which the Company is notified by the Commission or
otherwise determines that it is not required to file the Exchange Offer
Registration Statement pursuant to clause (i) above and (2) 30 days after the
date on which the Company receives the notice specified in clause (ii) above, a
shelf registration statement pursuant to Rule 415 under the Act, (which may be
an amendment to the Exchange Offer Registration Statement (in either event, the
"SHELF REGISTRATION STATEMENT")), relating to all Transfer Restricted Securities
the Holders of which shall have provided the information required pursuant to
Section 4(b) hereof, and (y) use their reasonable best efforts to cause such
Shelf Registration Statement to become effective at the earliest possible time,
but in no event later than 150 days after the date on which the Company becomes
obligated to file such Shelf Registration Statement. If, after the Company has
filed an Exchange Offer Registration Statement which satisfies the requirements
of Section 3(a) above, the Company is required to file and make effective a
Shelf Registration Statement solely because the Exchange Offer shall not be
permitted under applicable federal law, then the filing of the Exchange Offer
Registration Statement shall be deemed to satisfy the requirements of clause (x)
above. Such an event shall have no effect on the requirements of clause (y)
above, or on the Effectiveness Target Date as defined in Section 5 below. The
Company and the Subsidiary Guarantors shall use their reasonable best efforts to
keep the Shelf Registration Statement discussed in this Section 4(a)
continuously effective, supplemented and amended as required by and subject to
the provisions of Sections 6(b) and (c) hereof to the extent necessary to ensure
that it is available for sales of Transfer Restricted Securities by the Holders
thereof entitled to the benefit of this Section 4(a), and to ensure that it
conforms with the requirements of this Agreement, the Act and the policies,
rules and regulations of the Commission as announced from time to time, for a
period of at least two years (as extended pursuant to Section 6(c)(i)) following
the date on which such Shelf Registration Statement first becomes effective
under the Act or such shorter period ending when all of the Transfer Restricted
Securities available for sale thereunder have been sold pursuant thereto.
(b) PROVISION BY HOLDERS OF CERTAIN INFORMATION IN CONNECTION WITH THE
SHELF REGISTRATION STATEMENT. No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder
5
<PAGE> 50
furnishes to the Company in writing, within 20 days after receipt of a request
therefor, such information specified in Item 507 of Regulation S-K under the Act
for use in connection with any Shelf Registration Statement or Prospectus or
preliminary Prospectus included therein. No Holder of Transfer Restricted
Securities shall be entitled to Liquidated Damages pursuant to Section 5 hereof
unless and until such Holder shall have used its best efforts to provide all
such information. Each Holder as to which any Shelf Registration Statement is
being effected agrees to furnish promptly to the Company all information
required to be disclosed in order to make the information previously furnished
to the Company by such Holder not materially misleading.
5. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement is not
filed with the Commission on or prior to the date specified for such filing in
this Agreement, (ii) any such Registration Statement has not been declared
effective by the Commission on or prior to the date specified for such
effectiveness in this Agreement (the "EFFECTIVENESS TARGET DATE"), (iii) the
Exchange Offer has not been Consummated within 30 Business Days after the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement or (iv) any Registration Statement required by this Agreement is filed
and declared effective but shall thereafter cease to be effective or fail to be
usable for its intended purpose without being succeeded within three Business
Days by a post-effective amendment to such Registration Statement that cures
such failure and that is itself declared effective within three Business Days of
filing (each such event referred to in clauses (i) through (iv), a "REGISTRATION
DEFAULT"), the Company hereby agrees to pay to each Holder of Transfer
Restricted Securities, for the first 90-day period immediately following the
occurrence of such Registration Default, liquidated damages in an amount equal
to $.05 per week per $1,000 principal amount of Senior Notes constituting
Transfer Restricted Securities held by such Holder for each week or portion
thereof that the Registration Default continues. The amount of the liquidated
damages payable to each Holder shall increase by an additional $.05 per week per
$1,000 in principal amount of Transfer Restricted Securities with respect to
each subsequent 90-day period until all Registration Defaults have been cured,
up to a maximum amount of liquidated damages of $.50 per week per $1,000
principal amount of Transfer Restricted Securities held by such Holder.
Notwithstanding anything to the contrary set forth herein, (1) upon filing of
the Exchange Offer Registration Statement (and/or, if applicable, the Shelf
Registration Statement), in the case of (i) above, (2) upon the effectiveness of
the Exchange Offer Registration Statement (and/or, if applicable, the Shelf
Registration Statement), in the case of (ii) above, (3) upon Consummation of the
Exchange Offer, in the case of (iii) above, or (4) upon the filing of a
post-effective amendment to the Registration Statement or an additional
Registration Statement that causes the Exchange Offer Registration Statement
(and/or, if applicable, the Shelf Registration Statement) to again be declared
effective or made usable in the case of (iv) above, the liquidated damages
payable with respect to the Transfer Restricted Securities as a result of such
clause (i), (ii), (iii) or (iv), as applicable, shall cease.
All accrued liquidated damages shall be paid to the Global Note Holder
by wire transfer of immediately available funds or by federal funds check and to
Holders of Certificated Securities by wire transfer to the accounts specified by
them or by mailing checks to their registered addresses if no such accounts have
been specified on each Damages Payment Date. All obligations of the Company and
the Subsidiary Guarantors set forth in the preceding paragraph that are
outstanding with respect to any Transfer Restricted Security at the time such
security ceases to be a Transfer Restricted Security shall survive until such
time as all such obligations with respect to such security shall have been
satisfied in full.
6
<PAGE> 51
6. REGISTRATION PROCEDURES
(a) EXCHANGE OFFER REGISTRATION STATEMENT. In connection with the
Exchange Offer, the Company and the Subsidiary Guarantors shall comply with all
applicable provisions of Section 6(c) below, shall use their reasonable best
efforts to effect such exchange and to permit the sale of Broker-Dealer Transfer
Restricted Securities being sold in accordance with the intended method or
methods of distribution thereof (which shall be in a manner consistent with the
terms of this Agreement), and shall comply with all of the following provisions:
(i) If, following the date hereof and prior to Consummation of
the Exchange Offer, there has been published a change in Commission
policy with respect to exchange offers such as the Exchange Offer, such
that in the reasonable judgment of counsel to the Company there is a
substantial question as to whether the Exchange Offer is permitted by
applicable federal law or Commission policy, the Company and the
Subsidiary Guarantors hereby agree to seek a no-action letter or other
favorable decision from the Commission allowing the Company and the
Subsidiary Guarantors to Consummate an Exchange Offer for such Series A
Senior Notes. The Company and the Subsidiary Guarantors hereby agree to
pursue the issuance of such a decision to the Commission staff level
but shall not be required to take commercially unreasonable action to
effect a change of Commission policy. In connection with the foregoing,
the Company and the Subsidiary Guarantors hereby agree, however, but
subject to the proviso set forth above, to take all such other actions
as are reasonably requested by the Commission or otherwise required in
connection with the issuance of such decision, including without
limitation (A) participating in telephonic conferences with the
Commission, (B) delivering to the Commission staff an analysis prepared
by counsel to the Company setting forth the legal bases, if any, upon
which such counsel has concluded that such an Exchange Offer should be
permitted and (C) diligently pursuing a resolution (which need not be
favorable) by the Commission staff of such submission.
(ii) As a condition to its participation in the Exchange Offer
pursuant to the terms of this Agreement, each Holder of Transfer
Restricted Securities shall furnish, upon the request of the Company,
prior to the Consummation of the Exchange Offer, a written
representation to the Company and the Subsidiary Guarantors (which may
be contained in the letter of transmittal contemplated by the Exchange
Offer Registration Statement) to the effect that (A) it is not an
affiliate of the Company, (B) it is not engaged in, and does not intend
to engage in, and has no arrangement or understanding with any person
to participate in, a distribution of the Series B Senior Notes to be
issued in the Exchange Offer and (C) it is acquiring the Series B
Senior Notes in its ordinary course of business. Each Holder hereby
acknowledges and agrees that any Broker-Dealer and any such Holder
using the Exchange Offer to participate in a distribution of the
securities to be acquired in the Exchange Offer (1) could not under
Commission policy as in effect on the date of this Agreement rely on
the position of the Commission enunciated in MORGAN STANLEY AND CO.,
INC. (available June 5, 1991) and EXXON CAPITAL HOLDINGS CORPORATION
(available May 13, 1988), as interpreted in the Commission's letter to
Shearman & Sterling dated July 2, 1993, and similar no-action letters
(including, if applicable, any no-action letter obtained pursuant to
clause (i) above), and (2) must comply with the registration and
prospectus delivery requirements of the Act in connection with a
secondary resale transaction and that such a secondary resale
transaction must be covered by an effective registration statement
containing the selling security holder information required by Item 507
or 508, as applicable, of Regulation S-K if the resales are of Series B
Senior Notes obtained by such Holder in exchange for Series A Senior
Notes acquired by such Holder directly from the Company or an affiliate
thereof.
7
<PAGE> 52
(iii) To the extent required by the Commission, prior to
effectiveness of the Exchange Offer Registration Statement, the Company
and the Subsidiary Guarantors shall provide a supplemental letter to
the Commission (A) stating that the Company and the Subsidiary
Guarantors are registering the Exchange Offer in reliance on the
position of the Commission enunciated in EXXON CAPITAL HOLDINGS
CORPORATION (available May 13, 1988), MORGAN STANLEY AND CO., INC.
(available June 5, 1991) and, if applicable, any no-action letter
obtained pursuant to clause (i) above, (B) including a representation
that neither the Company nor any Subsidiary Guarantor has entered into
any arrangement or understanding with any Person to distribute the
Series B Senior Notes to be received in the Exchange Offer and that, to
the best of the Company's and the Subsidiary Guarantors' information
and belief, each Holder participating in the Exchange Offer is
acquiring the Series B Senior Notes in its ordinary course of business
and has no arrangement or understanding with any Person to participate
in the distribution of the Series B Senior Notes received in the
Exchange Offer and (C) any other undertaking or representation required
by the Commission as set forth in any no-action letter obtained
pursuant to clause (i) above.
(b) SHELF REGISTRATION STATEMENT. In connection with the Shelf
Registration Statement the Company and the Subsidiary Guarantors shall comply
with all the provisions of Section 6(c) below and shall use their reasonable
best efforts to effect such registration to permit the sale of the Transfer
Restricted Securities being sold in accordance with the intended method or
methods of distribution thereof (as indicated in the information furnished to
the Company pursuant to Section 4(b) hereof), and pursuant thereto the Company
and the Subsidiary Guarantors will prepare and file with the Commission a
Registration Statement relating to the registration on any appropriate form
under the Act, which form shall be available for the sale of the Transfer
Restricted Securities in accordance with the intended method or methods of
distribution thereof within the time periods and otherwise in accordance with
the provisions hereof.
(c) GENERAL PROVISIONS. In connection with any Registration Statement
and any related Prospectus required by this Agreement to permit the sale or
resale of Transfer Restricted Securities Notes (including, without limitation,
any Exchange Offer Registration Statement and the related Prospectus, to the
extent that the same are required to be available to permit sales of
Broker-Dealer Transfer Restricted Securities by Restricted Broker-Dealers), the
Company and the Subsidiary Guarantors shall:
(i) use their reasonable best efforts to keep such
Registration Statement continuously effective and provide all requisite
financial statements for the period specified in Section 3 or 4 of this
Agreement, as applicable. Upon the occurrence of any event that would
cause any such Registration Statement or the Prospectus contained
therein (A) to contain a material misstatement or omission or (B) not
to be effective and usable for resale of Transfer Restricted Securities
during the period required by this Agreement, the Company shall file
promptly an appropriate amendment to such Registration Statement, (1)
in the case of clause (A), correcting any such misstatement or
omission, and (2) in the case of either clause (A) or (B), use their
reasonable best efforts to cause such amendment to be declared
effective and such Registration Statement and the related Prospectus to
become usable for their intended purpose(s) as soon as practicable
thereafter;
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be
necessary to keep the Registration Statement effective for the
applicable period set forth in Section 3 or 4 hereof, or such shorter
period as will
8
<PAGE> 53
terminate when all Transfer Restricted Securities covered by such
Registration Statement have been sold; cause the Prospectus to be
supplemented by any required Prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 under the Act, and to
comply fully with Rules 424, 430A and 462 as applicable, under the Act
in a timely manner; and comply with the provisions of the Act with
respect to the disposition of all securities covered by such
Registration Statement during the applicable period in accordance with
the intended method or methods of distribution by the selling Holders
thereof set forth in such Registration Statement or supplement to the
Prospectus;
(iii) advise the underwriter(s), if any, and selling Holders
promptly and, if requested by such Persons, confirm such advice in
writing, (A) when the Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to any
Registration Statement or any post-effective amendment thereto, when
the same has become effective, (B) of any request by the Commission for
amendments to the Registration Statement or amendments or supplements
to the Prospectus or for additional information relating thereto, (C)
of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement under the Act or of the
suspension by any state securities commission of the qualification of
the Transfer Restricted Securities for offering or sale in any
jurisdiction, or the initiation of any proceeding for any of the
preceding purposes, (D) of the existence of any fact or the happening
of any event that makes any statement of a material fact made in the
Registration Statement, the Prospectus, any amendment or supplement
thereto or any document incorporated by reference therein untrue, or
that requires the making of any additions to or changes in the
Registration Statement in order to make the statements therein not
misleading, or that requires the making of any additions to or changes
in the Prospectus in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading. If at
any time the Commission shall issue any stop order suspending the
effectiveness of the Registration Statement, or any state securities
commission or other regulatory authority shall issue an order
suspending the qualification or exemption from qualification of the
Transfer Restricted Securities under state securities or Blue Sky laws,
the Company and the Subsidiary Guarantors shall use their reasonable
best efforts to obtain the withdrawal or lifting of such order at the
earliest possible time;
(iv) furnish to the Initial Purchaser, each selling Holder
under any Registration Statement or Prospectus and each of the
underwriter(s) in connection with such sale, if any, before filing with
the Commission, copies of any Registration Statement or any Prospectus
included therein or any amendments or supplements to any such
Registration Statement or Prospectus (including all documents
incorporated by reference after the initial filing of such Registration
Statement), which documents will be subject to the review and comment
of such Holders and underwriter(s) in connection with such sale, if
any, for a period of at least five Business Days, and the Company will
not file any such Registration Statement or Prospectus or any amendment
or supplement to any such Registration Statement or Prospectus
(including all such documents incorporated by reference) if the selling
Holders of the Transfer Restricted Securities covered by such
Registration Statement or the underwriter(s) in connection with such
sale shall provide notice to the Company within five Business Days
after the receipt thereof to the effect that (A) such Registration
Statement, amendment, Prospectus or supplement, as applicable, as
proposed to be filed, contains a material misstatement or omission or
fails to comply with the applicable requirements of the Act or (B) that
any of the information furnished to the Company by such selling Holder
or underwriter, if any, and included in such Registration
9
<PAGE> 54
Statement, amendment, Prospectus or supplement, as applicable, as
proposed to be filed is incorrect in any respect;
(v) at reasonable times requested by the selling Holders
and/or the underwriters upon reasonable notice, prior to the filing of
any document that is to be incorporated by reference into a
Registration Statement or Prospectus, provide copies of such document
to the selling Holders and to the underwriter(s) in connection with
such sale, if any, make the Company's and the Subsidiary Guarantors'
representatives available for discussion of such document and other
customary due diligence matters, and include such information in such
document prior to the filing thereof as such selling Holders or
underwriter(s), if any, reasonably may request;
(vi) make available at reasonable times for inspection by the
selling Holders, any managing underwriter participating in any
disposition pursuant to such Registration Statement and any attorney or
accountant retained by such selling Holders or any of such
underwriter(s), all financial and other records, pertinent corporate
documents and properties of the Company and the Subsidiary Guarantors
and cause the Company's and the Subsidiary Guarantors' officers,
directors and employees to supply all information reasonably requested
by any such Holder, underwriter, attorney or accountant in connection
with such Registration Statement or any post-effective amendment
thereto subsequent to the filing thereof and prior to its
effectiveness;
(vii) if requested by any selling Holders or the
underwriter(s) in connection with such sale, if any, promptly include
in any Registration Statement or Prospectus, pursuant to a supplement
or post-effective amendment if necessary, such information as such
selling Holders and underwriter(s), if any, may reasonably request to
have included therein, including, without limitation, information
relating to the "Plan of Distribution" of the Transfer Restricted
Securities, information with respect to the principal amount of
Transfer Restricted Securities being sold to such underwriter(s), the
purchase price being paid therefor and any other terms of the offering
of the Transfer Restricted Securities to be sold in such offering; and
make all required filings of such Prospectus supplement or
post-effective amendment as soon as practicable after the Company is
notified of the matters to be included in such Prospectus supplement or
post-effective amendment;
(viii) furnish to each selling Holder and each of the
underwriter(s) in connection with such sale, if any, without charge, at
least one copy of the Registration Statement, as first filed with the
Commission, and of each amendment thereto, including all documents
incorporated by reference therein and all exhibits (including exhibits
incorporated therein by reference);
(ix) deliver to each selling Holder and each of the
underwriter(s), if any, without charge, as many copies of the
Prospectus (including each preliminary prospectus) and any amendment or
supplement thereto as such Persons reasonably may request; the Company
and the Subsidiary Guarantors hereby consent to the use (in accordance
with law) of the Prospectus and any amendment or supplement thereto by
each of the selling Holders and each of the underwriter(s), if any, in
connection with the offering and the sale of the Transfer Restricted
Securities covered by the Prospectus or any amendment or supplement
thereto;
(x) enter into such agreements (including an underwriting
agreement) and make such representations and warranties and take all
such other actions in connection therewith in order to expedite or
facilitate the disposition of the Transfer Restricted Securities
pursuant to any
10
<PAGE> 55
Registration Statement contemplated by this Agreement as may be
reasonably requested by any Holder of Transfer Restricted Securities or
underwriter in connection with any sale or resale pursuant to any
Registration Statement contemplated by this Agreement, and in such
connection, whether or not an underwriting agreement is entered into
and whether or not the registration is an Underwritten Registration,
the Company and the Subsidiary Guarantors shall:
(A) furnish to each selling Holder and each
underwriter, if any, upon the effectiveness of the Shelf
Registration Statement and to each Restricted Broker-Dealer
upon Consummation of the Exchange Offer:
(1) a certificate, dated the date of
Consummation of the Exchange Offer or the date of
effectiveness of the Shelf Registration Statement, as
the case may be, signed on behalf of each of the
Company and the Subsidiary Guarantors by (x) the
President or any Vice President and (y) a principal
financial or accounting officer of each of the
Company and the Subsidiary Guarantors confirming, as
of the date thereof, the matters set forth in
paragraphs (a) through (c) of Section 9 of the
Purchase Agreement and such other similar matters as
the Holders, underwriter(s) and/or Restricted Broker
Dealers may reasonably request;
(2) an opinion, dated the date of
Consummation of the Exchange Offer or the date of
effectiveness of the Shelf Registration Statement, as
the case may be, of counsel for the Company and the
Subsidiary Guarantors, covering matters customarily
covered in opinions requested in Underwritten
Offerings and dated the date of effectiveness of the
Shelf Registration Statement or the date of
Consummation of the Exchange Offer, as the case may
be; and
(3) customary comfort letters, dated as of
the date of effectiveness of the Shelf Registration
Statement or the date of Consummation of the Exchange
Offer, as the case may be, from the Company's
independent accountants, in the customary form and
covering matters of the type customarily covered in
comfort letters to underwriters in connection with
Underwritten Offerings, and affirming the matters set
forth in the comfort letters delivered pursuant to
Section 9(f) of the Purchase Agreement, without
exception;
(B) set forth in full or incorporated by reference in
the underwriting agreement, if any, in connection with any
sale or resale pursuant to any Shelf Registration Statement
the indemnification provisions and procedures of Section 8
hereof with respect to all parties to be indemnified pursuant
to said Section; and
(C) deliver such other documents and certificates as
may be reasonably requested by the selling Holders, the
underwriter(s), if any, and Restricted Broker Dealers, if any,
to evidence compliance with clause (A) above and with any
customary conditions contained in the underwriting agreement
or other agreement entered into by the Company and the
Subsidiary Guarantors pursuant to this clause (x).
The above shall be done at each closing under such
underwriting or similar agreement, as and to the extent required
thereunder, and if at any time the representations and warranties of
11
<PAGE> 56
the Company and the Subsidiary Guarantors contemplated in (A)(1) above
cease to be true and correct, the Company and the Subsidiary Guarantors
shall so advise the underwriter(s), if any, selling Holders and each
Restricted Broker Dealer promptly and if requested by such Persons,
shall confirm such advice in writing;
(xi) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders, the underwriter(s), if
any, and their respective counsel in connection with the registration
and qualification of the Transfer Restricted Securities under the
securities or Blue Sky laws of such jurisdictions as the selling
Holders or underwriter(s), if any, may reasonably request and do any
and all other acts or things reasonably necessary or advisable to
enable the disposition in such jurisdictions of the Transfer Restricted
Securities covered by the applicable Registration Statement; provided,
however, that neither the Company nor any Subsidiary Guarantor shall be
required to register or qualify as a foreign corporation where it is
not now so qualified or to take any action that would subject it to the
service of process in suits or to taxation, other than as to matters
and transactions relating to the Registration Statement, in any
jurisdiction where it is not now so subject;
(xii) issue, upon the request of any Holder of Series A Senior
Notes covered by any Shelf Registration Statement contemplated by this
Agreement, Series B Senior Notes, having an aggregate principal amount
equal to the aggregate principal amount of Series A Senior Notes
surrendered to the Company by such Holder in exchange therefor or being
sold by such Holder; such Series B Senior Notes to be registered in the
name of such Holder or in the name of the purchaser(s) of such Senior
Notes, as the case may be; in return, the Series A Senior Notes held by
such Holder shall be surrendered to the Company for cancellation;
(xiii) in connection with any sale of Transfer Restricted
Securities that will result in such securities no longer being Transfer
Restricted Securities, cooperate with the selling Holders and the
underwriter(s), if any, to facilitate the timely preparation and
delivery of certificates representing Transfer Restricted Securities to
be sold and not bearing any restrictive legends; and to register such
Transfer Restricted Securities in such denominations and such names as
the Holders or the underwriter(s), if any, may request at least two
Business Days prior to such sale of Transfer Restricted Securities;
(xiv) use their reasonable best efforts to cause the
disposition of the Transfer Restricted Securities covered by the
Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the
seller or sellers thereof or the underwriter(s), if any, to consummate
the disposition of such Transfer Restricted Securities, subject to the
proviso contained in clause (xi) above;
(xv) subject to Section 6(c)(i), if any fact or event
contemplated by Section 6(c)(iii)(D) above shall exist or have
occurred, prepare a supplement or post-effective amendment to the
Registration Statement or related Prospectus or any document
incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of Transfer
Restricted Securities, the Prospectus will not contain an untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
12
<PAGE> 57
(xvi) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of a Registration
Statement covering such Transfer Restricted Securities and provide the
Trustee under the Indenture with printed certificates for the Transfer
Restricted Securities which are in a form eligible for deposit with the
Depository Trust Company;
(xvii) cooperate and assist in any filings required to be made
with the NASD and in the performance of any due diligence investigation
by any underwriter (including any "qualified independent underwriter")
that is required to be retained in accordance with the rules and
regulations of the NASD, and use their reasonable best efforts to cause
such Registration Statement to become effective and approved by such
governmental agencies or authorities as may be necessary to enable the
Holders selling Transfer Restricted Securities to consummate the
disposition of such Transfer Restricted Securities;
(xviii) otherwise use their reasonable best efforts to comply
with all applicable rules and regulations of the Commission, and make
generally available to its security holders with regard to any
applicable Registration Statement, as soon as practicable, a
consolidated earnings statement meeting the requirements of Rule 158
(which need not be audited) covering a twelve-month period beginning
after the effective date of the Registration Statement (as such term is
defined in paragraph (c) of Rule 158 under the Act);
(xix) cause the Indenture to be qualified under the TIA not
later than the effective date of the first Registration Statement
required by this Agreement and, in connection therewith, cooperate with
the Trustee and the Holders of Senior Notes to effect such changes to
the Indenture as may be required for such Indenture to be so qualified
in accordance with the terms of the TIA; and execute and use its
reasonable best efforts to cause the Trustee to execute, all documents
that may be required to effect such changes and all other forms and
documents required to be filed with the Commission to enable such
Indenture to be so qualified in a timely manner; and
(xx) provide promptly to each Holder upon request each
document filed with the Commission pursuant to the requirements of
Section 13 or Section 15(d) of the Exchange Act.
(d) RESTRICTIONS ON HOLDERS. Each Holder agrees by acquisition of a
Transfer Restricted Security that, upon receipt of the notice referred to in
Section 6(c)(i) or any notice from the Company of the existence of any fact of
the kind described in Section 6(c)(iii)(D) hereof, such Holder will immediately
discontinue disposition of Transfer Restricted Securities pursuant to the
applicable Registration Statement until such Holder's receipt of the copies of
the supplemented or amended Prospectus contemplated by Section 6(c)(xv) hereof,
or until it is advised in writing by the Company that the use of the Prospectus
may be resumed, and has received copies of any additional or supplemental
filings that are incorporated by reference in the Prospectus (the "Advice"). If
so directed by the Company, each Holder will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such Transfer Restricted
Securities that was current at the time of receipt of either such notice. In the
event the Company shall give any such notice, the time period regarding the
effectiveness of such Registration Statement set forth in Section 3 or 4 hereof,
as applicable, shall be extended by the number of days during the period from
and including the date of the giving of such notice pursuant to Section 6(c)(i)
or Section 6(c)(iii)(D) hereof to and including the date when each selling
Holder covered by such
13
<PAGE> 58
Registration Statement shall have received the copies of the supplemented or
amended Prospectus contemplated by Section 6(c)(xv) hereof or shall have
received the Advice.
7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's and the Subsidiary
Guarantors' performance of or compliance with this Agreement will be borne by
the Company, regardless of whether a Registration Statement becomes effective,
including without limitation: (i) all registration and filing fees and expenses
(including filings made by any Initial Purchaser or Holder with the NASD (and,
if applicable, the fees and expenses of any "qualified independent underwriter")
and its counsel that may be required by the rules and regulations of the NASD);
(ii) all fees and expenses of compliance with federal securities and state Blue
Sky or securities laws; (iii) all expenses of printing (including printing
certificates for the Series B Senior Notes to be issued in the Exchange Offer
and printing of Prospectuses); (iv) all fees and disbursements of counsel for
the Company, the Subsidiary Guarantors and, in accordance with Section 7(b)
below, the Holders of Transfer Restricted Securities; (v) all messenger and
delivery services and telephone expenses of the Company and the Subsidiary
Guarantors; (vi) all application and filing fees in connection with listing the
Senior Notes on a national securities exchange or automated quotation system
pursuant to the requirements hereof and (vii) all fees and disbursements of
independent certified public accountants of the Company and the Subsidiary
Guarantors (including the expenses of any special audit and comfort letters
required by or incident to such performance).
The Company will, in any event, bear its and the Subsidiary Guarantors'
internal expenses (including, without limitation, all salaries and expenses of
its officers and employees performing legal or accounting duties), the expenses
of any annual audit and the fees and expenses of any Person, including special
experts, retained by the Company or the Subsidiary Guarantors.
(b) In connection with any Registration Statement required by this
Agreement, as applicable, (including, without limitation, the Exchange Offer
Registration Statement and the Shelf Registration Statement), the Company and
the Subsidiary Guarantors will reimburse the Initial Purchaser and the Holders
of Transfer Restricted Securities being tendered in the Exchange Offer and/or
pursuant to the "Plan of Distribution" contained in the Exchange Offer
Registration Statement or registered pursuant to the Shelf Registration
Statement, as applicable, for the reasonable fees and disbursements of not more
than one counsel, who shall be chosen by the Holders of a majority in principal
amount of the Transfer Restricted Securities for whose benefit such Registration
Statement is being prepared; provided however, that such fees and disbursements
shall in no event exceed $10,000.
8. INDEMNIFICATION
(a) The Company and each Subsidiary Guarantor, jointly and severally,
agree to indemnify and hold harmless (i) the Initial Purchaser, (ii) each
Holder, (iii) each person, if any, who controls (within the meaning of Section
15 of the Act or Section 20 of the Exchange Act) the Initial Purchaser or Holder
(any of the persons referred to in this clause (iii) being hereinafter referred
to as a "Controlling Person") and (iv) the respective officers, directors,
partners, employees and agents of the Initial Purchaser or any Holder or any
Controlling Person (any person referred to in clause (i), (ii), (iii) or (iv)
may hereinafter be referred to as an "INDEMNIFIED HOLDER"), to the fullest
extent lawful, from and against any and all losses, claims, damages,
liabilities, judgments, actions and expenses (including without limitation, and
as incurred, reimbursement of all reasonable costs of investigating, preparing,
pursuing or defending any claim or action, or any investigation or proceeding by
any governmental agency or body, commenced
14
<PAGE> 59
or threatened, including the reasonable fees and expenses of counsel to any
Indemnified Holder) directly or indirectly caused by, related to, based upon,
arising out of or in connection with any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement,
preliminary prospectus or Prospectus (or any amendment or supplement thereto),
or any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, except insofar as
such losses, claims, damages, liabilities, judgments, actions or expenses are
caused by any such untrue statement or alleged untrue statement or omission or
alleged omission that is made in reliance upon and in conformity with
information relating to the Initial Purchaser or any of the Holders furnished in
writing to the Company by the Initial Purchaser or any of the Holders expressly
for use therein; provided however, that the indemnification contained in this
paragraph (a) with respect to any preliminary prospectus shall not inure to the
benefit of any Holder (or to the benefit of any person controlling any Holder)
on account of any such loss, claim, damage, liability, judgment, action or
expense arising from the sale of Series A Senior Notes by such Holder to any
person if a copy of the Prospectus, as it may be amended or supplemented, shall
not have been delivered or sent to such person, at or prior to the written
confirmation of such sale, and the untrue statement or alleged untrue statement
or omission or alleged omission of a material fact contained in any preliminary
prospectus was corrected in the Prospectus, as it may have been amended or
supplemented; provided that the Company has delivered the Prospectus, as it may
be amended or supplemented, to such Holder in requisite quantity on a timely
basis to permit such delivery or sending. The Company and each Subsidiary
Guarantor also agree to, jointly and severally, reimburse each Indemnified
Holder for any and all fees and expenses (including, without limitation, the
fees and expenses of counsel) as they are incurred in connection with enforcing
such Indemnified Holder's rights under this Agreement (including, without
limitation, its rights under this Section 8).
In case any action or proceeding (including any governmental
or regulatory investigation or proceeding) shall be brought or asserted against
any of the Indemnified Holders with respect to which indemnity may be sought
against the Company or any Subsidiary Guarantor, the Indemnified Holder shall
promptly notify the Company in writing (provided, that the failure to give such
notice shall not relieve the Company or the Subsidiary Guarantors of their
obligations pursuant to this Agreement, unless it shall have been determined by
a court of competent jurisdiction that such failure shall have materially
adversely affected the Company or a Subsidiary Guarantor) and the Company shall
assume the defense thereof, including the employment of counsel reasonably
satisfactory to such Indemnified Holder and payment of all fees and expenses
(regardless of whether it is ultimately determined that an Indemnified Holder is
not entitled to indemnification hereunder). Such Indemnified Holder shall have
the right to employ separate counsel in any such action and participate in the
defense thereof, but the reasonable fees and expenses of such counsel shall be
at the expense of such Indemnified Holder unless (i) the employment of such
counsel has been specifically authorized in writing by the Company, (ii) the
Company has failed to assume the defense and employ counsel or (iii) the named
parties to any such action (including any impleaded parties) include both such
Indemnified Holder and the Company or a Subsidiary Guarantor, and such
Indemnified Holder has been advised by such counsel that there may be one or
more legal defenses available to it which are different from or additional to
those available to the Company or the Subsidiary Guarantors (in which case the
Company shall not have the right to assume the defense of such action on behalf
of such Indemnified Holder, it being understood, however, that the Company shall
not, in connection with any one such action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel) for
all such Indemnified Holders, which firm shall be designated in writing by the
Indemnified Holders, and that all
15
<PAGE> 60
such fees and expenses shall be reimbursed as they are incurred). Neither the
Company nor any Subsidiary Guarantor shall be liable for any settlement of any
such action effected without prior written consent of the Company, but if
settled with the Company's written consent (which consent will not be
unreasonably withheld) the Company and each Subsidiary Guarantor agree to,
jointly and severally, indemnify and hold harmless each Indemnified Holder from
and against any loss, claim, damage, liability, judgment, action or expense by
reason of such settlement. No indemnifying party shall, without the prior
written consent of the indemnified party effect any settlement of any pending or
threatened proceeding in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter of
such proceeding.
(b) Each Holder of Transfer Restricted Securities agrees,
severally and not jointly, to indemnify and hold harmless the Company, the
Subsidiary Guarantors, each Controlling Person, if any, who controls (within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act) the Company
or any Subsidiary Guarantor, and the officers, directors, partners, employees
and agents of each such person (the "Company Indemnified Parties"), to the same
extent as the foregoing indemnity from the Company and the Subsidiary Guarantors
to each of the Indemnified Holders, but only with respect to claims and actions
based on information relating to such Holder furnished in writing by such Holder
expressly for use in any Registration Statement. In case any action shall be
brought against any Company Indemnified Party in respect of which indemnity may
be sought against a Holder of Transfer Restricted Securities, such Holder shall
have the rights and duties given the Company and the Subsidiary Guarantors, and
the Company Indemnified Parties shall have the rights and duties given to each
Holder by the preceding paragraph. In no event shall any Holder be liable or
responsible for any amount in excess of the amount by which the total received
by such Holder with respect to its sale of Transfer Restricted Securities
pursuant to a Registration Statement exceeds (i) the amount paid by such Holder
for such Transfer Restricted Securities and (ii) the amount of any damages which
such Holder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission.
(c) If the indemnification provided for in this Section 8 is
unavailable to an indemnified party under Section 8(a) or Section 8(b) hereof
(other than by reason of exceptions provided in those Sections) in respect of
any losses, claims, damages, liabilities, judgments, actions or expenses
referred to therein, then each indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities,
judgments, actions or expenses in such proportion as is appropriate to reflect
the relative benefits received by such indemnifying party (or parties, as
applicable), on the one hand, and the indemnified party (or parties, as
applicable), on the other hand, from the initial placement and the sale of
Transfer Restricted Securities pursuant to the applicable Registration Statement
or if such allocation is not permitted by applicable law, the relative fault of
such indemnifying party, on the one hand, and of such indemnified party, on the
other hand, in connection with the statements or omissions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative benefits received by the Company
and the Subsidiary Guarantors shall be deemed to be equal to the total proceeds
from the initial placement (net of the Initial Purchaser's commissions, but
before deducting expenses) as set forth on the cover page of the Offering
Memorandum. The relative benefits of the Initial Purchaser shall be deemed to be
equal to the total purchase discounts and commissions as set forth on the cover
page of the Offering Memorandum and benefits received by any other Indemnified
Holders shall be deemed to be equal to the total proceeds received by such
Holder upon its sale of Series A Senior Notes. The relative fault of such
indemnifying party, on the one hand,
16
<PAGE> 61
and of such indemnified party, on the other hand, shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by such indemnifying party on the one hand or by
such indemnified party, on the other hand and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Company, the Subsidiary Guarantors, the Initial Purchaser
and each Holder of Transfer Restricted Securities agree that it would not be
just and equitable if contribution pursuant to this Section 8(c) were determined
by pro rata allocation (even if the Holders were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities, judgments, actions or expenses referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 8, neither the
Initial Purchaser nor its related Indemnified Holders shall be required to
contribute, in the aggregate, any amount in excess of the amount equal to (A)
the amount of the total purchase discounts and commissions applicable to such
Transfer Restricted Securities less (B) any amount paid or contributed by the
Initial Purchaser under the Purchase Agreement; nor shall any Holder or its
related Indemnified Holders be required to contribute, in the aggregate, any
amount in excess of the amount by which the total received by such Holder with
respect to the sale of its Transfer Restricted Securities pursuant to a
Registration Statement exceeds the sum of (A) the amount paid by such Holder for
such Transfer Restricted Securities plus (B) the amount of any damages which
such Holder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The obligations of the Initial Purchaser and the
Holders to contribute pursuant to this Section 8(c) are several in proportion to
the respective principal amount of Series A Senior Notes held by each of the
Holders hereunder and not joint.
The indemnity and contribution agreements of the Company, the
Subsidiary Guarantors and the Initial Purchaser contained in this Section 8 are
in addition to any liability or obligation which the Company, the Subsidiary
Guarantors and the Initial Purchaser may otherwise have to the Indemnified
Holders and the Company Indemnified Parties, respectively, referred to above.
9. RULE 144A
The Company and the Subsidiary Guarantors hereby agree with each
Holder, for so long as any Transfer Restricted Securities remain outstanding and
during any period in which the Company and the Subsidiary Guarantors are not
subject to Section 13 or 15(d) of the Securities Exchange Act, to make
available, upon request of any Holder of Transfer Restricted Securities, to any
Holder or beneficial owner of Transfer Restricted Securities in connection with
any sale thereof and any prospective purchaser of such Transfer Restricted
Securities designated by such Holder or beneficial owner, the information
required by Rule 144A(d)(4) under the Act in order to permit resales of such
Transfer Restricted Securities pursuant to Rule 144A.
17
<PAGE> 62
10. UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration hereunder
unless such Holder (a) agrees to sell such Holder's Transfer Restricted
Securities on the basis provided in customary underwriting arrangements entered
into in connection therewith and (b) completes and executes all reasonable
questionnaires, powers of attorney, lock-up letters and other documents required
under the terms of such underwriting arrangements.
11. SELECTION OF UNDERWRITERS
For any Underwritten Offering of Senior Notes, the investment banker or
investment bankers and manager or managers for any Underwritten Offering of
Senior Notes, that will administer such offering will be selected by the Holders
of a majority in aggregate principal amount of the Transfer Restricted
Securities included in such offering. Such investment bankers and managers are
referred to herein as the "underwriters."
12. MISCELLANEOUS
(a) REMEDIES. Each Holder, in addition to being entitled to exercise
all rights provided herein, in the Indenture, the Purchase Agreement or granted
by law, including recovery of liquidated or other damages, will be entitled to
specific performance of its rights under this Agreement. The Company and the
Subsidiary Guarantors agree that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by them of the
provisions of this Agreement and hereby agree to waive the defense in any action
for specific performance that a remedy at law would be adequate.
(b) NO INCONSISTENT AGREEMENTS. Neither the Company nor any Subsidiary
Guarantor will, on or after the date of this Agreement, enter into any agreement
with respect to its securities that is inconsistent with the rights granted to
the Holders in this Agreement or otherwise conflicts with the provisions hereof.
Neither the Company nor any Subsidiary Guarantor has previously entered into any
agreement granting any registration rights with respect to its securities to any
Person. The rights granted to the Holders hereunder do not in any way conflict
with and are not inconsistent with the rights granted to the holders of the
Company's and the Guarantors' securities under any agreement in effect on the
date hereof.
(c) ADJUSTMENTS AFFECTING THE SENIOR NOTES. Neither the Company nor any
Subsidiary Guarantor will take any action, or voluntarily permit any change to
occur, with respect to the Senior Notes that would materially and adversely
affect the ability of the Holders to Consummate any Exchange Offer.
(d) AMENDMENTS AND WAIVERS. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless (i) in the case of Section 5
hereof and this Section 12(d)(i), the Company has obtained the written consent
of the Holders of all outstanding Transfer Restricted Securities and (ii) in the
case of all other provisions hereof, the Company has obtained the written
consent of Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities. Notwithstanding the foregoing, a waiver or consent to
departure from the provisions hereof that relates exclusively to the rights of
Holders whose securities are being tendered pursuant to the Exchange Offer and
that does not affect directly or indirectly the rights of other Holders whose
securities are not being tendered pursuant to such Exchange Offer may
18
<PAGE> 63
be given by the Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities subject to such Exchange Offer.
(e) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of
the Registrar under the Indenture, with a copy to the Registrar under
the Indenture;
With a copy to:
Latham & Watkins
885 Third Avenue
New York, New York 10022
Telecopier No.: (212) 751-4864
Attention: Kirk A. Davenport
(ii) if to the Company or any Subsidiary Guarantor:
Continental Global Group, Inc.
438 Industrial Drive
Winfield, Alabama 35594
Telecopier No.: (205) 487-4233
Attention: Chief Financial Officer
With a copy to:
Squire, Sanders & Dempsey L.L.P.
4900 Key Tower
127 Public Square
Cleveland, Ohio 44114
Telecopier No.: (216) 479-8793
Attention: Jeffrey J. Margulies
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next business day, if timely delivered
to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment,
subsequent Holders of Transfer Restricted Securities; provided, however, that
this Agreement shall not inure to the benefit of or be binding upon a successor
or assign of a Holder unless
19
<PAGE> 64
and to the extent such successor or assign acquired Transfer Restricted
Securities directly from such Holder at a time when such Holder could not
transfer such Transfer Restricted Securities pursuant to a Shelf Registration
Statement. Each Holder of Transfer Restricted Securities agrees to be bound by
and comply with the terms and provisions of this Agreement.
(g) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK.
(j) SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) ENTIRE AGREEMENT. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings among the parties with respect to such subject matter.
[signature page follows]
20
<PAGE> 65
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
CONTINENTAL GLOBAL GROUP, INC.
By:
---------------------------------------
Name:
Title:
CONTINENTAL CONVEYOR & EQUIPMENT
COMPANY
By:
---------------------------------------
Name:
Title:
GOODMAN CONVEYOR COMPANY
By:
---------------------------------------
Name:
Title:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:
-------------------------------
Name:
Title:
<PAGE> 66
EXHIBIT B
---------
Opinion of Australian Counsel
(1) Each of the Australian Subsidiaries (A) is a corporation validly
existing and in good standing under the laws of its respective jurisdiction of
incorporation, (B) has requisite corporate power and authority to carry on its
respective business as it is currently being conducted and to own, lease and
operate its respective properties and (C) to the best of such counsel's
knowledge, is duly qualified and in good standing as a foreign corporation
registered to do business in each jurisdiction in which the nature or its
business or ownership or leasing or property requires such qualification, except
where the failure to be so qualified would not, singly or in the aggregate, have
a material adverse effect on the assets, property, business, results of
operations (financial or otherwise) or prospects of the Australian Subsidiaries
taken as a whole.
(2) All of the outstanding shares of capital stock of or other
ownership interests in each of the Australian Subsidiaries has been duly
authorized and validly issued, is fully paid and nonassessable; the outstanding
shares of capital stock of or other ownership interests in each of the
Australian Subsidiaries have not been issued in violation of any preemptive or
similar rights and to the best of such counsel's knowledge are owned free and
clear of any Lien except for Liens granted pursuant to the Australian Revolving
Credit Facility.
(3) To the best knowledge of such counsel after due inquiry, none of
the Australian Subsidiaries is in violation of its respective charter or bylaws
in default in the performance of any material term, provision, obligation,
agreement or condition contained in any bond, debenture, note or any other
evidence of indebtedness or any indenture, mortgage, deed of trust or other
contract, lease or other instrument, to which any of the Australian Subsidiaries
is a party or to which any of them or their respective properties may be subject
or bound.
<PAGE> 1
Exhibit 4.3
================================================================================
CONTINENTAL GLOBAL GROUP, INC.
----------------------------------------
$120,000,000
11% SERIES A SENIOR NOTES DUE 2007
----------------------------------------
-------------------
REGISTRATION RIGHTS AGREEMENT
DATED AS OF APRIL 1, 1997
-------------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
================================================================================
<PAGE> 2
This Registration Rights Agreement (this "AGREEMENT") is made and
entered into as of April 1, 1997, by and among Continental Global Group, Inc., a
Delaware corporation (the "COMPANY"), and Continental Conveyor & Equipment
Company, a Delaware corporation ("CONTINENTAL") and Goodman Conveyor Company, a
Delaware corporation ("GOODMAN") (each, a "SUBSIDIARY GUARANTOR" and together,
the "SUBSIDIARY GUARANTORS") and Donaldson, Lufkin & Jenrette Securities
Corporation (the "INITIAL PURCHASER"), who has agreed to purchase the Company's
11% Series A Senior Notes due 2007 (the "SERIES A SENIOR NOTES") pursuant to the
Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated March
26, 1997 (the "PURCHASE AGREEMENT"), by and among the Company, the Subsidiary
Guarantors and the Initial Purchaser. In order to induce the Initial Purchaser
to purchase the Series A Senior Notes, the Company has agreed to provide the
registration rights set forth in this Agreement. The execution and delivery of
this Agreement is a condition to the obligations of the Initial Purchaser set
forth in the Purchase Agreement.
The parties hereby agree as follows:
1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the following meanings:
ACT: The Securities Act of 1933, as amended.
BUSINESS DAY: Any day except a Saturday, Sunday or other day in the
City of New York, or in the city of the corporate trust office of the Trustee,
on which banks are authorized to close.
BROKER-DEALER: Any broker or dealer registered under the Exchange Act.
BROKER-DEALER TRANSFER RESTRICTED SECURITIES: Series B Senior Notes
that are acquired by a Broker-Dealer in the Exchange Offer in exchange for
Series A Senior Notes that such Broker-Dealer acquired for its own account as a
result of market-making activities or other trading activities (other than
Series A Senior Notes acquired directly from the Company or any of its
affiliates).
CERTIFICATED SECURITIES: As defined in the Indenture.
CLOSING DATE: The date hereof.
COMMISSION: The Securities and Exchange Commission.
CONSUMMATE: An Exchange Offer shall be deemed "Consummated" for
purposes of this Agreement upon the occurrence of (a) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Series B Senior Notes to be issued in the Exchange Offer, (b)
the maintenance of such Registration Statement continuously effective and the
keeping of the Exchange Offer open for a period not less than the minimum period
required pursuant to Section 3(b) hereof and (c) the delivery by the Company to
the Registrar under the Indenture of Series B Senior Notes in the same aggregate
principal amount as the aggregate principal amount of Series A Senior Notes
tendered by Holders thereof pursuant to the Exchange Offer.
<PAGE> 3
DAMAGES PAYMENT DATE: With respect to the Transfer Restricted
Securities, each Interest Payment Date.
EFFECTIVENESS TARGET DATE: As defined in Section 5.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
EXCHANGE OFFER: The registration by the Company under the Act of the
Series B Senior Notes pursuant to the Exchange Offer Registration Statement
pursuant to which the Company shall offer the Holders of all outstanding
Transfer Restricted Securities the opportunity to exchange all such outstanding
Transfer Restricted Securities for Series B Senior Notes in an aggregate
principal amount equal to the aggregate principal amount of the Transfer
Restricted Securities tendered in such exchange offer by such Holders.
EXCHANGE OFFER REGISTRATION STATEMENT: The Registration Statement
relating to the Exchange Offer, including the related Prospectus.
EXEMPT RESALES: The transactions in which the Initial Purchaser
proposes to sell the Series A Senior Notes to certain "qualified institutional
buyers," as such term is defined in Rule 144A under the Act, to certain
"accredited investors," as such term is defined in Rule 501(a)(1), (2), (3), (5)
or (7) of Regulation D under the Act, and to non-U.S. persons outside the Untied
States in reliance upon Regulation S under the Act.
GLOBAL NOTE HOLDER: As defined in the Indenture.
HOLDERS: As defined in Section 2 hereof.
INDEMNIFIED HOLDER: As defined in Section 8(a) hereof.
INDENTURE: The Indenture, dated the Closing Date, among the Company,
the Subsidiary Guarantors and Norwest Bank Minnesota, N.A., as trustee (the
"TRUSTEE"), pursuant to which the Senior Notes are to be issued, as such
Indenture is amended or supplemented from time to time in accordance with the
terms thereof.
INTEREST PAYMENT DATE: As defined in the Indenture and the Senior
Notes.
NASD: National Association of Securities Dealers, Inc.
OFFERING MEMORANDUM: As defined in the Purchase Agreement.
PERSON: Any individual, corporation, partnership, joint venture,
association, jointstock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
PROSPECTUS: The prospectus included in a Registration Statement at the
time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.
2
<PAGE> 4
RECORD HOLDER: With respect to any Damages Payment Date, each Person
who is a Holder of Senior Notes on the record date with respect to the Interest
Payment Date on which such Damages Payment Date shall occur.
REGISTRATION DEFAULT: As defined in Section 5 hereof.
REGISTRATION STATEMENT: Any registration statement of the Company and
the Subsidiary Guarantors relating to (a) an offering of Series B Senior Notes
pursuant to an Exchange Offer or (b) the registration for resale of Transfer
Restricted Securities pursuant to the Shelf Registration Statement, in each
case, (i) which is filed pursuant to the provisions of this Agreement and (ii)
including the Prospectus included therein, all amendments and supplements
thereto (including post-effective amendments) and all exhibits and material
incorporated by reference therein.
RESTRICTED BROKER-DEALER: Any Broker-Dealer which holds Broker-Dealer
Transfer Restricted Securities.
SENIOR NOTES: The Series A Senior Notes and the Series B Senior Notes.
SERIES B SENIOR NOTES: The Company's 11% Series B Senior Notes due 2007
to be issued pursuant to the Indenture (i) in the Exchange Offer or (ii) upon
the request of any Holder of Series A Senior Notes covered by a Shelf
Registration Statement, in exchange for such Series A Senior Notes.
SHELF REGISTRATION STATEMENT: As defined in Section 4 hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb)
as in effect on the date of the Indenture.
TRANSFER RESTRICTED SECURITIES: Each Senior Note, until the earliest to
occur of (a) the date on which such Senior Note is exchanged in the Exchange
Offer and entitled to be resold to the public by the Holder thereof without
complying with the prospectus delivery requirements of the Act, (b) the date on
which such Senior Note has been disposed of in accordance with a Shelf
Registration Statement, (c) the date on which such Senior Note is disposed of by
a Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the
Exchange Offer Registration Statement (including delivery of the Prospectus
contained therein) or (d) the date on which such Senior Note is distributed to
the public pursuant to Rule 144 under the Act.
UNDERWRITTEN REGISTRATION or UNDERWRITTEN OFFERING: A registration in
which securities of the Company are sold to an underwriter for reoffering to the
public.
2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities
(each, a "HOLDER") whenever such Person owns Transfer Restricted Securities.
3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable
federal law (after the procedures set forth in Section 6(a)(i) below have been
complied with), the Company and the Subsidiary
3
<PAGE> 5
Guarantors shall (i) cause to be filed with the Commission, on or prior to 60
days after the Closing Date, the Exchange Offer Registration Statement, (ii) use
their reasonable best efforts to cause such Exchange Offer Registration
Statement to become effective at the earliest possible time, but in no event
later than 150 days after the Closing Date, (iii) in connection with the
foregoing, (A) file all pre-effective amendments to such Exchange Offer
Registration Statement as may be necessary in order to cause such Exchange Offer
Registration Statement to become effective, (B) file, if applicable, a
post-effective amendment to such Exchange Offer Registration Statement pursuant
to Rule 430A under the Act and (C) cause all necessary filings, if any, in
connection with the registration and qualification of the Series B Senior Notes
to be made under the Blue Sky laws of such jurisdictions as are necessary to
permit Consummation of the Exchange Offer and (iv) upon the effectiveness of
such Exchange Offer Registration Statement, commence and Consummate the Exchange
Offer. The Exchange Offer shall be on the appropriate form permitting
registration of the Series B Senior Notes to be offered in exchange for the
Series A Senior Notes that are Transfer Restricted Securities and to permit
sales of Broker-Dealer Transfer Restricted Securities by Restricted
Broker-Dealers as contemplated by Section 3(c) below.
(b) The Company and the Subsidiary Guarantors shall use their
reasonable best efforts to cause the Exchange Offer Registration Statement to be
effective continuously, and shall keep the Exchange Offer open, for a period of
not less than the minimum period required under applicable federal and state
securities laws to Consummate the Exchange Offer; provided, however, that in no
event shall such period be less than 20 Business Days. The Company and the
Subsidiary Guarantors shall cause the Exchange Offer to comply with all
applicable federal and state securities laws. No securities other than the
Senior Notes shall be included in the Exchange Offer Registration Statement. The
Company and the Subsidiary Guarantors shall use their reasonable best efforts to
cause the Exchange Offer to be Consummated on the earliest practicable date
after the Exchange Offer Registration Statement has become effective, but in no
event later than 30 Business Days thereafter.
(c) The Company shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and indicate
therein that any Restricted Broker-Dealer who holds Series A Senior Notes that
are Transfer Restricted Securities and that were acquired for the account of
such Broker-Dealer as a result of market-making activities or other trading
activities, may exchange such Series A Senior Notes (other than Transfer
Restricted Securities acquired directly from the Company or any Affiliate of the
Company) pursuant to the Exchange Offer; however, such Broker-Dealer may be
deemed to be an "underwriter" within the meaning of the Act and must, therefore,
deliver a prospectus meeting the requirements of the Act in connection with its
initial sale of each Series B Senior Note received by such Broker-Dealer in the
Exchange Offer, which prospectus delivery requirement may be satisfied by the
delivery by such Broker-Dealer of the Prospectus contained in the Exchange Offer
Registration Statement. Such "Plan of Distribution" section shall also contain
all other information with respect to such sales of Broker-Dealer Transfer
Restricted Securities by Restricted Broker-Dealers that the Commission may
require in order to permit such sales pursuant thereto, but such "Plan of
Distribution" shall not name any such Broker-Dealer or disclose the amount of
Senior Notes held by any such Broker-Dealer except to the extent required by the
Commission as a result of a change in policy after the date of this Agreement.
The Company and the Subsidiary Guarantors shall use their reasonable
best efforts to keep the Exchange Offer Registration Statement continuously
effective, supplemented and amended as required by the provisions of Section
6(c) below to the extent necessary to ensure that it is available for sales of
Broker-Dealer Transfer Restricted Securities by Restricted Broker-Dealers, and
to ensure that such Registration Statement conforms with the requirements of
this Agreement, the Act and the policies, rules
4
<PAGE> 6
and regulations of the Commission as announced from time to time, for a period
of 120 days from the date on which the Exchange Offer is Consummated.
The Company and the Subsidiary Guarantors shall provide sufficient
copies of the latest version of such Prospectus to such Restricted
Broker-Dealers promptly upon request, and in no event later than two days after
such request, at any time during such 120-day period in order to facilitate such
sales.
4. SHELF REGISTRATION
(a) SHELF REGISTRATION. If (i) the Company is not required to file an
Exchange Offer Registration Statement with respect to the Series B Senior Notes
because the Exchange Offer is not permitted by applicable law (after the
procedures set forth in Section 6(a)(i) below have been complied with) or (ii)
if any Holder of Transfer Restricted Securities shall notify the Company within
20 Business Days following the Consummation of the Exchange Offer that (A) such
Holder is prohibited by law or Commission policy from participating in the
Exchange Offer or (B) such Holder may not resell the Series B Senior Notes
acquired by it in the Exchange Offer to the public without delivering a
prospectus and the Prospectus contained in the Exchange Offer Registration
Statement is not appropriate or available for such resales by such Holder or (C)
such Holder is a Broker-Dealer and holds Series A Senior Notes acquired directly
from the Company or one of its affiliates, then the Company and the Subsidiary
Guarantors shall (x) cause to be filed on or prior to the earliest of (1) 30
days after the date on which the Company is notified by the Commission or
otherwise determines that it is not required to file the Exchange Offer
Registration Statement pursuant to clause (i) above and (2) 30 days after the
date on which the Company receives the notice specified in clause (ii) above, a
shelf registration statement pursuant to Rule 415 under the Act, (which may be
an amendment to the Exchange Offer Registration Statement (in either event, the
"SHELF REGISTRATION STATEMENT")), relating to all Transfer Restricted Securities
the Holders of which shall have provided the information required pursuant to
Section 4(b) hereof, and (y) use their reasonable best efforts to cause such
Shelf Registration Statement to become effective at the earliest possible time,
but in no event later than 150 days after the date on which the Company becomes
obligated to file such Shelf Registration Statement. If, after the Company has
filed an Exchange Offer Registration Statement which satisfies the requirements
of Section 3(a) above, the Company is required to file and make effective a
Shelf Registration Statement solely because the Exchange Offer shall not be
permitted under applicable federal law, then the filing of the Exchange Offer
Registration Statement shall be deemed to satisfy the requirements of clause (x)
above. Such an event shall have no effect on the requirements of clause (y)
above, or on the Effectiveness Target Date as defined in Section 5 below. The
Company and the Subsidiary Guarantors shall use their reasonable best efforts to
keep the Shelf Registration Statement discussed in this Section 4(a)
continuously effective, supplemented and amended as required by and subject to
the provisions of Sections 6(b) and (c) hereof to the extent necessary to ensure
that it is available for sales of Transfer Restricted Securities by the Holders
thereof entitled to the benefit of this Section 4(a), and to ensure that it
conforms with the requirements of this Agreement, the Act and the policies,
rules and regulations of the Commission as announced from time to time, for a
period of at least two years (as extended pursuant to Section 6(c)(i)) following
the date on which such Shelf Registration Statement first becomes effective
under the Act or such shorter period ending when all of the Transfer Restricted
Securities available for sale thereunder have been sold pursuant thereto.
(b) PROVISION BY HOLDERS OF CERTAIN INFORMATION IN CONNECTION WITH THE
SHELF REGISTRATION STATEMENT. No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder
5
<PAGE> 7
furnishes to the Company in writing, within 20 days after receipt of a request
therefor, such information specified in Item 507 of Regulation S-K under the Act
for use in connection with any Shelf Registration Statement or Prospectus or
preliminary Prospectus included therein. No Holder of Transfer Restricted
Securities shall be entitled to Liquidated Damages pursuant to Section 5 hereof
unless and until such Holder shall have used its best efforts to provide all
such information. Each Holder as to which any Shelf Registration Statement is
being effected agrees to furnish promptly to the Company all information
required to be disclosed in order to make the information previously furnished
to the Company by such Holder not materially misleading.
5. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement is not
filed with the Commission on or prior to the date specified for such filing in
this Agreement, (ii) any such Registration Statement has not been declared
effective by the Commission on or prior to the date specified for such
effectiveness in this Agreement (the "EFFECTIVENESS TARGET DATE"), (iii) the
Exchange Offer has not been Consummated within 30 Business Days after the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement or (iv) any Registration Statement required by this Agreement is filed
and declared effective but shall thereafter cease to be effective or fail to be
usable for its intended purpose without being succeeded within three Business
Days by a post-effective amendment to such Registration Statement that cures
such failure and that is itself declared effective within three Business Days of
filing (each such event referred to in clauses (i) through (iv), a "REGISTRATION
DEFAULT"), the Company hereby agrees to pay to each Holder of Transfer
Restricted Securities, for the first 90-day period immediately following the
occurrence of such Registration Default, liquidated damages in an amount equal
to $.05 per week per $1,000 principal amount of Senior Notes constituting
Transfer Restricted Securities held by such Holder for each week or portion
thereof that the Registration Default continues. The amount of the liquidated
damages payable to each Holder shall increase by an additional $.05 per week per
$1,000 in principal amount of Transfer Restricted Securities with respect to
each subsequent 90-day period until all Registration Defaults have been cured,
up to a maximum amount of liquidated damages of $.50 per week per $1,000
principal amount of Transfer Restricted Securities held by such Holder.
Notwithstanding anything to the contrary set forth herein, (1) upon filing of
the Exchange Offer Registration Statement (and/or, if applicable, the Shelf
Registration Statement), in the case of (i) above, (2) upon the effectiveness of
the Exchange Offer Registration Statement (and/or, if applicable, the Shelf
Registration Statement), in the case of (ii) above, (3) upon Consummation of the
Exchange Offer, in the case of (iii) above, or (4) upon the filing of a
post-effective amendment to the Registration Statement or an additional
Registration Statement that causes the Exchange Offer Registration Statement
(and/or, if applicable, the Shelf Registration Statement) to again be declared
effective or made usable in the case of (iv) above, the liquidated damages
payable with respect to the Transfer Restricted Securities as a result of such
clause (i), (ii), (iii) or (iv), as applicable, shall cease.
All accrued liquidated damages shall be paid to the Global Note Holder
by wire transfer of immediately available funds or by federal funds check and to
Holders of Certificated Securities by wire transfer to the accounts specified by
them or by mailing checks to their registered addresses if no such accounts have
been specified on each Damages Payment Date. All obligations of the Company and
the Subsidiary Guarantors set forth in the preceding paragraph that are
outstanding with respect to any Transfer Restricted Security at the time such
security ceases to be a Transfer Restricted Security shall survive until such
time as all such obligations with respect to such security shall have been
satisfied in full.
6
<PAGE> 8
6. REGISTRATION PROCEDURES
(a) EXCHANGE OFFER REGISTRATION STATEMENT. In connection with the
Exchange Offer, the Company and the Subsidiary Guarantors shall comply with all
applicable provisions of Section 6(c) below, shall use their reasonable best
efforts to effect such exchange and to permit the sale of Broker-Dealer Transfer
Restricted Securities being sold in accordance with the intended method or
methods of distribution thereof (which shall be in a manner consistent with the
terms of this Agreement), and shall comply with all of the following provisions:
(i) If, following the date hereof and prior to Consummation of
the Exchange Offer, there has been published a change in Commission
policy with respect to exchange offers such as the Exchange Offer, such
that in the reasonable judgment of counsel to the Company there is a
substantial question as to whether the Exchange Offer is permitted by
applicable federal law or Commission policy, the Company and the
Subsidiary Guarantors hereby agree to seek a no-action letter or other
favorable decision from the Commission allowing the Company and the
Subsidiary Guarantors to Consummate an Exchange Offer for such Series A
Senior Notes. The Company and the Subsidiary Guarantors hereby agree to
pursue the issuance of such a decision to the Commission staff level
but shall not be required to take commercially unreasonable action to
effect a change of Commission policy. In connection with the foregoing,
the Company and the Subsidiary Guarantors hereby agree, however, but
subject to the proviso set forth above, to take all such other actions
as are reasonably requested by the Commission or otherwise required in
connection with the issuance of such decision, including without
limitation (A) participating in telephonic conferences with the
Commission, (B) delivering to the Commission staff an analysis prepared
by counsel to the Company setting forth the legal bases, if any, upon
which such counsel has concluded that such an Exchange Offer should be
permitted and (C) diligently pursuing a resolution (which need not be
favorable) by the Commission staff of such submission.
(ii) As a condition to its participation in the Exchange Offer
pursuant to the terms of this Agreement, each Holder of Transfer
Restricted Securities shall furnish, upon the request of the Company,
prior to the Consummation of the Exchange Offer, a written
representation to the Company and the Subsidiary Guarantors (which may
be contained in the letter of transmittal contemplated by the Exchange
Offer Registration Statement) to the effect that (A) it is not an
affiliate of the Company, (B) it is not engaged in, and does not intend
to engage in, and has no arrangement or understanding with any person
to participate in, a distribution of the Series B Senior Notes to be
issued in the Exchange Offer and (C) it is acquiring the Series B
Senior Notes in its ordinary course of business. Each Holder hereby
acknowledges and agrees that any Broker-Dealer and any such Holder
using the Exchange Offer to participate in a distribution of the
securities to be acquired in the Exchange Offer (1) could not under
Commission policy as in effect on the date of this Agreement rely on
the position of the Commission enunciated in MORGAN STANLEY AND CO.,
INC. (available June 5, 1991) and EXXON CAPITAL HOLDINGS CORPORATION
(available May 13, 1988), as interpreted in the Commission's letter to
Shearman & Sterling dated July 2, 1993, and similar no-action letters
(including, if applicable, any no-action letter obtained pursuant to
clause (i) above), and (2) must comply with the registration and
prospectus delivery requirements of the Act in connection with a
secondary resale transaction and that such a secondary resale
transaction must be covered by an effective registration statement
containing the selling security holder information required by Item 507
or 508, as applicable, of Regulation S-K if the resales are of Series B
Senior Notes obtained by such Holder in exchange for Series A Senior
Notes acquired by such Holder directly from the Company or an affiliate
thereof.
7
<PAGE> 9
(iii) To the extent required by the Commission, prior to
effectiveness of the Exchange Offer Registration Statement, the Company
and the Subsidiary Guarantors shall provide a supplemental letter to
the Commission (A) stating that the Company and the Subsidiary
Guarantors are registering the Exchange Offer in reliance on the
position of the Commission enunciated in EXXON CAPITAL HOLDINGS
CORPORATION (available May 13, 1988), MORGAN STANLEY AND CO., INC.
(available June 5, 1991) and, if applicable, any no-action letter
obtained pursuant to clause (i) above, (B) including a representation
that neither the Company nor any Subsidiary Guarantor has entered into
any arrangement or understanding with any Person to distribute the
Series B Senior Notes to be received in the Exchange Offer and that, to
the best of the Company's and the Subsidiary Guarantors' information
and belief, each Holder participating in the Exchange Offer is
acquiring the Series B Senior Notes in its ordinary course of business
and has no arrangement or understanding with any Person to participate
in the distribution of the Series B Senior Notes received in the
Exchange Offer and (C) any other undertaking or representation required
by the Commission as set forth in any no-action letter obtained
pursuant to clause (i) above.
(b) SHELF REGISTRATION STATEMENT. In connection with the Shelf
Registration Statement the Company and the Subsidiary Guarantors shall comply
with all the provisions of Section 6(c) below and shall use their reasonable
best efforts to effect such registration to permit the sale of the Transfer
Restricted Securities being sold in accordance with the intended method or
methods of distribution thereof (as indicated in the information furnished to
the Company pursuant to Section 4(b) hereof), and pursuant thereto the Company
and the Subsidiary Guarantors will prepare and file with the Commission a
Registration Statement relating to the registration on any appropriate form
under the Act, which form shall be available for the sale of the Transfer
Restricted Securities in accordance with the intended method or methods of
distribution thereof within the time periods and otherwise in accordance with
the provisions hereof.
(c) GENERAL PROVISIONS. In connection with any Registration Statement
and any related Prospectus required by this Agreement to permit the sale or
resale of Transfer Restricted Securities Notes (including, without limitation,
any Exchange Offer Registration Statement and the related Prospectus, to the
extent that the same are required to be available to permit sales of
Broker-Dealer Transfer Restricted Securities by Restricted Broker-Dealers), the
Company and the Subsidiary Guarantors shall:
(i) use their reasonable best efforts to keep such
Registration Statement continuously effective and provide all requisite
financial statements for the period specified in Section 3 or 4 of this
Agreement, as applicable. Upon the occurrence of any event that would
cause any such Registration Statement or the Prospectus contained
therein (A) to contain a material misstatement or omission or (B) not
to be effective and usable for resale of Transfer Restricted Securities
during the period required by this Agreement, the Company shall file
promptly an appropriate amendment to such Registration Statement, (1)
in the case of clause (A), correcting any such misstatement or
omission, and (2) in the case of either clause (A) or (B), use their
reasonable best efforts to cause such amendment to be declared
effective and such Registration Statement and the related Prospectus to
become usable for their intended purpose(s) as soon as practicable
thereafter;
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be
necessary to keep the Registration Statement effective for the
applicable period set forth in Section 3 or 4 hereof, or such shorter
period as will
8
<PAGE> 10
terminate when all Transfer Restricted Securities covered by such
Registration Statement have been sold; cause the Prospectus to be
supplemented by any required Prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 under the Act, and to
comply fully with Rules 424, 430A and 462 as applicable, under the Act
in a timely manner; and comply with the provisions of the Act with
respect to the disposition of all securities covered by such
Registration Statement during the applicable period in accordance with
the intended method or methods of distribution by the selling Holders
thereof set forth in such Registration Statement or supplement to the
Prospectus;
(iii) advise the underwriter(s), if any, and selling Holders
promptly and, if requested by such Persons, confirm such advice in
writing, (A) when the Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to any
Registration Statement or any post-effective amendment thereto, when
the same has become effective, (B) of any request by the Commission for
amendments to the Registration Statement or amendments or supplements
to the Prospectus or for additional information relating thereto, (C)
of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement under the Act or of the
suspension by any state securities commission of the qualification of
the Transfer Restricted Securities for offering or sale in any
jurisdiction, or the initiation of any proceeding for any of the
preceding purposes, (D) of the existence of any fact or the happening
of any event that makes any statement of a material fact made in the
Registration Statement, the Prospectus, any amendment or supplement
thereto or any document incorporated by reference therein untrue, or
that requires the making of any additions to or changes in the
Registration Statement in order to make the statements therein not
misleading, or that requires the making of any additions to or changes
in the Prospectus in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading. If at
any time the Commission shall issue any stop order suspending the
effectiveness of the Registration Statement, or any state securities
commission or other regulatory authority shall issue an order
suspending the qualification or exemption from qualification of the
Transfer Restricted Securities under state securities or Blue Sky laws,
the Company and the Subsidiary Guarantors shall use their reasonable
best efforts to obtain the withdrawal or lifting of such order at the
earliest possible time;
(iv) furnish to the Initial Purchaser, each selling Holder
under any Registration Statement or Prospectus and each of the
underwriter(s) in connection with such sale, if any, before filing with
the Commission, copies of any Registration Statement or any Prospectus
included therein or any amendments or supplements to any such
Registration Statement or Prospectus (including all documents
incorporated by reference after the initial filing of such Registration
Statement), which documents will be subject to the review and comment
of such Holders and underwriter(s) in connection with such sale, if
any, for a period of at least five Business Days, and the Company will
not file any such Registration Statement or Prospectus or any amendment
or supplement to any such Registration Statement or Prospectus
(including all such documents incorporated by reference) if the selling
Holders of the Transfer Restricted Securities covered by such
Registration Statement or the underwriter(s) in connection with such
sale shall provide notice to the Company within five Business Days
after the receipt thereof to the effect that (A) such Registration
Statement, amendment, Prospectus or supplement, as applicable, as
proposed to be filed, contains a material misstatement or omission or
fails to comply with the applicable requirements of the Act or (B) that
any of the information furnished to the Company by such selling Holder
or underwriter, if any, and included in such Registration
9
<PAGE> 11
Statement, amendment, Prospectus or supplement, as applicable, as
proposed to be filed is incorrect in any respect;
(v) at reasonable times requested by the selling Holders
and/or the underwriters upon reasonable notice, prior to the filing of
any document that is to be incorporated by reference into a
Registration Statement or Prospectus, provide copies of such document
to the selling Holders and to the underwriter(s) in connection with
such sale, if any, make the Company's and the Subsidiary Guarantors'
representatives available for discussion of such document and other
customary due diligence matters, and include such information in such
document prior to the filing thereof as such selling Holders or
underwriter(s), if any, reasonably may request;
(vi) make available at reasonable times for inspection by the
selling Holders, any managing underwriter participating in any
disposition pursuant to such Registration Statement and any attorney or
accountant retained by such selling Holders or any of such
underwriter(s), all financial and other records, pertinent corporate
documents and properties of the Company and the Subsidiary Guarantors
and cause the Company's and the Subsidiary Guarantors' officers,
directors and employees to supply all information reasonably requested
by any such Holder, underwriter, attorney or accountant in connection
with such Registration Statement or any post-effective amendment
thereto subsequent to the filing thereof and prior to its
effectiveness;
(vii) if requested by any selling Holders or the
underwriter(s) in connection with such sale, if any, promptly include
in any Registration Statement or Prospectus, pursuant to a supplement
or post-effective amendment if necessary, such information as such
selling Holders and underwriter(s), if any, may reasonably request to
have included therein, including, without limitation, information
relating to the "Plan of Distribution" of the Transfer Restricted
Securities, information with respect to the principal amount of
Transfer Restricted Securities being sold to such underwriter(s), the
purchase price being paid therefor and any other terms of the offering
of the Transfer Restricted Securities to be sold in such offering; and
make all required filings of such Prospectus supplement or
post-effective amendment as soon as practicable after the Company is
notified of the matters to be included in such Prospectus supplement or
post-effective amendment;
(viii) furnish to each selling Holder and each of the
underwriter(s) in connection with such sale, if any, without charge, at
least one copy of the Registration Statement, as first filed with the
Commission, and of each amendment thereto, including all documents
incorporated by reference therein and all exhibits (including exhibits
incorporated therein by reference);
(ix) deliver to each selling Holder and each of the
underwriter(s), if any, without charge, as many copies of the
Prospectus (including each preliminary prospectus) and any amendment or
supplement thereto as such Persons reasonably may request; the Company
and the Subsidiary Guarantors hereby consent to the use (in accordance
with law) of the Prospectus and any amendment or supplement thereto by
each of the selling Holders and each of the underwriter(s), if any, in
connection with the offering and the sale of the Transfer Restricted
Securities covered by the Prospectus or any amendment or supplement
thereto;
(x) enter into such agreements (including an underwriting
agreement) and make such representations and warranties and take all
such other actions in connection therewith in order to expedite or
facilitate the disposition of the Transfer Restricted Securities
pursuant to any
10
<PAGE> 12
Registration Statement contemplated by this Agreement as may be
reasonably requested by any Holder of Transfer Restricted Securities or
underwriter in connection with any sale or resale pursuant to any
Registration Statement contemplated by this Agreement, and in such
connection, whether or not an underwriting agreement is entered into
and whether or not the registration is an Underwritten Registration,
the Company and the Subsidiary Guarantors shall:
(A) furnish to each selling Holder and each
underwriter, if any, upon the effectiveness of the Shelf
Registration Statement and to each Restricted Broker-Dealer
upon Consummation of the Exchange Offer:
(1) a certificate, dated the date of
Consummation of the Exchange Offer or the date of
effectiveness of the Shelf Registration Statement, as
the case may be, signed on behalf of each of the
Company and the Subsidiary Guarantors by (x) the
President or any Vice President and (y) a principal
financial or accounting officer of each of the
Company and the Subsidiary Guarantors confirming, as
of the date thereof, the matters set forth in
paragraphs (a) through (c) of Section 9 of the
Purchase Agreement and such other similar matters as
the Holders, underwriter(s) and/or Restricted Broker
Dealers may reasonably request;
(2) an opinion, dated the date of
Consummation of the Exchange Offer or the date of
effectiveness of the Shelf Registration Statement, as
the case may be, of counsel for the Company and the
Subsidiary Guarantors, covering matters customarily
covered in opinions requested in Underwritten
Offerings and dated the date of effectiveness of the
Shelf Registration Statement or the date of
Consummation of the Exchange Offer, as the case may
be; and
(3) customary comfort letters, dated as of
the date of effectiveness of the Shelf Registration
Statement or the date of Consummation of the Exchange
Offer, as the case may be, from the Company's
independent accountants, in the customary form and
covering matters of the type customarily covered in
comfort letters to underwriters in connection with
Underwritten Offerings, and affirming the matters set
forth in the comfort letters delivered pursuant to
Section 9(f) of the Purchase Agreement, without
exception;
(B) set forth in full or incorporated by reference in
the underwriting agreement, if any, in connection with any
sale or resale pursuant to any Shelf Registration Statement
the indemnification provisions and procedures of Section 8
hereof with respect to all parties to be indemnified pursuant
to said Section; and
(C) deliver such other documents and certificates as
may be reasonably requested by the selling Holders, the
underwriter(s), if any, and Restricted Broker Dealers, if any,
to evidence compliance with clause (A) above and with any
customary conditions contained in the underwriting agreement
or other agreement entered into by the Company and the
Subsidiary Guarantors pursuant to this clause (x).
The above shall be done at each closing under such
underwriting or similar agreement, as and to the extent required
thereunder, and if at any time the representations and warranties of
11
<PAGE> 13
the Company and the Subsidiary Guarantors contemplated in (A)(1) above
cease to be true and correct, the Company and the Subsidiary Guarantors
shall so advise the underwriter(s), if any, selling Holders and each
Restricted Broker Dealer promptly and if requested by such Persons,
shall confirm such advice in writing;
(xi) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders, the underwriter(s), if
any, and their respective counsel in connection with the registration
and qualification of the Transfer Restricted Securities under the
securities or Blue Sky laws of such jurisdictions as the selling
Holders or underwriter(s), if any, may reasonably request and do any
and all other acts or things reasonably necessary or advisable to
enable the disposition in such jurisdictions of the Transfer Restricted
Securities covered by the applicable Registration Statement; provided,
however, that neither the Company nor any Subsidiary Guarantor shall be
required to register or qualify as a foreign corporation where it is
not now so qualified or to take any action that would subject it to the
service of process in suits or to taxation, other than as to matters
and transactions relating to the Registration Statement, in any
jurisdiction where it is not now so subject;
(xii) issue, upon the request of any Holder of Series A Senior
Notes covered by any Shelf Registration Statement contemplated by this
Agreement, Series B Senior Notes, having an aggregate principal amount
equal to the aggregate principal amount of Series A Senior Notes
surrendered to the Company by such Holder in exchange therefor or being
sold by such Holder; such Series B Senior Notes to be registered in the
name of such Holder or in the name of the purchaser(s) of such Senior
Notes, as the case may be; in return, the Series A Senior Notes held by
such Holder shall be surrendered to the Company for cancellation;
(xiii) in connection with any sale of Transfer Restricted
Securities that will result in such securities no longer being Transfer
Restricted Securities, cooperate with the selling Holders and the
underwriter(s), if any, to facilitate the timely preparation and
delivery of certificates representing Transfer Restricted Securities to
be sold and not bearing any restrictive legends; and to register such
Transfer Restricted Securities in such denominations and such names as
the Holders or the underwriter(s), if any, may request at least two
Business Days prior to such sale of Transfer Restricted Securities;
(xiv) use their reasonable best efforts to cause the
disposition of the Transfer Restricted Securities covered by the
Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the
seller or sellers thereof or the underwriter(s), if any, to consummate
the disposition of such Transfer Restricted Securities, subject to the
proviso contained in clause (xi) above;
(xv) subject to Section 6(c)(i), if any fact or event
contemplated by Section 6(c)(iii)(D) above shall exist or have
occurred, prepare a supplement or post-effective amendment to the
Registration Statement or related Prospectus or any document
incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of Transfer
Restricted Securities, the Prospectus will not contain an untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
12
<PAGE> 14
(xvi) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of a Registration
Statement covering such Transfer Restricted Securities and provide the
Trustee under the Indenture with printed certificates for the Transfer
Restricted Securities which are in a form eligible for deposit with the
Depository Trust Company;
(xvii) cooperate and assist in any filings required to be made
with the NASD and in the performance of any due diligence investigation
by any underwriter (including any "qualified independent underwriter")
that is required to be retained in accordance with the rules and
regulations of the NASD, and use their reasonable best efforts to cause
such Registration Statement to become effective and approved by such
governmental agencies or authorities as may be necessary to enable the
Holders selling Transfer Restricted Securities to consummate the
disposition of such Transfer Restricted Securities;
(xviii) otherwise use their reasonable best efforts to comply
with all applicable rules and regulations of the Commission, and make
generally available to its security holders with regard to any
applicable Registration Statement, as soon as practicable, a
consolidated earnings statement meeting the requirements of Rule 158
(which need not be audited) covering a twelve-month period beginning
after the effective date of the Registration Statement (as such term is
defined in paragraph (c) of Rule 158 under the Act);
(xix) cause the Indenture to be qualified under the TIA not
later than the effective date of the first Registration Statement
required by this Agreement and, in connection therewith, cooperate with
the Trustee and the Holders of Senior Notes to effect such changes to
the Indenture as may be required for such Indenture to be so qualified
in accordance with the terms of the TIA; and execute and use its
reasonable best efforts to cause the Trustee to execute, all documents
that may be required to effect such changes and all other forms and
documents required to be filed with the Commission to enable such
Indenture to be so qualified in a timely manner; and
(xx) provide promptly to each Holder upon request each
document filed with the Commission pursuant to the requirements of
Section 13 or Section 15(d) of the Exchange Act.
(d) RESTRICTIONS ON HOLDERS. Each Holder agrees by acquisition of a
Transfer Restricted Security that, upon receipt of the notice referred to in
Section 6(c)(i) or any notice from the Company of the existence of any fact of
the kind described in Section 6(c)(iii)(D) hereof, such Holder will immediately
discontinue disposition of Transfer Restricted Securities pursuant to the
applicable Registration Statement until such Holder's receipt of the copies of
the supplemented or amended Prospectus contemplated by Section 6(c)(xv) hereof,
or until it is advised in writing by the Company that the use of the Prospectus
may be resumed, and has received copies of any additional or supplemental
filings that are incorporated by reference in the Prospectus (the "Advice"). If
so directed by the Company, each Holder will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such Transfer Restricted
Securities that was current at the time of receipt of either such notice. In the
event the Company shall give any such notice, the time period regarding the
effectiveness of such Registration Statement set forth in Section 3 or 4 hereof,
as applicable, shall be extended by the number of days during the period from
and including the date of the giving of such notice pursuant to Section 6(c)(i)
or Section 6(c)(iii)(D) hereof to and including the date when each selling
Holder covered by such
13
<PAGE> 15
Registration Statement shall have received the copies of the supplemented or
amended Prospectus contemplated by Section 6(c)(xv) hereof or shall have
received the Advice.
7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's and the Subsidiary
Guarantors' performance of or compliance with this Agreement will be borne by
the Company, regardless of whether a Registration Statement becomes effective,
including without limitation: (i) all registration and filing fees and expenses
(including filings made by any Initial Purchaser or Holder with the NASD (and,
if applicable, the fees and expenses of any "qualified independent underwriter")
and its counsel that may be required by the rules and regulations of the NASD);
(ii) all fees and expenses of compliance with federal securities and state Blue
Sky or securities laws; (iii) all expenses of printing (including printing
certificates for the Series B Senior Notes to be issued in the Exchange Offer
and printing of Prospectuses); (iv) all fees and disbursements of counsel for
the Company, the Subsidiary Guarantors and, in accordance with Section 7(b)
below, the Holders of Transfer Restricted Securities; (v) all messenger and
delivery services and telephone expenses of the Company and the Subsidiary
Guarantors; (vi) all application and filing fees in connection with listing the
Senior Notes on a national securities exchange or automated quotation system
pursuant to the requirements hereof and (vii) all fees and disbursements of
independent certified public accountants of the Company and the Subsidiary
Guarantors (including the expenses of any special audit and comfort letters
required by or incident to such performance).
The Company will, in any event, bear its and the Subsidiary Guarantors'
internal expenses (including, without limitation, all salaries and expenses of
its officers and employees performing legal or accounting duties), the expenses
of any annual audit and the fees and expenses of any Person, including special
experts, retained by the Company or the Subsidiary Guarantors.
(b) In connection with any Registration Statement required by this
Agreement, as applicable, (including, without limitation, the Exchange Offer
Registration Statement and the Shelf Registration Statement), the Company and
the Subsidiary Guarantors will reimburse the Initial Purchaser and the Holders
of Transfer Restricted Securities being tendered in the Exchange Offer and/or
pursuant to the "Plan of Distribution" contained in the Exchange Offer
Registration Statement or registered pursuant to the Shelf Registration
Statement, as applicable, for the reasonable fees and disbursements of not more
than one counsel, who shall be chosen by the Holders of a majority in principal
amount of the Transfer Restricted Securities for whose benefit such Registration
Statement is being prepared; provided however, that such fees and disbursements
shall in no event exceed $10,000.
8. INDEMNIFICATION
(a) The Company and each Subsidiary Guarantor, jointly and severally,
agree to indemnify and hold harmless (i) the Initial Purchaser, (ii) each
Holder, (iii) each person, if any, who controls (within the meaning of Section
15 of the Act or Section 20 of the Exchange Act) the Initial Purchaser or Holder
(any of the persons referred to in this clause (iii) being hereinafter referred
to as a "Controlling Person") and (iv) the respective officers, directors,
partners, employees and agents of the Initial Purchaser or any Holder or any
Controlling Person (any person referred to in clause (i), (ii), (iii) or (iv)
may hereinafter be referred to as an "INDEMNIFIED HOLDER"), to the fullest
extent lawful, from and against any and all losses, claims, damages,
liabilities, judgments, actions and expenses (including without limitation, and
as incurred, reimbursement of all reasonable costs of investigating, preparing,
pursuing or defending any claim or action, or any investigation or proceeding by
any governmental agency or body, commenced
14
<PAGE> 16
or threatened, including the reasonable fees and expenses of counsel to any
Indemnified Holder) directly or indirectly caused by, related to, based upon,
arising out of or in connection with any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement,
preliminary prospectus or Prospectus (or any amendment or supplement thereto),
or any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, except insofar as
such losses, claims, damages, liabilities, judgments, actions or expenses are
caused by any such untrue statement or alleged untrue statement or omission or
alleged omission that is made in reliance upon and in conformity with
information relating to the Initial Purchaser or any of the Holders furnished in
writing to the Company by the Initial Purchaser or any of the Holders expressly
for use therein; provided however, that the indemnification contained in this
paragraph (a) with respect to any preliminary prospectus shall not inure to the
benefit of any Holder (or to the benefit of any person controlling any Holder)
on account of any such loss, claim, damage, liability, judgment, action or
expense arising from the sale of Series A Senior Notes by such Holder to any
person if a copy of the Prospectus, as it may be amended or supplemented, shall
not have been delivered or sent to such person, at or prior to the written
confirmation of such sale, and the untrue statement or alleged untrue statement
or omission or alleged omission of a material fact contained in any preliminary
prospectus was corrected in the Prospectus, as it may have been amended or
supplemented; provided that the Company has delivered the Prospectus, as it may
be amended or supplemented, to such Holder in requisite quantity on a timely
basis to permit such delivery or sending. The Company and each Subsidiary
Guarantor also agree to, jointly and severally, reimburse each Indemnified
Holder for any and all fees and expenses (including, without limitation, the
fees and expenses of counsel) as they are incurred in connection with enforcing
such Indemnified Holder's rights under this Agreement (including, without
limitation, its rights under this Section 8).
In case any action or proceeding (including any governmental
or regulatory investigation or proceeding) shall be brought or asserted against
any of the Indemnified Holders with respect to which indemnity may be sought
against the Company or any Subsidiary Guarantor, the Indemnified Holder shall
promptly notify the Company in writing (provided, that the failure to give such
notice shall not relieve the Company or the Subsidiary Guarantors of their
obligations pursuant to this Agreement, unless it shall have been determined by
a court of competent jurisdiction that such failure shall have materially
adversely affected the Company or a Subsidiary Guarantor) and the Company shall
assume the defense thereof, including the employment of counsel reasonably
satisfactory to such Indemnified Holder and payment of all fees and expenses
(regardless of whether it is ultimately determined that an Indemnified Holder is
not entitled to indemnification hereunder). Such Indemnified Holder shall have
the right to employ separate counsel in any such action and participate in the
defense thereof, but the reasonable fees and expenses of such counsel shall be
at the expense of such Indemnified Holder unless (i) the employment of such
counsel has been specifically authorized in writing by the Company, (ii) the
Company has failed to assume the defense and employ counsel or (iii) the named
parties to any such action (including any impleaded parties) include both such
Indemnified Holder and the Company or a Subsidiary Guarantor, and such
Indemnified Holder has been advised by such counsel that there may be one or
more legal defenses available to it which are different from or additional to
those available to the Company or the Subsidiary Guarantors (in which case the
Company shall not have the right to assume the defense of such action on behalf
of such Indemnified Holder, it being understood, however, that the Company shall
not, in connection with any one such action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel) for
all such Indemnified Holders, which firm shall be designated in writing by the
Indemnified Holders, and that all
15
<PAGE> 17
such fees and expenses shall be reimbursed as they are incurred). Neither the
Company nor any Subsidiary Guarantor shall be liable for any settlement of any
such action effected without prior written consent of the Company, but if
settled with the Company's written consent (which consent will not be
unreasonably withheld) the Company and each Subsidiary Guarantor agree to,
jointly and severally, indemnify and hold harmless each Indemnified Holder from
and against any loss, claim, damage, liability, judgment, action or expense by
reason of such settlement. No indemnifying party shall, without the prior
written consent of the indemnified party effect any settlement of any pending or
threatened proceeding in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter of
such proceeding.
(b) Each Holder of Transfer Restricted Securities agrees,
severally and not jointly, to indemnify and hold harmless the Company, the
Subsidiary Guarantors, each Controlling Person, if any, who controls (within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act) the Company
or any Subsidiary Guarantor, and the officers, directors, partners, employees
and agents of each such person (the "Company Indemnified Parties"), to the same
extent as the foregoing indemnity from the Company and the Subsidiary Guarantors
to each of the Indemnified Holders, but only with respect to claims and actions
based on information relating to such Holder furnished in writing by such Holder
expressly for use in any Registration Statement. In case any action shall be
brought against any Company Indemnified Party in respect of which indemnity may
be sought against a Holder of Transfer Restricted Securities, such Holder shall
have the rights and duties given the Company and the Subsidiary Guarantors, and
the Company Indemnified Parties shall have the rights and duties given to each
Holder by the preceding paragraph. In no event shall any Holder be liable or
responsible for any amount in excess of the amount by which the total received
by such Holder with respect to its sale of Transfer Restricted Securities
pursuant to a Registration Statement exceeds (i) the amount paid by such Holder
for such Transfer Restricted Securities and (ii) the amount of any damages which
such Holder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission.
(c) If the indemnification provided for in this Section 8 is
unavailable to an indemnified party under Section 8(a) or Section 8(b) hereof
(other than by reason of exceptions provided in those Sections) in respect of
any losses, claims, damages, liabilities, judgments, actions or expenses
referred to therein, then each indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities,
judgments, actions or expenses in such proportion as is appropriate to reflect
the relative benefits received by such indemnifying party (or parties, as
applicable), on the one hand, and the indemnified party (or parties, as
applicable), on the other hand, from the initial placement and the sale of
Transfer Restricted Securities pursuant to the applicable Registration Statement
or if such allocation is not permitted by applicable law, the relative fault of
such indemnifying party, on the one hand, and of such indemnified party, on the
other hand, in connection with the statements or omissions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative benefits received by the Company
and the Subsidiary Guarantors shall be deemed to be equal to the total proceeds
from the initial placement (net of the Initial Purchaser's commissions, but
before deducting expenses) as set forth on the cover page of the Offering
Memorandum. The relative benefits of the Initial Purchaser shall be deemed to be
equal to the total purchase discounts and commissions as set forth on the cover
page of the Offering Memorandum and benefits received by any other Indemnified
Holders shall be deemed to be equal to the total proceeds received by such
Holder upon its sale of Series A Senior Notes. The relative fault of such
indemnifying party, on the one hand,
16
<PAGE> 18
and of such indemnified party, on the other hand, shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by such indemnifying party on the one hand or by
such indemnified party, on the other hand and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Company, the Subsidiary Guarantors, the Initial Purchaser
and each Holder of Transfer Restricted Securities agree that it would not be
just and equitable if contribution pursuant to this Section 8(c) were determined
by pro rata allocation (even if the Holders were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities, judgments, actions or expenses referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 8, neither the
Initial Purchaser nor its related Indemnified Holders shall be required to
contribute, in the aggregate, any amount in excess of the amount equal to (A)
the amount of the total purchase discounts and commissions applicable to such
Transfer Restricted Securities less (B) any amount paid or contributed by the
Initial Purchaser under the Purchase Agreement; nor shall any Holder or its
related Indemnified Holders be required to contribute, in the aggregate, any
amount in excess of the amount by which the total received by such Holder with
respect to the sale of its Transfer Restricted Securities pursuant to a
Registration Statement exceeds the sum of (A) the amount paid by such Holder for
such Transfer Restricted Securities plus (B) the amount of any damages which
such Holder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The obligations of the Initial Purchaser and the
Holders to contribute pursuant to this Section 8(c) are several in proportion to
the respective principal amount of Series A Senior Notes held by each of the
Holders hereunder and not joint.
The indemnity and contribution agreements of the Company, the
Subsidiary Guarantors and the Initial Purchaser contained in this Section 8 are
in addition to any liability or obligation which the Company, the Subsidiary
Guarantors and the Initial Purchaser may otherwise have to the Indemnified
Holders and the Company Indemnified Parties, respectively, referred to above.
9. RULE 144A
The Company and the Subsidiary Guarantors hereby agree with each
Holder, for so long as any Transfer Restricted Securities remain outstanding and
during any period in which the Company and the Subsidiary Guarantors are not
subject to Section 13 or 15(d) of the Securities Exchange Act, to make
available, upon request of any Holder of Transfer Restricted Securities, to any
Holder or beneficial owner of Transfer Restricted Securities in connection with
any sale thereof and any prospective purchaser of such Transfer Restricted
Securities designated by such Holder or beneficial owner, the information
required by Rule 144A(d)(4) under the Act in order to permit resales of such
Transfer Restricted Securities pursuant to Rule 144A.
17
<PAGE> 19
10. UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration hereunder
unless such Holder (a) agrees to sell such Holder's Transfer Restricted
Securities on the basis provided in customary underwriting arrangements entered
into in connection therewith and (b) completes and executes all reasonable
questionnaires, powers of attorney, lock-up letters and other documents required
under the terms of such underwriting arrangements.
11. SELECTION OF UNDERWRITERS
For any Underwritten Offering of Senior Notes, the investment banker or
investment bankers and manager or managers for any Underwritten Offering of
Senior Notes, that will administer such offering will be selected by the Holders
of a majority in aggregate principal amount of the Transfer Restricted
Securities included in such offering. Such investment bankers and managers are
referred to herein as the "underwriters."
12. MISCELLANEOUS
(a) REMEDIES. Each Holder, in addition to being entitled to exercise
all rights provided herein, in the Indenture, the Purchase Agreement or granted
by law, including recovery of liquidated or other damages, will be entitled to
specific performance of its rights under this Agreement. The Company and the
Subsidiary Guarantors agree that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by them of the
provisions of this Agreement and hereby agree to waive the defense in any action
for specific performance that a remedy at law would be adequate.
(b) NO INCONSISTENT AGREEMENTS. Neither the Company nor any Subsidiary
Guarantor will, on or after the date of this Agreement, enter into any agreement
with respect to its securities that is inconsistent with the rights granted to
the Holders in this Agreement or otherwise conflicts with the provisions hereof.
Neither the Company nor any Subsidiary Guarantor has previously entered into any
agreement granting any registration rights with respect to its securities to any
Person. The rights granted to the Holders hereunder do not in any way conflict
with and are not inconsistent with the rights granted to the holders of the
Company's and the Guarantors' securities under any agreement in effect on the
date hereof.
(c) ADJUSTMENTS AFFECTING THE SENIOR NOTES. Neither the Company nor any
Subsidiary Guarantor will take any action, or voluntarily permit any change to
occur, with respect to the Senior Notes that would materially and adversely
affect the ability of the Holders to Consummate any Exchange Offer.
(d) AMENDMENTS AND WAIVERS. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless (i) in the case of Section 5
hereof and this Section 12(d)(i), the Company has obtained the written consent
of the Holders of all outstanding Transfer Restricted Securities and (ii) in the
case of all other provisions hereof, the Company has obtained the written
consent of Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities. Notwithstanding the foregoing, a waiver or consent to
departure from the provisions hereof that relates exclusively to the rights of
Holders whose securities are being tendered pursuant to the Exchange Offer and
that does not affect directly or indirectly the rights of other Holders whose
securities are not being tendered pursuant to such Exchange Offer may
18
<PAGE> 20
be given by the Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities subject to such Exchange Offer.
(e) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of
the Registrar under the Indenture, with a copy to the Registrar under
the Indenture;
With a copy to:
Latham & Watkins
885 Third Avenue
New York, New York 10022
Telecopier No.: (212) 751-4864
Attention: Kirk A. Davenport
(ii) if to the Company or any Subsidiary Guarantor:
Continental Global Group, Inc.
438 Industrial Drive
Winfield, Alabama 35594
Telecopier No.: (205) 487-4233
Attention: Chief Financial Officer
With a copy to:
Squire, Sanders & Dempsey L.L.P.
4900 Key Tower
127 Public Square
Cleveland, Ohio 44114
Telecopier No.: (216) 479-8793
Attention: Jeffrey J. Margulies
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next business day, if timely delivered
to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment,
subsequent Holders of Transfer Restricted Securities; provided, however, that
this Agreement shall not inure to the benefit of or be binding upon a successor
or assign of a Holder unless
19
<PAGE> 21
and to the extent such successor or assign acquired Transfer Restricted
Securities directly from such Holder at a time when such Holder could not
transfer such Transfer Restricted Securities pursuant to a Shelf Registration
Statement. Each Holder of Transfer Restricted Securities agrees to be bound by
and comply with the terms and provisions of this Agreement.
(g) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK.
(j) SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) ENTIRE AGREEMENT. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings among the parties with respect to such subject matter.
[signature page follows]
20
<PAGE> 22
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
CONTINENTAL GLOBAL GROUP, INC.
By: /s/ C. Edward Bryant, Jr.
---------------------------------------
Name: C. Edward Bryant, Jr.
Title: President
CONTINENTAL CONVEYOR & EQUIPMENT
COMPANY
By: /s/ C. Edward Bryant, Jr.
---------------------------------------
Name: C. Edward Bryant, Jr.
Title: President
GOODMAN CONVEYOR COMPANY
By: /s/ Richard M. Sickinger
---------------------------------------
Name: Richard M. Sickinger
Title: President
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Ajay Patel
-------------------------------
Name: Ajay Patel
Title: Senior Vice President
<PAGE> 1
Exhibit 4.4
CREDIT FACILITY AND SECURITY AGREEMENT
--------------------------------------
THIS CREDIT FACILITY AND SECURITY AGREEMENT is made as of the 14th day
of September, 1992, by and among BANK ONE, CLEVELAND, NA, a national banking
association organized and existing under the laws of the United States of
America ("Lender"), with its principal place of business located at 600 Superior
Avenue, Cleveland, Ohio 44114; CONTINENTAL CONVEYOR & EQUIPMENT CO. L.P., a
limited partnership organized and existing under the laws of the State of
Delaware ("Continental"), with its principal place of business and executive
offices located at 216 West 4th Avenue, South, P.O. Box 400, Winfield, Alabama
35594 (the "Continental Principal Place of Business"); and GOODMAN CONVEYOR CO.
L.P., a limited partnership organized and existing under the laws of the State
of Delaware ("Goodman"), with its principal place of business and executive
offices located at U.S. Route 178 South, P.O. Box 866, Belton, South Carolina
29627 (the "Goodman Principal Business Location") (each of "Continental" and
"Goodman" being sometimes referred to herein individually as a "Borrower" and
collectively as the "Borrowers").
WITNESSETH:
-----------
WHEREAS, each Borrower desires, from time to time hereafter, to borrow
from Lender, and Lender is willing and may, from time to time hereafter, be
willing to make loans to each Borrower, subject to the terms and conditions set
forth herein,
NOW, THEREFORE, in consideration of the terms and conditions contained
herein, and of any extension of credit heretofore, now or hereafter made by
Lender to either Borrower, the parties hereto hereby agree as follows:
1. GENERAL
-------
1.1 DEFINED TERMS. When used herein, the following terms shall have the
following meanings:
ACCOUNTS - All of each Borrower's respective accounts, contracts,
contract rights, notes, bills, drafts, acceptances, general intangibles, choses
in action, and all other debts, obligations and liabilities in whatever form,
owing to such Borrower from any Person, whether now existing or hereafter
arising, now or hereafter received by or belonging or owing to such Borrower,
for goods sold or leased or for services rendered, whether or not earned by
performance and whether or not evidenced by contracts, instruments or documents,
or however otherwise the same may have been established or created, all
guarantees and security therefor, all right, title and interest of such Borrower
in the merchandise or services which gave rise thereto, including the rights of
reclamation and stoppage in transit, and all rights of an unpaid seller of
merchandise or services.
ACCOUNT DEBTOR - Any Person who is or may become obligated to either
Borrower under, with respect to, or on account of an Account.
<PAGE> 2
ADJUSTED TANGIBLE NET WORTH - At any time, the aggregate total value of
the Borrowers' assets, plus Subordinated Debt of the Borrowers, less the
remaining value of the Borrowers' liabilities including deferred credits and/or
deferred income, specifically excluding the sum of:
(i) any surplus resulting from any write-up subsequent to
September 14, 1992 of assets of the Borrowers or assets acquired by the
Borrowers; and
(ii) good will, including any amounts, however designated on a
balance sheet of the Borrowers, representing the excess of the purchase
price paid for assets or stock acquired over the value assigned thereto
on the books of the Borrowers; and
(iii) proprietary rights of the Borrowers, including all
patents, trademarks, trade names and copyrights; and
(iv) any amount at which partnership units of the Borrowers
appear as assets on Borrowers' balance sheets; and
(v) loans and advances to Affiliates or to partners, officers
or employees of either Borrower or the partners, stockholders,
directors, officers or employees of either General Partner of either
Borrower or any Affiliate; and
(vi) Affiliate Accounts receivable.
AFFILIATE - The General Partner of each Borrower and each Subsidiary of
the General Partner of each Borrower, if any, or each Borrower or any other
Person:
(i) Which, directly or indirectly, through one or more
intermediaries controls, or is controlled by, or is under common
control with, either Borrower;
(ii) Which owns or controls, on an aggregate basis, including
all beneficial ownership and ownership or control as a trustee,
guardian or other fiduciary, at least ten percent (10%) or more of the
partnership units of either Borrower; or
(iii) Ten percent (10%) or more of the Voting Stock (or in the
case of a Person which is not a corporation, ten percent (10%) or more
of the equity interest) of which is beneficially owned or held by
either Borrower.
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 Stock, by contract or otherwise.
AGREEMENT - This Credit Facility and Security Agreement, as it may be
amended from time to time pursuant to Section 13.1 hereof.
BANKRUPTCY LAWS - All statutes, rules, regulations and other forms of
law, federal, state or otherwise, including, without limitation, the provisions
of Title 11 of the United States Code,
- 2 -
<PAGE> 3
in each instance as in effect from time to time, relating to the bankruptcy,
insolvency, liquidation or reorganization of debtors or the modification or
alteration of the rights of creditors.
BASE RATE - The Lender's Prime Rate for commercial loans, as in effect
from time to time, or such other designation announced by Lender in replacement
of such Prime Rate for commercial loans, which in either instance may not
necessarily be the most favorable or lowest or best rate offered by Lender.
CAPITAL EXPENDITURES - Amounts expended or which either Borrower
becomes obligated to expend, without regard to the manner in which such amounts
or the instrument pursuant to which they are made are characterized by any
Person, (i) for the acquisition, construction or installation of properties that
are to be included as fixed assets on either Borrower's books, (ii) for the
lease of any property that would be capitalized under GAAP, (iii) for the
incurrence of any other capitalized cost, or (iv) for any additions to or
replacements of any of the foregoing.
CASH COLLATERAL ACCOUNT - A commercial deposit account designated "cash
collateral account" maintained by each Borrower with Lender, without liability
by Lender to pay interest thereon, from which Cash Collateral Account Lender
shall have the exclusive right to withdraw funds until all Obligations are paid,
performed, satisfied, enforced and observed in full.
CODE - The Uniform Commercial Code as adopted and in force in the State
of Ohio or any other State where Collateral is located as from time to time in
effect.
COLLATERAL - The Fixed Collateral and Revolving Collateral,
collectively, together with all of the Property, and interests of Borrowers
therein, otherwise described in Section 4.1 of this Agreement and all other
Property of the Borrowers now or at any time or times hereafter subject to a
Lien in favor of Lender.
COLLATERAL LOCATION - The Continental Principal Business Location as to
Continental and the Goodman Principal Business Location as to Goodman and such
other locations as may be identified on EXHIBIT B attached hereto, if any,
together with such other locations at which any Collateral consisting of
tangible personal property may be located provided Lender has, in writing,
approved and designated such location as a Collateral Location hereunder,
subject to any conditions which Lender may reasonably designate and provided:
(i) Such location is a location as to which Borrowers give
Lender prior written notice at least forty-five (45) days prior to
using such location; and
(ii) Such location is located within the United States of
America; and
(iii) Each Borrower has executed and delivered to Lender
appropriate financing statements with respect to the Collateral located
at such location showing Borrowers as debtor and Lender as secured
party; and
(iv) A search of all filings made against Borrowers or such
Collateral in the jurisdiction in which the location is located, made
after the filing of the financing
- 3 -
<PAGE> 4
statements referred to in (iii) above, confirms that the Lender's
security interest in the Collateral at such location constitutes a
first priority Lien on such Collateral (subject to any Permitted
Liens); and
(v) Lender has obtained a written lien waiver in favor of
Lender from each lessor, mortgagee, bailee, warehouseman or similar
Person who may, by operation of law or otherwise, have any Lien in or
upon such Collateral at such location, in such form and containing such
assurances as may be requested by Lender.
COMMITMENT - Lender's letter to Borrower dated August 17, 1992, as
accepted by Borrowers on August 27, 1992.
COMMITMENT FEE - As defined in Section 2.9 of this Agreement.
CONTRACT RATE - A fluctuating rate equal to one and 50/100 percentage
points (1.50%) above the Base Rate.
CONTRACT YEAR - The twelve (12) month period which commences on each
anniversary of the execution of this Agreement.
CREDIT DOCUMENTS - This Agreement, the Notes, the Open-End Mortgage
Deeds and Security Agreements, the Environmental Inspection Easements, the
Environmental Indemnity Agreement, the Collateral Assignment of Security
Interest in Trademarks and Patents, the UCC-1 Financing Statements, the Lien
Waivers of Hughes Wheel & Axle, Delta Rubber Company, Bookcliff Sales, Inc., Jim
Walter Resources, Inc. and Fairmont Supply Company, the Agency Account
Agreements of Pittsburgh National Bank, Wachovia Bank & Trust Co. N.A. and NCNB
Texas National Bank, the Subordination Agreement of Nesco Holdings, Inc., the
Acknowledgment, Consent and Agreement of Dresser Industries, Inc. and all other
agreements, instruments and documents hereafter executed by Borrower or any
other Person and/or delivered to Lender in respect of the transactions
contemplated by this Agreement, in each instance as amended from time to time.
DEBT INSTRUMENTS - Any contract, agreement, instrument or other
document or arrangement under which either Borrower has (i) any indebtedness,
obligation or liability (including, without limitation, any contingent liability
under any Guaranty) for borrowed money or for the deferred portion of the
purchase price of any capital asset or for other capital financing or (ii) the
right or obligation to incur any such indebtedness, obligation or liability.
DEFAULT RATE - A fluctuating rate of interest equal to two percentage
points (2.0%) above (i) the rate of interest set forth in the applicable Note
for Obligations evidenced by a Note and (ii) above the Contract Rate for
Obligations not evidenced by a Note.
DEPOSITORY ACCOUNT - As defined in Section 5.2(A) of this Agreement.
DEPOSITORY AGREEMENT - As defined in Section 5.2(A) of this Agreement.
- 4 -
<PAGE> 5
DEPOSITORY BANK - As defined in Section 5.2(A) of this Agreement.
DISTRIBUTION - In respect of a Borrower means:
(i) The payment of any dividends or other distributions,
whether in cash, by transfer of property or otherwise, to the General
Partner of such Borrower or any limited partner of such Borrower
whether on partnership units of such Borrower or otherwise (except
distributions of such partnership units); and
(ii) The redemption or acquisition of any Securities of such
Borrower.
ELIGIBLE ACCOUNTS - Accounts of each Borrower to the extent arising out
of the completed bona fide sale or lease of goods or rendition of services by
such Borrower in the ordinary course of such Borrower's business and
substantially in accordance with the terms and conditions of all purchase
orders, contracts or other documents relating thereto, subject to Lender's
perfected security interest and no other Lien or security interest, and for a
liquidated amount maturing as stated in an invoice or other documentary evidence
relating thereto which has been provided, and is in form reasonably
satisfactory, to Lender, provided, that, unless Lender otherwise agrees, no such
Account shall be an Eligible Account if:
(i) It arises out of a sale made by such Borrower to an
Affiliate of such Borrower or to a Person controlled by an Affiliate of
such Borrower; or
(ii) It is due or unpaid more than ninety (90) days after the
invoice date thereof; or
(iii) Fifty percent (50%) or more of the aggregate Accounts
(determined on the basis of the aggregate dollar amount thereof)
payable by the Account Debtor thereof are at that time not otherwise
deemed Eligible Accounts hereunder; or
(iv) The Account Debtor claims any right of credit, allowance
or adjustment with respect to such Account by the Account Debtor,
except a discount allowed for prompt payment, or such Account is
otherwise disputed or contingent in any respect; or
(v) The Account Debtor has returned any of the goods from the
sale of which the Account arose; or
(vi) There exist any facts, events or circumstances which in
any way impair the validity, collectability or enforcement of such
Account or would tend to reduce the amount payable thereunder from the
face value of the invoice related thereto; or
(vii) The Account Debtor is also such Borrower's creditor or
supplier or the Account otherwise is or may become subject to any right
of offset by the Account Debtor; or
- 5 -
<PAGE> 6
(viii) The Account Debtor has commenced a voluntary case under
any Bankruptcy Laws, as now constituted or hereafter amended, or made
an assignment for the benefit of creditors, or a decree or order for
relief has been entered by a court having jurisdiction in the premises
in respect of the Account Debtor in an involuntary case under any
Bankruptcy Laws or any other petition or other application for relief
under any Bankruptcy Laws has been filed against the Account Debtor, or
the Account Debtor has failed, suspended business, ceased to be
solvent, or consented to or suffered a receiver, trustee, liquidator or
custodian to be appointed for it or for all or a significant portion of
its assets or affairs; or
(ix) The sale is to an Account Debtor outside the United
States unless the sale is on letter of credit, guaranty, or acceptance
terms, in each case acceptable to Lender in its reasonable judgment; or
(x) The sale to the Account Debtor is on a bill-and-hold,
guaranteed sale, sale-and-return, sale on approval, consignment or any
other repurchase or return basis or is evidenced by chattel paper; or
(xi) Lender reasonably believes that collection of such
Account is insecure or that such Account may not be paid by reason of
the Account Debtor's financial inability to pay; or
(xii) The Account Debtor is the United States of America or
any department, agency or instrumentality thereof, unless such Borrower
assigns its right to payment of such Account to Lender pursuant to the
Assignment of Claims Act of 1940, as amended; or
(xiii) The goods giving rise to such Account have not been
shipped and delivered to and received by the Account Debtor or the
services giving rise to such Account have not been fully performed by
such Borrower and received by the Account Debtor or the Account
otherwise does not represent a final sale; or
(xiv) The Account, when added to the aggregate balance of all
other Accounts of the Account Debtor, exceeds a credit limit determined
by Lender, in its reasonable discretion, to the extent such Account
exceeds such limit; or
(xv) Lender otherwise reasonably deems such Account to be
ineligible or that such Account or the Account Debtor is unsatisfactory
in any reasonable respect.
ELIGIBLE INVENTORY - Such Inventory, subject to Lender's perfected
security interest and no other Lien, consisting of raw materials and finished
goods owned by such Borrower and located at a Collateral Location which, in
Lender's reasonable opinion, is in good and saleable condition and not obsolete
or unmerchantable and which Lender, in its reasonable credit judgment, deems to
be Eligible Inventory, based on such credit and collateral considerations as
Lender may deem appropriate. Inventory shall not be Eligible Inventory to the
extent it consists of work-in-process, spare parts, property used in packaging
or shipping of Inventory, or
- 6 -
<PAGE> 7
Inventory of a like use or character to the foregoing or otherwise to the extent
such Inventory does not conform to all standards imposed by any governmental
agency, division or department thereof which has regulatory authority over such
goods or the use or sale thereof.
ERISA - The Employee Retirement Income Security Act of 1974, as amended
from time to time, and all rules and regulations from time to time promulgated
thereunder.
EVENT OF DEFAULT - As defined in Section 11.1 of this Agreement.
FINANCIAL STATEMENTS - The audited annual financial statements of each
of Continental and Goodman for their respective fiscal years ending December 31,
1991 and the balance sheet(s) of each of Continental and Goodman as of June 30,
1992 and the related statements of income for the fiscal period(s) then ended,
copies of which are attached hereto as EXHIBIT D-1.
FIXED COLLATERAL - All fixed assets of each Borrower including, without
limitation, all real property, machinery, equipment, furniture, furnishings,
fixtures, tools, dies, molds, parts, material handling equipment, supplies and
motor vehicles (titled and untitled) of every kind and description, now or
hereafter owned by either Borrower, or in which either Borrower may have or may
hereafter acquire any interest, wheresoever located, including, without
limitation, the items of Fixed Collateral described in EXHIBIT E attached to
this Agreement.
GAAP - Generally accepted accounting principles consistently applied.
GENERAL PARTNER - As to Continental, CC&E Corp., a corporation
organized and existing under the laws of the State of Delaware and the sole
general partner of Continental and as to Goodman, New Goodman Corp., a
corporation organized and existing under the laws of the State of Delaware and
the sole general partner of Goodman.
GUARANTY - All obligations of any Person (the "guarantor") which
guarantee, or in effect guarantee, or assure the payment of, or performance with
respect to, any indebtedness, liability, or other obligation of any other Person
(the "primary obligor") in any manner, whether directly or indirectly, including
but not limited to, obligations incurred by such guarantor through an agreement,
contingent or otherwise:
(i) To purchase such indebtedness, liability or obligation or
any Property or assets constituting security therefor; or
(ii) To advance or supply funds;
(a) For the purchase or payment of such indebtedness,
liability or obligation, or
(b) To maintain working capital or other balance
sheet condition or otherwise to advance or make available
funds for the purchase or payment of such indebtedness,
liability or obligations; or
- 7 -
<PAGE> 8
(iii) To lease Property or to purchase any Security or other
Property or services primarily for the purpose of assuring the owner of
such indebtedness, liability or obligation of the ability of the
primary obligor to make payment of the indebtedness, liability or
obligations; or
(iv) Otherwise to assure the owner of the indebtedness,
liability or obligation of the primary obligor against loss in respect
thereof.
INDEBTEDNESS - All of each Borrower's present and future obligations,
liabilities, debts, claims and indebtedness, contingent, fixed or otherwise,
however evidenced, created, incurred, acquired, owing or arising (whether under
written or oral agreement, by operation of law or otherwise), including, without
limitation, (i) the Obligations, (ii) any obligations or liabilities of any
Person which are secured by any Lien upon Property of either Borrower, even
though such Borrower has not assumed or otherwise become liable for the payment
thereof, (iii) any obligations or liabilities created or arising under any lease
(including capitalized leases) or under any conditional sales contract or other
title retention agreement with respect to Property used or acquired by either
Borrower, even though the rights and remedies of the lessor, seller or lender
are limited to repossession, (iv) any obligations or liabilities arising under
any lease or other contractual arrangement relating to security deposits,
advance payments or other prepaid funds in the hands of or held by either
Borrower subject to return or refund to any Person, (v) all unfunded pension
fund obligations and liabilities and (vi) deferred taxes of any nature.
INVENTORY - All inventory now owned or hereafter acquired by either
Borrower, including without limitation, all goods, merchandise, work in process,
raw materials, finished goods, and all other materials, supplies and tangible
personal property of any kind, nature or description held for sale or lease or
for display or demonstration, or furnished or to be furnished under contracts of
service or which are or which might be used or consumed in connection with the
manufacturing, packing, shipping, advertising, selling, leasing or furnishing of
such goods, merchandise or other personal property and all documents of title or
other documents pertaining thereto.
LENDER'S ACCOUNT - As defined in Section 5.2(C) of this Agreement.
LIEN - Any interest in Property securing an obligation owed to, or a
claim by, a Person other than the owner of the Property, whether such interest
is based on the common law, statute or contract, including, but not limited to,
the security interest or lien arising from a mortgage, encumbrance, pledge,
conditional sale, trust receipt or lease, consignment or bailment for security
purposes.
LOAN ACCOUNT - An account maintained by Lender on its books, which
shall evidence all advances under the Revolving Loan and Term Loan, interest
thereon, other amounts due Lender with respect to the Revolving Loan and Term
Loan, and all payments thereof by either Borrower.
LOCKBOX - As defined in Section 5.2(B) of this Agreement.
- 8 -
<PAGE> 9
MANAGEMENT FEES - Management fees and other similar type fees paid by a
Borrower to Nesco, Inc. paid at a rate not to exceed two percent (2%) of such
Borrower's gross sales and if an Event of Default has occurred and is continuing
at the time of payment of such fee or would occur by reason thereof or after
giving effect thereto, the same shall be paid at a rate not to exceed one
percent (1%) of such Borrower's gross sales.
MATERIAL ADVERSE EFFECT - As to any events, occurrences or conditions,
if the result thereof would, either singly or in the aggregate, have a material
and adverse effect on (i) either Borrower's Property, business, operations or
condition (financial or otherwise), (ii) either Borrower's ability to repay the
Obligations or (iii) Lender's Lien on the Collateral or the priority thereof.
MATERIAL AGREEMENTS - Those contracts, agreements, documents or other
arrangements required to be disclosed under the provisions of Section 7.1(C) of
this Agreement.
NET INCOME - The net income of each Borrower determined in accordance
with GAAP, provided, that in determining the same, there shall not be included
in gross revenues any earnings (i) properly attributable to the assets and
business of any Person acquired by said Borrower which were earned prior to the
date of such acquisition, (ii) relating to extraordinary accounting adjustments
or non-recurring items of income and, provided further, that the same shall be
net of all interest expenses, taxes, depreciation and amortization expenses and
any Tax Distributions made or Management Fees paid by said Borrower.
NOTES - The Revolving Note, Term Note and any other promissory note or
other instrument evidencing the Borrowers' obligation to repay any Obligations.
OBLIGATIONS - All debts, liabilities and obligations of either Borrower
to Lender under this Agreement and also any and all other debts, liabilities and
obligations of either Borrower to Lender of every kind and description, direct
or indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, including without limiting the generality of the foregoing,
any debt, liability or obligation of either Borrower to Lender under any
Guaranty, or of either Borrower to any other Person which Lender may have
obtained by assignment or otherwise and all interest, fees, charges and expenses
which at any time may be payable by either Borrower to Lender.
ORIGINATION FEE - As defined in Section 2.8 of this Agreement.
PENSION PLAN - Any pension plan, retirement payment plan,
profit-sharing plan, defined benefit or contribution plan or "employee pension
benefit plan" as defined in Section 3(2) of ERISA.
PERMITTED DISTRIBUTION - (i) Distributions by Continental for its
fiscal year ending December 31, 1992 to the partners of Continental pursuant to
its partnership agreement in the aggregate amount of Ten Million Dollars
($10,000,000), Eight Million Two Hundred and Seventy-five Thousand Dollars
($8,275,000) of which must be disbursed within sixty (60) days from the date
hereof and the remaining One Million Seven Hundred Twenty-five Thousand
- 9 -
<PAGE> 10
Dollars ($1,725,000) of which may not be disbursed until the remaining
$1,500,000 of the Term Loan is disbursed in accordance with Section 2.1 hereof,
but which, in any event, must be disbursed within sixty (60) days from the date
hereof and, (ii) commencing with calendar year 1994, so long as the Borrowers
are in compliance with the affirmative financial covenants contained in Sections
8.1(O), (P) and (Q) hereof and the negative financial covenant contained in
Section 8.2(K) hereof, aggregate annual Distributions by either Borrower to its
partners in an amount not to exceed fifty percent (50%) of such Borrower's Net
Income for the previous fiscal year beginning with each Borrower's fiscal year
ending December 31, 1993.
PERMITTED INDEBTEDNESS - As defined in Section 8.2(C) of this
Agreement.
PERMITTED LIENS - As defined in Section 8.2(G) of this Agreement.
PERSON - An individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political subdivision
thereof.
PRIME RATE - The interest rate established from time to time by Lender
as the Lender's Prime Rate, whether or not publicly announced, which may not
necessarily be the most favorable or lowest or best rate offered by Lender.
PROPERTY - Any kind of property or asset, whether real, personal or
mixed, or tangible or intangible, or any interest, including, without
limitation, any leasehold interest, held in any such properties or assets.
PROJECTIONS - A proforma consolidated opening balance sheet of
Borrowers and proforma consolidated five (5) year projected balance sheet,
income statement and statement of cash flows for the Borrowers, copies of which
are attached hereto as EXHIBIT D-2.
RESERVE AMOUNT - A variable amount equal to Two Million Five Hundred
Thousand Dollars ($2,500,000) until June 30, 1993 and thereafter such amount
will be reduced by the aggregate amount of all principal payments made by
Borrowers on the Term Loan on or after July 1, 1993 as of the date of reference
thereto.
RESTRICTED INVESTMENT - As defined in Section 8.2(R) of this Agreement.
REVOLVING COLLATERAL - All of each Borrower's
(i) Inventory;
(ii) contract rights and general intangibles, including,
without limitation, goodwill, trademarks, trademark applications, trade
styles, trade names, patents, patent applications, and deposit accounts
whether now owned or hereafter created or acquired;
(iii) Accounts and other receivables, together with all
customer lists, original books and records, ledger and account cards,
computer tapes, discs, printouts and records, whether now in existence
or hereafter created; and
- 10 -
<PAGE> 11
(iv) documents, warehouse receipts, instruments and chattel
paper, whether now owned or hereafter created.
REVOLVING LOAN - As defined in Section 2.3 of this Agreement.
REVOLVING NOTE - The revolving promissory note to be executed by
Borrowers in the form attached as EXHIBIT C-3 to this Agreement (with such
changes or modifications, if any, to which Lender may agree) evidencing the
Revolving Loan made by Lender pursuant to Section 2.3 of this Agreement,
together with all amendments thereto and all promissory notes issued in
substitution therefor or replacement thereof.
SECURITY - As defined in Section 2(1) of the Securities Act of 1933 as
amended.
SUBORDINATED DEBT - Such Indebtedness which is subordinated and junior
in right of payment to the Obligations to the extent, in such manner, and
pursuant to an instrument evidencing such subordination, acceptable to Lender.
SUBSIDIARY - Any corporation of which more than 50% of the Voting Stock
is at any time, directly or indirectly, owned by either Borrower and/or one or
more Subsidiaries.
TAX DISTRIBUTIONS - Distributions made by a Borrower to its partners
for actual or estimated income tax liability relating to income of such Borrower
attributed to such partners, provided that the same shall at all times be
subject to certain letter agreements dated of even date herewith between each
Borrower and Lender relating to such Distributions and acknowledged by each
Borrower's respective partners.
TERM LOAN - As defined in Section 2.1 of this Agreement.
TERM NOTE - The term promissory note to be executed by Borrowers in the
form attached as EXHIBIT C-1 to this Agreement (with such changes or
modifications, if any, to which Lender may agree) evidencing the Term Loan made
by Lender pursuant to Section 2.1 of this Agreement, together with all
amendments thereto and all notes issued in substitution therefor or replacement
thereof.
VOTING STOCK - Securities of any class or classes of a corporation
which, at the time of reference thereto, entitle the holders to elect corporate
directors.
1.2 ACCOUNTING TERMS. Any accounting terms used in this Agreement which
are not otherwise specifically defined shall have the meanings customarily given
them in accordance with GAAP.
1.3 OTHER TERMS. All other terms contained in this Agreement shall
have, unless the context indicates to the contrary, the meanings provided for by
the Code as adopted in the State of Ohio to the extent the same are used or
defined therein.
- 11 -
<PAGE> 12
1.4 USE OF PLURAL FORM. All definitions shall be equally applicable to
both the singular and plural forms of the defined terms.
2. LOANS AND ADVANCES
------------------
Subject to the terms and conditions of this Agreement and each of the
other Credit Documents, and otherwise provided that no loan advances need be
made by Lender if, at the date of any request for a loan advance hereunder by
either Borrower, an Event of Default, or event or condition which, with notice,
lapse of time or both, would constitute an Event of Default, then exists, Lender
will provide the credit facility described in this Section 2 for the account of
the Borrowers.
2.1 TERM LOAN. Lender will make a term loan (the "Term Loan") to
Borrowers in the principal amount of Eleven Million Dollars ($11,000,000). The
Term Loan shall be subject to repayment in accordance with, and bear interest as
provided in Section 2.2 of this Agreement and shall otherwise be evidenced by,
and repayable in accordance with the Term Note. $9,500,000 of the Term Loan
shall be disbursed at the time of closing of this credit facility and the
remaining $1,500,000 of the Term Loan shall be disbursed on or prior to November
1, 1992 upon the delivery by Borrowers to Lender of an ALTA Mortgagees' Policy
of Title Insurance covering six parcels of real property situated in Marion
County, Alabama and owned or to be acquired by Borrowers. Such Title Policy
shall (a) show Borrower(s) as the owner in fee simple of all six parcels, (b)
insure Lender as the holder of the first and best mortgage lien on each of such
parcels, free and clear of all liens, encumbrances and other title defects
unacceptable to Lender and (c) be otherwise reasonably acceptable in form and
substance to Lender.
2.2 PAYMENT TERMS OF THE TERM LOAN.
(A) INTEREST. The Term Loan shall bear interest on the unpaid
principal balance until the date paid at a rate per annum equal to two
percent (2.0%) in excess of the Base Rate, such interest being payable
monthly on the 1st day of each month, and at maturity, commencing
October 1, 1992. Interest shall be computed on a 360-day year basis
based upon the actual number of days elapsed.
(B) FIXED PRINCIPAL INSTALLMENTS. Subject otherwise to the
terms and provisions of the Term Note, the principal balance of the
Term Loan shall be payable in eighty-three (83) consecutive equal
monthly installments of Ninety-One Thousand Six Hundred Sixty-Seven
Dollars ($91,667) each, commencing November 1, 1992, and continuing on
the 1st day of each month thereafter and a final installment of Three
Million Three Hundred Ninety-One Thousand Six Hundred Thirty-Nine
Dollars ($3,391,639) on October 1, 1999.
2.3 REVOLVING LOAN.
(A) REVOLVING LOAN. Subject at all times to the terms hereof,
the Lender will, until September 14, 1995 make such loans to each
Borrower as from time to time each Borrower requests (the "Revolving
Loan") consisting of advances made by Lender
- 12 -
<PAGE> 13
against the value of each Borrower's respective Eligible Inventory and
Eligible Accounts. Such advances are anticipated to be repaid by
Borrowers and thereafter readvanced by Lender without any premium or
penalty therefor. Subject to the provisions of Subsection (B) of this
Section 2.3, the aggregate unpaid principal of the Revolving Loan
outstanding at any one time shall not exceed the lesser of (a) the line
of credit approved for Borrowers, which is currently Eleven Million
Five Hundred Thousand Dollars ($11,500,000) or (b) the sum of (i)
eighty-five percent (85%) of the unpaid face amount of each Borrower's
respective Eligible Accounts (or such other percentages of each
Borrower's respective Eligible Accounts as may from time to time be
fixed by the Lender upon notice to the Borrowers) and (ii) the lesser
of (1) fifty percent (50%) of the cost or market value, whichever is
lower, determined on a first-in, first-out basis, of each Borrower's
respective Eligible Inventory located at the Continental Collateral
Location or Goodman Collateral Location, as applicable (or such other
percentages of each Borrower's respective Eligible Inventory as may
from time to time be fixed by the Lender upon notice to the Borrowers)
or (2) Four Million Five Hundred Thousand Dollars ($4,500,000) (or such
other dollar amount as may from time to time be fixed by the Lender
upon notice to the Borrowers).
(B) MAXIMUM BORROWINGS AVAILABLE UNDER THE REVOLVING LOAN.
Notwithstanding anything to the contrary contained in this Section 2.3,
at no time shall the aggregate loans outstanding to the Borrowers at
any time under the Revolving Loan exceed Eleven Million Five Hundred
Thousand Dollars ($11,500,000) LESS the Reserve Amount; provided
however, that advances under the Revolving Loan to either Borrower
shall not exceed that which is permitted on the basis of the advance
rate percentages set forth in Section 2.3(A)(b) above as the same are
applied to each respective Borrower.
(C) PAYMENT. The Revolving Loan shall be payable on September
14, 1995 and bear interest as provided in Section 2.4 of this Agreement
and shall otherwise be evidenced by, and repayable in accordance with,
the Revolving Note, but in the absence of such promissory note shall be
evidenced by the Lender's record of disbursements and repayments.
(D) LETTERS OF CREDIT. Lender may, in its sole discretion,
without any obligation to do so, issue for the account of either
Borrower commercial and/or standby letters of credit up to a maximum
aggregate face amount of One Million Five Hundred Thousand Dollars
($1,500,000). The face amount of each such letter of credit shall be
deemed an advance under the Revolving Loan and shall be subject to the
limitations set forth under Subsection 2.3(A) hereof pertaining to
Eligible Accounts and Eligible Inventory. In no event, however, shall
the aggregate total face amount of letters of credit issued by the
Lender for the account of the Borrowers outstanding at any time exceed
the sum of One Million Five Hundred Thousand Dollars ($1,500,000).
2.4 INTEREST ON THE REVOLVING LOAN. The Revolving Loan shall bear
interest on the unpaid principal balance from time to time outstanding until the
date paid at a rate per annum equal to the Contract Rate, such interest being
payable monthly on the 1st day of each month, and at maturity, commencing
October 1, 1992. Any increase or decrease in the interest rate
- 13 -
<PAGE> 14
resulting from a change in the Base Rate shall become effective on the date of
such change. Interest shall be computed on a 360-day year basis based upon the
actual number of days elapsed.
2.5 OPTIONAL CHARGE AGAINST THE REVOLVING LOAN. To the extent Borrowers
do not remit, when due, any payments of interest or, in the case of loans other
than the Revolving Loan, any payment of principal, or any other payment required
to be made by Borrowers to the Lender pursuant to the terms of any of the Credit
Documents, the Lender may, at its option, make such payment by increasing the
outstanding principal balance of the Revolving Loan in order to prevent such
amount from becoming past due, but it is expressly acknowledged and agreed that
Lender shall be under no obligation to do so.
2.6 LOAN ACCOUNT. Lender shall debit to the Loan Account the amount of
each advance under the Revolving Loan, all interest on the Revolving Loan and
the amount of all other compensation or fees payable to Lender in respect of the
Term Loan or the Revolving Loan and shall credit to the Loan Account the amount
of each payment of principal and interest on the Revolving Loan and the amount
of all payments of any other amounts payable under the Revolving Loan by
appropriate entries. Any accounting rendered by the Lender to the Borrowers
shall be deemed correct and conclusively binding upon the Borrowers, except for
manifest errors, unless the Borrowers notify the Lender by certified mail,
return receipt requested, within five (5) business days after the date when each
such accounting is delivered to the Borrowers.
2.7 ALL ADVANCES TO CONSTITUTE ONE LOAN. The Term Loan and the
Revolving Loan and all other sums owed by Borrowers to Lender under this
Agreement, whether or not evidenced by the Notes, shall constitute one
obligation of Borrowers, secured by Lender's lien on and security interest in
all of the Collateral. Borrowers shall jointly and severally be liable to Lender
for all Obligations hereunder, regardless of whether such Obligations arise as a
result of advances made directly to Borrowers, it being stipulated and agreed
that all monies advanced by Lender hereunder inure to the benefit of each
Borrower, and that Lender is relying on the liability of each Borrower in
extending credit and otherwise making advances hereunder.
2.8 ORIGINATION FEE. In order to compensate Lender for its services in
preparing and reviewing the Credit Documents and the documentation relating
thereto in connection with this Credit Facility, Borrower shall pay to Lender on
the date hereof an origination fee (the "Origination Fee") of One Hundred
Twenty-Five Thousand Dollars ($125,000).
2.9 COMMITMENT FEE. Borrowers shall pay to Lender on September 14, 1993
and annually thereafter, a commitment fee (the "Commitment Fee") of one-fourth
of one percentage point (0.25%) of the amount of the line of credit approved for
Borrowers under the Revolving Loan pursuant to Section 2.3(A) of this Agreement,
whether the Borrowers shall be entitled to request such amount pursuant to
Section 2.3(A) of this Agreement or not.
- 14 -
<PAGE> 15
3. DEFAULT INTEREST
----------------
Upon and after the occurrence of an Event of Default, and during the
continuation thereof, unless Lender otherwise agrees, the Obligations shall bear
interest, calculated daily on the basis of a three hundred and sixty (360) day
year, for the actual days elapsed, at the Default Rate.
4. COLLATERAL; GENERAL TERMS
-------------------------
4.1 GRANT OF SECURITY INTEREST. To secure the prompt payment and
performance of the Obligations, and in addition to any other Collateral securing
the Obligations, each Borrower hereby grants to Lender a continuing security
interest in and to all of the following Property of such Borrower, whether now
owned or existing or hereafter acquired or arising and wheresoever located:
(A) all Fixed Collateral;
(B) all Revolving Collateral;
(C) any and all deposits or other sums at any time credited by
or due from Lender to such Borrower, whether in a Depository Account or other
account, together with any and all instruments, documents, policies and
certificates of insurance, securities, goods, Accounts, choses in action,
general intangibles, chattel paper, cash or other Property, and the proceeds of
each of the foregoing, to the extent owned by the Borrower or in which such
Borrower has an interest and which now or hereafter are at any time in the
possession or control of the Lender or in transit by mail or carrier to or from
Lender or in the possession of any Person acting on Lender's behalf, without
regard to whether Lender received the same in pledge, for safekeeping, as agent
for collection or transmission or otherwise or whether Lender had conditionally
released the same, and any and all balances, sums, proceeds and credits of such
Borrower with, and any claims of such Borrower against, Lender;
(D) All accessions to, substitutions for and all replacements,
products and proceeds of the Property described in Subsections (A), (B) and (C)
above, including, without limitation, proceeds of insurance policies insuring
such Property; and
(E) All books, records and other property (including without
limitation, credit files, programs, printouts and other materials and records)
of such Borrower pertaining to any of the Property described in Subsections (A),
(B), (C) or (D) above.
It is acknowledged and agreed that the Obligations shall be secured by
a first priority lien on and security interest in the Collateral.
4.2 REPRESENTATIONS, WARRANTIES AND COVENANTS -- COLLATERAL. Each
Borrower represents, warrants and covenants to Lender that, except as otherwise
permitted herein or in any of the other Credit Documents:
- 15 -
<PAGE> 16
(A) Borrower's present Collateral is now, and Borrower's
hereafter acquired Collateral at the time acquired will be, and so long as such
Borrower is obligated to Lender will continue to be, owned solely by such
Borrower and no other Person has or will have any right, title, interest, claim
or Lien therein, thereon, or thereto, whether by assignment or otherwise
pursuant to any Lien, encumbrance or security interest, other than pursuant to
Liens constituting Permitted Liens hereunder;
(B) Except as provided in Section 8.1(C) with regard to taxes,
levies and other charges being contested in good faith, the Borrower shall pay
and discharge when due all taxes, levies, and other charges upon the Collateral
and shall defend Lender against and save Lender and the Collateral harmless from
all claims of any Person with respect thereto; and
(C) The Borrower will at all times keep accurate and complete
records of all Collateral.
4.3 PERFECTION OF LENDER'S SECURITY INTEREST IN COLLATERAL. Each
Borrower agrees to execute such financing statements provided for by applicable
law, and to otherwise take such other action, and execute such assignments or
other instruments or documents, in each case as Lender may request, to evidence,
perfect or record Lender's security interest in the Collateral. Each Borrower
hereby authorizes Lender to execute and file any such financing statement or
continuation statement on such Borrower's behalf. The parties agree that a
carbon, photographic or other reproduction of this Agreement shall be sufficient
as a financing statement.
4.4 LOCATION OF COLLATERAL. Each Borrower warrants and covenants that,
except for Inventory in transit and as otherwise approved by Lender in writing,
all Collateral is, and will remain, at all times, at a Collateral Location.
4.5 INSURANCE. Each Borrower agrees to maintain and pay for insurance,
including, without limitation, insurance upon all tangible Collateral wherever
located, in storage or in transit in vehicles, including goods evidenced by
documents, covering casualty, hazards, public liability or such other risks in
such amounts and with such insurance companies as shall in each instance be
reasonably satisfactory to Lender. Each Borrower shall deliver such policies, or
copies of such policies and certificates evidencing such insurance, to Lender
with satisfactory loss payable endorsements naming Lender as its interest may
appear. Each policy of insurance or endorsement shall contain a provision
requiring thirty (30) days advance written notice to Lender in the event of
cancellation of the policy for any reason whatsoever or any modification thereto
and a clause that the interest of Lender shall not be impaired or invalidated by
any act or neglect of such Borrower or other owner of the Property nor by the
occupation of the premises for purposes more hazardous than are permitted by
said policy. Each Borrower agrees to deliver to Lender, promptly as rendered,
true copies of all reports made to insurance companies. Each Borrower
irrevocably makes, constitutes and appoints Lender (and all officers, employees
or agents designated by Lender) as such Borrower's true and lawful
attorney-in-fact and agent, with full power of substitution, to make and adjust
claims under such policies of insurance in excess of $100,000 (provided,
however, that Lender agrees to consult with such Borrower prior to finally
making, settling, or adjusting claims under such policies of insurance),
receive, and endorse the name of such Borrower on any check, draft, instrument
or other item
- 16 -
<PAGE> 17
or payment for the proceeds of such policies of insurance and make all
determinations and decisions with respect to such policies of insurance or to
pay any premium in whole or in part relating thereto. Lender, without waiving or
releasing any obligation or default by such Borrower hereunder, may (but shall
be under no obligation to do so) at any time or times thereafter maintain such
action with respect thereto which Lender deems advisable. All sums disbursed by
Lender in connection therewith, including reasonable attorneys' fees, court
costs, expenses and other charges relating thereto, shall be payable, on demand,
and until paid by such Borrower to Lender, with interest thereon at the Contract
Rate, shall be additional Obligations hereunder secured by the Collateral.
4.6 PROTECTION OF COLLATERAL: REIMBURSEMENT. All insurance expenses and
all expenses of protecting, storing, warehousing, insuring, handling,
maintaining, and shipping any Collateral, any and all excise, property, sales,
use or other taxes imposed by any state, federal or local authority on any of
the Collateral, or in respect of the sale thereof, or otherwise in respect of
either Borrower's business operations which, if unpaid, could result in the
imposition of any Lien upon the Collateral, shall be borne and paid by
Borrowers. If any Borrower fails to promptly pay any portion thereof when due,
except as may otherwise be permitted hereunder or under any of the other Credit
Documents, Lender may, at its option, but shall not be required to, pay the
same. All sums so paid or incurred by Lender for any of the foregoing and any
and all other sums for which any Borrower may become liable hereunder and all
costs and expenses (including attorneys' fees, legal expenses, and court costs)
which Lender may incur in enforcing or protecting its Lien on or rights and
interest in the Collateral or any of its rights or remedies under this or any
other agreement between the parties hereto or in respect of any of the
transactions to be had hereunder shall be repayable on demand and, until paid by
such Borrower to Lender with interest thereon at the Contract Rate, shall be
additional Obligations hereunder secured by the Collateral. Lender shall not be
liable or responsible in any way for the safekeeping of any of the Collateral or
for any loss or damage thereto or for any diminution in the value thereof,
except gross negligence or wilful misconduct on the part of Lender while the
Collateral is in the possession of or under the control of Lender, or for any
act or default of any warehouseman, carrier, forwarding agency, or other Person
whomsoever.
4.7 INSPECTION. Lender (by any of its officers, employees, agents or
representatives) shall have the right to inspect the Collateral, the premises
upon which any of the Collateral is located, and any and all books, records,
journals, orders, receipts or other correspondence (and to make extracts or
copies thereof as Lender may desire) to verify the amount, quality, quantity,
value and condition of, or any other matter relating to, the Collateral or the
financial condition of either Borrower.
5. PROVISIONS RELATING TO ACCOUNTS
-------------------------------
5.1 CONDITIONS. With respect to each Borrower's Accounts, Lender may
rely, in determining which Accounts are Eligible Accounts, on all reports,
statements or representations made by each Borrower with respect to any such
Account or Accounts. In the event any Account is or becomes ineligible,
Borrowers shall promptly notify Lender upon obtaining knowledge of the same and,
in any event, if any such report, statement or representation by any Borrower is
breached or otherwise proves untrue, regardless of either Borrower's knowledge
- 17 -
<PAGE> 18
thereof, Lender may deem such Accounts ineligible, but Lender shall retain its
security interest in all Accounts, eligible and ineligible, until all
Obligations are paid and satisfied in full.
5.2 COLLECTION OF ACCOUNTS.
----------------------
(A) All checks, drafts, cash and other proceeds realized from
the sale of any Inventory or otherwise from the sale or other disposition of any
of the other Collateral, including, without limitation, all proceeds realized
from the collection of the Accounts or otherwise pursuant to any contract right,
note, bill, draft, acceptance, chose in action and other like forms of general
intangibles, and all remittances received by either Borrower in respect to the
foregoing, shall, upon receipt by the Borrower, be held by such Borrower as
trustee of an express trust for Lender's sole benefit and subject to immediate
deposit (in their original form duly endorsed in blank) in the Cash Collateral
Account or in a special account over which Lender has the sole right and power
of withdrawal, maintained at a financial institution acceptable to Lender (such
financial institution and account being herein referred to as the "Depository
Bank" and "Depository Account" respectively). The Depository Account shall be
subject to the written agreement of the Depository Bank to waive any right of
setoff it might otherwise claim to have against any funds in the Depository
Account and to otherwise charge any costs relative to the Depository Account to
Borrowers or such other account(s) as either Borrower may maintain with the
Depository Bank, such agreement (the "Depository Agreement") to be in form and
substance acceptable to Lender. Lender assumes no responsibility for any claim
of accord and satisfaction or release with respect to funds which have been
deposited in the Depository Account.
(B) Upon the occurrence and during the continuance of an Event
of Default, if at any time requested by Lender, Continental shall instruct all
Account Debtors to mail their payments directly to a designated post office
lockbox (a "Lockbox") maintained at Continental's expense, with respect to which
only Lender or, should Lender so agree, a designated financial institution shall
have the right of access and all payments so received shall be subject to
immediate deposit into the Depository Account.
(C) All funds held in the Depository Account shall be subject
to transfer to the Cash Collateral Account, an account designated by the Lender
(the "Lender's Account") as set forth in the Depository Agreement or as
otherwise designated by Lender. The application of any funds to the payment of
the Obligations shall not occur until Lender's receipt of such funds in cleared
federal funds in the Cash Collateral Account or in Lender's Account. Lender
agrees that all funds received by Lender by wire transfer for either Borrower's
account prior to 10:00 a.m. on any business day of Lender shall be deemed
cleared federal funds in the Cash Collateral Account. Funds received by Lender
by wire transfer for either Borrower's account after 10:00 a.m. on any business
day of Lender shall be deemed cleared federal funds in the Cash Collateral
Account on the next business day of Lender. The order and method of application
of such payments shall be in the sole discretion of Lender.
(D) Lender reserves the right upon the occurrence and during
the continuance of an Event of Default to notify Account Debtors and other
Persons indebted to Borrowers of Lender's interest in any such amounts payable
to Borrowers and to instruct such Account
- 18 -
<PAGE> 19
Debtors and other Persons to remit the same directly to Lender and upon
collection of the same and deposit in the Cash Collateral Account, or in
Lender's Account of all funds arising therefrom (less any costs of collection
and other charges or expenses incurred in connection therewith as hereinafter
provided) in cleared federal funds, the same shall be subject to application to
the Obligations.
5.3 VERIFICATION OF ACCOUNTS. Any of Lender's officers, employees, or
agents shall have the right, at any time or times hereafter, in the name of
Lender, any designee of Lender or in the name of the Borrowers, to verify the
validity, amount or any other matter relating to any Accounts by mail,
telephone, telegraph, or otherwise.
5.4 ASSIGNMENTS, RECORDS AND SCHEDULES OF ACCOUNTS. Each Borrower shall
execute and deliver to Lender, on forms supplied by Lender and no less
frequently than once a week, written assignments of all of its Accounts after
shipment of the subject goods, together with copies of invoices and/or invoice
registers related thereto as Lender may from time to time request and, on or
before the last day of each month from and after the date hereof, each Borrower
shall deliver to Lender, in form and substance acceptable to Lender, a detailed
aged trial balance, dated as of the last day of the preceding month, of all then
existing Accounts specifying the names, face value and dates of invoices for
each Account Debtor obligated on an Account so listed. In addition, each
Borrower shall, upon Lender's request, furnish Lender with copies of proof of
delivery and the original copy of all documents relating to the Accounts,
including, without limitation, repayment histories and present status reports,
relating to the Accounts and such other matters and information relating to the
status of then existing Accounts as Lender shall reasonably request.
6. PROVISIONS RELATING TO INVENTORY
--------------------------------
6.1 INVENTORY REPRESENTATIONS AND WARRANTIES. In determining which
items of Inventory constitute Eligible Inventory, Lender may rely on all
reports, statements or representations made by either Borrower with respect to
any Inventory. In the event any Inventory is or becomes ineligible, Borrowers
shall promptly notify Lender upon obtaining knowledge of the same and, in any
event, if any such report, statement or representation by either Borrower is
breached or otherwise proves untrue, regardless of either Borrower's knowledge
thereof, Lender may deem such Inventory ineligible, but Lender shall retain its
security interest in all Inventory, eligible and ineligible, until all
Obligations are paid and satisfied in full and this Agreement is terminated.
6.2 RETURNED INVENTORY. Each Borrower shall execute and deliver to
Lender, on forms supplied by Lender and no less frequently than once a month, a
report of returns of any Inventory and as requested by Lender, provide to Lender
copies of any credit memorandums to the Account Debtor issued in respect
thereof. In all cases, Lender shall be promptly notified of returns of
Inventory, the reason for such return and the location of such returned
Inventory and, unless otherwise agreed by Lender, no such returned Inventory
shall be Eligible Inventory for purposes of this Agreement.
- 19 -
<PAGE> 20
6.3 INVENTORY REPORTS. Each Borrower shall furnish Lender with such
reports regarding Inventory as Lender may request at least once each month. Such
reports shall be on forms requested or provided by Lender and shall contain such
detailed information satisfactory to Lender. Each Borrower shall otherwise
conduct a physical count of its Inventory annually so long as no Event of
Default has occurred, supplying Lender with a copy of such counts accompanied by
a report of the value (at the lower of cost or market value) thereof. Upon the
occurrence and during the continuance of an Event of Default, each Borrower
shall conduct a physical count of its Inventory at such intervals as Lender may
request.
7. REPRESENTATIONS AND WARRANTIES
------------------------------
7.1 GENERAL REPRESENTATIONS AND WARRANTIES. As an inducement to Lender
to make advances hereunder, each Borrower warrants, represents and covenants to
Lender that:
(A) ORGANIZATION AND OUALIFICATION. Such Borrower is a limited
partnership duly formed, validly existing and in good standing under the laws of
the State of Delaware and has duly qualified and is authorized to do business
and is in good standing as a foreign partnership in each other state or
jurisdiction where the character of its Property or the nature of its activities
makes such qualification necessary, or in which the failure of such Borrower to
be so qualified would have a Material Adverse Effect.
(B) PARTNERSHIP POWERS. Such Borrower has the partnership
right and power and is duly authorized and empowered to enter into, execute,
deliver and perform this Agreement and each of the other Credit Documents to
which it is a party. This Agreement and each of the other Credit Documents to
which such Borrower is a party have each been duly authorized and approved by
the General Partner of such Borrower, and are the legal, valid and binding
obligations of such Borrower, enforceable against such Borrower in accordance
with their respective terms, except to the extent such enforceability is limited
by bankruptcy, reorganization, moratorium or similar laws affecting generally
the enforcement of creditors' rights and remedies from time to time in effect.
The execution, delivery and performance of this Agreement and each of the other
Credit Documents to which it is a party will not conflict with or result in any
breach of any of the provisions of, or constitute a default under, or result in
the creation of any Lien (other than Permitted Liens) upon any Property of such
Borrower under the provisions of, the Partnership Agreement of such Borrower or
any Material Agreement.
(C) MATERIAL AGREEMENTS. Except as disclosed on EXHIBIT F
hereto, such Borrower is not a party to nor is such Borrower or any of its
Property bound by (i) any order, writ, injunction, judgment or decree of any
court or government agency or instrumentality which could have a Material
Adverse Effect, (ii) any Debt Instrument, (iii) any security agreement,
mortgage, deed of trust, pledge, assignment or other document or arrangement
whereby any Lien upon any of such Borrower's Property exists in favor of any
Person other than Lender except for Permitted Liens, (iv) any lease (capital,
operating or otherwise), whether as lessee or lessor thereunder where the amount
involved is in excess of the sum of $50,000 per annum, or extends for more than
one year, or both, which, if violated, could have a Material Adverse Effect, (v)
any contract, commitment, agreement or other arrangement involving the purchase
- 20 -
<PAGE> 21
or sale of any Inventory by such Borrower, or the license of any right to or by
such Borrower, which, if terminated for any reason, could result in a Material
Adverse Effect, (vi) any contract, commitment, agreement or other arrangement
with any Affiliate which, if violated, could have a Material Adverse Effect,
(vii) any management or employment contract or contract for personal services
with any Person, not otherwise an Affiliate, which is not otherwise terminable
at will or on less than one (1) year's notice without liability which, if
violated, could have a Material Adverse Effect, (viii) any collective bargaining
agreement which, if violated, could have a Material Adverse Effect, (ix) any
Pension Plan which, if violated, could have a Material Adverse Effect or (x) any
other contract, agreement, understanding or arrangement which, if violated,
could have a Material Adverse Effect.
(D) GENERAL MATTERS. Except as disclosed on EXHIBIT G hereto,
such Borrower (i) has not, during the preceding five (5) years, been known as or
operated under or otherwise used any other corporate or fictitious name, trade
name or tradestyle, (ii) has not, during the preceding five (5) years, been the
surviving Person of any merger or consolidation and has no Affiliates, except
for its General Partner and its limited partners and any Affiliates of any of
them, (iii) has no lawsuits, actions, investigations or other proceedings
pending or to the best of its knowledge currently threatened against it of any
nature whatsoever in any court or before any governmental authority, arbitration
board or other tribunal, (iv) holds all material permits, certificates,
licenses, orders, registrations, franchises, authorizations and other approvals
from all federal, state, local and foreign governmental and regulatory bodies
necessary for the conduct of its business operations in compliance with
applicable law, (v) has to the best of its knowledge fully complied in all
material respects with all applicable statutes, rules, regulations and orders,
federal, state, local or foreign, including, without limitation, equal
employment practices, (vi) is not in violation of or in default with respect to
any material term or condition of any Material Agreement, (vii) has not received
any notice to the effect that it is not substantially in full compliance with
any of the requirements of ERISA or (viii) has no actual knowledge of material
grievances, disputes or controversies outstanding with any union or other
organization of its employees or threats of work stoppage, strike or pending
demands for collective bargaining which, if any of the foregoing representations
in (i) - (viii) hereof were breached, could have a Material Adverse Effect.
(E) USE OF PROCEEDS. Borrower's uses of the proceeds of the
Term Loan and Revolving Loan made by Lender to Borrowers pursuant to this
Agreement are, and will continue to be, legal and proper partnership uses, duly
authorized by the General Partner of such Borrower, and such uses are and will
continue to be consistent with the Commitment and all applicable laws and
statutes, as in effect from time to time. Such Borrower is not engaged in the
business of extending credit for the purpose of purchasing or carrying margin
stock (within the meaning of any regulation of the Board of Governors of the
Federal Reserve System), and no part of the proceeds of the Term Loan and
Revolving Loan to Borrowers will be used to purchase or carry (or refinance any
borrowing, the proceeds of which were used to purchase or carry) any margin
stock, or to extend credit to others for the purpose of purchasing or carrying
margin stock.
(F) PATENTS AND TRADEMARKS. Such Borrower owns or possesses
all the patents, trademarks, service marks, copyrights, licenses, and rights
with respect to the foregoing
- 21 -
<PAGE> 22
necessary for the conduct of its business as now conducted without any known
conflict with the rights of others. All such patents, trademarks, service marks,
trade names, copyrights, licenses and other similar intellectual property rights
are listed on EXHIBIT H attached hereto.
(G) SOLVENT FINANCIAL CONDITION. As of the date hereof, and
after giving effect to the transactions contemplated by this Agreement, to the
best of such Borrower's knowledge and belief (i) the fair saleable value of such
Borrower's assets is greater than the amount required to pay its total
liabilities, (ii) such Borrower is able to pay its debts as they mature in the
ordinary course of business and is not otherwise insolvent in any respect and
(iii) such Borrower's capital is sufficient and not unreasonably small for the
business and transactions in which such Borrower is engaged or about to engage.
(H) TITLE TO PROPERTIES. Such Borrower has good, indefeasible
and marketable title to and ownership of all Property it purports to own, which,
in the case of the Collateral, is free and clear of all Liens, except those in
favor of Lender and any Permitted Liens.
(I) FINANCIAL STATEMENTS AND PROJECTIONS.
(i) The Financial Statements have each been prepared in accordance with
GAAP, consistently applied, and present fairly in all material respects the
financial position of such Borrower at such date and the results of such
Borrower's operations for such period. There has been no change in the
condition, financial or otherwise, of such Borrower as shown on the Financial
Statements and no change in the aggregate value of machinery and equipment owned
by such Borrower, except changes in the ordinary course of business, none of
which individually or in the aggregate will have a Material Adverse Effect.
(ii) The Projections have been prepared by an officer, or agent, of
Borrowers in good faith, substantially in accordance with GAAP on a pro-forma
basis, after giving effect to the consummation of the transactions contemplated
by this Agreement and the Projections are arithmetically accurate.
(J) FULL DISCLOSURE. Neither this Agreement, nor any written
statement made by such Borrower in connection herewith, contains any untrue
statement of a material fact. To the best knowledge of such Borrower, there is
no fact which such Borrower has not disclosed to Lender which has, or will have,
a Material Adverse Effect.
(K) TAX RETURNS. Such Borrower has filed all federal, state
and local tax returns and other reports it is required by law to file and has,
except as otherwise permitted herein, paid all taxes, assessments, fees and
other governmental charges that are due and payable. The provision for taxes on
the books of such Borrower is adequate for all years not closed by applicable
statutes and for its current fiscal year.
(L) SECURITIES LAWS. Such Borrower's execution and delivery of
this Agreement and each of the other Credit Documents to which it is a party
will not directly or indirectly violate or result in a violation of Section 7 of
the Securities Exchange Act of 1934, as amended, or any regulations issued
pursuant thereto.
- 22 -
<PAGE> 23
(M) O.S.H.A. AND ENVIRONMENTAL MATTERS. Such Borrower has duly
complied with, and its facilities, business, assets, property, leaseholds and
equipment are in compliance in all material respects with, the provisions of the
Federal Occupational Safety and Health Act as amended, the Environmental
Protection Act as amended, the Resource Conservation and Recovery Act as amended
and all rules and regulations thereunder and all similar federal, state and
local laws, rules and regulations and there have been no outstanding citations,
notices or orders of non-compliance issued to such Borrower or relating to its
respective facilities, business, assets, property, leaseholds or equipment under
any such laws, rules or regulations. Such Borrower has been issued all required
federal, state and local licenses, certificates or permits relating to such
Borrower's business and facilities, and such Borrower and its facilities,
business, assets, property, leaseholds and equipment are in compliance in all
material respects with, all applicable federal, state and local laws, rules and
regulations relating to air emissions, water discharge, noise emissions, solid
or liquid waste disposal, hazardous waste or materials, or other environmental,
health or safety matters.
(N) TRADE RELATIONS. To the best of such Borrower's knowledge,
there exists no actual or threatened termination, cancellation or limitation of,
or any modification or change in, the business relationship of such Borrower and
any customer or any group of customers whose purchases individually or in the
aggregate are material to the business of such Borrower, or with any material
supplier, and there exists no present condition or state of facts or
circumstances known to such Borrower which would have a Material Adverse Effect
on such Borrower in any respect or prevent such Borrower from conducting such
business after the consummation of the transactions contemplated by this
Agreement in substantially the same manner which it has heretofore been
conducted except for economic conditions and such other factors not within the
reasonable control of such Borrower.
(O) FIXED COLLATERAL. To the best of such Borrower's
knowledge, all Fixed Collateral is in good operating condition and repair and
all necessary replacements of and repairs to the same have been made so that the
value and operating efficiency thereof has been maintained and preserved,
reasonable wear and tear excepted and where a breach hereof would have a
Material Adverse Effect.
7.2 REAFFIRMATION. Each request for an advance made by each Borrower
pursuant to this Agreement shall, unless Lender is otherwise notified in writing
prior to the time of such advance, constitute (i) an automatic representation
and warranty by such Borrower to Lender that there does not then exist an Event
of Default or any event or condition which, with notice, lapse of time and/or
the making of such advance, would constitute an Event of Default, and (ii) a
reaffirmation as of the date of said request of all of the representations and
warranties of such Borrower contained in this Agreement or any of the other
Credit Documents.
7.3 SURVIVAL OF REPRESENTATION AND WARRANTIES. Each Borrower covenants,
warrants and represents to Lender that all representations and warranties of
such Borrower contained in this Agreement and each of the other Credit Documents
shall be true at the time of such Borrower's execution of this Agreement and
such other Credit Documents, and shall survive the execution, delivery and
acceptance thereof by Lender and the parties thereto and the closing of the
transactions described therein or related thereto.
- 23 -
<PAGE> 24
8. COVENANTS AND CONTINUING AGREEMENTS
-----------------------------------
8.1 AFFIRMATIVE COVENANTS. So long as any Obligations remain
unsatisfied, each Borrower covenants that, unless otherwise consented to by
Lender in writing, it will:
(A) Pay to Lender, on demand, any and all fees, costs or
expenses which Lender pays to a bank or other similar institution arising out of
or in connection with (i) the forwarding by Lender to any Borrower or any other
Person on behalf of any Borrower of any proceeds of loans made by Lender
pursuant to this Agreement or, (ii) the depositing for collection, by Lender, of
any check or item of payment received and/or delivered to Lender on account of
the Obligations.
(B) Preserve and maintain its separate partnership existence
and all rights, privileges, and franchises in connection therewith, and maintain
its qualification and good standing in all states in which such qualification is
necessary in order for such Borrower to conduct its business in such states or
in which the failure to so qualify would have a Material Adverse Effect.
(C) File all federal, state and local tax returns and other
reports such Borrower is required by law to file, maintain adequate reserves for
the payment of all taxes, assessments, governmental charges, and levies imposed
upon it, its income, or its profits, or upon any Property belonging to it, and
pay and discharge all such taxes, assessments, governmental charges and levies
prior to the date on which penalties attach thereto, except where the same are
being contested in good faith by appropriate proceedings and adequate book
reserves have been established with respect to each such claim being contested.
(D) Maintain its Property in good condition and make all
necessary renewals, repairs, replacements, additions and improvements thereto so
as to maintain the value and operating efficiency thereof, reasonable wear and
tear excepted.
(E) Comply with all laws, ordinances, governmental rules and
regulations to which it is subject and obtain all licenses, permits, franchises,
or other governmental authorizations necessary to the ownership of its
Properties or to the conduct of its business and which, if violated, would
result in a Material Adverse Effect.
(F) If applicable, at all times make prompt payment of any and
all contributions required to meet the minimum funding standards set forth in
Sections 302 and 305 of ERISA with respect to each Pension Plan, if any,
maintained by such Borrower and otherwise in regard thereto (i) furnish Lender
with any annual report required to be filed pursuant to Section 103 of ERISA in
connection with each Pension Plan and any other employee benefit plan of such
Borrower or its Affiliates subject to said Section; (ii) notify Lender as soon
as practicable of any "Reportable Event" (as defined under ERISA) and of any
additional act or condition arising in connection with any Pension Plan which
might constitute grounds for the termination thereof by the Pension Benefit
Guaranty Corporation or for the appointment by the appropriate United States
District Court of a trustee to administer the Pension Plan; and (iii) furnish to
Lender, promptly upon Lender's request therefor, such additional information
- 24 -
<PAGE> 25
concerning any such Pension Plan or any other such employee benefit plan as may
be reasonably requested.
(G) Promptly upon, but in no event later than three (3)
business days after acquiring actual knowledge thereof, (i) inform Lender, in
writing, of the assertion of any claims, offsets or counterclaims by any Account
Debtor and of any allowances, credits and/or other monies granted by it to any
Account Debtor not otherwise disclosed to Lender; and (ii) furnish to and inform
Lender of all material adverse information relating to the financial condition
of any Account Debtor.
(H) Keep adequate records and books of account with respect to
its business activities in which proper entries are made in accordance with GAAP
reflecting all its financial transactions and permit the Lender, in its
discretion, to conduct quarterly audits, at such Borrower's expense.
(I) Cause to be prepared and furnished to Lender the following
(which in the case of any financial statements shall consist of a balance sheet,
income statement and statement of cash flow kept and prepared in accordance with
GAAP, unless such Borrower's certified public accountants concur in any changes
therein and such changes are disclosed to Lender and are consistent with then
generally accepted accounting principles):
(i) As soon as possible, but not later than ninety (90) days
after the close of each fiscal year of such Borrower, audited annual
financial statements of such Borrower as of the end of each such fiscal
year, prepared by a firm of independent certified public accountants of
recognized standing, selected by such Borrower and reasonably
acceptable to Lender;
(ii) As soon as possible, but not later than thirty (30) days
after the end of each month hereafter, unaudited interim financial
statements of such Borrower as of the end of such month and of the
portion of such Borrower's fiscal year then elapsed certified by the
chief financial officer or controller of such Borrower or of such
Borrower's General Partner as prepared in accordance with GAAP (without
footnotes) and fairly presenting in all material respects the financial
position and results of operations of such Borrower for such month and
period;
(iii) Concurrently with the delivery of the financial
statements described in Subsections (i) and (ii) above, and quarterly
at the request of Lender, certificates from the chief financial officer
or controller of such Borrower or of such Borrower's General Partner
certifying to Lender that to the best of his knowledge, such Borrower
has kept, observed, performed and fulfilled in all material respects
each and every covenant, obligation and agreement binding upon such
Borrower contained in this Agreement or the Credit Documents, and that
no Event of Default, or any event which with the giving of notice or
lapse of time or both, would constitute an Event of Default, has
occurred or specifying any such Event of Default, together with a
Compliance Certificate, including a financial covenant compliance
worksheet, in the forms of EXHIBIT K attached hereto,
- 25 -
<PAGE> 26
reflecting the computation of the financial covenants set forth in
Sections 8.1 and 8.2 hereof as of the end of the period covered by such
financial statements;
(iv) If applicable, concurrently with the sending or filing
thereof, as the case may be, copies of any definitive financial
statements or reports which such Borrower has made available to its
General Partner or limited partners and copies of any regular periodic
or special reports, schedules, registration statements or other
documents (including, without limitation, all forms 8-K, 10-Q or 10-K)
which such Borrower files with the Securities and Exchange Commission
or any governmental authority which may be substituted therefor, or any
national securities exchange or self-regulatory securities
organization, including the National Association of Securities Dealers,
Inc.;
(v) Concurrently with each request for an advance under the
Revolving Loan, and monthly on the last day of each month, a
certificate prepared by the chief financial officer or controller of
such Borrower or of such Borrower's General Partner in the form
attached hereto as EXHIBIT A;
(vi) Such other data and information (financial and otherwise)
as Lender, from time to time, may reasonably request, bearing upon or
related to the Collateral or such Borrower's financial condition and/or
results of operations.
(J) Notify Lender in writing:
(i) Promptly upon such Borrower's learning thereof, of the
institution of any suit, action or administrative proceeding against
such Borrower or relating to any of its Property in an amount exceeding
$100,000, whether or not the claim is considered by such Borrower to be
covered by insurance;
(ii) At least ten (10) days prior thereto, of such Borrower's
opening of any new office or place of business or such Borrower's
closing of any existing office or place of business resulting in the
relocation of Collateral or business records;
(iii) Promptly upon such Borrower's learning thereof, of any
material labor dispute to which such Borrower may become a party, any
strikes or walkouts relating to any of its plants or other facilities,
and the expiration of any labor contract to which such Borrower is a
party or by which such Borrower is bound;
(iv) Within three (3) business days after the occurrence
thereof, of such Borrower's default under any Material Agreement; and
(v) Promptly upon the occurrence thereof, of any default by
any obligor under any note or other evidence of debt payable to such
Borrower.
(K) Provide Lender with all warehouse receipts respecting any
Inventory and copies of all agreements between such Borrower and any bailee,
warehousemen or similar party with whom Inventory may from time to time be
stored.
- 26 -
<PAGE> 27
(L) If any of the Accounts arise out of a contract with the
United States of America, or any department, agency, subdivision or
instrumentality thereof, promptly notify Lender thereof in writing and execute
any instruments and take any other action required or requested by Lender to
perfect Lender's security interest in such Accounts under the provisions of the
Assignment of Claims Act of 1940.
(M) Deliver to Lender, upon demand, any and all evidence of
ownership of Fixed Collateral, inclusive of any certificates of title or
applications therefor, and maintain accurate, itemized records describing the
kind, type, quantity and value of all Fixed Collateral, a summary of which shall
be provided to Lender on at least an annual basis and more frequently if
requested by Lender.
(N) In the event any Account is or becomes evidenced by any
note, trade acceptance or other instrument, promptly notify Lender of such fact
and, upon Lender's request, deliver the same to Lender, appropriately endorsed
to Lender's order and, regardless of the form of such endorsement, such Borrower
hereby waives presentment, demand, notice of dishonor, protest and notice of
protest and all other notices with respect thereto.
(O) Maintain at all times a consolidated Adjusted Tangible Net
Worth equal to or greater than Three Million Seven Hundred Fifty Thousand
Dollars ($3,750,000) for Borrowers' fiscal years ending December 31, 1992; Six
Million Five Hundred Thousand Dollars ($6,500,000) for Borrowers' fiscal years
ending December 31, 1993; and Nine Million Seven Hundred Fifty Thousand Dollars
($9,750,000) for Borrowers' fiscal years ending December 31, 1994 and thereafter
calculated quarterly based upon each Borrower's fiscal quarter end direct
financial statements prepared in accordance with GAAP.
(P) Maintain a ratio of consolidated total unsubordinated
liabilities (including deferred liabilities and/or deferred income), computed in
accordance with GAAP, to consolidated Adjusted Tangible Net Worth equal to or
less than 5.0 to 1.0 at Borrowers' fiscal years ending December 31, 1992; 4.0 to
1.0 at Borrowers' fiscal years ending December 31, 1993 and 3.0 to 1.0 at
Borrowers' fiscal years ending December 31, 1994 calculated annually based upon
each Borrower's fiscal year end audited financial statements prepared in
accordance with GAAP.
(Q) Maintain Debt Coverage (as defined herein) not less than
2.5 to 1.0 on or prior to the date of any Permitted Distribution, and not less
than 1.5 to 1.0 after the date of any Permitted Distribution. "Debt Coverage" as
used in this Section 8.1(Q) means the ratio of Borrowers' consolidated net
income, plus consolidated depreciation, consolidated amortization and
consolidated interest paid to Lender, to the amount of all principal and
interest payable to Lender and the holder of Subordinated Debt and the
consolidated net amount of all Capital Expenditures at the date of calculation
thereof calculated quarterly based upon each Borrower's fiscal quarter end
direct financial statements prepared in accordance with GAAP.
8.2 NEGATIVE COVENANTS. So long as either Borrower shall have any
Obligations to Lender under this Agreement, each Borrower covenants that, unless
Lender has first consented thereto in writing (each Borrower's request for
Lender's consent to be in writing and to be provided to Lender at least ten (10)
days prior to the date on which Lender must decide whether
- 27 -
<PAGE> 28
to give its consent), which consent will not be unreasonably withheld by Lender
as to (A) and (C) below only, provided as to (C) only as (C) relates to
Indebtedness secured only by real property of such Borrower, it will not:
(A) Merge or consolidate with or acquire all or any
substantial portion of the assets or capital stock of any Person.
(B) Make any loans or other advances of money, or grant
extensions of credit (other than normal extensions of trade credit in the
ordinary course of business and reasonable salary, travel or relocation
advances, advances against commissions and other similar advances in the
ordinary course of business) to any Person.
(C) Create, incur, assume, or suffer to exist any
Indebtedness, except the Obligations and the following (herein referred to as
"Permitted Indebtedness"):
(i) Trade payables and other current liabilities incurred in
the ordinary course of business;
(ii) Subordinated Debt;
(iii) Such other Indebtedness not to exceed $50,000 in the
aggregate annually as to both Borrowers or as described on EXHIBIT I
hereto or as hereafter approved by Lender in writing.
(D) Enter into, or be a party to, any transaction with any
Affiliate of either Borrower, except in the ordinary course of, and pursuant to
the reasonable requirements of, such Borrower's business and upon fair and
reasonable terms which are fully disclosed to Lender and which are no less
favorable to such Borrower than such Borrower would obtain in a comparable arm's
length transaction with a Person not an Affiliate of any Borrower.
(E) Permit or agree to any material extension or modification
with respect to, or compromise or settle any Account, other than as reflected in
the schedules of accounts submitted to Lender pursuant to Section 5.4 hereof.
(F) Become or be liable in respect of any Guaranty except by
endorsement of instruments or items of payment in the ordinary course of
business for deposit or collection.
(G) Permit or suffer to exist any Lien in or upon any of the
Collateral, except the following (herein referred to as "Permitted Liens"):
(i) Those security interests granted in favor of Lender
pursuant to this Agreement and the other Credit Documents; and
(ii) Such other Liens as described on EXHIBIT J hereto or as
hereafter approved by Lender in writing.
- 28 -
<PAGE> 29
(H) Make any Distributions, except Permitted Distributions,
Tax Distributions and Management Fees.
(I) Divest itself of any material assets or business
theretofore conducted by transferring the same to any Affiliate or any
partnership, joint venture, or similar arrangement.
(J) Subcontract any material operations to any Affiliate,
except with the written consent of Lender.
(K) Make Capital Expenditures during any fiscal years of such
Borrower which, in the aggregate when consolidated with all Capital Expenditures
of both Borrowers, exceed One Million Dollars ($1,000,000) during Borrowers'
fiscal years ending December 31, 1992 and December 31, 1993, or which exceed
Seven Hundred Fifty Thousand Dollars ($750,000) thereafter calculated annually
based upon each Borrower's fiscal year end audited financial statements prepared
in accordance with GAAP.
(L) Without ten (10) days prior notice to Lender, transfer its
executive offices, or maintain records with respect to Accounts at any locations
other than its Principal Business Location.
(M) Except with respect to transactions otherwise permitted
hereunder, make deposits to or withdrawals from any of such Borrower's deposit
accounts for the benefit of any of its Affiliates.
(N) Sell, lease, transfer or otherwise dispose of any of its
Property where the net book value exceeds in the aggregate $50,000 during any
fiscal year of such Borrower, other than Inventory sold in the ordinary course
of business.
(O) Use any name (other than its own) or any fictitious name,
trade name, tradestyle or "d/b/a" except for the names disclosed on EXHIBIT G
attached hereto and made a part hereof.
(P) Make a sale to any customer on approval, consignment,
bill-and-hold, guaranteed sale, sale and return or any other repurchase basis,
unless such sale is specifically identified on the written assignments of
Accounts delivered to Lender pursuant to Section 5.4 hereof.
(Q) Own, purchase or acquire (or enter into any contract to
purchase or acquire) any "margin security" as defined by any regulation of the
Federal Reserve Board as now in effect or as the same may hereafter be in effect
unless, prior to any such purchase or acquisition or entering into any such
contract, Lender shall have received an opinion of counsel satisfactory to
Lender to the effect that such purchase or acquisition will not cause this
Agreement or the Notes to violate Regulation G or any other regulation of the
Federal Reserve Board then in effect.
- 29 -
<PAGE> 30
(R) Make or have any Restricted Investment, which for purposes
of this Agreement shall mean any investment in cash or by delivery of Property
to any Person, whether by acquisition of stock, indebtedness or other obligation
or Security, or by loan, advance or capital contribution, or otherwise, in any
Property except the following:
(i) Property to be used in the ordinary course of business;
(ii) Current assets arising from the sale of goods and
services in the ordinary course of business of such Borrower;
(iii) Investments in direct obligations of the United States
of America, or any agency thereof or obligations guaranteed by the
United States of America, provided that such obligations mature within
one (1) year from the date of acquisition thereof;
(iv) Investments in certificates of deposit maturing within
one (1) year from the date of acquisition issued by a bank or trust
company organized under the laws of the United States or any state
thereof having capital surplus and undivided profits aggregating at
least One Hundred Million Dollars ($100,000,000.00); and
(v) Investments in commercial paper given the highest rating
by a national credit rating agency and maturing not more than two
hundred seventy (270) days from the date of creation thereof.
(S) Enter into any arrangement with any Person providing for
the leasing by such Borrower of Property which has been or is to be sold or
transferred by such Borrower to such person if funds have been or are to be
advanced by such Person on the security of such Property or rental obligations
of such Borrower.
(T) Make any prepayment of principal on any Indebtedness,
excepting the Obligations.
9. SURVIVAL OF OBLIGATIONS UPON TERMINATION OF AGREEMENT
-----------------------------------------------------
Except as otherwise expressly provided for in this Agreement and in any
of the other Credit Documents, no termination or cancellation (regardless of
cause or procedure) of this Agreement or any of the other Credit Documents shall
in any way affect or impair the powers, obligations, duties, rights, and
liabilities of the Borrowers or Lender in any way or respect relating to (i) any
transaction or event occurring prior to such termination or cancellation or (ii)
any of the undertakings, agreements, covenants, warranties and representations
of the Borrowers or Lender contained in this Agreement or the other Credit
Documents. All such undertakings, agreements, covenants, warranties and
representations shall survive such termination or cancellation and Lender shall
retain its Lien on the Collateral and all of its rights and remedies under this
Agreement, notwithstanding such termination or cancellation, until all
Obligations of the Borrowers to Lender have been fully paid and satisfied and
this Agreement is terminated.
- 30 -
<PAGE> 31
10. CONDITIONS PRECEDENT
--------------------
Notwithstanding any other provision of this Agreement or any of the
other Credit Documents, and without affecting in any manner the rights of Lender
under the other Sections of this Agreement, it is understood and agreed that
Lender shall have no obligation at any time under Section 2 of this Agreement
unless and until the following conditions are satisfied, all in form and
substance satisfactory to Lender and its counsel:
10.1 CONDITIONS. The following conditions shall have been and shall
continue to be satisfied, in the sole discretion of Lender:
(A) No legal action, proceeding, investigation, regulation or
legislation shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain, or prohibit, or to
obtain damages in respect of, or which is related to or arises out of this
Agreement or any of the other Credit Documents or the consummation of the
transactions contemplated hereby or thereby, or which, in Lender's reasonable
opinion would make it inadvisable to consummate the transactions contemplated by
this Agreement.
(B) The representations and warranties of the Borrowers herein
are true and correct in all respects and no Event of Default or condition which,
with notice, lapse of time or both would constitute an Event of Default then
exists.
(C) No event, occurrence or condition shall then exist which
might have a Material Adverse Effect.
10.2 DOCUMENTATION. Lender shall have received the following documents,
each to be in form and substance satisfactory to Lender and its counsel:
(A) Copies of each Borrower's casualty insurance policies
evidencing the existence of the insurance coverage required pursuant to this
Agreement and certificates evidencing such insurance, together with loss payable
endorsements thereto naming Lender as a loss payee or additional insured in form
and substance satisfactory to Lender.
(B) Copies of all filing receipts or acknowledgments issued by
any governmental authority to evidence any filing or recordation necessary to
perfect the Liens of Lender in the Collateral and evidence, in a form acceptable
to Lender, that such Liens constitute valid and first priority perfected Liens,
subject only to any Permitted Liens.
(C) Certificates of each Borrower dated as of the date Lender
makes its initial advance of loan proceeds pursuant hereto, certifying (i) that
attached thereto is a true and complete copy of its Partnership Agreement, as in
effect on the date of such certification, (ii) that attached thereto is a true
and complete copy of resolutions, in form satisfactory to Lender, adopted by
such Borrower, authorizing the execution, delivery and performance of this
Agreement and each of the other Credit Documents to which it is a party and the
consummation of the transactions contemplated hereby and thereby, and (iii) as
to the incumbency and
- 31 -
<PAGE> 32
genuineness of the signature of each officer of such Borrower executing this
Agreement or any of the other Credit Documents to which such Borrower is a
party.
(D) A Certificate of the General Partner of such Borrower,
dated as of the date Lender makes its initial advance of loan proceeds pursuant
hereto, certifying (a) that attached thereto are true and complete copies of its
Certificate of Incorporation and By-laws, as in effect on the date of such
certification, (b) that attached thereto is a true and complete copy of
resolutions, in form satisfactory to Lender, adopted by the board of directors
of the General Partner of such Borrower, authorizing on behalf of such Borrower
the execution, delivery and performance of this Agreement and each of the other
Credit Documents to which such Borrower is a party and the consummation of the
transactions contemplated hereby and thereby, and (c) as to the incumbency and
genuineness of the signature of each officer of the General Partner of such
Borrower executing on behalf of such Borrower this Agreement or any of the other
Credit Documents to which such Borrower is a party.
(E) Copies of the Certificate of Limited Partnership of such
Borrower, and all amendments thereto, certified by the Secretary of State of
such Borrower's state of formation.
(F) Good standing certificates for such Borrower and General
Partner of such Borrower issued by the Secretary of State of Delaware and the
Secretary of State of each other jurisdiction in which such Borrower's or
General Partner's qualification is required hereunder.
(G) A certificate signed by an officer of such Borrower or of
such Borrower's General Partner and dated as of the date Lender makes its
initial advance of loan proceeds pursuant hereto, stating that (i) the
representations and warranties set forth in Section 7 hereof are true and
correct on and as of such date, (ii) such Borrower is on such date in compliance
with all the terms and provisions set forth in this Agreement, and (iii) on such
date no event or condition has occurred or is continuing which, with the giving
of notice, the lapse of time, or both, would constitute an Event of Default.
(H) Duly executed written lien waivers in favor of Lender from
each lessor, bailee, warehouseman, mortgagee or similarly situated Person who
may, with respect to any location at which any of the Collateral is to be
located or stored, by operation of law or otherwise, have any Lien in or upon
such Collateral.
(I) Duly executed subordination agreements in respect of all
Subordinated Debt, including, but not limited to N.E.S. Investment Co. L.P. and
Dresser Industries, Inc., evidencing the agreement of the holder of such
Subordinated Debt to subordinate the same in right of payment to the Obligations
to the extent and in such manner acceptable to Lender.
(J) Duly executed Depository Agreements with the Depository
Banks at which all Depository Accounts are to be established and, such other
agreements, in form and substance acceptable to Lender as to the collection
and/or servicing of Accounts and the operation of any lockbox required by
Lender, all in form satisfactory to the Lender.
- 32 -
<PAGE> 33
(K) Written instructions from such Borrower directing the
disbursement of the loan proceeds made pursuant to this Agreement.
(L) The written opinion of counsel to such Borrower as to the
transactions contemplated by this Agreement, in form and substance satisfactory
to Lender.
(M) The Term Note and the Revolving Note, duly executed by
such Borrower, and such other agreements, instruments and documents, including,
without limitation, assignments, security agreements, mortgages, deeds of trust,
pledges, guaranties and consents, which Lender may require to be executed in
connection herewith, including, but not limited to, the following:
(i) Evidence that Borrowers have paid off their existing
indebtedness to Lender and all appropriate lien releases, terminations
and satisfactions have been recorded.
(ii) Environmental Assessments, Appraisals of Real Property
and Fixed Collateral, ALTA Lender Title Policies and Surveys of the
Continental Principal Business Location and Goodman Principal Business
Location and each Collateral Location, in form and substance acceptable
to Lender and its counsel.
(iii) Duly executed Mortgages and Environmental Inspection
Easements from each Borrower, in form and substance acceptable to
Lender and its counsel, for the Continental Principal Business Location
and Goodman Principal Business Location and each Collateral Location.
(iv) Duly executed Collateral Assignments of Security
Interests in Trademarks from each Borrower, in form and substance
acceptable to Lender and its counsel.
(v) Duly executed UCC-1 Financing Statements from each
Borrower, in recordable form, in form and substance acceptable to
Lender and its counsel.
(vi) Duly executed Environmental Indemnity Agreements from
each Borrower, in form and substance acceptable to Lender and its
counsel.
10.3 WAIVER OF CONDITIONS PRECEDENT. If Lender makes an initial advance
of loan proceeds hereunder prior to the fulfillment of any of the conditions
precedent set forth in Sections 10.1 and 10.2 hereof, the making of such initial
advance of loan proceeds shall constitute only an extension of time for the
fulfillment of such condition and not a waiver thereof, and each Borrower shall
thereafter use its best efforts to fulfill each such condition promptly.
11. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
-------------------------------------------------
11.1 EVENTS OF DEFAULT. The occurrence of any one or more of the
following events shall constitute an "Event of Default":
- 33 -
<PAGE> 34
(A) Failure by either Borrower to make payment of principal,
interest or any other sum on any Note on the due date thereof, or failure to pay
any other Obligation on the due date thereof or failure by either Borrower to
remit or deposit funds as required by the terms of this Agreement.
(B) Any warranty, representation, or other statement made or
furnished to Lender by or on behalf of either Borrower, either General Partner
of either Borrower, or any guarantor of the Obligations, if any, in this
Agreement or in any of the other Credit Documents or in any instrument furnished
in compliance with or in reference to this Agreement proves to have been false
or inaccurate in any material respect when made or furnished.
(C) Either Borrower, either General Partner of either
Borrower, or any guarantor of the Obligations, if any, fails or neglects to
perform, keep or observe in any material respect any other term, provision,
condition, covenant, warranty or representation contained in this Agreement or
in any of the other Credit Documents, which is required to be performed, kept or
observed by either Borrower, either General Partner of either Borrower, or any
such guarantor, if any, and such failure continues for a period of ten (10) days
beyond the earlier of such Borrower, such General Partner of either Borrower, or
such guarantor, if any, having actual knowledge thereof or Lender giving such
Borrower, such General Partner of either Borrower, or such guarantor, if any,
written notice hereof in the manner set forth in Section 13.10 hereof.
(D) The occurrence of any default or event of default on the
part of either Borrower (including specifically, but not limited to, due to
nonpayment) under any Debt Instrument and the expiration of any applicable grace
period.
(E) To the actual knowledge of either Borrower, any statement,
report, financial statement, or certificate made or delivered by either
Borrower, either General Partner of either Borrower, or any of their officers,
employees or agents, to Lender is not true and correct in any material respect.
(F) The loss, theft, substantial damage or destruction of any
material portion of the Collateral to the extent not fully covered by insurance
(as required by this Agreement and subject to such deductibles as Lender shall
have agreed to in writing), or the sale, lease, encumbrance or other disposition
of any of the Collateral, except in all cases as may be specifically permitted
by other provisions of this Agreement.
(G) Any material adverse change in the value of the Collateral
or the financial condition or operating results of either Borrower or any
guarantor of the Obligations, if any, which has a Material Adverse Effect or
otherwise in the event the Lender deems itself insecure.
(H) The dissolution, termination of existence, insolvency
(failure to pay its debts as they mature in the ordinary course of business or
where the fair saleable value of its assets is not in excess of its liabilities)
or business failure of either Borrower, either General Partner of either
Borrower, or any guarantor of the Obligations, if any, or the appointment of a
receiver, trustee, custodian or similar fiduciary for either Borrower, either
General Partner of
- 34 -
<PAGE> 35
either Borrower, or any guarantor of the Obligations, if any, or any of their
respective assets, or the assignment for the benefit of the creditors of either
Borrower, either General Partner of either Borrower, or any such guarantor, if
any, or the making by either Borrower, either General Partner of either
Borrower, or any such guarantor, if any, of any offer of settlement, extension
or composition to its unsecured creditors generally.
(I) The commencement of any proceedings under any Bankruptcy
Laws by either Borrower, either General Partner of either Borrower, or any
guarantor of the Obligations, if any.
(J) The commencement of any proceedings under any Bankruptcy
Laws against either Borrower, either General Partner of either Borrower, or any
guarantor of the Obligations, if any, to the extent such proceedings are not
dismissed within sixty (60) days after the filing thereof.
(K) Either Borrower, or either General Partner of either
Borrower, ceases to conduct all or any material part of its business or is
enjoined, restrained or in any way prevented by court, governmental or
administrative order from conducting all or any material part of its business
affairs.
(L) The entry by a court of any judgment in excess of
$50,000.00 requiring the payment of money against either Borrower, which
judgment is not paid, discharged, stayed, vacated or set aside within thirty
(30) days of its entry.
(M) Other than Permitted Liens, a notice of any Lien, levy,
attachment or assessment is filed of record with respect to all or any of the
Collateral by any Person, including, without limitation, the United States, any
department, agency or instrumentality thereof, or by any state, county,
municipal or other governmental agency, or if any taxes or assessments owing at
any time or times hereafter becomes a Lien upon the Collateral or any other of
either Borrower's assets and, except as otherwise permitted by Lender, the same
is not effectively stayed, bonded or released within thirty (30) days after the
same becomes a Lien, or in the case of ad valorem taxes, prior to the last date
when payment may be made without penalty.
(N) The revocation of any Guaranty, if any, of the
Obligations.
(O) The failure of Borrowers to deliver, on or prior to
November 1, 1992, an ALTA Mortgagee's Policy of Title Insurance satisfying the
requirements set forth in clauses (a)-(c) of Section 2.1 above covering the six
parcels of real property situated in Marion County, Alabama which are owned or
to be acquired by Borrowers.
11.2 ACCELERATION OF THE OBLIGATIONS. In addition to any of the
remedies otherwise available to Lender (a) upon and after an Event of Default
specified in Sections 11.1(I), (J) and (O) hereof, and without notice by Lender
to either Borrower, and (b) upon the occurrence and during the continuance of an
Event of Default (other than an Event of Default specified in Sections 11.1(I),
(J) and (O) hereof), upon notice by Lender to Borrowers in the manner set
- 35 -
<PAGE> 36
forth in Section 13.10 hereof, the Revolving Loan shall be terminated and all of
the Obligations due or to become due from Borrowers to Lender, whether under
this Agreement, any Note or otherwise, shall, at the option of Lender become at
once due and payable, anything in the Notes or other evidence of the Obligations
or in any of the other Credit Documents to the contrary notwithstanding.
11.3 REMEDIES. Upon the occurrence and during the continuance of an
Event of Default, Lender shall have, to the extent permitted by applicable law,
and in addition to any other right or remedy provided for in this Agreement or
the other Credit Documents, the following rights and remedies:
(A) All of the rights and remedies of a secured party under
the Code or under other applicable law, and all other legal and equitable rights
to which Lender may be entitled, all of which rights and remedies shall be
cumulative, and none of which shall be exclusive, to the extent permitted by
law, in addition to any other rights or remedies contained in this Agreement or
in any of the other Credit Documents.
(B) The right to take immediate possession of the Collateral,
and (i) require each Borrower to assemble the Collateral, at such Borrower's
expense, and make it available to Lender at a place to be designated by Lender
which is reasonably convenient to both parties, and (ii) enter any of the
premises of either Borrower or wherever any Collateral shall be located and to
keep and store the same on said premises until sold (and if said premises be the
property of such Borrower, such Borrower agrees not to charge Lender for storage
thereof for a period of at least ninety (90) days after sale or disposition of
the Collateral). Lender is hereby granted a non-exclusive license or other right
to use, without charge, such Borrower's labels, patents, copyrights, rights of
use of any name, trade secrets, trade names, trademarks and advertising matter,
or any property of a similar nature, as it pertains to the Collateral, in
advertising for sale and selling any Collateral and such Borrower's rights under
all licenses and all franchise agreements shall inure to Lender's benefit.
(C) The right to foreclose the Liens created under this
Agreement and each of the other Credit Documents or under any other agreement
relating to the Collateral.
(D) The right to sell or to otherwise dispose of all or any
Collateral in its then condition, or after any further manufacturing or
processing thereof, at public or private sale or sales, wholesale dispositions,
or sales pursuant to one or more contracts, with such notice as may be required
by law, in lots or in bulk, for cash or on credit, all as Lender, in its sole
discretion, may deem advisable. Each Borrower agrees that ten (10) days written
notice to such Borrower of the date any public sale will take place or the date
after which any private sale or other disposition of Collateral will take place
shall be reasonable notice thereof, and such sale may be at such location(s) as
Lender shall designate in said notice. Lender shall have the right to conduct
such sales on either Borrower's premises, without charge therefor, and such
sales may be adjourned from time to time in accordance with applicable law
without further requirement of notice to either Borrower. Lender shall have the
right to bid or credit bid at any such sale on its own behalf.
- 36 -
<PAGE> 37
(E) The right to sell, lease or otherwise dispose of the
Collateral, or any part thereof, for cash, credit or any combination thereof,
and Lender may purchase all or any part of the Collateral at public or private
sale and, in lieu of actual payment of such purchase price, may set off the
amount of such price against the Obligations. Subject to the rights of the
holders of any Permitted Lien having priority over the Liens of Lender, if any,
the proceeds realized from the sale of any Collateral shall be applied first to
the reasonable costs, expenses and attorneys' fees and expenses incurred by
Lender for collection and for acquisition, completion, protection, removal,
storage, sale and delivery of the Collateral; second, to interest due upon any
of the Obligations; and third, to the principal of the Obligations. If any
deficiency shall arise, Borrowers shall jointly and severally remain liable to
Lender therefor, subject in all respects to the provisions of Section 13.13
hereof.
11.4 APPLICATION OF COLLATERAL; TERMINATION OF FINANCING. Upon the
occurrence and during the continuance of any Event of Default, Lender may also,
with or without proceeding with sale or foreclosure or demanding payment of the
Obligations, without notice, terminate Lender's further performance under this
Agreement, or any other agreement or agreements between Lender and either
Borrower, without further liability or obligation by Lender, and may also, at
any time, appropriate and apply on any Obligations any and all Collateral in the
possession of Lender. No such termination shall absolve, release or otherwise
affect the liability of such Borrower in respect of transactions had prior to
such termination, nor affect any of the Liens, rights, powers, and remedies of
Lender, but they shall, in all events, continue until all Obligations of both
Borrowers to Lender are satisfied.
11.5 REMEDIES CUMULATIVE. All covenants, conditions, provisions,
warranties, guaranties, indemnities, and other undertakings of the Borrowers
contained in this Agreement, each of the other Credit Documents or in any
document referred to herein or therein or contained in any agreement
supplementary hereto or thereto or in any schedule or report given to Lender, or
contained in any other agreement between Lender and either Borrower, heretofore,
concurrently, or hereafter entered into or delivered, shall be deemed cumulative
and not in derogation or substitution of any of the terms, covenants,
conditions, or agreements of the Borrowers herein contained.
12. APPOINTMENT OF LENDER AS BORROWER'S LAWFUL ATTORNEY
---------------------------------------------------
Each Borrower hereby irrevocably designates, makes, constitutes and
appoints Lender (and all persons designated by Lender) as such Borrower's true
and lawful attorney (and agent-in-fact) and Lender, or Lender's agent, may, at
such time or times as Lender or said agent, in its sole discretion, may
determine, upon the occurrence of an Event of Default hereunder, in such
Borrower's or Lender's name: (i) demand payment of the Accounts; (ii) enforce
payment of the Accounts, by legal proceedings or otherwise; (iii) exercise all
of such Borrower's rights and remedies with respect to the collection of the
Accounts and any other Collateral; (iv) settle, adjust, compromise, extend or
renew the Accounts; (v) settle, adjust or compromise any legal proceedings
brought to collect the Accounts; (vi) if permitted by applicable law, sell or
assign the Accounts and other Collateral upon such terms, for such amounts and
at such time or times as Lender deems advisable; (vii) discharge and release the
Accounts and any other Collateral; (viii) take control, in any manner, of any
item of payment
- 37 -
<PAGE> 38
or proceeds relating to any Collateral; (ix) prepare, file and sign such
Borrower's name on a proof of claim in bankruptcy or similar document against
any Account Debtor; (x) prepare, file and sign such Borrower's name on any
notice of Lien, assignment or satisfaction of Lien or similar document in
connection with the Accounts; (xi) do all acts and things necessary, in Lender's
sole discretion, to fulfill such Borrower's obligations under this Agreement;
(xii) endorse the name of such Borrower upon any of the items of payment or
proceeds relating to any Collateral and deposit the same to the account of
Lender on account of the Obligations; (xiii) endorse the name of such Borrower
upon any chattel paper, document, instrument, invoice, freight bill, bill of
lading or similar document or agreement relating to the Accounts, Inventory and
any other Collateral; (xiv) use such Borrower's stationery and sign the name of
such Borrower to verifications of the Accounts and notices thereof to Account
Debtors; (xv) use the information recorded on or contained in any data
processing equipment and computer hardware and software relating to the
Accounts, Inventory and any other Collateral to which such Borrower has access;
and (xvi) notify post office authorities to change the address for delivery of
such Borrower's mail to an address designated by Lender and receive and open all
mail addressed to such Borrower, and after removing all remittances and other
proceeds of Collateral, forwarding the mail to such Borrower.
13. MISCELLANEOUS
-------------
13.1 MODIFICATION OF AGREEMENT; SALE OF INTEREST. This Agreement, the
Notes and each of the other Credit Documents may not be modified, altered or
amended, except by an agreement in writing signed by both Borrowers and Lender.
Neither Borrower may sell, assign or transfer this Agreement, or any of the
other Credit Documents or any portion thereof, including, without limitation,
either Borrower's rights, title, interests, remedies, powers, and/or duties
hereunder or thereunder. Each Borrower hereby consents to Lender's
participation, sale, assignment, transfer or other disposition, at any time or
times hereafter, of this Agreement, or any of the other Credit Documents, or of
any portion hereof or thereof, including, without limitation, Lender's rights,
title, interests, remedies, powers, and/or duties hereunder or thereunder to any
financial institution.
13.2 ATTORNEYS' FEES AND EXPENSES. If, at any time or times, whether
prior or subsequent to the date hereof, regardless of the existence of an Event
of Default, Lender employs counsel for advice or other representation or incurs
legal and/or other costs and expenses in connection with:
(A) The preparation of this Agreement and all of the other
Credit Documents or any amendment of or modification of this Agreement, the
Notes or any of the other Credit Documents.
(B) The administration of this Agreement, the Notes and each
of the other Credit Documents and the transactions contemplated hereby and
thereby.
(C) Any litigation, contest, dispute, suit, proceeding or
action (whether instituted by Lender, either Borrower or any other Person) in
any way relating to the Collateral, this Agreement, the Notes, any of the other
Credit Documents or either Borrower's affairs, but
- 38 -
<PAGE> 39
excluding any litigation between either Borrower and Lender as adverse parties
unless otherwise permitted by law in connection with any judgment awarded in
favor of the prevailing party.
(D) Any attempt to enforce any rights of Lender against any
Person, other than the Borrowers, which may be obligated to Lender by virtue of
this Agreement, the Notes or any of the other Credit Documents, including,
without limitation, any guarantor of the Obligations and any Account Debtors.
(E) Any attempt to inspect, verify, protect, collect, sell,
liquidate or otherwise dispose of the Collateral.
(F) The filing and recording of all documents required by
Lender to perfect Lender's Liens in the Collateral, including without
limitation, any documentary stamp tax or any other taxes incurred because of
such filing or recording;
Then, in any such event, the reasonable attorneys' fees arising from such
services and all reasonably incurred expenses, costs, charges and other fees of
such counsel or of Lender or relating to any of the events or actions described
in this Section 13.2 shall be payable, on demand, by Borrowers to Lender and
shall be additional Obligations hereunder secured by the Collateral. Without
limiting the generality of the foregoing, such expenses, costs, charges and fees
may include accountants' fees, costs and expenses; court costs and expenses;
photocopying and duplicating expenses; court reporter fees, costs and expenses;
long distance telephone charges; air express charges, telegraph charges;
secretarial overtime charges; and expenses for travel, lodging and food paid or
incurred in connection with the performance of such legal services.
Additionally, if any taxes shall be payable on account of the execution or
delivery of this Agreement, the Notes or the execution, delivery, issuance or
recording of any of the other Credit Documents, or the creation of any of the
Obligations hereunder, by reason of any existing or hereafter enacted federal or
state statute, Borrowers will pay all such taxes, including, but not limited to,
any interest and/or penalty thereon, and will indemnify and hold Lender harmless
from and against liability in connection therewith.
13.3 WAIVER BY LENDER. Lender's failure, at any time or times
hereafter, to require strict performance by either Borrower of any provision of
this Agreement, the Notes or any of the other Credit Documents shall not waive,
affect or diminish any right of Lender thereafter to demand strict compliance
and performance therewith. Any suspension or waiver by Lender of an Event of
Default by either Borrower under this Agreement, the Notes or any of the other
Credit Documents shall not suspend, waive or affect any other Event of Default
by either Borrower under this Agreement, the Notes or any of the other Credit
Documents, whether the same is prior or subsequent thereto and whether of the
same or of a different type. None of the undertakings, agreements, warranties,
covenants and representations of Borrowers contained in this Agreement, the
Notes or any of the other Credit Documents and no Event of Default by Borrowers
under this Agreement, the Notes or any of the other Credit Documents shall be
deemed to have been suspended or waived by Lender, unless such suspension or
waiver is by an instrument in writing specifying such suspension or waiver and
is signed by a duly authorized representative of Lender and directed to
Borrowers.
- 39 -
<PAGE> 40
13.4 SEVERABILITY. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
13.5 PARTIES. This Agreement and the other Credit Documents shall be
binding upon and inure to the benefit of the successors and assigns of Borrowers
and Lender. This provision, however, shall not be deemed to modify Section 13.1
hereof.
13.6 CONFLICT OF TERMS. The provisions of the Commitment, the Notes and
each of the other Credit Documents and any exhibit or schedule hereto are
incorporated in this Agreement by this reference thereto. Except as otherwise
provided in this Agreement, and except as otherwise provided in the Commitment,
the Notes and any of the other Credit Documents by specific reference to the
applicable provision of this Agreement, if any provision contained in this
Agreement is in conflict with, or inconsistent with, any provision in the
Commitment, the Notes and any of the other Credit Documents, the provision
contained in this Agreement shall govern and control.
13.7 WAIVERS BY BORROWERS (INCLUDING RIGHT TO JURY TRIAL). EXCEPT AS
OTHERWISE PROVIDED FOR IN THIS AGREEMENT OR AS REQUIRED BY APPLICABLE LAW, EACH
BORROWER WAIVES (i) PRESENTMENT, DEMAND AND PROTEST AND NOTICE OF PRESENTMENT,
PROTEST, DEFAULT, NONPAYMENT, MATURITY, RELEASE, COMPROMISE, SETTLEMENT,
EXTENSION OR RENEWAL OF ANY OR ALL COMMERCIAL PAPER, ACCOUNTS, CONTRACT RIGHTS,
DOCUMENTS, INSTRUMENTS, CHATTEL PAPER AND GUARANTIES AT ANY TIME HELD BY LENDER
ON WHICH BORROWERS MAY IN ANY WAY BE LIABLE, (ii) NOTICE PRIOR TO TAKING
POSSESSION OR CONTROL OF THE COLLATERAL WHICH MIGHT BE REQUIRED BY ANY COURT
PRIOR TO ALLOWING LENDER TO EXERCISE ANY OF LENDER'S REMEDIES AND (iii) ITS
RIGHT TO A JURY TRIAL IN THE EVENT OF ANY LITIGATION INSTITUTED IN RESPECT OF
THIS AGREEMENT, THE NOTES OR ANY OF THE OTHER CREDIT DOCUMENTS. EACH BORROWER
ACKNOWLEDGES THAT IT HAS BEEN ADVISED BY COUNSEL OF ITS CHOICE WITH RESPECT TO
THIS AGREEMENT AND THE TRANSACTIONS EVIDENCED BY THIS AGREEMENT.
13.8 AUTHORIZATION. Lender is authorized to make loans in the name of
either Borrower under the terms of this Agreement upon the request, either
written or oral, of the Controller or Chief Financial Officer of either Borrower
or of either Borrower's General Partner, or such other persons, from time to
time, holding the offices or positions with each Borrower as designated in any
separate borrowing or banking resolutions delivered by such Borrower to Lender
and all loans made by Lender to such Borrower or for its account under this
Agreement shall be conclusively deemed to have been authorized by such Borrower
and to have been made pursuant to duly authorized requests therefor.
- 40 -
<PAGE> 41
13.9 GOVERNING LAW. This Agreement has been accepted by Lender at and
shall be deemed to have been made at Cleveland, Ohio. The loans provided for
herein are to be funded and repaid at Cleveland, Ohio and this Agreement shall
be interpreted, and the rights and liabilities of the parties hereto determined,
in accordance with the laws of the State of Ohio. As part of the consideration
for new value received, each Borrower hereby consents to the jurisdiction of any
state or federal court located within the State of Ohio and consents that all
such service of process be made by registered or certified mail directed to such
Borrower at the address stated in Section 13.10(B) below and service so made
shall be deemed to be completed upon actual receipt thereof. Each Borrower
waives any objection to jurisdiction and venue of any action instituted
hereunder and agrees not to assert any defense based on lack of jurisdiction or
venue. Nothing contained herein shall affect the right of Lender to serve legal
process in any other manner permitted by law or affect the right of Lender to
bring any action or proceeding against such Borrower or its property in the
courts of any other jurisdiction.
13.10 NOTICES. Except as otherwise provided herein, any notice required
hereunder shall be in writing, and shall be deemed to have been validly served,
given or delivered upon deposit in the United States mails, with proper postage
prepaid, and addressed to the party to be notified as follows:
(A) If to Lender, at: Bank One, Cleveland, NA
600 Superior Avenue
Cleveland, Ohio 44114
Attn: Stephanie A. Gajdzik
Assistant Vice President
Asset-Based Lending
With a copy to: Arter & Hadden
1100 Huntington Building
Cleveland, Ohio 44115
Attn: Donald J. Fisher, Esq.
(B) If to Borrowers, at: Continental Conveyor & Equipment Co. L.P.,
or Goodman Conveyor Co. L.P.
6140 Parkland Boulevard
Mayfield Heights, Ohio 44124
Attn: F.J. Rzicznek,
Vice President/Finance
With copies to: Continental Conveyor & Equipment Co. L.P.,
or Goodman Conveyor Co. L.P.
6140 Parkland Boulevard
Mayfield Heights, Ohio 44124
and
- 41 -
<PAGE> 42
Baker & Hostetler
3200 National City Center
1900 East Ninth Street
Cleveland, Ohio 44114
Attn: William E. Atkinson, Esq.
or to such other address as each party may designate for itself by like notice
given in accordance with this Section 13.10.
13.11 SECTION TITLES. The section titles contained in this Agreement
are and shall be without substantive meaning and content of any kind whatsoever
and are not a part of the agreement between the parties hereto.
13.12 EFFECTIVENESS OF AGREEMENT. This Agreement shall be effective
only upon Lender's acceptance hereof.
13.13 NONRECOURSE NATURE OF INDEBTEDNESS. Notwithstanding any other
provision of this Agreement or any ancillary agreement executed in connection
herewith to the contrary, all Indebtedness of Borrowers to Lender under this
Agreement shall be on a non recourse basis as to the General Partner of each
Borrower and the limited partners of the Borrowers and upon the occurrence of an
Event of Default hereunder or otherwise, no deficiency or other personal
judgment shall be sought or enforced against any General Partner of each
Borrower or limited partner of the Borrowers and the Lender shall look solely to
each Borrower and its assets for satisfaction of any such deficiency or any
judgment against the Borrowers.
- 42 -
<PAGE> 43
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day
and year specified at the beginning hereof.
CONTINENTAL CONVEYOR & EQUIPMENT CO. L.P.
("Borrower")
By CC&E Corp., its General Partner
By /s/ Ralph L. Nehrig
------------------------------
Name: Ralph L. Nehrig
Title: V. P.
GOODMAN CONVEYOR CO. L.P.
("Borrower")
By New Goodman Corp., its General Partner
By /s/ F. J. Rzicznek
------------------------------
Name: F. J. Rzicznek
Title: V. P.
Accepted at Cleveland, Ohio
as of the date first above written.
BANK ONE, CLEVELAND, NA ("LENDER")
By /s/ Stephanie A. Gajdzik
---------------------------------
Name: Stephanie A. Gajdzik
Title: Asst. Vice President
- 43 -
<PAGE> 44
CONSOLIDATED AMENDMENT NO. 1
----------------------------
TO
--
CREDIT FACILITY AND SECURITY AGREEMENT
--------------------------------------
THIS CONSOLIDATED AMENDMENT NO. 1 TO CREDIT FACILITY AND SECURITY
AGREEMENT (this "Consolidated Amendment No. 1"), dated as of July 28, 1995, is
entered into by and among BANK ONE, CLEVELAND, NA, a national banking
association organized and existing under the laws of the United States of
America ("Lender"), with its principal place of business located at 600 Superior
Avenue, Cleveland, Ohio 44114; CONTINENTAL CONVEYOR & EQUIPMENT CO., L.P., a
limited partnership organized and existing under the laws of the State of
Delaware ("Continental"), with its principal place of business and executive
offices located at 216 West 4th Avenue, South, P. O. Box 400, Winfield, Alabama
35594 (the "Continental Principal Place of Business"); and GOODMAN CONVEYOR CO.,
L.P., a limited partnership organized and existing under the laws of the State
of Delaware ("Goodman"), with its principal place of business and executive
offices located at U.S. Route 178 South, P. O. Box 866, Belton, South Carolina
29627 (the "Goodman Principal Business Location") (each of Continental and
Goodman being sometimes referred to herein individually as a "Borrower" and
collectively as the "Borrowers").
W I T N E S S E T H:
--------------------
WHEREAS, the Borrowers and the Lender are parties to that certain
Credit Facility and Security Agreement dated as of September 14, 1992, as
amended by a certain First Amendment to Credit Facility and Security Agreement
executed on August 27, 1993 and as further amended by a certain Second
Amendatory Agreement dated as of October 5, 1994 (collectively, herein the "Loan
Agreement," all terms defined in said Loan Agreement being used herein with the
same meaning), pursuant to which the Lender loaned the Borrowers $11,000,000 on
a term loan basis; and agreed to loan to the Borrowers up to an additional
maximum aggregate sum of $11,500,000 on a revolving loan basis (which amount
heretofore has been increased to $12,500,000); which Term Loan is evidenced by a
Note dated September 14, 1992; and which Revolving Loan is evidenced by a Note
dated September 14, 1992, as replaced by Note dated October 5, 1994, each such
Note being executed and delivered by the Borrowers to the Lender; and
WHEREAS, the Borrowers and the Lender have agreed to amend the Loan
Agreement to (i) increase the Revolving Loan to $25,000,000 and extend the
maturity date of the Revolving Loan from September 14, 1995 to July 28, 1998,
(ii) increase the Term Loan to $15,600,000, to be repayable in 84 installments,
and (iii) modify and replace certain financial covenants and definitions
contained in the Loan Agreement and add certain additional financial covenants
and definitions to the Loan Agreement; and
WHEREAS, the Borrowers and the Lender wish to provide for payment by
the Borrowers of an origination fee of $300,000 and the expenses of Lender in
connection with the matters contemplated hereby; and
<PAGE> 45
WHEREAS, in light of the fact that certain previous amendments will be
affected by the terms of this Amendment and for ease of reference, the Borrowers
and the Lender also desire to restate and consolidate in this Amendment all
amendments to the Loan Agreement that are effective on and as of the date
hereof;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
Borrowers and the Lender agree as follows:
SECTION I. AMENDMENT OF LOAN AGREEMENT
---------------------------
A. The definitions "Commitment," "Contract Rate," "Permitted
Distribution," "Reserve Amount," "Revolving Note" and "Term Note" in Section 1.1
of the Loan Agreement are, effective the date hereof, hereby amended and
restated to read in their entirety as follows:
"COMMITMENT - Lender's letter to Borrowers dated August 17, 1992, as
accepted by Borrowers on August 27, 1992, Lender's letter to Borrowers
dated September 28, 1994, as accepted by Borrowers on October 3, 1994
and Lender's letter to Borrowers dated July 14, 1995, as accepted by
Borrowers on July 28, 1995."
"CONTRACT RATE - A fluctuating rate equal to One Hundred (100) basis
points above the Base Rate."
"PERMITTED DISTRIBUTION - (i) A Distribution by Borrowers to the
partners of Borrowers pursuant to Borrowers' partnership agreements in
the aggregate amount of Twenty Million Dollars ($20,000,000), all of
which must be disbursed within ten (10) days of the date of
Consolidated Amendment No. 1 to this Loan Agreement, and (ii)
commencing with calendar year 1997, so long as (a) no Event of Default
has occurred and is continuing or will occur as a result thereof, and
(b) Term Loan B is Fully Conforming, aggregate annual Distributions by
either Borrower to its partners in an amount not to exceed fifty
percent (50%) of such Borrower's Net Income for the previous fiscal
year beginning with each Borrower's fiscal year ending December 31,
1996."
"RESERVE AMOUNT - Until Term Loan B is Fully Conforming and the
Borrowers' consolidated Adjusted Tangible Net Worth is equal to or
greater than One Million Dollars ($1,000,000), on a fair market value
basis, a variable amount equal to Two Million Dollars ($2,000,000)
until December 31, 1995, Three Million Dollars ($3,000,000) until
December 31, 1996 and Four Million Dollars $4,000,000) until December
31, 1997. For purposes hereof, Adjusted Net Worth shall be calculated
and tested on a quarterly basis, as of the fifteenth day of each
September, December, March and June utilizing the Borrowers Certificate
Accounts Receivable and Inventory, in the form attached as Exhibit A to
the Loan Agreement."
-2-
<PAGE> 46
"REVOLVING NOTE - The Amended and Restated Replacement Promissory Note
(Revolving Loan) to be executed by Borrowers in form attached as
EXHIBIT C-5 to this Agreement (with such changes or modifications, if
any, to which Lender may agree) evidencing the Revolving Loan made by
Lender pursuant to Section 2.3 of this Agreement, together with all
amendments thereto and all promissory notes issued in substitution
therefor or replacement thereof."
"TERM NOTE - The Amended and Restated Replacement Promissory Note (Term
Loan) to be executed by Borrowers in form attached as EXHIBIT C-4 to
this Agreement (with such changes or modifications, if any, to which
Lender may agree) evidencing the Term Loan made by Lender pursuant to
Section 2.1 of this Agreement, together with all amendments thereto and
all notes issued in substitution therefore or replacement thereof."
B. New definitions of "Fully Conforming," "Appraisals," "Excess Cash
Flow" and "Working Capital" are, effective the date hereof, hereby added to
Section 1.1 of the Loan Agreement as follows:
"FULLY CONFORMING - The time at which the outstanding principal balance
of Term Loan B is equal to or less than eighty percent (80%) of the
aggregate fair market value of the machinery, equipment and real estate
of Borrowers as determined under the Appraisals."
"APPRAISALS - Collectively, the appraisal to be provided by L&B
Liquidation Corp. relating to the machinery and equipment of Borrowers
and the appraisal to be provided by Realty One Appraisal relating to
the real estate of Borrowers."
"EXCESS CASH FLOW - With respect to each fiscal year of Borrowers,
commencing with the fiscal year ending December 31, 1995, an amount
equal to (i) Borrowers' consolidated net income, plus consolidated
depreciation, consolidated amortization and consolidated interest paid
to Lender, less (ii) the aggregate of all principal and interest
payable to Lender plus Permitted Distributions (other than the
Permitted Distribution made during the fiscal year ending December 31,
1995) plus (minus) increases (decreases) in Working Capital, plus the
amount of all non-bank funded Capital Expenditures calculated annually
based upon Borrowers' annual audited financial statements."
"WORKING CAPITAL - The excess of Borrowers' aggregate current assets
over aggregate current liabilities, each as determined in accordance
with GAAP, but excluding from the calculation thereof all cash and cash
equivalents of Borrowers, the current portion of all of Borrowers'
outstanding long-term Indebtedness, the outstanding principal balance
of the Revolving Loan and any and all amounts due to or due from
Affiliates."
C. Section 2.1 of the Loan Agreement is, effective the date hereof,
hereby amended and restated to read in its entirety as follows:
-3-
<PAGE> 47
"2.1 TERM LOAN.
----------
Lender will make an increased term loan to Borrower in the
principal amount of Fifteen Million Six Hundred Thousand
Dollars ($15,600,000) ("Term Loan B"). Term Loan B shall be
subject to repayment in accordance with, and bear interest as
provided in, Section 2.2 of this Agreement and shall otherwise
be evidenced by, and repayable in accordance with, the Term
Note.
D. Section 2.2 of the Loan Agreement is, effective the date hereof,
hereby amended and restated to read in its entirety as follows:
"2.2 PAYMENT TERMS OF TERM LOAN B.
----------------------------
(A) INTEREST. Term Loan B shall bear interest on the unpaid
principal balance until the date paid at a fixed rate per annum equal
to ten percent (10%), such interest being payable monthly on the 1st
day of each month, and at maturity, commencing September 1, 1995. On
the third anniversary of the execution of Consolidated Amendment No. 1
to this Loan Agreement, and so long as an Event of Default does not
then exist, Borrowers shall have the option to convert the above
interest rate to a fluctuating rate per annum equal to the Contract
Rate upon prior written notice to Lender delivered on or before July 1,
1998. Interest on the Term Loan shall be computed on a 360-day year
basis based upon the actual number of days elapsed.
(B) FIXED PRINCIPAL INSTALLMENTS. Subject otherwise to the
terms and provisions of the Term Note, the principal balance of Term
Loan B shall be payable in eighty-three (83) consecutive equal monthly
principal installments of One Hundred Eighty-Five Thousand Seven
Hundred Fourteen Dollars ($185,714) each, commencing September 1, 1995,
and continuing on the 1st day of each month thereafter and a final
principal installment of One Hundred Eighty-Five Thousand Seven Hundred
Thirty-Eight Dollars ($185,738) on August 1, 2002.
(C) PREPAYMENT FEE. In the event that Term Loan B is paid in
full (other than as a result of scheduled reductions by way of payments
in accordance with the Term Note), Borrowers will pay to Lender a
prepayment fee of (a) 2% of the outstanding principal balance then
outstanding on Term Loan B, if the same occurs during the first year
following the execution of Consolidated Amendment No. 1 to this Loan
Agreement, and (b) 1% of the outstanding principal balance then
outstanding on Term Loan B, if the same occurs during the second year
following the execution of Consolidated Amendment No. 1 to this Loan
Agreement, in order to compensate Lender for its reliance expenses and
loss of anticipated profits. It is acknowledged that this fee shall be
deemed to be liquidated damages for loss of a bargain and not a penalty
and the same is acknowledged to be an integral part of the
consideration for Lender to execute Consolidated Amendment No. 1 to
this Loan Agreement; provided, however, that such fee will not be due
and payable in the event that the Borrowers make the
-4-
<PAGE> 48
foregoing prepayments exclusively from funds generated from a sale of
substantially all of the assets of the Borrowers or a sale of the
controlling interest in the voting securities in the Borrowers.
(D) MANDATORY PRINCIPAL PREPAYMENTS OF TERM LOAN B. In
addition to the principal payments described in Section 2.2(B) above,
until Term Loan B is Fully Conforming, the Borrowers agree to make
annual payments to be applied to pay the principal balance of Term Loan
B within one hundred five (105) days of each fiscal year end of the
Borrowers, beginning with respect to the fiscal year ending December
31, 1995, in an amount equal to fifty percent (50%) of Borrowers'
Excess Cash Flow calculated for the fiscal year just ended. Borrowers
further agree that any such principal payments required under this
Section 2.2(D) shall be (i) made by Lender increasing the outstanding
principal balance of the Revolving Loan, and (ii) applied against
principal installments on Term Loan B in their inverse order of
maturity."
E. Subsections (A), (B) and (C) of Section 2.3 of the Loan Agreement
are, effective the date hereof, hereby amended and restated to read in their
entirety as follows:
"2.3 REVOLVING LOAN.
--------------
(A) REVOLVING LOAN. Subject at all times to the terms hereof,
the Lender will, until July 28, 1998, make such loans to each Borrower
as from time to time such Borrower requests (the "Revolving Loan")
consisting of advances made by Lender against the value of each
Borrower's respective Eligible Inventory and Eligible Accounts. Such
advances are anticipated to be repaid by Borrowers and thereafter
re-advanced by Lender without any premiums or penalty therefor. Subject
to the provisions of Subsection (B) of this Section 2.3, the aggregate
unpaid principal of the Revolving Loan outstanding at any one time
shall not exceed the lesser of (a) the line of credit approved for
Borrowers, which is currently Twenty-Five Million and no/100 Dollars
($25,000,000) or (b) the sum of (i) eighty-five percent (85%) of the
unpaid face amount of each Borrower's respective Eligible Accounts (or
such other percentages of each Borrower's Eligible Accounts as may from
time to time be fixed by the Lender upon notice to the Borrowers) and
(ii) the lesser of (1) fifty-five percent (55%) of the cost or market
value, whichever is lower, determined on a first-in, first-out basis,
of each Borrower's respective Eligible Inventory located at the
Continental Collateral Location or Goodman Collateral Location (or such
other percentages of each Borrower's respective Eligible Inventory as
may from time to time be fixed by the Lender upon notice to the
Borrowers) or (2) Twelve Million Dollars ($12,000,000) (or such other
dollar amount as may from time to time be fixed by the Lender upon
notice to the Borrowers).
(B) MAXIMUM BORROWINGS AVAILABLE UNDER REVOLVING LOAN.
Notwithstanding anything to the contrary contained in this Section 2.3,
at no time shall the aggregate loans outstanding to the Borrowers at
any time under the Revolving Loan exceed Twenty-Five Million and no/100
Dollars ($25,000,000)
-5-
<PAGE> 49
LESS the Reserve Amount; nor shall advances under the Revolving Loan to
either Borrower exceed that which is permitted on the basis of the
advance rate percentages set forth in Section 2.3(A)(b) above as the
same are applied to each respective Borrower.
(C) PAYMENT. The Revolving Loan shall be payable on July 28,
1998, and bear interest as provided in Section 2.4 of this Agreement
and shall otherwise be evidenced by, and repayable in accordance with,
the Revolving Note, but in the absence of such revolving promissory
note shall be evidenced by the Lender's record of disbursements and
repayments."
F. Section 2.8 of the Loan Agreement is, effective the date hereof,
hereby amended and restated to read in its entirety as follows:
"2.8 ORIGINATION FEE. In order to compensate Lender for its services in
preparing and reviewing Consolidated Amendment No. 1 to this Loan
Agreement and related documents in connection with the amendment to
Credit Facility, Borrowers shall pay to Lender on the date of
Consolidated Amendment No. 1 to this Loan Agreement, an origination fee
(the "Origination Fee") of Three Hundred Thousand Dollars ($300,000).
G. Section 2.9 of the Loan Agreement is, effective the date hereof,
hereby amended and restated to read in its entirety as follows:
"2.9 COMMITMENT FEE. Borrowers shall pay to Lender on the date of
Consolidated Amendment No. 1 to this Loan Agreement and on each
succeeding anniversary of such date annually thereafter, a commitment
fee (the "Commitment Fee") of Twenty-Five (25) basis points on the
amount of the line of credit approved for Borrowers under the Revolving
Loan pursuant to Section 2.3(A) of this Agreement, whether the
Borrowers shall be entitled to request such amount pursuant to Section
2.3(A) of this Agreement or not.
H. A new Section 2.10 of the Loan Agreement is, effective the date
hereof, hereby added to read in its entirety as follows:
"2.10 EARLY TERMINATION FEE. In the event that the Revolving Loan and
Term Loan B are paid in full (other than as a result of payment of Term
Loan B at maturity or scheduled reduction of the Term Loan B by way of
payments in accordance with the Term Note or the expiration of the
Revolving Loan at maturity), or in the event of any intentional
non-compliance by either Borrower with any provisions of this Agreement
which results in a termination of the Credit Facility by Lender
pursuant to Section 11.2 or 11.4 hereof, Borrowers will pay to Lender
an early termination fee of (a) 3% of the line of credit approved for
Borrowers under the Revolving Loan pursuant to Section 2.3(A) hereof
plus the outstanding principal balance then outstanding on Term Loan B,
if the same occurs during the first year following the execution of
Consolidated Amendment No. 1 to this Loan Agreement, (b) 2% of the line
of credit approved for
-6-
<PAGE> 50
Borrowers under the Revolving Loan pursuant to Section 2.3(A) hereof
plus the outstanding principal balance then outstanding on Term Loan B,
if the same occurs during the second year following the execution of
Consolidated Amendment No. 1 to this Loan Agreement, and (c) 1% of the
line of credit approved for Borrowers under the Revolving Loan pursuant
to Section 2.3(A) hereof plus the outstanding principal balance then
outstanding on Term Loan B, if the same occurs during the third year
following the execution of Consolidated Amendment No. 1 to this Loan
Agreement, in order to compensate Lender for its reliance expenses and
loss of anticipated profits. It is acknowledged that this fee shall be
deemed to be liquidated damages for loss of a bargain and not a penalty
and the same is acknowledged to be an integral part of the
consideration for Lender to execute Consolidated Amendment No. 1 to
this Loan Agreement; provided, however, that such fee will not be due
and payable in the event that the Borrowers make the foregoing
prepayments exclusively from funds generated from a sale of
substantially all of the assets of the Borrowers or a sale of the
controlling interest in the voting securities in the Borrowers."
I. Section 8.1(O) of the Loan Agreement is, effective the date hereof,
hereby amended and restated to read in its entirety as follows:
"(O) Maintain (i) a consolidated Adjusted Tangible Net Worth
equal to or greater than negative Eight Million Dollars (-$8,000,000)
on the date of Consolidated Amendment No. 1 to this Loan Agreement and
increasing by Seven Hundred Fifty Thousand Dollars ($750,000) each
fiscal quarter end thereafter, commencing December 31, 1995, and
calculated based upon each Borrower's fiscal quarter end direct
financial statements prepared in accordance with GAAP, and (ii) a
consolidated Adjusted Tangible Net Worth (exclusive of that portion of
Borrowers' net worth attributable to Borrowers' Australian joint
venture) equal to or greater than negative Six Million Dollars
(-$6,000,000) for Borrowers' fiscal years ending December 31, 1995; One
Million Dollars ($1,000,000) for Borrowers' fiscal years ending
December 31, 1996; and Six Million Dollars ($6,000,000) for Borrowers'
fiscal years ending December 31, 1997 and thereafter calculated
annually based upon each Borrower's audited annual financial
statements."
J. Section 8.1(Q) of the Loan Agreement is, effective the date hereof,
hereby amended and restated in its entirety to read as follows:
"(Q) Maintain Debt Coverage (as defined herein) not less than
1.20 to 1.00 on or prior to the date of any payment of Management Fees
and non-Bank funded Capital Expenditures and not less than 1.00 to 1.00
after the date of any payment of Management Fees and non-Bank funded
Capital Expenditures. "Debt Coverage" as used in this Section 8.1(Q)
means the ratio of Borrowers' consolidated net income, plus
consolidated depreciation, consolidated amortization and consolidated
interest paid to Lender, to the amount of all principal and interest
payable to Lender and the amount of all Permitted Distributions (after
1995) at the
-7-
<PAGE> 51
date of calculation thereof calculated quarterly based upon each
Borrower's fiscal quarter end direct financial statements prepared in
accordance with GAAP."
K. Section 8.2(H) of the Loan Agreement is, effective the date hereof,
hereby amended and restated to read in its entirety as follows:
"(H) Make any Distributions, except Permitted Distributions,
Tax Distributions and, so long as Term Loan B is Fully Conforming,
Management Fees."
L. Section 8.2(K) of the Loan Agreement is, effective the date hereof,
hereby amended and restated to read in its entirety as follows:
"(K) CAPITAL EXPENDITURES. Make Capital Expenditures (without
Lender's prior consent) during any fiscal year of such Borrower which,
when combined with the Capital Expenditures of the other Borrower,
cause the aggregate Capital Expenditures of both Borrowers to exceed
One Million Dollars ($1,000,000) during Borrowers' fiscal year ending
December 31, 1995 and during each fiscal year of Borrowers thereafter."
SECTION II. CONDITIONS PRECEDENT
--------------------
Each Borrower understands and hereby agrees that the effectiveness of
this Consolidated Amendment No. 1 is subject to receipt by the Lender, on or
prior to the date hereof, in form and substance satisfactory to the Lender and
its counsel, of the following:
(A) A Certificate, dated as of the date hereof, signed by an officer of
each Borrower or of such Borrower's General Partner and to the effect that:
(1) As of said date, no Event of Default has occurred and
is continuing and no event has occurred and is
continuing that, with the giving of notice or passage
of time or both, would be an Event of Default;
(2) The representations and warranties set forth in
Section 7 of the Loan Agreement are true and correct
as of such date; and
(3) Borrower is in compliance with all of the terms and
provisions set forth in the Loan Agreement on and as
of said date.
(B) A Certificate, dated as of the date hereof, of the secretary of the
General Partner of each Borrower certifying (1) that such General Partner's
Articles of Incorporation and Code of Regulations have not been amended since
the execution of the Loan Agreement (or certifying that true, correct and
complete copies of any amendments are attached), (2) that copies of resolutions
of the Board of Directors of such General Partner are attached with respect to
the approval of this Consolidated Amendment No. 1 and of the matters
contemplated hereby and authorizing the execution, delivery and performance by
such General Partner and Borrower of
-8-
<PAGE> 52
this Consolidated Amendment No. 1 and each other document to be delivered
pursuant hereto, (3) as to the incumbency and signatures of the officers of such
General Partner signing this Consolidated Amendment No. 1 and each other
document to be delivered pursuant hereto; and (4) that the Certificate of
Limited Partnership of each Borrower has not been amended since the execution of
this Loan Agreement.
(C) This Consolidated Amendment No. 1, an Amended and Restated
Replacement Promissory Note ("Revolving Loan"), substantially in the form of
EXHIBIT C-5 attached hereto, with all blanks completed; an Amended and Restated
Replacement Promissory Note (Term Loan), substantially in the form of EXHIBIT
C-4 attached hereto, with all blanks completed, all duly executed by each
Borrower and Amendments to Open-End Mortgages, each duly executed by the
applicable Borrower.
(D) An Acknowledgement of Receipt of a copy of, and Consent and
Agreement to the terms of, this Consolidated Amendment No. 1 and the above
referenced promissory notes and mortgage amendments from Nesco Holdings, Inc.
with respect to that certain Subordination Agreement, executed and delivered to
the Lender by it and dated September 14, 1992.
(E) An Origination Fee of Three Hundred Thousand Dollars ($300,000).
(F) Such other documents as the Lender may request to implement this
Consolidated Amendment No. 1 and the transactions contemplated hereby including,
without limitation, such legal opinion or opinions as Lender shall request.
If Lender shall consummate the transactions contemplated hereby prior
to the fulfillment of any of the conditions precedent set forth above, the
consummation of such transactions shall constitute only an extension of time for
the fulfillment of such conditions and not a waiver thereof.
SECTION III. ACKNOWLEDGEMENTS CONCERNING OUTSTANDING LOANS
---------------------------------------------
Borrowers hereby acknowledge and agree that as of July 28, 1995 the
principal balance of the Term Loan was the sum of $7,974,989, and that such loan
is outstanding and unpaid and payable to Lender in accordance with the terms of
the Loan Agreement (as amended by this Consolidated Amendment No. 1) and the
Term Note. Said balance, as well as the current outstanding balance of the
Revolving Loan ($4,620,603.24) and amounts owed pursuant to letters of credit
and/or existing equipment leases, are owed to Lender without any offset,
deduction, defense or counterclaim of any nature whatsoever.
-9-
<PAGE> 53
SECTION IV. FEES AND EXPENSES
------------------
Borrowers shall pay all out-of-pocket fees and expenses incurred by the
Lender in connection with the preparation, negotiation, execution and delivery
of this Consolidated Amendment No. 1, the Promissory Notes and all the other
agreements, documents or certificates required or contemplated hereby,
including, without limitation, legal fees and expenses of the Lender up to, but
not in excess of, Five Thousand Dollars ($5,000).
SECTION V. REFERENCES
----------
On and after the effective date of this Consolidated Amendment No. 1,
each reference in the Loan Agreement to "this Agreement", "hereunder", "hereof",
or words of like import referring to the Loan Agreement, and in the Notes to the
"Loan Agreement", "thereof", or words of like import referring to the Loan
Agreement shall mean and refer to the Loan Agreement as amended hereby. The Loan
Agreement, as amended by this Consolidated Amendment No. 1, is and shall
continue to be in full force and effect and is hereby and in all respects
ratified and confirmed. To the extent any amendment set forth in any prior
amendment is omitted from or revised in this Consolidated Amendment No. 1, the
same shall be deemed eliminated or revised, as the case may be, as between
Borrowers and Lender as of the date hereof. The execution, delivery and
effectiveness of this Consolidated Amendment No. 1 shall not operate as a waiver
of any right, power or remedy of Lender under the Loan Agreement or constitute a
waiver of any provision of the Loan Agreement except as specifically set forth
herein. All references in the Loan Agreement to any definitions modified or
replaced herein shall be deemed references to such definitions as so modified or
replaced. References in the Loan Agreement to EXHIBIT C-5 in the definition of
"Revolving Note" and to EXHIBIT C-4 in the definition of "Term Note" shall be
deemed to refer to the Note executed in connection herewith.
SECTION VI. APPLICABLE LAW
--------------
This Consolidated Amendment No. 1 shall be deemed to be a contract
under the laws of the State of Ohio, and for all purposes shall be construed in
accordance with the laws of the State of Ohio.
-10-
<PAGE> 54
SECTION VII. COUNTERPARTS
------------
This Consolidated Amendment No. 1 may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any one of the parties hereto may execute this Consolidated
Amendment No. 1 by signing any such counterpart.
IN WITNESS WHEREOF, the Borrowers and the Lender have caused this
Consolidated Amendment No. 1 to be executed by their duly authorized officers as
of the date and year first above written.
CONTINENTAL CONVEYOR & EQUIPMENT
CO., L.P.
("Borrower")
By CC&E Corp., its General Partner
By /s/ Ralph L. Nehrig
-----------------------------
Name: Ralph L. Nehrig
Title: V.P.
GOODMAN CONVEYOR CO., L.P.
("Borrower")
By New Goodman Corp.,
its General Partner
By /s/ Frank J. Rzicznek
-----------------------------
Name: Frank J. Rzicznek
Title: V. P.
BANK ONE, CLEVELAND, NA ("Lender")
By /s/ Stephanie A. Gajdzik
-----------------------------
Name: Stephanie A. Gajdzik
Title: Vice President
Asset-Based Lending
-11-
<PAGE> 55
CONSOLIDATED AMENDMENT NO. 2
----------------------------
TO
--
CREDIT FACILITY AND SECURITY AGREEMENT
--------------------------------------
THIS CONSOLIDATED AMENDMENT NO. 2 TO CREDIT FACILITY AND SECURITY
AGREEMENT (this "Consolidated Amendment No. 2"), dated as of December 13, 1996,
is entered into by and among BANK ONE, CLEVELAND, NA, a national banking
association organized and existing under the laws of the United States of
America ("Lender"), with its principal place of business located at 600 Superior
Avenue, Cleveland, Ohio 44114; CONTINENTAL CONVEYOR & EQUIPMENT CO. L.P., a
limited partnership organized and existing under the laws of the State of
Delaware ("Continental"), with its principal place of business and executive
offices located at 216 West 4th Avenue, South, P. O. Box 400, Winfield, Alabama
35594 (the "Continental Principal Place of Business"); and GOODMAN CONVEYOR CO.
L.P., a limited partnership organized and existing under the laws of the State
of Delaware ("Goodman"), with its principal place of business and executive
offices located at U.S. Route 178 South, P. O. Box 866, Belton, South Carolina
29627 (the "Goodman Principal Business Location") (each of Continental and
Goodman being sometimes referred to herein individually as a "Borrower" and
collectively as the "Borrowers").
W I T N E S S E T H:
--------------------
WHEREAS, the Borrowers and the Lender are parties to that certain
Credit Facility and Security Agreement dated as of September 14, 1992, as
amended by a certain First Amendment to Credit Facility and Security Agreement
executed on August 27, 1993, as further amended by a certain Second Amendatory
Agreement dated as of October 5, 1994 and as further amended by a certain
Consolidated Amendment No. 1 to Credit Facility and Security Agreement dated as
of July 28, 1995 (collectively, herein the "Loan Agreement," all terms defined
in said Loan Agreement being used herein with the same meaning), pursuant to
which the Lender loaned the Borrowers $15,600,000 on a term loan basis; and
agreed to loan to the Borrowers up to an additional maximum aggregate sum of
$25,000,000 on a revolving loan basis; which Term Loan is known as Term Loan B
and is evidenced by a Note dated July 28, 1995; and which Revolving Loan is
evidenced by a Note dated July 28, 1995, each such Note being executed and
delivered by the Borrowers to the Lender; and
WHEREAS, the Borrowers and the Lender have agreed to amend the Loan
Agreement to (i) increase Term Loan B to its original principal amount of
$15,600,000 (Term Loan C), to be repayable in 68 installments, (ii) make an
additional Term Loan in the principal amount of $1,500,000 to be repayable in 36
installments (Term Loan D), (iii) change the Rate of Interest on the Revolving
Loan and the Term Loan; and (iv) modify and replace certain financial covenants
and definitions contained in the Loan Agreement and add certain additional
financial covenants and definitions to the Loan Agreement; and
<PAGE> 56
WHEREAS, the Borrowers and the Lender wish to provide for payment by
the Borrowers of an origination fee of $125,000 and the expenses of Lender in
connection with the matters contemplated hereby; and
WHEREAS, in light of the fact that certain previous amendments will be
affected by the terms of this Amendment and for ease of reference, the Borrowers
and the Lender also desire to restate and consolidate in this Amendment all
amendments to the Loan Agreement that are effective on and as of the date
hereof;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
Borrowers and the Lender agree as follows:
SECTION I. AMENDMENT OF LOAN AGREEMENT
---------------------------
A. New definitions "Acquisition" and "Permitted Investment" are hereby
added as follows and the definitions "Commitment," "Contract Rate," "Management
Fees," "Permitted Distribution," " "Revolving Note" and "Term Note" in Section
1.1 of the Loan Agreement are, effective the date hereof, hereby amended and
restated to read in their entirety as follows:
"ACQUISITION - The Acquisition by Continental Conveyor & Equipment Pty
Limited ("CC&E Pty Limited"), a wholly-owned subsidiary of Continental
of all of the shares of BCE Holdings Pty Limited ("BCE"), a corporation
registered under the Corporation Law of Australia, which is a holding
company whose subsidiaries (listed hereinafter) carry on the business
of the manufacture of conveyors, conveyor componentry and associated
equipment in New South Wales, Victoria and Queensland and their
distribution and installation in Australia and elsewhere; the
aforementioned subsidiaries are Australian Conveyor Engineering Pty
Limited, Ace Conveyor Services Pty Limited, Ace Conveyor Components Pty
Limited, A. Crane Pty Limited and Ringway Pty Limited (collectively
with BCE, the "ACE Conveyor Group")."
"COMMITMENT - Lender's letter to Borrowers dated August 17, 1992, as
accepted by Borrowers on August 27, 1992, Lender's letter to Borrowers
dated September 28, 1994, as accepted by Borrowers on October 3, 1994,
Lender's letter to Borrowers dated July 14, 1995, as accepted by
Borrowers on July 28, 1995, and Lenders' letter to Borrowers dated
December 10, 1996, as accepted by Borrowers on December 10, 1996."
"CONTRACT RATE - A fluctuating rate equal to One Hundred Twenty Five
(125) basis points above the Base Rate."
"MANAGEMENT FEES - Management fees and other similar type fees paid by
a Borrower to Nesco, Inc. or an affiliate of Nesco, Inc. paid at a rate
not to exceed two percent (2%) of such Borrower's gross sales and if an
Event of Default has occurred and is continuing at the time of payment
of such fee or would occur by
-2-
<PAGE> 57
reason thereof or after giving effect thereto, the same shall be paid
at a rate not to exceed one percent (1%) of such Borrower's gross
sales. For purposes of this definition, gross sales shall not include
sales of any of Continental's foreign subsidiaries."
"PERMITTED INVESTMENT - Commencing with calendar year 1998 so long as
no Event of Default has occurred and is continuing or will occur as a
result thereof, aggregate annual Distributions by either Borrower to
its partners in an amount not to exceed fifty percent (50%) of such
Borrower's Net Income for the previous fiscal year beginning with each
Borrower's fiscal year ending December 31, 1997. For purposes of this
definition, Net Income shall not include income of any foreign
subsidiary of Continental."
"PERMITTED DISTRIBUTION - An advance of funds by Borrowers to
Continental Conveyor & Equipment Pty Limited (in the form of equity,
debt or a combination of both) to be used to consummate the Acquisition
in an amount not to exceed Eleven Million Three Hundred Thousand
Dollars ($11,300,000), all of which must be disbursed within twenty
(20) days of the date of Consolidated Amendment No.
2 to this Loan Agreement.
"TERM NOTE - The Amended and Restated Replacement Promissory Note (Term
Loan C) to be executed by Borrowers in form attached as EXHIBIT C-6 to
this Agreement (with such changes or modifications, if any, to which
Lender may agree) evidencing the Term Loan made by Lender pursuant to
Section 2.1.1 of this Agreement, together with all amendments thereto
and all notes issued in substitution therefore or replacement thereof
and the Promissory Note (Term Loan D) to be executed by Borrowers in
the form attached as EXHIBIT C-7 to this Agreement (which such changes
or modifications, if any, to which Lender by agree) evidencing the Term
Loan made by Lender pursuant to Section 2.1.2 of this Agreement,
together with all amendments thereto and all notes issued in
substitution therefor or replacement thereof."
B. New definitions of "Excess Cash Flow," "Revolving Note" and "Working
Capital" are, effective the date hereof, added to Section 1.1 of the Loan
Agreement as follows:
"EXCESS CASH FLOW - With respect to each fiscal year of Borrowers,
commencing with the fiscal year ending December 31, 1997, an amount
equal to (i) Borrowers' consolidated net income, PLUS consolidated
depreciation, consolidated amortization and consolidated interest paid
to Lender, less (ii) the aggregate of all principal and interest
payable to Lender (other than prepayment of principal, including
mandatory prepayments of Term Loan D) PLUS Permitted Distributions PLUS
(minus) increases (decreases) in Working Capital, PLUS the amount of
all non- Lender funded Capital Expenditures calculated annually based
upon Borrowers' annual audited financial statements but not including
the results and financial position of any foreign based subsidiary of
either Borrower."
-3-
<PAGE> 58
"REVOLVING NOTE - The Amended and Restated Replacement Promissory Note
(Revolving Loan) to be executed by Borrowers in form attached as
EXHIBIT C-5 to this Agreement (with such changes or modifications, if
any, to which Lender may agree) evidencing the Revolving Loan made by
Lender pursuant to Section 2.3 of this Agreement, together with all
amendments thereto and all promissory notes issued in substitution
therefor or replacement thereof."
"WORKING CAPITAL - The excess of Borrowers' aggregate current assets
over aggregate current liabilities, each as determined in accordance
with GAAP but not including the results and financial position of any
foreign based subsidiary of either Borrower, and excluding from the
calculation thereof all cash and cash equivalents of Borrowers, the
current portion of all of Borrowers' outstanding long-term
Indebtedness, the outstanding principal balance of the Revolving Loan
and any and all amounts due to or due from Affiliates."
C. Section 2.1 of the Loan Agreement is, effective the date hereof,
hereby amended and restated to read in its entirety as follows:
"2.1.1 TERM LOAN C.
-----------
Lender will make a term loan to Borrowers in the principal
amount of Fifteen Million Six Hundred Thousand Dollars
($15,600,000) ("Term Loan C"). Term Loan C shall be subject to
repayment in accordance with, and bear interest as provided
in, Section 2.2.1 of this Agreement and shall otherwise be
evidenced by, and repayable in accordance with, the applicable
Term Note."
"2.1.2 TERM LOAN D
-----------
Lender will make a term loan to Borrowers in the principal
amount of One Million Five Hundred Thousand Dollars
($1,500,000) ("Term Loan D"). Term Loan D shall be subject to
repayment in accordance with, and bear interest as provided
in, Section 2.2.2 of this Agreement and shall otherwise be
evidenced by, and repayable in accordance with, the applicable
Term Note."
D. Section 2.2 of the Loan Agreement is, effective the date hereof,
hereby amended and restated to read in its entirety as follows:
"2.2.1 PAYMENT TERMS OF TERM LOAN C.
----------------------------
(A) INTEREST. Term Loan C shall bear interest on the unpaid
principal balance until the date paid at a fixed rate per annum equal
to ten percent (10%), such interest being payable monthly on the 1st
day of each month, and at maturity, commencing January 1, 1997. On July
28, 1998, and so long as an Event of Default does not then exist,
Borrowers shall have the option to convert the above interest rate to
either (i) a fixed rate per annum equal to Three Hundred (300)
-4-
<PAGE> 59
basis points over the asked-for yield of U.S. Treasury securities of a
similar term and maturity, as published in the July 27, 1998 edition of
the WALL STREET JOURNAL or (ii) a fluctuating rate per annum rate equal
to One Hundred Fifty (150) basis points above the Base Rate upon prior
written notice to Lender delivered on or before July 21, 1998. In the
event Borrowers do not for any reason deliver notice of which option is
elected within the prescribed period, they shall be deemed to have
selected option (i) above. Interest on Term Loan C shall be computed on
a 360-day year basis based upon the actual number of days elapsed.
(B) FIXED PRINCIPAL INSTALLMENTS. Subject otherwise to the
terms and provisions of the applicable Term Note, the principal balance
of Term Loan C shall be payable in sixty-seven (67) consecutive equal
monthly principal installments of One Hundred Eighty-Five Thousand
Seven Hundred Fourteen Dollars ($185,714) each, commencing January 1,
1997, and continuing on the 1st day of each month thereafter and a
final principal installment of Three Million One Hundred Fifty-Seven
Thousand One Hundred Sixty-Two Dollars ($3,157,162) on August 1, 2002.
(C) PREPAYMENT FEE. In the event that Term Loan C is paid in
full (other than as a result of scheduled reductions by way of payments
in accordance with the Term Note), Borrowers will pay to Lender a
prepayment fee of (a) 1% of the outstanding principal balance then
outstanding on Term Loan C, if the same occurs at any time prior to
July 28, 1997, provided, however, that so long as there are loans
outstanding pursuant to the Revolving Loan provided in Section 2.3
hereof and the same shall not have been refinanced and retired, the
repayment fee prior to July 28, 1997 shall be the sum of $25,000, (b)
in the event that the Borrowers select the fixed rate interest option,
in accordance with Section 2.2.1(A)(i), 3% of the outstanding principal
balance then outstanding on Term Loan C if the same occurs during the
first full year following July 28, 1998, (c) 2% of the outstanding
principal balance then outstanding on Term Loan C, if the same occurs
during the second year following July 28, 1998, and (d) 1% of the
outstanding principal balance then outstanding on Term Loan C, if the
same occurs during the third year following July 28, 1998, in order to
compensate Lender for its reliance expenses and loss of anticipated
profits. It is acknowledged that this fee shall be deemed to be
liquidated damages for loss of a bargain and not a penalty and the same
is acknowledged to be an integral part of the consideration for Lender
to execute Consolidated Amendment No. 2 to this Loan Agreement;
provided, however, that such fee will not be due and payable in the
event that the Borrowers make the foregoing prepayments exclusively
from funds generated from a sale of substantially all of the assets of
the Borrowers or a sale of the controlling interest in the voting
securities in the Borrowers."
"2.2.2 PAYMENT TERMS OF TERM LOAN D.
----------------------------
(A) INTEREST. Term Loan D shall bear interest on the unpaid
principal balance until the date paid at a fixed rate per annum of
twelve percent (12%), such interest being payable monthly on the 1st
day of each month, and at maturity,
-5-
<PAGE> 60
commencing January 1, 1997. Interest on Term Loan D shall be computed
on a Three Hundred Sixty (360)-day year basis based upon the actual
number of days elapsed.
(B) FIXED PRINCIPAL INSTALLMENTS. Subject otherwise to the
terms and provisions of the applicable Term Note, the principal balance
of Term Loan D shall be repayable in thirty-five (35) consecutive equal
monthly principal installments of Forty-One Thousand Six Hundred
Sixty-Seven Dollars ($41,667) each, commencing January 1, 1997, and
continuing on the first day of each month thereafter and a final
principal installment of Forty-One Thousand Six Hundred Fifty-Five
Dollars ($41,655) on December 1, 1999.
(C) MANDATORY PRINCIPAL PREPAYMENT OF TERM LOAN D. In addition
to the principal payments described in Section 2.2.2.(B) above, the
Borrowers agree to make annual payments to be applied to pay the
principal balance of Term Loan D within One Hundred Five (105) days of
each fiscal year end of the Borrowers beginning with respect to the
fiscal year ending December 31, 1997, in an amount equal to Twenty-Five
Percent (25%) of Borrowers' Excess Cash Flow calculated for the fiscal
year just ended. Borrowers further agree that any such principal
payments required under this Section 2.2.2(C) shall be (i) made by
Lender increasing the outstanding principal balance of the Revolving
Loan, and (ii) applied against principal installments on Term Loan D in
their inverse order of maturity."
E. Subsections (A), (B) and (C) of Section 2.3 of the Loan Agreement
are, effective the date hereof, hereby amended and restated to read in their
entirety as follows:
"2.3 REVOLVING LOAN.
--------------
(A) REVOLVING LOAN. Subject at all times to the terms hereof,
the Lender will, until July 28, 1998, make such loans to each Borrower
as from time to time such Borrower requests (the "Revolving Loan")
consisting of advances made by Lender against the value of each
Borrower's respective Eligible Inventory and Eligible Accounts. Such
advances are anticipated to be repaid by Borrowers and thereafter
re-advanced by Lender without any premiums or penalty therefor. Subject
to the provisions of Subsection (B) of this Section 2.3, the aggregate
unpaid principal of the Revolving Loan outstanding at any one time
shall not exceed the lesser of (a) the line of credit approved for
Borrowers, which is currently Twenty-Five Million and no/100 Dollars
($25,000,000) or (b) the sum of (i) Eighty-Five percent (85%) of the
unpaid face amount of each Borrower's respective Eligible Accounts (or
such other percentages of each Borrower's Eligible Accounts as may from
time to time be fixed by the Lender upon notice to the Borrowers) and
(ii) the lesser of (1) Fifty-Five percent (55%) of the cost or market
value, whichever is lower, determined on a first-in, first-out basis,
of each Borrower's respective Eligible Inventory located at the
Continental Collateral Location or Goodman Collateral Location (or such
other percentages of each Borrower's respective Eligible Inventory as
may from time to time be fixed by the
-6-
<PAGE> 61
Lender upon notice to the Borrowers) or (2) Twelve Million Dollars
($12,000,000) (or such other dollar amount as may from time to time be
fixed by the Lender upon notice to the Borrowers).
(B) MAXIMUM BORROWINGS AVAILABLE UNDER REVOLVING LOAN.
Notwithstanding anything to the contrary contained in this Section 2.3,
at no time shall the aggregate loans outstanding to the Borrowers at
any time under the Revolving Loan exceed Twenty-Five Million and no/100
Dollars ($25,000,000), nor shall advances under the Revolving Loan to
either Borrower exceed that which is permitted on the basis of the
advance rate percentages set forth in Section 2.3(A)(b) above as the
same are applied to each respective Borrower.
(C) PAYMENT. The Revolving Loan shall be payable on July 28,
1998, and bear interest as provided in Section 2.4 of this Agreement
and shall otherwise be evidenced by, and repayable in accordance with,
the Revolving Note, but in the absence of such revolving promissory
note shall be evidenced by the Lender's record of disbursements and
repayments."
F. Section 2.8 of the Loan Agreement is, effective the date hereof,
hereby amended and restated to read in its entirety as follows:
"2.8 ORIGINATION FEE. In order to compensate Lender for its services in
preparing and reviewing Consolidated Amendment No. 2 to this Loan
Agreement and related documents in connection with the amendment to
Credit Facility, Borrowers shall pay to Lender not later than the date
of Consolidated Amendment No. 2 to this Loan Agreement, an origination
fee (the "Origination Fee") of One Hundred Twenty-Five Thousand Dollars
($125,000)."
G. Section 2.9 of the Loan Agreement is, effective the date hereof,
amended and restated to read in its entirety as follows:
"2.9 COMMITMENT FEE. Borrowers shall pay to Lender on July 28, 1997 and
on each succeeding anniversary of such date annually thereafter, a
commitment fee (the "Commitment Fee") of Twenty-Five (25) basis points
on the amount of the line of credit approved for Borrowers under the
Revolving Loan pursuant to Section 2.3(A) of this Agreement, whether
the Borrowers shall be entitled to request such amount pursuant to
Section 2.3(A) of this Agreement or not."
H. Section 2.10 of the Loan Agreement is, effective the date hereof,
hereby amended and restated to read in its entirety as follows:
"2.10 EARLY TERMINATION FEE. In the event that the Revolving
Loan and Term Loan C and Term Loan D are paid in full (other than as a
result of payment of Term Loan C or Term Loan D at maturity or by
reason of mandatory prepayments from Excess Cash Flow or scheduled
reduction of the Term Loans C or Term Loan D by way of payments in
accordance with the applicable Term Note or the expiration of the
Revolving Loan at maturity), or in the event of any
-7-
<PAGE> 62
intentional non-compliance by either Borrower with any provisions of
this Agreement which results in a termination of the Credit Facility by
Lender pursuant to Section 11.2 or 11.4 hereof, Borrowers will pay to
Lender an early termination fee of (a) 3% of the line of credit
approved for Borrowers under the Revolving Loan pursuant to Section
2.3(A) hereof plus the outstanding principal balance then outstanding
on Term Loan C and Term Loan D, if the same occurs during the first
year following the execution of Consolidated Amendment No. 2 to this
Loan Agreement, (b) 2% of the line of credit approved for Borrowers
under the Revolving Loan pursuant to Section 2.3(A) hereof plus the
outstanding principal balance then outstanding on Term Loan C and Term
Loan D, if the same occurs during the second year following the
execution of Consolidated Amendment No. 2 to this Loan Agreement, and
(c) 1% of the line of credit approved for Borrowers under the Revolving
Loan pursuant to Section 2.3(A) hereof plus the outstanding principal
balance then outstanding on Term Loan C and Term Loan D, if the same
occurs during the third year following the execution of Consolidated
Amendment No. 2 to this Loan Agreement, in order to compensate Lender
for its reliance expenses and loss of anticipated profits. It is
acknowledged that this fee shall be deemed to be liquidated damages for
loss of a bargain and not a penalty and the same is acknowledged to be
an integral part of the consideration for Lender to execute
Consolidated Amendment No. 2 to this Loan Agreement; provided, however,
that such fee will not be due and payable in the event that the
Borrowers make the foregoing prepayments exclusively from funds
generated from a sale of substantially all of the assets of the
Borrowers or a sale of the controlling interest in the voting
securities in the Borrowers or if the outstanding borrowings under this
Agreement are replaced by borrowings under a new credit facility
granted by Lender to a borrower who is affiliated with either Borrower
or the General Partner of either Borrower."
I. Section 8.1(O) of the Loan Agreement is, effective the date hereof,
hereby amended and restated to read in its entirety as follows:
"(O) Maintain (i) a consolidated Adjusted Tangible Net Worth
equal to or greater than negative Four Million Two Hundred Fifty
Thousand Dollars (-$4,250,000) as of the year ending December 31, 1996
and increasing by Nine Hundred Thousand Dollars ($900,000) by each
fiscal quarter-end thereafter commencing March 31, 1997, and calculated
based upon the Borrower's combined consolidated audited year-end
financial statements or upon each Borrower's unaudited fiscal
quarter-end financial statements prepared in accordance with GAAP. For
purposes hereof, the interim financial statements shall include a
consolidation with the financial position of CC&E Pty Limited and BCE."
Debt Coverage shall be calculated quarterly based on each Borrower's
fiscal quarter and direct financial statements for the four preceding fiscal
quarters prepared in accordance with GAAP but exclusive of the results of any
foreign subsidiary of Continental."
J. Section 8.1(Q) of the Loan Agreement is, effective the date hereof,
hereby amended and restated in its entirety to read as follows:
-8-
<PAGE> 63
"(Q). Maintain Debt Coverage (as defined herein) of not less
than 1.40 to 1.00 without regard to any payment of Management Fees and
non-Lender funded Capital Expenditures and not less than 1.20 to 1.00
without regard to any payment of Management Fees and non-Lender funded
Capital Expenditures. "Debt Coverage" as used in this Section 8.1(Q)
means the ratio of Borrowers' combined consolidated net income PLUS,
with respect to calculation of the 1.4 to 1.00 ratio only, Management
Fees PLUS, with respect to both 1.40 to 1.00 and the 1.20 to 1.00
ratio, consolidated depreciation, consolidated amortization and
consolidated interest paid to Lender, to the amount of all principal
and interest payable to Lender (except for any mandatory prepayments of
principal on Term Loan D) and the amount of all Permitted Distributions
PLUS, with respect to calculation of the 1.20 to 1.0 ratio only,
non-Lender funded Capital Expenditures at the date of calculation
thereof. Debt Coverage shall be calculated quarterly based upon each
Borrower's fiscal quarter-end financial statements for the four
preceding fiscal quarters prepared in accordance with GAAP but
exclusive of the results of any foreign subsidiary of Continental."
(K) Section 8.1 of the Loan Agreement is, effective the date hereof,
hereby amended by the addition of the following Section 8.1(R):
"(R) PAYDOWN OF TERM LOANS. In addition to, and not in
limitation of the requirements to make mandatory prepayments of
principal, each Borrower agrees that it shall use any upstream
dividends from its subsidiaries, inter-company debt repayments,
distributions, management fees or any similar type of payment received
from CC&E Pty Limited and/or any member of the ACE Group or any
affiliate thereof by Continental or any affiliate of Continental
including, but not limited to, partners of Continental, to pay the Term
Loan C or Term Loan D, as the Lender shall specify, unless Lender shall
specifically otherwise consent in writing. Payments received from CC&E
Pty Limited or any member of the ACE Conveyor Group for services or
goods furnished by Continental or Goodman shall not be subject to this
provision."
L. Section 8.2(H) of the Loan Agreement is, effective the date hereof,
hereby amended and restated to read in its entirety as follows:
"(H) Make any Distributions, except Permitted Distributions,
Tax Distributions and Management Fees."
M. Section 8.2(K) of the Loan Agreement is, effective the date hereof,
amended and restated to read in its entirety as follows:
"(K) CAPITAL EXPENDITURES. Make Capital Expenditures (without
Lender's prior consent) during any fiscal year of such Borrower which,
when combined with the Capital Expenditures of the other Borrower,
cause the aggregate Capital Expenditures of both Borrowers to exceed
One Million Dollars ($1,000,000) during Borrowers' fiscal year ending
December 31, 1995 and during each fiscal year of Borrowers thereafter."
-9-
<PAGE> 64
N. Section 11.1 of the Loan Agreement is, effective the date hereof,
hereby amended by addition of the following new subsection 11.1(P):
"(P) The default by CC&E Pty Limited on any loan agreement to
which it is a party, including without limitation, its agreement to
repay certain subordinated indebtedness in connection with the
Acquisition and any attempt by sellers to invoke or attempt to invoke
any of their rights under a certain guaranty agreement executed by
Continental in conjunction with the Acquisition."
O. Section 8.1 of the Loan Agreement is, effective the date hereof,
hereby amended by addition of the following new subsection 8.1(S):
(S) AVAILABILITY UNDER REVOLVING LOAN. Borrowers shall have a
minimum aggregate unused availability under the Revolving Loan of Two
Million Dollars ($2,000,000) on the 15th day of March, June, September
and December, 1997 and Three Million Dollars ($3,000,000) on the 15th
day of March and June, 1998 utilizing the Borrowers' Certificate of
Accounts Receivable and Inventory in the form attached as EXHIBIT A to
the Loan Agreement."
SECTION II. CONDITIONS PRECEDENT
--------------------
Each Borrower understands and hereby agrees that the effectiveness of
this Consolidated Amendment No. 2 is subject to receipt by the Lender, on or
prior to the date hereof, in form and substance satisfactory to the Lender and
its counsel, of the following:
(A) A Certificate, dated as of the date hereof, signed by an officer of
each Borrower or of such Borrower's General Partner and to the effect that:
(1) As of said date, no Event of Default has occurred and
is continuing and no event has occurred and is
continuing that, with the giving of notice or passage
of time or both, would be an Event of Default;
(2) The representations and warranties set forth in
Section 7 of the Loan Agreement are true and correct
as of such date; and
(3) Borrower is in compliance with all of the terms and
provisions set forth in the Loan Agreement on and as
of said date.
(B) A Certificate, dated as of the date hereof, of the secretary of the
General Partner of each Borrower certifying (1) that such General Partner's
Articles of Incorporation and Code of Regulations have not been amended since
the execution of the Loan Agreement (or certifying that true, correct and
complete copies of any amendments are attached), (2) that copies of resolutions
of the Board of Directors of such General Partner are attached with respect to
the approval of this Consolidated Amendment No. 2 and of the matters
contemplated hereby and authorizing the execution, delivery and performance by
such General Partner and Borrower of this Consolidated Amendment No. 2 and each
other document to be delivered pursuant hereto, (3) as to the incumbency and
signatures of the officers of such General Partner signing this
-10-
<PAGE> 65
Consolidated Amendment No. 2 and each other document to be delivered pursuant
hereto; and (4) that the Certificate of Limited Partnership of each Borrower has
not been amended since the execution of this Loan Agreement.
(C) This Consolidated Amendment No. 2; an Amended and Restated
Replacement Promissory Note (Term Loan C), substantially in the form of EXHIBIT
C-6 attached hereto, with all blanks completed; Promissory Note (Term Loan D)
substantially in the form of EXHIBIT C-7 attached hereto, with all blanks
completed, all duly executed by each Borrower; and Amendments to Open-End
Mortgages, each duly executed by the applicable Borrower.
(D) An Acknowledgment of Receipt of a copy of, and Consent and
Agreement to the terms of, this Consolidated Amendment No. 2 and the above
referenced promissory notes and mortgage amendments from N.E.S. Investment Co.,
L.P. with respect to that certain Subordination Agreement, executed and
delivered to the Lender by it and dated September 14, 1992.
(E) An Origination Fee of One Hundred Twenty-Five Thousand Dollars
($125,000).
(F) A Certificate, dated as of the date hereof, signed by an officer of
each Borrower or of such Borrowers' General Partner and to the effect that:
1. CC&E Pty Limited and the companies in the ACE Conveyor
Group have not incurred any term indebtedness other than certain loans
provided to CC&E Pty Limited by the selling shareholders in the
Acquisition; and
2. Following (i) repayment and refunding of Term Loan B by the
execution and funding of Term Loan C, (ii) the funding of Continental's
investment required to consummate the Acquisition and (iii) the payment
of all costs, fees and expenses incurred in closing Consolidated
Amendment No. 2 and the transactions related thereto and closing the
Acquisition, no more than Twenty Million Dollars ($20,000,000) will
have been drawn down on the Revolving Loan.
(G) Copies of all material transactional and closing documents relevant
to the Acquisition certified to Lender's reasonable satisfaction.
(H) The written opinion of counsel to Borrowers as to the transactions
contemplated by Consolidated Amendment No. 2 and as to the Acquisition, in form
and substance satisfactory to Lender.
(I) Such other documents as the Lender may request to implement this
Consolidated Amendment No. 2 and the transactions contemplated hereby.
If Lender shall consummate the transactions contemplated hereby prior
to the fulfillment of any of the conditions precedent set forth above, the
consummation of such transactions shall constitute only an extension of time for
the fulfillment of such conditions and not a waiver thereof.
-11-
<PAGE> 66
SECTION III. ACKNOWLEDGMENTS CONCERNING OUTSTANDING LOANS
--------------------------------------------
Borrowers hereby acknowledge and agree that as of December 13, 1996 the
principal balance of the Term Loan B was the sum of $12,628,576 and that such
loan is outstanding and unpaid and payable to Lender in accordance with the
terms of the Loan Agreement (as amended by this Consolidated Amendment No. 2)
and the Term Note, and that Term Loan B will be repaid by use, in part, of the
proceeds of Term Loan C. Said balance, as well as the current outstanding
balance of the Revolving Loan ($12,545,646.38) and amounts owed pursuant to
letters of credit and/or existing equipment leases, are owed to Lender without
any offset, deduction, defense or counterclaim of any nature whatsoever.
SECTION IV. FEES AND EXPENSES
-----------------
Borrowers shall pay all out-of-pocket fees and expenses incurred by the
Lender in connection with the preparation, negotiation, execution and delivery
of this Consolidated Amendment No. 2, the Term Notes and all the other
agreements, documents or certificates required or contemplated hereby,
including, without limitation, legal fees and expenses of the Lender.
SECTION V. REFERENCES
----------
On and after the effective date of this Consolidated Amendment No. 2,
each reference in the Loan Agreement to "this Agreement", "hereunder", "hereof",
or words of like import referring to the Loan Agreement, and in the Notes to the
"Loan Agreement", "thereof", or words of like import referring to the Loan
Agreement shall mean and refer to the Loan Agreement as amended hereby. The Loan
Agreement, as amended by this Consolidated Amendment No. 2, is and shall
continue to be in full force and effect and is hereby and in all respects
ratified and confirmed. To the extent any amendment set forth in any prior
amendment is omitted from or revised in this Consolidated Amendment No. 2, the
same shall be deemed eliminated or revised, as the case may be, as between
Borrowers and Lender as of the date hereof. The execution, delivery and
effectiveness of this Consolidated Amendment No. 2 shall not operate as a waiver
of any right, power or remedy of Lender under the Loan Agreement or constitute a
waiver of any provision of the Loan Agreement except as specifically set forth
herein. All references in the Loan Agreement to any definitions modified or
replaced herein shall be deemed references to such definitions as so modified or
replaced. References in the Loan Agreement to EXHIBIT C-6 in the definition of
"Term Note" and to EXHIBIT C-7 in the definition of "Term Note" shall be deemed
to refer to the respective Notes executed in connection herewith.
SECTION VI. APPLICABLE LAW
--------------
This Consolidated Amendment No. 2 shall be deemed to be a contract
under the laws of the State of Ohio, and for all purposes shall be construed in
accordance with the laws of the State of Ohio.
-12-
<PAGE> 67
SECTION VII. COUNTERPARTS
------------
This Consolidated Amendment No. 2 may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any one of the parties hereto may execute this Consolidated
Amendment No. 2 by signing any such counterpart.
IN WITNESS WHEREOF, the Borrowers and the Lender have caused this
Consolidated Amendment No. 2 to be executed by their duly authorized officers as
of the date and year first above written.
CONTINENTAL CONVEYOR & EQUIPMENT
CO. L.P.
("Borrower")
By CC&E Corp., its General Partner
By /s/ Ralph L. Nehrig
--------------------------
Name: Ralph Nehrig
Title: V. P.
GOODMAN CONVEYOR CO. L.P.
("Borrower")
By New Goodman Corp.,
its General Partner
By /s/ Frank J. Rzicznek
--------------------------
Name: Frank J. Rzicznek
Title: V. Pres.
BANK ONE, CLEVELAND, NA ("Lender")
By /s/ Louis G. Johnston
--------------------------
Name: Louis G. Johnston
Title: Senior Vice President and Manager
Special Industries
-13-
<PAGE> 68
THIRD AMENDATORY AGREEMENT
--------------------------
TO
--
CREDIT FACILITY AND SECURITY AGREEMENT
--------------------------------------
THIS THIRD AMENDATORY AGREEMENT TO CREDIT FACILITY AND SECURITY
AGREEMENT (this "Third Amendatory Agreement"), dated as of March 28, 1997, is
entered into by and among BANK ONE, CLEVELAND, NA, a national baking association
organized and existing under the laws of the United States of America
("Lender"), with its principal place of business located at 600 Superior Avenue,
Cleveland, Ohio 44114; CONTINENTAL CONVEYOR & EQUIPMENT COMPANY, a Delaware
corporation ("Continental"), with its principal place of business and executive
offices located at 216 West 4th Avenue, South, P.O. Box 400, Winfield, Alabama
35594 (the "Continental Principal Place of Business"); and GOODMAN CONVEYOR
COMPANY, a Delaware corporation ("Goodman"), with its principal place of
business and executive offices located at U.S. Route 178 South, P.O. Box 866,
Belton, South Carolina 29627 (the "Goodman Principal Business Location") (each
of Continental and Goodman being sometimes referred to herein individually as a
"Borrower" and collectively as the "Borrowers").
W I T N E S S E T H:
--------------------
WHEREAS, pursuant to the terms of that certain Assumption and
Modification Agreement by and between Borrowers and Lender dated as of March 7,
1997, the Borrowers assumed all of the Obligations of CONTINENTAL CONVEYOR &
EQUIPMENT CO. L.P., a limited partnership organized and formerly existing under
the laws of the State of Delaware, and GOODMAN CONVEYOR CO. L.P., a limited
partnership organized and formerly existing under the laws of the State of
Delaware (the "Original Borrowers"),under that certain Credit Facility and
Security Agreement by and between the Original Borrowers and Lender dated as of
September 14, 1992, as amended by a certain First Amendment to Credit Facility
and Security Agreement executed on August 27, 1993, as further amended by a
certain Second Amendatory Agreement dated as of October 5, 1994, as further
amended by a certain Consolidated Amendment No. 1 to Credit Facility and
Security Agreement dated as of July 28, 1995 and as further amended by a certain
Consolidated Amendment No. 2 to Credit Facility and Security Agreement dated as
of December 13, 1996 (collectively, herein the "Loan Agreement," all terms
defined in said Loan Agreement being used herein with the same meaning),
pursuant to which the Lender loaned the Original Borrowers $15,600,000 on a term
loan basis; and made an additional term loan in the principal amount of
$1,500,000; and agreed to loan to the Original Borrowers up to an additional
maximum aggregate sum of $25,000,000 on a revolving loan basis; which term loans
are known, respectively, as Term Loan C, evidenced by a Note dated December 13,
1996, and Term Loan D, evidenced by a Note dated December 13, 1996, and which
Revolving Loan is evidenced by a Note dated July 28, 1995, each such Note being
executed and delivered by the Original Borrowers to the Lender; and
WHEREAS, the Borrowers and the Lender have agreed to amend the Loan
Agreement to (i) increase the maximum aggregate sum available under the
Revolving Loan from $25,000,000 to $30,000,000, (ii) discharge Borrowers from
their obligations under the promissory notes evidencing Term Loan C and Term
Loan D upon full payment of all amounts due and owing thereunder (collectively,
the "Term Loans") and (iii) modify and replace certain financial covenants and
definitions contained in the Loan Agreement and add certain additional financial
covenants and definitions to the Loan Agreement; and
WHEREAS, the Borrowers and the Lender wish to provide for payment by
the Borrowers of a documentation and restructure fee of $50,000 and the expenses
of Lender in connection with the matters contemplated hereby.
<PAGE> 69
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
Borrowers and the Lender agree as follows:
SECTION I. AMENDMENT OF LOAN AGREEMENT
---------------------------
A. The definitions "Commitment," "Management Fees," "Revolving Note"
and "Working Capital" in Section 1.1 of the Loan Agreement are, effective the
date hereof, hereby amended and restated to read in their entirety as follows:
"COMMITMENT - Lender's letter to the Original Borrowers dated
August 17, 1992, as accepted by the Original Borrowers on August 27,
1992, Lender's letter to the Original Borrowers dated September 28,
1994, as accepted by the Original Borrowers on October 3, 1994,
Lender's letter to the Original Borrowers dated July 14, 1995, as
accepted by the Original Borrowers on July 28, 1995, Lenders' letter to
the Original Borrowers dated December 10, 1996, as accepted by the
Original Borrowers on December 10, 1996 and Lender's Letter to Original
Borrowers dated February 26, 1997, as accepted by Borrowers on March 7,
1997."
"MANAGEMENT FEES - Management fees and other similar type fees
paid by a Borrower to Nesco, Inc. or an affiliate of Nesco, Inc."
"REVOLVING NOTE - The Amended and Rested Replacement
Promissory Note (Revolving Loan) to be executed by Borrowers in form
attached as EXHIBIT C-8 to this Agreement (with such changes or
modifications, if any, to which Lender may agree) evidencing the
Revolving Loan made by Lender pursuant to Section 2.3 of this
Agreement, together with all amendments thereto and all promissory
notes issued in substitution therefor or replacement thereof."
"WORKING CAPITAL - The excess of Borrowers' consolidated
combined aggregate current assets over aggregate current liabilities,
each as determined in accordance with GAAP, and excluding from the
calculation thereof the outstanding principal balance of the Revolving
Loan to the extent reflected as a current liability."
B. Subsections (A), (B) and (C) of Section 2.3 of the Loan Agreement
are, effective the date hereof, hereby amended and restated to read in their
entirety as follows:
"2.3 REVOLVING LOAN.
--------------
(A) REVOLVING LOAN. Subject at all times to the terms hereof,
the Lender will, until March 28, 2000, make such loans to each Borrower
as from time to time such Borrower requests (the "Revolving Loan")
consisting of advances made by Lender against the value of each
Borrower's respective Eligible Inventory and Eligible Accounts. Such
advances are anticipated to be repaid by Borrowers and thereafter
re-advanced by Lender without any premiums or penalty therefor. Subject
to the provisions of Subsection (B) of this Section 2.3, the aggregate
unpaid principal of the Revolving Loan outstanding at any one time
shall not exceed the lesser of (a) the line of credit approved for
Borrowers, which is currently Thirty Million and no/100 Dollars
($30,000,000) or (b) the sum of (i) Eighty-Five percent (85%) of the
unpaid face amount of each Borrower's respective Eligible Accounts (or
such other percentages of each Borrower's Eligible Accounts as may from
time to time be fixed by the Lender upon notice
-2-
<PAGE> 70
to the Borrowers) and (ii) the lesser of (1) Fifty-Five percent (55%)
of the cost or market value, whichever is lower, determined on a
first-in, first-out basis, of each Borrower's respective Eligible
Inventory located at the Continental Collateral Location or Goodman
Collateral Location (or such other percentages of each Borrower's
respective Eligible Inventory as may from time to time be fixed by the
Lender upon notice to the Borrowers) or (2) Twelve Million Dollars
($12,000,000) (or such other dollar amount as may from time to time be
fixed by the Lender upon notice to the Borrowers).
(B) MAXIMUM BORROWINGS AVAILABLE UNDER REVOLVING LOAN.
Notwithstanding anything to the contrary contained in this Section 2.3,
at no time shall the aggregate loans outstanding to the Borrowers at
any time under the Revolving Loan exceed Thirty Million and no/100
Dollars ($30,000,000), nor shall advances under the Revolving Loan to
either Borrower exceed that which is permitted on the basis of the
advance rate percentages set forth in Section 2.3(A)(b) above as the
same are applied to each respective Borrower.
(C) PAYMENT. The Revolving Loan shall be payable on March 28,
2000, and bear interest as provided in Section 2.4 of this Agreement
and shall otherwise be evidenced by, and repayable in accordance with,
the Revolving Note, but in the absence of such revolving promissory
note shall be evidenced by the Lender's record of disbursements and
repayments."
C. Section 2.8 of the Loan Agreement is, effective the date hereof,
hereby amended and restated to read in its entirety as follows:
"2.8 DOCUMENTATION AND RESTRUCTURE FEE. In order to compensate Lender
for its services in preparing and reviewing the Third Amendatory
Agreement to this Loan Agreement and related documents in connection
with the amendment to Credit Facility, Borrowers shall pay to Lender
not later than the date of the Third Amendatory Agreement to this Loan
Agreement, a documentation and restructure fee (the "Documentation and
Restructure Fee") of Fifty Thousand Dollars ($50,000)."
D. Section 2.9 of the Loan Agreement is, effective the date hereof,
hereby amended and restated to read in its entirety as follows:
"2.9 COMMITMENT FEE. Borrowers shall pay to Lender on March 28, 1997
and on each succeeding anniversary of such date annually thereat
(provided no such fee shall be taken on March 28, 2000 unless the
maturity of the Revolving Loan is extended beyond said date), a
commitment fee (the "Committment Fee") of Twenty-Five (25) basis points
on the amount of the line of credit approved for Borrowers under the
Revolving Loan pursuant to Section 2.3(A) of this Agreement, whether
the Borrowers shall be entitled to request such amount pursuant to
Section 2.3(A) of this Agreement or not."
E. Section 5.2 of the Loan Agreement is, effective the date hereof,
hereby amended and restated to read in its entirety as follows:
"Lender reserves the right upon the occurrence and during the
continuance of an Event of Default to notify Account Debtors and other
Persons indebted to Borrowers of Lender's interest in any such amounts
payable to Borrowers and to instruct such Account Debtors and other
Persons to remit the same directly to Lender and all such funds (less
any costs of collection and other charges or
-3-
<PAGE> 71
expenses incurred in connection therewith as hereinafter provided)
shall be subject to application to the Obligations."
F. Section 8.1(Q) of the Loan Agreement is, effective the date hereof,
hereby amended and restated in its entirety to read as follows:
"(Q) Maintain Debt Coverage (as defined herein) of not less
than 1.50 to 1.00. "Debt Coverage" as used in this Section 8.1(Q)
means, on a combined consolidated basis, the ratio of Borrowers'
operating income (which shall be after deduction for any Management
Fees) plus depreciation and amortization less Distributions (which for
purposes of this Section 8.1(Q) shall include all interest on the
Senior Notes and all income taxes paid or payable by the Borrowers or
Global (as defined below)) to the amount of all principal and interest
paid or payable by the Borrowers to Lenders plus all Capital
Expenditures not funded on a term basis at the date of calculation
thereof. Debt Coverage shall be initially calculated for the Borrowers'
fiscal year ending December 31, 1997, based upon the Borrowers' and
Global's year end audited consolidated financial statements prepared in
accordance with GAAP; thereafter, Debt Coverage shall be calculated
quarterly based upon each Borrower's fiscal quarter-end financial
statements for the preceding fiscal quarters prepared in accordance
with GAAP.
G. Section 8.1 of the Loan Agreement is, effective the date hereof,
hereby amended by the addition of the following Sections 8.1(T) and 8.1(U):
"(T) Beginning with Global's (as defined below) fiscal year
ending December 31, 1997, Global's consolidated operating income (which
shall be after deduction for any Management Fees) shall be an amount
equal to or greater than the sum of $10,950,000 plus any interest paid
or payable by Borrowers under the Line of Credit, based upon Global's
fiscal quarter-end financial statements for the three preceding fiscal
quarters prepared in accordance with GAAP. Beginning with Global's
quarter ending March 31, 1998, Global's consolidated operating income
(which shall be after deduction for any Management Fees) shall be an
amount equal to or greater than the sum of $14,600,000 plus any
interest paid or payable by Borrowers under the Line of Credit, based
upon Global's fiscal quarter-end financial statements for the four
preceding fiscal quarters prepared in accordance with GAAP."
"(U) The Borrowers shall maintain Working Capital at a minimum
of $15,000,000, calculated quarterly based on each Borrower's fiscal
quarter end financial statements."
H. Sections 8.1(S), 8.2(H) and 8.2(K) of the Loan Agreement are,
effective the date hereof, hereby deleted.
I. Section 11.1 of the Loan Agreement is, effective the date hereof,
hereby amended by the deletion in its entirety of Section 11.1(G) and the
addition of the following new subsections 11.1(P) and 11.1(Q):
"(P) The default by CC&E Pty Limited on any loan agreement to
which it is a party, including without limitation, its agreement to
repay certain subordinated indebtedness in connection with the
Acquisition and any attempt by sellers to invoke or attempt to invoke
any of their rights under a certain guaranty agreement executed by
Continental in conjunction with the Acquisition; provided, however,
that no default shall be deemed to exist under this Section 11.1(P) so
-4-
<PAGE> 72
long as Continental is contesting in good faith any default or alleged
default under the guaranty agreement and no judgment or lien attaches
which is not vacated in sixty days."
"(Q) The default by Continental Global Group, Inc. ("Global")
in the payment of principal or interest on its Series A Senior Notes,
due 2007 (the "Senior Notes") or on any other obligation under the
Senior Notes or under the Senior Note Indenture pursuant to which the
Notes were issued (the "Senior Note Obligations")."
SECTION II. REPRESENTATIONS AND WARRANTIES
------------------------------
Each Borrower hereby represents and warrants that the dissolution of
the Original Borrowers occurred and was effective on March 1, 1997 and that each
Borrower owns and holds all of the assets, respectively, of the Original
Borrowers of which it was a general partner and that each Borrower has assumed
all of the respective Obligations and liabilities of each of the Original
Borrowers of which it was a General Partner. The Lender, in reliance on the
foregoing representations, enters into this Third Amendatory Agreement and
consents to such dissolution and consents to the guaranty by Borrowers of the
Senior Notes.
SECTION III. CONDITIONS PRECEDENT
--------------------
Each Borrower understands and hereby agrees that the effectiveness of
this Third Amendatory Agreement is subject to receipt by the Lender, on or prior
to the date hereof, in form and substance satisfactory to the Lender and its
counsel, of the following:
(A) A Certificate, dated as of the date hereof, signed by an officer of
each Borrower to the effect that:
(1) As of said date, no Event of Default has occurred and
is continuing and no event has occurred and is
continuing that, with the giving of notice or passage
of time or both, would be an Event of Default;
(2) The representations and warranties set forth in
Section 7 of the Loan Agreement are true and correct
as of such date; and
(3) Borrower is in compliance with all of the terms and
provisions set forth in the Loan Agreement on and as
of said date.
(B) A Certificate, dated as of the date hereof, of the secretary of
each Borrower certifying (1) that Borrower's Articles of Incorporation and
By-Laws have not been amended since the execution of the Loan Agreement (or
certifying that true, correct and complete copies of any amendments are
attached),(2) that copies of resolutions of the Board of Directors of such
Borrower are attached with respect to the approval of this Third Amendatory
Agreement and of the matters contemplated hereby and authorizing the execution,
delivery and performance by such Borrower of this Third Amendatory Agreement and
each other document to be delivered pursuant hereto, (3) as to the incumbency
and signatures of the officers of such Borrower signing this Third Amendatory
Agreement and each other document to be delivered pursuant hereto.
(C) A Certificate, dated as of the date hereof, of the secretary of
Global certifying (1) that copies of resolutions of the Board of Directors of
Global are attached with respect to the Guaranty by Global of each Borrower's
obligations under this Third Amendatory Agreement and authorizing the execution,
delivery and performance by Global of such Guaranty and each other
-5-
<PAGE> 73
document to be delivered pursuant thereto, (2) as to the incumbency and
signatures of the officers of Global signing the Guaranty and each other
document to be delivered pursuant thereto.
(D) This Third Amendatory Agreement; an Amended and Restated
Replacement Promissory Note (Revolving Loan), substantially in the form of
EXHIBIT C-8 attached hereto, with all blanks completed; all duly executed by
each Borrower, and Amendments to Open-End Mortgages, each duly executed by the
applicable Borrower.
(E) A Restructure Fee of Fifty Thousand Dollars ($50,000).
(F) The corporate Guaranty of Global, guaranteeing Borrowers'
Obligations under the Loan Agreement.
(G) The payment in full by Borrowers of all their Obligations and other
liabilities under Term Loan C and Term Loan D.
(H) The written opinion of counsel to Borrowers as to the transactions
contemplated by this Third Amendatory Agreement, in form and substance
satisfactory to Lender.
(I) The written opinion of counsel to Global as to the transactions
contemplated by this Third Amendatory Agreement and the Guaranty given by Global
of Borrowers' Obligations under the Loan Agreement.
(J) Landlord waivers for new Collateral Locations.
(K) UCC-1s executed by Borrowers.
(L) UCC-3s executed by Borrowers as the successors in interest of
Original Borrowers.
(M) Such other documents as the Lender may request to implement this
Third Amendatory Agreement and the transactions contemplated hereby.
If Lender shall consummate the transactions contemplated hereby prior
to the fulfillment of any of the conditions precedent set forth above, the
consummation of such transactions shall constitute only an extension of time for
the fulfillment of such conditions and not a waiver thereof.
SECTION IV. ADDITIONAL CLOSING DOCUMENTS
----------------------------
(A) Termination of NESCO Subordination Agreement.
SECTION V. ACKNOWLEDGMENTS CONCERNING OUTSTANDING LOANS
--------------------------------------------
Borrowers hereby acknowledge and agree that as of March 28, 1997 the
current outstanding balance of the Revolving Loan ($16,826,417.27) and amounts
owed pursuant to letters of credit and/or existing equipment leases, are owed to
Lender without any offset, deduction, defense or counterclaim of any nature
whatsoever.
SECTION VI. FEES AND EXPENSES
-----------------
Borrowers shall pay all out-of-pocket fees and expenses incurred by the
Lender in connection with the preparation, negotiation, execution and delivery
of this Third Amendatory
-6-
<PAGE> 74
Agreement, the Revolving Note and all the other agreements, documents or
certificates required or contemplated hereby, including, without limitation,
legal fees and expenses of the Lender.
SECTION VII. REFERENCES
----------
On and after the effective date of this Third Amendatory Agreement,
each reference in the Loan Agreement to "this Agreement", "hereunder", "hereof",
or words of like import referring to the Loan Agreement, and in the Notes to the
"Loan Agreement", "thereof", or words of like import referring to the Loan
Agreement shall mean and refer to the Loan Agreement as amended hereby. On and
after the effective date of this Third Amendatory Agreement, each reference in
the Loan Agreement to "Partner", "General Partner", or "Limited Partner", shall,
to the extent required by the context thereof, be deemed to refer to
"stockholder". The Loan Agreement, as amended by this Third Amendatory
Agreement, is and shall continue to be in full force and effect and is hereby
and in all respects ratified and confirmed. The execution, delivery and
effectiveness of this Third Amendatory Agreement shall not operate as a waiver
of any right, power or remedy of Lender under the Loan Agreement or constitute a
waiver of any provision of the Loan Agreement except as specifically set forth
herein. All references in the Loan Agreement to any definitions modified or
replaced herein shall be deemed references to such definitions as so modified or
replaced. References in the Loan Agreement to EXHIBIT C-8 in the definition of
"Revolving Note" shall be deemed to refer to the Note executed in connection
herewith.
SECTION VIII. APPLICABLE LAW
--------------
This Third Amendatory Agreement shall be deemed to be a contract under
the laws of the State of Ohio, and for all purposes shall be construed in
accordance with the laws of the State of Ohio.
SECTION IX. COUNTERPARTS
------------
This Third Amendatory Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any one of the parties hereto may execute this Third Amendatory
Agreement by signing any such counterpart.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-7-
<PAGE> 75
IN WITNESS WHEREOF, the Borrowers and the Lender have caused this Third
Amendatory Agreement to be executed by their duly authorized officers as of the
date and year first above written.
CONTINENTAL CONVEYOR &
EQUIPMENT COMPANY
("Borrower")
By /s/ Ralph L. Nehrig
--------------------------
Name: Ralph L. Nehrig
---------------------
Title:
---------------------
GOODMAN CONVEYOR COMPANY
("Borrower")
By /s/ Frank J. Rzicznek
--------------------------
Name: Frank J. Rzicznek
---------------------
Title: Vice Pres.
---------------------
BANK ONE, CLEVELAND, NA ("Lender")
By /s/ John R. Straka
--------------------------
Name: John R. Straka
---------------------
Title: V. P.
---------------------
-8-
<PAGE> 76
AMENDED AND RESTATED REPLACEMENT PROMISSORY NOTE
------------------------------------------------
(REVOLVING LOAN)
$30,000,000.00 Cleveland, Ohio
March 28, 1997
FOR VALUE RECEIVED, CONTINENTAL CONVEYOR & EQUIPMENT COMPANY, a
Delaware corporation, and GOODMAN CONVEYOR COMPANY, a Delaware corporation
(hereinafter each referred to as a "Company" and collectively as the
"Companies"), jointly and severally promise to pay to the order of BANK ONE,
CLEVELAND, NA (hereinafter referred to as the "Bank"), the principal amount of
Thirty Million and No/100 Dollars ($30,000,000.00), or such lesser amount as
shall have from time to time been borrowed by the Companies, on March 28, 2000,
or sooner as hereinafter provided, with interest on the unpaid balance of said
principal amount from the date hereof at the Contract Rate, as defined in the
Agreement hereinafter referred to, which definition is hereby accepted by each
Company,
as the same may from time to time be established. If any installment of
principal, interest or other amounts due and payable hereunder are not paid when
due, or within any applicable grace periods, the Companies shall pay interest
thereon at the rate per annum of three and one-half percent (3 1/2%) in excess
of the Contract Rate, as the same may from time to time be established.
The Companies jointly and severally agree to pay interest on the unpaid
principal amount outstanding of this Note in monthly installments commencing on
the 1st day of April, 1997, and continuing on the 1st day of each month
thereafter. The unpaid balance of the principal amount outstanding and all
accrued interest thereon shall be due and payable on March 28, 2000.
Payments of both principal of and interest on this Note shall be made
in lawful money of the United States of America, at 600 Superior Avenue,
Cleveland, Ohio 44114, or at such other place as the Bank or any subsequent
holder hereof shall have designated to each Company in writing. Interest payable
on this Note shall be computed on a three hundred sixty (360) day per year basis
counting the actual number of days elapsed.
This Note is issued pursuant to and is entitled to the benefits of a
Credit Facility and Security Agreement dated as of September 14, 1992 by and
between CONTINENTAL CONVEYOR & EQUIPMENT CO. L.P., a limited partnership
organized and formerly existing under the laws of the State of Delaware, and
GOODMAN CONVEYOR CO. L.P., a limited partnership organized and formerly existing
under the laws of the State of Delaware (such partnerships hereinafter referred
to as the "Original Borrowers") and the Bank, as amended by that certain First
Amendment to Credit Facility and Security Agreement executed on August 27, 1993,
by that certain Second Amendatory Agreement dated as of October 5, 1994, by that
certain Consolidated Amendment No. 1 to Credit Facility and Security Agreement
dated as of July 28, 1995, and by that certain Consolidated Amendment No. 2 to
Credit Facility and Security Agreement dated as of December 13, 1996, all by and
among the Original Borrowers and the Bank, and as further amended by that
Certain Third Amendatory Agreement by and among the Companies and the Bank dated
March 28, 1997 (collectively, the "Agreement"), to which reference is hereby
made for a statement of the rights and obligations of the Bank and the
<PAGE> 77
duties and obligations of each Company in relation thereto; but neither this
reference to said Agreement nor any provisions thereof shall affect or impair
the absolute and unconditional obligation of each Company to pay the principal
of or interest on this Note when due. This Note has been issued pursuant to the
Agreement in substitution for a certain existing Amended and Restated
Replacement Promissory Note (Revolving Loan) dated July 28, 1995, which was
issued in Substitution for a certain Amended and Restated Promissory Note
(Revolving Loan) dated October 5, 1994, which was issued in substitution for a
certain Promissory Note (Revolving Loan) dated September 14, 1992 (collectively,
the "Old Notes"). It is understood and acknowledged by each Company that this
Note is not intended as a novation of the obligations of the Original Borrowers
and two Companies under the Old Notes but is merely a restatement of the
obligations thereunder and under the Agreements, after giving effect to the most
recent amendatory agreement thereto.
The Companies may prepay all or any portion of this Note at any time or
times and in any amount without penalty or premium, except as otherwise provided
in the Agreement.
In case an Event of Default, as defined in said Agreement, shall occur
and be continuing beyond any applicable grace period, the principal of this Note
may be declared immediately due and payable at the option of the Bank.
Each Company hereby authorizes any attorney-at-law to appear in any
court of record in the State of Ohio, or in any other state or territory of the
United States, at any time or times after the above sum becomes due, and waive
the issuance and service of process and confess judgment against it, in favor of
any holder of this Note, for the amount then appearing due, together with the
costs of suit, and thereupon to release all errors and waive all rights of
appeal and stay of execution. The foregoing warrant of attorney shall survive
any judgment, it being understood that should any judgment be vacated for any
reason, the foregoing warrant of attorney nevertheless may thereafter be used
for obtaining an additional judgment or judgments.
No delay on the part of any holder hereof in exercising any power or
rights hereunder shall operate as a waiver of any power or rights. Any demand or
notice hereunder to either Company may be made by delivering the same to the
address last known to the Bank, or by mailing the same to such address, with the
same effect as if delivered to such Company in person.
This Note is executed in Cleveland, Cuyahoga County, Ohio.
"WARNING. BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME, A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE
- 2 -
<PAGE> 78
POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU
MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE
ON HIS PART TO COMPLY WITH THE AGREEMENT OR ANY OTHER CAUSE."
CONTINENTAL CONVEYOR & EQUIPMENT GOODMAN CONVEYOR COMPANY
COMPANY a Delaware Corporation
a Delaware Corporation
By: /s/ Ralph L. Nehrig By: /s/ Frank J. Rzicznek
------------------------------ ----------------------------
Name: Ralph L. Nehrig Name: Frank J. Rzicznek
--------------------------- -------------------------
Title: V. P. Title: V. Pres.
------------------------- ------------------------
- 3 -
<PAGE> 79
SUBORDINATION AGREEMENT
-----------------------
THIS SUBORDINATION AGREEMENT (the "Agreement") is entered into as of
September 14, 1992 by and among N.E.S. INVESTMENT CO. L.P., a Delaware limited
partnership ("Creditor"), GOODMAN CONVEYOR CO. L.P. ("Borrower"), and BANK ONE,
CLEVELAND, NA ("Bank").
Capitalized terms used herein but not otherwise defined shall have the
meanings given in the Loan Agreement (as hereafter defined).
WHEREAS, to induce Bank to enter into a Credit Facility and Security
Agreement dated as of September 14, 1992, by and among Borrower, Continental
Conveyor & Equipment Co. L.P. and Bank (the "Loan Agreement"), Creditor agrees
that all obligations of Borrower to Creditor, however arising, shall be
subordinated to all obligations of Borrower to Bank, however arising, in
accordance with the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Bank, Borrower and Creditor agree as follows:
SECTION 1. THE SUBORDINATED OBLIGATIONS. Creditor hereby subordinates
all obligations of Borrower to Creditor, however arising (the "Subordinated
Obligations") including, without limitation, all rights to receive any payments,
whether in cash, property or otherwise, from Borrower to any and all obligations
of Borrower to Bank, however arising, including, without limitation, all
Indebtedness of Borrower to Bank under the Loan Agreement and any extensions,
renewals, modifications or conversions thereof.
SECTION 2. PAYMENTS HELD IN TRUST. If any payment, whether in cash,
property or otherwise, is made by Borrower in violation of this Agreement, such
payment will be held in trust by Creditor for Bank and upon demand be paid over
to Bank. Creditor agrees that in the event any payment, whether in cash,
property or otherwise, or distribution of the assets of
<PAGE> 80
Borrower is made among creditors of Borrower, however effected and whether
voluntary or involuntary or in bankruptcy, insolvency, receivership or other
proceedings, then any such payments or distributions of cash, property or
securities of Borrower payable to Creditor shall be paid or delivered directly
to Bank for application to any Indebtedness of Borrower to Bank, including but
not limited to, all Indebtedness of Borrower to Bank under the Loan Agreement
and any extensions, renewals, modifications or conversions thereof, until the
same is paid in full. Creditor shall deliver to Bank and hold in trust for Bank
until such delivery, any such payments or distributions made to it.
SECTION 3. ASSIGNMENT OF SUBORDINATED OBLIGATIONS. Creditor shall not
assign or transfer any of the Subordinated Obligations to any third party unless
such transfer or assignment is made subject to this Agreement and with the prior
written consent of Bank. Creditor shall assign and transfer to Bank any and all
promissory notes issued by Borrower to Creditor evidencing the Subordinated
Obligations as additional collateral security for repayment of the Indebtedness
of Borrower to Bank under the Loan Agreement. In furtherance thereof, Creditor
agrees to deliver to Bank, contemporaneously with the execution and delivery of
this Agreement, the originals of all such promissory notes.
SECTION 4. PAYMENT SUBORDINATION. Borrower shall not make any payments
to Creditor, whether in cash, property or otherwise, with respect to the
Subordinated Obligations so long as Borrower is indebted to Bank in any way for
the period from the date hereof to and including September 14, 1995, and
thereafter so long as an Event of Default shall have occurred and be continuing
under the Loan Agreement or such payment will result in the occurrence of an
Event of Default with passage of time or service of notice or both; PROVIDED,
HOWEVER, notwithstanding the foregoing Borrower may make Tax Distributions and
pay Management Fees (in each case, as defined in the Loan Agreement) and, so
long as no Event of Default shall have occurred and be continuing under the Loan
Agreement and so long as such payment will not result in the occurrence of an
Event of Default, Borrower may make payments of interest to
-2-
<PAGE> 81
Creditor in accordance with the terms of the promissory note evidencing the
Subordinated Obligations, a copy of which promissory note is attached hereto as
EXHIBIT A.
SECTION 5. NO ACTION BY CREDITOR. Except as provided in Section 4
hereof, Creditor agrees not to demand, sue for, take or receive, by set-off or
otherwise, any payment, whether in cash, property or otherwise, with respect to
the Subordinated Obligations. Creditor hereby agrees that it will not proceed
against Borrower if Borrower fails to make any payments of the Subordinated
Obligations, and that Creditor will take no action to levy, execute, seize, or
otherwise acquire any assets or property of Borrower until permitted to do so by
Bank, or as otherwise provided under the terms and conditions of this
Subordination Agreement. Creditor specifically covenants and agrees that the
security interest of Bank with respect to all assets or property of Borrower,
including, but not limited to, cash, inventory, equipment, and accounts
receivable, shall remain in all situations prior and superior to any rights of
Creditor in such assets or property.
SECTION 6. TERMINATION. This is a continuing agreement of
subordination. Bank may continue to make loans or otherwise accept the
obligations of Borrower on the faith of this Agreement without notice to
Creditor, and this Agreement may not be terminated until all Indebtedness,
however arising, of Borrower to Bank is paid in full. Bank may make any
renewals, extensions, amendments or other modifications of any kind relating to
any Obligations of Borrower to Bank, including, without limitation, the
Indebtedness, the Loan Agreement, or relating to the terms and conditions of
such Obligations and Bank may release or exchange or otherwise deal with any
collateral or may release any balance of funds held by Bank without notice to
Creditor and without impairing or affecting this Agreement or the rights and
obligations of Creditor under this Agreement.
SECTION 7. NOTICES. All notices required or permitted to be provided
under this Agreement shall be in writing and delivered by hand, certified or
registered mail, or by telex
-3-
<PAGE> 82
or electronic facsimile transmission and shall be deemed to have been given or
made when delivered or transmitted as follows:
If to Bank:
Bank One, Cleveland, NA
600 Superior Avenue
Cleveland, Ohio 44114
Attention: Stephanie A. Gajdzik,
Assistant Vice President
With a copy to:
Arter & Hadden
1100 Huntington Building
Cleveland, Ohio 44115
Attention: Donald J. Fisher, Esq.
If to Creditor:
N.E.S. Investment Co. L.P.
6140 Parkland Boulevard
Mayfield Heights, Ohio 44124
Attention: F.J. Rzicznek,
Vice President/Finance
If to Borrower:
Goodman Conveyor Co. L.P.
6140 Parkland Boulevard
Mayfield Heights, Ohio 44124
Attention: F.J. Rzicznek,
Vice President/Finance
SECTION 8. LEGEND ON INSTRUMENTS. Creditor and Borrower agree to place
a legend, in form and substance acceptable to Bank, referencing the
subordination provided under this Agreement on the promissory notes and any
paper, document or instrument evidencing any of the Subordinated Obligations.
SECTION 9. CHANGES IN THE SUBORDINATED OBLIGATIONS. Creditor and
Borrower agree that they shall not amend or in any way modify or permit any
amendment or modification of any of the Subordinated Obligations without first
obtaining the prior written consent of Bank.
-4-
<PAGE> 83
SECTION 10. EXPENSES. Should it be necessary for Bank to initiate legal
action in order to enforce and protect its rights under this Agreement, Bank
shall be entitled to reimbursement from Creditor and Borrower for all costs and
expenses incurred in respect to such action, including, but not limited to,
reasonable attorney's fees.
SECTION 11. SUCCESSORS AND ASSIGNS. This Agreement and the respective
rights and obligations of Bank, Creditor and Borrower under this Agreement shall
be binding on the successors and assigns thereof.
SECTION 12. GOVERNING LAW. This Agreement shall be governed by, and be
construed in accordance with, the laws of the State of Ohio, without giving
effect to the principles of conflicts of laws thereof.
SECTION 13. COUNTERPARTS. This Agreement may be executed in one or more
counterparts all of which shall be read together as but one and the same
Agreement.
-5-
<PAGE> 84
IN WITNESS WHEREOF, Borrower, Creditor, and Bank, by their duly
authorized officers, have executed and delivered this Agreement on the day and
year first written above.
N.E.S. INVESTMENT CO. L.P.
By /s/ F. J. Rzicznek
--------------------------------
Name: F. J. Rzicznek
Title: V. P.
GOODMAN CONVEYOR CO. L.P.,
A Delaware Limited Partnership
By New Goodman Corp.,
Its General Partner
By /s/ F. J. Rzicznek
--------------------------------
Name: F. J. Rzicznek
Title: V. P.
BANK ONE, CLEVELAND, NA
By /s/ Stephanie A. Gajdzik
--------------------------------
Name: Stephanie A. Gajdzik
Title: Asst. Vice President
-6-
<PAGE> 85
TERMINATION OF SUBORDINATION AGREEMENT
This termination of Subordination Agreement (the "Termination
Agreement") is entered into as of March 28, 1997 by and among N.E.S. Investment
Co. L.P., a Delaware Limited Partnership, ("Creditor"), Goodman Conveyor
Company, a Delaware Corporation, and successor in interest to Goodman Conveyor
Co. L.P. ("Borrower"), and BANK ONE, CLEVELAND, NA ("Bank").
In consideration of the premises and other valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Bank, Borrower, and
Creditor agree as follows:
1. The Subordination Agreement entered into as of September 14, 1992 by
and among Bank, Borrower, and Creditor shall be, and it is hereby, terminated
and canceled and henceforth shall have no further force and effect.
2. This Termination Agreement and the respective rights and obligations
of Bank, Creditor, and Borrower under this Termination Agreement shall be
binding on each of their respective successors and assigns.
3. This Termination Agreement may be executed in one or more
counterparts, all of which shall be read together as but one and the same
agreement.
<PAGE> 86
IN WITNESS WHEREOF, Borrower, Creditor, and Bank, by their duly
authorized officers, have executed and delivered this Termination Agreement as
of the day and the year first written above.
N.E.S. Investment Co. L.P.
By: [ILLEGIBLE], its General Partner
-----------
Name: /s/ Ralph L. Nehrig
--------------------------
Title: V. P. of General Partner
--------------------------
GOODMAN CONVEYOR COMPANY,
as successor in interest to
Goodman Conveyor Co. L.P.
By: /s/ Frank J. Rzicznek
----------------------------
Name: Frank J. Rzicznek
--------------------------
Title: V. Pres.
--------------------------
BANK ONE, CLEVELAND, NA
By: /s/ John R. Straka
----------------------------
Name: John R. Straka
--------------------------
Title: V. P.
--------------------------
- 2 -
<PAGE> 87
ASSUMPTION AND MODIFICATION AGREEMENT
THIS ASSUMPTION AND MODIFICATION AGREEMENT ("Agreement") is executed
this 28th day of March, 1997, to be effective as of March 7, 1997, by and among
CONTINENTAL CONVEYOR & EQUIPMENT COMPANY, a Delaware Corporation,
("Continental"), and GOODMAN CONVEYOR COMPANY, a Delaware Corporation,
("Goodman"), and BANK ONE, CLEVELAND, NA, a national banking association
("Lender"), and is entered into in connection with that certain Credit Facility
and Security Agreement by and among Continental Conveyor & Equipment Co. L.P., a
limited partnership organized and formerly existing under the laws of the State
of Delaware ("Continental L.P."), and Goodman Conveyor Co. L.P., a limited
partnership organized and formerly existing under the laws of the State of
Delaware, ("Goodman L.P."), (Continental L.P. and Goodman L.P., collectively,
"Original Borrowers"), dated as of September 14, 1992 (which agreement, together
with all amendments thereto, the most recent amendment being dated as of
December 13, 1996, is referred to herein as the "Loan Agreement"). Capitalized
terms used herein which are defined in the Loan Agreement shall, unless
otherwise defined herein, have the meaning set forth in the Loan Agreement.
W I T N E S S E T H:
WHEREAS, Lender has made certain loans and other financial
accommodations to Original Borrowers pursuant to the Loan Agreement;
WHEREAS, to secure the Obligations of the Original Borrowers to Lender,
the Original Borrowers have granted to Lender security interests in and liens
upon substantially all of the Original Borrowers' assets pursuant to the Loan
Agreement;
WHEREAS, pursuant to the Loan Agreement, the Original Borrowers have
made certain representations and warranties to Lender (the "Loan Representations
and Warranties") and have agreed to be bound by certain affirmative and negative
covenants (the "Loan Covenants");
WHEREAS, Continental L.P. and Goodman L.P. have been dissolved and all
of their assets and liabilities have been transferred to, and assumed by,
Continental and Goodman respectively;
WHEREAS, each of Goodman and Continental have assumed, by operation of
law, and are willing expressly to assume hereby all of the rights, interests and
liabilities of the Original Borrowers under the Loan Agreement and each desires
to become a borrower under the Loan Agreement;
WHEREAS, Lender has requested that Continental and Goodman enter into
this Agreement in order to (i) expressly assume all of the Obligations, (ii)
reaffirm all of the Loan Representations and Warranties and Loan Covenants, and
(iii) acknowledge and confirm Lender's security interest in or lien on the
Collateral, including, without limitation, substantially all of the assets of
Continental and Goodman; and
<PAGE> 88
WHEREAS, Lender agrees to consent to the dissolution of Continental
L.P. and Goodman L.P., but on the express condition that the assumption of all
of their respective liabilities and Obligations under the Loan Agreement be
expressly assumed by Continental and Goodman;
NOW THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Continental, Goodman, and Lender hereby agree as follows:
1. The premises set forth above are acknowledged and agreed to by
Continental, Goodman and Lender and are incorporated herein by this reference.
2. Continental and Goodman hereby agree to assume and to perform the
Obligations with the same effect and to the same extent as if Continental and
Goodman had been the original obligors thereof. Continental and Goodman further
agree that the Collateral (i) shall continue to be subject to all liens and
security interests in favor of Lender which existed against the Collateral prior
to the dissolution of Continental L.P. and Goodman L.P. and the execution of
this Agreement, and (ii) shall continue to secure the Obligations. Continental
and Goodman hereby grant and confirm a continuing security interest to Lender in
and to all Collateral, including, without limitation, all Fixed Collateral and
all Revolving Collateral now owned, acquired from Continental L.P. or Goodman
L.P., or hereafter acquired, and owned legally or beneficially by either
Continental or Goodman. Continental and Goodman hereby jointly and severally
make and affirm the representations, warranties and covenants as to such
collateral set forth in Section 4.2 of the Loan Agreement.
3. Continental and Goodman shall, from and after the date hereof, be
deemed to be a "Borrower" under the Loan Agreement and all references therein to
"Borrower" shall hereafter refer to Continental and Goodman to the same extent
as to an Original Borrower and any reference therein to "Borrowers" shall
hereafter refer to both Continental and Goodman and the Original Borrowers as
the context may require. Continental and Goodman hereby reaffirm, as of the date
hereof, all of the Loan Representations and Warranties, including, without
limitation, all Loan Representations and Warranties made by Original Borrowers
prior to the date hereof.
4. The execution, delivery and performance by Continental and Goodman
of this Agreement has not or will not, by the lapse of time, the giving of
notice or otherwise, constitute a violation of any applicable law or a breach of
any provision contained in the Certificate of Incorporation or Bylaws of
Continental and Goodman or contained in any agreement, instrument or document to
which Continental and Goodman is a party or by which Continental and Goodman is
bound.
5. Continental and Goodman agree to be bound and to abide by all of the
Loan Covenants.
6. Continental and Goodman shall, at their expense, promptly execute
and deliver to Lender such instruments, documents and agreements, and perform or
take such acts or actions, as Lender may, from time to time, request in order to
further evidence or carry out the
- 2 -
<PAGE> 89
terms of this Agreement and the Loan Agreement or otherwise to perfect,
maintain, protect and enforce Lender's security interests in and liens on the
Collateral, including, without limitation, executing, delivering and/or filing
any acknowledgments, amendments, assignments, assumption instruments, financing
or continuation statements or mortgages or other instruments of security, each
in form and substance satisfactory to the Lender.
7. This Agreement has been executed and delivered at and shall be
deemed to have been made at Cleveland, Ohio and shall be interpreted and the
rights and liabilities of the parties hereto determined, in accordance with the
internal laws (as opposed to conflicts of law provisions) of the State of Ohio.
Wherever possible each provision of this Agreement shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Agreement shall be prohibited by or be invalid under applicable law,
such provision shall be ineffective to the extent of such prohibition or
invalidity without invalidating the remainder of such provision or the remaining
provisions of this Agreement.
8. The provisions of this Agreement shall be binding upon and shall
inure to the benefit of the successors and assigns of the parties hereto.
Whenever in this Agreement reference is made to any of the parties hereto, such
reference shall be deemed to include, wherever applicable, a reference to the
successors and assigns of such party.
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of the day and year first above written.
Attest: CONTINENTAL CONVEYOR &
EQUIPMENT COMPANY
/s/ [ILLEGIBLE] By: /s/ Ralph L. Nehrig, V. P.
- ------------------- ------------------------------------
/s/ [ILLEGIBLE]
- -------------------
GOODMAN CONVEYOR COMPANY
/s/ [ILLEGIBLE] By: /s/ Frank J. Rzicznek, V. P.
- ------------------- ------------------------------------
/s/ [ILLEGIBLE]
- -------------------
BANK ONE, CLEVELAND, NA
/s/ [ILLEGIBLE] By: /s/ John R. Straka
- ------------------- ------------------------------------
/s/ [ILLEGIBLE]
- -------------------
- 3 -
<PAGE> 90
CONTRACT OF GUARANTY
--------------------
1. To induce BANK ONE, CLEVELAND, NA (the "Bank"), to make direct loans
to CONTINENTAL CONVEYOR & EQUIPMENT COMPANY, a Delaware corporation
("Continental"), and GOODMAN CONVEYOR COMPANY, a Delaware corporation
("Goodman") (each of Continental and Goodman being sometimes referred to herein
individually as a "Borrower " and collectively as the "Borrowers"), CONTINENTAL
GLOBAL GROUP, INC. (the "Guarantor"), hereby unconditionally guarantees to Bank
the prompt performance of each and every obligation and payment of each and
every liability of the Borrowers to the Bank, including but not limited to,
payment of all principal, interest and other sums due, whether by acceleration
or otherwise, pursuant to that certain Credit Facility and Security Agreement
dated as of September 14, 1992 by and among CONTINENTAL CONVEYOR & EQUIPMENT CO.
L.P., a limited partnership organized and formerly existing under the laws of
the State of Delaware, and GOODMAN CONVEYOR CO. L.P., a limited partnership
organized and formerly existing under the laws of the State of Delaware (such
partnerships hereinafter referred to as the "Original Borrowers") and the Bank,
as amended by that certain First Amendment to Credit Facility and Security
Agreement executed on August 27, 1993, by that certain Second Amendatory
Agreement dated as of October 5, 1994, by that certain Consolidated Amendment
No. 1 to Credit Facility and Security Agreement dated as of July 28, 1995, and
by that certain Consolidated Amendment No. 2 to Credit Facility and Security
Agreement dated as of December 13, 1996, all by and among the Original Borrowers
and the Bank, and as further amended by that Certain Third Amendatory Agreement
by and among the Borrowers and the Bank dated March 28, 1997 (collectively, the
"Credit Agreement"), together with all late charges, fees, disbursements,
expenses and deficiencies.
2. This is a continuing Guaranty and shall remain in full force and
effect until revoked by the Guarantor in writing and a signed copy thereof is
duly served upon the Bank, but revocation shall not affect any outstanding
obligation or liability hereunder, or any unpaid portion thereof which may be
renewed or extended. This Guaranty shall be construed as an absolute and
unconditional guaranty of performance and the Guarantor's liability shall be
direct, immediate and not conditional or contingent upon the pursuit by the Bank
of any remedies it may have or the requirement to resort first to any collateral
or security. Subject to the prior indefeasible payment in full of all
obligations guaranteed hereunder, Guarantor shall have and may exercise all
rights that Guarantor may have at law or in equity (including, without
limitation, any law subrogating the Guarantor to the rights of the Bank) to seek
contribution, indemnification, or any other form of reimbursement from the
Borrower, any other guarantor, or any other person now or hereafter primarily or
secondarily liable for any obligations of the Borrowers to the Bank, for any
disbursement made by the Guarantor under or in connection with the Guaranty or
otherwise. The obligations of the Guarantor hereunder shall not be released,
discharged or in any way affected, nor shall the Guarantor have any rights
against the Bank by reason of: (a) the fact that any collateral or security
securing any obligation of the Borrowers or of the Guarantor hereunder may be
subject to equitable claims or defenses in favor of others or may be invalid or
defective in any way; (b) the failure to convey, perfect or create a valid lien
in any such collateral or security; (c) the invalidity or unenforceability for
any reason of any obligation or liability of the Borrowers; (d) the change,
loss, or deterioration in value of any collateral or of the financial condition
of the Borrowers, whether due to incorrect estimates of such value or financial
condition, failure to protect or insure, or because of any other reason; (e) the
exchange, sale, release or surrender of any such collateral or security; or (f)
any other defense at law or in equity to which the Guarantor may be entitled.
This Guaranty shall continue to be effective, or be revived and reinstated, as
the case may be, if at any time any payment of all or part of the obligations or
liabilities covered hereunder is rescinded, or must otherwise be returned by the
Bank, upon the insolvency, bankruptcy, receivership or liquidation of the
Borrowers or the Guarantor, or otherwise, all as though such payment had never
been made.
<PAGE> 91
3. The Guarantor hereby waives any notice of acceptance of this
Guaranty, or any notice of the incurring by the Borrowers at any time of any
obligation or liability covered hereunder. The Guarantor also waives any and all
presentment, demand of payment, protest or notice of protest, notice of
nonpayment or other default with respect to any obligation or liability covered
hereunder, and all defenses at law or in equity. Except for distributions to the
Guarantor not prohibited by the Credit Agreement, any and all present and future
debts and obligations of the Borrowers to the Guarantor are hereby postponed in
favor of and subordinated to the full payment and performance of all present and
future obligations and liabilities of the Borrowers to the Bank. The Guarantor
hereby grants to the Bank full power, in its absolute discretion and without
notice to the Guarantor, to: (a) modify, accelerate, or otherwise change the
terms of any obligation or liability guaranteed hereunder in accordance with its
provisions (but not to increase the aggregate liability as stated in the
Guaranty); (b) renew or extend at one or more times any such obligation or
guaranty; (c) release, compromise, or settle any such obligation or liability in
settlement, liquidation, adjustment, bankruptcy proceedings or otherwise as the
Bank deems advisable; (d) delay or forbear to act in respect to any obligation,
liability or collateral, or the enforcement thereof whether such delay or
forbearance is deliberate or by omission; (e) consent to the substitution,
exchange or release of any collateral or security for such obligations and
liabilities or forbear from calling for additional security; or (f) take an
additional guaranty or guaranties, or settle, compromise or release one or more
other guaranties. All sums at any time to the credit of the Guarantor and any
property of the Guarantor at any time in the Bank's possession may be held by
the Bank as security for all obligations of the Guarantor to the Bank arising
out of this Guaranty.
4. Upon the happening of any Event of Default under the Credit
Agreement, the Bank may declare all of the obligations to be immediately due and
payable and shall then have all remedies under the laws of the State of Ohio,
including, without limitation thereto, the right to setoff and apply any
deposits, balances, money, proceeds, credits or property of the Guarantor in
possession of the Bank to the balance due under this Guaranty. The Bank may
pursue all or any of its remedies at one or at different times. The Bank's books
and records showing the account between the Bank and the Borrower shall be
admissible in any action or proceeding, shall be binding upon the Guarantor for
the purpose of establishing the items therein set forth, and shall constitute
prima facie proof thereof.
5. Guarantor hereby agrees that it shall cause to be prepared and
furnished to Bank the following:
(i) As soon as possible, but not later than ninety (90) days after
the close of each fiscal year of Guarantor, audited annual
consolidated financial statements of Guarantor as of the end
of each such fiscal year, together with unaudited
supplementary consolidating information of Guarantor as of the
end of each such fiscal year, prepared by a firm of
independent certified public accountants of recognized
standing, selected by Guarantor and reasonably acceptable to
Bank;
(ii) As soon as possible, but not later than thirty (30) days after
the end of each fiscal quarter hereafter, quarterly
consolidated financial statements of Guarantor as of the end
of such quarter and of the portion of Guarantor's fiscal year
then elapsed, together with unaudited supplementary
consolidating information of Guarantor, certified by the Chief
Financial Officer or controller of Guarantor as prepared in
accordance with GAAP (without footnotes) and fairly presenting
in all material respects the financial position and results of
operations of Guarantor for such quarter and period.
6. The words "Guarantor," "Bank," and "Borrower," as used herein, shall
indicate the plural as well as the singular, if appropriate. The obligations and
liabilities hereunder are
-2-
<PAGE> 92
joint and several and shall be binding upon the heirs, executors,
administrators, successors, and assigns of the parties hereto.
7. The Guarantor hereby authorizes any attorney-at-law on the
Guarantor's behalf or on behalf of the Guarantor's successors or survivors, to
appear in an action on this Guaranty at any time after the Guaranty becomes due
in any court of record in Ohio or elsewhere; to waive the issuing and service of
process and to confess judgment in favor of the holder hereof for the amount due
plus interest and costs and to release and waive all errors and appeals in the
actions and judgments. No such judgment against the Guarantor based upon one or
more mutual obligations shall be a bar to a subsequent judgment or judgments
pursuant to this warrant of attorney against the Guarantor based upon
subsequently matured obligations.
This Contract of Guaranty is executed at Cleveland, Cuyahoga County,
Ohio this 28th day of March, 1997.
"WARNING--BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND
COURT TRIAL. IF YOU DO NOT PAY ON TIME, A COURT JUDGMENT MAY BE TAKEN AGAINST
YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO
COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR
WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE
AGREEMENT OR ANY OTHER CAUSE."
CONTINENTAL GLOBAL GROUP, INC.
By: /s/ Jimmy L. Dickinson
------------------------------
Its: Vice President
------------------------------
-3-
<PAGE> 1
EXHIBIT 5
Squire, Sanders & Dempsey L.L.P.
4900 Key Tower
127 Public Square
Cleveland, Ohio 44114-1304
May 22, 1997
Continental Global Group, Inc.
438 Industrial Drive
Winfield, Alabama 35594
Continental Conveyor & Equipment Company
c/o Continental Global Group, Inc.
438 Industrial Drive
Winfield, Alabama 35594
Goodman Conveyor Company
c/o Continental Global Group, Inc.
438 Industrial Drive
Winfield, Alabama 35594
Gentlemen:
Reference is made to the Registration Statement on Form S-4 (the
"Registration Statement") to be filed by Continental Global Group, Inc. (the
"Company"), Continental Conveyor & Equipment Company ("Continental") and Goodman
Conveyor Company ("Goodman") under the Securities Act of 1933, as amended (the
"Securities Act"), in connection with the Company's offer to exchange (the
"Exchange Offer") up to $120,000,000 aggregate principal amount of its 11%
Series B Senior Notes due 2007 ("Series B Notes") for an equal principal amount
of its outstanding 11% Series A Senior Notes due 2007 ("Series A Notes") and the
guarantee by Continental and Goodman of the Series B Notes. The Series A Notes
were issued, and the Series B Notes are issuable, pursuant to an Indenture,
dated as of April 1, 1997, among the Company, Continental, Goodman and Norwest
Bank Minnesota, National Association, as Trustee (the "Indenture"). We have
examined the Indenture, the Series A Notes, the form of the Series B Notes and
such other documents and matters of law as we have deemed necessary for purposes
of this opinion.
Based upon the foregoing, we are of the opinion that:
<PAGE> 2
Continental Global Group, Inc.
Continental Conveyor & Equipment Company
Goodman Conveyor Company
May 22, 1997
Page 2
1. The Series B Notes, when executed by the Company and authenticated
by the Trustee in accordance with the provisions of the Indenture, and when
issued in exchange for Series A Notes as contemplated in the Registration
Statement, will constitute valid and binding obligations of the Company and will
be entitled to the benefits of the Indenture, subject to applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws affecting the enforcement
of creditors' rights generally and subject to general principles of equity
(whether considered in a proceeding at law or in equity).
2. The guarantees by Continental and Goodman of the Series B Notes,
when executed by Continental and Goodman in accordance with the provisions of
the Indenture and when issued as contemplated in the Registration Statement,
will constitute valid and binding obligations of Continental and Goodman,
respectively, and will be entitled to the benefits of the Indenture, subject to
applicable bankruptcy, insolvency, moratorium, reorganization or similar laws
affecting the enforcement of creditors' rights generally and subject to general
principles of equity (whether considered in a proceeding at law or in equity).
3. Under existing law, the exchange of the Series B Notes for the
Series A Notes pursuant to the Exchange Offer will not be treated as an
"exchange," or otherwise as a taxable event, for federal income tax purposes.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the prospectus contained therein.
Respectfully submitted,
Squire, Sanders & Dempsey L.L.P.
<PAGE> 1
Exhibit 10.1
THIS DEED is made the 8th day of November one thousand nine hundred and ninety
six BETWEEN EIGHTZIGBARB PTY LIMITED ACN 075 261 497 a duly incorporated company
having its registered office at C/- 39 Queen Street, Auburn in the State of New
South Wales 2144, Y.F.B. INVESTMENTS PTY LIMITED ACN 075 261 488 a duly
incorporated company and having its registered office at C/- 39 Queen Street,
Auburn, 2144 in the said State and IRENE INVESTMENTS PTY LIMITED ACN 075 261 479
a duly incorporated company having its registered office at C/- 39 Queen Street,
Auburn, 2144 in the said State (called "Vendors") of the first part
AND
PETER JOHN BAIRD of 133 Australia Avenue, Umina, 2257, in the said State, MARK
DAVID ELLIOTT of 65 Taylor Street, Woy Woy, 2256, in the said State, JOHN ROBERT
CLACK of 161 Australia Avenue, Umina, 2257 in the said State, STEPHEN JAMES PAGE
of 28 Dumfries Court, Eaglemount Heights, Mackay, 4740, in the State of
Queensland and PATMORE ENTERPRISE PTY LIMITED ACN 075 261 470 a duly
incorporated company having its registered office at C/- 39 Queen Street, Auburn
in the State of New South Wales (called "Guarantors") of the second part
AND
CONTINENTAL CONVEYOR & EQUIPMENT PTY LIMITED ACN 059 870 058 a duly incorporated
company having its registered office at 145 Bridge Street, Muswellbrook in the
said State (called "Purchaser") of the third part
RECITALS
A. BCE Holdings Pty Limited ACN 003 525 988 (called "the Company") is
registered under the Corporations Law and is the holding company whose
subsidiaries carry on the business of the manufacture of conveyors, conveyor
componentry and associated equipment in New South Wales, Victoria and Queensland
and their distribution and installation in Australia and elsewhere.
B. The Company is the registered legal and beneficial owner of the shares
hereunder specified in the companies set out below:-
(a) Australian Conveyor Engineering Pty Limited ("ACE") ACN 003 725 915
22,500 ordinary shares of $1.00 each being the whole of the issued
shareholding in Australian Conveyor Engineering Pty Limited;
(b) Ace Conveyor Services Pty. Limited ("ACS") ACN 056 396 760 3 ordinary
fully paid $1 shares (out of a total of four issued fully paid
ordinary shares)
(c) Ace Conveyor Components Pty Limited ("ACC") (formerly Prince Conveyor
Components Pty Limited) ACN 005 458 373 1,500,000 ordinary 50(cent)
shares comprising the whole of the issued shares in Ace Conveyor
Components Pty Limited;
(d) A. Crane Pty Limited
ACN 003 280 475
300 ordinary $1.00 shares which shareholding comprises the whole of
the issued capital of A. Crane Pty Limited.
<PAGE> 2
(e) Ringway Pty Limited
ACN 003 581 897
1 A class share, 1 B class share and 3,000 ordinary $1.00 shares
out of a total of the following issued shares: 1a class share, 1b
class share 5,000 ordinary shares;
C. The Company has entered into an agreement for the purchase from Patmore
Enterprise Pty Limited ("Patmore") by it of one fully paid ordinary share in ACS
being the only issued share in the capital of ACS not already owned by the
Company.
D. The Vendors are the registered legal and beneficial owners of all the
issued shares in the Company.
E. It is the parties' intention that by the sale and purchase of the shares
referred to in Recital D, the Purchaser will have the right to control not only
the business and undertaking of the Company and the subsidiaries but also the
shares held by the Company in and the right to control the businesses and
undertakings of the companies referred to in B. above.
F. On this basis the Purchaser has agreed to purchase the Vendors' shares in
the Company on the terms contained in this Agreement.
G. On 28 June 1996:-
(a) ACE paid amounts totalling $345,000; and
(b) ACS paid amounts totalling $460,000.
by way of superannuation contributions to the superannuation funds
established for the benefit of Peter John Baird, Mark David Elliott, John Robert
Clack and Stephen James Page.
H. The following dividends have been declared or declared and paid from the
Company and/or ACS prior to the date of this Agreement in respect of retained
profits earned by the Company and ACS since commencement of operations of the
Company up to and including 30th September 1996:
The Company: -
-----------
(a) $226.74 per share declared prior to and paid, or credited
to the loan accounts as set out in Table 23 of Schedule 5 on
31 May 1996 (3,000 shares = $680,220);
(b) $635.28 per share declared on 9th October 1996 and credited
to loan accounts as set out in Table 23 of Schedule 5 on
10th October 1996 (3,000 shares = $1,905,849).
ACS:-
-----
(a) $16,741 per share declared prior to and paid, or credited to
loan accounts as set out in Table 23 of Schedule 5 on 31 May 1996 (4 shares =
$66,964);
(b) $461,742 per share declared on 9th October 1996 and credited
to loan accounts as set out in Table 23 of Schedule 5 on 10th October 1996 (four
shares = $1,846,968);
-2-
<PAGE> 3
I. The Purchaser acknowledges the payments of superannuation contributions by
ACE and ACS and the payment of the dividends by the Company and ACS as set out
in Recitals G. and H. have been effected.
J. The Guarantors have agreed to guarantee the Vendors' obligations under this
Agreement.
K. The Guarantors have at the request of the Vendors agreed to enter into this
Agreement for the purposes of acting as surety and providing A guarantee to the
Purchaser for the performance by the Vendors jointly and severally of the
provisions of this Agreement in accordance with the agreement referred to in
Recital J.
OPERATIVE PART
Interpretation provisions
1. In this Agreement unless the context otherwise requires:-
(a) "this Agreement" means this deed for the sale of shares and includes
the schedules and annexures to the schedules to this deed;
(b) "assets" means all the assets and undertaking of each of the Company
and its subsidiaries whether of real, personal or intellectual
property and includes the assets specified in Schedule 5;
(c) "bank" means a bank as defined in the Banking Act 1959, (Cth);
(d) "business" means the business or businesses of the Company and its
subsidiaries; all trading operations of the Company and its
subsidiaries; all assets used by the Company and its subsidiaries in
each such business and all liabilities of the Company and its
subsidiaries;
(e) "business day" means any day which is not Saturday, Sunday or a public
holiday;
(f) "Company" means BCE Holdings Pty Limited ACN 003 525 988.
(g) "contractual arrangement" shall include letters of intent on which
reliance is placed, purchase orders, and outstanding tenders.
(h) the reference to "Dollars" is to Australian currency;
(i) "due diligence bundle" means the bundle of documents or copies of
documents identified by being initialled by the Vendors, the Purchaser
and the Guarantors as containing information concerning the Company
and its subsidiaries and the business as at the date here-of.
(j) "financial records" means all financial information of the relevant
company including statutory accounts.
(k) "interest rate" means the rate of interest as defined by the term
"interest rate" in the Loan Agreement set out in Schedule 7(a) hereto.
(l) "last accounts" means the audited consolidated financial statements of
the Company and its subsidiaries as at 30 June 1996;
-3-
<PAGE> 4
(m) "material adverse change" means a change affecting the Company and its
subsidiaries taken as a whole which change singularly or together with
other changes (both favourable and adverse) is materially adverse to
the net assets, operating income, financial conditions or the
operations of the Company and its subsidiaries measured as of or from
30 June 1996.
(n) "outstanding purchase monies" means the amount determined by deduction
from the share price specified in clause 8.1 of the amount of the loan
referred to in clause 9.1;
(o) "Purchaser" includes the Purchaser its successors and assigns, subject
to clause 2.4 hereof ;
(p) "share price" means the monies specified in clause 8.1;
(q) "subsidiaries" means each of the companies in which BCE Holdings Pty
Limited at the date of this agreement owns a majority of the
shareholding, whether such company shall be wholly or partly owned by
BCE Holdings Pty Limited and shall include the following companies:-
(i) Australian Conveyor Engineering Pty Limited ACN 003 725 915
(ii) Ace Conveyor Services Pty. Limited
ACN 056 396 760
(iii) Ace Conveyor Components Pty Limited
ACN 005 458 373
(iv) A.Crane Pty Limited ACN 003 280 475
(v) Ringway Pty Limited
ACN 003 581 897
(r) "taxation liabilities" includes any liability of the Company and
its subsidiaries for all taxes, duties or levies made by the Crown in the right
of the Commonwealth of Australia or of any State or Territory or of any of their
respective instrumentalities, including but not limited to income tax, fringe
benefits tax, franking account deficit tax, sales tax, customs duty, stamp duty,
and all costs, charges, interest, fines, penalties and expenses which are
included in, or are incidental to or relate to, the taxation liability of the
Company or any of its subsidiaries.
(s) "Vendors" includes the Vendors jointly and severally and their
respective successors and assigns;
(t) words expressed in the singular include the plural and vice
versa;
(u) words expressed in one gender include the other genders, as is
appropriate in the context;
(v) the reference to "person" includes a corporation.
-4-
<PAGE> 5
General contractual provisions
Governing law
2.1 This Agreement is governed by and construed in accordance with the law of
the State of New South Wales and the parties agree to submit to the
non-exclusive jurisdiction of the Courts of New South Wales and the Federal
Court of Australia in its New South Wales venue and any other Courts which may
hear appeals therefrom.
Severance
2.2 If any provision contained in this Agreement is or becomes legally
ineffective, under the general law or by force of legislation, the ineffective
provision shall be severed from this Agreement which otherwise continues to be
valid and operative.
Joint and several liability
2.3 Each and every Vendor and Guarantor assumes the liability to comply with his
or its obligations under this Agreement jointly with each other Vendor or
Guarantor (as the case may be), and in addition each of them assumes the
liability to comply with those obligations severally.
Benefit of Agreement non assignable
2.4 The Vendors or the Purchaser may not assign the benefit of the rights under
this Agreement without the written consent of all other parties.
Compliance with notices on Business day
2.5 If under the provisions of this Agreement or under any notice or demand
anything is required to be done on a day which is not a Business day, the day or
the last day for compliance is deemed to be the immediately following Business
day.
SHARE ALLOTMENT
3.1 On the execution of this Agreement the Vendors will cause the Company to
enter into a share allotment agreement with the Purchaser in accordance with the
form of Agreement for Allotment of Shares set out in Schedule 6 hereto.
3.2 The Vendors will cause the Company to be ready, willing and able to effect
completion of the Agreement for Allotment of Shares referred to in clause 3.1 on
the day fixed for completion of this Agreement.
3.3 It is an essential term of this Agreement that the Vendors will cause the
issue of shares contemplated by the Agreement for Allotment of Shares referred
to in clause 3.1 to be completed on or before completion of this agreement.
3.4 Completion of this Agreement shall not be effected unless at the same time
or prior to completion of this Agreement the Agreement for Allotment of Shares
referred to in clause 3.1 shall have been completed and the shares which are to
be the subject of that allotment shall have been issued by the Company and
vested in the Purchaser.
3.5 The Vendors and the Guarantors jointly and severally hereby release and
forever discharge the Purchaser and the Company and any of its subsidiaries and
the directors of those
-5-
<PAGE> 6
companies from all actions proceedings claims and demands which they or their
executors administrators or successors or any one or more of them now have or
might but for the provisions of this clause have had against the Purchaser or
the Company or any of its subsidiaries or the directors of those companies in
respect of any obligation or claim or taxation liability relating to the
dividends referred to in Recital H or arising from the declaration or payment of
those dividends provided that where the Company and/or its subsidiaries is able
as a matter of law to cooperate in relation to the dividends referred to in
Recital H or the declaration or payment of those dividends then the Purchaser
shall, at the Vendors and Guarantors expense, co-operate with the Vendor with a
view to rectifying or remedying such matter, provided further that such
cooperation will not materially disadvantage the Company and any of its
subsidiaries. The Vendors and Guarantors jointly and severally shall indemnify
and hold the Company and its subsidiaries harmless against any loss or damage
suffered by the Company and any of its subsidiaries as a result of such
cooperation. This clause shall not merge on completion of this Agreement.
AUTHORISATION BY AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
4.1 It is a precondition of this Agreement that the Purchaser obtain from the
Australian Competition and Consumer Commission an authorisation under Section
88(9) of the Trade Practices Act 1974 for the Purchaser to acquire the shares in
the capital of the Company.
4.2 The Purchaser shall apply for the authorisation within seven (7) days after
the date of this Agreement, shall furnish to the Australian Competition and
Consumer Commission the documents, information and particulars required by the
Commission which the Purchaser is reasonably able to furnish, and shall act
reasonably, honestly, promptly and sufficiently in pursuing the application to
the Commission.
4.3 The Vendors shall make available to the Purchaser on reasonable demand all
such documents information and particulars as may be required by the Commission
of the Purchaser in relation to the Company and its subsidiaries.
4.4 If the authorisation is not granted by the Australian Competition and
Consumer Commission within 30 days from the date of this Agreement, or is
granted on conditions which the Purchaser, acting reasonably and honestly,
considers to be adverse and unacceptable, the Purchaser may rescind this
Agreement by notice in writing to the Vendors.
FURTHER PRE-CONDITIONS
5.1 It is a pre-condition of this Agreement that each of the following
circumstances or events occur prior to completion and the completion of this
Agreement is subject to that occurrence:-
5.1.1 the provision of duly executed agreements as required by clauses 3.1,
9.1, 15.1, 16.2, 21.9 and 32 of this Agreement;
5.1.2 that there has been no material adverse change in circumstances of
the Company and its subsidiaries;
5.1.3 that no breach of an essential term of this Agreement has occurred
which has not been waived in writing;
5.1.4 that the requirements of section 205(10) of the Corporations Law have
been satisfied as regards the loan agreements referred to in clause 9 hereof and
specified in Schedule 7
-6-
<PAGE> 7
hereto and in this regard the Vendors agree to undertake the carriage of
compliance with the requirements of that section;
5.1.5 DELETED
5.1.6 that the transfer document in respect of the acquisition by the
Company of 1 fully paid issued ordinary share in the capital of ACS as referred
to in Recital C, has been:-
5.1.6.1 duly executed by Patmore Enterprise Pty Limited and the Company
as the parties to such transfer;
5.1.6.2 stamped by the Office of State Revenue with ad valorem stamp
duty;
5.1.6.3 approved by a meeting of the Directors of ACS to the intent
that the transferee named in such document of transfer is a person or company
approved by the Directors of ACS for the purposes of membership of ACS; and
5.2 If any of the above pre-conditions shall not pertain within any period
specified or before completion either party may rescind this Agreement.
PROVISION OF FUNDS
6. Deleted
DUE DILIGENCE
7.1 The parties acknowledge that in accordance with agreement between the
parties the Purchaser has conducted and is at the date of this Deed conducting
searches and enquiries in relation to the assets, operations and undertaking of
the Company and its subsidiaries and the business in accordance with the
procedures generally described as due diligence.
7.2 The Purchaser shall use its best endeavours to bring such enquiries to
completion at the earliest possible time and shall notify the Vendors in writing
at the time when the Purchaser regards the making of such enquiries to have been
completed and the results thereof to have been obtained. The time of such
notification shall in this Agreement be referred to "completion of due
diligence".
7.3 The Purchaser shall notify the Vendors of any matter which may come to its
attention up to completion and which may cause the Purchaser to form the opinion
referred to in clause 7.4. Such notification shall be made within seven (7)
business days after date of the Purchaser becoming aware of any such matter,
7.4 If at any time prior to the completion of this agreement the Purchaser shall
have received information or advice or other results of due diligence which the
Purchaser reasonably and honestly considers to be materially adverse and
unacceptable, or is not reasonably satisfied with the level of disclosure by the
Company for the purposes of financial, legal and operations due diligence
investigations the Purchaser may rescind this Agreement by notice in writing to
the Vendors.
AGREEMENT TO SELL
8. Subject to the fulfilment of the conditions contained in clauses 3, 4, 5 and
7 of this Agreement:-
-7-
<PAGE> 8
PRICE
8.1 The Vendors agree to sell and the Purchaser agrees to purchase the 3,000
ordinary shares held by the Vendors in the Company for the price of $4,435.64
per share for the total purchase price of $13,306,920, adjusted pursuant to
clause 10.
Manner of payment
8.2 The share price shall be paid as is specified in clause 9.
8.3 Subject to the fulfilment of all conditions precedent, completion of this
Agreement shall be effected in accordance with the provisions of clauses 10 and
21 hereof.
PAYMENT OF PURCHASE PRICE
9. The share price and all other amounts payable by the Purchaser at the time of
completion shall be paid:-
9.1 As to the sum of $5,400,000 being part of the share price, in accordance
with loan agreements into which the parties hereby agree that the Purchaser (as
Borrower) will enter with each of the Vendors (as Lender) severally on
completion ON the terms and conditions of the Loan Agreement set out in Schedule
7(a) to this Agreement.
9.2 Deleted
9.3 The Purchaser shall on completion pay interest on the amount of fourteen
million seven hundred and forty nine thousand, nine hundred and eighty seven
dollars $14,749,987 (being the sum of the share price and the amount to be paid
by the Company for the purchase of one share in ACS) from Patmore referred to in
Recital C hereof, at the interest rate provided in the Loan Agreement in
Schedule 7(b) from the date of this Agreement until the actual date of
completion PROVIDED THAT the liability to pay such interest shall not apply in
respect of any period prior to completion in which progress of this Agreement to
completion shall be delayed through any cause which shall be the sole
responsibility or fault of the Vendors; such period shall be inclusive of their
commencement and end dates.
9.4 As to the balance of the share price, on completion of the sale, by bank
cheque, to the Vendors' solicitor, or as the Vendors' solicitor or the Vendors
direct in writing.
9.5 The amounts to be provided for in respect of the Loan Agreements
referred to in clauses 9.1 and 21.9 shall be as follows:-
<TABLE>
<S> <C>
EIGHTZIGBARB PTY LIMITED ACN 075 261 497: $1,800,000
Y.F.B. INVESTMENTS PTY LIMITED ACN 075 261 488: $1,800,000
IRENE INVESTMENTS PTY LIMITED ACN 075 261 479: $1,800,000
PATMORE ENTERPRISE PTY LIMITED ACN 075 261 470: $600,000
</TABLE>
9.6 It is a precondition of this Agreement that the Purchaser shall provide
to the Vendor, at least five (5) business days prior to completion:
-8-
<PAGE> 9
9.6.1 details of the entity which shall provide the Deed of
Guarantee and Indemnity referred to in Clause 6.4 of the Loan Agreements
set out in Schedules 7(a) and 7(b) to this Agreement ("the Guarantee");
9.6.2 a letter from an independent lawyer in Alabama, USA
("letter of comfort") to the effect set out in Annexure "A" to this
Agreement and that the Guarantee is enforceable against the Guarantor; and
9.6.3 a copy of the most recent annual financial accounts for the
Guarantor demonstrating sufficient substance to reasonably give comfort to
the Vendors as to the security for the Guarantee.
ADJUSTMENTS ON COMPLETION
10.1 The share price shall be adjusted on completion:-
10.1.1 Subject to Clauses 24.2 and 24.3, in respect of any amount calculated
by the Purchaser's accountants and verified by the Vendors' accountants as being
a fair and reasonable allowance for breach occurring before completion of any
warranty contained in this Agreement and not elsewhere adjusted pursuant to this
agreement.
10.1.2 In respect of any amount calculated by the Purchaser's accountants
and verified by the Vendors' accountants as being a fair and reasonable
allowance (in accordance with clauses 17.2, 17.3 and 17.4) for destruction or
damage to the business premises, plant or machinery owned by the Company and its
subsidiaries and after taking into account any realisable insurance and not
elsewhere adjusted pursuant to this Agreement.
10.1.3 In respect of any amount calculated by the Purchaser's accountants
and verified by the Vendors' accountants as being a fair and reasonable
allowance for any expenditures effected or liabilities incurred by the Company
and its subsidiaries after the date of the last accounts other than in the
normal course of their trading and operations or other than as referred to in
the provisions of this Agreement in the period between the date of the last
accounts and completion of this Agreement and not elsewhere adjusted pursuant to
this Agreement.
10.1.4 Subject to Clauses 24.2 and 24.3, in respect of costs and expenses
incurred or likely reasonably to be incurred by the Company and any of its
subsidiaries in carrying out changes and rectifications to freehold and
leasehold property and business interests of the Company or a subsidiary
relating to the following matters already notified to the Vendors by the
Purchaser as a result of due diligence:-
10.1.4.1 transfer of title to part of lot 234 Somersby Falls Rd
Somersby from A. Crane Pty Ltd to ACE;
10.1.4.2 satisfaction of the requirements of Gosford City Council in
relation to encroachment (approx. 5 metres) by improvements on the Somersby
property on to Somersby Falls Road;
10.1.4.3 transfer of title to property at lot 10 Michelmore Street,
Mackay to corporate lessor of that property, and establishment and registration
of lease from that lessor in accordance with details in Table 13 of Schedule 5
in favour of ACS;
10.1.4.4 approval by Workcover Authority of N.S.W. of factory building
leased by Ringway Pty Ltd at 347 Keira Street, Wollongong.
-9-
<PAGE> 10
10.2 10.2.1 The parties acknowledge that the price of the shares as specified in
clause 8 has been agreed upon as a result of the Purchaser's consideration of
the last accounts.
10.2.2 Notwithstanding the provisions of clause 10.2.1 the price of
the shares, as specified in clause 8, shall be adjusted by increasing or
decreasing that purchase price, in equal proportions in respect of each of the
Vendors, in accordance with the adjustments referred to in subclause 10.1.
10.2.3 Any adjustments occurring in pursuance of clause 10.1 shall, after
taking into account the threshold referred to in clauses 13.12.2 and 24.2 of
this Agreement, be deemed to be an adjustment to the share price.
Warranty concerning correctness of financial statements.
10.3 The Vendors and the Guarantors agree to warrant on completion that the last
accounts are accurate, complete and not misleading and are correctly compiled on
the basis of information furnished by the Company its subsidiaries and the
Vendors and the Guarantors which is accurate, complete and not misleading and
the provisions of clause 13 apply to this warranty.
10.4 The warranty contained in clause 10.3 shall extend to the matters referred
to in clause 13.2.4.2.
EXCLUSION OF PRE-CONTRACTUAL AND OTHER REPRESENTATIONS
Entire agreement
11.1 This Agreement constitutes the entire agreement between the Vendors and the
Purchaser relating to the acquisition of the shares in the Company.
Earlier agreements supplanted
11.2 This Agreement supplants and supersedes any previous written or oral
negotiations or preliminary agreements between the parties or between any two of
the parties, which to the extent that they may have had any legal effect the
parties now agree that they have ceased to be legally effective from the date
when the parties entered into this Agreement.
No collateral agreements
11.3 The parties have not entered into and are not bound by any collateral or
other agreement apart from this Agreement and the Schedules.
Warranties imposed in agreement or by statute binding
11.4 The parties are not bound by any warranty, representation, collateral
agreement, or implied term, under the general law or imposed by legislation
unless:
11.4.1 such warranty, representation, agreement or term is contained in the
express terms of this Agreement including the Schedules to this Agreement and in
the matters referred to in the provisions of clause 12 of this Agreement; or
11.4.2 it is an implied term or warranty imposed by statute which is
mandatory and cannot be excluded by the parties' agreement.
-10-
<PAGE> 11
Matters relied on by Purchaser
12. The parties acknowledge that the Purchaser, when entering into this
Agreement, has relied on the following matters relating to inducements or
representations made by or on behalf of the Vendors:-
12.1.1 all information relating to the Company and its subsidiaries and the
business as contained in or disclosed by the due diligence bundle.
12.1.2 the warranties and representations expressly contained in this
Agreement and its Schedules;
12.1.3 without limiting the application of the warranties and
representations referred to in clause 12.1.2, specifically the following
representations of the Vendors and the Company:-
12.1.3.1 as contained in the last accounts;
12.1.3.2 that the Company or its subsidiaries holds licence agreements
or authorisations or is undertaking pending negotiations to act in
representative capacities as manufacturing selling and distribution agents for
the following companies holding world wide patents in respect of conveyor
technology and manufacturing such agreements, authorisations or pending
negotiations relating to the countries or territories set out at the end of each
matter as follows:-
(a) Bridgestone Pipe Conveyor (Japan) (but only as to
arrangements for supply of conveyor hardware for pipe conveyors to Barclay
Mowlem) - in Australia;
(b) in relation to the supply and installation of Bridgestone
Pipe Conveyor - in New Zealand;
(c) in relation to the supply, distribution, servicing and
installation of Dodge CST and associated products - in Australia; and
(d) Lewin Horizontal Conveyor - in Australia
12.1.4 The accuracy of the financial records in respect of the period
ending 30 June 1996 of the Company and its subsidiaries being the records which
were produced for inspection by or on behalf of the Purchaser or in respect of
which copies were furnished to the Purchaser.
12.1.5 The Articles of Association of the Company do not restrict the
transfer of its shares such as to prevent the transfer of the shares under this
Agreement to the Purchaser.
12.1.6 The shares referred to in clause 8.1 are the only shares on
issue in the Company at the date of this Agreement and will, subject to the
shares to be allotted pursuant to the Agreement for Allotment of Shares,
Schedule 6 hereto, be the only shares on issue in the Company at the date of
completion of this Agreement.
12.1.7 The understanding that, in respect of the dividends referred to
in Recital H, nothing has, prior to completion of this agreement, been done or
left undone which may give rise to a claim for damage or losses by a shareholder
of the Company or any subsidiary, and the Vendors and the Guarantors hereby
waive to the full extent of the same and agree not to make all or any such
claims or causes of action arising at the suit of one or more of them against
the
-11-
<PAGE> 12
Company and/or one or more of its subsidiaries and this clause may be pleaded in
bar by the Company or any of its subsidiaries in respect of any such action
commenced contrary to the provisions of this clause.
12.1.8 The parties agree that:
12.1.8.1 the due diligence bundle shall be intitialled by the
Vendors and the Purchaser on or before the date hereof.
12.1.8.2 the due diligence bundle shall be held in trust on
behalf of the Vendors and the Purchasers by an independent third party agreed
upon by parties, as and from the date hereof.
12.1.8.3 the Vendors on the one hand and the Purchaser on the other
hand shall each nominate, from time to time, a signatory whom together shall be
joint signatories for the purpose of obtaining access to the due diligence
bundle.
12.2 The parties acknowledge that for the purposes of this Agreement in the
Purchaser's assessment of the financial affairs of the Company and its
subsidiaries:
12.2.1 The Purchaser is relying upon the last accounts;
12.2.2 The Vendor is not guaranteeing or warranting any budgets,
forecasts, projections or estimates for sales, profits or otherwise relating to
the Company and its subsidiaries and the business; and
12.2.3 The warranties contained in clause 13.1 hereof do not apply to
such budgets, forecasts, projections or estimates for sales, profits or
otherwise relating to the Company and its subsidiaries and the business.
VENDORS' WARRANTIES
13. The contractual warranties
13.1 13.1.1 The Vendors warrant that the information concerning the Company, its
subsidiaries and the business as at the date hereof disclosed in the due
diligence bundle is true and accurate.
13.1.2 The Vendors and the Guarantors jointly and severally
make each of the warranties contained in schedule 1 as at the date of this
Agreement and up to and including the date of completion of this Agreement.
13.1.3 or The Purchaser acknowledges that it has satisfied
itself with respect to all information contained in the due diligence bundle so
that no claim for breach of warranty can be made against the Vendors or the
Guarantors in respect of any information contained in the due diligence bundle,
except for the matters detailed below, which are outstanding and may or may not
give rise to a claim against the Vendors Guarantors:
13.1.3.1 The matters referred to in clause 10.1.4 hereof;
13.1.3.2 There is an amount of $61,000 owed to ACE in respect
of the Kenmare Contract at South Blackwater . This is a result of double
counting by the client in respect of an offset which it made against the amount
it owed ACE, for accommodation which the client provided to ACE employees
working on the Kenmare Contract. When it has been
-12-
<PAGE> 13
verified that the client double counted in making an offset against the amounts
it owed to ACE the client will pay the outstanding amount of $61,000 to ACE.
13.1.3.3 ACE entered into a contract with Walker Engineering at Prospect
Reservoir under which ACE supplied a conveyor system to Walker Engineering.
Walker Engineering has been and is continuing to feed the conveyor system with
material which exceeds the specifications of the conveyor system. This oversized
material is causing damage to the conveyor system, which ACE is repairing at
Walker Engineering's cost. A dispute regarding payment under this contract by
Walker Engineering may arise in the future.
13.1.3.4 Shaft Machining Lathe being Lealde TCN-12-2C CNC Two Spindle/Two
Turret Lathe complete with Bar Feeder, Shaft Unloader and Finished Shaft Storage
Ramp. In addition to the application of the warranties to the Lathe the parties
have agreed as follows:
13.1.3.4.1 ACC has acquired the lathe described above from a Spanish supplier
("the Lathe"). The Lathe is presently partially operating. It is agreed that the
Vendors will undertake the carriage of ensuring that the Lathe operates as
specified in clause 13.1.3.4.2 and in so doing will consult with the Purchaser
on the steps to be taken so as to ensure its operation as set out in this
clause.
13.1.3.4.2 The operation of the Lathe will be brought by the Vendors to
standards in accordance with the specifications and the performance standards
set out in the following documents which are included in the due diligence
bundle and which are deemed to be incorporated in this clause:
(a) undated letter from ACE to Lealde S Coop Ltda (5 pages);
(b) letter dated 24 June 1994 from Lealde S Coop Ltda to ACE (2
pages);
(c) Official Order Number 12576 from Prince Conveyor Components
Pty Limited (now ACC) dated 29 June 1996.
(d) facsimile cover sheet from Prince Conveyor Components Pty
Limited (now ACC) to Cibrian dated 28 June 1996.
13.1.3.4.3 The costs of getting the Lathe to full operating order as above
shall be borne by the Company and applied firstly as a debit against the
threshold referred in clause 24.2 hereof and thereafter the excess of costs (if
any) shall be reimbursed by the Vendors to the company or its relevant
subsidiary within 30 days of completion of getting the Lathe to full operating
order provided that in the event the Vendors are successful in achieving a
contribution in respect of the cost of getting the Lathe to full operating order
from the supplier then the value of same shall be supplied in the first instance
against any liability of the Vendors and secondly as a credit towards any above
debiting of the threshold referred to in clause 24.2 hereof.
13.1.3.4.4 The Purchaser agrees that it shall not be entitled to bring any
claim against the Vendors and/or Guarantors for any loss or damages of whatever
nature or description suffered or to be suffered by it or the Company howsoever
arising with respect to the Lathe save as allowed for in clauses 13.1.3.4.1 and
13.1.3.4.2.
13.1.3.5 The dividends referred to in Recital H hereof were properly
declared and paid in accordance with the Corporations Law and the Income Tax
Assessment Act.
13.1.3.6 matters relating to or connected with potential taxation
liabilities referred to in the due diligence bundle.
-13-
<PAGE> 14
13.1.3.7 The Vendors warrant that the ACE idler designs are ACE's own
proprietory designs.
13.1.3.8 The Roundo plate rolls at Somersby are operating satisfactorily.
13.1.4 The Purchaser shall after execution of this Agreement verify that
certain factual matters set out below advised to it by the Vendor are correct.
If these matters are not correct in any material way then that subject matter
shall be included in the list set out in clause 13.1.3 above:
13.1.4.1 The dispute between Transfield and ACC in respect of
the dimensioning of a component for the Mae Moh mine in Thailand was resolved in
or about 1994.
13.1.4.2 ACS credited Dartbrook in the amounts of $85,000 and
$32,000. Accordingly, both amounts are no longer outstanding debts owed by
Dartbrook to ACS.
13.1.4.3 Howrie Herringon & Forsyth made a settlement with ACE
in July 1996 in respect of a debt owed to ACE by Howrie Herringon & Forsyth for
an amount of $72,210. Howrie Herringon & Forsyth have paid ACE the amount of
$60,000 and ACE has credited Howrie Herringon Forsyth the balance of the debt in
the $12,210. Accordingly, this amount of $72,210 is no longer a debt owed by
Howrie Herringon & Forsyth to ACE .
13.1.4.4 ACS has prepaid rent in respect of a lease at Lot 10
Michelmore Street, Mackay between PACE Engineering Pty Limited as lessor, and
ACS as Lessee in the amount of $99,100 for the period commencing from 1 July
1996.
13.1.5 The Purchaser shall verify whether or not the matters referred to in
clause 13.1.4 above are correct or not by notice in writing to the Vendors at
least five (5) business days prior to completion, failing which no claim can be
made against the Vendors or the Guarantors in respect of such matters. The
Vendors shall cooperate and assist the Purchaser in verifying whether or not the
matters referred to in clause 13.1.4 above are correct.
13.1.6 If the company or its subsidiaries suffers any loss or damage as a
result of any matter which forms part of the list in clause 13.1.3 above then
the threshold referred to in clause 13.12.2 and in clause 24.2 of this Agreement
shall be taken into account in the calculation of such loss or damage.
Interpretation of contractual warranties
13.2 13.2.1 Each warranty contained in this Agreement is a separate warranty and
its scope and meaning is not limited or governed by the existence and scope of
any other warranty.
13.2.2 When a warranty is expressed in absolute terms, it covers the
particular topic or matter, including anything known to the Vendors, Directors
or to the employees.
13.2.3 When a warranty is made only on the basis of the Vendors' knowledge
of the Company or a subsidiary of the Company, the warranty:
13.2.3.1 includes the knowledge or awareness of the Vendors'
shareholders, directors, or employees;
13.2.3.2 imposes on the Vendors and each of them:-
-14-
<PAGE> 15
13.2.3.2.1 the obligation to make all
diligent and reasonable inquiries, before entering into this Agreement, to
ensure that the warranty is accurate, complete and not false or misleading; and
13.2.3.2.2 liability for breach of warranty
if the Vendors or their directors or the employees would have acquired knowledge
of facts establishing a breach if the Vendors had carried out those inquiries.
13.2.4 Application of warranties to ACS
13.2.4.1 The parties acknowledge that the last accounts were
prepared in respect of a period during which the Company owned three out of the
four issued shares in ACS;
13.2.4.2 The warranties contained in clauses 10.3 and 13.1 and
the First Schedule shall be read as applying, in so far as their provisions
shall be so applicable, to the audited financial statements of ACS and of each
other subsidiary for the year ending 30 June 1996.
13.2.4.3 Liability for breach of warranty shall be applied as if at all times
ACS were a wholly owned subsidiary of BCE and damages will also be assessed
accordingly.
13.2.5 in the interpretation of this clause 13.2 "employees" shall mean
the following employees of the Company or its subsidiaries:-
Ernest Robins, Martin Roberts, David Knight, Michael Geuder,
Alan James and Gerald Tinney.
Reliance on contractual warranties
13.3 The Purchaser has entered into this Agreement in reliance on each of the
warranties contained in Schedule 1 and the representations set out in clause 12.
Accuracy of warranties
13.4 The Vendors and the Guarantors warrant that the warranties contained in
this Agreement are accurate, contain no material omissions and are not
misleading or deceptive.
Application of warranties at completion
13.5 Any warranties which are expressed to apply at the date of this Agreement
also apply as warranties made jointly and severally by the Vendors and the
Guarantors with reference to the facts existing for each day up to and including
the date of completion of the sale of shares to the Purchaser.
Disclosure of facts rendering warranty incorrect
13.6 13.6.1 In the event of any party becoming aware prior to completion of any
facts which render any of the warranties contained in this Agreement incorrect,
inaccurate, false or misleading, and materially adverse to the Purchaser, such
party warrants that it will disclose those facts to the Vendors or the Purchaser
as the case may be prior to that completion.
13.6.2 The Purchaser acknowledges that as at the date hereof it is unaware
of any facts which render any of the warranties contained in this Agreement as
incorrect false or
-15-
<PAGE> 16
misleading and materially adverse to the Purchaser, except as specified in
clause 13 and Schedule 5 or in any other provision of this Agreement.
Verification of warranties
13.7 The Purchaser is entitled to make requisitions and inquiries before
completion to verify any of the warranties given by the Vendors or the
Guarantors and contained in this Agreement.
Vendors' obligation to furnish information
13.8 The Vendors agree to furnish before completion to the Purchaser or to the
Purchaser's solicitors or accountants (as may be requested by the Purchaser)
such documents and information as the Purchaser may reasonably require to verify
the accuracy of any warranties contained in this Agreement.
Non-Merger
13.9 The warranties contained in this Agreement and its Schedules do not merge
on completion of the sale of shares. Notwithstanding any rule of law to the
contrary, the Purchaser must give written notice to the Vendors of the nature of
any warranty claim within five (5) years from the date of completion of this
Agreement. After the end of such period all warranties shall expire except in
respect of any warranty claim which the Purchaser notifies the Vendors of by
notice in writing within the five (5) year period, and the benefit of those
warranties subject to any such notice shall enure beyond the notice period
herein referred to for the benefit of the Purchaser. This notice obligation does
not apply in respect of claims arising from circumstances involving fraud as to
which there shall be no notice period.
Rescission for breach of warranty
13.10 DELETED
13.11 If the Purchaser before completion discovers a breach of any warranty
contained in this Agreement which would render the Vendors liable for debt or
damages exceeding one million dollars (A$1,000,000), or would reduce the value
of the business of the Company or any of its subsidiaries or any of the assets
or increase their liabilities by an amount exceeding one million dollars
(A$1,000,000) the Purchaser may elect to:
13.11.1 rescind this Agreement by notice in writing to the Vendors and in
respect of such rescission the provisions of clause 27 hereof shall apply; or
13.11.2 complete the purchase of the shares referred to in Recital E
hereof, and receive an allowance on completion in respect of such breach of
warranty and notify the Vendors in writing of such breach and its election
(which the Purchaser agrees to do), in which event the Vendor may, within five
(5) business days of such notification rescind this Agreement by notice in
writing to the Purchaser and in respect of such rescission the provisions of
clause 27 hereof shall apply.
Measure of damages and liability for damages
13.12 13.12.1 The Vendors and the Guarantors jointly and severally are liable to
the Purchaser for damages for any breach of any warranty contained in this
Agreement, whether the breach of warranty is discovered by the Purchaser before
completion or is a breach for which notice is given within the period of five
(5) years after completion of the sale (as required by
-16-
<PAGE> 17
clause 13.9), unless the Purchaser shall have rescinded this Agreement in
accordance with clause 13.11.1 in which event no damages shall be payable by the
Vendors.
13.12.2 A threshold shall apply to the amount of the liability of the
Vendors for damages for any breach of any warranty contained in this Agreement
as set out in clause 24.
13.12.3.1 The aggregate of the amounts able to be recovered by the
Purchaser in respect of any warranty claim, including costs in establishing the
liability of the Vendor (other than a claim for breach of warranties relating to
taxation being the matters referred to in Section I of Schedule 1) shall not
exceed the amount of ten million dollars (A$10,000,000);
13.12.3.2 The aggregate of the amounts able to be recovered by the
Purchaser in respect of breaches of warranties relating to taxation being the
matters referred to in Section I of Schedule 1 including costs in establishing
the liability of the Vendor shall not exceed the amount of twenty million
dollars (A$20,000,000);
13.12.3.3 The aggregate of the amounts referred to in sub-clauses 13.12.3.1
and 13.12.3.2 above shall not exceed twenty million dollars (A$20,000,000).
13.12.4 The Purchaser will notify the discovery of any breach of warranty
contained in this agreement to the Vendors in the period of five (5) years from
the date of completion of this agreement except in relation to any breach of
warranty involving fraud in respect of which the time for notification shall be
unlimited.
13.12.5 Damages for breach of warranty shall be determined having regard to
the principles for the assessment of damages, including each of the following:-
13.12.5.1 any diminution in the value of the assets below
their value if there was no breach of warranty;
13.12.5.2 any additional liability incurred by the Company or
any of its subsidiaries for debt, damages, or any other loss incurred by the
Company or any of its subsidiaries, including the costs of investigating and
(subject to the proviso hereto) contesting claims giving rise to a breach of
warranty, to the extent not already reflected in clause 13.12.5.1 above;
PROVIDED HOWEVER THAT prior to contesting any such claim the Company or its
subsidiary shall obtain the written advice of a Barrister whom the Vendors and
the Purchaser agree to appoint jointly and who has at least seven (7) years
experience in the field, to the effect that the claim does have a reasonable
chance of success; THAT the Vendors and the Purchaser will be bound by such
opinion; and THAT the solicitor acting for the Company or a subsidiary in those
proceedings shall be the solicitor usually appointed by the Company, which shall
liaise and consult with the Vendors at all relevant times during the course of
the litigation arising from such claim.
13.12.5.3 any taxation liability that will arise on the
receipt of or in respect of an amount of damages payable under this agreement
but only in the event and to the extent:-
(a) that in assessing the amount of damages
payable under this agreement the amount of all taxes which would have been
payable but for the breach of warranty has been taken into account and reduced
the assessment accordingly; and
(b) that such taxation liability is not already
reflected in clauses 13.12.5.1 and 13.12.5.2 above.
-17-
<PAGE> 18
13.12.6 When quantifying the liability of the Vendors or of the Guarantors
for breach of warranty, the amount recoverable from the Vendors or the
Guarantors shall be reduced by each of the following:-
13.12.6.1 any compensation or reimbursement net of any
relevant tax payable in respect thereof (whether as regards the Company or a
subsidiary) received by the Company or its subsidiary or by the Purchaser from
any third party or any benefit received by the Company or its subsidiary as a
result of or consequent on the matters giving rise to the liability for breach
of warranty;
13.12.6.2 any reduction or extinguishment in the taxation or
other liability of the Company or its subsidiary as a result of the claim or
payment giving rise to the breach of warranty;
13.12.6.3 any provision included or allowed in the Company's
last accounts, which is current at the date of completion of this Agreement,
providing against the matter or event constituting the breach of warranty, to
the extent of that provision. with the intent that the Company and the Purchaser
are put back into the position they would have been but for the breach of
warranty.
13.12.7 The Purchaser shall be entitled, in respect of any liquidated
claim or sum certain which shall be due and payable by the Vendors or the
Guarantors to the Purchaser arrising from or as a result of the provisions of
this Agreement pursuant to any express right in this Agreement or under the
general law, and whether against the Vendors or the Guarantors or any one or
more of them, to claim such amount as a set off against principal monies and
interest payable by the Purchaser under the Loan Agreements to be entered into
on completion by the Purchaser in accordance with the provisions of clause 9.1
hereof and Schedule 7.
Notification of breach of warranties
13.13 The Purchaser shall notify the Vendors in writing of any of breach of
warranty within seven (7) business days of becoming aware of the same.
13.14 The parties shall attempt to agree on a means of remedy or rectification
of all alleged breaches of warranty under this agreement. If they are unable to
so agree then the such disagreement shall be regarded as a dispute for the
purposes of clause 29.1 and clause 29 shall operate in relation to such dispute
except for the provisions of clauses 29.2 and 29.7 which shall not operate.
PURCHASER'S REPRESENTATIONS
The representations
14.1 The Purchaser represents, that at the date of this Agreement:-
14.1.1 The Purchaser (if a company)-
14.1.1.1 has authorised the execution of this Agreement under
its common seal;
14.1.1.2 has the legal power to enter into the provisions of
this Agreement;
14.1.1.3 has not received:-
-18-
<PAGE> 19
14.1.1.3.1 any notice, summons or order for winding up;
14.1.1.3.2 any notice or order for the appointment of a
receiver or of an administrator;
14.1.2 There are no currently unsatisfied judgements, orders or writs of
execution against the Purchaser, nor has the Purchaser entered into any
arrangement or composition with creditors.
14.1.3 The Purchaser is not involved in or aware of any current or
threatened civil or criminal proceedings, arbitration or dispute, relating to
its assets or business or shares, or directors or principal executive officer.
14.1.4 14.1.4.1 In this Clause pre-completion transactions shall mean
invoiced or supplied work undertakings projects and contractual works entered
into or engaged upon by the Purchaser involving the furnishing of advice the
manufacture and supply and installations of materials or equipment or plant and
the performance of any work whether during the ordinary course of the Purchasers
business or otherwise at any time prior to the date of completion of this
Agreement.
14.1.4.2 There are no nor will there be any liabilities claims
causes of actions suits or demands in respect of any pre-completion transaction
as at completion or for A period OF FIVE (5) YEARS after completion.
Application of representations at completion
14.2 These representations apply at this date of this Agreement and up to and
including the date of completion of the sale of shares to the Purchaser,
provided that this clause shall not affect the operation of clause 14.1.4.2.
Disclosure of facts rendering representation incorrect
14.3 In the event of the Purchaser becoming aware prior to completion of any
facts which render any of the representations under this clause incorrect,
inaccurate, false or misleading, the Purchaser warrants that the Purchaser will
promptly disclose those facts to the Vendors in writing prior to completion.
14.4 The Purchaser warrants that it is or will prior to completion be a fully
owned subsidiary of Continental Conveyor and Equipment Company LP.
14.5 DELETED
Indemnities
The indemnity
15.1 Subject to clause 13.1 hereof, the Vendors and the Guarantors agree jointly
and severally from the date of this Agreement and for each day up to and
including the day of completion, and from completion to indemnify the Purchaser
and the Company and its subsidiaries against the losses, damages and liabilities
specified in the Deed of Indemnity in Schedule 2:
-19-
<PAGE> 20
15.1.1 which in aggregate are limited to a sum of ten million dollars
(A$10,000,000) in respect of any warranty claim (other than a claim for
breach of warranties relating to taxation being the matters referred to in
Section I of Schedule 1);
15.1.2 which in aggregate are limited to a sum of twenty million dollars
(A$20,000,000) in respect of breaches of warranties relating to taxation being
the matters referred to in Section I of Schedule 1; and
15.1.3 Notwithstanding the foregoing, the aggregate of all losses damages
and liabilities under the Deed of Indemnity in Schedule 2 referred to in
sub-clauses 15.1.1 and 15.1.2 above shall not exceed twenty million dollars
(A$20,000,000).
Preparation of Deed of Indemnity
15.2 The Purchaser will cause to be prepared the Deed of Indemnity and shall
submit for execution to the Vendors and the Guarantors not later than 7 days
before the date of completion sufficient copies of that deed duly executed by
the Purchaser to enable each party to the deed to receive a fully executed copy.
Delivery of executed deed
15.3 On completion the Vendors will deliver to the Purchaser the Deed of
Indemnity duly executed by the Vendors, by the Guarantors and by the Company.
Priorities
15.4 15.4.1 The Purchaser may claim against the Vendors or any one or more of
the Guarantors either for breach of warranty or under this indemnity, or
concurrently for both breach of warranty and for indemnity.
15.4.2 The Purchaser may exercise and exhaust all remedies against the
Vendors and the Guarantors for breach of warranty and for indemnity, without
being required to elect between those rights and remedies.
15.4.3 The Vendors and the Guarantors are liable to the Purchaser for the
full amount covered by the warranties and the indemnities for the particular
matters claimed, but the amount recovered under either of them shall be credited
against the claim made under the other basis.
Service agreements
Service agreements with Vendors
16.1 Each of Peter John Baird, Mark David Elliott, John Robert Clack and Stephen
James Page ("Executives") will on completion enter into and execute severally a
service agreement with the company named as a party to the deed set out in
Schedule 3.
16.2 The form and content of each of such service agreement shall be in the form
of that set out in Schedule 3 to this Agreement. The bonus percentage to be
included in clause 4.5 of such agreement shall be as follows:-
PETER JOHN BAIRD: 6%
MARK DAVID ELLIOTT: 6%
-20-
<PAGE> 21
JOHN ROBERT CLACK: 6%
STEPHEN JAMES PAGE: 2%
Preparation and Execution of service agreement.
16.2.1 the Purchaser shall cause to be prepared the form of each service
agreement;
16.2.2 the Purchaser will submit to each Executive no later than five (5)
business days prior to the date fixed for completion of this Agreement an
engrossment of the service agreement together with sufficient copies in order
that there shall be an executed copy of the deed available for the Executives,
Purchaser and the company named as a party in the deed set out in Schedule 3 at
completion;
16.2.3 the Vendors and the Guarantors jointly and severally shall cause
such deeds to be executed by the respective Executives and by the company named
as a party in the deed set out in Schedule 3 before completion and for the same
to be handed over to the Purchaser on completion.
Obligation on completion
16.3 Completion of this sale is conditional on the Vendors having procured the
execution of the deeds submitted by the Purchaser in accordance with para 16.2,
by each of the parties to such deeds including by the company named as a party
in the deed set out in Schedule 3 and on fully executed copies of such deeds
being handed over by the Vendors to the Purchaser and to the Company on
completion.
PROPERTY, RISK AND TITLE
Transfer on completion
17.1 The property, risk (of loss or damage) and title to the Vendors' shares:-
17.1.1 remains with the Vendors until completion;
17.1.2 passes to the Purchaser on and from completion.
Destruction of Company's property
17.2 If any part of the business premises or equipment plant and machinery owned
or occupied by the Company and any of its subsidiaries is destroyed or
substantially damaged before completion:-
17.2.1 the Vendors shall within 48 hours after the destruction or damage
notify the Purchaser in writing ("notice of damage") of the occurrence, the
nature and extent of the loss and whether and to what extent it is covered by
insurance;
17.2.2 DELETED
17.2.3 if the allowance provided for in clause 10.1.2 applies to a claim
for damage or destruction which claim exceeds one million dollars (A$1,000,000),
which is made before completion and which is not to an amount of at least the
excess over one million dollars (A$1,000,000), covered by realisable payments
under policies of insurance, then the Vendors
-21-
<PAGE> 22
may by notice in writing given to the Purchaser within one calendar month of the
occurrence of such damage or destruction, rescind this agreement.
Meaning of destruction or substantial damage
17.3 For the purpose of clause 17.2 destruction or substantial damages means
total amount of the loss or damage to the assets of the Company or of the
relevant subsidiary of the Company exceeding one hundred thousand dollars
(A$100,000) comprising:-
17.3.1 the cost or repair or replacement of the destroyed or damaged items;
and
17.3.2 loss of profits and other losses incurred or reasonably expected to
be incurred as a result of the destruction or damage.
Adjustments where insurance is inadequate
17.4 Subject to clause 17.2.3 if the Purchaser elects under clause 17.2.2 to
purchase the shares and if the loss or damage is not covered to its full extent
by insurance, the share price will be adjusted on completion by reducing the
share price by the amount of the loss or damage net of any insurance recoveries.
COSTS
Legal and other costs
18.1 Subject to clause 21.6 each party shall bear its own legal and other costs
of the negotiations, due diligence enquiries, and the preparation, execution and
completion of this Agreement and of all other instruments.
Stamp duty
18.2 The Purchaser is responsible for stamp duty payable on this Agreement, the
transfers of shares, and on all other instruments executed pursuant to the
provisions of this Agreement except any stamp duties payable on the executed
forms of the documents referred to in Schedules 2 to this Agreement.
18.3 The Purchaser will pay to BCE on completion the stamp duty payable on the
share transfer document referred to in clause 5.1.6 and the reasonable costs
incurred by the Company in respect of the preparation, execution and stamping of
that share transfer.
CONDUCT PENDING COMPLETION
Assistance to purchaser
19.1 From the date of this Agreement until completion the Vendors agree to
cooperate with the Purchaser and to procure the cooperation of the officers and
employees of the Company and its subsidiaries to allow the Purchaser, and the
Purchaser's employees and agents, including solicitors, accountants and other
consultants, to:-
19.1.1 attend during business hours at the premises of the Company and its
subsidiaries;
19.1.2 observe the conduct of the business;
-22-
<PAGE> 23
19.1.3 inspect and examine the statutory, financial, taxation business and
other records, correspondence and documents of the Company and its subsidiaries;
19.1.4 consult with the auditor, officers and employees of the Company and
its subsidiaries, with regard to the conduct of the business and the Company,
assets, liabilities, employees and business of the Company and its subsidiaries.
Confidentiality
19.2 The Purchaser warrants that the Purchaser will use its best endeavours to
ensure that its employees, agents and advisers shall treat all the financial,
marketing, technical and other information provided by or on behalf of the
Vendors or the Company relating to the Company its subsidiaries and the
business, whether orally or in writing as confidential, until completion, and
not, without the express written permission of both the Vendors and the Company,
disclose any of it to anyone else other than the Vendors the Company and the
Purchaser's parent company and advisers employees and agents of the Purchaser's
parent company.
Management and conduct of business
19.3 The Vendors agree to ensure that until completion the business and affairs
of the Company and each subsidiary will be conducted in the ordinary course of
business as follows:-
19.3.1 The Company and its subsidiaries will conduct and manage the
business and their affairs:-
19.3.1.1 with reasonable care and skill in accordance with normal
and prudent practice;
19.3.1.2 as a going concern;
19.3.1.3 so as to maintain the goodwill, value and profitability of
the business; and
19.3.1.4 to preserve intact its business organisation, employees,
management, suppliers and distributors.
19.3.2 The Company and its subsidiaries shall:-
19.3.2.1 maintain, preserve and keep in working condition their
assets, plant and equipment and stock-in-trade excepting fair wear and tear;
19.3.2.2 maintain the licences, permits and authorities held by the
Company and its subsidiaries which are required to conduct the business;
19.3.2.3 maintain until after completion all insurance policies
held by the Company and subsidiaries at the date of this Agreement;
19.3.2.4 maintain up to date the statutory, financial and other
books, accounts and records of the Company and its subsidiaries.
19.3.3 The Company and its subsidiaries shall not without the consent in
writing of the Purchaser, which consent shall not be unreasonably withheld:-
-23-
<PAGE> 24
19.3.3.1 dispose of or encumber any of its assets, other than in
the ordinary course of business;
19.3.3.2 dispose of stock-in-trade except at usual and prevailing
prices and conditions and in the ordinary course of business;
19.3.3.3 enter into any material contract, commitment or liability
affecting the Company or any subsidiary unless both:-
19.3.3.3.1 such contract commitment, or liability is
entered into in the ordinary course of the business of the Company or its
subsidiary; and
19.3.3.3.2 the amount of such contract, commitment or
liability does not exceed one hundred thousand Dollars ($100,000) or extend
beyond twelve months;
19.3.3.4 subject to clause 19.3.3.3 purchase any assets, plant or
equipment at a price, except:-
19.3.3.4.1 to replace essential plant or equipment
required to conduct the business of the Company and its subsidiaries which has
been damaged, destroyed or is not in working order or needs replacement as a
result of fair wear and tear;
19.3.3.4.2 to perform a commitment entered into before the
date of this Agreement;
19.3.3.5 terminate the office or employment of any officer or
employee of the Company or its subsidiaries, or change the terms of employment
of any employees or pay any bonuses without the consent of the Purchaser to any
employees or alter the remuneration or conditions of employment of employees
(except as to non-salaried employees) other than in the ordinary course of
business;
19.3.3.6 hire or appoint any new employees or officers of the
Company or its subsidiaries (except as to non-salaried employees) other than in
the ordinary course of business or other than as expressly provided in this
Agreement;
19.3.3.7 alter the constitution of the Company or its subsidiaries,
hold any meetings of the Company or any of its subsidiaries, pass any
resolutions, allot any shares other than as provided for in clause 3 hereof, or
declare any dividend or distribute assets or profits of the Company or a
subsidiary or return any capital to its members, except as is expressly provided
in this Agreement.
19.3.3.8 Declare and/or pay any dividend or make superannuation
payments to the Vendors or the Guarantors other than as provided for in Recitals
H to this Agreement; the proposed service agreement under Schedule 3 to this
Agreement; or the Superannuation Guarantee Scheme.
REQUISITIONS
Time for requisitions
20.1 The Purchaser or the Purchaser's solicitor may, within ten business days
after the date of this Agreement, deliver to the Vendors' solicitor, or to the
Vendors if not represented by a solicitor, requisitions and inquiries regarding
the matters indicated in para 20.2 (called "requisitions").
-24-
<PAGE> 25
Subject of requisitions
20.2 Requisitions may be made regarding the Vendors' shares, the Company and its
subsidiaries (including their assets, liabilities, and the topics covered in
this Agreement) and the business.
Consequences of being late
20.3 The Purchaser is deemed to have waived this entitlement if the requisitions
are not made within the time indicated in 20.1.
Replies to requisitions
20.4 Completion is conditional on the Vendors' solicitor, or the Vendors if not
represented by a solicitor, furnishing detailed, accurate and complete replies,
to the Vendors' knowledge, information and belief, to the requisitions in
accordance with Clause 20.5.
Time for replies
20.5 The replies to requisitions shall be given within five (5) business days
after receipt of the requisitions and in any event not less than three business
days before the date of completion.
COMPLETION
Time of completion
21.1 Completion of this agreement shall occur not later than 4 pm on the day
which is the 15th business day after the completion of the due diligence. The
due diligence shall be completed on or prior to 22 November 1996 or such later
date as to which the parties may agree in writing. In respect of the day fixed
for completion time is not of the essence of this Agreement. If completion does
not occur on that date, either party may on or after the next business day serve
on the other party a notice requiring completion to occur on a business day
which is not less than ten (10) business days after the date when notice is
received by the recipient of the notice, and service of such notice renders such
date specified in that notice an essential time for completion. In the event
that the due diligence is not completed by 22 November 1996, then the Vendors
may rescind this Agreement by notice in writing to the Purchaser
Place of completion
21.2 Completion shall be effected at the Vendors' solicitor's office or at such
other place as is nominated by the Vendors' solicitor or agreed between the
parties.
Vendors to vest title and control
21.3 On completion the Vendors will vest in the Purchaser title to the Vendors'
shares in the Company and control of the assets, business and affairs of the
Company and its subsidiaries, and the parties will comply with all matters
required to occur on completion in accordance with this Agreement.
Delivery to Purchaser on completion
21.4 On completion the Vendors will deliver to the Purchaser:-
-25-
<PAGE> 26
21.4.1 a statutory declaration verifying the Vendors' title,
capacity and ownership of the Vendors' shares in the Company;
21.4.2 share certificates in respect of the Vendors' shares;
21.4.3 transfers of the Vendors' shares to the Purchaser, duly
executed;
21.4.4 discharges or releases of mortgages, charges or encumbrances, or
of outstanding interests, over any asset of the Company or of its subsidiaries
not listed in Tables 4 and 5 to Schedule 5;
21.4.5 keys and security devices to the business premises;
21.4.6 written resignations by the directors, secretary and public
officer of the Company and each subsidiary;
21.4.7 authority for alteration of instructions for the operation of
the bank accounts of the Company and each subsidiary, as required by the
Purchaser, duly executed;
21.4.8 the following property and records of the Company and each of
its subsidiaries:-
21.4.8.1 the certificate of incorporation;
21.4.8.2 the common seal and any other seals;
21.4.8.3 minutes books of directors' and shareholders'
meetings;
21.4.8.4 all available copies of the memorandum and articles
of association;
21.4.8.5 all registers of members, directors, charges, and
any other statutory registers, fully entered up to the date of completion;
21.4.8.6 cheque books, deposit books, bank statements and
other banking books and records;
21.4.8.7 control over the financial, accounting and business
records, including copy taxation returns, assessments, and all other documents
and records held by each company relating to its business, assets, liabilities
and affairs;
21.4.8.8 title deeds and records of ownership relating to the
assets of the Company and each subsidiary, including all leases, licences,
authorities and permits in respect of the business and including the share scrip
in respect of the shares held by the Company in the subsidiaries as specified in
Recital B and in respect of the shares to be acquired by the Company as
specified in Recital C;
21.4.8.9 insurance policies held by the Company and each
subsidiary;
21.4.8.10 the trust deed, and all books, records, taxation
returns, relating to each superannuation fund of the Company and each of its
subsidiaries;
21.4.8.11 the Deed of Indemnity in accordance with clause 15;
21.4.8.12 service agreements in accordance with clause 16;
-26-
<PAGE> 27
21.4.8.13 the Vendors' authority to receive the balance
purchase price and a direction as to its payment.
21.4.8.14 the deed referred to in clause 32.
Meeting of directors
21.5 The Vendors will cause meetings of the directors of the Company and of each
of its subsidiaries to be held at the time and place of completion, in order to:
21.5.1 accept the resignations of the relevant directors, secretary and
public officer;
21.5.2 appoint the Purchaser's nominees as directors, secretary and
public officer of each company;
21.5.3 approve the Purchaser as a member of the Company and resolve to
register the transfers of shares subject to the transfers being stamped with
payment of stamp duty;
21.5.4 authorise the new arrangements for operating each company's bank
accounts. Debts relating to Company and its subsidiaries and Vendors
21.6 21.6.1 If any moneys are due by the Vendors or the Guarantors to the
Company or any of its subsidiaries at the time of completion, the entire debt is
payable by the Vendors or the Guarantors as the case may be to the creditor
company on completion and the creditor company shall execute a release
discharging the Vendors or the Guarantors as the case may be from liability at
the date of completion.
21.6.2 If any moneys are due by the persons or companies nominated in
Table 25 of Schedule 5 to the Company or any of its subsidiaries at the time of
completion, the entire debt shall be paid by the Vendors either as debtor or as
agent for the debtor (as the case may be) to the creditor company on completion
and the creditor company shall execute a release discharging the Vendors from
any liability at the date of completion.
21.6.3 Any moneys due by the Company or any of its subsidiaries to one
another or to the Vendors or to the Guarantors or any of them shall be paid by
the debtor company on completion as set out in Table 23 to Schedule 5, and the
Vendors and Guarantors shall on completion execute a release discharging the
debtor company as the case may be from liability at the date of completion.
21.6.4 Any monies due by the Company or any of its subsidiaries to the
persons or companies nominated in Table 24 to Schedule 5 shall be paid by the
debtor Company on completion.
21.6.5 The amount of all professional and other fees or outgoings of a
non-deductible character incurred or expended by the Company and each of its
subsidiaries on behalf of the Vendors or the Guarantors with its accountants and
lawyers or otherwise in respect of negotiations towards the exchange of this
agreement, (otherwise than for preparation of accounts and reports required by
this agreement), litigation entered into prior to the date hereof and the
obtaining of advice in relation to previous negotiations between the parties and
in respect of this Agreement and not already adjusted in the last accounts, must
be paid by the Vendors or the Guarantors as the case may be to the Company on
completion.
-27-
<PAGE> 28
21.6.6 The amount of each debt due to the Company or each of its
subsidiaries and unpaid at completion which is at completion or shall later
become overdue by more than 180 days, to the extent not already provided against
in the last accounts, shall, at the time of completion, or within seven (7) days
of the date upon which each such debt shall later become overdue by more than
180 days (as the case may be), be paid by the Vendors to the Purchaser and each
such debt shall thereby be assigned to the Vendors as tenants in common in equal
shares, and the Vendors shall be responsible for the collection of the same for
their own benefit and in that event the Purchaser will co-operate with the
Vendors and use its best endeavours to assist the Vendors in collecting such
debts. The Purchaser shall cause the Company to do and sign all such things and
documents of assignment and notice as reasonably required by the Vendors to
effect the said assignments.
21.6.7 DELETED.
Guarantees
21.7 The Purchaser agrees to indemnify the Vendors and the Guarantors against
any liability arising after the date of completion of this agreement under any
guarantees which have been entered into by one or more of the Vendors or the
Guarantors for the obligations of the Company or any of its subsidiaries and
which have been made in the ordinary course of business and which remain in
force after completion.
Purchaser's obligations on completion
21.8 On completion the Purchaser will deliver to the Vendors:-
21.8.1 a nomination of the person whom the Purchaser desires to be the
directors, secretary and public officer of each of the Company and its
subsidiaries and their written consent to accept nomination for those offices;
21.8.2 bank cheques for the balance purchase price (plus or minus
adjustments) to the Vendors or as the Vendors may direct;
21.8.3 any other documents, authorities or undertakings expressly
provided in this Agreement.
PATMORE LOAN PROVISION
21.9.1 The parties acknowledge:
21.9.1.1 At the date of this Agreement Patmore owns one ordinary share
in the capital of ACS.
21.9.1.2 The remaining shares in ACS are owned by BCE.
21.9.1.3 The parties have entered into this Agreement for sale of
shares in BCE on the basis that on or prior to completion of this Agreement BCE
will own the whole of the issued capital in ACS.
21.9.1.4 To this intent the Company is on or prior to completion
purchasing from Patmore one ordinary share in the capital of ACS for the
consideration of A$1,443,067.00.
21.9.2 On completion of the purchase by BCE of the ACS share as referred to in
clause
21.9.1.4 above Patmore will direct the payment of A$600,000 being part of the
consideration
-28-
<PAGE> 29
referred to in clause 29.1.9.4 above in favour of the Purchaser. The parties
shall cause BCE to pay such sum by bank cheque to the Purchaser on completion
21.9.3 The A$600,000 of such directed consideration in clause 21.9.2 above shall
then be owing by the Purchaser to Patmore. Patmore and the Purchaser agree that
the terms of repayment of the said loan shall be as set out in the loan
agreement set out in schedule 7(b) and the said loan shall for all purposes be
the same as the loan under such loan agreement.
SHAREHOLDERS AGREEMENT WITH RINGWAY SHAREHOLDERS
22.1 The Vendors shall use their best endeavours to procure on or before
completion a Shareholders Agreement on the part of Paul Jeffrey Owen, Peter
Gordon Scifleet and Bruce Douglas Incoll as shareholders in Ringway Pty Limited
ACN 003 581 897.
22.2 Such agreement shall be in the form of the draft deed in Schedule 8 to this
Agreement.
22.3 The Vendors shall use their best endeavours to cause the deed in accordance
with Schedule 8 to be prepared and executed by Paul Jeffrey Owen, Peter Gordon
Scifleet and Bruce Douglas Incoll and the Company before completion and handed
over to the Purchaser on completion.
PARTIES' CONDUCT AFTER COMPLETION
Further assurance
23.1 The Vendors and the Guarantors agree that after completion each of them
will execute such instruments and deeds and perform such acts as will be
reasonably necessary to carry out the provisions of this Agreement and the
transactions contemplated by this Agreement.
Provision of information by Vendors
23.2 For the period of five (5) years after completion, the Vendors and the
Guarantors will promptly provide to the Purchaser or to persons nominated by the
Purchaser, including to the directors and the auditor of the Company, such
information and explanation relating to the affairs of the Company prior to
completion as is reasonably required by the Purchaser for the purpose of
litigation or disputes involving the Company and third parties, and to satisfy
the requirements of taxation and other authorities.
Access to Company's records
23.3 The Purchaser agrees to ensure that the Company will permit the Vendors,
and the Vendors' authorised agent, for the period of five (5) years after
completion, at reasonable times, to inspect and at the Vendors' expense to
obtain copies of the Company's financial and business records, relating to the
period of seven (7) years before completion, if reasonably required by the
Vendors for taxation purposes or for litigation between the Vendors and parties.
24.1 In this clause:-
24.1.1 "Damages for breach of contractual warranty" shall mean the damages
for breach of warranties contained in this Agreement as referred to in clause 13
and shall include contractual warranties relating to each of the Company and
each of its subsidiaries;
24.1.2 "Damages for breach of product warranty" shall mean the damages for
breach of warranties described in clauses 4.1 and 4.2 of the Deed of Indemnity
set out in
-29-
<PAGE> 30
Schedule 2 to this Agreement, and shall include warranties under agreements made
by or in respect of products manufactured, sold, distributed or installed by the
Company and each of its subsidiaries.
24.2 No action or proceeding shall be instituted by the Purchaser against any
other party to this Agreement for damages for breach of contractual warranty or
for damages for breach of product warranty unless and until the amount of any
claim for such damages (and in respect of more than one claim the aggregate of
the amounts of such claims for damages) shall exceed A$250,000.
24.3 In all circumstances the Purchaser will bear and be responsible for the
threshold of A$250,000 forming part of damages for breach of contractual
warranty and damages for breach of product warranty referred to in clause 24.2.
24.4.1 In the event the Purchaser makes a claim for breach of contractual
warranty on the basis that one or more assets of the Company have a lesser value
than that attributed by the last accounts and the audited financial statements
of the subsidiaries for the period ending 30th June 1996 ("the balance sheet")
and such claim is ultimately proven and damages are payable by the Vendors or
Guarantors to the Purchaser then payment shall be delayed pending the Vendors or
Guarantors electing by notice in writing to the Purchaser, to call for an
assessment ("the assessment") of all assets valued in the balance sheet.
24.4.2 The Purchaser's accountants and the Vendors' and/or Guarantors'
accountants shall jointly carry out the assessment and shall be entitled to have
regard to knowledge subsequent to 30 June 1996 bearing on the value of assets as
at 30th June 1996. In the event that the Purchaser's accountants and the
Vendors' and/or Guarantors' accountants are unable to agree on the outcome of
the assessment then such disagreement shall be regarded as a dispute for the
purposes of clause 29.1 hereof and clause 29 hereof shall operate in relation to
such dispute.
24.4.3 The assessment shall take into account the amount of any damages payable
to the Purchaser under clause 24.4.1 above, which shall then be reduced by the
amount that the assessment shows is the net surplus of all other assets in the
balance sheet over the book value thereof in the balance sheet, and such reduced
amount (if any) shall then subject to clause 13.12.3 be payable by the Vendors
and/or Guarantors.
CONSEQUENCES OF TERMINATION
25. If this Agreement is terminated by the Purchaser upon the Vendors' breach of
an essential term or by the Purchasers acceptance of the Vendors repudiation of
this Agreement or for breach of any warranty contained in this Agreement, the
Purchaser is entitled to recover from the Vendors:-
25.1 return of any money paid by the Purchaser on account of the purchase
price; and
25.2 all direct legal and accounting costs and the expenses incurred by the
Purchaser to acquire financing in entering into this agreement and in respect of
such breach.
26. If the Vendors terminate this Agreement due to the Purchaser's breach of an
essential term or by virtue of the Vendors' acceptance of the Purchaser
repudiation of this Agreement, the Vendors are entitled:-
26.1 to retain or to resell the Vendors' shares in the Company; and
-30-
<PAGE> 31
26.2 to recover from the Purchaser all direct legal and accounting costs
incurred by the Vendor in entering into this Agreement and in respect of such
breach.
RESCISSION OF AGREEMENT
Consequences of rescission
27.1 If this Agreement is rescinded by either party pursuant to an express right
to rescind contained in this Agreement:-
27.1.1 it is a rescission ab initio and the parties shall be restored, as
far as possible, to the position as if they had not entered into this Agreement;
27.1.2 any money, including interest, paid by the Purchaser towards the
purchase price, shall be refunded to the Purchaser;
27.1.3 each party will bear its own costs and expenses of entering into and
participating in this Agreement and the rescission;
27.1.4 neither party will be liable to the other party for any damages or
claims under or relating to this Agreement.
Clause inapplicable to termination
27.2 This clause does not apply to the termination of this Agreement by either
party, for breach, for repudiation or for breach of warranty.
EVENTS OF DEFAULT
28.1 The following provisions of this agreement shall, without affecting the
essentiality of any other provisions of this Agreement under the general law, be
deemed to be essential terms of this agreement:-
clause 2.4 Benefit of agreement not assignable
clause 3 Share allotment
clause 9 Manner of payment of purchase price
clause 9.1 Loan Agreement
Clauses 9.6 letter of comfort and Guarantor's accounts
clause 10.1 Adjustments on completion
clause 16.1 Service agreements with Guarantors
Clause 19.3 Management and conduct of business until completion
clause 21.4 Deliverables on completion
clause 21.5 Meeting of directors
clause 21.9 Deed of Loan Agreement
-31-
<PAGE> 32
clause 31 Guarantee
28.2 A party may terminate this agreement by notice in writing to the other
within fourteen (14) days of receiving Notice of an event of default.
28.3 The following are events of default:-
28.3.1 if another party is a natural person: if that person shall be made
bankrupt or shall assign his estate to the benefit of creditors or shall enter
into an arrangement under Part X of the Bankruptcy Act 1966;
28.3.2 if another party is a corporation if the corporation shall have a
liquidator appointed or a petition presented seeking its winding up or an
administrator appointed under Part 5.3A of the Corporations Law;
28.3.3 if a party shall commit a breach of a non-essential term of this
agreement and such non-essential term being able to be remedied, that party
shall not have effected its remedy within thirty (30) days of being given a
notice requiring remedy of that breach;
28.3.4 if breach of a non-essential term of this agreement shall be a
continuing breach and the party in breach shall not have remedied that breach
within thirty (30) days of being given notice requiring its remedy;
28.3.5 breach of a non-essential term of this Agreement which is not
capable of being remedied by the party committing the same.
28.3.6 breach of an essential term of this Agreement.
MEDIATION
Settlement of disputes by Mediation
29.1 In the event of there being any dispute between one or more of the parties,
before or after completion, relating to or arising out of this Agreement,
including its construction, effect, the rights and obligations of the parties,
the performance, breach, rescission or termination of this Agreement, the
entitlement of any party to damages or compensation and the amount of that
entitlement (called "dispute"), the dispute shall be and is hereby referred to a
Mediator, to be agreed upon by the parties or such of them as shall be in
dispute or in the absence of agreement to a person nominated for the purpose by
the President for the time being of The Law Society of New South Wales, in
accordance with the procedure set out in clauses 29.3 to 29.5 below.
29.2 Unless a party to this Agreement has complied with paragraphs 29.2 to 29.5
inclusive, that party may not commence court proceedings relating to any dispute
arising from this Agreement except where that party seeks urgent interlocutory
relief in which case that party need not comply with this clause before seeking
such relief. Where a party to this Agreement fails to comply with paragraphs
29.2 to 29.5 inclusive any other party to the Agreement in dispute with the
party so failing to comply need not comply with this clause before commencing
court proceedings relating to that dispute.
29.3 Any party to this Agreement claiming that a dispute has arisen under this
Agreement between any of the parties to this Agreement shall give written notice
to the other party or parties in dispute designating as its representative in
negotiations relating to the dispute a person with authority to settle the
dispute and each other party given written notice shall promptly give
-32-
<PAGE> 33
notice in writing to the other parties in dispute designating as its
representative in negotiations relating to the dispute a person with similar
authority.
29.4 The designated persons shall, within ten days of the last designation
required by paragraph 29.3, following whatever investigations each deems
appropriate, seek to resolve the dispute.
29.5 If the dispute is not resolved within the following ten days (or within
such further period as the representatives may agree is appropriate) the parties
in dispute shall within a further ten days (or within such further period as the
representatives may agree is appropriate) seek to agree on a process for
resolving the whole or part of the dispute through mediation and on:-
29.5.1 The procedure and timetable for any exchange of documents and other
information relating to the dispute;
29.5.2 Procedure rules and a timetable for the conduct of the mediation;
29.5.3 Whether the parties should seek the assistance of a dispute
resolution organisation.
29.6 The parties acknowledge that the purpose of any exchange of information or
documents or the making of any offer of settlement pursuant to this clause 29 is
to attempt to settle the dispute between the parties. No party may use any
information or documents obtained through the dispute resolution process
established by this clause 29 for any other purpose than an attempt to settle a
dispute between that party and other parties to this Agreement.
29.7 Compliance with the provisions of clauses 29.1 and 29.3 to 29.5 inclusive
is a condition precedent to any party commencing court proceedings as referred
to in clause 29.2.
SERVICE OF NOTICES
Service in accordance with this clause
30.1 Any notice, document or demand (called "notice") under this Agreement may
be served in accordance with this clause.
Written notice
30.2 The notice shall be in writing, signed by the party giving it or by that
party's solicitor.
Service of notice
30.3 The notice shall be served on the another party or on that party's
solicitor. Service on one of the Vendors or the Guarantors shall be deemed
service on all of the Vendors or Guarantors.
Particulars for service
30.4 Particulars for the service of notices are:-
Vendors: Eightzigbarb Pty Ltd,
Y.F.B.Investments Pty Ltd
Irene Investments Pty Ltd and Patmore Enterprises Pty. Limited
Address: 39 Queen Street Auburn, NSW 2144
-33-
<PAGE> 34
Vendors' solicitor: Esplins
Address: Level 6, 261 George Street,
SYDNEY 2000
Facsimile: (02) 9251 3090
DX: 346, SYDNEY
Purchaser: Continental Conveyor & Equipment Pty Limited
Address: 145 Bridge Street,
MUSWELLBROOK 2333
Purchaser's solicitor: Thompson Norrie
Address: 9 Church Street,
MAITLAND 2320
Facsimile: (049) 33 6399
DX: 21605, MAITLAND
Guarantors: Messrs Peter John Baird, John Robert Clack, Mark
David Elliott and Stephen James Page.
Address: As set out on page 1 to this Agreement
Guarantors' solicitor: Esplins
Address: Level 6, 261 George Street,
SYDNEY 2000
Facsimile: (02) 9251 3090
DX: 346, SYDNEY
Additional or altered address
30.5 Any party may advise another party of an additional or an altered address
for the service of notices, which is within the State of New South Wales and is
not a post office box or poste restante.
Modes of service
30.6 A notice may be served:-
30.6.1 by delivering it to the party or to the party's solicitor at the
address shown in clause 30.4 or notified under clause 30.5 (called "the party's
address") and leaving it with the party, the solicitor or some other person
accepting the notice on behalf of either of them;
30.6.2 by sending it by pre-paid post, correctly addressed, to the party's
address;
30.6.3 by transmitting it on a business day by facsimile to the party's
solicitor's facsimile receiving facility indicated in clause 30.4;
30.6.4 by delivering it to the party's solicitors through the Document
Exchange in which the solicitor has receiving facilities as indicated in clause
30.4.
Time of service
30.7 A notice is considered to have been served:-
-34-
<PAGE> 35
30.7.1 at the time of delivery;
30.7.2 on the third business day after the day on which it is posted, the
first business day being the day of posting;
30.7.3 on the business day on which the notice is received by the
recipient's facsimile receiving facility;
30.7.4 on the third business day after the day on which the notice is
delivered by the send to the Document Exchange in which the recipient has the
receiving facilities indicated in clause 30.4 and is placed in the correct box
for dispatch to the recipient's facility at that Document Exchange, the first
Business day being the day of delivery by the sender to the Document Exchange.
GUARANTEE FOR VENDORS' OBLIGATIONS
Guarantee
31.1 In consideration of the Purchaser entering into this Agreement to purchase
the Vendors' shares, the Guarantors, at the request of the Vendors, jointly and
severally agree to guarantee to the Purchaser:-
31.1.1 the performance and observance by the Vendors and each of them, of
each of the Vendors' obligations under this Agreement, before, on and after
completion of the sale;
31.1.2 the accuracy of all warranties and representations in this agreement
made jointly or severally by or on behalf of the Vendors or of persons
representing one or more of the Vendors jointly or severally either in the
Agreement or to induce the Purchaser to enter into or to complete this
Agreement;
31.1.3 the payment of any money by all or any of the Vendors to the
Purchaser, to the Company or to any third party, in accordance with this
Agreement.
Continuing guarantee
31.2 This is a continuing guarantee and is irrevocable until discharged pursuant
to the terms of this guarantee.
Guarantors' obligation to pay
31.3 In the event of any breach by one or more of the Vendors covered by this
guarantee, the Purchaser may proceed to recover the amount claimed as a debt or
as damages from any one or more of the Guarantors without having instituted
legal proceedings against one or more of the Vendors and without first
exhausting the Purchaser's remedies against the Vendors.
Further assurance
31.4.1 Principal obligations
The obligation of each Guarantor is a principal obligation and not
ancillary or collateral to any other obligation.
-35-
<PAGE> 36
31.4.2 Obligations absolute and unconditional
The obligation of each Guarantor is absolute and unconditional
and the liability of each Guarantor under this guarantee extends to and will not
be abrogated, prejudiced, affected or discharged (either in whole or in part) by
any one or more of the following:-
31.4.2.1 any modification of the liability of the Vendors under
this Agreement;
31.4.2.2 the release, amendment, variation, replacement or
discharge (either in whole or in part) of; or an agreement to release, amend,
vary, replace or discharge (either in whole or in part) the Vendors'
obligations, whether or not these matters are formalised in writing and whether
or not the Guarantors are aware of , or consents to these matters;
31.4.2.3 the granting of time, credit or any other indulgence or
concession to the Vendors, the Guarantors or any other person by the Purchaser
with or without the knowledge or consent of the Guarantors;
31.4.2.4 any compounding, compromise, release, discharge,
abandonment, assignment, transfer, waiver, exchange, relinquishment, variation
or renewal of the Vendors' obligations or other arrangements now or from time to
time in force between the Vendors and the Purchaser or any other persons, with
or without knowledge or consent of the Guarantors;
31.4.2.5 any judgement or rights which the Purchaser may have or
exercise against the Vendors, the Guarantors or any other person;
31.4.2.6 the Vendors' obligations or any part thereof, or the
Guarantors' obligations or any part thereof, being or becoming wholly or
partially illegal, void, voidable, defective, informal or unenforceable, whether
by reason of any statute (including without limitation, any statute of
limitation) or for any other reason whatever by which the liability of the
Vendors or the liability of the Guarantors would, but for this paragraph, have
been discharged or otherwise adversely affected;
31.4.2.7 any of the Guarantors being released or ceasing to be
bound by this guarantee;
31.4.2.8 the delay or failure of the Purchaser to enforce this
guarantee or the giving of any release or waiver by the Purchaser under this
guarantee or the making of any arrangement or compromise by the Purchaser with
any one or more of the Guarantors;
31.4.2.9 the Purchaser becoming a party to, or becoming bound by,
any compromise, assignment of property, scheme of arrangement, compromise of
debts or scheme of reconstruction by or relating to the Vendors or the
Guarantors or any one or more of them or the acceptance by the Purchaser of any
dividend or sum of money thereunder;
31.4.2.10 the winding up or bankruptcy of the Vendors, the
Guarantors or any one or more of them;
31.4.2.11 the liability of the Guarantors ceasing for any cause
whatever, including, without limitation, the Guarantors or any one of them being
or becoming incompetent to give this guarantee;
31.4.2.12 the death, lunacy or incapacity of any one or more of
the Guarantors;
-36-
<PAGE> 37
31.4.2.13 completion of the sale of shares;
31.4.2.14 the fact that the Vendors or any one of them may enter
into transactions with or incur obligations to the Purchaser without the
knowledge or consent of or notice to the Guarantors; or
31.4.2.15 any other fact, circumstance or thing whatever which,
but for this provisions, could or might operate to abrogate, prejudice, affect
or discharge (either in whole or in part) this guarantee.
DISTRIBUTORSHIP AGREEMENT
32.1 On or before completion of this Agreement the parties will cause
CONTINENTAL CONVEYOR & EQUIPMENT COMPANY L.P. a limited partnership having its
registered office at Winfield Alabama in the United States of America and PRINCE
ACE CORPORATION (Philippines) to enter into a distributorship agreement in
accordance with the draft form of Distributorship Agreement in Schedule 4
hereto.
32.2 Completion of this Agreement is conditional upon the execution of the
Distributorship Agreement referred to in clause 32.1 above, the form of which
shall have been submitted to the Vendors at least seven days prior to
completion, by each of the parties to such Deed, and on fully executed copies of
such deeds being handed over by the Vendors to the Purchaser and on completion.
33. Purchase Finance
33.1 The Purchaser is obtaining finance from an independent third party lending
institution ("the financier") up to maximum amounts as set out in clause 33.3
below, to finance its aquisition of the share capital of the Company and to
provide working capital for the Company and its subsidiaries ("financial
arrangements").
33.2 The financier shall be National Australia Bank Limited, Australia & New
Zealand Banking Group Limited, Commonwealth Bank of Australia Limited, Westpac
Banking Corporation or such other lending institution as the Vendors may approve
in writing.
33.3 This Agreement is conditional upon the Purchaser obtaining on or before
5.00pm on 22 November 1996 written advice of approval from the financier of the
financial arrangements and the terms of those arrangements as set out below:
33.3.1 Loan funds in an amount of not less than A$4,000,000 to be secured
to the financier by first registered charge over the shares to be acquired by
the Purchaser pursuant to this Agreement and;
33.3.2 Further loan funds in an amount of not less than A$5,000,000 to be
secured to the financier by first registered mortgage over the assets and
undertaking of the Company and its subsidiaries
33.3.3 the term over which such loans must be repaid shall be ten (10)
years
33.3.4 The interest rate applicable to such loans shall not exceed a fixed
rate of nine per centum (9%) per annum.
33.3.5 Approval and execution by the financier of the priority agreements
as set out in Schedules 9 and 10 hereto.
-37-
<PAGE> 38
33.3.6 Such other terms as shall be commercially reasonable and acceptable
to the Purchaser.
33.4 The Purchaser shall within seven (7) days of the date of this Agreement,
lodge finance applications for the loans set out above, with the financial
institutions specified in clause 33.2 above and shall furnish the particulars
reasonably required by those financial institutions for consideration of those
applications.
33.5 The Purchaser shall use its best endeavours to select and finalise the
financial arrangements with the financier as soon as practicable and use its
best endeavours to obtain approval and execution of the priority agreements in
accordance with clause 33.3.5 hereof.
33.6 In the event that the Purchaser shall not receive notice of approval of the
financial arrangements as set out in clause 33.3 above on or before 5pm on 22
November 1996, then the Purchaser shall notify the Vendors in writing served
within three (3) business days after that time:-
33.6.1 That the Purchaser has elected to waive the benefit of this clause;
or
33.6.2 That the Purchaser has elected to rescind this Agreement.
33.7 If the Purchaser elects to waive the benefit of this clause under subclause
33.6.1, completion of this Agreement shall occur within fifteen (15) business
days after the date of service of such notice of waiver on the Vendors;
33.8 If the Purchaser fails to serve the Vendor with any notification under
clause 33.6 above within the period of three (3) business days specified in that
paragraph, the Vendors may give notice in writing to the Purchaser within three
(3) business days after the expiration of that time, and before such finance
approval has been obtained, electing to rescind this Agreement, failing which
this Agreement shall become binding and unconditional.
33.9 If the Purchaser elects to rescind this Agreement under clause 33.6.2, or
if the Vendors elect to rescind this Agreement under clause 33.8, the provisions
of clause 27 of this Agreement shall apply in respect of such rescission.
33.10 If this Agreement shall be rescinded under clause 33.6.2 or under clause
33.8, then the Purchaser agrees that it will hold for and on behalf of the
Vendors as hereinafter specified, the benefit of any contracts tendered or
entered into jointly by the parties prior to the date of such rescission, unless
the other party to such contract or contracts shall otherwise direct. This
clause 33.10 shall be interpreted so as to allow each of the Purchaser on the
one hand and the Vendors on the other hand (operating under the auspices of any
of ACE, BCE or ACS) to receive the revenues from such contracts based upon the
proportion of services on equipment each contributes to the total customer
order.
-38-
<PAGE> 39
IN WITNESS WHEREOF the parties hereto have set their hands and seals on the date
first within written.
THE COMMON SEAL of )
EIGHTZIGBARB PTY LIMITED )
ACN 075 261 497 was hereunto )
affixed by authority of the ) /s/ Peter J. Baird
directors in the presence of )
a Director whose signature )
appears opposite and: )
Secretary
THE COMMON SEAL of )
Y.F.B. INVESTMENTS PTY )
LIMITED ACN 075 261 488 )
was hereunto affixed by )
authority of the directors ) /s/ John Clack
in the presence of a Director )
whose signature appears )
opposite and: )
Secretary
THE COMMON SEAL of )
IRENE INVESTMENTS PTY )
LIMITED ACN 075 261 479 )
was hereunto affixed by )
authority of the directors ) /s/ Mark Elliott
in the presence of a Director )
whose signature appears )
opposite and: )
Secretary
THE COMMON SEAL of )
PATMORE ENTERPRISE PTY )
LIMITED ACN 075 261 470 was )
hereunto affixed by authority of ) /s/ Stephen Page
the Directors in the presence of a )
Director whose signature appears )
opposite and: )
Secretary
-39-
<PAGE> 40
SIGNED SEALED AND )
DELIVERED by the said )
PETER JOHN BAIRD ) /s/ Peter J. Baird
in the presence of: )
SIGNED SEALED AND )
DELIVERED by the said )
MARK DAVID ELLIOTT ) /s/ Mark Elliott
in the presence of: )
SIGNED SEALED AND )
DELIVERED by the said )
JOHN ROBERT CLACK ) /s/ John Clack
in the presence of: )
SIGNED SEALED AND )
DELIVERED by the said )
STEPHEN JAMES PAGE ) /s/ Stephen Page
in the presence of: )
THE COMMON SEAL of )
CONTINENTAL CONVEYOR & )
EQUIPMENT PTY LIMITED )
ACN 059 870 058 was hereunto )
affixed by authority of the ) /s/ G. Williams
directors in the presence of )
a Director whose signature )
appears opposite and: )
Secretary
-40-
<PAGE> 41
THIS SECOND SUPPLEMENTARY DEED is made the 6th day of December one thousand
nine hundred and ninety six
BETWEEN
EIGHTZIGBARB PTY LIMITED ACN 075 261 497 a duly incorporated company having its
registered office at C/- 39 Queen Street, Auburn in the State of New South Wales
2144, Y.F.B. INVESTMENTS PTY LIMITED ACN 075 261 488 a duly incorporated company
and having its registered office at C/- 39 Queen Street, Auburn, 2144 in the
said State and IRENE INVESTMENTS PTY LIMITED ACN 075 261 479 a duly incorporated
company having its registered office at C/- 39 Queen Street, Auburn, 2144 in the
said State (called "Vendors") of the first part
AND
PETER JOHN BAIRD of 133 Australia Avenue, Umina, 2257, in the said State, MARK
DAVID ELLIOTT of 65 Taylor Street, Woy Woy, 2256, in the said State, JOHN ROBERT
CLACK of 161 Australia Avenue, Umina, 2257 in the said State, STEPHEN JAMES PAGE
of 28 Dumfries Court, Eaglemount Heights, Mackay, 4740, in the State of
Queensland and PATMORE ENTERPRISE PTY LIMITED ACN 075 261 470 a duly
incorporated company having its registered office at C/- 39 Queen Street, Auburn
in the State of New South Wales (called "Guarantors") of the second part
AND
CONTINENTAL CONVEYOR & EQUIPMENT PTY LIMITED ACN 059 870 058 a duly incorporated
company having its registered office at 145 Bridge Street, Muswellbrook in the
said State (called "Purchaser") of the third part
RECITALS
A. By Deed made on 8 November 1996 between the same parties as are the parties
to this Deed ("the Share Sale Agreement") the parties of the first part as
Vendors at the request of the parties of the second part as Guarantors agreed
with the party of the third part as Purchaser for the sale and purchase of
certain shares in BCE Holdings Pty Limited ACN 003 525 988 ("the Company") and
otherwise on the terms and conditions set out in the Share Sale Agreement.
B. By a Supplementary Deed made between the parties on 22 November 1996 ("the
Supplementary Deed")certain provisions of the Share Sale Agreement were varied.
C. The parties have subsequently agreed that the time and date fixed by clause
33.6 of the Share Sale Agreement as subsequently varied by the Supplementary
Deed shall be further amended as hereafter appears.
D. The parties have further subsequently agreed that the date on which
completion of the Share Sale Agreement is to be effected as a non-essential
provision as contained in clause 21.1 of the Share Sale Agreement as amended by
Supplementary Deed shall be further amended as hereafter appears.
<PAGE> 42
E. The parties have further subsequently agreed as to other amendments as
hereinafter appears.
OPERATIVE PART
Interpretation provisions
1. Words and expressions contained in this Deed shall have the same meaning as
ascribed to those words and expressions as set out in clause 1 of the Share Sale
Agreement.
2. This Second Supplementary Deed is supplemental to the Share Sale Agreement
and to the Supplementary Deed both of which are to be read and interpreted as
amended by the provisions of this Deed.
3. Clause 33.1 of the Share Sale Agreement is hereby amended and shall have
effect between the parties on or from the date of this Deed as follows:-
3.1 By deleting from clause 33.1 "an independent third party lending
institution" and inserting in its place "one or more of the lending institutions
referred to in clause 33.2".
4. Clause 33.2 of the Share Sale Agreement is hereby amended and shall have
effect between the parties on or from the date of this Deed as follows:-
4.1 By adding in the third line after "Westpac Banking Corporation" the
words "Bank One (United States)".
5. Clause 33.3 of the Share Sale Agreement is hereby amended and shall have
effect between the parties on or from the date of this Deed in the following
terms in the place of the terms of clause 33.3 in the Share Sale Agreement and
the Supplementary Deed:-
"33.3 This Agreement is conditional upon the Purchaser obtaining on or
before 5.00pm on 8 December 1996 written advice of approval from the financier
of the financial arrangements and the terms of those arrangements as set out
below:-
33.3.1 Loan funds of an amount of not less than A$4,000,000 to be
secured up to a maximum of A$4,000,000 to the financier by first registered
charge over the shares to be acquired by the Purchaser pursuant to this
Agreement;
33.3.2 Further loan funds in an amount of not less than A$5,000,000
to be secured up to a maximum of A$5,000,000 to the financier by first
registered mortgage over the assets and undertaking of the Company and its
subsidiaries;
33.3.3 The term over which such loans must be repaid shall be ten
(10) years;
-2-
<PAGE> 43
33.3.4 The interest rate applicable to such loans shall not exceed a
fixed rate of nine per centum (9%) per annum;
33.3.5 Approval and execution by the financier of the priority
agreements as set out in Schedules 9 and 10 hereto; and
33.3.6 Such other terms as shall be commercially reasonable and
acceptable to the Purchaser."
6. Clause 33.6 of the Share Sale Agreement is hereby amended and shall have
effect between the parties on or from the date of this Deed in the following
terms in place of the terms of Clause 33.6 in the Share Sale Agreement and the
Supplementary Deed:-
"33.6 In the event that the Purchaser shall not receive notice of approval
of the financial arrangements as set out in clause 33.3 above on or before 5pm
on 8 December 1996, then the Purchaser shall notify the Vendors in writing
served within three (3) business days after that time:-
33.6.1 That the Purchaser has elected to waive the benefit of this
clause; or
33.6.2 That the Purchaser has elected to rescind this Agreement."
7. The Share Sale Agreement is hereby amended and shall have effect between the
parties on or from the date of this Deed by the addition to the Share Sale
Agreement of the following clauses:
33.12.1 Notwithstanding the provisions of clause 21.6 or the 5th Schedule
to the Share Sale Agreement or any other provision of the Share Sale Agreement
the Vendors agree that the finance facilities particularised in Table 4 to
Schedule 5 to the Share Sale Agreement and the corporate securities and the
personal guarantees supporting those finance facilities will not be discharged
and released on completion but will remain in place notwithstanding such
completion. The Purchaser covenants that the Purchaser and the Company and its
subsidiaries shall cause those finance facilities to be repaid and the
securities and the personal guarantees to be discharged and released within ten
(10) business days after completion. The Vendors consent to the foregoing
subject only to the receipt of the indemnity referred to in clause 33.12.2
hereof.
33.12.2 Prior to completion the Purchaser will procure the indemnity of
Continental Conveyor & Equipment Company L.P. in favour of the Guarantors in a
form reasonably acceptable to the Guarantors indemnifying the Guarantors from
any liability howsoever arising in connection with the finance facilities
referred to in Clause 33.12.1 hereof.
33.12.3 This clause 33.12 shall not merge on completion and shall enure
thereafter for the benefit of the Guarantors."
-3-
<PAGE> 44
8. In all other respects the parties hereby confirm the provisions of the Share
Sale Agreement.
IN WITNESS WHEREOF the parties hereto have set their hands and seals on the date
first within written.
THE COMMON SEAL of )
EIGHTZIGBARB PTY LIMITED )
ACN 075 261 497 was hereunto affixed )
by authority of its director, )
PETER JOHN BAIRD whose signature ) /s/ Peter J. Baird
appears opposite the only Director )
and the only Secretary of the Company )
and who attests the affixing of the )
Common Seal in the capacity of sole )
director and sole secretary of the )
Company )
Secretary
THE COMMON SEAL of )
Y.F.B. INVESTMENTS PTY LIMITED )
ACN 075 261 488 was hereunto affixed )
by authority of its director, )
JOHN ROBERT CLACK whose ) /s/ John Clack
signature appears opposite the only )
Director and the only Secretary of )
the Company and who attests the affixing )
of the Common Seal in the capacity )
of sole director and sole secretary )
of the Company )
Secretary
-4-
<PAGE> 45
THE COMMON SEAL of )
IRENE INVESTMENTS PTY LIMITED )
ACN 075 261 479 was hereunto affixed )
by authority its director, )
MARK DAVID ELLIOTT whose ) /s/ Mark Elliott
signature appears opposite the only )
Director and the only Secretary of )
the Company and who attests the affixing )
of the Common Seal in the capacity )
of sole director and sole secretary )
of the Company )
Secretary
THE COMMON SEAL of )
PATMORE ENTERPRISE PTY )
LIMITED ACN 075 261 470 was )
hereunto affixed by authority of its )
director, STEPHEN JAMES PAGE ) /s/ Stephen Page
whose signature appears opposite the )
only Director and the only Secretary )
of the Company and who attests the )
affixing of the Common Seal in the )
capacity of sole director and sole )
secretary of the Company )
Secretary
SIGNED SEALED AND DELIVERED )
by the said PETER JOHN BAIRD ) /s/ Peter J. Baird
in the presence of: )
SIGNED SEALED AND DELIVERED )
by the said MARK DAVID ELLIOTT ) /s/ Mark Elliott
in the presence of: )
SIGNED SEALED AND DELIVERED )
by the said JOHN ROBERT CLACK ) /s/ John Clack
in the presence of: )
-5-
<PAGE> 46
SIGNED SEALED AND DELIVERED )
by the said STEPHEN JAMES PAGE ) /s/ Stephen Page
in the presence of: )
THE COMMON SEAL of )
CONTINENTAL CONVEYOR & )
EQUIPMENT PTY LIMITED )
ACN 059 870 058 was hereunto affixed ) /s/ G. Williams
by authority of the directors in the )
presence of a Director whose signature )
appears opposite and: )
Secretary
-6-
<PAGE> 47
THIS SUPPLEMENTARY DEED is made the 22nd day of November one thousand nine
hundred and ninety six
BETWEEN
EIGHTZIGBARB PTY LIMITED ACN 075 261 497 a duly incorporated company having its
registered office at C/- 39 Queen Street, Auburn in the State of New South Wales
2144, Y.F.B. INVESTMENTS PTY LIMITED ACN 075 261 488 a duly incorporated company
and having its registered office at C/- 39 Queen Street, Auburn, 2144 in the
said State and IRENE INVESTMENTS PTY LIMITED ACN 075 261 479 a duly incorporated
company having its registered office at C/- 39 Queen Street, Auburn, 2144 in the
said State (called "Vendors") of the first part
AND
PETER JOHN BAIRD of 133 Australia Avenue, Umina, 2257, in the said State, MARK
DAVID ELLIOTT of 65 Taylor Street, Woy Woy, 2256, in the said State, JOHN ROBERT
CLACK of 161 Australia Avenue, Umina, 2257 in the said State, STEPHEN JAMES PAGE
of 28 Dumfries Court, Eaglemount Heights, Mackay, 4740, in the State of
Queensland and PATMORE ENTERPRISE PTY LIMITED ACN 075 261 470 a duly
incorporated company having its registered office at C/- 39 Queen Street, Auburn
in the State of New South Wales (called "Guarantors") of the second part
AND
CONTINENTAL CONVEYOR & EQUIPMENT PTY LIMITED ACN 059 870 058 a duly incorporated
company having its registered office at 145 Bridge Street, Muswellbrook in the
said State (called "Purchaser") of the third part
RECITALS
A. By Deed made on 8 November 1996 between the same parties as are the parties
to this Deed ("the Share Sale Agreement") whereby the parties of the first part
as Vendors at the request of the parties of the second part as Guarantors agreed
with the party of the third part as Purchaser for the sale and purchase of
certain shares in BCE Holdings Pty Limited ACN 003 525 988 ("the Company") and
otherwise on the terms and conditions set out in the Share Sale Agreement.
B. By its clause 33, the Share Sale Agreement was conditional upon the Purchaser
obtaining written advice of approval of financial arrangements as is more
particularly in that clause set out on or before 5pm on 22 November 1996.
C. The parties have subsequently agreed that the period fixed by clause 33 of
the Share Sale Agreement shall be extended as herein set out.
D. Clause 21 of the Share Sale Agreement provided for the fixing of a date of
completion of the Share Sale Agreement.
E. The parties have otherwise agreed as to the date on which completion of the
Share Sale Agreement shall be effected as a non-essential provision of that
Agreement as herein set out.
<PAGE> 48
F. The Vendors and Patmore have entered into this Deed in order to verify and
confirm execution of the Share Sale Agreement in compliance with the provisions
of Section 240 (7B)(c) of the Corporations Law.
G. The parties have agreed to clarify of clause 10.1.4.2 of the Share Sale
Agreement as herein set out.
OPERATIVE PART
Interpretation provisions
1. Words and expressions contained in this Deed shall have the same meaning as
ascribed to those words and expressions as set out in clause 1 of the Share Sale
Agreement.
2. This Deed is supplemental to the Share Sale Agreement which is to be read and
interpreted as amended by the provisions of this Deed.
3. Clause 33.3 of the Share Sale Agreement is hereby amended and shall have
effect between the parties on or from the date of this Deed in the following
terms in the place of the terms of clause 33.3 in the Share Sale Agreement:-
"33.3 This Agreement is conditional upon the Purchaser obtaining on or
before 5.00pm on 2 December 1996 written advice of approval from the financier
of the financial arrangements and the terms of those arrangements as set out
below:-
33.3.1 Loan funds in an amount of not less than A$4,000,000 to be secured
up to a maximum of $4,000.000.00 to the financier by first registered charge
over the shares to be acquired by the Purchaser pursuant to this Agreement and;
33.3.2 Further loan funds in an amount of not less than A$5,000,000 to be
secured up to a maximum of $5,000,000.00 to the financier by first registered
mortgage over the assets and undertaking of the Company and its subsidiaries.
33.3.3 the term over which such loans must be repaid shall be ten (10)
years.
33.3.4 The interest rate applicable to such loans shall not exceed a fixed
rate of nine per centum (9%) per annum.
33.3.5 Approval and execution by the financier of the priority agreements
as set out in Schedules 9 and 10 hereto.
33.3.6 Such other terms as shall be commercially reasonable and acceptable
to the Purchaser."
-2-
<PAGE> 49
4. Clause 33.6 of the Share Sale Agreement is hereby amended and shall have
effect between the parties on or from the date of this Deed in the following
terms in place of the terms of Clause 33.6 in the Share Sale Agreement:-
"33.6 In the event that the Purchaser shall not receive notice of approval
of the financial arrangements as set out in clause 33.3 above on or before 5pm
on 2 December 1996, then the Purchaser shall notify the Vendors in writing
served within three (3) business days after that time:-
33.6.1 That the Purchaser has elected to waive the benefit of this
clause; or
33.6.2 That the Purchaser has elected to rescind this Agreement."
5. Clause 21.1 of the Share Sale Agreement is hereby amended and shall have
effect between the parties on or from the date of this Deed in the following
terms in place of the terms of Clause 21.1 in the Share Sale Agreement:-
"21.1 Completion of this agreement shall occur not later than 5 pm
on 13 December 1996. In respect of the time hereby fixed for completion, time is
not of the essence of this Agreement. The due diligence shall be completed on or
prior to 2 December 1996 or such later date as to which the parties may agree in
writing. If completion does not occur on that date, either party may on or after
the next business day serve on the other party a notice requiring completion to
occur on a business day which is not less than ten (10) business days after the
date when notice is received by the recipient of the notice, and service of such
notice renders such date specified in that notice an essential time for
completion. In the event that the due diligence is not completed by 2 December
1996, then the Vendors may rescind this Agreement by notice in writing to the
Purchaser."
6. Clause 10.1.4.2 of the Share Sale Agreement is hereby amended and shall have
effect between the parties on or from the date of this Deed in the following
terms in place of the terms of clause 10.1.4.2 in the Share Sale Agreement:-
"10.1.4.2 satisfaction of the requirements of Gosford City Council in
relation to encroachment (approx. 5 metres) by improvements on the Somersby
property on to Somersby Falls Road and in relation to the issue of a Certificate
under Section 172 of the Local Government Act 1993 in respect of that property;"
7. In all other respects the parties hereby confirm the provisions of the Share
Sale Agreement.
8. Each of the Vendors and Patmore Enterprise Pty Limited hereby confirm and
verify the execution of the Share Sale Agreement on the part of each of the
Vendors and Patmore Enterprise Pty Limited as a deed.
-3-
<PAGE> 50
IN WITNESS WHEREOF the parties hereto have set their hands and seals on the date
first within written.
THE COMMON SEAL of )
EIGHTZIGBARB PTY LIMITED )
ACN 075 261 497 was hereunto affixed )
by authority of its director, )
PETER JOHN BAIRD whose signature ) /s/ Peter J. Baird
appears opposite the only Director )
and the only Secretary of the Company )
and who attests the affixing of the )
Common Seal in the capacity of sole )
director and sole secretary of the )
Company )
Secretary
THE COMMON SEAL of )
Y.F.B. INVESTMENTS PTY LIMITED )
ACN 075 261 488 was hereunto affixed )
by authority of its director, )
JOHN ROBERT CLACK whose ) /s/ John Clack
signature appears opposite the only )
Director and the only Secretary of )
the Company and who attests the affixing )
of the Common Seal in the capacity )
of sole director and sole secretary )
of the Company )
Secretary
-4-
<PAGE> 51
THE COMMON SEAL of )
IRENE INVESTMENTS PTY LIMITED )
ACN 075 261 479 was hereunto affixed )
by authority its director, )
MARK DAVID ELLIOTT whose ) /s/ Mark Elliott
signature appears opposite the only )
Director and the only Secretary of )
the Company and who attests the affixing )
of the Common Seal in the capacity )
of sole director and sole secretary )
of the Company )
Secretary
THE COMMON SEAL of )
PATMORE ENTERPRISE PTY )
LIMITED ACN 075 261 470 was )
hereunto affixed by authority of its )
director, STEPHEN JAMES PAGE ) /s/ Stephen Page
whose signature appears opposite the )
only Director and the only Secretary )
of the Company and who attests the )
affixing of the Common Seal in the )
capacity of sole director and sole )
secretary of the Company )
Secretary
SIGNED SEALED AND DELIVERED )
by the said PETER JOHN BAIRD ) /s/ Peter J. Baird
in the presence of: )
SIGNED SEALED AND DELIVERED )
by the said MARK DAVID ELLIOTT ) /s/ Mark Elliott
in the presence of: )
SIGNED SEALED AND DELIVERED )
by the said JOHN ROBERT CLACK ) /s/ John Clack
in the presence of: )
-5-
<PAGE> 52
SIGNED SEALED AND DELIVERED )
by the said STEPHEN JAMES PAGE ) /s/ Stephen Page
in the presence of: )
THE COMMON SEAL of )
CONTINENTAL CONVEYOR & )
EQUIPMENT PTY LIMITED )
ACN 059 870 058 was hereunto affixed ) /s/ G. Williams
by authority of the directors in the )
presence of a Director whose signature )
appears opposite and: )
Secretary
-6-
<PAGE> 1
Exhibit 10.2
ASSET PURCHASE AGREEMENT
dated as of
March 3, 1997
among
PROCESS TECHNOLOGY HOLDINGS, INC.,
W.S. TYLER, INCORPORATED
and
CONTINENTAL CONVEYOR & EQUIPMENT COMPANY
<PAGE> 2
TABLE OF CONTENTS
-----------------
SECTION PAGE
R E C I T A L S.......................... 1
ARTICLE 1
DEFINITIONS......................... 1
1.1 Definitions...................................................... 1
ARTICLE 2
SALE OF ASSETS, ASSUMPTION OF LIABILITIES
AND RELATED TRANSACTIONS................... 10
2.1 Purchase and Sale of Assets. ................................... 10
2.2 Assumption of Certain Liabilities. ............................. 13
2.3 Purchase Price and Allocation.................................... 15
2.4 Payment of Purchase Price; Working Capital
Adjustment....................................................... 15
ARTICLE 3
CLOSING............................... 16
3.1 Closing Date..................................................... 16
3.2 Items to be Delivered at the Closing By Seller................... 17
3.3 Items to be Delivered at the Closing by Buyer.................... 18
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER............... 18
4.1 Organization and Related Matters................................. 18
4.2 Financial Statements; Changes; Contingencies..................... 19
4.3 Material Contracts............................................... 20
4.4 Condition of Property............................................ 21
4.5 Intellectual Property............................................ 21
4.6 Authorization; No Conflicts...................................... 22
4.7 Legal Proceedings................................................ 22
4.8 Minute Books..................................................... 22
4.9 Accounting Records............................................... 23
4.10 Insurance........................................................ 23
4.11 Permits.......................................................... 23
4.12 Compliance with Law.............................................. 23
4.13 Employee Benefits................................................ 23
4.14 Certain Interests................................................ 25
4.15 No Brokers or Finders............................................ 25
4.16 Inventory........................................................ 25
4.17 Environmental Compliance......................................... 26
4.18 Labor Contracts.................................................. 26
4.19 Overtime, Back Wages, Vacation and Minimum Wages................. 26
4.20 Discrimination, Occupational Safety and Other
Statutes and Regulations......................................... 26
4.21 Suppliers and Customers.......................................... 27
4.22 Disclosure....................................................... 27
i
<PAGE> 3
4.23 Warranty and Product Liability Claims............................ 27
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER............... 27
5.1 Organization and Related Matters................................. 27
5.2 Authorization.................................................... 27
5.3 No Conflicts..................................................... 28
5.4 No Brokers or Finders............................................ 28
5.5 Legal Proceedings................................................ 28
5.6 WARN Act......................................................... 28
ARTICLE 6
PRE-CLOSING COVENANTS .................................................... 29
6.1 Access........................................................... 29
6.2 Conduct of Business.............................................. 29
6.3 Notification of Certain Matters.................................. 30
6.4 Permits and Approvals; Third Party Consents...................... 31
6.5 Preservation of Business Prior to Closing Date................... 31
6.6 Bulk Transfer Laws............................................... 31
6.7 Benefit Plans.................................................... 31
6.8 Backlog.......................................................... 32
ARTICLE 7
POST-CLOSING COVENANTS...................... 32
7.1 Noncompetition................................................... 32
7.2 Nondisclosure of Proprietary Data................................ 32
7.3 Tax Cooperation.................................................. 33
7.4 Employment Matters............................................... 33
7.5 Retention and Access to Records.................................. 36
7.6 Trademark License................................................ 36
7.7 Liability for Failure to Close................................... 36
7.8 Accounts Receivable.............................................. 37
7.9 Product Warranty................................................. 38
ARTICLE 8
CONDITIONS OF PURCHASE.................... 38
8.1 General Conditions............................................... 38
8.2 Conditions to Obligations of Buyer............................... 39
8.3 Conditions to Obligations of Seller.............................. 40
ARTICLE 9
TERMINATION OF OBLIGATIONS; SURVIVAL................. 41
9.1 Termination of Agreement......................................... 41
9.2 Effect of Termination............................................ 42
9.3 Survival of Representations and Warranties....................... 42
ARTICLE 10
ii
<PAGE> 4
INDEMNIFICATION...................... 42
10.1 Obligations of Seller............................................ 42
10.2 Obligations of Buyer............................................. 43
10.3 Procedure........................................................ 43
10.4 Limitations on Indemnification................................... 45
10.5 Survival......................................................... 45
10.6 Not Exclusive Remedy............................................. 46
10.7 Offset........................................................... 46
ARTICLE 11
GENERAL............................... 47
11.1 Amendments; Waivers.............................................. 47
11.2 Schedules; Exhibits; Integration................................. 47
11.3 Best Efforts; Further Assurances................................. 47
11.4 Governing Law.................................................... 48
11.5 No Assignment.................................................... 48
11.6 Headings......................................................... 48
11.7 Counterparts..................................................... 48
11.8 Publicity and Reports............................................ 48
11.9 Confidentiality.................................................. 48
11.10 Parties in Interest......................................... 49
11.11 Notices..................................................... 49
11.12 Expenses.................................................... 51
11.13 Remedies; Waiver............................................ 51
11.14 Knowledge Convention........................................ 51
11.15 Representation By Counsel; Interpretation................... 52
11.16 No Consequential Damages.................................... 52
11.17 Submission to Jurisdiction.................................. 52
11.18 Waiver of Jury Trial........................................ 52
iii
<PAGE> 5
Exhibits
--------
EXHIBIT A Bill of Sale and Assignment
EXHIBIT B [Intentionally Omitted]
EXHIBIT C Trademark License
EXHIBIT D Assumption Agreement
EXHIBIT E Form of Lease Assignment
EXHIBIT F Form of Use Agreement
Schedules
---------
SCHEDULE 1.1B Business Employees; Non-Retained
Employees; Media Employees
SCHEDULE 1.1Bf Buyer's Signing Financials
SCHEDULE 1.1Le Leased Real Property
SCHEDULE 1.1Li Licensed Trademarks
SCHEDULE 1.10 Owned Real Property
SCHEDULE 1.1P Pueblo Facility Lease Terms
SCHEDULE 2.1(a) Certain Purchased Assets
SCHEDULE 2.1(b) Certain Excluded Assets
SCHEDULE 2.2(a) Certain Assumed Liabilities
SCHEDULE 2.3 Allocation of Purchase Price
SCHEDULE 4.1 Certain States
SCHEDULE 4.2 Certain Financial Statements
SCHEDULE 4.2(c) Certain Other Liabilities
SCHEDULE 4.3 Material Contracts
SCHEDULE 4.3A Contracts Modified or Terminated
List
SCHEDULE 4.4 Condition of Property
SCHEDULE 4.5 Intellectual Property
SCHEDULE 4.6 Authorization
SCHEDULE 4.10 Insurance
SCHEDULE 4.11 Certain Permits
SCHEDULE 4.13 Employee Benefits
SCHEDULE 4.17 Environmental
SCHEDULE 4.21 Certain Suppliers and Customers
SCHEDULE 4.23 Warranty and Product Liability Claims
SCHEDULE 7.4(b)(ii) Seller's Medical Coverage Costs
SCHEDULE 7.4(c) Business Employee Severance
iv
<PAGE> 6
ASSET PURCHASE AGREEMENT
Asset Purchase Agreement ("Agreement") dated as of March
3, 1997, among PROCESS TECHNOLOGY HOLDINGS, INC. (as to the provisions in
Section 10.1 and Section 7.7 only) ("Holdings"), W.S. TYLER, INCORPORATED, an
Ohio corporation ("Seller" and, collectively with Holdings, the "Selling
Parties"), and CONTINENTAL CONVEYOR & EQUIPMENT COMPANY, a Delaware corporation
("Buyer").
R E C I T A L S
WHEREAS, except to the extent otherwise set forth in this
Agreement, Seller owns all of the assets used or held for use by its
Hewitt-Robins Conveyor Components Division (the "Division") in connection with
the conveyor component manufacturing business currently conducted by the
Division at the Pueblo Facility and at the West Caldwell Facility (the
"Business").
WHEREAS, Seller has invited Buyer to perform and Buyer has
performed certain due diligence and business investigations with respect to the
Business, with the intention that Buyer form its own conclusions regarding the
condition and value of the business, property, liabilities, contracts and
related matters of the Business pursuant to the parties' express intention that
the sale of the Business be without representation or warranty by Seller,
express or implied, except as specifically set forth herein.
WHEREAS, Seller desires to sell, and Buyer desires to purchase
such assets on the terms and conditions set forth in this Agreement.
A G R E E M E N T
In consideration of the mutual promises contained herein and
intending to be legally bound, the parties agree as follows:
ARTICLE 1
DEFINITIONS
1.1 DEFINITIONS.
For all purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires,
1
<PAGE> 7
(a) the terms defined in this Article 1 have the meanings
assigned to them in this Article 1 and include the plural as well as the
singular,
(b) all accounting terms not otherwise defined herein have the
meanings assigned under GAAP,
(c) all references in this Agreement to designated
"Articles," "Sections" and other subdivisions are to the designated Articles,
Sections and other subdivisions of the body of this Agreement,
(d) pronouns of either gender or neuter shall include, as
appropriate, the other pronoun forms, and
(e) the words "herein," "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision.
As used in this Agreement and the Exhibits and Schedules
delivered pursuant to this Agreement, the following definitions shall apply:
"Action" means any action, complaint, investigation, petition,
suit or other proceeding, whether civil or criminal, in law or in equity, or
before any arbitrator or Governmental Entity.
"Affiliate" means a Person that directly or indirectly,
through one or more intermediaries, controls, or is controlled by, or is under
common control with, a specified Person.
"Agreement" means this Agreement as amended or supplemented
together with all Exhibits and Schedules attached or incorporated by reference.
"Approval" means any approval, authorization, consent,
qualification or registration, or any waiver of any of the foregoing, required
to be obtained from, or any notice, statement or other communication required to
be filed with or delivered to, any Governmental Entity or any other Person.
"Assumed Liabilities" has the meaning specified in
Section 2.2(a).
"Assumption Agreement" means the Assumption Agreement dated as
of the Closing Date executed and delivered by Buyer and Seller, in substantially
the form of Exhibit D.
2
<PAGE> 8
"Benefit Arrangements" means all life and health insurance,
hospitalization, savings, bonus, incentive compensation, individual employment
contract, consulting contracts, termination, severance pay, holiday, vacation,
termination, severance pay, sick pay, sick leave, disability, tuition refund,
relocation, fringe benefit, collective bargaining agreements and other policies
or practices of the Division providing employee or executive compensation or
benefits to Business Employees.
"Business" has the meaning specified in the
Recitals to this Agreement.
"Business Employees" means those persons employed by Seller in
connection with the Business as set forth on Schedule 1.1B, and any additional
persons hired by Seller in the ordinary course in connection with the Business
between the date hereof and the Closing Date.
"Buyer's Signing Financials" means the audited Balance Sheet
of the Business for calendar year 1996 and the audited Income Statement for
calendar year 1996 prepared by E & Y at Buyer's sole cost and expense and
annexed hereto as Schedule 1.1Bf
"Buyer Terminated West Caldwell Employee" has the meaning
specified in Section 7.4(b).
"Closing" means the consummation of the transaction
contemplated by this Agreement.
"Closing Balance Sheet" has the meaning specified in Section
2.4(c).
"Closing Date" means the date of the Closing.
"Closing Date Working Capital" means, as at the Closing Date,
the excess of Current Assets over Current Liabilities.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collective Bargaining Agreement" has the meaning specified
in Section 4.18.
"Contract" means any agreement, arrangement, bond, commitment,
franchise, indemnity, indenture, instrument, lease or license.
"Current Assets" means, as at any date of determination, the
total assets of the Division which may
3
<PAGE> 9
properly be classified as current assets in conformity with GAAP, excluding (i)
accounts receivable and (ii) cash.
"Current Liabilities" means, as at any date of determination,
the total liabilities of the Division which may properly be classified as
current liabilities in conformity with GAAP.
"Deductible" has the meaning specified in Section 10.4.
"Division" has the meaning specified in the Recitals to this
Agreement.
"Encumbrance" means any claim, charge, lease, covenant,
easement, encumbrance, security interest, lien, option, pledge, rights of
others, or restriction (whether on voting, sale, transfer, disposition or
otherwise), whether imposed by agreement, law, equity or otherwise, except for
any restrictions on transfer generally arising under any applicable federal or
state securities law.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the regulations and published interpretations promulgated
thereunder.
"ERISA Affiliate" means an entity that would be treated as a
single employer with the Seller under Section 414 of the Code.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Excluded Assets" has the meaning specified in Section 2.1(a).
"Excluded Liabilities" has the meaning specified in Section
2.2(b).
"E & Y" has the meaning specified in Section 2.4(b).
"GAAP" means generally accepted accounting principles in the
United States of America, as in effect from time to time.
"Governmental Entity" means any government or any agency,
bureau, board, commission, court, department, official, political subdivision,
tribunal or other instrumentality of any government, whether federal, state or
local, domestic or foreign.
4
<PAGE> 10
"Hazardous Substance" means (but shall not be limited to)
substances that are defined or listed in, or otherwise classified pursuant to,
any applicable Laws as "hazardous substances," "hazardous materials," "hazardous
wastes" or "toxic substances," or any other formulation intended to define, list
or classify substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, radioactivity, carcinogenicity, reproductive toxicity
or "EP toxicity," and petroleum and drilling fluids, produced waters and other
wastes associated with the exploration, development, or production of crude oil,
natural gas or geothermal energy.
"High Yield Offering" means Buyer's public offering of its
high yield debt securities underwritten by Donaldson Lufkin & Jenrette
Securities Corporation.
"Holdings" has the meaning assigned that term in the
introduction to this Agreement.
"Income Tax" means a tax imposed on or measured by net income,
net worth or net capital, together with any interest or any penalty, addition to
tax or additional amount imposed with respect thereto.
"Indemnifiable Claim" means any Loss for or against which any
party is entitled to indemnification under this Agreement; "INDEMNIFIED PARTY"
means the party entitled to indemnity hereunder; and "INDEMNIFYING PARTY" means
the party obligated to provide indemnification hereunder.
"Intellectual Property" means any trade secret, secret
process, inventions, invention rights, processes (including, without limitation,
all formulae and processes for the production of the goods manufactured by the
Business), and all know-how, drawings, blue prints, computer software (to the
extent transferable without consent), specifications, designs, technology, data,
product development information and rights, lab notebooks, trade secrets, and
other proprietary information, and any and all Marks.
"Inventory" has the meaning specified in Section 2.1(a).
"IRS" means the Internal Revenue Service or any successor
entity.
"ISRA" has the meaning specified in Section 8.1.
5
<PAGE> 11
"Law" means any constitutional provision, statute or other
law, rule, regulation, or interpretation of any Governmental Entity and any
Order.
"Lease Assignment" means the Lease Assignment dated as of the
Closing Date executed and delivered by Seller and Buyer, substantially in the
form of Exhibit E annexed hereto.
"Lease" means the Lease Agreement between Dowel Associates, a
New Jersey partnership, and Seller (as successor in interest to Hewitt-Robins
Corporation), dated as of July 23, 1990, as amended by that certain Amendment to
Lease dated as of March 31, 1995.
"Leased Real Property" means the real property set forth on
Schedule 1.1Le.
"Licensed Trademarks" means those Marks set forth on Schedule
1.1Li.
"Loss" means any action, cost, damage, disbursement, expense,
liability, loss, deficiency, diminution in value, obligation, penalty or
settlement of any kind or nature, whether foreseeable or unforeseeable,
including but not limited to, interest or other carrying costs, penalties,
legal, accounting and other professional fees and expenses incurred in the
investigation, collection, prosecution and defense of claims and amounts paid in
settlement, that may be imposed on or otherwise incurred or suffered by the
specified person.
"Mark" means any brand name, copyright, patent, service mark,
trademark, tradename, and all registrations or application for registration of
any of the foregoing.
"Material Adverse Effect" means a material adverse effect on
(i) the business, operations, properties, assets, prospects or condition
(financial or otherwise) of the Business or (ii) on Seller's ability to perform
its obligations under this Agreement.
"Material Contract" means any Contract that Seller is a party
to that is material to the Business as of the date hereof; PROVIDED that (i) a
Contract shall be deemed to not be material to the Business unless such Contract
(A) provides that the aggregate amount of consideration paid by or to the Seller
pursuant to the terms of such Contract is in an amount in excess of $50,000 or
(B) is a supply contract, distributorship agreement, manufacturer representation
agreement, employment contract, consulting agreement, union contract, license of
Intellectual Property,
6
<PAGE> 12
confidentiality agreement, noncompete agreement or any other Contract, in each
case that was entered into outside of the ordinary course of business of the
Business and (ii) notwithstanding anything to the contrary contained in this
definition, the Lease shall be deemed to be a Material Contract.
"Media Division Assets" means the assets, rights, privileges,
claims and Contracts owned by Seller and used in connection with the business
conducted by the W.S. Tyler, Incorporated Media Division including, without
limitation, any of Seller's Intellectual Property related to such business and
any tangible property related to such business.
"Media Employees" means those Business Employees set forth on
Part (iii) of Schedule 1.1B.
"Multiemployer Plan" means a Pension Plan which is a
multiemployer plan as defined in Section 3(37)(A) of ERISA.
"Neutral Auditors" has the meaning specified in Section
2.4(c).
"NJDEP" has the meaning specified in Section 8.1.
"Order" means any decree, injunction, judgment, order,
ruling, assessment or writ.
"OSHA" has the meaning specified in Section 4.21.
"Other Businesses" means Seller's businesses other than the
Business.
"Owned Real Property" means the real property set forth on
Schedule 1.10.
"PBGC" means the Pension Benefit Guaranty Corporation or any
successor thereto.
"Pension Plan" means any Plan that is an "employee benefit
pension plan" as such term is defined in Section 3(2) of ERISA.
"Permit" means any license, permit, franchise, certificate of
authority, or order, or any waiver of the foregoing, required to be issued by
any Governmental Entity.
"Permitted Exception" means any Encumbrance that (i) is
reflected in the financial statements referred to herein that have been
delivered to Buyer, (ii) is not material in amount, (iii) constitutes a
statutory lien
7
<PAGE> 13
arising in the ordinary course of business of the Business, (iv) does not in the
aggregate materially detract from the value of the encumbered Purchased Asset or
materially interfere with the use of the encumbered Purchased Asset in the
ordinary course of business of the Business as conducted as of the date hereof,
(v) is a lien for Taxes (A) not yet delinquent or (B) the validity of which are
being contested in good faith by appropriate actions or (vi) does not materially
impair or adversely affect the Business, taken as a whole.
"Person" means an association, a corporation, an individual, a
partnership, a trust or any other entity or organization, including a
Governmental Entity.
"Plan" means any bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase, stock option,
stock ownership, stock appreciation rights, phantom stock, leave of absence,
layoff, vacation, day or dependent care, legal services, educational assistance,
relocation assistance, cafeteria, life, health, accident, disability, workers
compensation or other insurance, severance, separation or other employee benefit
plan, practice, policy or arrangement of any kind, whether written or oral,
including but not limited to any "employee benefit plan" within the meaning of
Section 3(3) of ERISA, which provides compensation or benefits to Business
Employees.
"Prepaid Expenses" has the meaning specified in
Section 2.1(a).
"Pueblo Facility" means the manufacturing facility of Seller
located at 129 Enterprise Drive, Pueblo West, Colorado 81007.
"Pueblo Lease" means the Lease Agreement dated as of the
Closing Date executed and delivered by Seller and Buyer, which shall (i)
incorporate each of the terms and conditions set forth on Schedule 1.1P, (ii) be
in the form of a triple net lease for a manufacturing facility located in
Colorado and (iii) otherwise be in form and substance reasonably satisfactory to
Buyer and Seller.
"Pueblo Non-Retained Employee" means (x) each Business
Employee listed in Part (i) of Schedule 1.1B and (y) any additional persons
hired by Seller in connection with the Pueblo Facility between the date hereof
and the Closing Date who are necessary or advisable (in the reasonable
discretion of Seller) to conduct the Business in accordance with Section 6.2.
8
<PAGE> 14
"Purchase Price" has the meaning specified in Section 2.3.
"Purchased Assets" has the meaning specified in Section
2.1(a).
"Resolution Period" has the meaning specified in Section
2.4(b).
"Seller's Accounts" has the meaning specified in Section 7.8.
"Severance Plan" means those of Seller's Benefit Arrangements,
Plans and collective bargaining agreements (other than any Pension Plan) that
provide for payment(s) on or following an employee's termination of employment
or separation from service, without regard to whether such payment is a flat
dollar amount, is based on the employee's years of service, or is deemed to be
payment in lieu of notice.
"Side Letter" means that certain letter agreement dated as of
the date hereof by and between Seller and Buyer.
"Tax" means any foreign, federal, state, county or local
income, sales and use, excise, franchise, real and personal property, transfer,
gross receipt, capital stock, production, business and occupation, disability,
employment, payroll, severance or withholding tax or charge imposed by any
Governmental Entity, any interest and penalties (civil or criminal) related
thereto or to the nonpayment thereof, and any Loss in connection with the
determination, settlement or litigation of any Tax liability.
"Tax Return" means a report, return or other information
required to be supplied to a Governmental Entity with respect to Taxes.
"Trademark License" means the Trademark License dated as of
the Closing Date executed and delivered by Seller and Buyer, substantially in
the form of Exhibit C, pursuant to which Seller shall license the Licensed
Trademarks for certain limited uses for a period that shall terminate on the
second anniversary of the Closing Date.
"Use Agreement" means the Use Agreement dated as of the
Closing Date executed and delivered by Seller and Buyer, which is substantially
in the form of Exhibit F annexed hereto and shall otherwise be in form and
substance reasonably satisfactory to Seller and Buyer.
9
<PAGE> 15
"WARN Act" has the meaning specified in Section 5.6.
"West Caldwell Facility" means the warehouse and
administrative facility of Seller located at 40 Fairfield Place, West Caldwell,
New Jersey 07006.
"West Caldwell Non-Retained Employee" means each Business
Employee listed in Part (ii) of Schedule 1.1B and (y) any additional persons
hired by Seller in connection with the West Caldwell Facility between the date
hereof and the Closing Date who are necessary or advisable (in the reasonable
discretion of Seller) to conduct the Business in accordance with Section 6.2.
"Year-End Working Capital" means, as at December 31, 1996, the
excess of Current Assets over Current Liabilities, as determined by reference to
the Financial Statements set forth in Schedule 4.2.
"Welfare Plans" mean all Plans which are employee welfare
benefit plans as defined in Section 3(1) of ERISA.
ARTICLE 2
SALE OF ASSETS, ASSUMPTION OF LIABILITIES
AND RELATED TRANSACTIONS
2.1 PURCHASE AND SALE OF ASSETS.
(a) PURCHASED ASSETS. Subject to the terms and conditions of
this Agreement, on the Closing Date Seller shall sell, convey, assign, transfer
and deliver to Buyer, and Buyer shall purchase, acquire and accept from Seller,
all of the assets, properties, rights, privileges, claims and contracts owned or
leased by Seller and used or held for use by the Division in connection with the
Business (the "Purchased Assets"), except the assets identified in Section
2.1(b) (the "Excluded Assets"). The Purchased Assets shall include the items set
forth on Schedule 2.1(a), except as changed by assets acquired or disposed of in
the ordinary course of business of the Business in compliance with Section 6.2
hereof after the date thereof, and also shall include the following:
(i) Seller's leasehold interest in the Leased Real
Property.
(ii) All fixtures and improvements attached to the
Leased Real Property.
10
<PAGE> 16
(iii) All machinery, apparatus, furniture and
fixtures, materials, supplies, motor vehicles, and other equipment of
every type which is (A) owned or leased by Seller and (B) used by the
Division in connection with the Business.
(iv) All inventory of usable goods, including all
merchandise, raw materials, work in progress, finished products and
other tangible personal property used or held for sale by the Division
in connection with the Business as of the date hereof (the
"Inventory"), together with any additions thereto and subject to any
reductions therefrom received or incurred by the Division in connection
with the Business in the ordinary course in compliance with Section 6.2
hereof after the date hereof through the Closing Date.
(v) All of Seller's rights and interests arising
under or in connection with the Contracts to which Seller is a party
which are directly related to the Business and other documents of the
Division which are directly related to the Business, together with all
advance payments thereon.
(vi) Seller's prepaid expenses directly related to
the Business as of the date hereof set forth on Schedule 2.1(a)
("Prepaid Expenses"), together with any additions thereto and subject
to any reductions therefrom made or accrued by Seller which are
directly related to the Business in the ordinary course and in
compliance with Section 6.2 hereof after the date hereof through the
Closing Date.
(vii) Any cash owned by the Seller which is
physically located at the Pueblo Facility.
(viii) Except as identified in Section 2.1(b), sales
data, customer lists, information relating to customers, suppliers'
names, mailing lists, and, if any, advertising matter, in each case to
the extent directly related to the Business.
(ix) Except as identified in subsection 2.1(b)
hereof, goodwill associated with the Business; all of the Division's
books and records directly related to the Business and the Non-Retained
Employees; and transferable Permits directly related to the Business.
(x) The payroll accounts set forth on Schedule
2.1(a).
11
<PAGE> 17
(b) EXCLUDED ASSETS. The assets that constitute Excluded
Assets shall include only:
(i) The consideration delivered to Seller pursuant to
this Agreement.
(ii) The right of Seller to enforce the
representations, warranties, covenants and indemnities of Buyer under
this Agreement, the Assumption Agreement, the Pueblo Lease, the
Trademark License, the Lease Assignment, the Side Letter, the Use
Agreement (if any) and any related agreements and the obligations of
Buyer to pay, perform or discharge the liabilities and obligations of
Seller assumed by Buyer under this Agreement, the Assumption Agreement,
the Pueblo Lease, the Trademark License, the Lease Assignment, the Side
Letter, the Use Agreement (if any) and any related agreements, and all
other rights, including rights of indemnification, of Seller under this
Agreement, the Assumption Agreement, the Pueblo Lease, the Trademark
License, the Lease Assignment, the Side Letter, the Use Agreement (if
any) and any related agreements.
(iii) All assets, rights, privileges, claims and
Contracts owned by Seller and used in connection with the Other
Businesses, including, without limitation, the Media Division Assets.
(iv) All credits, reserves and deposits with
applicable Governmental Entities including, without limitation, those
related to unemployment compensation and workers' compensation.
(v) All of Seller's insurance policies and any right,
title and interest of Seller in and to any proceeds thereof or any
claims thereunder or with respect thereto, in each case whenever
arising.
(vi) All of Seller's deposit accounts other than the
payroll accounts specified in Section 2.1(a)(xi).
(vii) All of Seller's Plans, any assets thereof, and
the books and records related to such Plans.
(viii) The Marks set forth on Schedule 2.1(b).
(ix) Seller's articles of incorporation,
non-transferable franchises, corporate seals, minute books, stock books
and other corporate records having to do
12
<PAGE> 18
with the corporate organization and capitalization of Seller and all
income tax records and nontransferable Permits.
(x) Seller's books of account related to the Other
Businesses.
(xi) All refunds with respect to (A) Income Taxes
attributable to periods of time that Seller was the owner of the
Purchased Assets and (B) sales Taxes and property Taxes due and payable
on or before the Closing Date.
(xii) All amounts owed, or reflected on the books of
account of Seller as being owed, by Seller to the Business.
(xiii) Cash other than the cash referenced in Section
2.1(a)(vii).
(xiv) Seller's fee interest in the Owned Real
Property.
(xv) All fixtures and improvements attached to the
Owned Real Property.
(xvi) All of Seller's accounts receivable as of the
date hereof arising from the Business, together with any additions
thereto received or incurred by Seller after the date hereof through
and including the Closing Date, the trade accounts receivable ledger
dated as of the Closing Date, and any other documents or instruments
related to such accounts receivable or useful in the collection
thereof, including, without limitation, bills of lading, invoices,
shipping documents, purchase orders, etc.
(xvii) The assets set forth on Schedule 2.1(b).
(c) To the extent that the assignment of any Contract, Permit
or Approval issued or to be issued by any Governmental Entity relating to the
Business or the Purchased Assets to be assigned to Buyer pursuant to this
Agreement shall require the Approval of any party other than Seller, this
Agreement shall not constitute a contract to assign the same if an attempted
assignment would constitute a breach thereof. Seller shall use its reasonable
commercial efforts, and shall cooperate where appropriate, to obtain any such
Approval necessary to any such assignment. If any such Approval is not obtained,
then Seller shall cooperate with Buyer in any reasonable
13
<PAGE> 19
arrangement requested by Buyer designed to provide to Buyer the benefits under
any such Contract, Permit or Approval including enforcement of any and all
rights of Seller against the other party thereto arising out of breach or
cancellation thereof by such other party or otherwise. Notwithstanding anything
to the contrary contained herein, in no event shall Seller's failure to assign
any Contract, Permit or Approval result in an adjustment of the Purchase Price.
2.2 ASSUMPTION OF CERTAIN LIABILITIES.
(a) ASSUMED LIABILITIES. Buyer shall assume, shall take
subject to and shall be liable for the following (collectively, the "Assumed
Liabilities"):
(i) All Current Liabilities of the type listed on
Part (i) of Schedule 2.2(a).
(ii) Any and all liabilities or obligations incurred,
arising from or out of or in connection with the operation of
the Business and the Purchased Assets after the Closing Date
and whether or not incurred in the ordinary course of
business.
(iii) The liabilities and obligations set forth on
Part (ii) of Schedule 2.2(a) annexed hereto.
(iv) Any other liabilities or obligations expressly
assumed by Buyer hereunder, or pursuant to (a) the Pueblo
Lease, (b) the Lease Assignment, (c) the Assumption Agreement
or (d) the Side Letter.
(b) LIABILITIES NOT ASSUMED. Buyer shall not assume, shall not
take subject to and shall NOT be liable for any liabilities other than the
Assumed Liabilities (all such liabilities other than the Assumed Liabilities,
the "Excluded Liabilities"). Excluded Liabilities shall include but not be
limited to:
(i) Any liabilities or obligations incurred, arising
from or out of or in connection with the issuance, sale, repayment or
repurchase of any of Seller's securities.
(ii) Any liabilities or obligations incurred, arising
from or out of, in connection with or as a result of claims made by or
against Seller whether
14
<PAGE> 20
before or after the Closing Date that arise out of the
Other Businesses.
(iii) Any liabilities or obligations (whether
assessed or unassessed) of Seller for (A) any Taxes arising by reason
of the transactions contemplated herein, (B) Seller's Income Taxes and
(C) sales Taxes and property Taxes due and payable on or before the
Closing Date.
(iv) All fees and expenses of Seller in connection
with the transactions contemplated herein.
(v) Any liabilities or obligations to stockholders or
former stockholders of Seller.
(vi) Any liabilities or obligations of Seller
incurred, arising from or out of or in connection with this Agreement
or the events or negotiations leading up to this Agreement.
(vii) Any liabilities or obligations arising from or
out of or in connection with any use, transportation, treatment,
disposal or release of any Hazardous Substance(s) in connection with
the Business at any location other than the Owned Real Property or the
Leased Real Property prior to the Closing Date.
(viii) Any fines or penalties under any environmental
Laws arising from or out of or in connection with the operation of the
Business prior to the Closing Date.
(ix) Except as specifically referred to in Section
2.2(a), any liabilities or obligations arising before the Closing Date
from or out of or in connection with (A) any pending or completed
Action relating to the Business including, without limitation, Actions
cited by current and former employees of the Business under OSHA or
based upon any other theory of recovery, (B) the conduct of the
Business or ownership of the Purchased Assets prior to the Closing
Date, (C) products sold or services rendered by the Business prior to
the Closing Date, whether in the nature of warranty or product
liability claims.
2.3 PURCHASE PRICE AND ALLOCATION.
(a) The total purchase price (the "Purchase Price") to be paid
to Seller by Buyer at the Closing for the Purchased Assets shall be (i) the
assumption of the Assumed
15
<PAGE> 21
Liabilities, PLUS (ii) $13,075,000 in cash, subject to certain adjustments as
set forth in Section 2.4(b).
(b) The Purchase Price shall be allocated among the Purchased
Assets and the Assumed Liabilities as set forth in Schedule 2.3. Seller and
Buyer agree that their agreed upon allocation shall be used, reported and
implemented for all federal, state, local and other tax purposes.
2.4 PAYMENT OF PURCHASE PRICE; WORKING CAPITAL
ADJUSTMENT.
(a) On the Closing Date, Buyer shall pay to Seller, by wire
transfer or other immediately available funds, the Purchase Price.
(b) After the Closing Date, the Purchase Price shall be
adjusted as follows:
(i) Within 30 days of the Closing Date, Buyer shall
cause Ernst & Young LLP ("E & Y") to prepare and deliver to
Seller an unaudited balance sheet of the Business as at the
Closing Date (the "Closing Balance Sheet"), prepared in
accordance with GAAP consistently applied (including, without
limitation, with respect to the Business as conducted by
Seller), which sets forth the Closing Date Working Capital.
Any fees and expenses incurred by Buyer in preparing the
Closing Balance Sheet shall be paid by Buyer.
(ii) After receipt of the Closing Balance Sheet,
Seller and its accountants and attorneys shall have 30 days to
review the Closing Balance Sheet. In addition, Seller and its
accountants and attorneys shall be given reasonable access to
the premises of Buyer, to its books, records and work papers,
and to the appropriate personnel at Buyer for purposes of
confirming the Closing Balance Sheet. Unless Seller notifies
Buyer to the contrary in writing within such 30-day period
pursuant to clause (iii) below, Seller shall be deemed to have
accepted the Closing Balance Sheet and such Closing Balance
Sheet shall be conclusive and binding on Seller and Buyer. Any
fees and expenses incurred by Seller in undertaking such
review shall be paid by Seller.
(iii) If Seller takes exception to any aspect of the
Closing Balance Sheet or the
16
<PAGE> 22
preparation thereof, Seller shall notify Buyer of such
exception in writing on or prior to the 30th day after
Seller's receipt of the Closing Balance Sheet. Unless resolved
by the parties within 10 days (the "Resolution Period"), such
exception or exceptions shall be submitted to a firm of
nationally recognized independent public accountants (the
"Neutral Auditors') selected by mutual agreement of Seller and
Buyer within five days after the expiration of the Resolution
Period or, in the absence of such mutual agreement, by a firm
of nationally recognized independent public accountants
selected by lot after eliminating Seller's principal outside
accountants, E & Y, Buyer's principal outside accountants, if
different from E & Y, and one additional firm designated as
objectionable by each of Seller and Buyer. Each party agrees
to execute a reasonable engagement letter, if requested to do
so by the Neutral Auditors. The Neutral Auditors, within 45
days after their selection shall make a determination of all
issues in dispute, which determination shall be set forth in a
written statement delivered to Seller and Buyer and shall be
binding and conclusive as among the parties hereto absent
fraud or manifest effort. All fees and expenses relating to
the work performed by the Neutral Auditors shall be borne
equally by Seller and Buyer.
(iv) The Purchase Price shall be adjusted upon the
happening of (A) the acceptance of the Closing Balance Sheet
by Seller, as evidenced by written notice thereof to Buyer,
(B) the deemed acceptance of the Closing Balance Sheet by
Seller pursuant to clause (ii) hereof, or (C) the resolution
of the parties or the delivery of the statement of the Neutral
Auditors pursuant to clause (iii) above. If the Closing Date
Working Capital (after taking into account any changes
resulting from the mutual agreement of the parties or the
statement of the Neutral Auditors, if any) is less than the
Year-End Working Capital, then Seller shall pay to Buyer, by
wire transfer or other immediately available funds, the
difference between the Year-End Working Capital and the
Closing Date Working Capital. Any payment made pursuant to
this clause (iv) shall be deemed to be an adjustment in
Purchase Price.
17
<PAGE> 23
ARTICLE 3
CLOSING
3.1 CLOSING DATE.
Upon the terms and subject to the conditions set forth in this
Agreement, the Closing of the transaction shall take place at the offices of
O'Melveny & Myers LLP, 153 East 53rd Street, New York, New York 10022, on March
31, 1997, or at such other location or time as Seller and Buyer may agree in
writing, but in no event later than the earlier of (i) three days after Buyer's
receipt of the proceeds (net of fees, commissions and underwriting discounts) of
the High Yield Offering and (ii) April 7, 1997.
3.2 ITEMS TO BE DELIVERED AT THE CLOSING BY
SELLER.
At the Closing, Seller shall deliver or cause to be delivered
to Buyer:
(a) A Bill of Sale and Assignment, in substantially the form
of Exhibit A.
(b) The Lease Assignment.
(c) The Pueblo Lease.
(d) The Trademark License.
(e) Such other instruments of transfer necessary or
appropriate to transfer to and vest in Buyer all of Seller's right, title and
interest in and to the Purchased Assets.
(f) All documentation required to exempt Seller from the
withholding requirement of Section 1445 of the Code, consisting of (a) an
affidavit from Seller to Buyer stating under penalty of perjury that Seller is
not a foreign person and providing Seller's U.S. taxpayer identification number,
or (b) a sworn affidavit of Seller that it is not a "U.S. real property holding
corporation," as defined in Section 897 of the Code or (c) a "qualifying
statement" obtained by Seller from the Internal Revenue Service.
(g) The certificates, consents and other documents referred to
herein as then deliverable by Seller.
18
<PAGE> 24
'
(h) The keys to all locks located on or in the Purchased
Assets (and any and all cards, devices or things necessary to access any
Purchased Assets).
In addition, in the event that Seller elects (in its sole
discretion) on or before the Closing Date to enter into the Use Agreement,
Seller shall deliver the Use Agreement.
3.3 ITEMS TO BE DELIVERED AT THE CLOSING BY
BUYER.
At the Closing, Buyer shall deliver to Seller:
(a) The Purchase Price.
(b) The Assumption Agreement.
(c) The Pueblo Lease.
(d) The Lease Assignment.
(e) Such instruments as requested by any creditor, lessor or
any other person whose consent is required to consummate the transactions
contemplated by this Agreement to evidence the assumption by Buyer of the
Assumed Liabilities.
(f) The certificates, consents and other documents referred to
herein as then deliverable to Buyer.
In addition, in the event that Seller elects (in its sole
discretion) on or before the Closing Date to enter into the Use Agreement, Buyer
shall deliver the Use Agreement.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents, warrants and agrees as follows:
4.1 ORGANIZATION AND RELATED MATTERS.
Seller is a corporation duly organized, validly existing and
in good standing under the laws of the State of Ohio. Seller has all necessary
corporate power and authority to execute, deliver and perform this Agreement and
any related agreements to which it is a party. Seller has all necessary
corporate power and authority to own the Purchased Assets and to carry on the
Business as now
19
<PAGE> 25
conducted and is qualified to do business as a foreign corporation and is in
good standing in the States of New Jersey and Colorado, and neither the conduct
of the Business nor the ownership of the Purchased Assets requires the
qualification of Seller as a foreign corporation in any other jurisdiction,
except where the failure to be so qualified or licensed would not have a
Material Adverse Effect. Schedule 4.1 sets forth each State in which any
employees or material assets of the Business are located, other than States in
which assets or employees are located solely because such assets or employees
are in transit.
4.2 FINANCIAL STATEMENTS; CHANGES; CONTINGENCIES.
(a) UNAUDITED FINANCIAL STATEMENTS. Seller has delivered to
Buyer (i) the unaudited balance sheet for the Business at December 31, 1996, and
(ii) the related unaudited statements of operations for the twelve months then
ended, each of which is set forth on Schedule 4.2. All such financial statements
have been prepared in conformity with GAAP applied on a consistent basis (except
for changes, if any, required by GAAP and disclosed therein). Such statement of
operations presents fairly in all material respects the results of operations of
the Business for the respective periods covered, and the balance sheet presents
fairly in all material respects the financial condition of Seller as of December
31, 1996. Since December 31, 1996, there has been no change in any of the
significant accounting policies, practices or procedures of Seller.
(b) ABSENCE OF CERTAIN CHANGES. Since December 31, 1996, there
has not been, occurred or arisen:
(i) any change in the Purchased Assets or the Assumed
Liabilities or the financial condition of the Business, other than in
the ordinary course of business, none of which would have a Material
Adverse Effect, or
(ii) any strike or other material labor dispute, or
(iii) any casualty, loss, damage or destruction
(whether or not covered by insurance) which involves a loss of more
than $100,000,
(iv) any material transaction other than in the
ordinary course of business,
(v) any material cancellation, termination, amendment
or grant of waiver of any Material Contract
20
<PAGE> 26
or of any material rights or claims arising thereunder,
or
(vi) any purchase commitments in excess of the normal
business requirement of the Business or a reduction in the aggregate
dollar volume of backlog of sales or orders of the Business in excess
of $150,000.
except, in each case, for changes affecting generally the material handling
industry as a whole, including but not limited to changes in or affecting
interest rates, securities markets, accounting principles, practices or
conventions or applicable laws and regulations (it being understood that Buyer
assumes the risks associated with changes of such type from and as of the date
of this Agreement).
(c) NO OTHER LIABILITIES OR CONTINGENCIES. Seller does not
have any liabilities of any material nature, whether accrued, absolute,
contingent or otherwise, and whether due or to become due, probable of assertion
or not, arising from or incurred in connection with the Business except such
liabilities that (i) are reflected or disclosed in the financial statements
referred to in subsection (a) above, (ii) were incurred after December 31, 1996
in the ordinary course of business or (iii) are set forth in Schedule 4.2(c).
(d) BUYER'S SIGNING FINANCIALS. Notwithstanding anything to
the contrary contained herein, the parties hereto hereby expressly agree that
(i) Seller shall not be deemed to have breached any representations, warranties,
covenants or agreements contained in this Agreement (including, without
limitation, in this Section 4.2 or Section 4.22) or any related agreement due to
any difference or discrepancy between the financial statements set forth in
Schedule 4.2 and Buyer's Signing Financials and (ii) any difference or
discrepancy between the financial statements set forth in Section 4.2 and
Buyer's Signing Financials, if any, has already been reflected in the Purchase
Price as determined on the date hereof.
4.3 MATERIAL CONTRACTS.
Schedule 4.3 lists each contract directly related to the
Business to which Seller is a party that is deemed a Material Contract under
this Agreement. Unless otherwise so noted in Schedule 4.3, each such Contract
was entered into in the ordinary course of business. True, correct and complete
copies of the agreements appearing on Schedule 4.3, including all amendments and
supplements, have been delivered to Buyer. Except as set forth in Schedule 4.3,
21
<PAGE> 27
each Material Contract is valid and binding. Seller has duly performed all its
material obligations thereunder to the extent that such obligations to perform
have accrued. No material breach or default, alleged material breach or default,
or event which would (with the passage of time, notice or both) constitute a
material breach or default thereunder by Seller (or, to the best knowledge of
Seller, any other party or obligor with respect thereto), has occurred or as a
result of this Agreement or its performance will occur. Except as set forth in
Schedule 4.3A, consummation of the transactions contemplated by this Agreement
will not (and will not give any person a right to) terminate or modify any
material rights of, or accelerate or augment any material obligation of, Seller.
Except as set forth on Schedule 4.3, there are no material offsets, credits or
defenses against or to any material rights of Seller under the Lease.
4.4 CONDITION OF PROPERTY.
(a) Except as set forth on Schedule 4.4, Seller has good and
marketable title to each of the Purchased Assets, free and clear of any
Encumbrances other than Permitted Exceptions. Except as set forth in the
Schedules, Seller has all rights, power and authority to sell, convey, assign,
transfer and deliver the Purchased Assets to Buyer in accordance with the terms
of this Agreement. At the Closing, Seller shall deliver the Purchased Assets to
Buyer, free and clear of any Encumbrances except for (i) Permitted Exceptions
and (ii) monetary liens which will be removed of record at or prior to the
Closing. The Purchased Assets are in a good state of maintenance and repair,
have been regularly and appropriately maintained, repaired and replaced, are not
materially defective except for ordinary wear and tear and are adequate for use
in the Business. Except as set forth in Schedule 4.17, the Leased Real Property
is, in all material respects, in appropriate condition for surrender to Dowel
Associates, as landlord under the Lease, pursuant to the terms of the Lease.
(b) Except as set forth on Schedule 4.4, the Purchased Assets,
the Owned Real Property and the Leased Real Property comprise all material
property and interests used or held for use by Seller in the conduct of the
Business. Seller has received no written notice of any proposed special
assessments, nor any proposed material changes in property tax or land use laws
affecting the Leased Real Property. Except as set forth on Schedule 4.4 annexed
hereto, the Purchased Assets, the Owned Real Property and the Leased Real
Property constitute substantially all of the assets necessary to conduct the
Business consistent with past practices of Seller. Seller
22
<PAGE> 28
has made no material disposition of assets used or held for use in connection
with the Business (other than inventory) during the twelve months preceding the
date hereof.
4.5 INTELLECTUAL PROPERTY.
----------------------
Schedule 4.5 lists any and all Marks and patents which are
used in the Business. Except as set forth on Schedule 4.5, Seller has complete
rights to and ownership of all material Intellectual Property required for use
in connection with the Business. Seller does not use any material Intellectual
Property in connection with the Business by consent of any other person and is
not required to and does not make any material payments to others with respect
thereto. Except as set forth on Schedule 4.5, the Intellectual Property of
Seller used by Seller in connection with the Business is fully assignable free
and clear of any Encumbrances other than Permitted Exceptions. Seller has in all
material respects performed all obligations required to be performed by it, and
is not in default in any material respect under any Material Contract relating
to any of the foregoing.
None of the past or present employees, officers, directors,
shareholders or affiliates of Seller has any rights in any material Intellectual
Property of Seller. Except as set forth in Schedule 4.5, Seller has not granted
any outstanding license or other rights to any material Intellectual Property
owned by it, and Seller is not liable, and has not made any contract or
arrangement whereby it may become liable, to any person for any royalty or other
compensation for the use of any material Intellectual Property in connection
with the Business. The Business, as presently conducted, does not materially
infringe any Intellectual Property rights of others, and Seller has not been
charged or, to the best of Seller's knowledge, threatened to be charged with any
such infringement.
4.6 AUTHORIZATION; NO CONFLICTS.
----------------------------
The execution, delivery and performance of this Agreement and
any related agreements by Seller has been duly and validly authorized by the
Board of Directors of Seller and by all other necessary corporate action on the
part of Seller. This Agreement and any related agreements constitutes the
legally valid and binding obligation of Seller, enforceable against Seller in
accordance with its terms except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws and
equitable principles relating to or limiting creditors rights generally. Except
as set forth in Schedule 4.6 annexed hereto, the execution, delivery and
23
<PAGE> 29
performance of this Agreement by Seller and the execution, delivery and
performance of any related agreements or contemplated transactions by Seller
will not materially violate, or constitute a material breach or default (whether
upon lapse of time and/or the occurrence of any act or event or otherwise)
under, the charter documents or by-laws of Seller or any Material Contract of
Seller, result in the imposition of any Encumbrance (other than Permitted
Exceptions) against any of the Purchased Assets or violate any Law in a material
respect. Schedule 4.6 lists all material Permits and Approvals required to be
obtained by Seller to consummate the transactions contemplated by this
Agreement.
4.7 LEGAL PROCEEDINGS.
There is no Order or Action pending, or, to the best knowledge
of Seller, overtly threatened, against or affecting Seller in connection with
the Business or any of the Purchased Assets, that individually or when
aggregated with one or more other Orders or Actions if determined adversely
would reasonably be expected to result in a liability in excess of $100,000. As
of the date hereof, there is no Order or Action pending against, or, to the best
knowledge of Seller, affecting Seller in connection with the Business or any of
the Purchased Assets.
4.8 MINUTE BOOKS.
The minute books of Seller accurately reflect all material
actions and proceedings taken since the date Seller acquired the Business by the
respective shareholders, boards of directors and committees of Seller, and such
minute books contain true and complete copies of the charter documents of Seller
and all related amendments.
4.9 ACCOUNTING RECORDS.
Seller's records to be transferred hereunder accurately and
validly reflect its material transactions directly related to the Business.
4.10 INSURANCE.
Schedule 4.10 lists all material insurance policies owned or
held by the Seller which cover risk to the Purchased Assets, the Business,
employees of the Seller directly related to the Business or potential
liabilities to third parties arising from or in connection with the Business.
Such insurance polices are in full force and effect. Seller has received no
written notice from any
24
<PAGE> 30
insurer or agent of any intent to cancel such insurance policies.
4.11 PERMITS.
Schedule 4.11 annexed hereto lists all material Permits that
are required by any Governmental Entity to permit Seller to conduct the
Business. Seller is not in material default under or in material violation of
any such Permit. To the best knowledge of Seller, no suspension, cancellation or
termination of any of such material Permits is overtly threatened or imminent.
4.12 COMPLIANCE WITH LAW.
(a) Seller has conducted the Business in accordance with
applicable Laws in all material respects, and the forms, procedures and
practices of Seller are in material compliance with all such Laws.
(b) Seller is not in violation of any material ordinance, law
or regulation of any Governmental Entity resulting from the current uses of, or
the buildings or improvements on, the Owned Real Property or the Leased Real
Property. No proceedings are pending or, to the best knowledge of Seller,
overtly threatened for condemnation of all or any material part of the Owned
Real Property of the Leased Real Property. All material structures located on
the Owned Real Property and the Leased Real Property and used in connection with
the Business are in good condition and repair, ordinary wear and tear excepted.
4.13 EMPLOYEE BENEFITS.
(a) Schedule 4.13 lists all Plans currently maintained by
Seller (or any ERISA Affiliate) which provides or has provided benefits to or
for any Business Employee within the most recent five years. Seller has
delivered or made available to Buyer copies of each Plan, all amendments
thereto, all related funding arrangements, all actuarial valuation reports for
the most recent five years, all Forms 5500 with schedules thereto for the most
recent five years; a copy of the most recent determination letter issued by the
Internal Revenue Service for each Pension Plan; and a copy of the most recent
summary plan description.
(b) Except as indicated on Schedule 4.13, each Plan and
related funding arrangements (i) are in form and have been administered in
material compliance with all applicable laws, including, without limitation,
ERISA and the Code; (ii) each Pension Plan intended to qualify under Section
401(a) of the Code has received a favorable
25
<PAGE> 31
determination letter from the Internal Revenue Service with respect to such
qualification or has been submitted timely to the Internal Revenue Service for
such a favorable determination; (iii) each trust maintained in conjunction with
a Pension Plan intended to qualify under Section 401(a) of the Code has received
a favorable determination letter from the Internal Revenue Service with respect
to the exemption thereof under Section 501(a) of the Code; (iv) none of the
Pension Plans or related trusts, or any administrator or trustee thereof, or
party-in-interest or disqualified person thereto has engaged in a transaction
that could cause any of them to be liable for a material civil penalty under
Section 409 or 502(i) or any other section of ERISA or result in a material tax
under Section 4975 or 4976 or any other section of Chapter 43 of Subtitle D of
the Code; (v) all material amounts required to be paid by Seller to or pursuant
to each of the Plans on or before the Closing Date have been paid within the
time periods required by the Plans or by law; (vi) no Pension Plan has incurred
any "accumulated funding deficiency," as defined in Section 412 of the Code; and
(vii) no "reportable event" within the meaning of Title IV of ERISA has occurred
with respect to any Pension Plan subject thereto.
(c) Except as listed in Schedule 4.13, no Business Employees
currently participate, or have participated within the last five years, in any
Multiemployer Plan. Seller represents that the sale of the Business to Buyer
shall not cause a withdrawal to occur with respect to any Multiemployer Plan.
Seller represents that there are no unpaid withdrawal liability claims with
respect to Seller or any ERISA Affiliate. No liability under Title IV of ERISA
has been incurred by Seller that has not been satisfied in full, and no
condition exists that presents a risk to Seller of incurring a material
liability under Title IV other than liability for premiums due the Pension
Benefit Guaranty Corporation. The PBGC has not instituted proceedings to
terminate any Pension Plan in which Seller participates, and no condition exists
that presents a risk that such proceedings will be instituted.
(d) Each Welfare Plan that provides medical benefits to
Business Employees has been operated in compliance in all material respects with
the requirements of Sections 601 through 608 of ERISA and Section 4980B of the
Code ("COBRA"), relating to the continuation of coverage under certain
circumstances in which coverage would otherwise cease. Seller represents that it
will provide appropriate COBRA notices to each Business Employee whose medical
coverage under Seller's Welfare Plans would cease as a result of the sale of the
Business.
26
<PAGE> 32
(e) Any Plan designed to satisfy the requirements of Section
125, Section 401(k), Section 409, Section 501(c)(9), Section 4975(e)(7), and/or
Section 4980B of the Code, satisfies such section in all material respects.
(f) Except as indicated on Section 4.13, there is no audit
which in process by, or for which notification has been received from, the
Internal Revenue Service, the Department of Labor or the PBGC, with respect to
any Plan.
(g) Buyer shall have no liability with respect to any Plan
except as assumed pursuant to Section 2.2(a), and shall have no obligation with
respect to any Business Employee except as assumed pursuant to Section 2.2(a) or
as set forth in Section 7.4.
4.14 CERTAIN INTERESTS.
No Affiliate of Seller nor any officer or director of any
thereof has any material interest in any of the Purchased Assets or the Assumed
Liabilities.
4.15 NO BROKERS OR FINDERS.
No agent, broker, finder, or investment or commercial banker,
or other Person or firm engaged by or acting on behalf of Seller or any of its
Affiliates in connection with the negotiation, execution or performance of this
Agreement or the transactions contemplated by this Agreement, is or will be
entitled to any brokerage or finder's or similar fee or other commission as a
result of this Agreement or such transactions except Donaldson Lufkin &
Jenrette, as to which Seller shall have full responsibility and Buyer shall have
no liability; PROVIDED that Seller shall have no responsibility or liability
with respect to any fees or commissions payable to Donaldson Lufkin & Jenrette
or any of its Affiliates with respect to the High Yield Offering.
4.16 INVENTORY.
All items of Inventory are of a quantity and quality salable
or useable in the ordinary course of the Business. All such Inventory is valued
on the Seller's books at the lower of cost (calculated using the first-in,
first-out valuation method) or market and have net realizable market values in
the ordinary course of business of not less than their book value (less any
reserve for obsolete inventory).
27
<PAGE> 33
4.17 ENVIRONMENTAL COMPLIANCE.
Except as set forth in Schedule 4.17, (i) Seller has not, in
connection with the Business, generated, used, transported, treated, stored,
released or disposed of, or suffered or permitted anyone else to generate, use,
transport, treat, store, release or dispose of any Hazardous Substance in
material violation of any Law; (ii) there has not been any generation, use,
transportation, treatment, storage, release or disposal of any Hazardous
Substance in connection with the conduct of the Business which has created or
would reasonably be expected to create any liability under any Law or which
would require reporting to or notification of any Governmental Entity; (iii) no
asbestos, polychlorinated biphenyl or underground storage tank is contained in
or located at the Pueblo Facility or the West Caldwell Facility; and (iv) any
Hazardous Substance handled or dealt with in any way in connection with the
Business during Seller's ownership, has been and is being handled or dealt with
in all respects in material compliance with all applicable Laws.
4.18 LABOR CONTRACTS. Except for the 1992-1995 Agreement
Between Hewitt-Robins Corp., Division of W.S. Tyler, and International
Association of Machinists and Aerospace Workers, A.F.L.-C.I.O., District 15
(as amended and extended by Appendix "A" to such agreement) (the "Collective
Bargaining Agreement"), Seller is not a party to any collective bargaining
agreement relating to the Business and there is no election or proceeding
pending to recognize a union for any of Seller's employees relating to the
Business, in each case as of the date hereof. There are no unfair labor
practice or other administrative or court proceedings pending between Seller
and its employees and there has not occurred within the past two years any
material work stoppage or strike or any significant labor troubles at Seller's
facilities, in each case as of the date hereof.
4.19 OVERTIME, BACK WAGES, VACATION AND MINIMUM WAGES. No present or
former employee of the Business has a pending claim against Seller (whether
under federal or state law) under any employment agreement, or otherwise, on
account of or for (i) overtime pay, other than overtime pay for the current
payroll period, (ii) wages or salary for any period other than the current
payroll period, (iii) vacation or time off (or pay in lieu thereof), other
than that earned in respect of the previous twelve months, or (iv) any
violation of any statute, ordinance or regulation relating to minimum wages or
maximum hours of work.
28
<PAGE> 34
4.20 DISCRIMINATION, OCCUPATIONAL SAFETY AND OTHER
STATUTES AND REGULATIONS. As of the date hereof, no person has a pending
claim against Seller with respect to the Business arising out of any material
breach or violation of any statute, ordinance or regulation relating to
discrimination in employment or employment practices or occupational safety
and health standards (including without limitation, The Occupational Safety
and Health Act ("OSHA"), The Fair Labor Standards Act, Title VII of the Civil
Rights Act of 1964, or the Age Discrimination in Employment Act of 1967).
4.21 SUPPLIERS AND CUSTOMERS. Except as set forth on
Schedule 4.21, no supplier or customer which accounted for more than five
percent (5%) of the sales or purchases of the Business in both the fiscal
year ended March 31, 1996 and the nine months ended December 31, 1996, and no
other supplier or customer material to the Business (including, but not limited
to, any supplier who is the sole source of supply of any product or service to
the Business) has terminated or threatened to terminate its relationship with
Seller since April 1, 1995.
4.22 DISCLOSURE. Neither this Agreement (including the
Exhibits hereto) nor the financial statements set forth on Schedule 4.2 nor
any certificate or information furnished by Seller under this Agreement
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary in order to make the statements
contained herein or therein not misleading, in each case as of the date thereof.
4.23 WARRANTY AND PRODUCT LIABILITY CLAIMS. Except as
set forth on Schedule 4.23, now or at any time since February 12, 1992, Seller
has not received notice of, nor has any person asserted against it, any material
product liability or warranty claim relating to the Business or products or
services offered or sold by the Business.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents, warrants and agrees as follows:
5.1 ORGANIZATION AND RELATED MATTERS.
Buyer is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Buyer has all necessary
corporate power and
29
<PAGE> 35
authority to carry on its business as now being conducted. Buyer has the
necessary corporate power and authority to execute, deliver and perform this
Agreement and any related agreements to which it is a party.
5.2 AUTHORIZATION.
The execution, delivery and performance of this Agreement and
any related agreements by Buyer has been duly and validly authorized by the
Board of Directors of Buyer and by all other necessary corporate action on the
part of Buyer. This Agreement constitutes the legal, valid and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws and equitable principles
relating to or limiting creditors' rights generally.
5.3 NO CONFLICTS.
The execution, delivery and performance of this Agreement and
any related agreements by Buyer will not violate the provisions of, or
constitute a breach or default whether upon lapse of time and/or the occurrence
of any act or event or otherwise under (a) the charter documents or bylaws of
Buyer, (b) any Law to which Buyer is subject or (c) any Contract to which Buyer
is a party that is material to the financial condition, results of operations or
conduct of the business of Buyer.
5.4 NO BROKERS OR FINDERS.
No agent, broker, finder or investment or commercial banker,
or other Person or firms engaged by or acting on behalf of Buyer or its
Affiliates in connection with the negotiation, execution or performance of this
Agreement or the transactions contemplated by this Agreement, is or will be
entitled to any broker's or finder's or similar fees or other commissions as a
result of this Agreement or such transactions.
5.5 LEGAL PROCEEDINGS.
There is no Order or Action pending or to the best knowledge
of Buyer, threatened against or affecting Buyer that individually or when
aggregated with one or more other Actions has or might reasonably be expected to
have a material adverse effect on Buyer's ability to perform this Agreement or
any other aspect of the transactions contemplated by this Agreement.
30
<PAGE> 36
5.6 WARN ACT.
Buyer is not planning or contemplating, and has not made or
taken, any decisions or actions concerning the Non-Retained Employees after the
Closing that would require the service of notice under the Worker Adjustment and
Retraining Act of 1988 (the "WARN Act").
ARTICLE 6
PRE-CLOSING COVENANTS
6.1 ACCESS.
Subject to applicable Laws and fiduciary and privacy
obligations, Seller shall authorize and permit Buyer and its representatives to
have reasonable access during normal business hours, upon reasonable notice and
in such manner as will not unreasonably interfere with the conduct of its
businesses, to all of its properties, books, records, operating instructions and
procedures, Tax Returns and all other information, in each case to the extent
directly related to the Business, as Buyer may from time to time reasonably
request, and to make copies of such books, records and other documents at
Buyer's expense and to discuss the Business with the Division's officers,
employees, accountants and counsel as Buyer considers reasonably necessary for
the purposes of familiarizing itself with the Business, the Purchased Assets or
the Assumed Liabilities, obtaining any necessary Approvals of or Permits for the
transactions contemplated by this Agreement.
6.2 CONDUCT OF BUSINESS.
Seller shall not, without the prior consent in writing of
Buyer (which may not be unreasonably withheld):
(a) conduct the Business except in the ordinary course
consistent with past practices; or
(b) except as required by its terms, amend in any material
respect, terminate or renegotiate any Material Contract or default (or
take or omit to take any action that with or without the giving of
notice or passage of time or both, would constitute a default) in any
of its material obligations under any Material Contract; or
(c) terminate or fail to renew any existing material insurance
coverage; or
31
<PAGE> 37
(d) terminate, amend or fail to renew or preserve any material
Permits; or
(e) incur or agree to incur any obligation or liability
(absolute or contingent) directly related to the Business that
individually calls for payment by Seller of more than $50,000 in any
specific case or $250,000 in the aggregate; PROVIDED that
notwithstanding anything to the contrary contained herein, the parties
hereto expressly acknowledge and agree that Seller may purchase or
otherwise establish a fully insured medical plan (or take such other
action that, in Seller's sole discretion, will reduce and/or eliminate
Seller's exposure on and after the Closing Date with respect to medical
payments to persons who were Seller's employees on or before the
Closing Date) with respect to any of Seller's employees, in each case
and to the extent necessary or advisable in Seller's sole discretion;
or
(f) sell, transfer, mortgage, encumber or otherwise dispose of
any of the Purchased Assets and Assumed Liabilities, except (i) for
dispositions of property not in excess of $100,000, (ii) in the
ordinary course of business or (iii) as contemplated by this Agreement;
or
(g) dispose of or permit to lapse any material Intellectual
Property included in the Purchased Assets or the Licensed Trademarks or
any rights to such Intellectual Property's use, except to the extent
such disposal or lapse would be permitted by the terms of the Trademark
License if it were then in effect; or
(h) fail to maintain or repair any material Purchased Asset in
accordance with good and prudent maintenance and repair procedures; or
(i) agree to or make any binding commitment to take any action
that is or would be prohibited by this Section 6.2; or
(j) terminate or enter into any customer orders, purchase
agreements or distribution agreements that are or would be Material
Contracts.
6.3 NOTIFICATION OF CERTAIN MATTERS.
Seller shall give prompt notice to Buyer, and Buyer shall give
prompt notice to Seller, of (i) the occurrence, or failure to occur, of any
event that would be likely to cause any of its representations or warranties
32
<PAGE> 38
contained in this Agreement to be untrue or inaccurate in any material respect
at any time from the date of this Agreement to the Closing Date, (ii) any
failure on its part to comply with or satisfy, in any material respect, any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement and (iii) any event of which Seller obtains knowledge which has
had or might reasonably be expected to have a Material Adverse Effect, except
for changes affecting generally the material handling industry as a whole,
including but not limited to changes in or affecting interest rates, securities
markets, accounting principles, practices or conventions or applicable laws and
regulations (it being understood that Buyer assumes the risks associated with
changes of such type from and as of the date of this Agreement).
6.4 PERMITS AND APPROVALS; THIRD PARTY CONSENTS.
(a) Seller and Buyer shall cooperate and use their best
efforts through and including the Closing Date to obtain (and will immediately
prepare all registrations, filings and applications, requests and notices
preliminary to obtaining all) Approvals and Permits that may be necessary or
that may be reasonably requested by Buyer or Seller, as the case may be, to
consummate the transactions contemplated by this Agreement. Seller shall
cooperate with Buyer through and including the Closing Date in connection with
Buyer obtaining any requisite Permits that Buyer needs in order to conduct the
Business in the manner conducted by Seller as of the date hereof. Seller and
Buyer shall furnish each other such necessary information and reasonable
assistance as the other may request in connection with its preparation of
necessary filings or submissions under the provisions of such laws.
(b) To the extent that the Approval of a third party with
respect to any Material Contract or material Permit is required in connection
with the transactions contemplated by this Agreement, Seller shall use its best
efforts to obtain such Approval prior to the Closing Date and in the event that
any such Approval is not obtained, Seller shall cooperate with Buyer to ensure
that Buyer obtains the benefits of each such Material Contract or material
Permit.
6.5 PRESERVATION OF BUSINESS PRIOR TO CLOSING DATE.
During the period beginning on the date hereof and ending on
the Closing Date, Seller shall use its best efforts to preserve the Business and
to preserve the good-
33
<PAGE> 39
will of customers, suppliers and others having business relations with Seller
directly related to the Business.
6.6 BULK TRANSFER LAWS.
Prior to the Closing, Seller shall take all action necessary
to comply with the bulk sales laws of any applicable jurisdiction, including but
not limited to the timely publication, recordation, mailing and delivery of any
and all statements, notices and other documents required by such bulk sales laws
as are applicable.
6.7 BENEFIT PLANS.
Except as may be required by law or as may be necessary to
continue the qualified status of any Benefit Arrangement or Plan under Section
401 of the Code, Seller shall not adopt, terminate, amend, extend or otherwise
change any Benefit Arrangement or Plan affecting the Business Employees without
the prior consent in writing of Buyer, which consent may not be unreasonably
withheld or delayed, and Seller shall give Buyer prior written notice of
Seller's intention to take any such action required by law or necessary to
continue the qualified status of any Plans.
6.8 BACKLOG.
On the Closing Date, Seller shall deliver to Buyer a schedule
setting forth the backlog of sales or orders of the Business as of the Friday
that is at least 2 business days prior to the Closing Date. Seller has
previously delivered to Buyer a schedule setting forth the backlog of sales or
orders of the Business as of December 31, 1996.
ARTICLE 7
POST-CLOSING COVENANTS
7.1 NONCOMPETITION.
(a) RESTRICTIONS ON COMPETITIVE ACTIVITIES. Seller agrees
that, after the Closing, Buyer shall be entitled to the goodwill and going
concern value of the Business and to protect and preserve the same to the
maximum extent permitted by law. For these and other reasons and as an
inducement to Buyer to enter into this Agreement, Seller agrees that for a
period of five years after the Closing Date Seller will not, directly or
indirectly, for its own benefit or as agent for another, carry on or participate
in the ownership, management or control of, or be employed by, or consult for or
otherwise render services to, any other present or future business enterprise
that competes with
34
<PAGE> 40
Buyer in the conveyor idler manufacturing, sales and distribution business
anywhere in the world.
(b) EXCEPTIONS. Nothing contained herein shall limit the right
of Seller as an investor to hold and make investments in securities of any
corporation, limited partnership, business trust or other entity that is
registered on a national securities exchange or admitted to trading privileges
thereon or actively traded in a generally recognized over-the-counter market,
provided Seller's equity interest therein does not exceed 5% of the outstanding
voting shares or interests in such entity. Notwithstanding anything to the
contrary contained in this Section 7.1, Seller may engage in the field of, and
may be employed by, or consult for or otherwise render services to, any present
or future business enterprise that competes with Buyer in the conveyor idler
manufacturing, sales and distribution business anywhere in the world so long as
Seller's services are insubstantial with respect to such conveyor idler
manufacturing, sales and distribution business.
7.2 NONDISCLOSURE OF PROPRIETARY DATA.
After the Closing, neither Seller nor any of its
representatives shall, at any time, make use of, divulge or otherwise disclose,
directly or indirectly, any trade secret or other proprietary data directly
related to the Business that Seller or any representative of Seller may have
learned as an owner or a shareholder, employee, officer or director of the
Division or the Business. In addition, neither Seller nor any of its
representatives shall make use of, divulge or otherwise disclose, directly or
indirectly, to persons other than Buyer, any confidential information directly
related to the Business that may have been learned in any such capacity.
7.3 TAX COOPERATION.
(a) After the Closing, Seller shall, and shall cause its
Affiliates to, cooperate fully with Buyer in the preparation of all Tax Returns
and shall provide, or cause to be provided at Seller's sole cost and expense, to
Buyer any records and other information reasonably requested by Buyer in
connection therewith as well as access to, and the cooperation of, Seller's
accountants. After the Closing, Seller shall, and shall cause its Affiliates to,
cooperate fully with Buyer in connection with any Tax investigation, audit or
other proceeding relating to the Business. Any information obtained pursuant to
this Section 7.3(a) or pursuant to any other Section hereof providing for the
sharing of information or the review of any Tax Return or
35
<PAGE> 41
other Schedule relating to Taxes shall be subject to Section 11.9.
(b) After the Closing, Buyer shall, and shall cause its
Affiliates to, cooperate fully with Seller in the preparation of all Tax Returns
and shall provide, or cause to be provided at Buyer's sole cost and expense, to
Seller any records and other information reasonably requested by Seller in
connection therewith as well as access to, and the cooperation of, Buyer's
accountants. After the Closing, Buyer shall, and shall cause its Affiliates to,
cooperate fully with Seller in connection with any Tax investigation, audit or
other proceeding relating to the Business. Any information obtained pursuant to
this Section 7.3(b) or pursuant to any other Section hereof providing for the
sharing of information or the review of any Tax Return or other Schedule
relating to Taxes shall be subject to Section 11.9.
7.4 EMPLOYMENT MATTERS.
(a) PUEBLO NON-RETAINED EMPLOYEES; MEDIA EMPLOYEES. As of the
Closing Date, Buyer shall offer employment to each Pueblo Non-Retained Employee
and shall hold such offers open for no less than 5 business days after such
offers are made. Such offers shall provide each Pueblo Non-Retained Employee
with (A) employment at the Pueblo Facility, (B) compensation that is the same as
the compensation provided to such Pueblo Non-Retained Employee by Seller as of
the day before the Closing Date and (C) benefits substantially similar to those
provided as of the date hereof by Buyer to those of its employees who are
similarly situated. Seller shall assume, pay, discharge and be responsible for
(i) any and all liabilities (including, without limitation, any severance
payments but excluding those liabilities assumed by Buyer pursuant to Section
2.2(a) and Section 7.4(h)) with respect to each Pueblo Non-Retained Employee
who (x) Buyer offers employment to in accordance with the preceding two
sentences of this Section 7.4(a) and (y) expressly declines such offer of
employment and (ii) any and all liabilities (including any severance payments)
with respect to the Media Employees. Notwithstanding anything to the contrary
contained herein, in the event that Buyer offers employment to any of the Media
Employees before, on or within one year after the Closing Date, Buyer shall
promptly reimburse Seller for any and all costs, liabilities and expenses Seller
incurred or will incur in connection with the termination of such Media
Employees from and after the date hereof, including, without limitation, any and
all severance payments, medical coverage, any other compensation or benefits and
any other liabilities.
36
<PAGE> 42
(b) West Caldwell Non-Retained Employees. As of the Closing
Date, Buyer shall offer employment to each West Caldwell Non-Retained Employee
and shall hold such offer open for no less than 5 business days after such
offers are made. Such offers shall provide each West Caldwell Non-Retained
Employee with compensation that is the same as the compensation provided to such
West Caldwell Non-Retained Employee by Seller as of the day before the Closing
Date. Buyer shall assume, pay, discharge and be responsible for severance
payments under the Severance Plans and Seller's cost of providing medical
coverage for the 60 day period following the termination of employment by Seller
pursuant to the Welfare Plans arising on or after the Closing Date (in addition
to any liabilities assumed by Buyer pursuant to Section 2.2(a) and Section
7.4(h)) with respect to the West Caldwell Non-Retained Employees, regardless of
whether or not any of such West Caldwell Non-Retained Employees accept Buyer's
offer of employment; PROVIDED that Buyer shall assume, pay, discharge and be
responsible for Seller's cost of providing medical coverage to John Wrobel for
the 12 month period following the Closing Date.
Within 60 days after the Closing Date, Buyer shall elect
either to continue to employ or to terminate each West Caldwell Non-Retained
Employee. Each West Caldwell Non- Retained Employee who continues in Buyer's
employment more than 60 days after the Closing Date shall thereafter receive
benefits substantially similar to those provided by Buyer to those of its
employees who are similarly situated. Buyer shall assume, pay, discharge and be
responsible for Seller's cost of providing medical coverage to each West
Caldwell Non-Retained Employee who Buyer terminates within 60 days after the
Closing Date or who does not continue in Buyer's employment more than 60 days
after the Closing Date (each a "Buyer Terminated West Caldwell Employee") for
the 60 day period following Buyer's termination of such Buyer Terminated West
Caldwell Employee. Each such Buyer Terminated West Caldwell Employee shall
thereafter be eligible for continued medical coverage under Seller's group
medical plan pursuant to the provisions (and subject to the limitations) of
COBRA; provided that to the extent Buyer provides to any Buyer Terminated West
Caldwell Employee medical coverage substantially similar to that provided by
Buyer to those of its employees who are similarly situated, such Buyer
Terminated West Caldwell Employee shall, after termination, be eligible for
continuation of such medical coverage (and shall not be eligible for continued
medical coverage under Seller's group medical plan) pursuant to the provisions
(and subject to the limitations) of COBRA.
Schedule 7.4(b)(ii) sets forth Seller's monthly cost of
providing medical coverage to the West Caldwell Non-
37
<PAGE> 43
Retained Employees following the termination of employment by Seller on the
Closing Date of the West Caldwell Non-Retained Employees.
(c) Schedule 7.4(c) sets forth the severance payments and
related obligations arising under the Severance Plans as of March 31, 1997 with
respect to each Business Employee deemed located at the West Caldwell Facility
as of the date hereof.
(d) BUYER RESPONSIBILITY FOR POST-CLOSING COMPENSATION AND
BENEFITS. Except as otherwise provided in this Section 7.4, on and after the
Closing Date, Buyer shall be responsible for any and all compensation and
benefits of Pueblo Non-Retained Employees and West Caldwell Non-Retained
Employees arising from employment by Buyer on or after the Closing Date.
(e) WORKER ADJUSTMENT AND RETRAINING NOTIFICATION (WARN).
Buyer shall not, at any time prior to 90 days after the Closing Date, effectuate
a "plant closing" or "mass layoff" as those terms are defined in the WARN Act
affecting in whole or in part any facility, site of employment, operating unit
or employee of Seller without complying fully with the requirements of the WARN
Act.
(f) EMPLOYEE BENEFIT PLANS. On and after the Closing Date,
Buyer shall not assume, continue or maintain any Pension Plan or Benefit
Arrangement maintained by Seller prior to the Closing Date for Business
Employees. Subject to Section 7.4(a), Buyer shall establish or extend such
employee benefit plans and programs with respect to Pueblo Non-Retained
Employees and West Caldwell Non-Retained Employees hired by Buyer as it may deem
appropriate, but shall credit service with respect to eligibility and vesting
purposes under any such plan for employment of such a Pueblo Non-Retained
Employee or West Caldwell Non-Retained Employee, as the case may be, with
Seller.
(g) SAVINGS PLAN. In the event Buyer establishes or extends a
tax-qualified defined contribution plan with a 401(k) feature to any Pueblo
Non-Retained Employee or any West Caldwell Non-Retained Employee, Buyer shall
allow eligible rollover distributions from the W.S. Tyler Incorporated Profit
Sharing and Savings Plan with respect to such Pueblo Non-Retained Employee and
such West Caldwell Non-Retained Employee.
(h) BUYER LIABILITY FOR PRE-CLOSING EMPLOYMENT DECISIONS.
Notwithstanding anything to the contrary contained herein, Buyer shall be
responsible and liable for any claims, actions, payments or other liabilities
arising
38
<PAGE> 44
from or out of or in connection with any employment decisions made or actions
taken before, on or after the Closing Date by Buyer or any of its agents
respecting the Business Employees.
(i) COOPERATION. Without limiting the generality of Article 7
or any other provisions of this Agreement, Seller and Buyer agree to furnish
each other promptly with such information concerning employees and employee
benefit plans, arrangements and policies as is reasonably necessary and
appropriate to effect the transactions contemplated by this Article 7.
(j) NO THIRD PARTY BENEFICIARIES. Notwithstanding any possible
inference to the contrary, neither Seller nor Buyer intends for this Section 7.4
to create any rights or obligations except as between Seller and Buyer, and no
past, present or future employees of Seller or Buyer shall be treated as
third-party beneficiaries of this Section 7.4.
7.5 RETENTION AND ACCESS TO RECORDS.
After the Closing, Seller shall be permitted, upon reasonable
notice and during normal business hours, access to inspect and copy, at its
expense, the books and records relating to the Business prior to the Closing
Date and that, notwithstanding the sale of such books and records to Buyer,
Seller shall be permitted to retain copies of all such books and records if and
to the extent required by law. Buyer further agrees that, during the 7 years
following the Closing Date, it shall not destroy or abandon any of the material
books and records relating to the Business without the prior written consent of
Seller, such consent not to be unreasonably withheld or delayed.
7.6 TRADEMARK LICENSE.
Buyer shall only use the Licensed Trademarks in accordance
with the terms and provisions of the Trademark License.
7.7 LIABILITY FOR FAILURE TO CLOSE. Holdings shall
guarantee any monetary obligation incurred by Seller and due and owing to Buyer
pursuant to this Agreement that arises solely from Seller's failure to effect
the Closing in accordance with the terms of this Agreement.
7.8 ACCOUNTS RECEIVABLE.
(a) Buyer shall use its reasonable best efforts to collect all
of Seller's accounts receivable arising from
39
<PAGE> 45
or in connection with the Business on or before the Closing Date ("SELLER'S
ACCOUNTS"); PROVIDED that nothing herein shall obligate Buyer to take or
threaten to take legal action in order to collect any of Seller's Accounts. If
Buyer receives a payment from an account debtor for which there is (i) an
outstanding Seller's Account and (ii) an account receivable arising after the
Closing Date from Buyer's operation of the Business after the Closing Date, such
payment shall be applied to the invoice to which it relates. If it cannot
reasonably be determined to which invoice such payment relates, such payment
shall be applied to the oldest outstanding invoice of such account debtor not
disputed by such account debtor; provided that each invoice shall be deemed to
not be in dispute until such time as such account debtor shall have expressly
stated to Buyer that such invoice is in dispute. Buyer shall promptly deliver to
Seller written notification of any such dispute.
(b) Buyer hereby covenants and agrees that Buyer shall not
indicate to any account debtor that any payment with respect to any of Seller's
Accounts should be sent anywhere except where such payments were being sent
immediately prior the Closing Date. Buyer hereby covenants and agrees to remit
to Seller by wire transfer within three days of its receipt of same any and all
payments which Buyer receives in respect of any of Seller's Accounts.
(c) At any time on or after the date that is 45 days after the
Closing Date, Seller may request that Buyer deliver to Seller any and all
documents, instruments, bills of lading, invoices or other documents relating to
any of Seller's Accounts that remain outstanding at the time of such request.
Buyer hereby covenants and agrees that it will promptly deliver all such
documents, instruments, bills of lading, invoices and other documents upon its
receipt of such request. On and after the date which is 60 days after the
Closing Date, Seller may undertake any and all collection efforts with respect
to any of Seller's Accounts; PROVIDED that Seller shall give Buyer 10 days prior
written notice of its intent to institute an Action with respect to any Seller's
Account; PROVIDED FURTHER that such written notice may be delivered prior to the
date which is 60 days after the Closing Date. Upon Buyer's delivery to Seller of
all documents, instruments, bills of lading, invoices and other documents
relating to any of Seller's Accounts pursuant to Seller's request therefore,
Buyer shall not thereafter be required to pursue any additional collection
action with respect to such Seller's Account. Notwithstanding anything to the
contrary contained herein, any and all expenses and liabilities incurred by
Buyer pursuant to this Section 7.8 shall be for the account of Buyer.
40
<PAGE> 46
(d) Notwithstanding anything to the contrary contained herein,
Seller may take any and all action at any time with respect to any account
debtor that Seller reasonably believes will commence or be subject to any
voluntary or involuntarily bankruptcy proceedings or otherwise be subject to any
applicable insolvency or creditors' rights laws.
7.9 PRODUCT WARRANTY. Notwithstanding anything to the contrary
contained herein, (i) Buyer shall settle product warranty claims with respect to
products shipped on or before the Closing Date consistent with the practice of
Seller immediately prior to the Closing Date, (ii) Buyer shall not settle any
product warranty claims with respect to products shipped on or before the
Closing Date in an aggregate amount in excess of the amount reserved for product
warranty claims on the Closing Balance Sheet without Seller's prior written
approval of each such settlement over such aggregate amount and (iii) subject to
Buyer's compliance with this Section 7.9, Seller shall be responsible for
payment of all product warranty claims for products shipped before the Closing
Date in excess of the amount reserved for product warranty claims on the Closing
Balance Sheet.
ARTICLE 8
CONDITIONS OF PURCHASE
8.1 GENERAL CONDITIONS.
The obligations of the parties to effect the Closing shall be
subject to the following conditions unless waived in writing by Seller and
Buyer:
(a) NO ORDERS; LEGAL PROCEEDINGS. No Law or Order shall have
been enacted, entered, issued, promulgated or enforced by any Governmental
Entity, nor shall any Action have been instituted and remain pending by any
Governmental Entity at what would otherwise be the Closing Date, that prohibits
or restricts or would (if successful) prohibit or restrict the transactions
contemplated by this Agreement.
(b) APPROVALS. To the extent required by applicable Law, all
Permits and Approvals required to be obtained from any Governmental Entity
(other than any such Permits or Approvals specifically referred to in Section
8.1(c)), shall have been received or obtained on or prior to the Closing Date,
except for such Permits and Approvals which the failure to obtain would not have
a Material Adverse Effect.
41
<PAGE> 47
(c) COMPLIANCE WITH ISRA. Seller shall have received from the
New Jersey Department of Environmental Protection ("NJDEP") pursuant to the
Industrial Site Recovery Act, N.J.S.A. 13:1K-6 ET SEQ., the regulations
promulgated thereunder and any amending of successor legislation and regulations
("ISRA"), on or before the Closing Date, any of: (i) a Letter of
Non-Applicability based upon an accurate and complete application for the same;
(ii) a De Minimis Quantity Exemption approval based upon an accurate and
complete application for the same; (iii) a Negative Declaration approval or No
Further Action approval (as such terms are defined under ISRA) or other
comparable written determination of the NJDEP that Seller has satisfied the
requirements of ISRA with respect to the Leased Real Property and the
transactions contemplated by this Agreement; or (iv) a Remediation Agreement (as
such term is defined under ISRA) permitting the consummation of the transactions
contemplated by this Agreement and committing Seller to conduct and complete to
the satisfaction of the NJDEP Seller's obligations under ISRA with respect to
the Leased Real Property, including the establishment of a Remediation Funding
Source if required by the NJDEP pursuant to ISRA (as such term is defined under
ISRA). Seller shall have the sole authority to select the remedial actions
necessary for Seller to comply with ISRA with respect to the Leased Real
Property, provided that the NJDEP consents to such remedial actions. Anything in
the preceding sentence to the contrary notwithstanding, Seller shall not
implement at the Leased Real Property any remedial actions or any institutional
or engineering controls (as such terms are defined under ISRA) associated with
such remedial actions that would materially interfere with Buyer conducting the
Business as the Business is conducted immediately prior to the Closing Date.
(d) CONSENT OF LANDLORD WITH RESPECT TO LEASE. Seller shall
have received the consent of Dowel Associates, as landlord under the Lease, in
connection with the assignment of the Lease by Seller to Buyer pursuant to the
Lease Assignment.
8.2 CONDITIONS TO OBLIGATIONS OF BUYER.
The obligations of Buyer to effect the Closing shall be
subject to the satisfaction of the following conditions, except to the extent
waived in writing by Buyer:
(a) REPRESENTATIONS AND WARRANTIES AND COVENANTS OF SELLER.
The representations and warranties of Seller herein contained shall be true in
all material respects at the Closing Date with the same effect as though made at
such
42
<PAGE> 48
time; Seller shall have in all material respects performed all obligations and
complied with all covenants and conditions required by this Agreement to be
performed or complied with by it at or prior to the Closing Date; and Seller
shall have delivered to Buyer certificates of Seller in form and substance
satisfactory to Buyer, dated the Closing Date and signed by the President of
Seller to such effect.
(b) NO MATERIAL ADVERSE EFFECT. There shall not have been any
material adverse change in or affecting the Business subsequent to December 31,
1996 which constitutes a Material Adverse Effect, except for changes affecting
generally the material handling industry as a whole, including but not limited
to changes in or affecting interest rates, securities markets, accounting
principles, practices or conventions or applicable laws and regulations (it
being understood that Buyer assumes the risks associated with changes of such
type from and as of the date of this Agreement).
(c) CONSENTS. Seller shall have obtained and provided to Buyer
evidence of the receipt of all Approvals and Permits listed on Schedule 4.6 and
Schedule 4.11.
(d) BUYER'S FINANCING. Buyer shall have completed the High
Yield Offering.
(e) ENVIRONMENTAL REPORTS AND CLEARANCES. Buyer shall have
received Phase I environmental site assessment reports dated October 30, 1991
with respect to the Owned Real Property from McLaren/Hart Environmental
Engineering Corporation. Buyer and its consultants shall have received access to
the Owned Real Property, the Leased Real Property and Seller's employees during
normal business hours upon 2 days prior written notice to Seller to take samples
of soil and groundwater, and to otherwise reasonably investigate potential
environmental liabilities relating to the Owned Real Property and the Business.
Seller shall have obtained and furnished to Buyer any and all environmental
approvals or clearances, if any, required in connection with Seller's
disposition of the Purchased Assets other than with respect to Seller's
disposition of the Lease and the Leased Real Property.
8.3 CONDITIONS TO OBLIGATIONS OF SELLER.
The obligations of Seller to effect the Closing shall be
subject to the satisfaction of the following conditions, except to the extent
waived in writing by Seller:
43
<PAGE> 49
(a) REPRESENTATIONS AND WARRANTIES AND COVENANTS OF BUYER. The
representations and warranties of Buyer herein contained shall be true in all
material respects at the Closing Date with the same effect as though made at
such time; Buyer shall have in all material respects performed all obligations
and complied with all covenants and conditions required by this Agreement to be
performed or complied with by it at or prior to the Closing Date, and Buyer
shall have delivered to Seller certificates of Buyer in form and substance
satisfactory to Seller, dated the Closing Date and signed by the chief executive
officer and chief financial officer of Buyer, to such effect.
(b) CONSENTS. Seller shall have obtained the Approvals set
forth on Schedule 4.11.
ARTICLE 9
TERMINATION OF OBLIGATIONS; SURVIVAL
9.1 TERMINATION OF AGREEMENT.
Anything herein to the contrary notwithstanding, this
Agreement and the transactions contemplated by this Agreement shall terminate at
the close of business on the earlier to occur of (i) three days after Buyer's
receipt of the proceeds (net of fees, commissions and underwriting discounts) of
the High Yield Offering and (ii) April 7, 1997, unless extended by mutual
consent in writing of Seller and Buyer and may otherwise be terminated at any
time before the Closing as follows and in no other manner:
(a) MUTUAL CONSENT. By mutual consent in writing of Seller and
Buyer.
(b) CONDITIONS TO BUYER'S PERFORMANCE NOT MET. By Buyer upon
written notice to Seller if any event occurs which would render impossible the
satisfaction of one or more conditions to the obligations of Buyer to consummate
the transactions contemplated by this Agreement as set forth in Section 8.1 or
Section 8.2.
(c) CONDITIONS TO SELLER'S PERFORMANCE NOT MET. By Seller upon
written notice to Buyer if any event occurs which would render impossible the
satisfaction of one or more conditions to the obligation of Seller to consummate
the transactions contemplated by this Agreement as set forth in Section 8.1 or
Section 8.3.
(d) MATERIAL BREACH. By Buyer or Seller if there has been a
material misrepresentation or material breach on
44
<PAGE> 50
the part of the other party in its representations, warranties or covenants
set forth herein; PROVIDED, HOWEVER, that if such breach or misrepresentation is
susceptible to cure, Seller or Buyer, as the case may be, shall have 10 business
days after receipt of notice from the other party of its intention to terminate
this Agreement pursuant to this Section 9.1(e) if such misrepresentation or
breach continues in which to cure such breach or misrepresentation before the
other party may so terminate this Agreement.
9.2 EFFECT OF TERMINATION.
In the event that this Agreement shall be terminated pursuant
to Section 9.1, all further obligations of the parties under this Agreement
shall terminate without further liability of any party to another; provided that
the obligations of the parties contained in Section 11.9 and Section 11.12 shall
survive any such termination. A termination under Section 9.1 shall not relieve
any party of any liability for a breach of, or for any misrepresentation under
this Agreement, or be deemed to constitute a waiver of any available remedy
(including specific performance if available) for any such breach or
misrepresentation.
9.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties contained in or made
pursuant to this Agreement shall expire on the second anniversary of the Closing
except that if a claim or notice is given under Article 10 with respect to any
representation or warranty prior to the applicable expiration date, such
representation or warranty shall continue indefinitely until the applicable
claim is finally resolved; PROVIDED that Seller's representations and warranties
contained in Sections 4.13, 4.17, 4.18, 4.19 and 4.20 shall survive
indefinitely.
ARTICLE 10
INDEMNIFICATION
10.1 OBLIGATIONS OF SELLER.
As of the Closing, the Selling Parties agree to indemnify and
hold harmless Buyer, and its directors, officers, employees, affiliates, agents
and assigns from and against any and all Losses of Buyer, directly or
indirectly, as a result of, or based upon or arising from:
(a) any material breach or nonperformance of any of the
representations, warranties, covenants or agreements
45
<PAGE> 51
made by Seller in or pursuant to this Agreement, the Pueblo Lease, the Trademark
License, the Lease Assignment, the Side Letter, the Use Agreement (if any) or
the Assumption Agreement; or
(b) any other matter as to which Seller in other provisions of
this Agreement, the Pueblo Lease, the Trademark License, the Lease Assignment,
the Side Letter, the Use Agreement (if any) or the Assumption Agreement has
agreed to indemnify Buyer; or
(c) any Excluded Liability or other obligation of Seller or
any of its Affiliates not assumed by Buyer pursuant to (i) Section 2.2(a) or
(ii) the Side Letter; or
(d) the second item set forth in Schedule 4.17.
10.2 OBLIGATIONS OF BUYER.
As of the Closing, Buyer agrees to indemnify and hold harmless
Seller and its respective directors, officers, employees, affiliates, agents and
assigns from and against any Losses of Seller, directly or indirectly, as a
result of, or based upon or arising from:
(a) any material breach or nonperformance of any of the
representations, warranties, covenants or agreements made by Buyer in or
pursuant to this Agreement, the Pueblo Lease, the Trademark License, the Lease
Assignment, the Use Agreement (if any), the Side Letter or the Assumption
Agreement; or
(b) any other matter as to which Buyer in other provisions of
this Agreement, the Pueblo Lease, the Trademark License, the Lease Assignment,
the Use Agreement (if any), the Side Letter or the Assumption Agreement has
agreed to indemnify Seller; or
(c) any liability or obligation assumed by Buyer pursuant to
Section 2.2(a), including, without limitation, obligations assumed or incurred
pursuant to the Assumption Agreement or the Side Letter.
10.3 PROCEDURE.
(a) NOTICE OF THIRD PARTY CLAIMS. Any party seeking
indemnification of any Loss or potential Loss arising from a claim asserted by a
third party (including but not limited to a notice of Tax audit or request to
waive or extend a statute of limitations applicable to any Tax) shall give
written notice to the party from whom indemnification is sought. Written notice
to the Indemnifying Party
46
<PAGE> 52
of the existence of a third-party claim shall be given by the Indemnified Party
within 20 days after its receipt of a written assertion of liability from the
third party, including in the case of tax matters, written notice of any tax
audit that might result in such a claim. The Indemnified Party shall have no
obligation to provide written notice of the existence of an Indemnifiable Claim
to the Indemnifying Party where the third party does not clearly and
unambiguously assert liability in writing and the Indemnified Party shall not be
foreclosed by any failure to provide timely notice of the existence of a third
party claim to the Indemnifying Party except to the extent that the Indemnifying
Party incurs an out-of-pocket expense or otherwise has been materially
prejudiced as a direct result of such delay.
(b) DEFENSE. At the request of the Indemnified Party, the
Indemnifying Party shall promptly assume the costs of defense of an
Indemnifiable Claim. The Indemnifying Party shall retain experienced counsel
reasonably satisfactory to the Indemnified Party and thereafter shall control
defense of the claim. Notwithstanding the foregoing, the Indemnified Party shall
have the right to retain counsel of its choice and control the defense of the
Indemnifiable Claim under any of the following circumstances:
(i) The Indemnifying Party fails to assume the
defense of an Indemnifiable Claim within five days after receiving
written notice of the existence of the claim; or
(ii) The Indemnifying Party agrees to assume the
defense of an Indemnifiable Claim but either reserves its rights to
challenge, or does not upon request acknowledge in writing, its
obligation to indemnify the party seeking indemnity with respect to the
Indemnifiable Claim; or
(iii) The persons against whom the Indemnifiable
Claim shall have been brought, asserted or threatened (including any
impleaded parties) include both the Indemnified Party and the
Indemnifying Party and the Indemnified Party is advised by counsel that
there may be one or more legal defenses available to the Indemnified
Party that are different from or additional to those available to the
Indemnifying Party.
If the Indemnifying Party does not assume such defense or the Indemnified Party
has the right to control the defense of the Indemnifiable Claim, the Indemnified
Party may compromise or settle the Indemnifiable Claim on behalf of
47
<PAGE> 53
and for the account and risk of the Indemnifying Party, who shall be bound by
the result. In all cases, the party without the right to control the defense of
the Indemnifiable Claim may participate in the defense at its own expense. The
parties shall cooperate in the defense of all third party claims which may give
rise to Indemnifiable Claims hereunder. In connection with the defense of any
claim, each party shall make available to the party controlling such defense,
any books, records or other documents within its control that are reasonably
requested in the course of such defense.
(c) SETTLEMENT LIMITATIONS. Notwithstanding anything in this
Section 10.3 to the contrary, the Indemnifying Party shall not, without the
written consent of the Indemnified Party, settle or compromise any Indemni-
fiable Claim or permit a default or consent to entry of any judgment unless the
claimant provides to the Indemnified Party an unqualified release from all
liability in respect of the Claim. Notwithstanding the foregoing, if a
settlement offer solely for money damages is made by the applicable third party
claimant, and the Indemnifying Party notifies the Indemnified Party in writing
of the Indemnifying Party's willingness to accept the settlement offer and pay
the amount called for by such offer, and the Indemnified Party declines to
accept such offer, the Indemnified Party may continue to contest such Claim,
free of any participation by the Indemnifying Party, and the amount of any
ultimate liability with respect to such Indemnifiable Claim that the
Indemnifying Party has an obligation to pay hereunder shall be limited to the
lesser of (A) the amount of the settlement offer that the Indemnified Party
declined to accept plus the Losses of the Indemnified Party relating to such
Indemnifiable Claim through the date of its rejection of the settlement offer or
(B) the aggregate Losses of the Indemnified Party with respect to such
Indemnifiable Claim. If the Indemnifying Party makes any payment on any
Indemnifiable Claim, the Indemnifying Party shall be subrogated, to the extent
of such payment, to all rights and remedies of the Indemnified Party to any
insurance benefits or other claims of the Indemnified Party with respect to such
Indemnifiable Claim.
10.4 LIMITATIONS ON INDEMNIFICATION.
No party shall be required to indemnify any other Person under
this Article 10 unless and until all such claims for which damages are
recoverable hereunder by Buyer or Seller, as the case may be, exceed $100,000 in
the aggregate (the "Deductible"); PROVIDED, HOWEVER, that Buyer or Seller, as
the case may be, shall be liable only for the amount by which all such
recoverable damages exceed the
48
<PAGE> 54
Deductible. Any Indemnifiable Claim with respect to any breach or nonperformance
by either party of a representation, warranty, covenant or agreement shall be
limited to the amount of actual damages sustained by the Indemnified Party by
reason of such breach or nonperformance, less (i) the dollar amount of any
permanent tax benefit on a present value basis (with any tax benefit in future
taxable years to be discounted based on a rate of 10% per annum) to Buyer's
consolidated tax group (based on an assumed ordinary composite tax rate of 40%)
by reason of such Losses and (ii) the dollar amount of any insurance proceeds
receivable by Buyer with respect to such Losses.
10.5 SURVIVAL.
This indemnification shall survive the Closing and shall
remain in effect for a period of two years after the date of Closing; PROVIDED
that Seller's obligation to indemnify Buyer pursuant to Section 10.1(a) (i) with
respect to the representations and warranties contained in Sections 4.13, 4.17,
4.18, 4.19 and 4.20 shall survive indefinitely, (ii) with respect to Seller
retaining liability (a) for Taxes payable with respect to the Business for any
period ending on or before the Closing Date pursuant to Section 2.2(b)(iii)
shall survive until the end of the applicable statutes of limitations (including
applicable extensions) and (b) pursuant to Section 2.2(b)(vii) and Section
2.2(b)(viii) shall survive indefinitely; PROVIDED FURTHER that Buyer's
obligation to indemnify Seller pursuant to Section 10.2 with respect to the
liabilities which Buyer has assumed and/or agreed to pay, discharge and be
responsible for pursuant to Section 7.4 and any other agreement of Buyer
pursuant to Section 7.4 shall survive indefinitely. Any matter as to which a
claim has been asserted by notice to the other party that is pending or
unresolved at the end of any limitation period shall continue to be covered by
this Article 10 until such matter is finally terminated or otherwise resolved
subject to applicable statutes of limitations by the parties and settled under
this Agreement or by a court of competent jurisdiction and any amounts payable
hereunder are finally determined and paid.
10.6 NOT EXCLUSIVE REMEDY.
This Article 10 shall not be deemed to preclude or otherwise
limit in any way the exercise of any other rights or pursuit of other remedies
for the breach of this Agreement or with respect to any misrepresentation.
49
<PAGE> 55
10.7 OFFSET.
(a) If any matter as to which Seller may be able to assert a
claim hereunder is pending or unresolved at the time any payment is due from
Seller to Buyer under this Agreement, Seller shall have the right, in addition
to other rights and remedies (whether under this Agreement or applicable Law),
to withhold from such payment an amount equal to the amount of the claim
(provided it has been or is then asserted in writing against Buyer in accordance
with the provisions hereof) until such matters are resolved. If it is finally
determined that such claims are covered by this Article, the amount of such
claims may be offset against the retained payments and the remainder, if any,
shall be delivered to Buyer pursuant to this Agreement together with interest on
such remainder payable from the date such remainder was withheld until paid at
the rate of 10% per annum.
(b) If any matter as to which Buyer may be able to assert a
claim hereunder is pending or unresolved at the time any payment is due from
Buyer to Seller under this Agreement, Buyer shall have the right, in addition to
other rights and remedies (whether under this Agreement or applicable Law), to
withhold from such payment an amount equal to the amount of the claim (provided
it has been or is then asserted in writing against Seller in accordance with the
provisions hereof) until such matters are resolved. If it is finally determined
that such claims are covered by this Article, the amount of such claims may be
offset against the retained payments and the remainder, if any, shall be
delivered to Seller pursuant to this Agreement together with interest on such
remainder payable from the date such remainder was withheld until paid at the
rate of 10% per annum.
ARTICLE 11
GENERAL
11.1 AMENDMENTS; WAIVERS.
This Agreement and any schedule or exhibit attached hereto may
be amended only by agreement in writing of Seller, Holdings and Buyer. No waiver
of any provision nor consent to any exception to the terms of this Agreement or
any agreement contemplated hereby shall be effective unless in writing and
signed by the party to be bound and then only to the specific purpose, extent
and instance so provided.
50
<PAGE> 56
11.2 SCHEDULES; EXHIBITS; INTEGRATION.
Each schedule and exhibit delivered pursuant to the terms of
this Agreement shall be in writing and shall constitute a part of this
Agreement, although schedules need not be attached to each copy of this
Agreement. This Agreement, together with such schedules and exhibits,
constitutes the entire agreement among the parties pertaining to the subject
matter hereof and supersedes all prior agreements and understandings of the
parties in connection therewith. Without limiting the effect of the foregoing
provisions of this Section 11.2, except as expressly set forth in Article 4 and
Article 5, neither of the parties is making or shall be deemed to have made any
representation or warranty of any kind, either express or implied, including,
without limitation, any representation or warranty with respect to any
information provided to Buyer by Donaldson, Lufkin & Jenrette Securities
Corporation.
11.3 BEST EFFORTS; FURTHER ASSURANCES.
(a) COMMITMENT TO BEST EFFORTS. Subject to the rights of
Seller or Buyer, as the case may be, under Section 9.1, (i) such party shall use
its best efforts to cause all conditions to its obligations hereunder to be
timely satisfied and to perform and fulfill all obligations on its part to be
performed and fulfilled under this Agreement, to the end that the transactions
contemplated by this Agreement shall be effected substantially in accordance
with its terms as soon as reasonably practicable, (ii) such party shall
cooperate with the other party in such actions and in securing requisite
Approvals and (iii) such party shall execute and deliver such further documents
and take such other actions as may be necessary or appropriate to consummate or
implement the transactions contemplated hereby or to evidence such events or
matters.
(b) LIMITATION. As used in this Agreement, the term "best
efforts" shall not mean efforts which require the performing party to do any act
that is unreasonable under the circumstances, to make any capital contribution
or to expend any funds other than in payment of reasonable out-of-pocket
expenses incurred in satisfying obligations hereunder, including but not limited
to the fees, expenses and disbursements of its accountants, actuaries, counsel
and other professional advisers.
11.4 GOVERNING LAW.
This Agreement and the legal relations between the parties
shall be governed by and construed in accordance with the laws of the State of
New York without regard to
51
<PAGE> 57
conflicts of law doctrines, except to the extent that certain matters are
preempted by federal law or are governed by the law of the jurisdiction of
incorporation of the respective parties.
11.5 NO ASSIGNMENT.
Neither this Agreement (nor related agreements pursuant to
this Agreement) nor any rights or obligations under any of them are assignable.
11.6 HEADINGS.
The descriptive headings of the articles, sections and
subsections of this Agreement are for convenience only and do not constitute a
part of this Agreement.
11.7 COUNTERPARTS.
This Agreement and any amendment hereto or any other agreement
(or document) delivered pursuant hereto may be executed in one or more
counterparts and by different parties in separate counterparts. All of such
counterparts shall constitute one and the same agreement (or other document) and
shall become effective (unless otherwise therein provided) when one or more
counterparts have been signed by each party and delivered to the other party.
11.8 PUBLICITY AND REPORTS.
Seller and Buyer shall coordinate all publicity relating to
the transactions contemplated by this Agreement, and no party shall issue any
press release, publicity statement or other public notice relating to this
Agreement, or the transactions contemplated by this Agreement, without
consulting with the other party except to the extent that a particular action is
required by applicable Law.
11.9 CONFIDENTIALITY.
All information disclosed by any party (or its
representatives) whether before or after the date hereof, in connection with the
transactions contemplated by, or the discussions and negotiations preceding,
this Agreement to any other party (or its representatives) shall be kept
confidential by such other party and its representatives and shall not be used
by any such Persons other than as contemplated by this Agreement, except to the
extent that such information (i) was known by the recipient when received, (ii)
it is or hereafter becomes lawfully obtainable from other sources, (iii) is
necessary or appropriate to disclose to a Governmental Entity having
52
<PAGE> 58
jurisdiction over the parties, (iv) as may otherwise be required by Law or (v)
to the extent such duty as to confidentiality is waived in writing by the other
party. If this Agreement is terminated in accordance with its terms, each party
shall use all reasonable efforts to return upon written request from the other
party all documents (and reproductions thereof) received by it or its
representatives from such other party (and, in the case of reproductions, all
such reproductions made by the receiving party) that include information not
within the exceptions contained in the first sentence of this Section 11.9,
unless the recipients provide assurances reasonably satisfactory to the
requesting party that such documents have been destroyed.
11.10 PARTIES IN INTEREST.
This Agreement shall be binding upon and inure to the benefit
of each party, and nothing in this Agreement, express or implied, is intended to
confer upon any other person any rights or remedies of any nature whatsoever
under or by reason of this Agreement. Nothing in this Agreement is intended to
relieve or discharge the obligation of any third person to, or to confer any
right of subrogation or action over or against, any party to this Agreement.
11.11 NOTICES.
Any notice or other communication hereunder must be given in
writing and either (i) delivered in person, (ii) transmitted by facsimile or
(iii) mailed by certified or registered mail, postage prepaid, as follows:
IF TO SELLER, ADDRESSED TO:
W.S. Tyler, Incorporated
c/o Process Technology Holdings, Inc.
Post Office Box 8900
3200 Bessemer City Road
Gastonia, North Carolina 28053
Attention: Randy A. Bakeberg
Facsimile: (704) 865-6533
WITH A COPY TO:
O'Melveny & Myers LLP
153 East 53rd Street
New York, New York 10022
Attention: Drake S. Tempest, Esq.
Facsimile: (212) 326-2061
53
<PAGE> 59
IF TO HOLDINGS, ADDRESSED TO:
Process Technology Holdings, Inc.
Post Office Box 8900
3200 Bessemer City Road
Gastonia, North Carolina 28053
Attention: Randy A. Bakeberg
Facsimile: (704) 865-6533
WITH A COPY TO:
O'Melveny & Myers LLP
153 East 53rd Street
New York, New York 10022
Attention: Drake S. Tempest, Esq.
Facsimile: (212) 326-2061
IF TO BUYER, ADDRESSED TO:
Continental Conveyor & Equipment Company
6140 Parkland Boulevard
Mayfield Heights, Ohio 44124
Attention: Joseph L. Mandia
Facsimile: (216) 449-3112
WITH A COPY TO:
Squire, Sanders & Dempsey L.L.P.
4900 Key Tower
127 Public Square
Cleveland, Ohio 44114
Attention: David A. Zagore, Esq.
Facsimile: (216) 479-8610
or to such other address or to such other person as such party shall have last
designated by such notice to the other parties. Each such notice or other
communication shall be effective (i) if given by facsimile, when transmitted to
the applicable number so specified in (or pursuant to) this Section 11.11 and an
appropriate answerback is received, (ii) if given by mail, three days after such
communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid or (iii) if given by any other means, when actually
delivered at such address.
11.12 EXPENSES.
--------
(a) Except as expressly provided to the contrary in this
Section 11.12 or elsewhere in this Agreement, each of Seller and Buyer shall pay
its own expenses incident to the negotiation, preparation and performance of
this
54
<PAGE> 60
Agreement and the transactions contemplated hereby, including but not limited to
the fees, expenses and disbursements of its investment bankers, accountants and
counsel and of securing third party consents and approvals required to be
obtained by it except as otherwise expressly provided in this Section 11.12.
(b) Seller shall pay (i) any documentary transfer tax, real
property transfer or gains tax, and any income, franchise or revenue tax or
excise tax (and any surtax thereon) due in connection with the consummation of
the transactions contemplated by this Agreement and (ii) 50% percent of all
other closing costs with respect to transfers of specified types of properties.
(c) Buyer shall pay (i) all document recording fees and
charges, (ii) 50% percent of the aggregate closing costs referred to in Section
11.12(b)(ii) and (iii) all costs, fees and expenses of Buyer and E & Y in
connection with the preparation of Buyer's Signing Financials.
11.13 REMEDIES; WAIVER.
Except to the extent this Section 11.13 is inconsistent with
any other provision in this Agreement or applicable law, all rights and remedies
existing under this Agreement and any related agreements or documents are
cumulative to, and not exclusive of, any rights or remedies otherwise available
under applicable Law. No failure on the part of any party to exercise or delay
in exercising any right hereunder shall be deemed a waiver thereof, nor shall
any single or partial exercise preclude any further or other exercise of such or
any other right.
11.14 KNOWLEDGE CONVENTION.
Whenever any statement herein or in any schedule, exhibit,
certificate or other documents delivered to any party pursuant to this Agreement
is made "to the knowledge" or "to the best knowledge" or words of similar intent
or effect of any party or its representative, such person shall make such
statement only after conducting a diligent investigation of the subject matter
thereof, and each statement shall be deemed to include a representation that
such investigation has been conducted.
11.15 REPRESENTATION BY COUNSEL; INTERPRETATION.
Each party acknowledges that such party has been represented
by counsel in connection with this Agreement and the transactions contemplated
by this Agreement.
55
<PAGE> 61
Accordingly, any rule of Law, or any legal decision that would require
interpretation of any claimed ambiguities in this Agreement against the party
that drafted it has no application and is expressly waived. The provisions of
this Agreement shall be interpreted in a reasonable manner to effect the intent
of the parties.
11.16 NO CONSEQUENTIAL DAMAGES.
Notwithstanding anything to the contrary elsewhere in this
Agreement, no party (or its Affiliates) shall, in any event, be liable to the
other party (or its Affiliates) for any consequential damages, including, but
not limited to, loss of revenue or income, cost of capital, or loss of business
reputation or opportunity relating to the breach or alleged breach of this
Agreement.
11.17 SUBMISSION TO JURISDICTION.
Any Action with respect to this Agreement or any related
agreement may be brought in the courts of the State of New York, the State of
Ohio or of the United States of America for the Southern District of New York or
the Northern District of Ohio, and each party hereby accepts for itself and in
respect of its property, generally and unconditionally, the jurisdiction of
those courts. Each party hereby irrevocably waives any objection, including,
without limitation, any objection to the laying of venue or based on the grounds
of FORUM NON CONVENIENS, which it may now or hereafter have to the bringing of
any Action in those jurisdictions.
11.18 WAIVER OF JURY TRIAL.
EACH PARTY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION
TO ENFORCE OR DEFEND ANY RIGHT UNDER THIS AGREEMENT, ANY RELATED AGREEMENT OR
ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED, OR WHICH IN THE
FUTURE MAY BE DELIVERED IN CONNECTION WITH THIS AGREEMENT OR ANY RELATED
AGREEMENT AND AGREES THAT ANY ACTION SHALL BE TRIED BEFORE A COURT AND NOT
BEFORE A JURY.
----------------------------
[Intentionally Left Blank]
56
<PAGE> 62
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its duly authorized officers as of the day and year
first above written.
W.S. TYLER, INCORPORATED
By: /s/ [ILLEGIBLE]
----------------------------
Its:
----------------------------
PROCESS TECHNOLOGY HOLDINGS, INC.
By: /s/ [ILLEGIBLE]
----------------------------
Its:
----------------------------
CONTINENTAL CONVEYOR &
EQUIPMENT COMPANY
By: /s/ J. L. Mandia
----------------------------
Its: Vice President
----------------------------
1
<PAGE> 1
Exhibit 10.3
MANAGEMENT AGREEMENT
THIS AGREEMENT is entered into as of the 1st of April, 1997, by and among
NESCO, INC., a Delaware corporation, hereinafter referred to as "Nesco"; and
Continental Global Group, Inc., hereinafter referred to as the "Company", being
a Delaware corporation, in order to set forth the express terms of the
relationship:
WHEREAS, Nesco has provided general management oversight services to
the predecessor operations of the Company for the past ten years, and Nesco
Executives provide similar services to other wholly-owned companies of NES
Group, Inc. that are diversified in many businesses in the United States and
Europe,
WHEREAS, the Company is in need of such services as provided by Nesco
and can benefit therefrom, and
WHEREAS, in view of the fact that this Agreement will inure to the
benefit of the Company, due to the additional advisory services that can be
provided to the Company.
NOW, THEREFORE, be it hereby agreed by and among Nesco and the Company
that in exchange for the mutual promises herein recited and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. Nesco, through its Executives will provide general management
oversight services on a regular basis with the Company in regards to business
activities involving financial results, legal issues and long-term planning
regarding current operations and acquisitions. Business development planning
will include Nesco assistance to identify and acquire acquisition candidates,
including preliminary negotiations and contractual preparations for such
activities. Nesco has and plans to assist the Company's efforts for banking
relationships of the Company for cash operation needs as well as acquisitions
and cash requirements, and will also monitor excess cash investments for the
Company through professional money management accounts.
2. In payment for these services, the Company will pay to Nesco a
management fee equal to 5% of the Company's EBITDA (as defined in the offering
memorandum for the Senior Note) on an annual basis. This fee shall be payable
monthly.
3. It is understood and agreed that the Company will directly
employ independent auditors, legal counsel and other consulting services, such
as advertising both in the United States and its foreign operations. Such
services will be paid directly by the Company.
4. This Agreement and the fees to be paid hereunder shall be
modified and limited to the extent necessary from time to time to maintain the
Company's compliance with any specific restriction imposed by a lending
institution or indentures relating to outstanding indebtedness to the Company,
including the indenture governing the Company's Senior Notes due 2007, entered
into on April 1, 1997. In such event the Company shall pay a managment fee to
Nesco in an amount which will not violate the specific lending restriction. Any
amount of management fee not timely paid due to the limitation stated herein
shall be accrued until such time as the restriction may be removed or subject
to further agreement between Nesco and the Company.
<PAGE> 2
5. This Agreement shall continue for an indefinite period, unless
one party notifies the other of its intent to terminate this Agreement upon not
less than 60 days written notice prior to the annual anniversary date of the
execution of this agreement.
6. This Agreement constitutes the entire agreement between the
parties hereto; all previous understandings and negotiations are merged into
this Agreement and there are not understandings or agreements between the
parties hereto other than those set forth in this Agreement. In the event the
parties hereafter reach mutual agreement as to additional terms, the
performance of the parties shall be evidence of the terms of such mutual
agreement, however, the parties will maintain a written record of the specific
terms constituting amendments hereto.
7. The Company does hereby to indemnify, defend and hold Nesco,
its directors and officers, harmless from any claim of liability asserted by it
or by any third party, arising from the services rendered by Nesco, except only
in the case of gross negligence or willful misconduct solely attributable to
Nesco. Nesco's liability for damage shall be limited to the total amount of
management fees paid to Nesco during the preceding 12 month period. In no
event shall Nesco be liable to the Company or any third party for incidental,
consequential, exemplary or special damages of any kind whatsoever. The
Company, at its expense, will maintain Directors and Officers Liability
insurance in substantially its current form, with Nesco named as an "additional
named insured", for all periods during which this agreement is in effect and
for 5 years after termination of this agreement.
8. This Agreement has been executed and shall be construed in
accordance with and governed by the laws of the State of Ohio.
IN WITNESS WHEREOF, the parties hereunto have affixed or caused to be
affixed their respective signatures on the date aforesaid.
NESCO, INC. CONTINENTAL GLOBAL GROUP, INC.
By: /s/ Ralph L. Nehrig By: /s/ Jimmy L. Dickinson
---------------------- -------------------------
Its: VP Its: Vice President
---------------------- -------------------------
2
<PAGE> 1
Exhibit 10.4
TAX PAYMENT AGREEMENT
WHEREAS, NES Group, Inc. (Shareholder) is the sole Shareholder of
Continental Global Group, Inc. (Global) and Global is the sole Shareholder of
Continental Conveyor & Equipment Company (CC&E) and Goodman Conveyor Company
(Goodman); Global, CC&E and Goodman (collectively the Subsidiaries, each
individually - Subsidiary); each of the foregoing parties hereto; and
WHEREAS, the Subsidiaries have elected to be treated as "S"
Corporations for U.S. Federal Income Tax purposes; and
WHEREAS, the taxable income of the Subsidiaries will be included in the
income of Shareholder for federal income tax purpose, and the tax thereon is
payable by the shareholder of NES Group, Inc., and similar consequences may
result for state or local tax purposes as well;
NOW, THEREFORE, in consideration of the mutual promises herein
exchanged and for other good and valuable consideration, the receipt and
sufficiency of which is mutually acknowledged, the parties agree that the
Subsidiaries shall each make estimated tax payments to Shareholder as set forth
herein based on their respective earnings.
1. Within fifteen (15) days after the end of each month each
Subsidiary shall make distributions to Shareholder relating to the federal,
state, local and foreign income taxes relating to Subsidiary's operations in an
amount which is equal to the Stand-Alone Taxes for such month and the accrued
and unreimbursed Reimbursements, as described in Paragraph 3 below, provided
that:
a) Subsidiary will be, during the entire taxable period to
which the distribution relates, an S corporation for federal income tax
purposes;
b) if the distributions made with respect to a calendar
year exceed the actual taxes for such calendar year (or as subsequently
adjusted by taxpayer and the taxing authority), the excess will be
returned to Subsidiary not later than 45 days after the taxpayer has
received the refund;
c) Distributions shall be made by each Subsidiary
with respect to state or local income taxes in a manner similar to
federal income tax, but only if (i) there is state or local income tax
rules providing for pass-through treatment, which is similar to the
treatment under the Subchapter S rules of the Internal Revenue Code of
1986, and (ii) the Subsidiary is qualified for such treatment for the
entire taxable period.
2. Distributions which comply with the requirements of 1. above
shall be made in one or more installments, including without limitation catch-up
installments at or after the end of a month or tax year, installments after
adjustments made by the Internal Revenue Service and installments made for
Reimbursements.
3. Definitions:
a) "Reimbursements" means an amount equal to the sum of
interest and penalties imposed on the Subsidiary's Shareholder as a result of
an incorrect calculation by such Subsidiary of the amount distributed to such
shareholder by the Subsidiary, adjustments made by the IRS relating to the
Subsidiary, late tax distributions made by the
<PAGE> 2
Subsidiary to such Shareholder. Notwithstanding the foregoing, Reimbursements
shall not include any amount described in the preceding sentence to the extent
such amount is as a result of, or directly attributable to, an action or
inaction taken by the Subsidiary's shareholder.
b) "Stand-Alone Tax" means an amount (which shall never be less
than zero) computed as of the end of any month for the total U.S. federal,
state, local and foreign (but only to the extent that foreign taxes are imposed
on the Subsidiary's income, but paid or payable by its shareholder to the
foreign jurisdiction imposing such taxes on behalf of the subsidiary) income
taxes (a) for which Subsidiary's Shareholders would be liable if their income
was only from the items of income, gain, loss, deduction or credit arising out
of Subsidiary's business and operations for the period beginning on the first
day of such month and ending on the last day of such month, determined on an
annualized basis, or (b) one twelfth (1/12) of the tax liability expected to be
reported for the year, whichever is greater. The tax rates applied to such
income are to be based on the maximum individual, U.S. federal, state, local
and foreign income tax rates imposed by Section 1 of the Internal Revenue Code
of 1986, as amended and as it may be amended, and by the equivalent provisions
of the state, local and foreign (but only to the extent that foreign taxes are
imposed on the Subsidiary's income, but paid or payable by its Shareholder to
the foreign jurisdiction imposing such taxes on behalf of the subsidiary)
income taxes (based on the assumption that all tax payments are subject to
state and local income tax at the domiciliary of the Shareholders in Ohio and
no other state or municipality). All of the preceding shall be computed
without regard to phase-in and phase-out rules for minimum tax and alternative
minimum tax, interest and penalties, but shall include any surtax, and shall
reflect the benefits of the deducibility of state and local income taxes and
allowable tax credits in effect for each of the respective taxable periods.
These tax payments will not recognize any future carry forward or carry back
tax benefits to Continental Global Group, Continental Conveyor & Equipment
Company and Goodman Conveyor Company.
c) For the purposes of this Agreement the term "subsidiary" shall
mean all present and future direct and indirect subsidiaries of Continental
Global Group, Inc.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed effective as of the 1st day of April, 1997.
---- -----
NES GROUP, INC. CONTINENTAL GLOBAL GROUP, INC.
By: /s/ Robert J. Tomsich By: /s/ Jimmy L. Dickinson
--------------------------- --------------------------
Its: President Its: Vice President
--------------------------- --------------------------
CONTINENTAL CONVEYOR & GOODMAN CONVEYOR COMPANY
EQUIPMENT COMPANY
By: /s/ Jimmy L. Dickinson By: /s/ Lawrence J. Kukulski
--------------------------- --------------------------
Its: Vice President Its: Vice President
--------------------------- --------------------------
<PAGE> 1
EXHIBIT 12
CONTINENTAL GLOBAL GROUP, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS, EXCEPT FOR RATIOS)
<TABLE>
<CAPTION>
Year Ended December 31, Three
------------------------------------------------------------ Months Ended
1992 1993 1994 1995 1996 March 31, 1997
------------------------------------------------------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
COMPUTATION OF EARNINGS:
Income before extraordinary
item and foreign income taxes $ 5,618 $ 3,731 $ 3,615 $11,785 $ 8,940 $ 1,925
Add:
Interest expense 590 1,214 1,493 2,506 2,889 1,187
Amortization of deferred
financing costs 5 8 8 16 27 7
Portion of rent expense representative
of an interest factor 267 268 310 455 407 112
----------------------------------------------------------- -------
EARNINGS $ 6,480 $ 5,221 $ 5,426 $14,762 $12,263 $ 3,231
=========================================================== =======
COMPUTATION OF FIXED CHARGES:
Interest expense $ 590 $ 1,214 $ 1,493 $ 2,506 $ 2,889 $ 1,187
Amortization of deferred
financing costs 5 8 8 16 27 7
Portion or rent expense representative
of an interest factor 267 268 310 455 407 112
----------------------------------------------------------- -------
FIXED CHARGES $ 862 $ 1,490 $ 1,811 $ 2,977 $ 3,323 $ 1,306
=========================================================== =======
RATIO OF EARNINGS TO FIXED CHARGES 7.52 3.50 3.00 4.96 3.69 2.47
=========================================================== =======
</TABLE>
<PAGE> 1
EXHIBIT 21
DIRECT AND INDIRECT SUBSIDIARIES OF
-----------------------------------
CONTINENTAL GLOBAL GROUP, INC.
------------------------------
A. Continental Conveyor & Equipment Company, a Delaware corporation, is
wholly-owned by Continental Global Group, Inc.
1. Continental Conveyor & Equipment Pty. Ltd., an Australian company, is
wholly-owned by Continental Conveyor & Equipment Company.
a. BCE Holdings Pty. Ltd., an Australian company, is wholly-owned by
Continental Conveyor & Equipment Pty. Ltd.
i. Continental ACE Pty. Ltd., an Australian company, is
wholly-owned by BCE Holdings Pty. Ltd.
ii. Continental ACE Services Pty. Ltd., an Australian company,
is wholly-owned by BCE Holdings Pty. Ltd.
iii. Continental ACE Components Pty. Ltd., an Australian company,
is wholly-owned by BCE Holdings Pty. Ltd.
iv. A. Crane Pty. Ltd., an Australian company, is wholly-owned
by BCE Holdings Pty. Ltd.
v. Continental Control Systems Pty. Ltd., an Australian
company, is 60% owned by BCE Holdings Pty. Ltd. and 40%
owned by Continental Conveyor & Equipment Pty. Ltd.
B. Goodman Conveyor Company, a Delaware corporation, is wholly-owned by
Continental Global Group, Inc.
<PAGE> 1
EXHIBIT 23.2
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our reports dated February 20, 1997 with respect to the financial
statements of Hewitt Robins Conveyor Components, and March 7, 1997, with
respect to the financial statements of Continental Global Group, Inc., in the
Registration Statement (Form S-4) and related Prospectus of Continental Global
Group, Inc. for the registration of $120,000,000 of 11% Series B Senior Notes.
ERNST & YOUNG LLP
Cleveland, Ohio
May 22, 1997
<PAGE> 1
Exhibit 23.3
Consent of Independant Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated March 11, 1997, with respect to the consolidated
financial statements of BCE Holdings Pty. Limited included in the Registration
Statement (Form S-4) and related Prospectus of Continental Global Group, Inc.
for the registration of $120,000,000 of 11% Series B Senior Notes.
Coopers & Lybrand
Chartered Accountants
Coopers & Lybrand
Newcastle, Australia
May 22, 1997
<PAGE> 1
Exhibit 25
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
-----------------------------
__ CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
A U.S. NATIONAL BANKING ASSOCIATION 41-1592157
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national Identification No.)
bank)
SIXTH STREET AND MARQUETTE AVENUE
Minneapolis, Minnesota 55479
(Address of principal executive offices) (Zip code)
Stanley S. Stroup, General Counsel
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479
(612) 667-1234
(Agent for Service)
-----------------------------
CONTINENTAL GLOBAL GROUP, INC.
(Exact name of obligor as specified in its charter)
Continental Conveyor & Equipment Company
Goodman Conveyor Company
(Co-Registrants and Subsidiary Guarantors)
DELAWARE 34-1506889
Delaware 34-1603197
Delaware 34-1603196
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
438 INDUSTRIAL DRIVE
WINFIELD, AL 35594
(Address of principal executive offices) (Zip code)
-----------------------------
SENIOR NOTES
(Title of the indenture securities)
================================================================================
<PAGE> 2
Item 1. GENERAL INFORMATION. Furnish the following information as to the
trustee:
(a) Name and address of each examining or supervising
authority to which it is subject.
Comptroller of the Currency
Treasury Department
Washington, D.C.
Federal Deposit Insurance Corporation
Washington, D.C.
The Board of Governors of the Federal Reserve System
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust
powers.
The trustee is authorized to exercise corporate trust
powers.
Item 2. AFFILIATIONS WITH OBLIGOR. If the obligor is an affiliate of the
trustee, describe each such affiliation.
None with respect to the trustee.
No responses are included for Items 3-14 of this Form T-1 because the obligor is
not in default as provided under Item 13.
Item 15. Foreign Trustee. Not applicable.
---------------
Item 16. List of Exhibits. List below all exhibits filed as a part of
---------------- this Statement of Eligibility. Norwest Bank
incorporates by reference into this Form T-1
the exhibits attached hereto.
Exhibit 1. a. A copy of the Articles of Association of the
trustee now in effect.*
Exhibit 2. a. A copy of the certificate of authority of
the trustee to commence business issued June
28, 1872, by the Comptroller of the Currency
to The Northwestern National Bank of
Minneapolis.*
b. A copy of the certificate of the Comptroller
of the Currency dated January 2, 1934,
approving the consolidation of The
Northwestern National Bank of Minneapolis
and The Minnesota Loan and Trust Company of
Minneapolis, with the surviving entity being
titled Northwestern National Bank and Trust
Company of Minneapolis.*
c. A copy of the certificate of the Acting
Comptroller of the Currency dated January
12, 1943, as to change of corporate title of
Northwestern National Bank and Trust Company
of Minneapolis to Northwestern National Bank
of Minneapolis.*
<PAGE> 3
d. A copy of the letter dated May 12, 1983 from
the Regional Counsel, Comptroller of the
Currency, acknowledging receipt of notice of
name change effective May 1, 1983 from
Northwestern National Bank of Minneapolis to
Norwest Bank Minneapolis, National
Association.*
e. A copy of the letter dated January 4, 1988
from the Administrator of National Banks for
the Comptroller of the Currency certifying
approval of consolidation and merger
effective January 1, 1988 of Norwest Bank
Minneapolis, National Association with
various other banks under the title of
"Norwest Bank Minnesota, National
Association."*
Exhibit 3. A copy of the authorization of the trustee to
exercise corporate trust powers issued January 2,
1934, by the Federal Reserve Board.*
Exhibit 4. Copy of By-laws of the trustee as now in effect.*
Exhibit 5. Not applicable.
Exhibit 6. The consent of the trustee required by Section 321(b)
of the Act.
Exhibit 7. A copy of the latest report of condition of the
trustee published pursuant to law or the requirements
of its supervising or examining authority.
Exhibit 8. Not applicable.
Exhibit 9. Not applicable.
* Incorporated by reference to exhibit number 25 filed with
registration statement number 33-66026.
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the
trustee, Norwest Bank Minnesota, National Association, a national banking
association organized and existing under the laws of the United States of
America, has duly caused this statement of eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of
Minneapolis and State of Minnesota on the 22nd day of May, 1997.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
/s/ Jane Schweiger
----------------------------------
Jane Schweiger
Corporate Trust Officer
<PAGE> 5
EXHIBIT 6
May 22, 1997
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In accordance with Section 321(b) of the Trust Indenture Act of 1939, as
amended, the undersigned hereby consents that reports of examination of the
undersigned made by Federal, State, Territorial, or District authorities
authorized to make such examination may be furnished by such authorities to the
Securities and Exchange Commission upon its request therefor.
Very truly yours,
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
/s/ Jane Schweiger
----------------------------
Jane Schweiger
Corporate Trust Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS LISTED ON PAGES F-3 AND F-4 OF THIS FORM S-4 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001039785
<NAME> CONTINENTAL GLOBAL GROUP, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,022
<SECURITIES> 0
<RECEIVABLES> 17,790
<ALLOWANCES> 530
<INVENTORY> 20,536
<CURRENT-ASSETS> 40,445
<PP&E> 9,845
<DEPRECIATION> 4,945
<TOTAL-ASSETS> 46,499
<CURRENT-LIABILITIES> 32,920
<BONDS> 11,585
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 46,499
<SALES> 143,524
<TOTAL-REVENUES> 143,524
<CGS> 114,716
<TOTAL-COSTS> 114,716
<OTHER-EXPENSES> 3,187
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,889
<INCOME-PRETAX> 8,940
<INCOME-TAX> 0
<INCOME-CONTINUING> 8,940
<DISCONTINUED> 0
<EXTRAORDINARY> 932
<CHANGES> 0
<NET-INCOME> 9,872
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS LISTED ON PAGES F-3 AND F-4 OF THIS FORM S-4 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001039785
<NAME> CONTINENTAL GLOBAL GROUP, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,207
<SECURITIES> 0
<RECEIVABLES> 25,457
<ALLOWANCES> 142
<INVENTORY> 22,687
<CURRENT-ASSETS> 50,645
<PP&E> 18,208
<DEPRECIATION> 7,443
<TOTAL-ASSETS> 72,132
<CURRENT-LIABILITIES> 49,312
<BONDS> 19,853
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 72,132
<SALES> 47,076
<TOTAL-REVENUES> 47,076
<CGS> 37,697
<TOTAL-COSTS> 37,697
<OTHER-EXPENSES> 776
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,187
<INCOME-PRETAX> 1,925
<INCOME-TAX> (250)
<INCOME-CONTINUING> 2,175
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,175
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE> 1
EXHIBIT 99
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
11% SERIES A SENIOR NOTES DUE 2007
OF
CONTINENTAL GLOBAL GROUP, INC.
PURSUANT TO
PROSPECTUS DATED __________, 1997
- -------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON
__________, 1997, UNLESS EXTENDED. TENDERS OF 11% SERIES A SENIOR NOTES
DUE 2007 MAY ONLY BE WITHDRAWN UNDER THE CIRCUMSTANCES DESCRIBED
IN THE PROSPECTUS AND HEREIN.
- -------------------------------------------------------------------------------
The Exchange Agent for the Exchange Offer is:
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
<TABLE>
<S> <C>
By Registered or Certified Mail: By Overnight Courier:
Norwest Bank Minnesota, National Association Norwest Bank Minnesota, National Association
Corporate Trust Operations Corporate Trust Operations
P. O. Box 1517 Norwest Center
Minneapolis, Minnesota 55480-1517 Sixth and Marquette
Minneapolis, Minnesota 55479-0069
By Hand: By Facsimile:
Norwest Bank Minnesota, National Association Norwest Bank Minnesota, National Association
Corporate Trust Operations Corporate Trust Operations
Northstar East, 12th Floor (612) 667-4927
608 2nd Avenue Confirm by telephone:
Minneapolis, Minnesota 55479-0113 (612) 667-9764
</TABLE>
- -------------------------------------------------------------------------------
DESCRIPTION OF SERIES A NOTES TENDERED
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
Names(s) and Address(es) of Holder(s) Series A Notes Tendered
Please fill in, if blank, exactly as name(s) appear(s) on (Attach additional schedule, if necessary)
Series A Notes)
<S> <C>
- -----------------------------------------------------------------------------------------------------------
(1) (2) (3)
------------------------------------------------------
Certificate Number(s) Total Principal Amount
(if enclosing of Series A Notes
certificates) Tendered
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
Total
- -----------------------------------------------------------------------------------------------------------
</TABLE>
THE UNDERSIGNED ACKNOWLEDGES RECEIPT OF THE PROSPECTUS, DATED ______,
1997 (THE "PROSPECTUS"), OF CONTINENTAL GLOBAL GROUP, INC., A DELAWARE
CORPORATION (THE "COMPANY"), RELATING TO THE OFFER (THE "EXCHANGE OFFER") OF THE
COMPANY, UPON THE TERMS AND SUBJECT TO THE CONDITIONS SET FORTH IN THE
PROSPECTUS AND HEREIN AND THE INSTRUCTIONS HERETO, TO EXCHANGE $1,000 PRINCIPAL
AMOUNT OF ITS 11% SERIES B SENIOR NOTES DUE 2007 (THE "SERIES B NOTES") FOR EACH
$1,000 PRINCIPAL AMOUNT OF ITS OUTSTANDING 11% SERIES A SENIOR NOTES DUE 2007
(THE "SERIES A NOTES"), OF WHICH $120 MILLION AGGREGATE PRINCIPAL AMOUNT IS
OUTSTANDING. THE
<PAGE> 2
MINIMUM PERMITTED TENDER IS $1,000 PRINCIPAL AMOUNT OF SERIES A NOTES, AND ALL
OTHER TENDERS MUST BE IN INTEGRAL MULTIPLES OF $1,000.
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION
BY FACSIMILE, OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID
DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE
READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
The Exchange Offer will expire at 5:00 p.m., New York City time, on
__________, 1997 (the "Expiration Date"), unless extended.
HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE SERIES B NOTES PURSUANT TO
THE EXCHANGE OFFER MUST VALIDLY TENDER THEIR SERIES A NOTES TO THE EXCHANGE
AGENT BY 5:00 P.M. ON THE EXPIRATION DATE.
This Letter of Transmittal should be used only to exchange the Series A
Notes, pursuant to the Exchange Offer as set forth in the Prospectus.
This Letter of Transmittal is to be used (a) if Series A Notes are to
be physically delivered to the Exchange Agent or (b) if delivery of Series A
Notes is to be made by book-entry transfer to the account maintained by the
Exchange Agent at The Depository Trust Company ("DTC" or the "Book-Entry
Transfer Facility") pursuant to the procedures set forth in the Prospectus under
the caption "The Exchange Offer--Procedures for Tendering." Delivery of
documents to the Book-Entry Transfer Facility does not constitute delivery to
the Exchange Agent.
Holders whose Series A Notes are not available or who cannot deliver
their Series A Notes and all other documents required hereby to the Exchange
Agent by 5:00 p.m. on the Expiration Date nevertheless may tender their Series A
Notes in accordance with the guaranteed delivery procedures set forth in the
Prospectus under the caption "The Exchange Offer--Guaranteed Delivery
Procedures." See Instruction 1.
THE EXCHANGE OFFER IS NOT BEING MADE TO (NOR WILL THE SURRENDER OF
SERIES A NOTES FOR EXCHANGE BE ACCEPTED FROM OR ON BEHALF OF) HOLDERS IN ANY
JURISDICTION IN WHICH THE MAKING OR ACCEPTANCE OF THE EXCHANGE OFFER WOULD NOT
BE IN COMPLIANCE WITH THE LAWS OF SUCH JURISDICTION.
All capitalized terms used herein and not defined herein shall have the
meanings ascribed to them in the Prospectus.
HOLDERS WHO WISH TO EXCHANGE THEIR SERIES A NOTES MUST COMPLETE COLUMNS
(1) THROUGH (3) IN THE BOX ENTITLED "DESCRIPTION OF SERIES A NOTES TENDERED" ON
THE PRIOR PAGE, COMPLETE THE BOX BELOW ENTITLED "METHOD OF DELIVERY" AND SIGN IN
THE APPROPRIATE BOX(ES) BELOW.
2
<PAGE> 3
METHOD OF DELIVERY
- -------------------------------------------------------------------------------
[ ] CHECK HERE IF CERTIFICATES FOR TENDERED SERIES A NOTES ARE ENCLOSED
HEREWITH.
[ ] CHECK HERE IF TENDERED SERIES A NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:
----------------------------------------
Account Number: Transaction Code Number:
----------------- --------------
- -------------------------------------------------------------------------------
[ ] CHECK HERE IF TENDERED SERIES A NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING (SEE INSTRUCTIONS 1 AND 4):
Name(s) of Registered Holder(s):
--------------------------------------
Window Ticket Number (if any):
----------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
-------------------
Name of Eligible Institution which Guaranteed Delivery:
---------------
IF DELIVERED BY THE BOOK-ENTRY TRANSFER FACILITY, PROVIDE THE FOLLOWING
INFORMATION:
[ ] The Depository Trust Company
Account Number: Transaction Code Number:
--------------------- ----------
- -------------------------------------------------------------------------------
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE TEN
ADDITIONAL COPES OF THE PROSPECTUS AND COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS THERETO.
Name:
-----------------------------------------------------------------
Address:
--------------------------------------------------------------
- -------------------------------------------------------------------------------
3
<PAGE> 4
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the principal amount of Series A Notes
indicated in the box entitled "Description of Series A Notes Tendered." Subject
to, and effective upon, the acceptance for exchange of the Series A Notes
tendered hereby, the undersigned hereby irrevocably sells, assigns and transfers
to or upon the order of the Company all right, title and interest in and to such
Series A Notes, and hereby irrevocably constitutes and appoints the Exchange
Agent the true and lawful agent and attorney-in-fact of the undersigned (with
full knowledge that said Exchange Agent also acts as the agent of the Company
and as Trustee under the indenture governing the Series A Notes and the Series B
Notes) with respect to such Series A Notes, with full power of substitution
(such power of attorney being deemed to be an irrevocable power coupled with an
interest) to (a) deliver certificates representing such Series A Notes, and to
deliver all accompanying evidences of transfer and authenticity to or upon the
order of the Company upon receipt by the Exchange Agent, as the undersigned's
agent, of the Series B Notes to which the undersigned is entitled upon the
acceptance by the Company of such Series A Notes for exchange pursuant to the
Exchange Offer, (b) receive all benefits and otherwise to exercise all rights of
beneficial ownership of such Series A Notes, all in accordance with the terms of
the Exchange Offer, and (c) present such Series A Notes for transfer on the
register for such Series A Notes.
The undersigned acknowledges that prior to this Exchange Offer, there
has been no public market for the Series A Notes or the Series B Notes. If a
market for the Series B Notes should develop, the Series B Notes could trade at
a discount from their principal amount. The undersigned is aware that the
Company does not intend to list the Series B Notes on a national securities
exchange and that there can be no assurance that an active market for the Series
B Notes will develop.
If the undersigned is not a broker-dealer, the undersigned represents
that it is not engaged in, and does not intend to engage in, a distribution of
Series B Notes. If the undersigned is a broker-dealer that will receive Series B
Notes, it represents that the Series A Notes to be exchanged for Series B Notes
were acquired as a result of market-making activities or other trading
activities and it acknowledges that it will deliver a prospectus in connection
with any resale of such Series B Notes; however, by so acknowledging and by
delivering a prospectus, the undersigned will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL TENDERS BE ACCEPTED
FROM OR ON BEHALF OF, HOLDERS OF THE SERIES A NOTES IN ANY JURISDICTION IN WHICH
THE MAKING OF THE OFFER OR ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH
THE LAWS OF SUCH JURISDICTION OR WOULD OTHERWISE NOT BE IN COMPLIANCE WITH ANY
PROVISION OF ANY APPLICABLE SECURITY LAW.
The undersigned represents that (a) it is not an "affiliate," as
defined under Rule 405 of the Securities Act, of the Company, (b) it is not
engaged in, and does not intend to engage in, and has no arrangement or
understanding with any person to participate in, a distribution of the Series B
Notes, and (c) it is acquiring the Series B Notes in the ordinary course of
business.
The undersigned understands and acknowledges that the Company reserves
the right, in its sole discretion, to purchase or make offers for any Series A
Notes that remain outstanding subsequent to the Expiration Date or to terminate
the Exchange Offer and, to the extent permitted by applicable law, purchase
Series A Notes in the open market, in privately negotiated transactions or
otherwise. The terms of any such purchases or offers will differ from the terms
of the Exchange Offer.
The undersigned hereby represents and warrants that (a) the undersigned
accepts the terms and conditions of the Exchange Offer, (b) the undersigned has
a net long position within the meaning of Rule 14e-4 under the Exchange Act
("Rule 14e-4") equal to or greater than the principal amount of Series A Notes
tendered hereby, (c) the tender of such Series A Notes complies with Rule 14e-4
(to the extent that Rule 14e-4 is applicable to such
4
<PAGE> 5
exchange), (d) the undersigned has full power and authority to tender, exchange,
assign and transfer the Series A Notes tendered hereby, and (e) when the same
are accepted for exchange by the Company, the Company will acquire good and
unencumbered title thereto, free and clear of all liens, restrictions, charges
and encumbrances and not subject to any adverse claim or right. The undersigned
will, upon request, execute and deliver any additional documents deemed by the
Exchange Agent or the Company to be necessary or desirable to complete the sale,
assignment and transfer of the Series A Notes tendered hereby.
The undersigned agrees that all authority conferred or agreed to be
conferred by this Letter of Transmittal and every obligation of the undersigned
hereunder shall be binding upon the successors, assigns, heirs, executors,
administrators, trustees in bankruptcy and legal representatives of the
undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned. The undersigned also agrees that, except as
stated in the Prospectus, the Series A Notes tendered hereby cannot be
withdrawn.
The undersigned understands that tenders of the Series A Notes pursuant
to any one of the procedures described in the Prospectus under the caption "The
Exchange Offer--Procedures for Tendering" and in the instructions hereto will
constitute a binding agreement between the undersigned and the Company in
accordance with the terms and subject to the conditions of the Exchange Offer.
The undersigned understands that by tendering Series A Notes pursuant
to one of the procedures described in the Prospectus and the instructions
thereto, the tendering holder will be deemed to have waived the right to receive
any payment in respect of interest on the Series A Notes accrued up to the date
of issuance of the Series B Notes.
The undersigned recognizes that, under certain circumstances set forth
in the Prospectus, the Company may not be required to accept for exchange any of
the Series A Notes tendered. Series A Notes not accepted for exchange or
withdrawn will be returned to the undersigned at the address set forth below
unless otherwise indicated under "Special Delivery Instructions" below.
Unless otherwise indicated herein under the box entitled "Special
Issuance Instructions" below, Series B Notes, and Series A Notes not validly
tendered or accepted for exchange, will be issued in the name of the
undersigned. Similarly, unless otherwise indicated under the box entitled
"Special Delivery Instructions" below, Series B Notes, and Series A Notes not
validly tendered or accepted for exchange, will be delivered to the undersigned
at the address shown below the signature of the undersigned. The undersigned
recognizes that the Company has no obligation pursuant to the "Special Issuance
Instructions" to transfer any Series A Notes from the name of the registered
holder thereof if the Company does not accept for exchange any of the principal
amount of such Series A Notes so tendered.
All questions as to the validity, form, eligibility (including time of
receipt), and withdrawal of the tendered Series A Notes will be determined by
the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Series A
Notes not properly tendered or any Series A Notes the Company's acceptance of
which would, in the opinion of counsel for the Company, be unlawful. The Company
also reserves the right to waive any irregularities or conditions of tender as
to particular Series A Notes. The Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in this Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Series A Notes must be
cured within such time as the Company shall determine. Neither the Company, the
Exchange Agent nor any other person shall be under any duty to give notification
of defects or irregularities with respect to tenders of Series A Notes, nor
shall any of them incur any liability for failure to give such notification.
Tenders of Series A Notes will not be deemed to have been made until such
irregularities have been cured or waived. Any Series A Notes received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned without cost to
such holder by the Exchange Agent to the tendering holders of Series A Notes,
unless otherwise provided in this Letter of Transmittal, as soon as practicable
following the Expiration Date.
5
<PAGE> 6
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF SERIES
A NOTES TENDERED" AND SIGNING THIS LETTER OF TRANSMITTAL, WILL BE DEEMED TO HAVE
TENDERED THE SERIES A NOTES AND MADE CERTAIN REPRESENTATIONS DESCRIBED IN THE
PROSPECTUS AND HEREIN.
- -------------------------------------------------------------------------------
SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
X
------------------------------------------------------------------------------
X
------------------------------------------------------------------------------
(SIGNATURE(S) OF HOLDER(S) OR AUTHORIZED SIGNATORY)
Must be signed by the registered holder(s) of Series A Notes exactly as
their name(s) appear(s) on certificate(s) for the Series A Notes or by person(s)
authorized to become registered holder(s) by endorsements and documents
transmitted with this Letter of Transmittal. If signature is by a trustee,
executor, administrator, guardian, attorney-in-fact, officer of a corporation,
agent or other person acting in a fiduciary or representative capacity, please
provide the following information. See Instruction 3.
Name(s):
-----------------------------------------------------------------------
- -------------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (full title):
---------------------------------------------------------
Address:
-----------------------------------------------------------------------
- -------------------------------------------------------------------------------
(INCLUDING ZIP CODE)
Area Code and Telephone No.:
---------------------------------------------------
SIGNATURE GUARANTEE
(SEE INSTRUCTION 3)
- -------------------------------------------------------------------------------
(NAME OF ELIGIBLE INSTITUTION GUARANTEEING SIGNATURE(S))
- -------------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NO., INCLUDING AREA CODE, OF FIRM)
- -------------------------------------------------------------------------------
(AUTHORIZED SIGNATURE)
- -------------------------------------------------------------------------------
(PRINTED NAME)
- -------------------------------------------------------------------------------
(TITLE)
Date: ________________________, 1997
- -------------------------------------------------------------------------------
6
<PAGE> 7
<TABLE>
<S> <C>
- -------------------------------------------------------- ----------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3, 4 AND 6) (SEE INSTRUCTIONS 3, 4 AND 6)
To be completed ONLY if certificates for To be completed ONLY if certificates for
Series A Notes in a principal amount not Series A Notes in a principal amount not
exchanged and/or certificates for Series B Notes exchanged and/or certificates for Series B Notes
are to be issued in the name of someone other than are to be sent to someone other than the
the undersigned, or if Series A Notes are to be undersigned at an address other than that shown
returned by credit to an account maintained by the above.
Book-Entry Transfer Facility.
Issue (check appropriate box) Deliver (check appropriate box)
|_| Series B Notes to: |_| Series B Notes to:
|_| Series A Notes to: |_| Series A Notes to:
Name: Name:
--------------------------------------------------- ----------------------------------------------
(Please Print) (Please Print)
Address: Address:
------------------------------------------------ -------------------------------------------
- -------------------------------------------------------- ---------------------------------------------------
Zip Code Zip Code
- -------------------------------------------------------- ---------------------------------------------------
Taxpayer Identification Number Taxpayer Identification Number
(YOU MUST ALSO COMPLETE (YOU MUST ALSO COMPLETE
SUBSTITUTE FORM W-9 BELOW.) SUBSTITUTE FORM W-9 BELOW.)
Credit unaccepted Series A Notes tendered by
book-entry transfer to:
[ ] The Depository Trust Company
account set forth below
- --------------------------------------------------------
(DTC ACCOUNT NUMBER)
- -------------------------------------------------------- -----------------------------------------------------
</TABLE>
7
<PAGE> 8
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE
OFFER AND THE SOLICITATION
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED
DELIVERY PROCEDURES. To be effectively tendered pursuant to the Exchange Offer,
the Series A Notes, together with a properly completed Letter of Transmittal (or
facsimile thereof), duly executed by the registered holder thereof, and any
other documents required by this Letter of Transmittal, must be received by the
Exchange Agent at one of its addresses set forth on the first page of this
Letter of Transmittal. If the beneficial owner of any Series A Notes is not the
registered holder, then such person may validly tender his or her Series A Notes
only by obtaining and submitting to the Exchange Agent a properly completed
Letter of Transmittal from the registered holder. SERIES A NOTES SHOULD BE
DELIVERED ONLY TO THE EXCHANGE AGENT AND NOT TO THE COMPANY OR TO ANY OTHER
PERSON.
THE METHOD OF DELIVERY OF SERIES A NOTES AND ALL OTHER REQUIRED
DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE HOLDER.
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY TO THE
EXCHANGE AGENT BY 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
If a holder desires to tender Series A Notes and such holder's Series A
Notes are not immediately available or time will not permit such holder's Letter
of Transmittal, Series A Notes or other required documents to reach the Exchange
Agent on or before the Expiration Date, such holder's tender may be effected if:
(a) the tender is made through an Eligible Institution (as
defined);
(b) prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice
of Guaranteed Delivery (by facsimile transmission, mail or hand
delivery) setting forth the name and address of the holder of the
Series A Notes, the certificate number or numbers of such Series A
Notes and the principal amount of Series A Notes tendered, stating that
the tender is being made thereby, and guaranteeing that, within three
business days after the Expiration Date, the Letter of Transmittal (or
facsimile thereof) together with the certificate(s) representing the
Series A Notes to be tendered in proper form for transfer or a
Book-Entry Confirmation, as the case may be, and any other documents
required by the Letter of Transmittal will be deposited by the Eligible
Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof) together with the certificate(s) representing all
tendered Series A Notes in proper form for transfer and all other
documents required by the Letter of Transmittal are received by the
Exchange Agent within three business days after the Expiration Date.
2. WITHDRAWAL OF TENDERS. Tendered Series A Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date,
unless previously accepted for exchange.
To be effective, a written or facsimile transmission notice of
withdrawal must (a) be received by the Exchange Agent at one of its addresses
set forth on the first page of this Letter of Transmittal prior to 5:00 p.m.,
New York City time, on the Expiration Date, unless previously accepted for
exchange, (b) specify the name of the person who tendered the Series A Notes,
(c) contain the description of the Series A Notes to be withdrawn, the
certificate numbers shown on the particular certificates evidencing such Series
A Notes and the aggregate principal amount represented by such Series A Notes
and (d) be signed by the holder of such Series A Notes in the same manner as the
original signature appears on this Letter of Transmittal (including any required
signature guarantees) or be accompanied by evidence sufficient to have the
Trustee with respect to the Series A Notes register the transfer of such Series
A Notes into the name of the holder withdrawing the tender. The signature(s) on
the notice of withdrawal must be guaranteed by an Eligible Institution unless
such Series A Notes have been tendered (a) by a
8
<PAGE> 9
registered holder of Series A Notes who has not completed either the box
entitled "Special Issuance Instructions" or the box entitled "Special Delivery
Instructions" on this Letter of Transmittal or (b) for the account of an
Eligible Institution. All questions as to the validity, form and eligibility
(including time of receipt) of such withdrawal notices shall be determined by
the Company, whose determination shall be final and binding on all parties. If
the Series A Notes to be withdrawn have been delivered or otherwise identified
to the Exchange Agent, a signed notice of withdrawal is effective immediately
upon receipt by the Exchange Agent of a written or facsimile transmission notice
of withdrawal even if physical release is not yet effected. In addition, such
notice must specify, in the case of Series A Notes tendered by delivery of
certificates for such Series A Notes, the name of the registered holder (if
different from that of the tendering holder) to be credited with the withdrawn
Series A Notes. Withdrawals may not be rescinded, and any Series A Notes
withdrawn will thereafter be deemed not validly tendered for purposes of the
Exchange Offer. However, properly withdrawn Series A Notes may be retendered by
following one of the procedures described under "The Exchange Offer--Procedures
for Tendering" in the Prospectus at any time on or prior to the applicable
Expiration Date.
3. SIGNATURES ON THIS LETTER OF TRANSMITTAL, BOND POWERS AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed
by the registered holder(s) of the Series A Notes tendered hereby, the signature
must correspond exactly with the name(s) as written on the face of the
certificates without any change whatsoever.
If any Series A Notes tendered hereby are owned of record by two or
more joint owners, all such owners must sign this Letter of Transmittal.
If any Series A Notes tendered hereby are registered in different names
on several certificates, it will be necessary to complete, sign and submit as
many separate copies of this Letter of Transmittal as there are different
registrations of certificates.
When this Letter of Transmittal is signed by the registered holder or
holders specified herein and tendered hereby, no endorsements of certificates or
separate bond powers are required unless Series B Notes are to be issued, or
certificates for any untendered principal amount of Series A Notes are to be
reissued, to a person other than the registered holder.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of any certificate(s) specified herein such certificates(s)
must be endorsed or accompanied by appropriate bond powers, in either case
signed exactly as the name(s) of the registered holder(s) appear(s) on the
certificate(s).
If this Letter of Transmittal or a Notice of Guaranteed Delivery or any
certificates or bond powers are signed by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, such persons should so indicate when
signing, and unless waived by the Company, evidence satisfactory to the Company
of their authority so to act must be submitted with this Letter of Transmittal.
Except as described below, signatures on this Letter of Transmittal or
a notice of withdrawal, as the case may be, must be guaranteed by an Eligible
Institution. Signatures on this Letter of Transmittal or a notice of withdrawal,
as the case may be, need not be guaranteed if the Series A Notes tendered
pursuant hereto are tendered (a) by a registered holder of Series A Notes who
has not completed either the box entitled "Special Issuance Instructions" or the
box entitled "Special Delivery Instructions" on this Letter of Transmittal or
(b) for the account of an Eligible Institution. In the event that signatures on
this Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantee must be by a firm which is a member of
a registered national securities exchange or a member of the National
Association of Securities Dealers, Inc. or by a commercial bank or trust company
having an office or correspondent in the United States (each as "Eligible
Institutions").
Endorsements on certificates for Series A Notes or signatures on bond
powers required by this Instruction 3 must be guaranteed by an Eligible
Institution.
9
<PAGE> 10
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering holders should
indicate in the applicable box the name and address to which certificates for
Series B Notes and/or substitute certificates evidencing Series A Notes for the
principal amounts not exchanged are to be issued or sent, if different from the
name and address of the person signing this Letter of Transmittal. In the case
of issuance in a different name, the employer identification or social security
number of the person named must also be indicated. If no such instructions are
given, any Series A Notes not exchanged will be returned to the name and address
of the person signing this Letter of Transmittal.
5. TAX IDENTIFICATION NUMBER WITHHOLDING. Federal income tax law of the
United States requires that a holder of Series A Notes whose Series A Notes are
accepted for exchange provide the Company with the holder's correct taxpayer
identification number, which, in the case of a holder who is an individual, is
his or her social security number, or otherwise establish an exemption from
backup withholding. If the Company is not provided with the correct taxpayer
identification number, the exchanging holder of Series A Notes may be subject to
a $50 penalty imposed by the Internal Revenue Service (the "IRS"). In addition,
interest on the Series B Notes acquired pursuant to the Exchange Offer may be
subject to backup withholding in an amount equal to 31% of any interest payment.
If withholding occurs and results in an overpayment of taxes, a refund may be
obtained.
To prevent backup withholding, each exchange holder of Series A Notes
subject to backup withholding must provide his correct taxpayer identification
number by completing the Substitute Form W-9 provided in this Letter of
Transmittal, certifying that the taxpayer identification number provided is
correct (or that the exchanging holder of Series A Notes is awaiting a taxpayer
identification number) and that either (a) the exchanging holder has not yet
been notified by the IRS that such holder is subject to backup withholding as a
result of failure to report all interest or dividends or (b) the IRS has
notified the exchanging holder that such holder is no longer subject to backup
withholding.
Certain exchanging holders of Series A Notes (including, among others,
all corporations and certain foreign individuals) are not subject to these
backup withholding requirements. A foreign individual and other exempt holders
(i.e., corporations) should certify, in accordance with the enclosed "Guidelines
for Certification of Taxpayer Identification Number on Substitute Form W-9," to
such exempt status on the Substitute Form W-9 provided in this Letter of
Transmittal.
6. TRANSFER TAXES. Holders tendering pursuant to the Exchange Offer
will not be obligated to pay brokerage commissions or fees or to pay transfer
taxes with respect to their exchange under the Exchange Offer unless the box
entitled "Special Issuance Instructions" in this Letter of Transmittal has been
completed, or unless the Series B Notes are to be issued to any person other
than the holder of the Series A Notes tendered for exchange. The Company will
pay all other charges or expenses in connection with the Exchange Offer. If
holders tender Series A Notes for exchange and the Exchange Offer is not
consummated, certificates representing the Series A Notes will be returned to
the holders at the Company's expense.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the certificate(s) specified in this Letter
of Transmittal.
7. INADEQUATE SPACE. If the space provided herein is inadequate, the
aggregate principal amount of the Series A Notes being tendered and the
certificate numbers (if available) should be listed on a separate schedule
attached hereto and separately signed by all parties required to sign this
Letter of Transmittal.
8. PARTIAL TENDERS. Tenders of Series A Notes will be accepted only in
integral multiples of $1,000. If tenders are to be made with respect to less
than the entire principal amount of any Series A Notes, fill in the principal
amount of Series A Notes which are tendered in column (3) in the box on the
cover entitled "Description of Series A Notes Tendered." In the case of partial
tenders, new certificates representing the Series A Notes in fully registered
form for the remainder of the principal amount of the Series A Notes will be
sent to the person(s) signing this Letter of Transmittal, unless otherwise
indicated in the appropriate place on this Letter of Transmittal, as promptly as
practicable after the expiration or termination of the Exchange Offer.
10
<PAGE> 11
9. MUTILATED, LOST, STOLEN OR DESTROYED SERIES A NOTES. Any holder
whose Series A Notes have been mutilated, lost, stolen or destroyed should
contact the Exchange Agent at the address indicated above for further
instructions.
10. REQUEST FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for
assistance or additional copies of the Prospectus or this Letter of Transmittal
may be obtained from the Exchange Agent at its telephone number set forth on the
first page of this Letter of Transmittal.
11
<PAGE> 12
PAYER'S NAME: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
SUBSTITUTE Part I--PLEASE PROVIDE
YOUR TIN IN THE BOX AT ----------------------------------
Form W-9 RIGHT AND CERTIFY BY Social Security Number
Department of the Treasury SIGNING AND DATING
Internal Revenue Service BELOW.
OR
---------------------------------
Payer's Request for Taxpayer Employer Identification Number
Identification Number (TIN)
</TABLE>
- -------------------------------------------------------------------------------
CERTIFICATION--UNDER PENALTIES OF PERJURY, I CERTIFY THAT:
(1) The number shown on this form is my correct Taxpayer Identification Number
(or I am waiting for a number to be issued to me) and
(2) I am not subject to backup withholding either because: (a) I am exempt from
backup withholding; or (b) I have not been notified by the Internal Revenue
Service (the "IRS") that I am subject to backup withholding as a result of
failure to report all interest or dividends, or (c) the IRS has notified me
that I am no longer subject to backup withholding.
-----------------------------------------------------
PART II--AWAITING TIN [ ] PART III--EXEMPT [ ]
-----------------------------------------------------
CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if you have
been notified by the IRS that you are subject to backup withholding because
of under-reporting interest or dividends on your tax return. However, if
after being notified by the IRS that you were subject to backup withholding
you received another notification from the IRS stating that you are no
longer subject to backup withholding, do not cross out item (2). If you are
exempt from backup withholding, check the box in Part III.
Signature Date
--------------------------------------- ---------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PAYER'S REQUEST FOR TAXPAYER IDENTIFICATION NUMBER (TIN)
Please fill out your name and address below:
- -------------------------------------------------------------------------------
Name
- -------------------------------------------------------------------------------
Address (Number and street)
- -------------------------------------------------------------------------------
City, State and Zip Code
- -------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER
AND THE SOLICITATION. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER OF SUBSTITUTE FORM W-9
FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF
YOU CHECKED THE BOX IN PART II OF SUBSTITUTE FORM W-9.
- -------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (b)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number to the payer by the time of
payment, 31% of all reportable payments made to me will be withheld until I
provide a number and that, if I do not provide my taxpayer identification number
within 60 days, such retained amounts shall be remitted to the IRS as backup
withholding.
Signature Date
-------------------------------------- ----------------------------
- -------------------------------------------------------------------------------
12
<PAGE> 13
CONTINENTAL GLOBAL GROUP, INC.
OFFER TO EXCHANGE
11% SERIES B SENIOR NOTES DUE 2007
FOR ANY AND ALL OUTSTANDING
11% SERIES A SENIOR NOTES DUE 2007
- -------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON __________,
l997, UNLESS EXTENDED. TENDERS OF 11% SERIES A SENIOR NOTES DUE 2007 MAY ONLY
BE WITHDRAWN UNDER THE CIRCUMSTANCES DESCRIBED IN THE PROSPECTUS AND THE
LETTER OF TRANSMITTAL.
- -------------------------------------------------------------------------------
___________, 1997
To Our Clients:
Enclosed for your consideration is the Prospectus dated __________,
1997 (the "Prospectus") and the related Letter of Transmittal and instructions
thereto (the "Letter of Transmittal") in connection with the offer (the
"Exchange Offer") of Continental Global Group, Inc., a Delaware corporation
("the Company"), to exchange $1,000 principal amount of its 11% Series B Senior
Notes due 2007 (the "Series B Notes") for each $1,000 principal amount of its
outstanding 11% Series A Senior Notes due 2007 (the "Series A Notes").
Consummation of the Exchange Offer is subject to certain conditions
described in the Prospectus. Capitalized terms used herein but not defined shall
have the meanings ascribed to them in the Prospectus.
WE ARE THE REGISTERED HOLDER OF SERIES A NOTES HELD BY US FOR YOUR
ACCOUNT. A TENDER OF ANY SUCH SERIES A NOTES CAN BE MADE ONLY BY US AS THE
REGISTERED HOLDER AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL
IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO
TENDER SERIES A NOTES HELD BY US FOR YOUR ACCOUNT.
Accordingly, we request instructions as to whether you wish us to
tender any or all such Series A Notes held by us for your account pursuant to
the terms and conditions set forth in the Prospectus and the Letter of
Transmittal. We urge you to read carefully the Prospectus and the Letter of
Transmittal before instructing us to tender your Series A Notes.
Your instructions to us should be forwarded as promptly as possible in
order to permit us to tender Series A Notes on your behalf in accordance with
the provisions of the Exchange Offer. THE EXCHANGE OFFER WILL EXPIRE AT 5:00
P.M., NEW YORK CITY TIME ON __________, 1997 (THE "EXPIRATION DATE"), UNLESS
EXTENDED. Series A Notes tendered pursuant to the Exchange Offer may only be
withdrawn under the circumstances described in the Prospectus and the Letter of
Transmittal.
Your attention is directed to the following:
1. The Exchange Offer is for the entire aggregate principal
amount of outstanding Series A Notes.
2. Consummation of the Exchange Offer is conditioned upon the
conditions set forth in the Prospectus under the caption "The Exchange
Offer--Conditions."
3. Tendering holders may withdraw their tender at any time
until the Expiration Date.
<PAGE> 14
4. Any transfer taxes incident to the transfer of Series A
Notes from the tendering holder to the Company will be paid by the
Company, except as provided in the Prospectus and the instructions to
the Letter of Transmittal.
5. The Exchange Offer is not being made to (nor will the
surrender of Series A Notes for exchange be accepted from or on behalf
of) holders of Series A Notes in any jurisdiction in which the making
or acceptance of the Exchange Offer would not be in compliance with the
laws of such jurisdiction.
6. The acceptance for exchange of Series A Notes validly
tendered and not validly withdrawn and the issuance of Series B Notes
will be made as promptly as practicable after the Expiration Date.
Subject to rules promulgated pursuant to the Securities Exchange Act of
1934, as amended (the "Exchange Act"), the Company, however, expressly
reserves the right to delay acceptance of any of the Series A Notes or
to terminate the Exchange Offer and not accept for purchase any Series
A Notes not theretofore accepted if any of the conditions set forth in
the Prospectus under the caption "The Exchange Offer-Conditions" shall
not have been satisfied or waived by the Company.
7. The Company expressly reserves the right, in its sole
discretion, (i) to delay accepting any Series A Notes, (ii) to extend
the Exchange Offer, (iii) to amend the terms of the Exchange Offer or
(iv) to terminate the Exchange Offer. Any delay, extension, amendment
or termination will be followed as promptly as practicable by oral or
written notice to the Exchange Agent and a public announcement thereof.
In the case of an extension, such public announcement shall include
disclosure of the approximate number of Series A Notes deposited to
date and shall be made prior to 9:00 a.m., New York City time, on the
next business day after the previously scheduled Expiration Date.
Without limiting the manner in which the Company may choose to make a
public announcement of any extension, amendment or termination of the
Exchange Offer, the Company shall have no obligation to publish,
advertise, or otherwise communicate any such public announcement, other
than by making a timely release to the Dow Jones News Service. Except
as otherwise provided in the Prospectus, withdrawal rights with respect
to Series A Notes tendered pursuant to the Exchange Offer will not be
extended or reinstated as a result of an extension or amendment of the
Exchange Offer.
8. Consummation of the Exchange Offer may have adverse
consequences to non-tendering Series A Note holders, including that the
reduced amount of outstanding Series A Notes as a result of the
Exchange Offer may adversely affect the trading market, liquidity and
market price of the Series A Notes.
If you wish to have us tender any or all of the Series A Notes held by
us for your account, please so instruct us by completing, executing and
returning to us the instruction form that follows.
2
<PAGE> 15
CONTINENTAL GLOBAL GROUP, INC.
INSTRUCTIONS REGARDING THE EXCHANGE OFFER
WITH RESPECT TO THE
11% SERIES A SENIOR NOTES DUE 2007
THE UNDERSIGNED ACKNOWLEDGE(S) RECEIPT OF YOUR LETTER AND THE ENCLOSED
DOCUMENTS REFERRED TO THEREIN RELATING TO THE EXCHANGE OFFER OF THE COMPANY.
THIS WILL INSTRUCT YOU WHETHER TO TENDER THE PRINCIPAL AMOUNT OF SERIES
A NOTES INDICATED BELOW HELD BY YOU TO THE ACCOUNT OF THE UNDERSIGNED PURSUANT
TO THE TERMS OF AND CONDITIONS SET FORTH IN THE PROSPECTUS AND THE LETTER OF
TRANSMITTAL.
Box 1 [ ] Please tender the Series A Notes held by you for my account, as
indicated below.
Box 2 | | Please do not tender any Series A Notes held by you for my account.
<TABLE>
<S> <C>
Date: __________________, 1997 --------------------------------------------------
--------------------------------------------------
Signature(s)
Principal Amount of Series A Notes
to be Tendered: -------------------------------------------------
$__________________________* -------------------------------------------------
(must be in the principal amount Please print name(s) here
of $1,000 or an integral multiple
thereof) -------------------------------------------------
-------------------------------------------------
-------------------------------------------------
Please type or print address
-------------------------------------------------
Area Code and Telephone Number
-------------------------------------------------
Taxpayer Identification or Social Security Number
-------------------------------------------------
My Account Number with You
</TABLE>
- ---------------------------
* UNLESS OTHERWISE INDICATED, SIGNATURE(S) HEREON BY BENEFICIAL OWNER(S)
SHALL CONSTITUTE AN INSTRUCTION TO THE NOMINEE TO TENDER ALL SERIES A
NOTES OF SUCH BENEFICIAL OWNER(S).
3
<PAGE> 16
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Corporate Trust Administration
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479-0069
CONTINENTAL GLOBAL GROUP, INC.
OFFER TO EXCHANGE
11% SERIES B SENIOR NOTES DUE 2007
FOR ANY AND ALL OUTSTANDING
11% SERIES A SENIOR NOTES DUE 2007
- -------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON __________,
1997, UNLESS EXTENDED. TENDERS OF 11% SERIES A SENIOR NOTES DUE 2007 MAY ONLY
BE WITHDRAWN UNDER THE CIRCUMSTANCES DESCRIBED IN THE PROSPECTUS AND THE
LETTER OF TRANSMITTAL.
- -------------------------------------------------------------------------------
To Brokers, Dealers, Commercial Banks, Trust
Companies and other Nominees:
We have been appointed by Continental Global Group, Inc., a Delaware
corporation (the "Company"), to act as the Exchange Agent in connection with the
offer (the "Exchange Offer") of the Company to exchange $1,000 principal amount
of its 11% Series B Senior Notes due 2007 for each $1,000 principal amount of
its 11% Series A Senior Notes due 2007 (the "Series A Notes"), upon the terms
and subject to the conditions set forth in the Prospectus dated __________, 1997
(the "Prospectus") and in the related Letter of Transmittal and the instructions
thereto (the "Letter of Transmittal").
Enclosed herewith are copies of the following documents:
1. The Prospectus;
2. The Letter of Transmittal for your use and for the information of your
clients, together with guidelines of the Internal Revenue Service for
Certification of Taxpayer Identification Number on Substitute Form W-9 providing
information relating to backup federal income tax withholding;
3. Notice of Guaranteed Delivery to be used to accept the Exchange Offer if the
Series A Notes and all other required documents cannot be delivered to the
Exchange Agent on or prior to the Expiration Date (as defined);
4. A form of letter which may be sent to your clients for whose account you hold
the Series A Notes in your name or in the name of a nominee, with space provided
for obtaining such clients' instructions with regard to the Exchange Offer; and
5. A return envelope addressed to the Exchange Agent.
PLEASE NOTE THAT THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME ON __________, 1997 (THE "EXPIRATION DATE"), UNLESS EXTENDED. WE URGE
YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE.
The Company will not pay any fees or commission to any broker or dealer
or other person (other than to the Exchange Agent) for soliciting tenders of the
Series A Notes pursuant to the Exchange Offer. You will be reimbursed for
customary mailing and handling expenses incurred by you in forwarding the
enclosed materials to your clients.
<PAGE> 17
Additional copies of the enclosed materials may be obtained by
contacting the Exchange Agent as provided in the enclosed Letter of Transmittal.
Very truly yours,
Norwest Bank Minnesota, National Association
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE
YOU OR ANY OTHER PERSON THE AGENT OF THE COMPANY OR THE EXCHANGE AGENT OR
AUTHORIZE YOU OR ANY OTHER PERSON TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF ANY OF THEM WITH RESPECT TO THE EXCHANGE OFFER NOT
CONTAINED IN THE PROSPECTUS OR THE LETTER OF TRANSMITTAL.
2
<PAGE> 18
NOTICE OF GUARANTEED DELIVERY
TO TENDER FOR EXCHANGE
11% SERIES A SENIOR NOTES DUE 2007
OF
CONTINENTAL GLOBAL GROUP, INC.
PURSUANT TO
PROSPECTUS DATED __________, 1997
This Notice of Guaranteed Delivery or a form substantially equivalent
hereto must be used to accept the offer (the "Exchange Offer") of Continental
Global Group, Inc., a Delaware corporation (the "Company"), to exchange $1,000
principal amount of its 11% Series B Senior Notes due 2007 for each $1,000
principal amount of its outstanding 11% Series A Senior Notes due 2007 (the
"Series A Notes") if (a) certificates representing the Series A Notes are not
immediately available or (b) time will not permit the Series A Notes and all
other required documents to reach the Exchange Agent on or prior to the
Expiration Date. This form may be delivered by an Eligible Institution (as
defined) by mail or hand delivery or transmitted, via facsimile, telegram or
telex to the Exchange Agent as set forth below. All capitalized terms used
herein but not defined herein shall have the meanings ascribed to them in the
Prospectus dated __________, 1997 (the "Prospectus").
THE EXCHANGE OFFER IS NOT BEING MADE TO (NOR WILL THE SURRENDER OF
SERIES A NOTES BE ACCEPTED FROM OR ON BEHALF OF) HOLDERS OF SERIES A NOTES IN
ANY JURISDICTION IN WHICH THE MAKING OR ACCEPTANCE OF THE EXCHANGE OFFER WOULD
NOT BE IN COMPLIANCE WITH THE LAWS OF SUCH JURISDICTION.
- -------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON __________,
1997, UNLESS EXTENDED. TENDERS OF 11% SERIES A SENIOR NOTES DUE 2007 MAY ONLY
BE WITHDRAWN UNDER THE CIRCUMSTANCES DESCRIBED IN THE PROSPECTUS AND THE
LETTER OF TRANSMITTAL.
- -------------------------------------------------------------------------------
The Exchange Agent for the Exchange Offer:
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
<TABLE>
<S> <C>
By Registered or Certified Mail: By Overnight Courier:
Norwest Bank Minnesota, National Association Norwest Bank Minnesota, National Association
Corporate Trust Operations Corporate Trust Operations
P. O. Box 1517 Norwest Center
Minneapolis, Minnesota 55480-1517 Sixth and Marquette
Minneapolis, Minnesota 55479-0069
By Hand: By Facsimile:
Norwest Bank Minnesota, National Association Norwest Bank Minnesota, National Association
Corporate Trust Operations Corporate Trust Operations
Northstar East, 12th Floor (612) 667-4927
608 2nd Avenue Confirm by telephone:
Minneapolis, Minnesota 55479-0113 (612) 667-9764
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS, OR
TRANSMISSION VIA FACSIMILE, TELEGRAM OR TELEX, OTHER THAN AS SET FORTH ABOVE,
WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on
the Letter of Transmittal is required to be guaranteed by an "Eligible
Institution" under the instructions thereto, such signature guarantee must
appear in the applicable space provided in the signature box on the Letter of
Transmittal.
<PAGE> 19
Ladies and Gentlemen:
The undersigned hereby tender(s) to the Company, upon the terms and
subject to the conditions set forth in the Prospectus, receipt of which is
hereby acknowledged, the principal amount of Series A Notes set forth below,
pursuant to the guaranteed delivery procedures set forth in the Prospectus under
the caption "The Exchange OfferGuaranteed Delivery Procedures."
Subject to and effective upon acceptance for exchange of the Series A
Notes tendered herewith, the undersigned hereby sells, assigns and transfers to
or upon the order of the Company all right, title and interest in and to, and
any and all claims in respect of or arising or having arisen as a result of the
undersigned's status as a holder of, all Series A Notes tendered hereby. In the
event of a termination of the Exchange Offer, the Series A Notes tendered
pursuant thereto will be returned to the tendering Series A Note holder
promptly.
The undersigned hereby represents and warrants that the undersigned
accepts the terms and conditions of the Prospectus and the Letter of
Transmittal, has full power and authority to tender, sell, assign and transfer
the Series A Notes tendered hereby and that the Company will acquire good and
unencumbered title thereto, free and clear of all liens, restrictions, charges
and encumbrances and not subject to any adverse claim. The undersigned will,
upon request, execute and deliver any additional documents deemed by the
Exchange Agent or the Company to be necessary to desirable to complete the sale,
assignment and transfer of the Series A Notes tendered.
All authority herein conferred or agreed to be conferred by this Notice
of Guaranteed Delivery shall survive the death or incapacity of the undersigned
and every obligation of the undersigned under this Notice of Guaranteed Delivery
shall be binding upon the heirs, personal representatives, executors,
administrators, successors, assigns, trustees in bankruptcy and other legal
representatives of the undersigned.
- -------------------------------------------------------------------------------
PLEASE SIGN AND COMPLETE
<TABLE>
<S> <C>
Signature(s) of Registered Holder(s) Address(es):
or Authorized Signatory: -------------------------------
----------------------------------------------
- -----------------------------------------------
----------------------------------------------
- -----------------------------------------------
----------------------------------------------
Name(s) of Registered Holder(s):
Area Code and Telephone No.:
- -----------------------------------------------
----------------------------------------------
- -----------------------------------------------
Principal Amount of Series A Notes Tendered:
- ----------------------------------------------- If Series A Notes will be delivered by a book-
entry
transfer, provide the following information:
Certificate No(s). of Series A Notes (if available):
- ------------------------------------------------- Transaction Code No.:
---------------------------
- ------------------------------------------------- Depository Account No.:
------------------------
</TABLE>
- -------------------------------------------------------------------------------
2
<PAGE> 20
- -------------------------------------------------------------------------------
This Notice of Guaranteed Delivery must be signed by the registered
holder(s) of Series A Notes exactly as their name(s) appear(s) on the Series A
Notes or by person(s) authorized to become registered holder(s) by endorsements
and documents transmitted with this Notice of Guaranteed Delivery. If signature
is by a trustee, guardian, attorney-in-fact, officer of a corporation, executor,
administrator, agent or other representative, such person must provide the
following information:
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s):
------------------------------------------------------------------
------------------------------------------------------------------
Capacity:
------------------------------------------------------------------
------------------------------------------------------------------
Address(es):
------------------------------------------------------------------
------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member of a registered national securities exchange
or a member of the National Association of Securities Dealers, Inc. or a
commercial bank or trust company having an office or correspondent in the United
States (each, an "Eligible Institution") hereby guarantees that, within three
business days from the date of this Notice of Guaranteed Delivery, a properly
completed and validly executed Letter of Transmittal (or a facsimile thereof),
together with Series A Notes tendered hereby in proper form for transfer (or
confirmation of the book-entry transfer of such Series A Notes into the Exchange
Agent's account at a Book-Entry Transfer Facility) and all other required
documents will be deposited by the undersigned with the Exchange Agent at one of
its addresses set forth above.
Name of Firm:
------------------------------------- ------------------------
Authorized Signature
Address: Name:
-------------------------------------- --------------------------
Title:
- ---------------------------------------------- --------------------------
Area Code and Telephone No.: Date:
------------------- --------------------------
DO NOT SEND SERIES A NOTES WITH THIS FORM. ACTUAL SURRENDER OF SERIES A
NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, A PROPERLY
COMPLETED AND VALIDLY EXECUTED LETTER OF TRANSMITTAL AND ANY OTHER
REQUIRED DOCUMENTS.
- -------------------------------------------------------------------------------
3
