<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 30, 1997
REGISTRATION NO.
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
ELGIN NATIONAL INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 3532 36-3908410
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION NUMBER) IDENTIFICATION NUMBER)
INCORPORATION OR
ORGANIZATION)
ELGIN NATIONAL INDUSTRIES, INC.
2001 BUTTERFIELD ROAD
SUITE 1020
DOWNERS GROVE, ILLINOIS 60515-1050
630-434-7243
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
WAYNE J. CONNER
CHIEF FINANCIAL OFFICER
ELGIN NATIONAL INDUSTRIES, INC.
2001 BUTTERFIELD ROAD
SUITE 1020
DOWNERS GROVE, ILLINOIS 60515-1050
630-434-7200
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
WITH A COPY TO:
PAUL W. THEISS
MAYER, BROWN & PLATT
190 SOUTH LASALLE STREET
CHICAGO, ILLINOIS 60603
(312) 782-0600
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE FEE(1)
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<S> <C> <C> <C> <C>
11% Series B Senior Notes Due
2007............................ $85,000,000 100% $85,000,000 $25,075
</TABLE>
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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, as amended or until the
Registration Statement shall become effective on such date as the Commission,
acting pursuant to such Section 8(a), may determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED DECEMBER 30, 1997
PROSPECTUS
ELGIN NATIONAL INDUSTRIES, INC.
OFFER TO EXCHANGE 11% SERIES B SENIOR NOTES DUE 2007
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, FOR ANY AND ALL OF ITS OUTSTANDING
11% SERIES A SENIOR NOTES DUE 2007
-------------
Elgin National Industries, Inc., a Delaware corporation (the "Company"),
hereby offers, upon the terms and subject to the conditions set forth in this
Prospectus and in the accompanying Letter of Transmittal (the "Letter of
Transmittal") (which together with this Prospectus constitutes the "Exchange
Offer"), to exchange up to $85 million aggregate principal amount of 11% Series
B Senior Notes due 2007 (the "New Notes") of the Company for a like principal
amount of the Company's issued and outstanding 11% Series A Senior Notes due
2007 (the "Old Notes" and, together with the New Notes, the "Notes") with the
holders (each holder of Old Notes a "Holder") thereof. The terms of the New
Notes are substantially identical to the terms of the Old Notes that are to be
exchanged therefor. See "Description of the New Notes." The Company used the
net proceeds of the offering of the Old Notes to finance the Recapitalization
Transactions (as defined).
Interest on the New Notes is payable semi-annually in arrears on May 1 and
November 1 of each year, commencing on May 1, 1998. The New Notes will mature
on November 1, 2007, unless previously redeemed, and the Company will not be
required to make any mandatory redemption or sinking fund payments prior to
maturity. The New Notes may be redeemed, in whole or in part, at any time on or
after November 1, 2002 at the option of the Company, at the redemption prices
set forth herein, plus, in each case, accrued and unpaid interest and premium
to the date of redemption. In addition, at any time prior to November 1, 2000,
the Company may, at its option, redeem up to $25.0 million in aggregate
principal amount of the New Notes at a redemption price of 111.0% of the
principal amount thereof, plus accrued and unpaid interest to the date of
redemption, with the net cash proceeds of one or more public offerings of the
Company's common stock, provided that not less than $60.0 million aggregate
principal amount of the New Notes remains outstanding immediately after the
occurrence of any such redemption. See "Description of New Notes--Optional
Redemption."
The New Notes will be general unsecured obligations of the Company and will
rank senior in right of payment to all existing and future subordinated
Indebtedness (as defined) of the Company and will rank pari passu in right of
payment with all other current and future unsubordinated Indebtedness of the
Company. The New Notes will be unconditionally guaranteed on a senior basis
(the "Guarantees") by each of the Company's material domestic Subsidiaries (as
defined) (the "Guarantors"). The Guarantees will be senior unsecured
obligations and will rank senior in right of payment to all existing and future
Indebtedness of the Guarantors that is subordinated to such Guarantees and will
rank pari passu in right of payment with all other current and future
unsubordinated obligations of the Guarantors. The Company is the borrower under
the Senior Credit Facility (as defined), which is guaranteed by its material
domestic Subsidiaries. Such borrowings and guarantees will be secured by the
inventory and accounts receivable of the Company and the respective Guarantors
and a pledge of the capital stock of the Company's material Subsidiaries, and
may also be secured by the property, plant and equipment of the Company and the
Guarantors. Accordingly, the New Notes and the Guarantees will be effectively
subordinated to all obligations under the
(continued on page 2)
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON , 1998, UNLESS EXTENDED.
-------------
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION
WITH AN INVESTMENT IN THE NEW NOTES, INCLUDING BY HOLDERS OF OLD NOTES WHO
TENDER THEIR OLD NOTES IN THE EXCHANGE OFFER, SEE "RISK FACTORS" BEGINNING ON
PAGE 13 OF THIS PROSPECTUS.
-------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is , 1998
<PAGE>
(continued from preceding page)
Senior Credit Facility and the guarantees of such obligations to the extent of
the value of the assets securing such loans and guarantees. As of September
30, 1997, on a pro forma basis after giving effect to the Recapitalization
Transactions, the Company would have had approximately $0.8 million of pari
passu Indebtedness outstanding (excluding $2.0 million in outstanding letters
of credit and excluding payment and performance bonds). The terms of the
Indenture (as defined) will permit the Company and its Restricted Subsidiaries
to incur additional indebtedness, subject to certain limitations. See
"Description of Notes."
In the event of a Change of Control (as defined), each holder of the New
Notes will have the right to require the Company to make an offer to purchase
such holder's Notes, in whole or in part, at a 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
Notes--Repurchase at the Option of Holders--Change of Control."
Prior to the Exchange Offer, there has been no established trading market
for the New Notes. The Company does not intend to apply for listing or
quotation of the New Notes on any securities exchange or stock market.
Therefore, there can be no assurance as to the existence or liquidity of any
trading market for the new Notes or that an active public market for the new
Notes will develop. Any Old Notes not tendered and accepted in the Exchange
Offer will remain outstanding. To the extent that Old Notes are tendered and
accepted in the Exchange Offer, a Holder's ability to sell untendered, or
tendered or unaccepted, Old Notes could be adversely affected. Following the
consummation of the Exchange Offer, the Holders of Old Notes will continue to
be subject to the existing restrictions on transfer thereof and the Company
will have no further obligations to such Holders to provide for the
registration of the Old Notes under the Securities Act. See "Exchange Offer--
Consequences of not Exchanging Old Notes." Broker-dealers selling the New
Notes may be deemed to be "underwriters" under the Securities Act (as defined
herein).
The Company accepts for exchange any and all Old Notes that are validly
tendered and not withdrawn on or prior to 5:00 p.m., New York City time, on
, 1998, or such later time and date to which the Exchange Offer is
extended (the "Expiration Date"). Tenders of Old 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 Old
Notes being tendered for exchange. However, the Exchange Offer is subject to
certain customary conditions which may be waived by the Company. The Company
has agreed to pay the expenses of the Exchange Offer. There will be no cash
proceeds to the Company from the exchange Offer. See "Use of Proceeds."
The Old Notes were issued and sold (the "Old Notes Offering") on November 5,
1997 (the "Closing Date") in a transaction that was not registered under the
Securities Act of 1933, as amended (the "Securities Act"), in reliance upon
the exemption provided in Section 4(2) of the Securities Act. Accordingly, the
Old Notes may not be reoffered, resold or otherwise pledged, hypothecated or
transferred in the United States unless so registered or unless an applicable
exemption from the registration requirements of the Securities Act is
available. The New Notes are being offered for exchange in order to satisfy
certain obligations of the Company under the Registration Rights Agreement (as
defined herein) between the Company and the Initial Purchasers (as defined
herein). The New Notes will be obligations of the Company evidencing the same
indebtedness as the Old Notes and will be entitled to the benefits of the same
Indenture which governs both the Old Notes and the New Notes. The form and
terms (including principal amount, interest rate, maturity and ranking) of the
New Notes are the same as the form and terms of the Old Notes except that the
New Notes (i) have been registered under the Securities Act and therefore are
not subject to certain restrictions on transfer applicable to the Old Notes;
(ii) will not be entitled to registration rights; and (iii) will not provide
for Liquidated Damages (as defined herein). See "The Exchange Offer--
Registration Rights Agreement."
(continued on page 3)
<PAGE>
(continued from preceding page)
The Company is making the Exchange Offer pursuant to the registration
statement of which this Prospectus is a part in reliance upon the position of
the staff of the Securities and Exchange Commission (the "Commission") set
forth in certain no-action letters addressed to other parties in other
transactions. However, the Company has not sought its own no-action letter and
there can be no assurance that the staff of the Commission would make a
similar determination with respect to the Exchange Offer. Based on these
interpretations by the staff of the Commission, the Company believes that the
New Notes issued pursuant to the Exchange Offer may be offered for resale,
resold and otherwise transferred by holders thereof (other than (i) any such
holder that is an "affiliate" of the Issuers within the meaning of Rule 405
under the Securities Act; (ii) an Initial Purchaser or holder who acquired the
Old Notes directly from the Issuers solely in order to resell pursuant to Rule
144A under the Securities Act or any other available exemption under the
Securities Act; or (iii) a broker-dealer who acquired the Old Notes as a
result of market-making or other trading activities) without further
compliance with the registration and prospectus delivery requirements of the
Securities Act, provided that such New Notes are acquired in the ordinary
course of such holder's business and such holder is not participating and has
no arrangement or understanding with any person to participate in a
distribution (within the meaning of the Securities Act) of such New Notes.
Each broker-dealer that receives New 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 New 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 New
Notes received in exchange for Old Notes where such Old Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of after the
date on which the Registration Statement (as defined herein) was declared
effective by the Commission, it will make this Prospectus available to any
broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
AVAILABLE INFORMATION
The Company has filed with the Commission a registration statement on Form
S-4 (the "Registration Statement") pursuant to the Securities Act, and the
rules and regulations promulgated thereunder, covering the New Notes being
offered hereby. This Prospectus does not contain all the information set forth
in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Company and the New Notes, reference is hereby
made to the Registration Statement. Statements made in this prospectus as to
the contents of any contract, agreement or other document referred to in the
Registration Statement are not necessarily complete. With respect to each such
contract, agreement or other document filed as an exhibit to the Registration
Statement, reference is made to the exhibit for a more complete description of
the matter involved, and each such statement shall be deemed qualified in its
entirety by such reference.
The Registration Statement, such reports and other information that have
been filed with the Commission can be inspected and copied at the offices of
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, as well as the following regional offices of the Commission: Seven
World Trade Center, Suite 1300, New York, New York 10048; and Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material can be obtained from the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. Such material also may be accessed electronically by means of the
Commission's home page on the Internet (http://www.sec.gov).
<PAGE>
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. Unless the context indicates or otherwise
requires, references in this Prospectus to the "Company" are to Elgin National
Industries, Inc. and its subsidiaries on a consolidated basis. Unless
otherwise indicated, pro forma information in this Prospectus gives effect to
the Old Notes Offering, the application of the net proceeds therefrom and the
consummation of the Recapitalization Transactions.
THE COMPANY
Elgin owns and operates a diversified group of middle-market industrial
manufacturing and engineering services businesses. The Company focuses on
operating businesses with leading positions in niche markets, consistent
operating profitability, diverse customer bases, efficient production
capabilities and broad product lines serving stable industries. The Company is
comprised of ten business units that are organized into two operating groups.
Through its Manufactured Products Group, Elgin is a leading manufacturer and
supplier of custom-designed, highly engineered products used by a wide variety
of customers in the industrial equipment, durable goods, mining, mineral
processing and electric utility industries. Through its Engineering Services
Group, Elgin provides design, engineering, procurement and construction
management services for mineral processing and bulk materials handling systems
used in the mining, mineral processing, electric utility and the rail and
marine transportation industries.
Elgin's business strategy is to increase the sales and profitability of its
businesses by building upon its competitive strengths. Key elements of this
strategy include: (i) the application of existing product and design
capabilities to new markets; (ii) increased focus on international markets;
(iii) facilities expansion and manufacturing cost improvements; and (iv) the
acquisition, consolidation and integration of related businesses. Elgin
believes that the diversified nature of its products and the increasingly
diversified nature of the end markets served by its businesses reduce the
effect of operating performance fluctuations in any single operating unit and
cyclical downturns within individual industries and end markets. The Company's
total net sales for the twelve months ended September 30, 1997 were $142.9
million and EBITDA (as defined herein) was $17.3 million for the same period.
MANUFACTURED PRODUCTS GROUP
The Manufactured Products Group is comprised of eight operating businesses
which manufacture and market products used in the industrial equipment,
durable goods, mining, mineral processing and electric utility industries.
Elgin is a leading U.S. manufacturer of cold-headed, long-length, small-
diameter threaded fasteners instrumental in the manufacture of fractional
horsepower electric motors and a leading producer of centrifuges and vibrating
screens used in coal preparation plants. In addition, Elgin manufactures cold-
headed precision components used by manufacturers of diesel truck engines and
transmissions, high and low voltage transformers, switch gear equipment and
custom steel products. Elgin also provides after-market replacement parts and
service for many of its products. The Manufactured Products Group is comprised
of businesses which have provided products and services for an average of over
36 years. The Group's products were sold to more than 1,900 customers in 1996,
with no single customer accounting for more than 4% of the Group's net sales.
End-users of the Manufactured Products Group's products include Consolidation
Coal, Detroit Diesel, Emerson Electric, General Electric, General Motors, Mack
Truck, Peabody Coal and Toyota. For the twelve months ended September 30,
1997, the Manufactured Products Group generated net sales and EBITDA,
excluding unallocated corporate overhead, of $78.5 million and $17.0 million,
respectively.
1
<PAGE>
ENGINEERING SERVICES GROUP
The Engineering Services Group is comprised of two operating units which
provide design, engineering, procurement and construction management services
to the mining, mineral processing, electric utility and rail and marine
transportation industries. The Engineering Services Group is known domestically
and internationally for its expertise in the areas of mineral processing and
bulk materials handling. The Group is the U.S. leader in the design and
construction of coal preparation plants. The Company believes that it is well
positioned to take advantage of the expanding international demand for
engineering services, driven by increased regional economic growth, increased
construction of electric utilities and modern mining and processing facilities,
and expanding environmental regulation. Representative customers of the
Engineering Services Group include Bechtel Power, Consolidation Coal, Katowice
Holding (Poland), KHD Humboldt Wedag (Thailand), Tennessee Valley Authority,
Vulcan Materials and Zeigler Coal. For the twelve months ended September 30,
1997, the Engineering Services Group generated net sales and EBITDA, excluding
unallocated corporate overhead, of $64.4 million and $5.0 million,
respectively.
PRINCIPAL OPERATING COMPANIES
Set forth below is a brief description of Elgin's principal operating
companies:
MANUFACTURED PRODUCTS GROUP
Ohio Rod Products Company ("Ohio Rod") is a leading U.S. manufacturer of
cold-headed, long-length, small-diameter threaded fasteners used in a wide
variety of applications including fractional horsepower electric motors, skate-
wheel conveyor systems, cable reels and roofing systems. In existence for 50
years, Ohio Rod has established a reputation for producing high quality
fastener products in each of its principal markets, serving a broad customer
base that includes over 650 active accounts. Management believes that Ohio Rod
has a broader product line than any of its competitors. Ohio Rod had net sales
of $23.2 million for the twelve months ended September 30, 1997.
Tabor Machine Company ("Tabor") and Norris Screen and Manufacturing, Inc.
("Norris") manufacture and supply vibrating screens and replacement parts used
in the coal, aggregates (sand, gravel and crushed rock) and mining industries.
Tabor is a leading supplier of vibrating screens and replacement parts to the
eastern U.S. coal industry, which it has served for over 35 years. Norris
manufactures stainless steel profile wire and polyurethane screen surfaces for
stationary and vibrating screens and sieve bends sold to distributors and
directly to end users, primarily in the eastern U.S. coal industry. Tabor and
Norris had combined net sales of $15.4 million (of which approximately $12.7
million was derived from the sale of service and replacement parts) for the
twelve months ended September 30, 1997.
Centrifugal and Mechanical Industries ("CMI") and Centrifugal Services, Inc.
("CSI") are leading designers and manufacturers of centrifuges and replacement
parts used in the coal industry to separate liquids and solids. For over 50
years, CMI has served the U.S. coal processing industry and has, more recently,
developed new applications for its products in the minerals, chemical and metal
recycling industries. CMI is the leading original equipment manufacturer
("OEM") of centrifuges used in the U.S. coal industry and, together with CSI,
which was acquired in 1995, is the leading U.S. provider of replacement parts
and repair services for coal centrifuges. CMI and CSI had combined net sales of
$14.3 million (of which approximately $11.2 million was derived from the sale
of service and replacement parts) for the twelve months ended September 30,
1997.
Mining Controls, Inc. ("Mining Controls") manufactures specialty high and low
voltage transformers and switch gear equipment and certain standard electrical
products for use in underground mining and tunneling operations. For over 20
years, Mining Controls' products have been used in the mining industry. Through
two acquisitions, Mining Controls has expanded its product line to include
specialized electrical power control equipment and power factor correction and
harmonic control equipment sold to a variety of industrial customers. Mining
Controls had net sales of $11.8 million for the twelve months ended September
30, 1997.
2
<PAGE>
Chandler Products ("Chandler") manufactures cold-headed precision threaded
components used in heavy duty diesel engines and transmissions, hand tools and
other specialty applications. For over 66 years, Chandler has specialized in
the manufacture of custom designed, precision engineered, complex shaped, close
tolerance products. Chandler had net sales of $7.7 million for the twelve
months ended September 30, 1997.
Clinch River Corporation ("Clinch River") is a full-service steel fabricator
utilizing design, engineering and fabrication capabilities to meet specific
customer requirements. Clinch River has served the coal mining and utility
industries in the southeastern United States for over 27 years. Clinch River
had net sales of $6.1 million for the twelve months ended September 30, 1997.
ENGINEERING SERVICES GROUP
Roberts & Schaefer Company ("R&S") and Soros Associates, Inc. ("Soros")
provide design, engineering, procurement and construction management services
principally to the mining, mineral processing, electric utility and rail and
marine transportation industries. R&S provides services ranging from small
engineering-only studies to turnkey project development. R&S, founded in 1903,
is the U.S. leader in the design and construction of coal preparation plants,
and its reputation has led to increased activity in other mineral projects and
increased international business. R&S focuses on projects that are less than
$25 million in size, where management believes R&S can best utilize its design,
engineering and construction management capabilities as a competitive advantage
while reducing its risk. Soros is a leading design and consulting firm
specializing in port and marine facilities. Elgin acquired Soros in 1994 to
strengthen the Company's capabilities in the design of port and marine
facilities. R&S and Soros had combined net sales of $64.4 million for the
twelve months ended September 30, 1997.
COMPETITIVE STRENGTHS
Elgin believes that it has the following competitive strengths:
Strong Market Positions. The Company's reputation for high quality products,
strong engineering capabilities and customer service has allowed it to
establish significant market shares in many of the markets it serves. Ohio Rod
is a leading U.S. manufacturer of cold-headed, long-length, small-diameter
threaded fasteners; CMI is the leading manufacturer of coal centrifuges used in
the United States and, together with CSI, is the leading supplier of
replacement parts for such centrifuges; Tabor, together with Norris, is a
leading manufacturer of vibrating screens and provider of replacement parts
sold to the eastern U.S. coal industry; and R&S is the leading U.S. firm for
the design and construction management of coal preparation plants.
Focus on Niche Markets. Elgin focuses on niche markets within mature industry
groups to allow it to achieve strong market positions and generate consistent
operating profitability. Management believes that the Company's efficient and
flexible production processes and consistent capital investment over the years,
together with its advanced design and engineering capabilities, have created
significant barriers to entry in its markets and have allowed it to establish
and maintain a high degree of customer loyalty.
Replacement Part Sales for Installed Equipment Base. Approximately 30% of the
Manufactured Products Group's net sales for the twelve months ended September
30, 1997 were from replacement parts and services. Replacement part sales have
been more stable and predictable than OEM equipment sales and typically
generate higher profit margins. Replacement parts and service sales accounted
for over 75% of CMI and CSI combined sales and over 80% of the combined sales
of Tabor and Norris during the twelve month period ended September 30, 1997.
CMI's installed base of over 1,800 centrifuges in the U.S. results in
significant ongoing replacement part sales. In addition, the Company's 1995
acquisition of CSI, a leading after-market supplier of centrifuge parts,
expanded its after-market parts and service capabilities. Components sold by
Tabor, Norris, CMI and CSI are regularly replaced in connection with the
ongoing maintenance of mining and processing facilities.
3
<PAGE>
Stability Through Diversification. Elgin manufactures and provides a broad
range of goods and services both domestically and internationally to stable and
mature industries, including industrial equipment, durable goods, coal, other
mining and mineral processing, electric utility and rail and marine
transportation industries. The Company believes that its increasing
diversification reduces the effects of individual industry business cycles and
economic trends that may adversely affect the demand for individual products.
Established Businesses; Long-Term Customer Relationships. Elgin's businesses
have long and established operating histories. The Company's businesses have
been operating for an average of over 42 years and enjoy stable and long-term
relationships with their customers. In excess of 60% of the Company's sales
during the year ending December 31, 1996 were to companies that have been
customers of the Company for at least five years.
Experienced, Stable and Committed Management. The Company's businesses are
run by operating managers who have an average tenure with the Company of over
16 years. The Company's Chief Executive Officer, Chief Operating Officer and
Chief Financial Officer (collectively, "Senior Management") beneficially own
and control 100% of the capital stock of Elgin. Members of Senior Management
successfully led the Company through leveraged recapitalizations in 1988 and
1993, significantly reducing the Company's leverage following each such
transaction.
BUSINESS STRATEGY
The Company's business strategy is to increase the sales, cash flow and
profitability of each business unit as follows:
Expand Product Offerings and Applications of Existing Product Capabilities.
Elgin seeks to build on its core strengths by entering new markets with its
products and services. For example, in the Manufactured Products Group, CMI is
applying its centrifugal dryer expertise, originally developed for the coal
industry, to other industrial applications in the minerals, chemical and metal
recycling industries. Similarly, in the Engineering Services Group, R&S is
applying its expertise in the design and construction management of processing
and bulk materials handling systems, originally developed for the coal mining
industry, to the aggregates, electric utility, cement, metals, industrial
minerals and other industries.
Increase International Sales. The Company has been active in international
markets for over 20 years, primarily through R&S. Since the early 1990s, the
Company has expanded the scope of its international marketing efforts. The
Company seeks to leverage its U.S. reputation for providing high quality design
and engineering services, and OEM products and related parts and services. The
Company also seeks to take advantage of expanding international demand for
expertise in the design and engineering of coal mining, mineral processing and
other bulk material handling systems. As a result of the Company's increased
focus on international markets, the Company's international sales increased to
approximately 15% of total net sales in 1996, compared to 7% and 2%,
respectively, in 1995 and 1994.
Maintain Cost-Efficient Equipment and Production Facilities. The Company has
maintained, upgraded and expanded its equipment and production facilities, and
plans to continue its strategy of focused capital investment to maximize
operating efficiency while meeting specific customer demands. Elgin has
identified certain of its facilities where production cost reductions or sales
increases can be achieved through equipment modernization and plant expansion.
Pursue Strategic Acquisitions. The Company believes that its position within
the industries it serves provides it with attractive opportunities to acquire
complementary businesses and product lines. Elgin believes that its five small
strategic acquisitions since 1989 have been made at attractive purchase prices
and have demonstrated the Company's ability to successfully integrate new
businesses into its existing operations. Elgin will consider acquisitions that
(i) add complementary products or technical capabilities, (ii) give it access
to new customers or (iii) allow it to further penetrate its existing customer
base.
4
<PAGE>
THE RECAPITALIZATION TRANSACTIONS
On November 5, 1997, pursuant to a Repurchase Agreement dated October 15,
1997 among the Company (then known as ENI Holding Corp. ("ENI")), its
subsidiary, Elgin National Industries, Inc., and all of the shareholders of ENI
(the "Repurchase Agreement"): (i) ENI and its subsidiary, Elgin National
Industries, Inc., repurchased all common stock, preferred stock and common
stock warrants of ENI not owned by Senior Management; (ii) the subsidiary,
Elgin National Industries, Inc. repaid all senior subordinated indebtedness,
including the payment of prepayment fees; (iii) the subsidiary, Elgin National
Industries, Inc. merged into ENI with ENI remaining as the surviving entity;
(iv) following such merger, ENI changed its name to Elgin National Industries,
Inc.; and (v) the Company and the Guarantors entered into an amended senior
credit facility (the "Senior Credit Facility"). As a result of these
transactions (collectively, the "Recapitalization Transactions"), Senior
Management beneficially owns all of the outstanding capital stock of the
Company.
* * *
The Company is a Delaware corporation with its executive offices located at
2001 Butterfield Road, Suite 1020, Downers Grove, Illinois 60515-1050, and its
telephone number is (630) 434-7243.
THE EXCHANGE OFFER
Securities Offered.......... $85,000,000 principal amount of 11% Series B
Senior Notes due 2007. The terms of the New Notes
and the Old Notes are identical in all material
respects, except for certain transfer
restrictions and registration rights relating to
the Old Notes and except for certain Liquidated
Damages provisions relating to the Old Notes
described below under "--Summary Description of
the New Notes."
Issuance of Old Notes;
Registration Rights........
On November 5, 1997, the Old Notes were issued to
BancAmerica Robertson Stephens and CIBC
Oppenheimer Corp. (formerly known as CIBC Wood
Gundy Securities Corp.) (collectively, the
"Initial Purchasers"). The Old Notes were placed
with "qualified institutional buyers" (as such
term is defined in Rule 144A promulgated under
the Securities Act) and institutional "accredited
investors" (as such term is defined in Rule
501(A)(1), (2), (3) or (7) under the Securities
Act). In connection therewith, the Company
executed and delivered for the benefit of the
holders of Old Notes a registration rights
agreement (the "Registration Rights Agreement"),
pursuant to which the Company agreed (i) to file
a registration statement (the "Registration
Statement") on or prior to January 4, 1998 with
respect to the Exchange Offer and (ii) to use its
best efforts to cause the Registration Statement
to be declared effective by the Commission on or
prior to April 4, 1998. In certain circumstances,
the Company will be required to provide a shelf
registration statement (the "Shelf Registration
Statement") to cover resales of the Old Notes by
the holders thereof. If the Company does not
comply with its obligations under the
Registration Rights Agreement, it will be
required to pay Liquidated Damages to holders of
the Old Notes under certain circumstances. See
"The Exchange Offer--Registration Rights
Agreement."
5
<PAGE>
The Exchange Offer.......... The New Notes are being offered in exchange for a
like principal amount of Old Notes. The issuance
of the New Notes is intended to satisfy the
obligations of the Company contained in the
Registration Rights Agreement. Based upon the
position of the staff of the Commission set forth
in no-action letters issued to third parties in
other transactions substantially similar to the
Exchange Offer (Exxon Capital Holdings
Corporation (available April 13, 1988), Morgan
Stanley & Co., Inc. (available June 5, 1991) and
Shearman and Sterling (available July 2, 1993)),
the Company believes that the New Notes issued
pursuant to the Exchange Offer may be offered for
resale, resold and otherwise transferred by
holders thereof (other than (i) any such holder
that is an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act;
(ii) an Initial Purchaser who acquired the Old
Notes directly from the Company solely in order
to resell pursuant to Rule 144A of the Securities
Act or any other available exemption under the
Securities Act; or (iii) a broker-dealer who
acquired the Old Notes as a result of market
making or other trading activities) without
further compliance with the registration and
prospectus delivery requirements of the
Securities Act, provided that such New Notes are
acquired in the ordinary course of such holder's
business and such holder is not participating and
has no arrangement with any person to participate
in a distribution (within the meaning of the
Securities Act) of the New Notes. Each broker-
dealer that receives New Notes for its own
account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus
meeting the requirements of the Securities Act in
connection with any resale for the New Notes.
Although there has been no indication of any
change in the staff's position, there can be no
assurance that the staff of the Commission would
make a similar determination with respect to the
resale of the New Notes. See "Risk Factors."
Procedures for Tendering.... Tendering holders of Old Notes must complete and
sign the Letter of Transmittal in accordance with
the instructions contained therein and forward
the same by mail, facsimile or hand delivery,
together with any other required documents, to
the applicable Exchange Agent (as defined
herein), either with the Old Notes to be tendered
or in compliance with the specified procedures
for guaranteed delivery of Old Notes. Holders of
the Old Notes desiring to tender such Old Notes
in exchange for New Notes should allow sufficient
time to ensure timely delivery. Certain brokers,
dealers, commercial banks, trust companies and
other nominees may also effect tenders by book-
entry transfer. Holders of Old Notes registered
in the name of a broker, dealer, commercial bank,
trust company or other nominee are urged to
contact such person promptly if they wish to
tender Old Notes pursuant to the Exchange Offer.
Letters of Transmittal and certificates
representing Old Notes should not be sent to the
Company. Such documents should only be sent to
the Exchange Agent. Questions regarding how to
tender and requests for information should be
directed to the Exchange Agent. See "The Exchange
Offer--Procedures for Tendering Old Notes."
6
<PAGE>
Tenders; Expiration Date; The Exchange Offer will expire on 5:00 p.m., New
Withdrawal................. York City time, on , 1998, or such
later date and time to which the Exchange Offer
is extended (the "Expiration Date"). The tender
of Old Notes pursuant to the Exchange Offer may
be withdrawn at any time prior to the Expiration
Date. Certificates representing Old Notes not
accepted for exchange for any reason will be
returned without expense to the tendering holder
thereof as promptly as practicable after the
expiration or termination of the Exchange Offer.
See "The Exchange Offer Terms of the Exchange
Offer; Period for Tendering Old Notes" and "--
Withdrawal Rights."
Certain Conditions to the
Exchange Offer.............
The Exchange Offer is subject to certain
customary conditions, all of which may be waived
by the Company, including the absence of (i)
threatened or pending proceedings seeking to
restrain the Exchange Offer or resulting in a
material delay to the Exchange Offer; (ii) a
general suspension of trading on any national
securities exchange or in the over-the-counter
market: (iii) a banking moratorium; (iv) a
commencement of war, armed hostilities or other
similar international calamity directly or
indirectly involving the United States; and (v)
change or threatened change in the business,
properties, assets, liabilities, financial
condition, operations, results of operations or
prospects of the Company and its subsidiaries
taken as a whole that, in the reasonable judgment
of the Company, is or may be adverse to the
Company. The Company shall not be required to
accept for exchange, or to issue New Notes in
exchange for, any Old Notes, if at any time
before the acceptance of such Old Notes for
exchange or the exchange of the New Notes for
such Old Notes, any of the foregoing events
occurs which, in the sole judgment of the
Company, make it inadvisable to proceed with the
Exchange Offer and/or with such acceptance for
exchange or with such exchange. If the Company
fails to consummate the Exchange Offer because
the Exchange Offer is not permitted by applicable
law or Commission policy, it will file with the
Commission a Shelf Registration Statement to
cover resales of the Transfer Restricted
Securities (as defined herein) by the holders
thereof who satisfy certain conditions. If the
Company fails to consummate the Exchange Offer or
file a Shelf Registration Statement in accordance
with the Registration Rights Agreements, the
Company will pay Liquidated Damages (as defined
herein) to each holder of Transfer Restricted
Securities until the cure of all Registration
Defaults (as defined herein). The Exchange Offer
is not conditioned upon any minimum aggregate
principal amount of Old Notes being tendered for
exchange. See "The Exchange Offer--Registration
Rights; Liquidated Damages" and --Certain
Conditions to the Exchange Offer."
Federal Income Tax For Federal income tax purposes, the exchange
Consequences............... pursuant to the Exchange Offer will not result in
any income, gain or loss to the Holders or the
Company. See "Certain Federal Income Tax
Considerations."
7
<PAGE>
Use of Proceeds............. There will be no proceeds to the Company from the
exchange pursuant to the Exchange Offer.
Exchange Agent.............. Norwest Bank Minnesota, National Association, is
serving as Exchange Agent in connection with the
Notes in the Exchange Offer.
CONSEQUENCES OF NOT EXCHANGING THE OLD NOTES
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities
Act and applicable state securities laws. In general, the Old 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. The Company does not currently anticipate
that it will register the Old Notes under the Securities Act. See "Risk
Factors--Consequences of Exchange and Failure to Exchange" and "The Exchange
Offer--Consequences of Not Exchanging Old Notes."
THE NEW NOTES
Issuer...................... Elgin National Industries, Inc.
Securities Offered.......... $85,000,000 principal amount of 11% Series B
Senior Notes due 2007.
Maturity Date............... November 1, 2007.
Interest Payment Dates...... May 1 and November 1, commencing May 1, 1998.
Mandatory Sinking Fund or
Redemption.................
None.
Optional Redemption......... The New Notes may be redeemed, in whole or in
part, at any time on or after November 1, 2002 at
the option of the Company, at the redemption
prices set forth herein, plus, in each case,
accrued and unpaid interest, and Liquidated
Damages, if any, to the date of redemption. In
addition, at any time prior to November 1, 2000
the Company may, at its option, redeem up to
$25.0 million in aggregate principal amount of
the New Notes at a redemption price of 111.0% of
the principal amount thereof, plus accrued and
unpaid interest thereon and Liquidated Damages,
if any, to the date of redemption, with the net
cash proceeds of one or more public offerings of
the Company's common stock, provided that not
less than $60.0 million aggregate principal
amount of the New Notes remains outstanding
immediately after the occurrence of any such
redemption.
Change of Control........... In the event of a Change of Control, each holder
of the New Notes will have the right to require
the Company to make an offer to purchase such
holder's New Notes, in whole or in part, at a
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.
8
<PAGE>
Ranking..................... The New Notes will be general unsecured
obligations of the Company and will rank senior
in right of payment to all existing and future
subordinated indebtedness of the Company and will
rank pari passu in right of payment with all
other current and future unsubordinated
indebtedness of the Company.
Guarantees.................. The New Notes will be unconditionally guaranteed
(the "Guarantees") by each of the Company's
material domestic Restricted Subsidiaries (the
"Guarantors"). The Guarantees will be senior
unsecured obligations and will rank senior in
right of payment to all existing and future
indebtedness of the Guarantors that is
subordinated to such Guarantees and will rank
pari passu in right of payment with all other
current and future unsubordinated obligations of
each Guarantor.
Effective Subordination..... The Company will be the borrower and the
Guarantors are expected to be guarantors under
the Senior Credit Facility. Such borrowings and
guarantees will be secured by the inventory and
accounts receivable of the Company and the
respective Guarantors and may be secured by
property, plant and equipment of the Company and
the Guarantors if there is a default or event of
default under the Senior Credit Facility.
Accordingly, the New Notes and the Guarantees
will be effectively subordinated to all
obligations under the Senior Credit Facility and
the guarantees of such obligations to the extent
of the value of the assets securing such loans
and guarantees. As of September 30, 1997, on a
pro forma basis, there would have been $0.8
million of aggregate senior Indebtedness
outstanding in addition to the Notes, excluding
$2.0 million in outstanding letters of credit and
excluding payment and performance bonds. As of
such date, there would have been no other pari
passu Indebtedness and no subordinated
Indebtedness of the Company or any Guarantor
outstanding. The terms of the Indenture will
permit the Company and its Restricted
Subsidiaries to incur additional Indebtedness,
subject to certain limitations.
Certain Covenants........... The Indenture will, among other things, limit the
ability of the Company and its Restricted
Subsidiaries to: incur additional Indebtedness;
make certain restricted payments; make certain
investments; grant liens on assets; sell assets;
enter into transactions with Affiliates; and
merge, consolidate or transfer substantially all
of their assets.
Registration Rights The Company and the Guarantors have agreed to
Agreement.................. file within 60 days after the Issue Date, and to
cause to become effective within 150 days of the
Issue Date, a registration statement under the
Securities Act with respect to an offer to
Holders to exchange the Old Notes (and the
related Guarantees) for the New Notes (and
related Guarantees). In the event that the
Exchange Offer is not consummated within 180 days
of the Issue Date or, under certain
circumstances, if the Initial Purchasers so
request, the Company and the Guarantors will
cause to become effective under the Securities
Act a Shelf Registration Statement with respect
to the resale of the
9
<PAGE>
Notes and keep such Shelf Registration Statement
effective until two years after the effective
date thereof. In the event the foregoing
registration requirements are not met, a
Registration Default shall be deemed to have
occurred and specified Liquidated Damages will
become payable with respect to the Old Notes
until such Registration Default has been cured.
Use of Proceeds............. The Company will receive no proceeds from the
Exchange Offer. The gross proceeds to the Company
from the Old Notes Offering was $85.0 million.
The Company used such proceeds to effect the
Recapitalization Transactions, for general
corporate purposes and to pay related fees and
expenses. See "Use of Proceeds."
Risk Factors................ See "Risk Factors" beginning on page 13 for a
discussion of certain factors that should be
considered by prospective purchasers of the New
Notes (including holders of the Old Notes
participating in the Exchange Offer), including
factors affecting forward-looking statements.
A description of the terms and conditions of the New Notes, including
definitions of terms which are capitalized above, is set forth herein under
"Description of New Notes."
10
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
The following table presents summary historical and pro forma financial
information of the Company. The summary historical financial data as of the
dates and for the periods indicated were derived from the audited and unaudited
consolidated financial statements of the Company. Results of operations for the
twelve months ended September 30, 1997 are not necessarily indicative of the
results that may be expected for the twelve month period ended December 31,
1997. The summary financial information should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Selected Historical and Pro Forma Consolidated Financial Data"
and the Company's consolidated financial statements and notes thereto, which
are included in this Offering Memorandum. The pro forma financial data for the
twelve months ended September 30, 1997 is derived from the unaudited
consolidated financial statements of the Company and is pro forma for the Old
Notes Offering and the Recapitalization Transactions.
<TABLE>
<CAPTION>
NINE MONTHS ENDED TWELVE MONTHS
FISCAL YEAR ENDED DECEMBER 31, SEPTEMBER 30, ENDED
------------------------------------------------ ------------------- SEPTEMBER 30,
1992 1993 1994 1995 (A) 1996 1996 1997 1997
-------- -------- -------- -------- -------- -------- --------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................ $148,147 $143,655 $197,284 $126,839 $135,651 $ 97,253 $ 104,510 $142,908
Cost of sales........................ 114,911 116,784 167,170 102,654 100,119 71,877 77,471 105,713
-------- -------- -------- -------- -------- -------- --------- --------
Gross profit........................ 33,236 26,871 30,114 24,185 35,532 25,376 27,039 37,195
Selling, general and administrative
expenses............................ 21,335 19,884 19,356 19,891 21,226 15,783 15,735 21,178
Amortization expense................. 116 877 3,050 3,052 3,085 2,329 2,336 3,092
-------- -------- -------- -------- -------- -------- --------- --------
Operating income.................... 11,785 6,110 7,708 1,242 11,221 7,264 8,968 12,925
Other expenses (income)
Interest expense, net............... 2,382 2,771 6,270 4,807 3,340 2,574 1,536 2,302
Gain on the sale of product line.... -- -- -- (2,520) -- 0 0 0
-------- -------- -------- -------- -------- -------- --------- --------
Income (loss) from continuing
operations before income taxes...... 9,403 3,339 1,438 (1,045) 7,881 4,690 7,432 10,623
Provision for income taxes........... 3,884 1,285 668 124 3,191 1,776 3,238 4,653
-------- -------- -------- -------- -------- -------- --------- --------
Net income (loss) from continuing
operations.......................... 5,519 2,054 770 (1,169) 4,690 2,914 4,194 5,970
Income from discontinued
operations, net of income taxes (b). 13,371 2,426 889 876 174 102 0 72
-------- -------- -------- -------- -------- -------- --------- --------
Net income (loss).................... $ 18,890 $ 4,480 $ 1,659 $ (293) $ 4,864 $ 3,016 $ 4,194 $ 6,042
======== ======== ======== ======== ======== ======== ========= ========
OTHER FINANCIAL DATA:
Gross margin %....................... 22.4% 18.7% 15.3% 19.1% 26.2% 26.1% 25.9% 26.0%
EBITDA (c)........................... $ 13,407 $ 10,493 $ 13,712 $ 5,964 $ 15,850 $ 11,064 $ 12,549 $ 17,335
EBITDA margin %...................... 9.0% 7.3% 7.0% 4.7% 11.7% 11.4% 12.0% 12.1%
Depreciation and amortization (d).... $ 2,085 $ 3,278 $ 5,776 $ 5,497 $ 5,382 $ 4,138 $ 4,034 $ 5,278
Capital expenditures (d)............. $ 1,474 $ 2,521 $ 1,506 $ 1,501 $ 1,739 $ 1,205 $ 969 $ 1,503
OPERATING UNIT DATA:
Net Sales:
Manufactured Products Group......... $ 71,563 $ 66,211 $ 75,698 $ 74,859 $ 78,952 $ 59,594 $ 59,117 $ 78,475
Engineering Services Group.......... 76,584 77,444 121,586 51,980 56,699 37,659 45,393 64,433
-------- -------- -------- -------- -------- -------- --------- --------
Total Net Sales................... $148,147 $143,655 $197,284 $126,839 $135,651 $ 97,253 $ 104,510 $142,908
======== ======== ======== ======== ======== ======== ========= ========
EBITDA:
Manufactured Products Group......... $ 13,221 $ 12,398 $ 16,304 $ 15,566 $ 16,412 $ 11,676 $ 12,307 $ 17,043
Engineering Services Group.......... 3,843 2,256 1,011 (5,724) 3,860 2,299 3,421 4,982
-------- -------- -------- -------- -------- -------- --------- --------
Total operating unit EBITDA....... 17,064 14,654 17,315 9,842 20,272 13,975 15,728 22,025
Corporate overhead.................. (3,657) (4,161) (3,603) (3,878) (4,422) (2,911) (3,179) (4,690)
-------- -------- -------- -------- -------- -------- --------- --------
Total EBITDA...................... $ 13,407 $ 10,493 $ 13,712 $ 5,964 $ 15,850 $ 11,064 $ 12,549 $ 17,335
======== ======== ======== ======== ======== ======== ========= ========
PRO FORMA FINANCIAL DATA:
Ratio of EBITDA to cash interest expense............................................................. 1.8x
Ratio of net debt to EBITDA (e)...................................................................... 4.4x
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
---------------------
ACTUAL PRO FORMA
--------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash (f).................... $ 6,093 $ 8,509
Working capital ............ 13,722 63,367
Property, plant and
equipment, net............. 13,001 13,001
Total assets................ 89,879 97,346
Total debt.................. 20,825 85,978
Preferred stock and
preferred stock units...... 37,374 12,821
Stockholders' equity........ (72) (32,576)
</TABLE>
11
<PAGE>
- -------
(a) The Company's 1995 performance was adversely affected by a loss of
approximately $7.8 million on a single turnkey project of the Engineering
Services Group that was completed in that year, and which resulted in
significant operating and control changes in that Group. See "Management's
Discussion and Financial Condition and Results of Operations--Results of
Operations" and "Business--Engineering Services Group--Roberts & Schaefer
Company."
(b) Income from discontinued operations is comprised of earnings of GC
Thorsen, Inc. (sold in 1995), American Fastener Corporation (sold in
1996), along with the associated gain on the sale of those businesses, and
an investment in a limited partnership (disposed of in 1993) plus
management fees (paid in 1992 and 1993), net of income taxes.
(c) EBITDA is income (loss) from continuing operations before income taxes
plus interest expense, depreciation, amortization and other non-cash
income and expense. In the periods presented, the following non-cash items
were included in income from continuing operations but excluded from
EBITDA: (i) allocated income from pension overfunding resulting from the
Company's overfunded pension plan; (ii) inventory revaluation expense
related to the market valuation of inventory in conjunction with the 1993
purchase of the Company pursuant to Accounting Principles Board Opinion
No. 16; and (iii) gain on sale of product line resulting from the 1995
sale of Ohio Rod's spoke and nipple product line.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED TWELVE MONTHS
FISCAL YEAR ENDED DECEMBER 31, SEPTEMBER 30, ENDED
------------------------------------ --------------- SEPTEMBER 30,
1992 1993 1994 1995 1996 1996 1997 1997
----- ------ ----- ------- ----- ------ ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Allocated income from
pension overfunding... $(463) $ (526) $(578) $ (775) $(753) $ (340) $ (225) $(638)
Inventory revaluation
expense............... -- 1,631 806 -- -- 0 0 0
Gain on sale of product
line.................. -- -- -- (2,520) -- 0 0 0
----- ------ ----- ------- ----- ------ ------- -----
Total non-cash (income)
expense............... $(463) $1,105 $ 228 $(3,295) $(753) $ (340) $ (225) $(638)
===== ====== ===== ======= ===== ====== ======= =====
</TABLE>
EBITDA is not intended as a substitute for measurements of cash flows under
generally accepted accounting principles, nor has it been presented as an
alternative to earnings from operations as an indicator of operating
performance or as a measure of liquidity. EBITDA should not be considered in
isolation or as substitute for measures of performance prepared in
accordance with generally accepted accounting principles. While EBITDA is
frequently used as a measure of the ability to meet debt service
requirements, it is not necessarily comparable to other similarly titled
captions of other companies due to potential inconsistencies in the method
of calculation.
(d) Excludes depreciation, amortization and capital expenditures related to
discontinued operations.
(e) Net debt equals total debt less cash.
(f) Excludes $1.6 million loaned to Senior Management in December 1997. See
"Related Transactions."
12
<PAGE>
RISK FACTORS
Holders of the Old Notes should consider carefully the following risk
factors, in addition to the other information set forth in this Prospectus,
before tendering their Old Notes in the Exchange Offer. This Prospectus
contains certain forward-looking statements, including statements containing
the words "believes," "anticipates," "expects" and words of similar import.
Such forward-looking statements involve known and unknown risks, uncertainties
and other factors which may cause the actual results, performance or
achievements of the Company, or industry results, to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors include, among others, the
following: adverse changes in national or local economic conditions, increased
competition, changes in availability, cost and terms of financing, changes in
operating expenses and other factors referenced in this Prospectus. Certain of
these factors are discussed in more detail elsewhere in this Prospectus,
including without limitation, under the captions "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business."
Given these uncertainties, prospective investors are cautioned not to place
undue reliance on such forward-looking statements. The Company disclaims any
obligation to update any such factors or to publicly announce the results of
any revisions to any of the forward-looking statements contained in this
Prospectus to reflect future events or developments. The risk factors set
forth below (other than "Consequences of Exchange and Failure to Exchange")
are generally applicable to the Old Notes as well as the New Notes.
LEVERAGE AND DEBT SERVICE REQUIREMENTS
The Company is highly leveraged and has significant debt service
obligations. On a pro forma basis, in addition to the Notes, at September 30,
1997 the Company had $0.8 million of pari passu Indebtedness (excluding $2.0
million of outstanding letters of credit and excluding payment and performance
bonds), preferred equity of $12.8 million and a common stockholders' deficit
of $32.6 million. The Company's pro forma ratio of earnings to fixed charges
for 1996 and the twelve months ended September 30, 1997 would have been 1.2 to
1 and 1.6 to 1, respectively. The Indenture permits the Company and its
subsidiaries to incur additional Indebtedness under one or more Credit
Facilities (as defined), including the Company's Senior Credit Facility, and
to incur other additional indebtedness (subject to certain limitations).
The Company's high degree of leverage could have important consequences for
the holders of the Notes including, without limitation, the following: (i) a
substantial portion of the Company's cash provided from operations will be
required for 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 operating
environment and in economic conditions generally. See "Description of Senior
Credit Facility" and "Description of New Notes."
The Company's ability to pay principal and interest on the Notes and to
satisfy its other debt service obligations will depend upon the future
operating performance of its businesses, which will be affected by prevailing
economic conditions in the markets it serves and financial, business and other
factors, certain of which are beyond the Company's control. The Company's
Senior Credit Facility and the Indenture contain certain restrictive
covenants. Restrictive covenants under the Senior Credit Facility and the
Indenture could significantly limit the Company's ability to withstand
competitive pressures or adverse economic conditions, make acquisitions, or
take advantage of business opportunities that may arise. If the Company is
unable to service its indebtedness it will be forced to adopt an alternative
strategy that may include reducing or delaying capital expenditures, selling
assets, restructuring or refinancing its indebtedness, or seeking additional
equity capital. There can be no assurance that any such strategy could be
effected on satisfactory terms, if at all. The Senior Credit Facility will
expire in November, 2000. The Company expects to extend or replace the Senior
Credit Facility at such time. There can be no assurance, however, that the
Senior Credit Facility will be extended or replaced upon expiration thereof,
or that any such refinancing would be possible, that any additional financing
could be obtained or that any refinancing or additional financing would be on
terms that are favorable to the Company. The inability to obtain financing or
refinancing of the Senior Credit Facility on favorable terms could have a
material adverse effect on the Company's business, financial condition,
results of operations and debt service capability.
13
<PAGE>
UNSECURED NATURE OF THE NOTES; EFFECTIVE SUBORDINATION
The Old Notes are, and the New Notes will be, unsecured obligations of the
Company and the Guarantees are and will be unsecured obligations of the
Guarantors. Persons seeking enforcement of the Notes or the Guarantees will
have only the rights of a general unsecured creditor and, as a result, the
benefits that might be realized in connection with the enforcement of such
obligations may be limited. The Company has the ability to borrow up to $20.0
million under Credit Facilities, subject to borrowing base limitations, or more
if supported by a borrowing base calculation. The Senior Credit Facility
(including borrowings and outstanding letters of credit) and guarantees thereof
by the Company and the Guarantors are secured by liens on inventory and
receivables of the Company and the Guarantors and a pledge of the capital stock
of the Company's material Subsidiaries, and other Credit Facilities are also
permitted to be secured by inventory and accounts receivable, subject to
certain limitations. In addition, the Senior Credit Facility may be secured by
the property, plant and equipment of the Company and the Guarantors if there is
a default or event of default thereunder or if a lien on such assets is granted
to any other party. Accordingly, the lenders under the Senior Credit Facility
and any other Credit Facility will have claims with respect to the assets
constituting collateral for any indebtedness (including outstanding letters of
credit thereunder) that will be satisfied prior to the unsecured claims of
holders of the Notes. The Notes and the Guarantees will be effectively
subordinated to the Credit Facilities to the extent of such security interests.
In the event of a default on the Notes or a bankruptcy, liquidation or
reorganization of the Company or any Guarantor, the assets subject to such
security interests will be available to satisfy obligations of the secured debt
before any payment could be made on the Notes or the Guarantees. Accordingly,
there may only be a limited amount of assets available to satisfy any claims of
the holders of Notes upon an acceleration of the Notes. To the extent that the
value of such collateral is insufficient to satisfy such secured indebtedness,
amounts remaining outstanding on such secured indebtedness would be entitled to
share pari passu with the Notes and other unsecured, unsubordinated claimants
(including trade creditors) with respect to any other assets of the Company and
the Guarantors. In addition, Foreign Subsidiaries (as defined) are not required
to become Guarantors of the Notes unless they become guarantors of another
Credit Facility of the Company. As a result, any borrowings by a Foreign
Subsidiary under a Credit Facility are likely to be satisfied out of such
Foreign Subsidiaries' assets prior to any assets of such Foreign Subsidiaries
being available for distribution to the Company and repayment of the Notes.
SIGNIFICANCE OF COAL MINING INDUSTRY TO THE COMPANY
Approximately 40% of the Company's consolidated net sales in 1996 were
derived from customers operating primarily in the coal mining industry. A
significant portion of the business of the Manufactured Products Group is the
manufacture and sale of screening systems, centrifuges, support equipment and
related components and replacement parts to companies engaged in underground
and surface mining of coal, primarily in the eastern United States.
Additionally, the Engineering Services Group provides design, engineering,
procurement and construction management services for the mining and mineral
processing industries, with the coal mining industry constituting its largest
end use market. Accordingly, the business, results of operations, financial
condition and the debt service capability of the Company may be materially and
adversely affected by adverse developments in the domestic or international
coal mining industry, including the risks and hazards that are inherent in such
industry.
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. Other factors that may cause coal
production levels to fluctuate (therefore affecting demand for a significant
portion of the Company's products and services) 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,
mining safety and other applicable regulations, as well as labor relations
between the U.S. coal industry and its labor force, particularly the United
Mine Workers of America. Labor stoppages can have a particularly significant
and broad-based effect upon the coal industry, and suppliers to the
14
<PAGE>
coal industry such as the Company. The last significant labor stoppage in the
United States coal industry occurred in 1993, lasting nine months. Such labor
stoppage materially and adversely affected the results of operations of the
Company, and had a negative impact on cash flow. The national union contract
resulting from that labor stoppage is subject to expiration in 1998 and
renegotiation of the contract began in 1997. There can be no assurance that
conditions in the coal industry, including any future labor stoppages, would
not have a material adverse effect on the Company's business, financial
condition, results of operation and debt service capability.
CONTRACT DESIGN AND ENGINEERING
In 1996, approximately 52% of the Engineering Services Group's net sales
were from fixed price turnkey projects. In such projects, the Company's
compensation is fixed regardless of the actual cost necessary to complete the
project. Consequently, in executing such projects, the Company is subject to
the risk of cost overruns caused by factors beyond its control, such as
adverse weather conditions, unexpected site conditions and non-performance or
delayed performance by subcontractors or suppliers. The Company's performance
is also subject to the impact of inaccurate estimations by the Company. Each
of these factors, as well as other unforeseeable factors (such as equipment
breakdown, loss of key personnel, property damage or personal injury), could
materially and adversely affect the Company's profit on the project in
question and even result in a loss. The Company has experienced losses on
certain Engineering Services Group contracts in prior years and experienced a
material loss on a project in 1995 (see "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Results of Operations"),
which resulted in significant operating and control changes in the Engineering
Services Group. See "Business--Engineering Services Group--Roberts & Schaefer
Company." There can be no assurance that losses will not recur, and, depending
on the magnitude or frequency of such losses, such projects could materially
and adversely affect the Company's business, financial condition, results of
operation and debt service capability. Additionally, receipt of fees for such
projects is generally tied to completion benchmarks. Therefore, the Company's
receipt of fees could be delayed due to factors beyond its control that
preclude achievement of the benchmarks, which could in turn adversely affect
the Company's cash flow and results of operations.
Design and construction engineering also necessarily subjects the service
provider to the risks of substantial claims should errors or omissions occur
in the course of executing a project. While the Company has generally not
experienced substantial errors and omissions claims, there can be no assurance
that such claims would not be asserted against the Company in the future. If
the Company's insurance coverage were insufficient to pay such claims, the
Company's business, financial condition, results of operation and debt service
capability could be materially and adversely affected.
COMPETITION
The Company's products and services are sold in competitive markets. The
Company believes that the principal points of competition in its markets are
product and service quality, price, design and engineering capabilities,
product development, conformity to customer specifications, quality of post-
sale support and timeliness of delivery. Maintaining and improving the
Company's competitive position will require continued investment by the
Company in manufacturing, quality standards, marketing and customer service
and support. There can be no assurance that the Company will have sufficient
resources to continue to make such investment or that it will be successful in
maintaining its competitive position. The Company's competitors may develop
products that are superior to the Company's products, or may develop methods
of more efficiently and effectively providing services or may adapt more
quickly than the Company to new technologies or evolving customer
requirements. Certain of the Company's competitors may have greater financial,
marketing and research and development resources than the Company. There can
be no assurance that the Company will be able to compete successfully with its
existing competitors or with new competitors. Failure to continue competing
successfully could adversely affect the Company's business, financial
condition, results of operation and debt service capability.
15
<PAGE>
INTERNATIONAL BUSINESS
In 1996, approximately 15% of the Company's net sales was attributable to
products sold or services provided outside of the United States. Foreign sales,
particularly construction management projects undertaken at foreign locations,
are subject to various risks, including exposure to currency fluctuations,
political, religious and economic instability, local labor market conditions,
the imposition of foreign tariffs and other trade barriers, and changes in
governmental policies. While the Company historically has not experienced
material adverse effects due to its foreign sales, the Company's foreign sales
may incur increased costs and experience delays or disruptions in product or
service deliveries that could cause loss of revenue and damage to customer
relationships. A portion of the Company's net sales and cost of sales is
derived from international operations which are conducted in foreign
currencies. Changes in the value of these foreign currencies relative to the
U.S. dollar could adversely affect the Company's business, financial condition,
results of operation and debt service capability. For example, recent
instability in the financial markets in Asia may adversely affect the Company's
business prospects in that region. There can be no assurance that the Company's
foreign operations, or expansion thereof, would not have a material adverse
effect on the Company's business, financial condition, results of operations
and debt service capability.
CONTROL BY SENIOR MANAGEMENT
Senior Management beneficially owns 100% of the Company's outstanding shares
of capital stock and is able to control the business and affairs of the
Company, including the election of the Company's Board of Directors, and to
determine the outcome of any action that requires shareholder approval,
including the adoption of amendments to the Company's certificate of
incorporation, and certain mergers, sales of assets and other business
acquisitions or dispositions. Through its control of the Board of Directors,
Senior Management also controls any decision made by the Board, including the
terms of material transactions to which the Company or any subsidiary is a
party, and the terms of employment of the Company's executives, including
members of Senior Management (subject to limitations on salary and bonuses as
set forth under "Description of Notes--Certain Covenants--Restricted
Payments"). There can be no assurance that the effect of any such action would
not be adverse to the holders of the Notes.
DEPENDENCE UPON MANAGEMENT PERSONNEL
The Company's success depends upon the efforts, abilities and expertise of
its executive officers and other key employees, particularly its Senior
Management. Although the Company has entered into employment and non-
competition agreements with Senior Management, the loss of the services of
Senior Management could have a material adverse effect on the Company's
operations.
RESTRICTIVE DEBT COVENANTS
The Senior Credit Facility and the Indenture restrict the ability of the
Company and its subsidiaries to, among other things, incur additional
indebtedness, incur liens or make certain restricted payments or investments,
consummate certain asset sales, enter into certain transactions with
affiliates, impose restrictions on the ability of a subsidiary to pay dividends
or make certain payments to the Company, merge or consolidate with any other
person or sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its assets. The Senior Credit Facility requires the
Company, on a consolidated basis, to maintain specified financial ratios and
satisfy certain financial tests. The Company's ability to meet such financial
ratios and tests may be affected by events beyond its control. There can be no
assurance that the Company will meet such ratios and tests. A breach of any of
these covenants could result in an event of default under the Senior Credit
Facility. If such an event of default occurs, the lenders thereunder could
elect to declare all amounts borrowed under the Senior Credit Facility,
together with accrued interest, to be immediately due and payable and to
terminate all commitments under the Senior Credit Facility. If the Company were
unable to repay all amounts declared due and payable, the lenders could proceed
against the collateral granted to them to satisfy the indebtedness and other
obligations due and payable. If indebtedness under the Senior Credit Facility
were to be accelerated, such acceleration would likely result in a default
under the Indenture and there can be no assurance that the assets of the
Company and its subsidiaries would be sufficient to repay in full such
indebtedness and the other indebtedness of the Company, including the Notes.
16
<PAGE>
POTENTIAL INABILITY TO FUND A CHANGE IN CONTROL OFFER
Upon the occurrence of a Change of Control, the holders of the Notes would be
entitled to require the Company to repurchase the Notes at a purchase price
equal to 101% of the principal amount of such Notes, plus accrued and unpaid
interest, if any, to the date of purchase. The source of funds for any such
repurchase would be the Company's available cash or cash generated from
operations or other sources, including borrowings, sales of equity or funds
provided by a new controlling person. However, 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 the Notes tendered. The Company's failure to make
such repayments in such instances would result in a default under both the
Notes and the Senior Credit Facility. Future indebtedness of the Company may
also contain restrictions or repayment requirements with respect to certain
events or transactions that would constitute a Change of Control. In the event
of a Change of Control, there can be no assurance that the Company would have
sufficient assets to satisfy all of its obligations under the Notes or the
Senior Credit Facility. See "Description of Notes--Change of Control" and
"Description of Senior Credit Facility."
ENVIRONMENTAL COMPLIANCE
The Company is subject to a variety of foreign, federal, state and local
governmental regulations related to the storage, use, discharge and disposal of
toxic, volatile or otherwise hazardous materials used in its manufacturing
processes. The Company has not historically incurred any material adverse
effect on its business, financial condition, results of operations or cash flow
as a result of the Company's compliance with U.S. federal, state, provincial,
local or foreign environmental laws or regulations or remediation costs. Some
risk of environmental liability and other costs is inherent, however, in the
nature of the businesses conducted by the Manufactured Products Group, which
have been in operation for an average of over 36 years and have performed
little invasive testing at their sites. In addition, businesses previously
operated by the Company have been sold in the past. There can be no assurance
that future identification of contamination at its current or former sites or
at third party-owned sites where waste generated by the Company has been
disposed of would not have a material adverse effect on the Company's business,
results of operations, financial condition or debt service capability. Any
failure by the Company to obtain required permits for, or adequately restrict
the discharge of, hazardous substances under present or future regulations
could subject the Company to substantial liability. Such liability could have a
material adverse effect on the Company's business, financial condition, results
of operations and debt service capability.
The Company has been named as a potentially responsible party by the New York
Department of Environmental Conservation for clean-up costs at the Company's
former manufacturing facility in Orangeburg, New York. The Company has obtained
the agreement of its former ultimate parent entity to indemnify it against
losses, damages and costs arising out of such action. Although the Company
believes that the indemnitor has performed its obligations on this site to
date, there can be no assurance that it will continue to do so or that the
Company would successfully recover on the indemnity. In such a case, the
Company would bear the cost of any remediation, which costs could be
significant and materially and adversely affect the Company's business,
financial condition, results of operations and debt service capability.
ACQUISITION STRATEGY
As part of its overall business strategy, the Company intends to continue to
acquire businesses and product lines through strategic acquisitions. The
Company's ability to continue to expand through acquisitions, however, will
depend upon the availability of suitable acquisition candidates, the Company's
ability to consummate such transactions, and the availability of financing on
terms acceptable to the Company, within the limits imposed by the Indenture,
the Senior Credit Facility and any other indebtedness. There can be no
assurance that the Company will be effective in making acquisitions or in
obtaining necessary financing. Such transactions involve numerous risks. In
carrying out its acquisition strategy, the Company attempts to minimize the
risk of unexpected liabilities and contingencies, but such liabilities may
nevertheless arise in a manner that could materially and adversely affect the
Company's business, financial condition, results of operation or debt service
capability. While the
17
<PAGE>
Company regularly evaluates potential acquisition candidates in the ordinary
course of its business, there are currently no binding commitments or
agreements with respect to any acquisition. There can be no assurance that
additional acquisitions will be completed or that any acquired business will be
able to operate profitably.
The success of any acquisition will depend in large part on the Company's
ability to effectively integrate the acquired assets into its existing
business. Integrating acquired businesses may, for example, result in a loss of
customers of the acquired businesses and, if the acquired company has
significant losses when purchased, may materially and adversely impact the
Company's results of operations and cash flow. The process of consolidating
acquired businesses requires significant management attention, may place
significant demands on the Company's operations, information systems and
financial resources, and may also result in costs that may materially and
adversely affect the Company's results of operations and cash flow. The failure
to effectively integrate acquired businesses with the Company's operations
could materially and adversely affect the Company's business, financial
condition, results of operations and debt service capability.
FRAUDULENT TRANSFER CONSIDERATIONS
Under federal or state fraudulent transfer laws, if a court were to find
that, at the time the Notes and Guarantees were issued, the Company or a
Guarantor, as the case may be, (i) issued the Notes or a 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 the Notes or a Guarantee, and (B) (1)
was insolvent or was rendered insolvent by reason of the issuance of the Notes
or such Guarantee or any transaction related thereto, (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 as defined in or interpreted under such fraudulent transfer
statutes), such court could avoid all or a portion of the Company's or a
Guarantor's obligations to the holders of Notes, subordinate the Company's or a
Guarantor's obligations to the holders of the Notes to other existing and
future indebtedness of the Company or such 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 Notes, and take other action
detrimental to the holders of the Notes, including, in certain circumstances,
invalidating the Notes. In that event, there would be no assurance that any
repayment on the Notes would ever be recovered by the holders of the 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 Guarantor
generally would be considered insolvent at the time it incurs the indebtedness
constituting the Notes or a 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 liabilities (including the
probable liability on contingent liabilities) as they become absolute or
matured, after giving effect to the use of the proceeds from the Notes to
redeem equity securities as contemplated in the Recapitalization Transactions,
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 Guarantor was "insolvent" as of the date the
Notes and Guarantees were issued, or that, regardless of the method of
valuation, a court would not determine that the Company or a 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 Guarantor was insolvent on
the date the Notes and Guarantees were issued, that the payments constituted
fraudulent transfers on another ground. To the extent that proceeds from the
sale of the Notes are used to make a distribution to a stockholder on account
of the ownership of capital stock, such as the use of the proceeds from the
Notes to redeem equity securities as contemplated in the Recapitalization
Transactions, a court may find that the Company or a Guarantor did not receive
fair consideration or reasonably equivalent value for the incurrence of the
indebtedness represented by the Notes or a Guarantee, as the case may be.
PRODUCT LIABILITY
The Company's businesses expose it to potential product liability risks that
are inherent in the design, manufacture and sale of its products. While the
Company currently maintains what it believes to be suitable product liability
insurance, there can be no assurance that it will be able to maintain such
insurance on acceptable
18
<PAGE>
terms or that any such insurance will provide adequate protection against
potential liabilities. In the event of a claim against the Company, a lack of
sufficient insurance coverage could have a material adverse effect on the
Company and its business, financial condition, results of operation and debt
service capability. Moreover, even if the Company maintains adequate
insurance, any successful claim could materially and adversely affect the
reputation of the Company and its business, financial condition, results of
operations and debt service capability. See "Business--Legal Proceedings."
ABSENCE OF PUBLIC MARKET
The Notes are a new issue of securities for which there is currently no
active trading market. If the Notes are traded after their initial issuance,
they may trade at a discount from their initial offering price, depending upon
prevailing interest rates, the market for similar securities and other
factors, including general economic conditions and the financial condition of,
performance of and prospects for the Company. Although the Company does not
intend to list the Notes on any securities exchange or to seek approval for
quotation of the Notes through any automated quotation system, the Company has
made application to have the Old Notes designated for trading in the Private
Offerings, Resales and Tradings through Automated Linkages ("PORTAL") System
of the National Association of Securities Dealers. There can be no assurance
that an active trading market for the Notes will develop.
CONSEQUENCES OF EXCHANGE AND FAILURE TO EXCHANGE
Issuance of the New Notes in exchange for the Old Notes pursuant to the
Exchange Offer will be made only after timely receipt by the applicable
Exchange Agent of such Old Notes and a properly completed and duly executed
Letter of Transmittal and all other required documents. Therefore, holders of
the Old Notes desiring to tender such Old Notes in exchange for New Notes
should allow sufficient time to ensure timely delivery. The Company is under
no duty to give notification of defects or irregularities with respect to
tenders of Old Notes for exchange. Holders of Old Notes who do not exchange
their Old Notes for New Notes pursuant to the Exchange Offer will continue to
be subject to the restrictions on transfer of such Old Notes as set forth in
the legend thereon. In general, the Old 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. The Company does not currently anticipate that it will
register the Old Notes under the Securities Act. In addition, upon the
consummation of the Exchange Offer holders of Old Notes which remain
outstanding will not be entitled to any rights to have such Old Notes
registered under the Securities Act or to any rights under the Registration
Rights Agreements. To the extent that Old Notes are tendered and accepted in
the Exchange Offer, a holder's ability to sell untendered, or tendered but
unaccepted, Old Notes could be adversely affected. See "The Exchange Offer--
Consequences of Not Exchanging Old Notes."
Based on interpretations by the staff of the Commission, the Company
believes that the New Notes issued pursuant to the Exchange Offer in exchange
for Old Notes may be offered for resale, resold and otherwise transferred by a
holder thereof (other than (i) an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act; (ii) an Initial Purchaser who
acquired the Old Notes directly from the Company solely in order to resell
pursuant to Rule 144A of the Securities Act or any other available exemption
under the Securities Act; or (iii) a broker-dealer who acquired the Old Notes
as a result of market-making or other trading activities) without further
compliance with the registration and prospectus delivery requirements of the
Securities Act, provided that such New Notes are acquired in the ordinary
course of such holder's business and that such holder is not participating and
has no arrangement or understanding with any person to participate in a
distribution (within the meaning of the Securities Act) of such New Notes. The
Company has not, however, sought its own no-action letter from the staff of
the Commission. Although there has been no indication of any change in the
staff's position, there can be no assurance that the staff of the Commission
would make a similar determination with respect to the resale of the New
Notes. Any holder that cannot rely upon such prior staff interpretations must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction, unless such
sale is made pursuant to an exemption from such requirements. See "The
Exchange Offer--Purpose of the Exchange Offer."
19
<PAGE>
THE RECAPITALIZATION TRANSACTIONS
On October 15, 1997, the Company (then known as ENI Holding Corp.), Elgin
National Industries, Inc. (a subsidiary of the Company) and all of the
stockholders of the Company entered into the Repurchase Agreement pursuant to
and in connection with which the following occurred on the Closing Date: (i)
the repurchase by the Company of all common stock, preferred stock and common
stock warrants of the Company owned by holders (the "Selling Stockholders")
other than Senior Management, representing approximately 68% of the total
equity of the Company, for an aggregate purchase price of approximately $56.2
million, (ii) the redemption by Elgin National Industries, Inc. (a subsidiary
of the Company) on the Closing Date of all $20.0 million aggregate principal
amount of its outstanding senior subordinated debt, together with accrued and
unpaid interest to the Closing Date and prepayment fees, (iii) the merger on
the Closing Date, effective immediately after such repurchase and redemption,
of Elgin National Industries, Inc. (a subsidiary of the Company) into the
Company, with the Company being the surviving corporation, (iv) the amendment
of the Certificate of Incorporation and by-laws of the Company to, among other
things, change its name to Elgin National Industries, Inc. and (v) the entry
into the Senior Credit Facility by the Company and the Guarantors.
As a result of the Recapitalization Transactions, Senior Management
beneficially owns all of the outstanding capital stock of the Company. Senior
Management holds the common stock of the Company through a general partnership
in which each member of Senior Management owns and controls a one-third
interest. Senior Management also continue to hold, in the aggregate, $12.8
million of preferred stock and preferred stock units (collectively, "Preferred
Stock") of the Company. See "Capitalization." Holders of the Preferred Stock
will be entitled, when, as and if declared by the Board of Directors, to
receive dividends (or dividend equivalents, in the case of preferred stock
units) on each outstanding share of the Preferred Stock at an annual rate of
10% of the then effective liquidation preference per share of Preferred Stock,
subject to the restrictions contained in the Indenture and the Senior Credit
Facility. The Company will be prohibited from redeeming the Preferred Stock
until after the maturity date or earlier redemption of the Notes and until the
Notes have been repaid in full, except as otherwise permitted by the
Restricted Payments covenant in the Indenture. See "Description of Notes--
Certain Covenants--Restricted Payments" and "Description of the Capital
Stock."
The principal amount of the Company's unsecured notes receivable from Senior
Management is $3.6 million. See "Related Transactions."
The Selling Stockholders will be entitled to receive an additional payment
from the Company if, within 18 months after the Closing Date, the Company
merges or consolidates with another entity, sells more than 25% of its
consolidated assets or effects a public offering of capital stock, or if more
than 25% of the Company's outstanding stock is transferred or sold. The
payment due to the Selling Stockholders would equal the excess, if any, of the
value to the Selling Stockholders of such merger, consolidation, sale, public
offering or stock transfer had the Selling Stockholders remained stockholders
of the Company, over the payment made to the Selling Stockholders in the
Recapitalization Transactions. The payment would be made simultaneously with
the consummation of the event giving rise to the payment obligation.
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<PAGE>
USE OF PROCEEDS
The gross proceeds from the sale of the Notes offered hereby were used to
fund the Recapitalization Transactions, for general corporate purposes and to
pay related fees and expenses. The following table sets forth the sources and
uses of funds:
<TABLE>
<CAPTION>
AMOUNTS
--------------
(IN THOUSANDS)
<S> <C>
SOURCES OF FUNDS:
Old Notes Offering............................................. $85,000
-------
Total........................................................ $85,000
=======
USES OF FUNDS:
Repurchase of common stock, preferred stock and warrants ...... $56,208
Repayment of 13% senior subordinated notes due 2001............ 20,777
General corporate purposes..................................... 4,015
Fees and expenses.............................................. 4,000
-------
Total........................................................ $85,000
=======
</TABLE>
21
<PAGE>
CAPITALIZATION
The following table sets forth the actual and pro forma consolidated
capitalization of the Company as of September 30, 1997. This table should be
read in conjunction with the "Selected Consolidated Financial Data" and the
related notes thereto, and the Company's consolidated financial statements,
including the related notes thereto, included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30,
1997
------------------
ACTUAL PRO FORMA
------- ---------
(IN THOUSANDS)
<S> <C> <C>
Cash...................................................... $ 6,093 $ 8,509(a)
======= =======
Long-term debt (including current portion):
Senior credit facility (b).............................. $ -- $ --
Other notes payable..................................... 825 825
Old Notes Offering...................................... -- 85,000
Senior subordinated notes (c)........................... 20,000 --
------- -------
Total long-term debt.................................. 20,825 85,825
------- -------
Preferred stock units (d)................................. 10,196 10,196
Preferred stock (e)....................................... 27,178 2,625
Total common stockholders' deficit (f).................... (72) (32,576)
------- -------
Total capitalization.................................. $58,127 $66,070
======= =======
</TABLE>
- --------
(a) Excludes $1.6 million loaned to Senior Management in December 1997. See
"Related Transactions."
(b) The Senior Credit Facility provides for revolving loans of up to $20.0
million, subject to a borrowing base and certain other conditions. See
"Description of Senior Credit Facility."
(c) Includes the estimated fair value of warrants of $153,000.
(d) The preferred stock units represent (i) $7.3 million of units issued in
connection with the 1993 leveraged buyout in lieu of accumulated deferred
compensation which Senior Management agreed to capitalize as preferred
stock units and (ii) $2.8 million of dividend equivalents accrued at 10%
per annum since 1993. The preferred stock units have maturity dates and
dividend provisions equivalent to the preferred stock.
(e) Reflects redemption of approximately $24.6 million in connection with the
Recapitalization Transactions. The preferred stock matures on December 31,
2007 and accrues cumulative preferred dividends at 10% per annum. The
preferred stock may not be redeemed until after the maturity date of the
Notes or until the Notes have been repaid in full except as otherwise
permitted by the Restricted Payments covenant in the Indenture. See
"Description of Capital Stock" and "Description of Notes--Certain
Covenants--Restricted Payments."
(f) Stockholders' deficit reflects (i) repurchase of common stock and
warrants, (ii) $0.4 million in dividends on preferred stock accrued from
July 1 through September 30, 1997, (iii) a non-cash write-off of
approximately $0.9 million for unamortized financing fees of a previous
senior credit facility and fees and debt issue costs, net of income tax
benefit, associated with the senior subordinated notes and the Senior
Credit Facility and (iv) a $0.2 million prepayment fee, net of income tax
benefit, on the senior subordinated notes.
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<PAGE>
SELECTED HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
The following table presents selected historical and pro forma financial
information of the Company, as of the dates and for the periods indicated. The
historical financial data as of December 31, 1994, 1995 and 1996 was derived
from the consolidated financial statements of the Company audited by Coopers &
Lybrand L.L.P. The historical financial data as of December 31, 1993 was
derived from the consolidated financial statements of the Company as of and
for the four months ended December 31, 1993, audited by Coopers & Lybrand
L.L.P. and from the unaudited consolidated financial statements of the Company
for the twelve months ended December 31, 1993. The historical financial data
as of December 31, 1992 was derived from the consolidated financial statements
of the Company audited by Coopers & Lybrand L.L.P. The historical financial
data as of September 30, 1996 and 1997 was derived from the unaudited
consolidated financial statements of the Company. The pro forma financial data
for the twelve months ended September 30, 1997 is derived from the unaudited
consolidated financial statements of the Company and is pro forma for the Old
Notes Offering and the Recapitalization Transactions. The selected financial
information should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Company's
consolidated financial statements and notes thereto, which are included in
this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------ -------------------
1992 1993 1994 1995 (A) 1996 1996 1997
-------- -------- -------- -------- -------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales............... $148,147 $143,655 $197,284 $126,839 $135,651 $97,253 $104,510
Cost of sales........... 114,911 116,784 167,170 102,654 100,119 71,877 77,471
-------- -------- -------- -------- -------- -------- ---------
Gross profit........... 33,236 26,871 30,114 24,185 35,532 25,376 27,039
Selling, general and
administrative
expenses............... 21,335 19,884 19,356 19,891 21,226 15,783 15,735
Amortization expense.... 116 877 3,050 3,052 3,085 2,329 2,336
-------- -------- -------- -------- -------- -------- ---------
Operating income....... 11,785 6,110 7,708 1,242 11,221 7,264 8,968
Other expenses (income)
Interest expense, net.. 2,382 2,771 6,270 4,807 3,340 2,574 1,536
Gain on the sale of
product line.......... -- -- -- (2,520) -- -- --
-------- -------- -------- -------- -------- -------- ---------
Income (loss) from
continuing operations
before income taxes.... 9,403 3,339 1,438 (1,045) 7,881 4,690 7,432
Provision for income
taxes.................. 3,884 1,285 668 124 3,191 1,776 3,238
-------- -------- -------- -------- -------- -------- ---------
Net income (loss) from
continuing operations.. 5,519 2,054 770 (1,169) 4,690 2,914 4,194
Income from discontinued
operations, net of
income taxes (b)....... 13,371 2,426 889 876 174 102 --
-------- -------- -------- -------- -------- -------- ---------
Net income (loss)....... $ 18,890 $ 4,480 $ 1,659 $ (293) $ 4,864 $ 3,016 $ 4,194
======== ======== ======== ======== ======== ======== =========
OTHER FINANCIAL DATA:
Gross margin %.......... 22.4% 18.7% 15.3% 19.1% 26.2% 26.1% 25.9%
EBITDA (c).............. $ 13,407 $ 10,493 $ 13,712 $ 5,964 $ 15,850 $ 11,064 $ 12,549
EBITDA margin %......... 9.0% 7.3% 7.0% 4.7% 11.7% 11.4% 12.0%
Depreciation and
amortization (d)....... $ 2,085 $ 3,278 $ 5,776 $ 5,497 $ 5,382 $ 4,138 $ 4,034
Capital expenditures
(d).................... $ 1,474 $ 2,521 $ 1,506 $ 1,501 $ 1,739 $ 1,205 $ 969
Ratio of earnings to
fixed charges (e)...... 3.9x 1.9x 1.2x 0.8x 2.6x 2.3x 3.4x
OPERATING UNIT DATA:
Net Sales:
Manufactured Products
Group................. $ 71,563 $ 66,211 $ 75,698 $ 74,859 $ 78,952 $ 59,594 $ 59,117
Engineering Services
Group................. 76,584 77,444 121,586 51,980 56,699 37,659 45,393
-------- -------- -------- -------- -------- -------- ---------
Total Net Sales...... $148,147 $143,655 $197,284 $126,839 $135,651 $ 97,253 $ 104,510
======== ======== ======== ======== ======== ======== =========
EBITDA:
Manufactured Products
Group................. $ 13,221 $ 12,398 $ 16,304 $ 15,566 $ 16,412 $ 11,676 $ 12,307
Engineering Services
Group................. 3,843 2,256 1,011 (5,724) 3,860 2,299 3,421
-------- -------- -------- -------- -------- -------- ---------
Total operating unit
EBITDA.............. 17,064 14,654 17,315 9,842 20,272 13,975 15,728
Corporate overhead..... (3,657) (4,161) (3,603) (3,878) (4,422) (2,911) (3,179)
-------- -------- -------- -------- -------- -------- ---------
Total EBITDA......... $ 13,407 $ 10,493 $ 13,712 $ 5,964 $ 15,850 $ 11,064 $ 12,549
======== ======== ======== ======== ======== ======== =========
BALANCE SHEET DATA (f):
Cash.................... $ 6,096 $ 4,173 $ 2,716 $ 4,506 $ 13,952 $ 6,526 $ 6,093
Working capital......... 12,566 32,006 28,772 16,515 5,129 13,723 13,722
Property, plant and
equipment, net......... 8,663 24,999 23,213 14,707 13,741 14,028 13,001
Total assets............ 112,328 150,282 141,798 97,465 98,875 102,006 89,879
Total debt.............. 16,711 71,785 58,567 37,676 26,891 31,114 20,825
Preferred stock and
preferred stock units.. -- 27,374 30,048 32,714 35,380 34,708 37,374
Stockholders' equity.... 54,390 (496) (1,511) (4,470) (2,272) (3,448) (72)
<CAPTION>
TWELVE MONTHS
ENDED
SEPTEMBER 30, 1997
-------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PRO FORMA FINANCIAL DATA:
Ratio of EBITDA to cash interest expense............................. 1.8x
Ratio of net debt to EBITDA (g)...................................... 4.4x
</TABLE>
23
<PAGE>
- -------
(a) The Company's 1995 performance was adversely affected by a loss of
approximately $7.8 million on a single turnkey project of the Engineering
Services Group that was completed in that year, and which resulted in
significant operating and control changes in that Group. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Results of Operations" and "Business--Engineering Services Group--Roberts
& Schaefer Company."
(b) Income from discontinued operations is comprised of earnings of GC
Thorsen, Inc. (sold in 1995), American Fastener Corporation (sold in
1996), along with the associated gain on the sale of those businesses, and
an investment in a limited partnership (disposed of in 1993) plus
management fees (paid in 1992 and 1993), net of income taxes.
(c) EBITDA is income (loss) from continuing operations before income taxes
plus interest expense, depreciation, amortization and other non-cash
income and expense. In the periods presented, the following non-cash items
were included in income from continuing operations but excluded from
EBITDA: (i) allocated income from pension overfunding resulting from the
Company's overfunded pension plan; (ii) inventory revaluation expense
related to the market valuation of inventory in conjunction with the 1993
purchase of the Company pursuant to Accounting Principles Board Opinion
No. 16; (iii) gain on the sale of product line resulting from the 1995
sale of Ohio Rod's spoke and nipple product line.
<TABLE>
<CAPTION>
NINE MONTHS
FISCAL YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
------------------------------------ -------------------
1992 1993 1994 1995 1996 1996 1997
----- ------ ----- ------- ----- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Allocated income from
pension overfunding... $(463) $ (526) $(578) $ (775) $(753) $ (340) $ (225)
Inventory revaluation
expense............... -- 1,631 806 -- -- -- --
Gain on the sale of
product line.......... -- -- -- (2,520) -- -- --
----- ------ ----- ------- ----- --------- ---------
Total non-cash (income)
expense............... $(463) $1,105 $ 228 $(3,295) $(753) $ (340) $ (225)
===== ====== ===== ======= ===== ========= =========
</TABLE>
EBITDA is not intended as a substitute for measurements of cash flows under
generally accepted accounting principles, nor has it been presented as an
alternative to earnings from operations as an indicator of operating
performance or as a measure of liquidity. EBITDA should not be considered in
isolation or as substitute for measures of performance prepared in
accordance with generally accepted accounting principles. While EBITDA is
frequently used as a measure of the ability to meet debt service
requirements, it is not necessarily comparable to other similarly titled
captions of other companies due to potential inconsistencies in the method
of calculation.
(d) Excludes depreciation, amortization and capital expenditures related to
discontinued operations.
(e) For purposes of determining the ratio of earnings to fixed charges,
earnings are defined as income from continuing operations before income
taxes plus fixed charges, and fixed charges consist of interest expense,
plus amortization of deferred debt issuance costs.
(f) Includes the balance sheet data of discontinued operations.
(g) Net debt equals total debt less cash.
24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
consolidated financial statements of the Company and the notes thereto and the
other financial information included in this Prospectus.
OVERVIEW
Elgin was a publicly traded company listed on the NYSE until it was taken
private in 1988, through the leveraged acquisition of Elgin's stock by The
Jupiter Corporation ("Jupiter"), a private diversified holding company.
Members of Senior Management participated in the 1988 transaction and were
instrumental in reducing Elgin's leverage following the acquisition. In 1993,
an investor group led by institutional investors and Senior Management formed
ENI, and purchased Elgin from Jupiter in a leveraged buyout. Following the
1993 buyout, Senior Management was instrumental in reducing Elgin's leverage.
Since 1988, the Company has made three major divestitures and has focused on
strengthening its businesses, and reducing its leverage. Proceeds from these
divestitures were used to retire debt and finance several small, strategic
acquisitions.
Elgin owns and operates a diversified group of middle-market industrial
manufacturing and engineering services businesses. The Company focuses on
operating businesses with leading positions in niche markets, consistent
profitability, diverse customer bases, efficient production capabilities and
broad product lines serving stable industries. The Company is comprised of ten
business units that are organized into two operating groups. Through its
Manufactured Products Group, Elgin is a leading manufacturer and supplier of
custom-designed, highly engineered products used by a wide variety of
customers in the industrial equipment, durable goods, mining, mineral
processing and electric utility industries. Through its Engineering Services
Group, Elgin provides design, engineering, procurement and construction
management services for mineral processing and bulk materials handling systems
used in the mining, mineral processing, electric utility and the rail and
marine transportation industries.
VARIABILITY OF REVENUES AND CASH FLOWS
The Engineering Services Group's project base is typically comprised of over
100 projects in process each year. At any given time, this project base
includes a substantial majority of small projects (which the Company defines
as producing less than $1.0 million in annual sales) as well as a number of
larger projects (which the Company defines as producing $1.0 million or more
in annual sales). The Company's revenues from these larger projects tend to
fluctuate from year to year depending on the number of such projects in
process and the respective status of each project. In addition, these larger
projects often extend over more than one year, causing potential fluctuations
in revenues and cash flows. The Company uses the percentage of completion
method of accounting for its engineering services contracts. Under this method
of accounting, the degree of completion of each contract is generally
determined by comparing the costs incurred to date to the total costs
anticipated for the entire contract, taking into account the current estimates
of cost to complete the contract. Revenue is recognized on each contract as a
percentage of the total contract revenue in proportion to the degree of the
project's completion. Management routinely reviews total estimated costs to
complete each contract and revises the estimated gross margin on the contract
accordingly. Losses are recognized in full in the period in which they are
determined. Cash flows can vary significantly from period to period, depending
on the terms of the larger contracts then in force. In some contracts, the
customers provide full or partial advance cash payments prior to performance
by the Company. In other contracts, receipts follow disbursements in varying
degrees. As a result, reported operating income of the Engineering Services
Group for any period is not necessarily indicative of cash flow for that
period.
25
<PAGE>
RESULTS OF OPERATIONS
The following tables set forth, for the periods indicated, amounts derived
from the Company's consolidated statements of operations and related
percentages of net sales. There can be no assurance that the trends in
operating results will continue in the future.
COMPANY CONSOLIDATED
(IN MILLIONS)
<TABLE>
<CAPTION>
FOR THE FISCAL FOR THE NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
---------------------------------------- -------------------------
1994 1995 1996 1996 1997
------------ ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales............... $197.3 100.0% $126.9 100.0% $135.6 100.0% $97.3 100.0% $104.5 100.0%
Cost of sales........... 167.2 84.7 102.7 80.9 100.1 73.8 71.9 73.9 77.5 74.1
Gross profit............ 30.1 15.3 24.2 19.1 35.5 26.2 25.4 26.1 27.0 25.9
Selling, general &
administrative
expenses............... 19.4 9.8 19.9 15.7 21.2 15.6 15.8 16.2 15.7 15.1
Amortization expense.... 3.0 1.6 3.1 2.4 3.1 2.3 2.3 2.4 2.3 2.2
Operating income........ 7.7 3.9 1.2 1.0 11.2 8.3 7.3 7.5 9.0 8.6
</TABLE>
MANUFACTURED PRODUCTS GROUP
(IN MILLIONS)
<TABLE>
<CAPTION>
FOR THE FISCAL FOR THE NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
------------------------------------- ------------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales..... $75.7 100.0% $74.9 100.0% $78.9 100.0% $59.6 100.0% $59.1 100.0%
Cost of sales. 51.8 68.4 50.6 67.6 52.8 66.9 40.6 68.2 39.4 66.6
Gross profit.. 23.9 31.6 24.3 32.4 26.1 33.1 19.0 31.8 19.7 33.4
</TABLE>
ENGINEERING SERVICES GROUP
(IN MILLIONS)
<TABLE>
<CAPTION>
FOR THE FISCAL FOR THE NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
--------------------------------------- ------------------------
1994 1995 1996 1996 1997
------------ ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales............... $121.6 100.0% $52.0 100.0% $56.7 100.0% $37.7 100.0% $45.4 100.0%
Cost of sales........... 115.4 94.9 52.1 100.2 47.3 83.5 31.3 83.0 38.1 83.9
Gross profit............ 6.2 5.1 (0.1) (0.2) 9.4 16.5 6.4 17.0 7.3 16.1
</TABLE>
Nine months Ended September 30, 1997 Compared to Nine Months Ended September
30, 1996
Net Sales. Net sales for the Manufactured Products Group for the nine months
ended September 30, 1997 decreased $0.5 million, or 0.8%, to $59.1 million
from $59.6 million for the corresponding period in 1996. Decreased screen and
parts sales to the aggregates market at Tabor and decreased starter sales at
Mining Controls were partially offset by increased high voltage distribution
equipment sales at Mining Controls, increased specialty fastener and reel bolt
sales at Ohio Rod, increased OEM and distributor sales at Chandler and
increased centrifuge sales at CMI.
Net sales for the Engineering Services Group for the nine months ended
September 30, 1997 increased $7.7 million or 20.4%, to $45.4 million from
$37.7 million for the corresponding period in 1996 due primarily to increased
sales from larger projects in process (including the completion of a domestic
gold processing facility that generated sales of $8.7 million during the
period). For the nine months ended September 30, 1997, sales of $32.3 million
were reported on fourteen larger projects, exceeding sales of $19.9 million
reported on ten larger projects for the corresponding period in 1996.
26
<PAGE>
Gross Profit. Gross profit for the Manufactured Products Group for the nine
months ended September 30, 1997 increased $0.7 million, or 3.7%, to $19.7
million from $19.0 million for the corresponding period in 1996 due to the
increase in gross profit as a percentage of sales. The Manufactured Products
Group's gross profit as a percentage of net sales increased to 33.4% for the
nine months ended September 30, 1997 from 31.8% for the corresponding period
in 1996. The increase in the gross profit was primarily due to increased sales
of higher margin replacement parts at CMI and Tabor, and to the higher sales
levels at Mining Controls, Chandler and Ohio Rod.
Gross profit of the Engineering Services Group for the nine months ended
September 30, 1997 increased $0.9 million, or 14.1%, to $7.3 million from $6.4
million for the corresponding period in 1996 primarily due to increased
project activity. As a percentage of net sales, the Engineering Services
Group's gross profit decreased to 16.1% for the nine months ended September
30, 1997 from 17.0% for the corresponding period in 1996 primarily due to the
inclusion of larger projects involving procurement and construction management
services, which typically earn a lower profit margin than smaller projects.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses of the Company for the nine months ended September 30,
1997 decreased slightly in comparison to the corresponding period in 1996.
Selling, general and administrative expenses as a percentage of net sales
decreased to 15.1% for the nine months ended September 30, 1997 from 16.2% for
the corresponding period in 1996 due to increased net sales. Lower selling
cost reported by the Engineering Services Group were partially offset by
increased selling costs within the Manufactured Products Group and increased
corporate costs.
Operating Income. Operating income of the Company for the nine months ended
September 30, 1997 increased $1.7 million, or 23.3%, to $9.0 million from $7.3
million for the corresponding period in 1996 for the reasons discussed above.
Operating income as a percentage of net sales increased to 8.6% for the nine
months ended September 30, 1997 from 7.5% for the corresponding period in
1996.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Net Sales. Net sales for the Manufactured Products Group for the year ended
December 31, 1996 increased $4.0 million, or 5.5%, to $78.9 million from $74.9
million in 1995 due primarily to modest increases in a number of businesses,
including increased high voltage distribution equipment sales at Mining
Controls and increased centrifuge sales at CMI, along with increased sales of
spare parts to the coal industry and increased screen sales to the aggregates
industry at Tabor. In addition, a full year of CSI's sales were included in
1996 compared to only six months of sales included in 1995.
Net sales for the Engineering Services Group for the year ended December 31,
1996 increased $4.7 million, or 9.1%, to $56.7 million from $52.0 million in
1995 due primarily to increased revenues from the larger projects in process.
Although ten larger projects were in process during the year ended December
31, 1996 as compared to twelve larger projects during 1995 due to the nature
of the projects, net sales were $33.1 million in 1996 compared to $32.4
million in 1995. The Engineering Services Group had approximately 250 projects
in process during both years.
Gross Profit. Gross profit for the Manufactured Products Group for the year
ended December 31, 1996 increased $1.8 million, or 7.8%, to $26.1 million from
$24.3 million in 1995 due to increased sales at CMI, Tabor, CSI and Mining
Controls. The Manufactured Products Group's gross profit as a percentage of
net sales increased to 33.1% for the year ended December 31, 1996 from 32.4%
in 1995 due to increased sales of higher margin replacement parts products at
CMI and CSI (including the successful introduction by CMI of its patented Long
Life Parts Package(TM)), increased sales volume at Mining Controls and
increased operating efficiencies at Ohio Rod.
Gross profit of the Engineering Services Group for the year ended December
31, 1996 increased to $9.4 million from a $0.1 million loss for the
corresponding period in 1995. The increased gross profit was primarily due to
an approximately $7.8 million loss on a large turnkey project that was
completed in 1995. See "Business--Engineering Services Group--Roberts &
Schaefer Company." The increased gross profit earned in 1996 was also due to
the increase in net sales.
27
<PAGE>
Selling, General and Administrative Expenses. Selling, general and
administrative expenses of the Company for the year ended December 31, 1996
increased $1.3 million, or 6.7%, to $21.2 million from $19.9 million in 1995
due to higher selling expenses related to increased net sales, increased
executive incentive compensation and costs from a full year of operations at
CSI. Selling, general and administrative expenses reported by the Engineering
Services Group for 1996 approximated the 1995 level. Due to the increased net
sales level, selling, general and administrative expenses as a percentage of
net sales was 15.6% for the year ended December 31, 1996 compared to 15.7% in
1995.
Operating Income. Operating income of the Company for the year ended December
31, 1996 increased $10.0 million to $11.2 million from $1.2 million in 1995 for
the reasons discussed above. Operating income as a percentage of net sales
increased to 8.3% for the year ended December 31, 1996 from 1.0% in 1995.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
Net Sales. Net sales for the Manufactured Products Group for the year ended
December 31, 1995 decreased $0.8 million, or 1.1%, to $74.9 million from $75.7
million in 1994. Increased fabrication sales at Clinch River, increased sales
of high voltage distribution equipment at Mining Controls and six months of CSI
sales were more than offset by decreased sales at Chandler due primarily to the
loss of a customer and at Ohio Rod due primarily to the sale of its spoke and
nipple product line in February, 1995.
Net sales for the Engineering Services Group for the year ended December 31,
1995 decreased $69.6 million, or 57.2%, to $52.0 million from $121.6 million in
1994 due to the completion of various projects and fewer projects in process
resulting from the Company's strategic decision to undertake smaller scale
projects and implement new control procedures. See "Business--Engineering
Services Group--Roberts & Schaefer Company." In 1994, the Group had twenty
larger projects with sales aggregating $104.0 million, compared to twelve
larger projects with sales aggregating $32.4 million in 1995.
Gross Profit. Gross profit for the Manufactured Products Group for the year
ended December 31, 1995 increased $0.4 million, or 1.6%, to $24.3 million from
$23.9 million in 1994 due to higher gross profit margins at most companies
within the Group and lower costs of sales in 1995 due to the inclusion of
higher cost inventory in 1994 cost of sales resulting from the non-cash
inventory revaluation pursuant to Accounting Principles Board Opinion No. 16 in
connection with the 1993 buyout. The Manufactured Products Group's gross profit
as a percentage of net sales increased to 32.4% for the year ended December 31,
1995 from 31.6% in 1994.
Gross profit of the Engineering Services Group for the year ended December
31, 1995 decreased $6.3 million from the gross profit of $6.2 million in 1994,
resulting in a loss of $0.1 million. The decrease in the gross profit was due
to a project loss of approximately $7.8 million, which resulted in significant
operational changes in the Engineering Services Group. See "Business--
Engineering Services Group--Roberts & Schaefer Company."
Selling, General and Administrative Expenses. Selling, general and
administrative expenses of the Company for the year ended December 31, 1995
increased $0.5 million, or 2.8%, to $19.9 million from $19.4 million in 1994
due primarily to the inclusion of CSI for the last six months of 1995. Selling,
general and administrative expenses as a percentage of net sales increased to
15.7% for the year ended December 31, 1995 from 9.8% in 1994 due primarily to
the decreased sales within the Engineering Services Group.
Operating Income. Operating income of the Company for the year ended December
31, 1995 decreased $6.5 million, or 83.8%, to $1.2 million from $7.7 million in
1994, due to the reasons discussed above. Operating income as a percentage of
net sales decreased to 1.0% for the year ended December 31, 1995 from 3.9% in
1994.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities for the nine months ended September 30,
1997 was $0.4 million, due primarily to a net increase in operating assets and
liabilities of $11.0 million, including a $6.7 million reduction
28
<PAGE>
in accounts payable, and accrued liabilities which more than offset the impact
of net income, non-cash charges and deferred income taxes. Cash generated by
operating activities for the year ended December 31, 1996 was $17.5 million
primarily comprised of net income, non-cash charges, deferred income taxes and
increases in trade accounts payable and contract billings in excess of related
costs. As evidenced by these results, cash flows from operations for any
specific period are often materially affected by the timing and amounts of
payments on contracts of the Engineering Services Group, and the timing of
payments by such Group for products and services. See "--Variability of
Revenues and Cash Flows."
Cash used in investing activities for the nine months ended September 30,
1997 was $1.0 million of capital expenditures; capital expenditures are
expected to be approximately $2.2 million for all of 1997, consistent with the
Company's regular practice of upgrading and maintaining its equipment base and
facilities. Capital expenditures in the last quarter of 1997 will include the
purchase of new equipment for Ohio Rod and CSI valued at approximately $0.4
million. The Company generated $1.9 million in 1996 from investing activities
as the sale of the Company's American Fastener Corporation subsidiary was
partially offset by capital expenditures.
Cash used in financing activities for the first nine months of 1997 was $6.4
million, primarily to retire the term loan under the Company's credit
facility. Cash used in financing activities in 1996 was $10.0 million,
primarily to reduce amounts outstanding under the Company's credit facility,
consistent with Senior Management's goal of reducing the leverage from the
1993 buyout.
The Company's liquidity requirements are for working capital, capital
expenditures and debt service. The primary source for meeting these needs has
been funds provided by operations. Based on current and planned operations the
Company believes that funds provided from operations, along with cash on hand,
will be adequate to meet its anticipated debt service requirements, working
capital needs and capital expenditures. In connection with the Old Notes
Offering, the Company amended its credit facility to provide an $20.0 million
revolving line of credit, subject to borrowing base limitations. The amended
term is for a three-year period. At September 30, 1997, there were no
borrowings under the Senior Credit Facility (excluding $2.0 million in
outstanding letters of credit and excluding payment and performance bonds) nor
were any borrowings drawn upon closing of the Old Notes Offering. See
"Description of the Senior Credit Facility."
Upon consummation of the Old Notes Offering and Recapitalization
Transactions, the senior subordinated notes were retired, along with the
attached warrants and the Company's total outstanding senior indebtedness, in
addition to the Notes, was approximately $0.8 million (excluding $2.0 million
in outstanding letters of credit and excluding payment and performance bonds).
BACKLOG
The Company's backlog consists primarily of that portion of contracts for
the Engineering Services Group that have been awarded but not performed and
also includes open orders for the Manufactured Products Group. Backlog at
November 30, 1997 increased $25.5 million, or 46.6%, to $80.3 million from
$54.8 million at November 30, 1996. Approximately $7.7 million and $8.6
million, respectively, for each period relates to the Manufactured Products
Group, with the remainder relating to the Engineering Services Group. Within
the Engineering Services Group's backlog at November 30, 1997, $14.5 million
relates to a coal handling facility, $8.0 million relates to the engineering
and procurement of equipment for a material handling system, approximately
$38.2 million relates to ten projects with individual backlogs in excess of
$1.0 million, and the remaining backlog of $11.9 million results from
approximately 120 additional projects with individual backlogs of less than
$1.0 million. A substantial majority of current backlog is expected to be
realized in the next twelve months.
INFLATION
Historically, general inflation has had only a minor affect on the
operations of the Company and its internal and external sources for liquidity
and working capital, and the Company has generally been able to increase
prices to reflect cost increases.
29
<PAGE>
BUSINESS
THE COMPANY
Elgin owns and operates a diversified group of middle-market industrial
manufacturing and engineering services businesses. The Company focuses on
operating businesses with leading positions in niche markets, consistent
operating profitability, diverse customer bases, efficient production
capabilities and broad product lines serving stable industries. The Company is
comprised of ten business units that are organized into two operating groups.
Through its Manufactured Products Group, Elgin is a leading manufacturer and
supplier of custom-designed, highly engineered products used by a wide variety
of customers in the industrial equipment, durable goods, mining, mineral
processing and electric utility industries. Through its Engineering Services
Group, Elgin provides design, engineering, procurement and construction
management services for mineral processing and bulk materials handling systems
used in the mining, mineral processing, electric utility and the rail and
marine transportation industries.
Elgin's business strategy is to increase the sales and profitability of its
businesses by building upon its competitive strengths. Key elements of this
strategy include: (i) the application of existing product and design
capabilities to new markets; (ii) increased focus on international markets;
(iii) facilities expansion and manufacturing cost improvements; and (iv) the
acquisition, consolidation and integration of related businesses. Elgin
believes that the diversified nature of its products and the increasingly
diversified nature of the end markets served by its businesses reduce the
effect of operating performance fluctuations in any single operating unit and
cyclical downturns within individual industries and end markets. The Company's
total net sales for the twelve months ended September 30, 1997 were $142.9
million and EBITDA (as defined herein) was $17.3 million for the same period.
COMPETITIVE STRENGTHS
Elgin believes that it has the following competitive strengths:
Strong Market Positions. The Company's reputation for high quality products,
strong engineering capabilities and customer service has allowed it to
establish significant market shares in many of the markets it serves. Ohio Rod
is a leading U.S. manufacturer of cold-headed, long-length, small-diameter
threaded fasteners; CMI is the leading manufacturer of coal centrifuges used
in the United States and, together with CSI, is the leading supplier of
replacement parts for such centrifuges; Tabor, together with Norris, is a
leading manufacturer of vibrating screens and provider of replacement parts
sold to the eastern U.S. coal industry; and R&S is the leading U.S. firm for
the design and construction management of coal preparation plants.
Focus on Niche Markets. Elgin focuses on niche markets within mature
industry groups to allow it to achieve strong market positions and generate
consistent operating profitability. Management believes that the Company's
efficient and flexible production processes and consistent capital investment
over the years, together with its advanced design and engineering
capabilities, have created significant barriers to entry in its markets and
have allowed it to establish and maintain a high degree of customer loyalty.
Replacement Part Sales for Installed Equipment Base. Approximately 30% of
the Manufactured Products Group's net sales for the twelve months ended
September 30, 1997 were from replacement parts and services. Replacement part
sales have been more stable and predictable than OEM equipment sales and
typically generate higher profit margins. Replacement parts and service sales
accounted for over 75% of CMI and CSI combined sales and over 80% of the
combined sales of Tabor and Norris during the twelve month period ended
September 30, 1997. CMI's installed base of over 1,800 centrifuges in the U.S.
results in significant ongoing replacement part sales. In addition, the
Company's 1995 acquisition of CSI, a leading after-market supplier of
centrifuge parts, expanded its after-market parts and service capabilities.
Components sold by Tabor, Norris, CMI and CSI are regularly replaced in
connection with the ongoing maintenance of mining and processing facilities.
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Stability Through Diversification. Elgin manufactures and provides a broad
range of goods and services both domestically and internationally to stable and
mature industries, including industrial equipment, durable goods, coal, other
mining and mineral processing, electric utility and rail and marine
transportation industries. The Company believes that its increasing
diversification reduces the effects of individual industry business cycles and
economic trends that may adversely affect the demand for individual products.
Established Businesses; Long-Term Customer Relationships. Elgin's businesses
have long and established operating histories. The Company's businesses have
been operating for an average of over 42 years and enjoy stable and long-term
relationships with their customers. In excess of 60% of the Company's sales
during the year ending December 31, 1996 were to companies that have been
customers of the Company for at least five years.
Experienced, Stable and Committed Management. The Company's businesses are
run by operating managers who have an average tenure with the Company of over
16 years. The Company's Chief Executive Officer, Chief Operating Officer and
Chief Financial Officer (collectively, "Senior Management") beneficially own
and control 100% of the capital stock of Elgin. Members of Senior Management
successfully led the Company through leveraged recapitalizations in 1988 and
1993, significantly reducing the Company's leverage following each such
transaction.
BUSINESS STRATEGY
The Company's business strategy is to increase the sales, cash flow and
profitability of each business unit as follows:
Expand Product Offerings and Applications of Existing Product Capabilities.
Elgin seeks to build on its core strengths by entering new markets with its
products and services. For example, in the Manufactured Products Group, CMI is
applying its centrifugal dryer expertise, originally developed for the coal
industry, to other industrial applications in the minerals, chemical and metal
recycling industries. Similarly, in the Engineering Services Group, R&S is
applying its expertise in the design and construction management of processing
and bulk materials handling systems, originally developed for the coal mining
industry, to the aggregates, electric utility, cement, metals, industrial
minerals and other industries.
Increase International Sales. The Company has been active in international
markets for over 20 years, primarily through R&S. Since the early 1990s, the
Company has expanded the scope of its international marketing efforts. The
Company seeks to leverage its U.S. reputation for providing high quality design
and engineering services, and OEM products and related parts and services. The
Company also seeks to take advantage of expanding international demand for
expertise in the design and engineering of coal mining, mineral processing and
other bulk material handling systems. As a result of the Company's increased
focus on international markets, the Company's international sales increased to
approximately 15% of total net sales in 1996, compared to 7% and 2%,
respectively, in 1995 and 1994.
Maintain Cost-Efficient Equipment and Production Facilities. The Company has
maintained, upgraded and expanded its equipment and production facilities, and
plans to continue its strategy of focused capital investment to maximize
operating efficiency while meeting specific customer demands. Elgin has
identified certain of its facilities where production cost reductions or sales
increases can be achieved through equipment modernization and plant expansion.
Pursue Strategic Acquisitions. The Company believes that its position within
the industries it serves provides it with attractive opportunities to acquire
complementary businesses and product lines. Elgin believes that its five small
strategic acquisitions since 1989 have been made at attractive purchase prices
and have demonstrated the Company's ability to successfully integrate new
businesses into its existing operations. Elgin will consider acquisitions that
(i) add complementary products or technical capabilities, (ii) give it access
to new customers or (iii) allow it to further penetrate its existing customer
base.
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OPERATING BUSINESSES
The Company conducts its business through two operating groups, the
Manufactured Products Group and the Engineering Services Group, containing a
total of ten business units. Four of the businesses (Tabor and Norris; CMI and
CSI) are paired for presentation purposes in the table below, which is followed
by a discussion of the businesses conducted by each of the business units.
NET SALES BY BUSINESS UNIT
(IN MILLIONS)
<TABLE>
<CAPTION>
FOR THE TWELVE MONTHS
ENDED SEPTEMBER 30, 1997
------------------------
<S> <C>
MANUFACTURED PRODUCTS GROUP
Ohio Rod....................................... $23.2
Tabor and Norris............................... 15.4
CMI and CSI.................................... 14.3
Mining Controls................................ 11.8
Chandler....................................... 7.7
Clinch River................................... 6.1
-----
Total Net Sales for Group.................... $78.5
=====
ENGINEERING SERVICES GROUP
R&S............................................ $61.7
Soros.......................................... 2.7
-----
Total Net Sales for Group.................... $64.4
=====
</TABLE>
MANUFACTURED PRODUCTS GROUP
The Manufactured Products Group, through its eight business units,
manufactures and markets products used primarily in the industrial equipment,
durable goods, mining, mineral processing and electric utility industries. The
businesses within the Manufactured Products Group consist of original equipment
manufacturers, suppliers of after-market parts and services (including for the
Company's OEM products) and manufacturers of components used by other original
equipment manufacturers. These businesses have supplied their customers with
quality products and services for an average of over 36 years. Under the
strategic direction of Elgin's Senior Management, each of these businesses
operates on a decentralized basis, with its own management team, independent
market identity and dedicated manufacturing facilities. Representative end-
users of the products of the Manufactured Products Group include Consolidation
Coal, Detroit Diesel, Emerson Electric, General Electric, General Motors, Mack
Truck, Peabody Coal and Toyota. The Manufactured Products Group has a broad and
diverse customer base, with sales to over 1,900 customers worldwide in 1996,
with no single customer accounting for more than 4% of the Group's sales for
that year.
Net sales and EBITDA, excluding unallocated corporate overhead, for the
Manufactured Products Group for the twelve month period ending September 30,
1997, were $78.5 million and $17.0 million, respectively. Each of the business
units of the Manufactured Products Group is described below.
Ohio Rod Products Company
Ohio Rod, a division of Elgin, founded in 1947 and acquired by the Company in
1986, is a leading U.S. manufacturer of cold-headed, long-length (up to 589),
small diameter (.079 to .509) fasteners and threaded products. Cold-headed
products are produced by forcing steel rods into a die, rather than through a
hot forging process. Ohio Rod has a large installed base of highly specialized
cold-forging equipment, built in Europe to Ohio Rod's specifications.
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The equipment is complex, with machinists generally requiring one to three
years of training before acquiring the necessary skills to operate it in full
production. The equipment efficiently combines the heading and threading
processes into a single step procedure and allows Ohio Rod's skilled machinists
to minimize set-up times for lower costs and faster turnaround. This gives Ohio
Rod the flexibility to complete production runs of customized fasteners in
almost any volume, including short production runs. Ohio Rod's manufacturing
processes have given it an important competitive advantage and, together with
its broad product line and emphasis on customer service, have combined to
generate strong customer loyalty and consistent profit margins. Ohio Rod also
maintains a continuous program of machine rebuild, acquisition and technology
improvement to improve productivity and product features. Ohio Rod has a broad,
diverse and stable customer base that includes over 650 active accounts. Ohio
Rod had net sales of $23.2 million for the twelve months ended September 30,
1997.
Products. Ohio Rod is the leading supplier of thru-bolts to manufacturers of
fractional horsepower electric motors. "Thru-bolts" are headed and threaded
bolts of varying lengths that are basic components of the housing used to hold
together fractional horsepower electric motors. Fractional horsepower electric
motors are small specialized motors that are rated at increments of less than a
full horsepower. These motors are widely used in the housing, appliance, power
tool and automotive industries. For example, they power a broad range of
appliances such as refrigerators, air-conditioners, furnaces, humidifiers,
washers and dryers, sump pumps, garbage disposals, dishwashers, ceiling fans
and garage door openers. An industry source has estimated that over 30 motors
of this type could be found in the average newly constructed home. Fractional
horsepower electric motors are also widely used in industrial equipment, such
as power presses, lathes, drills and electric fork lifts, and in automotive
applications such as power windows, seats and trunks, windshield wipers and
starter motors. The variety of sizes and applications for electric motors
produces a corresponding need for thru-bolts with a wide variety of lengths and
diameters. The Company believes that Ohio Rod's ability to meet customer
specifications with timely delivery of a variety of quality thru-bolts has been
critical to Ohio Rod's success. Sales of thru-bolts used by manufacturers of
fractional horsepower electric motors comprised approximately 49% of Ohio Rod's
1996 sales. In addition to motor assembly, thru-bolts are used in a number of
other fastening applications that are also important to Ohio Rod's business.
Ohio Rod is also the leading supplier of reel bolts used to secure the ends
of cable reels. Cable reels are used to spool and store cable, wire, rope,
rubber hoses and similar products. Primary users of these reels are
manufacturers of cable, rope and hoses, whose products are then sold
principally to end users such as utilities, construction companies and heavy
manufacturers.
Ohio Rod's fastener products also constitute critical components in a variety
of other household and industrial products, including as reinforcement bolts
for steps on wooden ladders, axle rods for skate-wheel conveyor systems,
threaded studs to secure handles on equipment, construction bolts used in roof
repair and the assembly of pre-fabricated homes and bolts used as door hinges
and handle hinges on automobiles.
Markets and Customers. In 1996, Ohio Rod sold its products to over 650
customers, with no single customer accounting for over 10% of its sales. Ohio
Rod has grown by incrementally adding customers while successfully retaining a
high percentage of current customers, with approximately 85% of 1996 sales to
companies who have been customers of Ohio Rod for at least five years. The 1990
strategic acquisition of Demby Rod & Fastener Mfg. Co, which has been
integrated with Ohio Rod's operations, further strengthened its customer base.
In response to the just-in-time delivery requirements, Ohio Rod has implemented
stocking programs for certain customers. These programs have allowed for better
customer service, improved efficiencies and, in certain cases, enhanced
operating margins. Certain key customers of Ohio Rod have entered into
exclusive supply contracts with Ohio Rod. The term of these contracts are
generally one to two years.
Sales and Marketing. Ohio Rod's products are sold through a network of five
manufacturer representatives supported by a sales manager and six company sales
personnel, and are marketed on the basis of product quality, production time
and price. Ohio Rod sells products to its customers primarily on a direct
basis.
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Competition. Ohio Rod competes primarily with small independent suppliers.
Management believes that Ohio Rod's consistent investment in specialized
equipment, high product quality, quick response times and ability to run short
or irregular sized orders have given it a significant competitive advantage. In
addition, management believes that the small production runs and low dollar
volume orders discourage new competitors from making the sizeable capital
investment in specialized heading and threading equipment that is necessary to
produce small production runs profitably.
Tabor Machine Company and Norris Screen and Manufacturing Inc.
Tabor, founded in 1961 and acquired by the Company in 1975, is a leading
designer and custom manufacturer of vibrating screen systems. A vibrating
screen system employs a self-contained drive mechanism that uses one, two or
three moving screens of various textures, materials and grades to sort, size
and dewater coal, aggregates (sand, gravel and crushed rock) and other
minerals. Tabor is an industry leader in the supply of vibrating screen systems
to the eastern U.S. coal mining industry. Norris, founded in 1977 and acquired
by the Company in 1982, manufactures stainless steel screen cloths and
polyurethane screening surfaces that are used to separate the material being
screened according to size. Tabor and Norris had combined net sales of $15.4
million (of which $12.7 million was from the sale of service and replacement
parts) for the twelve months ended September 30, 1997.
Products. Tabor designs and manufactures incline and horizontal vibrating
screen systems of varying sizes and capacities to customer specifications and
needs. Tabor's screens vary in size with widths of up to 10 feet and lengths of
up to 24 feet. Tabor's screen systems are used for the processing of coal,
crushed stone, sand and gravel and minerals, to remove water or size the
material (i.e. separate large and coarse materials from those of desired size
and consistency). Tabor is committed to refine its screening machines to better
serve its customer base and respond to competition. Recently, in part to
respond to design improvements by competitors, Tabor introduced a multiple
slope vibrating screen system, otherwise known in the industry as the "banana
screen" (due to its sloping banana shaped angle). The banana screen can
accommodate a higher tonnage of materials for processing and represents a
further improvement in Tabor's processing screen system technology.
Norris manufactures screening surfaces from stainless steel, polyurethane and
other materials to suit various screening requirements. Norris has developed
the patented Tabor-Thane(TM) Modular Screening System, which employs a
screening system of polyurethane panels that provides a longer life than
conventional screens. For customers requiring screens with more exact grading,
Norris manufactures stainless steel screen cloths. Norris' screen surfaces are
used by Tabor as well as other manufacturers of vibrating screen systems.
Both Tabor and Norris derive a substantial part of their revenue from
supplying after-market replacement parts and services. Each company maintains a
24-hour parts and service team to respond to customer needs.
Markets and Customers. Tabor and Norris sell primarily to eastern U.S. coal
producers, and Tabor has expanded its markets for its vibrating screen systems
to non-coal applications. The non-coal sector of the vibrating screen market is
significantly larger than the coal sector and management believes that it
offers considerable expansion opportunities. The initial thrust of this program
has been the aggregates industry (sand, gravel and crushed rock) which has
screening and dewatering requirements similar to coal. As a result, by 1996,
Tabor's sales from aggregates had risen to 11% of its sales and sales to other
markets in the metallic and non-metallic mining industries had risen to 6% of
total sales. Management also believes increased international opportunities are
available for Tabor's products and plans to pursue them in conjunction with the
activities of CMI and R&S. Tabor now has sales representatives in Canada,
Mexico and China, and has sold products in each of these countries. Recently,
Tabor has increased sales in Poland, and, in 1996, sold its first vibrating
screen system in Russia.
Sales and Marketing. Tabor markets and sells its products through five
internal salespeople supported by an in-house engineer and technical services
group that provide 24-hour service. Norris has a small sales force but
primarily markets its products jointly with Tabor to the coal and mineral
processing industries. The sales effort is managed at both businesses by a
sales manager with 35 years of service in the screening industry.
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<PAGE>
Competition. The principal competitors of Tabor and Norris are Allis
Minerals, WS Tyler, Conn-Weld Industries and UOP Johnson. Principal after-
market competitors are small regional job shops. Competition is on the basis
of after-market product support, product quality and price.
Centrifugal and Mechanical Industries and Centrifugal Services, Inc.
CMI, a division of Elgin, founded in 1938 and acquired by the Company in
1973, is the leading U.S. designer and manufacturer of coal processing
centrifuges. A centrifuge utilizes centrifugal force to separate liquids from
solids. Centrifuges are used in the coal industry to dry coal after it has
been treated with water and other fluids in the coal cleaning and preparation
process. CMI has a current installed base of over 1,800 centrifuges in the
United States. In 1996, CMI manufactured and sold over 90% of all centrifuges
purchased by U.S. coal companies. CMI has long-standing relationships with
most U.S. coal producers and management views the quality of its machines and
the responsiveness of its field service personnel as marketing strengths. CSI,
founded in 1987 and acquired by the Company in 1995, provides after-market
parts and services to the centrifuge market. CMI and CSI had combined net
sales of $14.3 million (of which $11.2 million was from the sale of service
and replacement parts) for the twelve months ended September 30, 1997.
Products and Services. CMI currently offers three types of centrifuges: the
vibratory vertical centrifuge, the screen-scroll vertical centrifuge and the
horizontal "chip-wringer" centrifuge. In addition, CMI is now introducing the
"Sidewinder," a horizontal vibratory centrifuge.
CMI's vibratory vertical centrifuge, used for coarse particle applications,
dries coal through centrifugal force and vibratory motion. The vibratory
centrifuge is built in two sizes ranging from 12,000 lbs. to 24,000 lbs. with
capacities to dry up to 300 tons of coal per hour. Each vibratory centrifuge
features large feed inlets, heavy duty motors, rugged bearing and shaft
housing and continuous lubrication, all of which accommodate a coarser grade
of materials.
The screen-scroll vertical centrifuge, used for small and fine particle
applications, dries coal by centrifugal force. CMI builds the screen-scroll
centrifuge in five models, ranging in size from 10,000 lbs. to 16,000 lbs.
with capacities to dry up to 120 tons of coal per hour.
The "chip-wringer" centrifuge is used for non-coal applications. This small,
horizontal centrifuge, built in two models ranging in size from 1,000 lbs. to
3,600 lbs., is used in auto plants, other manufacturing facilities and machine
shops to separate oil, coolants and other impurities from tool and machine
metal cuttings for the purposes of reclaiming the liquids and allowing proper
disposal of the metal chips.
The Sidewinder features a streamlined servicing and maintenance design and a
wide variety of speed capabilities for use with a range of particle sizes.
Preliminary field tests of the Sidewinder have produced favorable results, and
indicate higher product recovery performance than screen scroll machines.
Management believes that the Sidewinder's design may offer significant
marketing advantages, particularly in international markets where horizontal
configurations are more compatible with common coal preparation plant designs.
The centrifugal drying of coal is an extremely abrasive process, requiring
machine component parts and ongoing service to maintain performance and safe
operation. Approximately 80% of the combined net sales of CMI and CSI for 1996
were after-market parts and services. CMI and CSI maintain an inventory of
replacement parts, rebuilt drive assemblies and complete machines for
customers. Rebuilt drive units are kept in stock, whenever possible, to be
offered on an exchange basis so the customer can minimize down time. CMI and
CSI provide the majority of replacement parts and service to the domestic coal
centrifuge after-market. Dedicated, specialized field service personnel, based
near the eastern coal fields are on call 24 hours a day, seven days a week to
respond to customer needs. This service force is instrumental in promoting the
sale of replacement parts. The acquisition of CSI has allowed the Company to
sell parts and services to smaller customers more effectively.
35
<PAGE>
A recent innovation has improved CMI's after-market competitive position.
Introduced in 1995, CMI's "Long Life Parts Package(TM)" is a patented,
integrated system of components developed to reduce operating costs in screen-
scroll centrifuges. CMI believes that the design of the Long Life Parts
Package(TM) results in a more efficient drying process and is less stressful on
component parts, thereby reducing operating costs. Management believes the
performance advantages that have propelled the initial sales of the Long Life
Parts Package(TM), together with customers' significant up-front investment and
the unavailability of alternative products of like quality, provide CMI with
the opportunity for meaningful incremental sales that should more than offset
any reduced sales of less durable screening products to these customers. This
package has been favorably received by customers that have installed it to
date.
Markets and Customers. CMI and CSI primarily serve the U.S. eastern coal
mining industry. In recent years, CMI has developed new markets for its
products in order to diversify its revenue sources and provide additional
growth opportunities. CMI has sold its centrifuges to the automotive and
machining, aggregates, steel and environmental remediation industries. The
chip-wringer is an example of this diversification. While seeking
diversification, CMI continues to refine and innovate its core product, the
coal centrifuge. Examples of this diversification include CMI's introduction of
its patented Long Life Parts Package(TM) and the Sidewinder horizontal
centrifuge.
CMI has sold centrifuges to seven countries since 1992. Management has
focused special attention on expanding international sales, including the
recent introduction of the Sidewinder. Additionally, CMI engages in joint
efforts with the Engineering Services Group to identify and market to foreign
coal preparation plant projects that may include the use of centrifuges. CMI is
in the process of establishing a marketing, sales and service joint venture to
serve central and eastern Europe. Particular focus is now being directed to the
coal industry in Poland.
Sales and Marketing. CMI markets to the U.S. coal industry through its sales
force of ten, whose activities are coordinated by regional sales managers. CMI
has also added an in-house sales representative responsible for increasing
sales of centrifuges for non-coal applications. CMI parts are distributed from
different locations in the eastern U.S. coal fields, and equipment and parts
are also available through distributors in Canada and England. CSI has its own
sales and service force of three employees.
Competition. CMI currently has no significant competitors in the domestic OEM
market. Management believes that CMI's product quality and service quality, and
the start up costs necessary to design and build centrifuges, represent
significant barriers to entry for any additional competitor. Management
believes that CMI's existing strong relationships with its customers,
established market presence and extensive network of sales and service
personnel create a further disincentive for any potential OEM competitor to
enter CMI's niche market. CMI and CSI compete with small independent providers
in the sale of after-market replacement parts and services. Management believes
that CMI and CSI differentiate themselves in this market by their extensive
expertise and support capabilities in servicing centrifuges, as well as by
offering an inventory of regularly replaced parts and rebuilt centrifuges.
Mining Controls, Inc.
Mining Controls, established by the Company in 1977, had net sales of $11.8
million for the twelve months ended September 30, 1997.
Products. Mining Controls designs and manufactures specialty high and low
voltage electrical power distribution equipment, electrical switch gear
equipment, power factor control and harmonic correction equipment and
underground lighting and electrical connectors. High and low voltage
distribution and switch gear equipment is sold to the coal, mineral and metals
mining industries and the underground tunneling industry. This equipment
regulates, controls and distributes electrical power for a variety of
requirements, depending on the customer's needs. Power factor control and
harmonic correction equipment is comprised of large, complex, customized
systems, generally selling for $50,000 to $750,000 each, and which control the
quality and characteristics of electrical power being transmitted into and from
industrial facilities with high levels of power
36
<PAGE>
consumption. Mining Controls sells electrical products (lighting and
connectors) and programmable control equipment used by portable power centers,
which provide lighting and electric power for underground mining and tunneling
equipment in a variety of inaccessible locations. Mining Controls also sells
replacement parts and rebuilt equipment. The Company's acquisition of Gilbert
Electrical in 1989 and K&M Inc. in 1994 broadened Mining Controls' customer
base into the heavy industrial and electric utility markets that requires
custom designed systems for non-standard applications. Today, the Gilbert
Division (which includes K&M) accounts for approximately 35% of Mining
Controls' total sales, as the Company continues its focus on diversifying its
end use markets.
Markets and Customers. Mining Controls historically served primarily the
eastern U.S. coal mining industry, and continues to do so. Through the
integration of Gilbert and K&M, Inc., Mining Controls is able to provide
specialized and customized electrical power distribution systems, power factor
correction equipment and harmonic control equipment to heavy manufacturing,
utility and governmental facilities.
Sales and Marketing. Mining Controls sells its products through a ten-person
technical sales staff supported by a twelve-person engineering staff, working
closely with its customers' engineering representatives. Mining Controls also
has key relationships with specialized distributors for the marketing, sale and
distribution of its lighting and electrical products.
Competition. Mining Controls' primary competitors are Line Power
Manufacturing Co., American Switchgear Company and Pemco Corporation.
Competition is generally on the basis of price and the expertise of in-house
engineering and design staff. Mining Controls seeks to differentiate itself
from its competitors through its design and engineering expertise and by
responding more quickly and effectively to customer support requests.
Chandler Products
Chandler, a division of Elgin, founded in 1930 and acquired by the Company in
1986, produces cold-formed, close tolerance, custom designed, precision-
threaded fasteners. Chandler's manufacturing facility has achieved ISO 9002
certification and has a fully functional quality lab accredited by the American
Association of Laboratory Accreditation. Chandler's manufacturing techniques
and quality control procedures have led to numerous customer awards, including
the General Motors Medallions of Excellence. In addition, the President of Ohio
Rod now has operating responsibility for Chandler and, along with Chandler's
experienced management team, is implementing several of Ohio Rod's proven
programs in marketing and operations. Chandler had net sales of $7.7 million
for the twelve-month period ended September 30, 1997.
Products. Chandler's fastener products, produced to close tolerance from
customer specifications, are used in diesel engines to secure the engine
cylinder head and as accessory bolts to secure the starter motor, carburetor
and other diesel engine components. These fastener products are manufactured in
a range of sizes to the customer's specifications. Chandler fasteners are also
used to secure and join various components of commercial heavy duty
transmissions. These transmissions are used in dump trucks, freight trucks,
tanks and cement trucks. Hand tool OEMs use Chandler products to secure tool
housings and various components. Chandler also sells to industrial distributors
for resale to industrial customers.
Markets and Customers. Chandler's primary customers are manufacturers of
component assemblies in the heavy duty vehicle manufacturing industry,
representing a majority of Chandler's 1996 sales. Chandler also sells its
products for use in various industrial applications such as hand tools and the
truck and auto after-markets.
Sales and Marketing. Chandler markets its products through a combination of
independent sales representatives and a two person in-house sales force
supported by design and tool engineers and production and quality technicians.
Competition. Chandler faces competition from larger fastener manufacturers,
generally serving the automobile industry, particularly during periods of
excess capacity at their production facilities. Chandler seeks
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<PAGE>
to differentiate itself from its competition through its ability and
willingness to complete short specialized production runs, product quality and
overall customer service. Management believes that Chandler's ability to
complete short specialized production runs profitably constitutes a particular
advantage over larger manufacturers, which usually require longer uniform
runs.
Clinch River Corporation
Clinch River, founded in 1970 and acquired by the Company in 1979, had net
sales of $6.1 million for the twelve month period ending September 30, 1997.
Products. Clinch River is a full-service custom fabrication facility
specializing in the manufacture and repair of various types of preparation
plant and underground coal mining equipment and small parts used for power
plants and other industrial applications. Clinch River also manufactures a
proprietary curved dewatering screen under the trademark RADII-VIB(R). Clinch
River offers fabrication and repair services using a variety of metals,
including stainless steel, to fabricate a wide range of products engineered to
the customer's specifications. Clinch River is also an authorized distributor
and service center for Roots-Dresser industrial vacuum pumps and blowers.
Sales and Marketing. Clinch River markets its services and products through
a sales force of five, and serves primarily the coal and electric utility
industries in the southeastern United States.
Competition. Clinch River competes with other small, regional fabrication
firms on the basis of price, engineering expertise and customer service.
ENGINEERING SERVICES GROUP
The Engineering Services Group, comprised of R&S and Soros, provides design,
engineering, procurement and construction management services principally to
the mining, mineral processing, electric utility and rail and marine
transportation industries. Depending upon the needs of the client, these
services are provided on either an unbundled (i.e. task-specific) basis or a
full project turnkey basis. Historically, the Engineering Services Group
provided its services primarily to the United States coal mining industry.
Over the past ten years, the Engineering Services Group has diversified into
markets which include aggregates, industrial minerals, base metals and
precious metals. Today, this Group has a broad, well-balanced customer base
within these industries and derived approximately 75% of its net sales from
customers outside the coal mining industry during 1996.
Historically, the Group executed international work opportunistically,
relying on its strong reputation in the United States to attract international
projects. Beginning in the early 1990s, the Engineering Services Group adopted
a strategy to systematically pursue international projects. The Company
believes that the Engineering Services Group is well-positioned to continue
expanding internationally while maintaining its strong presence and large
market share within the mature and stable domestic mining, mineral processing,
electric utility and marine and rail transportation industries.
Net sales and EBITDA, excluding unallocated corporate overhead, for the
Engineering Services Group for the twelve month period ending September 30,
1997 were $64.4 million and $5.0 million, respectively. The two business units
comprising the Engineering Services Group are described below.
Roberts & Schaefer Company
R&S, founded in 1903 and acquired by the Company in 1969, has for over 90
years provided design, engineering, procurement and construction management
services ranging from small engineering-only services to turnkey projects. R&S
had net sales of $61.7 million for the twelve month period ending September
30, 1997.
Services. R&S provides engineering services including evaluating the
feasibility of the customer's proposal (from both a cost and engineering
standpoint), translating the customer's concept to a workable design, or
38
<PAGE>
providing bankable feasibility studies and detailed and extensive engineering
support in effecting the realization of a design. In turnkey projects, R&S
performs all service activities necessary for project completion, including
design, subcontracting, equipment procurement, construction management and
startup. R&S also provides equipment procurement on behalf of its customers,
involving the designation and sourcing of equipment to meet the customer's
requirements.
Typical mineral processing facilities designed and built by R&S include coal
preparation plants, gold processing plants, copper processing plants and
aggregate and crushed rock processing plants. After mining, coal is often
prepared for shipment in a preparation plant. This facility crushes the coal
and cleans it by washing it in a liquid solution, separates it into higher and
lower grades, and removes non-coal materials. Cleaning upgrades the quality and
heating value of the coal by removing or reducing pyritic sulfur content, rock,
clay and other ash-producing impurities. Coal blending or mixing of various
sulfur types is often performed at the preparation plant in order to meet the
specific combustion and environmental needs of customers.
Mineral processing facilities generally are comprised of a conveying system
that transports mined raw material from a mine; a processing plant for size
reduction, sorting (often by use of screens of the type manufactured by Tabor
and Norris), and upgrading through chemical or mechanical means (often
involving use of centrifuges manufactured by CMI); a conveying system to move
the processed material to a storage area; and a loading facility for shipment
of the processed material to its final destination. Similar processes are often
required by transporters and end-users of the products, and R&S also designs
bulk materials handling systems for coal-fired electric power plants and for
handling multiple commodities at rail terminals, storage facilities, marine
terminals and ports. These systems consist of loading and unloading equipment
to remove the material from or place it into the transportation vehicle
(trucks, trains, ships or barges) and multiple conveying systems to move
material to or from stockpiles.
In 1995, R&S incurred a loss of approximately $7.8 million on a $51.5 million
fixed cost turnkey project that was awarded in 1992. This loss accelerated an
ongoing operational restructuring, directed by Elgin's Senior Management, that
involved personnel changes and the implementation of a comprehensive and
detailed set of project procurement, execution and completion guidelines. These
guidelines include requirements that Elgin management review and approve all
proposals in excess of $3.0 million; regular meetings between Elgin management
and R&S management; project specific organizational teams and benchmarks;
increased use of CAD equipment and design software; more frequent projection,
reporting, and monitoring of scheduling and costs; and a shift of emphasis away
from larger turnkey projects toward the smaller and mid-sized projects that are
consistent with the Company's niche strategy. These guidelines have been fully
implemented and, along with the renewed focus on smaller and mid-size jobs,
have resulted in eight profitable quarters at R&S since the completion of this
turnkey project during the third quarter of 1995.
Markets and Customers. R&S provides its services, ranging from engineering-
only services to turnkey project completion, primarily to the mining, mineral
processing, electric utility and rail and marine transportation industries,
with a diversified customer base including a number of leading domestic and
international mining companies, electric utility companies and transportation
companies. Engineering-only services range in size from under $10,000 to
several hundred thousand dollars. R&S' turnkey services include full project
responsibility for the design and construction of mineral processing and bulk
material handling facilities. R&S focuses on turnkey projects of less than $25
million, with most such projects significantly smaller, as indicated below.
39
<PAGE>
In 1996, approximately 52% of R&S' net sales were derived from fixed cost
turnkey projects. A profile of the larger projects that are currently in
progress or recently completed is set forth below; project value represents
the total project value including net sales recognized to date and backlog of
remaining payments to be received. Total backlog for the listed projects was
$51.9 million at November 30, 1997 out of overall Engineering Services Group
backlog of $72.6 million at that date.
<TABLE>
<CAPTION>
TOTAL
CUSTOMER LOCATION JOB DESCRIPTION PROJECT VALUE
-------- -------- --------------- -------------
(IN MILLIONS)
<S> <C> <C> <C>
Zeigler Coal Gillete, WY New coal handling system at $19.9
existing mine, includes coal
unloading, crushing,
conveying, slot storage,
reclaiming and train loadout
system.
LGZ Steel Trinidad, V.I. DRI (direct reduced iron) 13.6
Partners materials handling system
involving barge unloading,
stacking, reclaiming and
ship loading.
Tennessee Chattanooga, TN Barge unloading facility: 13.4
Valley conveying and crushing coal,
Authority transporting to existing
power plant. (Substantially
complete)
Mineral Ridge Silver Park, NV New gold processing in 12.0
Resources Southern Nevada, including
screens, crushers, process
plant to extract gold.
(Completed 1997)
United Puerto Ordaz, Venezuela Engineering and equipment 8.1
Engineers procurement of a material
International handling system at the
Posven HBI plant.
Katowice Coal Katowice, Poland Modernization of existing 7.3
Handling coal preparation plant to US
technology. (Substantially
complete)
Central Newburgh, NY Convey coal from self 6.0
Hudson Gas & unloading ship, storage,
Electric reclaiming, and conveying to
power plant.
Tennessee Paducah, KY Upgrade of a material 5.8
Valley handling system at the
Authority Shawnee Fossil Plant
Raytheon Cumberland, MD Coal handling system 4.8
including unloading,
storage, conveying, crushing
and transporting to power
plant.
Black & Veach Thailand Engineering and procurement 4.1
of a limestone preparation
system.
City Springfield, MO Expansion of existing coal 3.2
Utilities of storage and reclamation
Springfield facility by providing hopper
and conveyor system to power
station.
Genwal Huntington, UT Upgrade coal handling 2.9
Resources facility.
Lehigh College Park, GA Materials handling for 2.7
Portland cement distribution
Cement terminal.
Carlota Globe, AZ Copper crushing and 2.7
Copper processing plant.
Industrial Coahuila, Mexico New coal preparation plant 2.5
Minera for Plant Pasta de Conchos
Mexico Mine.
Williamette Hawesville, KY Wood chip handling conveyor 1.8
Industries system for expanding paper
mill.
Humboldt Thailand Design approximately 85 1.6
Wedag conveyors and associated
dust collection systems for
cement plants in Thailand.
U.S. Borax Born, CA Engineering and procurement 1.1
services to facilitate
reclaiming and reprocessing
borate ore from tailings
ponds.
</TABLE>
In addition, as of November 30, 1997, R&S was undertaking approximately 120
other projects with annual net sales of less than $1.0 million.
Management believes that targeting projects in the range of $1 million to
$25 million gives R&S two strategic advantages. First, this is a niche of the
mineral processing and material handling markets that generally does not
attract larger firms, permitting R&S to compete with smaller, local and
regional contractors that may lack R&S' experience and capabilities. Second,
by maintaining a larger portfolio of smaller projects, R&S is better able to
manage the risk inherent in its business.
40
<PAGE>
Traditionally, R&S provided its services primarily to the coal industry,
having designed and constructed 8 of the estimated 14 coal preparation plants
built in the United States during the last ten years. Due to R&S's strong
position and reputation as a designer and builder of coal preparation plants,
it has often been requested to execute coal projects internationally. R&S did
undertake international projects when the opportunities were presented,
principally in the area of coal preparation. From the mid-1970's through the
mid-1980's, R&S had built plants in nine countries. Beginning in the early
1990's, R&S initiated a program to broaden its market to include all types of
domestic mineral and metal processing facilities and bulk materials handling
systems. As a result of this program, R&S no longer depends to the same extent
on the U.S. coal mining industry, and now has a broad and diversified customer
base, having executed projects in the aggregates, industrial minerals and base
metal industries over the last ten years. This program has also been successful
in further diversifying the markets of R&S to include international work.
During 1996, approximately 29% of the net sales of R&S were from international
projects.
Sales and Marketing. R&S markets its services through internal marketing and
sales groups located in Chicago and Salt Lake City. R&S management and
engineering staff participate in the process to adequately price and
successfully bid on projects. R&S also secures projects through partnering or
joint bidding arrangements with larger engineering and construction firms or
architectural engineers, particularly in the case of international projects. In
such arrangements, R&S will assume specific responsibility for a particular
component of a larger project. In this regard, R&S has executed projects with
and has ongoing client relationships with Raytheon, Black & Veatch and Bechtel
Power, including occasional joint venture relationships. For example, the
Genwal Resources project in the table set forth above was a joint bid with The
Industrial Company, which provided the construction services to complement the
work of R&S.
Competition. Primary competitors of R&S include Dearborn Midwest Conveyor
(coal and limestone handling), Kilbourn International, Inc. (mining), Mincorp
Engineers and Constructors (precious and base metals), Industrial Resources,
Inc. (coal processing and material handling) and McNally Wellman Co. (coal and
limestone handling). Generally, R&S competes with a large number of specialty
engineering firms on the basis of quality of work performed, strength of
reputation, responsiveness to customer needs, price and ability to meet
deadlines, and R&S seeks to differentiate itself from its competitors with
respect to each of these factors.
Soros Associates, Inc.
Soros, founded in 1955 and acquired by the Company in 1994, specializes in
designing and providing consulting engineering services with respect to marine
bulk and liquid material handling systems. The acquisition of Soros
strengthened the Engineering Services Group's technical expertise in the
development of marine port facilities, and has enabled Soros to begin to expand
its business from its traditional project base of design and consulting
engineering. Soros has designed more than 200 bulk, liquid and general cargo
port facilities, 14 of which were greenfield projects (i.e. start-ups at
unimproved sites). Since 1955, Soros has completed over 640 projects in 70
countries and has received over 20 citations and awards for its engineering
excellence. Soros had net sales of $2.7 million for the twelve months ended
September 30, 1997.
Soros offers a special expertise in offshore terminals, involving bulk
loading and unloading at open sea. Soros has more successful offshore terminal
installations around the world than any other firm, including the first open
sea loading berth at Port Latta, Tasmania; the first multiple oriented loading
berth at Punta Colorada, Argentina and the first open sea continuous unloading
berth at Hsinta, Taiwan. Soros has extensive experience in the engineering of
all types of conveyers, shiploaders, unloaders, railroad yards, railroad and
truck loading and unloading, stackers, reclaimers, tunnels, covered and silo
storage, crushing, screening, drying, bagging, weighing, sampling and
computerized control and data management systems.
Soros' customer base consists of coal companies, port authorities (both
private and municipal) and municipalities. Competition for customers is on the
basis of reputation and perceived value added through the firm's expertise, as
well as price. Soros obtains its projects through reputation, requests for
proposals and local sales agents that build industry contacts. Soros has also
obtained project referrals from R&S.
41
<PAGE>
THE COAL INDUSTRY
Approximately 40% of the Company's consolidated net sales in 1996 were
derived from customers operating primarily in the coal mining industry. The
Engineering Services Group provides the industry with design and construction
management services, Mining Control and Clinch River supply equipment used in
the mining process, and CMI, CSI, Tabor and Norris supply equipment and
component parts used in processing coal.
The United States is the largest coal producer and consumer in the world.
According to preliminary data compiled by the United States Department of
Energy's Energy Information Administration (the "EIA"), United States coal
production totaled approximately 1.1 billion tons in 1996, a 7.6% increase from
the 1.0 billion tons produced in 1995 and a record high. Coal production levels
in 1996 were driven by an unusually large increase in coal consumption for
electricity generation resulting from the combination of increased natural gas
prices, negligible growth in nuclear-powered generation, colder-than-normal
weather, and strong economic growth.
Coal consumption in the United States has experienced generally steady annual
growth over the last ten years attributable to similar growth in the demand
from the electric utility industry, which consumes in excess of 85% of domestic
coal. For 1996, total U.S. coal consumption increased 4.1% over 1995, totaling
approximately 1.0 billion tons for the year. Coal continued to represent the
principal energy source for U.S. utilities through 1996, with coal accounting
for 56.4% of total utility power generation, up from 55.2% in 1995. Over the
last three years through 1996, coal prices have generally remained steady,
except for seasonal variations. 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.
Total domestic recoverable coal reserves are estimated at 263 billion tons,
or 23% of the world's total recoverable reserves. Total world recoverable
reserves 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.
Productivity gains, environmental legislation and a shift in the relative
importance of utility consumption compared to metallurgical and industrial
usage have worked together to exert pressures on the fundamental structure of
the coal industry. According to statistics compiled by the federal government,
the number of operating mines has declined 47% over the last ten years even
though production has increased 31%. During this period, work practice and
technological improvements, as well as the rapid expansion of surface mining in
Wyoming, have allowed production per man day to increase by 95% while industry
employment declined 42%. These productivity gains and resulting excess
productive capacity in most segments of the industry have contributed to the
stability of coal prices in recent years at levels lower than the 1970's and
early 1980's. The reduction in the number of mines has partially offset the
impact of the growing production and technology upgrades on suppliers to the
coal industry such as the Company. Clean air concerns and legislation have
increased consumption of low sulfur products mined in Appalachia and the
western United States, and the Company expects this trend to continue.
SUPPLIES
The Company acquires substantially all of its raw materials from outside
sources. The basic raw materials primarily used in the Manufactured Products
Group are flat sheet metal, coiled wire or rod and various forms of stainless
steel materials. Additionally, the Manufactured Products Group acquires circuit
breakers, components, transformer cores, motors and drive units from outside
sources. The Company subcontracts certain fabrication work to other suppliers.
The Company is dependent on the ability of such fabrication suppliers for
timely delivery, performance and quality specifications. The Engineering
Services Group sources many different types of components in the construction
of plant facilities, which in certain cases are sold directly to the Company's
customer by the selected supplier. These include equipment such as vibrating
screens, centrifuge dryers, flotation units and other finished products. The
Company believes there are numerous sources of supply for the different
materials used in its operations.
42
<PAGE>
FACILITIES
The Company and its businesses conduct operations from the following primary
facilities:
<TABLE>
<CAPTION>
APPROXIMATE
BUSINESS LOCATION PRINCIPAL FUNCTION OWNED/LEASED SQUARE FOOTAGE
-------- -------- ------------------ ------------ --------------
<S> <C> <C> <C> <C>
Elgin Downers Grove, IL Headquarters leased 6,470
Ohio Rod Versailles, IN Manufacturing owned 93,350
Chandler Euclid, OH Manufacturing owned 88,000
Products
Mining Con- Beckley, WV Manufacturing owned 28,825
trols
CMI St. Louis, MO Manufacturing owned 63,295
CSI Raleigh, IL Manufacturing owned 16,166
leased 18,245
Tabor Bluefield, WV Manufacturing owned 44,000
Norris Princeton, WV Manufacturing owned 12,700
Clinch River Tazewell, VA Manufacturing owned 25,400
leased 7,200
R&S Chicago, IL and Office leased 16,200
Salt Lake City, UT Office leased 25,267
Soros Chicago, IL Office leased 5,800
</TABLE>
EMPLOYEES
As of September 30, 1997, the Company had approximately 668 employees
(including approximately 15 temporary employees). Approximately 28 employees
of the Company at CMI's St. Louis, Missouri facility are represented by
District 9 of the International Association of Machinists and Aerospace
Workers ("IAM") and are covered by the 1993-1998 contract between CMI and the
IAM. Approximately eight employees of TranService, Inc., a subsidiary of R&S,
are represented by the United Mine Workers of America ("UMWA") and are covered
by the National Bituminous Coal Wage Agreement of 1993 and expiring in 1998,
as modified by that certain memorandum of understanding dated April 27, 1995
between the UMWA and TranService. The Company believes that its relations with
its employees are generally good.
REGULATORY 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. Stringent and extensive safety and health
standards are imposed by federal law and regulation on the mining industry,
including the equipment used in mining operations (such as that manufactured
by the Manufactured Products Group). The Mine Safety and Health Administration
monitors compliance with these federal laws and regulations. In addition, most
of the states in which the Company sells products or provides services impose
regulations for mine safety and health. The Company periodically reviews its
procedures and policies for compliance with environmental, health and safety
and mining 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 divisions or
subsidiaries.
LEGAL PROCEEDINGS
The Company and its subsidiaries are involved in legal proceedings from time
to time in the ordinary course of its business. As of the date of this
Prospectus, neither the Company nor any of its subsidiaries are a party to any
lawsuit or proceeding which, individually or in the aggregate, in the opinion
of management, is reasonably likely to have a material adverse effect on the
financial condition, results of operation or cash flow of the Company.
In connection with the 1993 leveraged buyout of the Company, Jupiter agreed
to indemnify the Company against various claims and ongoing litigation and
assumed the defense of such litigation. The litigation includes a wrongful
death product liability claim against R&S in connection with an accident at a
work site. Although the Company believes that Jupiter and its insurance
carrier are performing on the indemnity obligations, there can be no assurance
that they will continue to do so or that the Company would successfully
recover on the indemnity in the event of an adverse judgment against R&S or
adverse outcomes in any other proceeding. In any such case, the Company would
bear the cost of defense and any adverse judgment. One or more such adverse
judgments could materially and adversely affect the Company's business,
financial condition, results of operations and debt service capability.
43
<PAGE>
MANAGEMENT
The following table sets forth information regarding the directors and
executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY DIRECTOR SINCE
---- --- ------------------------- --------------
<S> <C> <C> <C>
Fred C. Schulte...... 51 Chairman of the Board, Chief 1988
Executive Officer and Director
Charles D. Hall...... 59 President, Chief Operating 1993
Officer and Director
Wayne J. Conner...... 45 Vice President, Treasurer, Chief 1993
Financial Officer and Director
Lynn C. Batory....... 38 Vice President, Controller and
Secretary
David Hall........... 38 Vice President of Manufacturing
Mort Maurer.......... 80 Director nominee
</TABLE>
A brief description of the employment history of the directors and executive
officers of the Company listed above are set forth below:
Fred C. Schulte is Chairman of the Board, Chief Executive Officer and a
Director of the Company. Mr. Schulte joined the Company as President and CEO in
1988 in connection with the acquisition of the Company by The Jupiter
Corporation. Mr. Schulte had joined The Jupiter Corporation earlier that same
year. From 1986 to 1988, Mr. Schulte served as Vice President-Executive
Department for Santa Fe Southern Pacific at its headquarters in Chicago. From
1976 to 1986, Mr. Schulte was employed with SF Mineral Company (a Santa Fe
Southern Pacific Company) in Albuquerque, New Mexico. From 1974 to 1976, Mr.
Schulte was employed by Kerr McGee Corporation where he held a number of
engineering, operating and management positions in the company's Hard-Minerals
Division. Prior to 1974, Mr. Schulte served for five years in the United States
Air Force as a pilot and operations officer. Mr. Schulte received an Engineer
of Mines degree from the Colorado School of Mines and a Master of Business
Administration degree from Oklahoma City University. Mr. Schulte also serves on
the board of directors of Pegasus Gold, Inc.
Charles D. Hall is President, Chief Operating Officer and a Director of the
Company. Mr. Hall joined the corporate staff of the Company in 1988, serving as
Vice President of Operations prior to being named President in 1997. From 1975
to 1988, Mr. Hall was employed by Ohio Rod, initially as Controller and Chief
Financial Officer and then, in late 1975, as President, a position he held
until 1988. Prior to joining Ohio Rod, Mr. Hall was employed by Walker China in
Bedford Heights, Ohio from 1971 to 1974. Mr. Hall is the father of David Hall,
the Company's Vice President of Manufacturing.
Wayne J. Conner is Vice President, Chief Financial Officer, Treasurer and a
Director of the Company. Mr. Conner joined the Company in 1989 as Vice
President and Chief Financial Officer. From 1985 to 1989, Mr. Conner was
employed by AluChem, Inc. of Cincinnati, Ohio as the Corporate Controller and
Chief Financial Officer. From 1984 to 1985, Mr. Conner served as the Vice
President of Finance and Administration for a start-up computer manual writing
company, Comware, Incorporated. From 1976 to 1984, Mr. Conner was employed by
Ohio Rod as the Controller and Chief Financial Officer. Mr. Conner began his
career at the public accounting firm of Haskins and Sells. Mr. Conner is a
graduate of the University of Cincinnati, College of Business Administration
and is a Certified Public Accountant.
Lynn C. Batory is Vice President, Controller and Secretary of the Company.
Ms. Batory joined the Company in 1983 as an internal auditor performing
operational audits and special projects. Since then, Ms. Batory has
44
<PAGE>
held positions of increasing responsibility including Accounting Manager,
Assistant Controller and her current position of Controller which she attained
1988. In 1993, Ms. Batory was also named Vice President and Secretary. Prior to
joining the Company, Ms. Batory was employed by NICOR, Inc. of Naperville,
Illinois from 1981 to 1983 as a staff accountant providing financial support
for ten mining companies and five marine transportation companies. Ms. Batory
holds a Bachelor of Science degree in Accounting from the University of
Houston.
David Hall is Vice President of Manufacturing. Mr. Hall joined the Company in
1995, and is currently responsible for the operations of the Manufactured
Products Group. From 1984 to 1995, Mr. Hall was employed by Consolidated
Industries of Lafayette, Indiana where he served in various positions of
increasing responsibility including Assistant Controller, Controller, Vice
President of Finance and Administration and, beginning in 1994, General
Manager. Mr. Hall has a Bachelor of Science degree in Accounting from Butler
University. David Hall is the son of Charles D. Hall, President, Chief
Operating Officer and a director of the Company.
Mort Maurer is a nominee to serve as a director of the Company. Mr. Maurer
has over 30 years executive managerial experience at large manufacturing
companies, including Northrop Corporation and RCA. From 1983 to 1987, Mr.
Maurer served as Vice President of Monogram Industries. Mr. Maurer currently
serves as Chairman of the Board of Spaulding Composites, Inc. and since 1987,
Mr. Maurer has been retained as a consultant by Nortek, Inc. Mr. Maurer holds a
Master of Business Administration degree from Pepperdine University and also
holds a Bachelor of Science degree in Mechanical Engineering.
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning compensation of
the Company's Chief Executive Officer and for the four other most highly
compensated officers of the Company having total annual salary and bonus in
excess of $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------------------------
ALL OTHER ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
--------------------------- ---- -------- -------- ----------------
<S> <C> <C> <C> <C>
Fred C. Schulte........................ 1996 $289,406 $195,500 $41,255(1)
Chairman and Chief Executive Officer
Charles D. Hall........................ 1996 $260,466 $195,500 $37,397(1)
President and Chief Operating Officer
Wayne J. Conner........................ 1996 $150,491 $195,500 $26,949(1)
Vice President, Treasurer and Chief
Financial Officer
Lynn C. Batory......................... 1996 $ 96,875 $ 60,000 $10,062(2)
Vice President, Controller and
Secretary
David Hall............................. 1996 $ 97,500 $ 35,000 $10,062(3)
Vice President of Manufacturing
</TABLE>
- --------
(1) Reflects employer contributions to the Company's Profit Sharing Plan (as
defined) and Supplemental Employee Retirement Plan (as defined) and the
value of term life insurance premiums.
(2) Includes employer contributions to the Company's Profit Sharing Plan and
the value of life insurance premiums.
(3) Includes employer contributions to the Company's Profit Sharing Plan.
Profit Sharing Plan
The Company maintains the Elgin National Industries, Inc. Master Savings &
Profit Sharing Plan (the "Profit Sharing Plan"). Generally, all non-union
employees of the Company who have completed one year of service are eligible to
participate in the Profit Sharing Plan. For any plan year, the Company may make
a discretionary contribution to the Profit Sharing Plan, which is allocated to
participants have completed 1,000 hours of service during the year and who are
employed on the last day of the year based on their compensation for that year.
Participants vest in their account balances ratably over five years (in 20
percent increments). Generally, distributions from the Profit Sharing Plan are
made following termination of employment.
45
<PAGE>
Supplemental Employee Retirement Plan
The Company maintains the Elgin National Industries, Inc. Supplemental
Retirement Plan (the "Supplemental Employee Retirement Plan"). Employees are
eligible for participation in this plan if they participate in the Profit
Sharing Plan or the ENI Pension Plan for Employees of Elgin National
Industries, Inc. and Participating Affiliates (the "Pension Plan") and have
been approved for participation by the Board of Directors. The Supplemental
Employee Retirement Plan provides benefits to participants whose full benefits
under the Profit Sharing Plan or the Pension Plan have been limited by certain
provisions of the Internal Revenue Code. Benefits under the Supplemental Plan
are generally payable upon termination of employment.
PENSION PLAN TABLE (A)
<TABLE>
<CAPTION>
REMUNERATION (B) YEARS OF SERVICE
---------------- -----------------------------------------
15 20 25 30 35
------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
$200,000......................... $20,852 $27,802 $34,753 $ 41,703 $ 48,654
$225,000......................... 23,664 31,552 39,440 47,328 55,216
$250,000......................... 26,477 35,302 44,128 52,953 61,779
$300,000......................... 32,102 42,802 53,503 64,203 74,904
$350,000......................... 37,727 50,302 62,878 75,453 88,029
$400,000......................... 43,352 57,802 72,253 86,703 101,154
$450,000......................... 48,977 65,302 81,628 97,953 114,279
$500,000......................... 54,602 72,802 91,003 109,203 127,404
$550,000......................... 60,227 80,302 100,378 120,453 140,529
$600,000......................... 65,852 87,802 109,753 131,703 153,654
</TABLE>
- --------
(a) The above table illustrates the estimated annual retirement benefits
payable to Pension Plan and Supplemental Employee Retirement Plan
participants commencing at age 65 in the form of a single life annuity, not
subject to deduction for social security or other offsets. The above
information is based on the current pension formula for various levels of
compensation and years of service.
(b) A participant's pension benefit is generally based on a percentage of his
salary and bonus for the highest five years of his employment and his years
of credited service. The compensation taken into account under the Pension
Plan for 1997 was limited to $160,000 in accordance with Internal Revenue
Code rules and such limitation may be adjusted periodically in the future
in accordance with Section 401(a)(17) of the Code. Remuneration in the
above table is represented as the highest consecutive five year average
salary. The above table does not reflect the current compensation
limitation under Code Section 401(a)(17) for qualified pension plans,
because the Supplemental Employee Retirement Plan provides benefits for
compensation above the limitation. Credited service under the Pension Plan
as of January 1, 1997 for the named executive officers is as follows: Mr.
Schulte, 8 years; Mr. C. Hall, 23 years; Mr. Conner, 15 years; Ms. Batory,
14 years; and Mr. D. Hall, 1 year.
Employment and Non-Competition Agreements
The Company and each of Messrs. Schulte, C. Hall and Conner entered into
employment and non-competition agreements, with an initial term beginning on
November 5, 1997, and ending on the fifth anniversary thereof (the "Employment
Agreements"). The terms of the new employment contracts relating to base salary
and related increases and annual bonuses are substantially similar to the terms
of the employment agreements negotiated between Senior Management and the
Selling Stockholders that were in effect prior to the Recapitalization
Transactions. The term of the Employment Agreements is subject to annual
renewal after the initial term unless one party gives written notice of non-
renewal to the other party at least 180 days prior to the then current
expiration date. Under the terms of the Employment Agreements, Mr. Schulte will
serve as the Chief Executive Officer and is to receive a base salary at an
annual rate of $303,876 for the remainder of 1997, with annual increases
beginning in 1998 equal to the greater of the change in the applicable consumer
price index or
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<PAGE>
5% per annum; Mr. C. Hall will serve as the President and Chief Operating
Officer and is to receive a base salary at an annual rate of $273,489 for the
remainder of 1997, with annual increases beginning in 1998 equal to the greater
of the change in the applicable consumer price index or 5% per annum; and Mr.
Conner will serve as the Chief Financial Officer and is to receive a base
salary of $158,016, with annual increases beginning in 1998 equal to the
greater of the change in the applicable consumer price index or 5% per annum.
Each of the executive officers is entitled to an annual bonus for 1997 and
later years of 1.5% of the Company's consolidated earnings before interest,
taxes, amortization and the employment agreement bonuses described in this
paragraph, subject to certain adjustments. Each such executive officer is also
entitled to employee benefits and perquisites under various programs, plans and
arrangements maintained by the Company from time to time. The Employment
Agreements contain a confidentiality covenant and a non-competition covenant
that generally applies during the term of employment and for a period of 3
years thereafter.
Each such Employment Agreement will terminate prior to the scheduled
expiration date in the event of the death or disability of the named executive
officer or upon the sale by such named executive officer of his stock in the
Company. In addition, the Company may terminate the employment of any of the
named executive officers for cause (as defined in the agreements, generally
commission of certain felonies, material breaches of duty or breaches of the
non-competition restriction) and any named executive officer may terminate
employment in the event the Company materially breaches the provisions of the
Employment Agreement. Upon such a termination by an executive officer or
termination by the Company without cause, the terminated executive officer will
be entitled to continued payments and benefits for the remainder of the then
current term. Upon the expiration and non-renewal of the Employment Agreement,
the executive officer will receive severance payments for one year thereafter
equal to the executive's base salary, subject to the executive's continued
compliance with the non-competition provisions. Under each of the Employment
Agreements, the Company has the obligation to maintain life insurance covering
each of the named executive officers, with the proceeds thereof to be used to
honor any put rights exercised by the estate of an executive officer, as set
forth below under "Principal Stockholders--Partnership Agreement."
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the capital stock of the Company on a pro forma basis after
consummation of the Recapitalization Transactions by (i) each stockholder
expected to own beneficially more than 5% of the outstanding capital stock of
the Company and (ii) each director or executive officer of the Company and all
directors and executive officers as a group.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK SHARES OF PREFERRED STOCK
BENEFICIALLY OWNED BENEFICIALLY OWNED (B)
---------------------- -----------------------------
NAME NUMBER PERCENT NUMBER PERCENT
- ---- ---------- ----------- --------------- -------------
<S> <C> <C> <C> <C>
SHC Investment Partnership
(a)...................... 6,408.3 100% -- --
Fred C. Schulte (a)....... 2,136.1 33 1/3% 11,621.7 58%
Charles D. Hall........... 2,136.1 33 1/3% 4,165.0 21%
Wayne J. Conner........... 2,136.1 33 1/3% 4,165.0 21%
Lynn C. Batory............ -- -- -- --
David Hall................ -- -- -- --
Mort Maurer............... -- -- -- --
Directors and executive
officers as a group
(6 persons).............. 6,408.3 100% 19,951.7 100%
</TABLE>
- --------
(a) SHC Investment Partnership is a Delaware general partnership (the
"Partnership") in which Messrs. Schulte (through Fern Limited Partnership),
Hall and Conner each have a one-third voting interest. Company common stock
held by the Partnership is to be voted as directed by holders of two-thirds
of the Partnership interests. Mr. Schulte's interest in the Partnership is
held through Fern Limited Partnership, a Delaware limited partnership
controlled by Mr. Schulte. In addition to his one-third voting interest,
Mr. Schulte (also through Fern Limited Partnership) also has a preferred
interest in the Partnership, as discussed below.
(b) Does not include preferred stock units. See "Capitalization."
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<PAGE>
Partnership Agreement. The issued and outstanding common stock of the
Company will be owned by SHC Investment Partnership, a Delaware general
partnership (the "Partnership"). Each of Fern Limited Partnership (a Delaware
limited partnership controlled by Fred C. Schulte), Charles D. Hall and Wayne
J. Conner will hold a 33.33% voting interest in the Partnership. The
management of the Partnership is governed by a partnership agreement (the
"Partnership Agreement") among Fern, Hall and Conner. The Partnership
Agreement requires that partners holding 66.66% of the voting interest in the
Partnership must consent to any vote cast by the Partnership in its capacity
as the sole common stockholder of the Company. Pursuant to the Partnership
Agreement, each partner agrees to cause the Partnership to vote in favor of
the election of Schulte, Hall and Conner as directors of the Company. Because
of the greater number of common shares originally contributed to the
Partnership by Fern, Fern will also hold a non-voting preferred equity
interest in the Partnership. This preferred equity interest is entitled to a
preference in any distributions until the agreed value of the preferred
interest, and all accrued interest thereon, is paid. Generally, the partners
are not permitted to transfer their interests in the Partnership, although the
Partnership Agreement does permit a partner to transfer to family members the
right to receive revenues due on the Partnership interest. In connection with
the Partnership Agreement, each of Fern, Hall and Conner have agreed to grant
each other a right of first refusal with respect to their respective shares of
preferred stock in the Company. The outstanding preferred stock in the Company
will continue to be held by Fern, Hall and Conner individually and will not be
held by the Partnership.
RELATED TRANSACTIONS
Members of Senior Management are indebted to the Company in the aggregate
net amount of $3,633,000, described below.
Fred C. Schulte through his affiliate Fern Limited Partnership, a Delaware
limited partnership controlled by Mr. Schulte, is indebted to the Company in
the amount of $1,000,000 evidenced by a promissory note originally dated
September 24, 1993 from Fern Limited Partnership, and payable to the Company,
bearing interest at 5.35% per annum and maturing on September 24, 2003,
subject to certain mandatory prepayment requirements. Fern Limited Partnership
is also the obligor on another promissory note dated September 24, 1997 and
payable to the Company in the amount of $1,603,000, bearing interest at 5.35%
per annum and maturing on September 24, 2003. This obligation is offset by two
promissory notes from the Company and GC Thorsen, Inc., a former affiliate and
payable to Mr. Schulte in the aggregate amount of $1,603,000 and bearing the
same 5.35% percent interest rate and September 24, 2003 maturity date. On the
Issue Date, the maturity date of each of these notes was extended until after
the maturity date of the Notes.
Charles D. Hall is indebted to the Company in the amount of $516,500
evidenced by a promissory note, dated September 24, 1993, bearing interest at
5.00% per annum and maturing on September 24, 2000, subject to certain
mandatory prepayment requirements. On the Issue Date, the maturity date of
such note was extended until after the maturity date of the Notes.
Wayne J. Conner is indebted to the Company in the amount of $516,500
evidenced by a promissory note dated September 24, 1993 bearing interest at
5.00% per annum and maturing on September 24, 2000, subject to certain
mandatory prepayment requirements. On the Issue Date, the maturity date of
such note was extended until after the maturity date of the Notes.
In late December, 1997, the Company loaned members of Senior Management an
aggregate of $1,600,000, to be repaid pursuant to ten year promissory notes
bearing interest at the rate of 6.31% per annum, with principal and accrued
interest due at maturity.
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<PAGE>
DESCRIPTION OF SENIOR CREDIT FACILITY
Bank of America National Trust and Savings Association ("Bank of America")
has provided the Company with a three-year Senior Credit Facility. The Senior
Credit Facility provides for borrowings of up to $20.0 million in aggregate
principal amount, which amount includes a letter of credit subfacility of up
to $5.0 million. The Company is currently negotiating with Bank of America to
increase the letter of credit subfacility to $7.0 million. The maximum amount
available under the Senior Credit Facility, however, is further subject to a
monthly borrowing base limitation of 85% of eligible accounts receivable of
the Manufactured Products Group and 50% of eligible accounts receivable of the
Engineering Services Group and 60% of eligible inventory. The Company's
borrowing availability is also reduced by outstanding letters of credit. The
Company plans to use the Senior Credit Facility for working capital, capital
expenditures and letters of credit.
Interest is payable on borrowings at one or more variable rates determined
by reference to LIBOR plus 1.50%. The Company pays a fee equal to 0.30% per
annum on the unused amount of the Senior Credit Facility. For letters of
credit, the Company pays an issuance fee of 0.25% of the amount of each letter
of credit plus a fee in an amount equal to 1.50% per annum times the daily
average of the amount of outstanding letters of credit.
The Senior Credit Facility contains certain covenants limiting, among other
things, the Company's and each Subsidiary's ability to pay cash dividends or
make other distributions, change its business, merge, consolidate or dispose
of assets, incur liens, agree to negative pledges, make loans and investments,
incur indebtedness, make capital expenditures, make certain amendments to the
Indenture and engage in certain transactions with affiliates. The Senior
Credit Facility also contains financial covenants that require the Company to
meet a maximum funded debt to cash flow ratio, minimum interest coverage
ratio, an underbillings ratio and a minimum fixed charge coverage ratio.
The Senior Credit Facility contains events of default customary for
facilities of its type, including without limitation, the Company's failure to
pay principal, interest, fees or other amounts when due; the Company's breach
of any covenants, representations or warranties; cross-default and cross
acceleration; bankruptcy, insolvency or similar events involving the Company
or the Subsidiaries; the unenforceability of any of the agreements or liens
securing payment of the obligations under the Senior Credit Facility; and the
occurrence or existence of any event or circumstance which has a material
adverse effect upon the Company.
Loans and letters of credit, if any, under the Company's Senior Credit
Facility are guaranteed by its current and future material domestic
Subsidiaries, which loans, letters of credit and guarantees are secured by a
first perfected security interest in the inventory and accounts receivable of
the Company and its current and future material domestic Subsidiaries, as well
as by a pledge of the capital stock of the material Subsidiaries (limited to
65% of the capital stock of foreign Subsidiaries). Upon the occurrence and
continuation of a default under the Senior Credit Facility, the Company has
also agreed to pledge the property, plant and equipment of the Company and its
current and future Subsidiaries.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 23,678 shares of
class A voting common stock, $.01 par value, of which 6,408.3 shares are issued
and outstanding, and 550,000 shares of preferred stock, $1.00 par value, of
which 19,951.7 shares are issued and outstanding.
Each holder of shares of common stock is entitled to one vote per share on
all matters to be voted on by stockholders. The holders of common stock are
entitled to dividends and other distributions if, as and when declared by the
Board of Directors out of assets legally available therefor, subject to
restrictions, if any, imposed by indebtedness outstanding from time to time.
Upon the liquidation, dissolution or winding up of the Company, the holders of
shares of common stock would be entitled to share ratably in the distribution
of the Company's assets.
Holders of preferred stock have the following dividend, redemption, voting
and liquidation rights:
Dividends on the preferred stock accrue cumulatively during each fiscal
quarter at the rate of 10% per annum on the liquidation value ($100 per share).
Dividends are payable as and when declared by the Board of Directors.
The preferred stock is mandatorily redeemable on December 31, 2007, provided
that no redemption shall be permitted during any period that the Notes remain
outstanding. The redemption price equals the liquidation value ($100 per share)
plus all accrued and unpaid dividends thereon. Additionally, the Company at its
option may, but is not required to, redeem all or any portion of the preferred
stock then outstanding at the foregoing redemption price. No redemption shall
be permitted during any period that the Notes remain outstanding.
Holders of the preferred stock have no voting rights with respect to general
corporate matters except as provided by law and as follows. The Company can not
amend, alter or repeal any of the preferences, special rights or other powers
of the preferred stock which would affect adversely the preferred stock without
the written consent or affirmative vote of the holders of at least two-thirds
of the then outstanding shares of preferred stock.
Holders of preferred stock are entitled to a preference over of holders of
common stock on liquidation in the amount of $100 per share plus all accrued
and unpaid dividends thereon.
The preferred stock units are not capital stock but have substantially the
same contractual rights and preferences as the preferred stock. See Note 12 of
Notes to Consolidated Financial Statements.
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<PAGE>
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Exchange Offer is being made by the Company to satisfy its obligations
pursuant to the Registration Rights Agreement. See "--Registration Rights
Agreement."
The Company is making the Exchange Offer in reliance upon the position of
the staff of the Commission set forth in certain no-action letters addressed
to other parties in other transactions. However, the Company has not sought
its own no-action letter and there can be no assurance that the staff of the
Commission would make a similar determination with respect to the Exchange
Offer as in such other circumstances. Based on these interpretations by the
staff of the Commission, the New Notes issued pursuant to the Exchange Offer
may be offered for resale, resold and otherwise transferred by holders thereof
(other than (i) any such holder that is an "affiliate" of the Company within
the meaning of Rule 405 under the Securities Act; (ii) an Initial Purchaser
who acquired the Old Notes directly from the Company solely in order to resell
pursuant to Rule 144A of the Securities Act or any other available exemption
under the Securities Act; or (iii) a broker-dealer who acquired the Old Notes
as a result of market making or other trading activities) without compliance
with the registration and prospectus delivery requirements of the Securities
Act, provided that such New Notes are acquired in the ordinary course of such
holder's business and such holder is not participating and has no arrangement
or understanding with any person to participate in a distribution (within the
meaning of the Securities Act) of such New Notes. Any Holder who tenders Old
Notes in the Exchange Offer for the purpose of participating in a distribution
of the New Notes could not rely on such interpretations by the staff of the
Commission and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction, unless such sale is made pursuant to an exemption from such
requirements.
Holders of Old Notes not tendered will not have any further registration
rights and the Old Notes not exchanged will continue to be subject to certain
restrictions on transfer. Accordingly, the liquidity of the markets for the
Old Notes could be adversely affected.
NEITHER THE BOARD OF DIRECTORS OF THE COMPANY NOR THE COMPANY MAKES ANY
RECOMMENDATION TO HOLDERS OF OLD NOTES AS TO WHETHER TO TENDER OR REFRAIN FROM
TENDERING ALL OR ANY PORTION OF THEIR OLD NOTES PURSUANT TO THE EXCHANGE
OFFER. IN ADDITION, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH
RECOMMENDATION. HOLDERS OF OLD NOTES MUST MAKE THEIR OWN DECISION WHETHER TO
TENDER PURSUANT TO THE EXCHANGE OFFER AND, IF SO, THE AGGREGATE PRINCIPAL
AMOUNT OF OLD NOTES TO TENDER AFTER READING THIS PROSPECTUS AND THE LETTER OF
TRANSMITTAL AND CONSULTING THEIR ADVISERS, IF ANY, BASED ON THEIR OWN
FINANCIAL POSITION AND REQUIREMENTS.
REGISTRATION RIGHTS AGREEMENT
In connection with the issuance of the Old Notes, the Company entered into
the Registration Rights Agreement with the Initial Purchasers of the Old
Notes.
The Company, the Guarantors and the Initial Purchasers entered into the
Registration Rights Agreement on the Closing Date. Pursuant to the
Registration Rights Agreement, the Company agreed to file with the Commission
the Exchange Offer Registration Statement on the appropriate form under the
Securities Act with respect to the New Notes. Upon the effectiveness of the
Exchange Offer Registration Statement, the Company will offer to the Holders
of Transfer Restricted Securities pursuant to the Exchange Offer who are able
to make certain representations the opportunity to exchange their Transfer
Restricted Securities for New Notes. If (i) the Company is not required to
file the Exchange Offer Registration Statement or permitted to consummate the
Exchange Offer because the Exchange Offer is not permitted by applicable law
or Commission policy or (ii) any
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<PAGE>
holder of Transfer Restricted Securities notifies the Company in writing 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) it may not resell the New Notes acquired by it in the Exchange
Offer to the public without delivering a prospectus and the prospectus
contained in the Exchange Offer Registration Statement is not appropriate or
available for such resales or (C) that it is a broker-dealer and owns Old
Notes acquired directly from the Company or an affiliate of the Company, the
Company will file with the Commission a Shelf Registration Statement to cover
resales of the New Notes by the Holders thereof who satisfy certain conditions
relating to the provision of information in connection with the Shelf
Registration Statement. The Company will use its reasonable best efforts to
cause the applicable registration statement to be declared effective as
promptly as practicable by the Commission. For purposes of the foregoing,
"Transfer Restricted Securities" means each Old Note until (i) the date on
which such Note has been exchanged by a person other than a broker-dealer for
an Exchange Note in the Exchange Offer, (ii) following the exchange by a
broker-dealer in the Exchange Offer of an Old Note for a New Note, the date on
which such Exchange 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 Exchange Offer Registration Statement, (iii) the date on which such New
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 Note is distributed to the public pursuant to Rule 144 under the
Securities Act.
The Registration Rights Agreement provides that (i) the Company will file an
Exchange Offer Registration Statement with the Commission on or prior to 60
days after the Closing Date, (ii) the Company will use its reasonable best
efforts to have the Exchange Offer Registration Statement declared effective
by the Commission on or prior to 150 days after the Closing Date, (iii) unless
the Exchange Offer would not be permitted by applicable law or Commission
policy, the Company will commence the Exchange Offer and use its best efforts
to issue on or prior to 30 business days after the date on which the Exchange
Offer Registration Statement was declared effective by the Commission, New
Notes in exchange for all Old Notes tendered prior thereto in the Exchange
Offer and (iv) if obligated to file the Shelf Registration Statement, the
Company will use its reasonable best efforts to file the Shelf Registration
Statement with the Commission on or prior to 30 days after such filing
obligation arises and to cause the Shelf Registration Statement to be declared
effective by the Commission on or prior to 90 days after such obligation
arises. During any consecutive 365-day period, the Company will have the
ability to suspend the availability of the Shelf Registration Statement for up
to two periods of up to 45 consecutive days, but no more than an aggregate of
60 days during any 365-day period. If (a) the Company fails to file any of the
Registration Statements required by the Registration Rights Agreement on or
before the latest date specified for such filing, (b) any of such Registration
Statements is not declared effective by the Commission on or prior to the
latest date specified for such effectiveness (the "Effectiveness Target
Date"), (c) the Company fails to consummate the Exchange Offer within 30
business days after the Effectiveness Target Date with respect to the Exchange
Offer Registration Statement or (d) the Shelf Registration Statement or the
Exchange Offer Registration Statement is declared effective but thereafter
ceases to be effective in connection with resales of Transfer Restricted
Securities during the periods specified in the Registration Rights Agreement
(each such event referred to in clauses (a) through (d) above, a "Registration
Default"), then the Company will pay Liquidated Damages to each Holder of
Notes, with respect to the first 90-day period immediately following the
occurrence of the first Registration Default in an amount equal to $.05 per
week per $1,000 principal amount of Notes held by such Holder. The amount of
the Liquidated Damages will increase by an additional $.05 per week per $1,000
principal amount of Notes with respect to each subsequent 90-day period until
all Registration Defaults have been cured, up to a maximum amount of
Liquidated Damages of $.25 per week per $1,000 principal amount of Notes. All
accrued Liquidated Damages will be paid by the Company on each Damages Payment
Date (as defined in the Indenture) 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 Notes will be required to make certain representations to the
Company (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and will be required to deliver
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<PAGE>
information to be used in connection with any Shelf Registration Statement and
to provide comments on, and be named in, the Shelf Registration Statement
within the time periods set forth in the Registration Rights Agreement in
order to have their Notes included in any Shelf Registration Statement and
benefit from the provisions regarding Liquidated Damages set forth above.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified
in its entirety by reference to, all the provisions of the Registration Rights
Agreement, copies of which are filed as exhibits to the Registration Statement
of which this Prospectus constitutes a part.
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal, which together constitute the
Exchange Offer, the Company will accept for exchange Old Notes which are
properly tendered on or prior to the Expiration Date and not withdrawn as
permitted below. As used herein, the term "Expiration Date" means 5:00 p.m.,
New York City time, on , 1998; provided, however, that if the
Company, in its sole discretion, has extended the period of time for which the
Exchange Offer is open, the term "Expiration Date" means the latest time and
date to which the Exchange Offer is extended. The Company may extend the
Exchange Offer at any time and from time to time by giving oral or written
notice to the Exchange Agent and by timely public announcement. Without
limiting the manner in which the Company may choose to make any public
announcement and subject to applicable law, the Company shall have no
obligation to publish, advertise or otherwise communicate any such public
announcement other than by issuing a release to an appropriate news agency.
During any extension of the Exchange Offer, all Old Notes previously tendered
pursuant to the Exchange Offer will remain subject to the Exchange Offer.
As of the date of this Prospectus, $85,000,000 aggregate principal amount of
Old Notes is outstanding. This Prospectus, together with the Letter of
Transmittal, is first being sent on or about , 1998, to all Holders
of Old Notes known to the Company. The Company's obligation to accept Old
Notes for exchange pursuant to the Exchange Offer is subject to certain
conditions as set forth below under "--Certain Conditions to the Exchange
Offer."
The terms of the New Notes and the Old Notes are identical in all material
respects, except for certain transfer restrictions and registration rights
relating to the Old Notes and rights to receive Liquidated Damages. See "--
Registration Rights Agreement." The Old Notes were, and the New Notes will be,
issued under the Indenture and all such Notes are entitled to the benefits of
the Indenture.
Old Notes tendered in the Exchange Offer must be in denominations of
principal amount of $1,000 and any integral multiple thereof. Any Old Notes
not accepted for exchange for any reason will be returned without expense to
the tendering Holder thereof as promptly as practicable after the expiration
or termination of the Exchange Offer.
The Company expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Old Notes not theretofore accepted
for exchange, upon the occurrence of any of the conditions of the Exchange
Offer specified below under "--Certain Conditions to the Exchange Offer." The
Company will give oral or written notice of any amendment, nonacceptance or
termination to the Holders of the Old Notes as promptly as practicable. Any
amendment to the Exchange Offer will not limit the right of Holders to
withdraw tendered Old Notes prior to the Expiration Date. See "--Withdrawal
Rights."
PROCEDURES FOR TENDERING OLD NOTES
The tender to the Company of Old Notes by a Holder thereof as set forth
below and the acceptance thereof by the Company will constitute a binding
agreement between the tendering Holder and the Company upon the
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<PAGE>
terms and subject to the conditions set forth in this Prospectus and in the
accompanying Letter of Transmittal. Except as set forth below, a Holder who
wishes to tender Old Notes for exchange pursuant to the Exchange Offer must
transmit a properly completed and duly executed Letter of Transmittal,
including all other documents required by such Letter of Transmittal, to the
Exchange Agent at the proper address set forth below under
"--Exchange Agent" on or prior to the Expiration Date. In addition, either (i)
certificates for such Old 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 Old Notes, if such procedure is
available, into the Exchange Agent's account at The Depository Trust Company
(the "Book-Entry Transfer Facility") pursuant to the procedure for book-entry
transfer described below, must be received by the Exchange Agent prior to the
Expiration Date; or (iii) the Holder must comply with the guaranteed delivery
procedures described below. THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF
THE HOLDERS. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED
MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF
TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed unless the Old Notes surrendered for exchange
pursuant thereto are tendered (i) by a registered Holder of the Old Notes 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 (as defined below). In the event that signatures on
a Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantees must be by 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 (collectively,
"Eligible Institutions"). If Old Notes are registered in the name of a person
other than the signer of the Letter of Transmittal, the Old Notes surrendered
for exchange must be endorsed by, or be accompanied by, a written instrument
or instruments of transfer or exchange, in satisfactory form as determined by
the Company in its sole discretion, duly executed by the registered Holder
with the signature thereon guaranteed by an Eligible Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined
by the Company in its sole discretion, which determination shall be final and
binding. The Company reserves the absolute right to reject any and all tenders
of any particular Old Notes not properly tendered or to not accept any
particular Old Notes which acceptance might, in the judgment of the Company or
its counsel, be unlawful. The Company also reserves the absolute right to
waive any defects or irregularities or conditions of the Exchange Offer as to
any particular Old Notes either before or after the Expiration Date (including
the right to waive the ineligibility of any Holder who seeks to tender Old
Notes in the Exchange Offer). The interpretation of the terms and conditions
of the Exchange Offer as to any particular Old Notes either before or after
the Expiration Date (including the Letter of Transmittal and the instructions
thereto) by the Company shall be final and binding on all parties. Unless
waived, all defects or irregularities in connection with tenders of Old Notes
for exchange must be cured within such reasonable period of time as the
Company shall determine. None of the Company, either Exchange Agent nor any
other person shall be under any duty to give notification of any defect or
irregularity with respect to any tender of Old Notes for exchange, nor shall
any of them incur any liability for failure to give such notification.
If the Letter of Transmittal is signed by a person or persons other than the
registered Holder or Holders of Old Notes, such Old Notes must be endorsed or
accompanied by appropriate powers of attorney, in either case signed exactly
as the name or names of the registered Holder or Holders that appear on the
Old Notes.
If the Letter of Transmittal or any Old Notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of a corporation or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and, unless waived by
the Company, proper evidence satisfactory to the Company of their authority to
so act must be submitted.
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<PAGE>
By tendering, each Holder will represent to the Company that, among other
things, the New Notes acquired pursuant to the Exchange Offer are being
obtained in the ordinary course of business of the person receiving such New
Notes, whether or not such person is the Holder, and such person has no
arrangement with any person to participate in the distribution of the New
Notes. If any Holder or any such other person is an "affiliate," as defined
under Rule 405 of the Securities Act, of the Company, is engaged in or intends
to engage in or has an arrangement or understanding with any person to
participate in a distribution of such New Notes to be acquired pursuant to the
Exchange Offer, or acquired the Old Notes as a result of market making or
other trading activities, such Holder or any such other person (i) could not
rely on the applicable interpretations of the staff of the Commission; and
(ii) must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction. Each broker-
dealer that receives New Notes for its own account pursuant to the Exchange
Offer must acknowledge that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such New
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.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly after the Expiration Date, all Old Notes
properly tendered and will issue the New Notes promptly after acceptance of
the Old Notes. See "--Certain Conditions to the Exchange Offer." For purposes
of the Exchange Offer, the Company shall be deemed to have accepted properly
tendered Old Notes for exchange when, as and if the Company has given oral or
written notice thereof to the Exchange Agent, with written confirmation of any
oral notice to be given promptly thereafter.
For each Old Note accepted for exchange, the Holder of such Old Note will
receive a New Note having a principal amount equal to that of the surrendered
Old Note. Accordingly, registered Holders of New Notes on the relevant record
date for the first interest payment date or dividend payment date following
the consummation of the Exchange Offer will receive interest accruing from the
most recent date to which interest has been paid on the Old Notes, or, if no
interest has been paid on the Old Notes, from November 5, 1997. Old Notes
accepted for exchange will cease to accrue interest from and after the date of
consummation of the Exchange Offer. Holders of Old Notes whose Old Notes are
accepted for exchange will not receive any payment in respect of accrued
interest on such Old Notes otherwise payable on any interest payment date
which occurs on or after consummation of the Exchange Offer.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of (i) certificates for such Old Notes or a timely Book-
Entry Confirmation of such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility; (ii) a properly completed and duly executed
Letter of Transmittal; and (iii) all other required documents. If any tendered
Old Notes are not accepted for any reason set forth in the terms and
conditions of the Exchange Offer, or if Old Notes are submitted for a greater
amount than the Holder desires to exchange, such unaccepted or nonexchanged
Old Notes will be returned without expense to the tendering Holder thereof
(or, in the case of Old Notes tendered by book-entry transfer into the
applicable Exchange Agent's account at the Book-Entry Transfer Facility
pursuant to the book-entry procedures described below, such nonexchanged Old
Notes will be credited to an account maintained with such Book-Entry Transfer
Facility) designated by the tendering Holder as promptly as practicable after
the expiration or termination of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make requests to establish accounts with respect to
the Old Notes at the Book-Entry Transfer Facility for purposes of the Exchange
Offer within two business days after the date of this Prospectus, and any
financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old Notes into the applicable
Exchange Agent's account at the Book-Entry Transfer Facility in accordance
with such Book-
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Entry Transfer Facility's procedures for transfer. However, although delivery
of Old Notes may be effected through book-entry transfer at the Book-Entry
Transfer Facility, the Letter of Transmittal or facsimile thereof, with any
required signature guarantees and any other required documents, must, in any
case, be transmitted to and received by the applicable Exchange Agent at the
address set forth below under "--Exchange Agent" on or prior to the Expiration
Date or the guaranteed delivery procedures described below must be complied
with.
GUARANTEED DELIVERY PROCEDURES
If a registered Holder of the Old Notes desires to tender such Old Notes and
the Old Notes are not immediately available, or time will not permit such
Holder's Old Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if (i) the tender is
made through an Eligible Institution; (ii) prior to the Expiration Date, the
Exchange Agent has received from such Eligible Institution a properly
completed and duly executed Letter of Transmittal (or a facsimile thereof) and
Notice of Guaranteed Delivery, substantially in the form of the corresponding
exhibit to the Registration Statement of which this Prospectus constitutes a
part (by telegram, telex, facsimile transmission, mail or hand delivery),
setting forth the name and address of the Holder of Old Notes and the amount
of Old Notes tendered, stating that the tender is being made thereby and
guaranteeing that within three New York Stock Exchange ("NYSE") trading days
after the date of execution of the Notice of Guaranteed Delivery, the
certificates for all physically tendered Old Notes, 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) the certificates for
all physically tendered Old Notes, in proper form for transfer, or a Book-
Entry Confirmation, as the case may be, and all other documents required by
the Letter of Transmittal, are received by the Exchange Agent within three
NYSE trading days after the date of execution of the Notice of Guaranteed
Delivery.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to the Expiration
Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent at the proper address set forth below under "--
Exchange Agent." Any such notice of withdrawal must specify the name of the
person having tendered the Old Notes to be withdrawn, identify the Old Notes
to be withdrawn (including the amount of such Old Notes), and (where
certificates for Old Notes have been transmitted) specify the name in which
such Old Notes are registered, if different from that of the withdrawing
Holder. If certificates for Old Notes have been delivered or otherwise
identified to the Exchange Agent, then, prior to the release of such
certificates the withdrawing Holder must also submit the serial numbers of the
particular certificates to be withdrawn and a signed notice of withdrawal with
signatures guaranteed by an Eligible Institution unless such Holder is an
Eligible Institution. If Old Notes have been tendered pursuant to the
procedure for book-entry transfer described above, any notice of withdrawal
must specify the name and number of the account at the Book-Entry Transfer
Facility to be credited with the withdrawn Old Notes and otherwise comply with
the procedures of such facility. All questions as to the validity, form and
eligibility (including time of receipt) of such notices will be determined by
the Company, whose determination shall be final and binding on all parties.
Any Old Notes so withdrawn will be deemed not to have been validly tendered
for exchange for purposes of the Exchange Offer. Any Old Notes which have been
tendered for exchange but which are not exchanged for any reason will be
returned to the Holder thereof without cost to such Holder (or, in the case of
Old Notes tendered by book-entry transfer into the Exchange Agent's account at
the Book-Entry Transfer Facility pursuant to the book-entry transfer
procedures described above, such Old Notes will be credited to an account with
such Book-Entry Transfer Facility specified by the Holder) as soon as
practicable after withdrawal, rejection of tender or termination of the
Exchange Offer. Properly withdrawn Old Notes may be retendered by following
one of the procedures described above under "--Procedures for Tendering Old
Notes" at any time on or prior to the Expiration Date.
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<PAGE>
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, the Company shall
not be required to accept for exchange, or to issue New Notes in exchange for,
any Old Notes and may terminate or amend the Exchange Offer, if at any time
before the acceptance of such Old Notes for exchange or the exchange of the
New Notes for such Old Notes, any of the following events shall occur:
(a) there shall be threatened, instituted or pending any action or
proceeding before, or any injunction, order or decree shall have been
issued by, any court or governmental agency or other governmental
regulatory or administrative agency or commission, (i) seeking to restrain
or prohibit the making or consummation of the Exchange Offer or any other
transaction contemplated by the Exchange Offer, or assessing or seeking any
damages as a result thereof; or (ii) resulting in a material delay in the
ability of the Company to accept for exchange or exchange some or all of
the Old Notes pursuant to the Exchange Offer; or any statute, rule,
regulation, order or injunction shall be sought, proposed, introduced,
enacted, promulgated or deemed applicable to the Exchange Offer or any of
the transactions contemplated by the Exchange Offer by any government or
governmental authority, domestic or foreign, or any action shall have been
taken, proposed or threatened, by any government, governmental authority,
agency or court, domestic or foreign, that in the sole judgment of the
Company might directly or indirectly result in any of the consequences
referred to in clauses (i) or (ii) above or, in the sole judgment of the
Company, might result in the holders of New Notes having obligations with
respect to resales and transfers of New Notes which are greater than those
described in the interpretation of the Commission referred to on the cover
page of this Prospectus, or would otherwise make it inadvisable to proceed
with the Exchange Offer; or
(b) there shall have occurred (i) any general suspension of or general
limitation on prices for, or trading in, securities on any national
securities exchange or in the over-the-counter market; (ii) any limitation
by any governmental agency or authority which may adversely affect the
ability of the Company to complete the transactions contemplated by the
Exchange Offer; (iii) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States or any
limitation by any governmental agency or authority which adversely affects
the extension of credit; or (iv) a commencement of a war, armed hostilities
or other similar international calamity directly or indirectly involving
the United States, or, in the case of any of the foregoing existing at the
time of the commencement of the Exchange Offer, a material acceleration or
worsening thereof; or
(c) any change (or any development involving a prospective change) shall
have occurred or be threatened in the business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects of the Company and its subsidiaries taken as a whole that, in the
reasonable judgment of the Company, is or may be adverse to the Company, or
the Company shall have become aware of facts that, in the sole judgment of
the Company, have or may have an adverse effect on the value of the Old
Notes or the New Notes.
Holders of Old Notes will have registration rights and the right to
Liquidated Damages as described above under "--Registration Rights; Liquidated
Damages" if the Company fails to consummate the Exchange Offer.
To the Company's knowledge as of the date of this Prospectus, none of the
above events has occurred.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any
such condition or may be waived by the Company in whole or in part at any time
and from time to time in its sole discretion. The failure by the Company at
any time to exercise any of the foregoing rights shall not be deemed a waiver
of any such right and each such right shall be deemed an ongoing right which
may be asserted at any time and from time to time.
In addition, the Company will not accept for exchange any Old Notes
tendered, and no New Notes will be issued in exchange for any such Old Notes,
if at such time any stop order shall be threatened or in effect with respect
to the Registration Statement of which this Prospectus constitutes a part or
the qualification of the Indentures under the Trust Indenture Act (as defined
herein).
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EXCHANGE AGENT
Norwest Bank Minnesota, National Association has been appointed as the
Exchange Agent for the Notes for the Exchange Offer. All executed Letters of
Transmittal and Notices of Guaranteed Delivery should be directed to the
Exchange Agent at the addresses set forth below. Questions and requests for
assistance, requests for additional copies of this Prospectus or of the Letter
of Transmittal and requests for Notices of Guaranteed Delivery should be
directed to the Exchange Agent addressed as follows:
Deliver to: Norwest Bank Minnesota, National Association, Exchange Agent:
By Registered or Certified Mail: By Hand Delivery:
Norwest Bank Minnesota, National Norwest Bank Minnesota, National
Association Association
P.O. Box 1517 Northstar East 12th Floor
Minneapolis, Minnesota 55480-1517 608 2nd Avenue
Attention: Corporate Trust Operations Minneapolis, Minnesota 55479-0113
Attention: Corporate Trust Operations
By Overnight Delivery: By Facsimile:
Norwest Bank Minnesota, National (612) 667-4927
Association Confirm by Telephone:
Norwest Center (612) 667-9764
6th and Marquette Avenue
Minneapolis, Minnesota 55479-0069
Attention: Corporate Trust Operations
DELIVERY OF A LETTER OF TRANSMITTAL FOR NOTES TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS
SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF
TRANSMITTAL.
FEES AND EXPENSES
The Company will not make any payment to brokers, dealers or others
soliciting acceptances of the Exchange Offer.
The Company will, however, pay the Exchange Agent reasonable and customary
fees for its services and will reimburse it for reasonable out-of-pocket
expenses in connection therewith. The Company will 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 and related
documents to the beneficial owners of Old Notes and in handling tenders for
their customers. The expenses to be incurred in connection with the Exchange
Offer, including the fees and expenses of the Exchange Agent and printing,
accounting, registration, and legal fees, will be paid by the Company.
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to pay
any transfer taxes in connection therewith, except that holders who instruct
the Company to register New Notes in the name of, or request that Old Notes
not tendered or not accepted in the Exchange Offer be returned to, a person
other than the registered tendering holder will be responsible for the payment
of any applicable transfer tax thereon.
CONSEQUENCES OF NOT EXCHANGING OLD NOTES
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to exemptions from, or
in transactions not subject to, the registration requirements of the
Securities Act and applicable state securities laws. In general, the Old 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. The Company does not
currently anticipate that it will register the Old Notes under the Securities
Act. Based upon no-action letters issued by the
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<PAGE>
staff of the Commission to third parties, the Company believes the New Notes
issued pursuant to the Exchange Offer in exchange for the Old Notes may be
offered for resale, resold or otherwise transferred by a Holder thereof (other
than any (i) Holder which is an "affiliate" of the Company within the meaning
of Rule 405 under the Securities Act); (ii) an Initial Purchaser who acquired
the Old Notes directly from the Company solely in order to resell pursuant to
Rule 144A of the Securities Act or any other available exemption under the
Securities Act; or (iii) a broker-dealer who acquired the Old Notes as a
result of market making or other trading activities) without compliance with
the registration and prospectus delivery requirements of the Securities Act,
provided that such New Notes are acquired in the ordinary course of such
holder's business and such holder is not participating and has no arrangement
or understanding with any person to participate in a distribution (within the
meaning of the Securities Act) of such New Notes. However, the Company has not
sought its own no-action letter and there can be no assurance that the staff
of the Commission would make a similar determination with respect to the
Exchange Offer as in such other circumstances. Each Holder, other than a
broker-dealer, must acknowledge that it is not engaged in, and does not intend
to engage in, a distribution of New Notes, and has no arrangement or
understanding to participate in a distribution of New Notes. If any Holder is
an affiliate of the Company, is engaged in or intends to engage in or has any
arrangement or understanding with respect to the distribution of the New Notes
to be acquired pursuant to the Exchange Offer, or acquired the Old Notes as a
result of market-making or other trading activities, such Holder (i) could not
rely on the relevant determinations of the staff of the Commission; and (ii)
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any secondary resale transaction. Each
broker-dealer that receives New Notes for its own account in exchange for Old
Notes must acknowledge that such Old Notes were acquired by such broker-dealer
as a result of market-making activities or other trading activities and that
it will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such New Notes. See "Plan of Distribution." In
addition, to comply with the securities laws of certain jurisdictions, if
applicable, the New Notes may not be offered or sold unless they have been
registered or qualified for sale in such jurisdiction or an exemption from
registration or qualification is available and is complied with. The Company
has agreed to register or qualify the sale of the New Notes in such
jurisdictions only in limited circumstances and subject to certain conditions.
ACCOUNTING TREATMENT
The exchange of the New Notes for the Old Notes will have no impact on the
Company's accounting records on the date of the exchange. Accordingly, no gain
or loss for accounting purposes will be recognized. Expenses of the Exchange
Offer and expenses related to the Old Notes will be amortized, pro rata, over
the term of the New Notes.
DESCRIPTION OF NEW NOTES
GENERAL
The Old Notes were, and the New Notes will be, issued pursuant to an
Indenture dated November 5, 1997 (the "Indenture") by and among the Company,
the Guarantors and Norwest Bank Minnesota, National Association, as trustee
(the "Trustee"). The terms of the Notes include those stated in the Indenture
and those made part of the Indenture by reference to the Trust Indenture Act
of 1939 (the "Trust Indenture Act"). The Notes are subject to all such terms,
and holders of 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. Copies of the proposed form of Indenture and Registration
Rights Agreement are available as set forth below under "Available
Information." 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 Elgin National Industries, Inc. and
not to any of its Subsidiaries.
The New Notes will be senior unsecured obligations of the Company and will
rank pari passu in right of payment with all current and future unsecured and
unsubordinated Indebtedness of the Company and senior to
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<PAGE>
all subordinated Indebtedness of the Company issued in the future, if any. The
Company and its domestic Subsidiaries are parties to the Senior Credit
Facility, and all borrowings under the Senior Credit Facility are secured by a
first priority Lien on the accounts receivable and inventory of the Company and
its Subsidiaries and capital stock of its Subsidiaries. As of September 30,
1997, on a pro forma basis after giving effect to the Recapitalization
Transactions, no Indebtedness would have been outstanding under the Senior
Credit Facility (except $2.0 million of letters of credit reimbursement
obligations). The Indenture will permit additional borrowings under the Senior
Credit Facility in the future. See "Risk Factors--Unsecured Nature of the
Notes--Effective Subordination."
The operations of the Company are conducted in substantial part through its
Subsidiaries and, therefore, the Company is dependent in substantial part upon
the cash flow of its Subsidiaries to meet its obligations, including its
obligations under the Notes.
As of the date of the Indenture, all of the Company's Subsidiaries were
Restricted Subsidiaries. However, under certain circumstances, the Company will
be able to designate current or future Subsidiaries as Unrestricted
Subsidiaries. Unrestricted Subsidiaries will not be subject to many of the
restrictive covenants set forth in the Indenture.
PRINCIPAL, MATURITY AND INTEREST
The New Notes will be issued in an aggregate principal amount of $85.0
million and will mature on November 1, 2007. Except as set forth below under
"--Repurchase at the Option of Holders," the Company is not required to make
mandatory redemption or sinking fund payments with respect to the New Notes.
Interest on the New Notes will accrue at the rate of 11% per annum and will be
payable semi-annually in arrears on May 1 and November 1 of each year,
commencing on May 1, 1998, to holders of record on the immediately preceding
April 15 and October 15. Interest on the Notes will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from the
date of original issuance. 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 New Notes will be payable at
the office or agency of the Company maintained for such purpose within the City
and State of New York or, at the option of the Company, payment of interest and
Liquidated Damages, if any, may be made by check mailed to the holders of the
New Notes at their respective addresses set forth in the register of holders of
Notes; provided that all payments of principal, premium, if any, interest and
Liquidated Damages, if any, with respect to Global Notes (as defined under "--
Book-Entry, Delivery and Form," below) or New Notes the holders of which have
given written wire transfer instructions to the Company will be required to be
made by wire transfer of immediately available funds to the Depositary or to
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 Notes will be issued in denominations
of $1,000 and integral multiples thereof.
SUBSIDIARY GUARANTEES
The Company's payment obligations under the New Notes will be jointly and
severally guaranteed on a senior basis (the "Subsidiary Guarantees") by the
Guarantors. The obligations of each Guarantor under its Subsidiary Guarantee
are unsecured, and will be limited so as not to constitute a fraudulent
conveyance under applicable law. See "Risk Factors--Fraudulent Transfer
Considerations." The Subsidiary Guarantees will rank pari passu in right of
payment with all current and future unsecured senior Indebtedness of the
Guarantors, and senior in right of payment to all future subordinated
Indebtedness of the Guarantors. The Subsidiary Guarantees are effectively
subordinated to the obligations of the Company under the Senior Credit Facility
and the guarantees thereof by the Guarantors, by reason of the first priority
Liens granted for the benefit of the lenders thereunder.
The Indenture will provide that no Guarantor may consolidate with or merge
with or into (whether or not such Guarantor is the surviving Person), another
corporation, Person or entity whether or not affiliated with such
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Guarantor unless (i) subject to the provisions of the following paragraph, the
Person formed by or surviving any such consolidation or merger (if other than
such Guarantor) assumes all the obligations of such Guarantor pursuant to a
supplemental indenture in form and substance reasonably satisfactory to the
Trustee, under the Notes and the Indenture; (ii) immediately after giving
effect to such transaction, no Default or Event of Default exists; (iii) except
for a merger between Guarantors or between the Company and any Guarantor, such
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
Guarantor immediately preceding the transaction; and (iv) except for a merger
between Guarantors or between the Company and any Guarantor, the Company would
be permitted by virtue of the Company's pro forma Fixed Charge Coverage Ratio,
immediately after giving effect to such transaction, to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in 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 Guarantor, by way of merger, consolidation or
otherwise, or a sale or other disposition of all of the capital stock of any
Guarantor, then such 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 Guarantor) or the corporation acquiring the property (in the event of a
sale or other disposition of all of the assets of such 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 the Option of Holders--Asset Sales."
OPTIONAL REDEMPTION
The New Notes will not be redeemable at the Company's option prior to
November 1, 2002. Thereafter, the New Notes will be subject to redemption at
any time at the option of the Company, in whole or in part, upon not less than
30 nor more than 60 days' notice, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the applicable redemption
date, if redeemed during the twelve-month period beginning on November 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 November 1, 2000, the
Company may redeem up to an aggregate of $25.0 million in aggregate principal
amount of New Notes, at a redemption price of 111.0% of the principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages thereon, if
any, to the redemption date, with the net cash proceeds of one or more public
offerings of common stock of the Company; provided that at least $60.0 million
in aggregate principal amount of New Notes remains outstanding immediately
after the occurrence of such redemption; and provided, further, that such
redemption shall occur within 45 days of the date of the closing of each such
public offering.
SELECTION AND NOTICE
If less than all of the New Notes are to be redeemed at any time, selection
of New Notes for redemption will be made by the Trustee on a pro rata basis, by
lot or by such other method as the Trustee shall deem fair and appropriate.
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 New Notes to be
redeemed at its registered address. Notices of redemption may not be
conditional. If any Note is to be redeemed in part only, the notice of
redemption that relates to such Note shall state the portion of the principal
amount thereof to be redeemed. A new Note in
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principal amount equal to the unredeemed portion thereof will be issued in the
name of the holder thereof upon cancellation of the original Note. New Notes
called for redemption become due on the date fixed for redemption. On and
after the redemption date, interest ceases to accrue on New Notes or portions
of them called for redemption.
REPURCHASE AT THE OPTION OF HOLDERS
Change of Control
Upon the occurrence of a Change of Control, each holder of New 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 New Notes pursuant to
the offer described below (the "Change of Control Offer") at an offer price in
cash equal to 101% of the aggregate principal amount thereof plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the date of
purchase (the "Change of Control Payment"). Within 20 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 New Notes on the date specified in such notice, which
date shall be no earlier than 30 days and no later than 60 days from the date
such notice is mailed (the "Change of Control Payment Date"), pursuant to the
procedures required by the Indenture and described in such notice. The Company
will comply with the requirements of Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the New 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 New 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 New
Notes or portions thereof so tendered and (3) deliver or cause to be delivered
to the Trustee the New Notes so accepted together with an Officers'
Certificate stating the aggregate principal amount of New Notes or portions
thereof being purchased by the Company. The Paying Agent will promptly mail to
each holder of New Notes so tendered the Change of Control Payment for such
New Notes, and the Trustee will promptly authenticate and mail (or cause to be
transferred by book entry) to each holder a new Note equal in principal amount
to any unpurchased portion of the New Notes surrendered, if any; provided that
each such new Note will be in a principal amount of $1,000 or an integral
multiple thereof. The Company will publicly announce the results of the Change
of Control Offer on or as soon as practicable after the Change of Control
Payment Date.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as
described above with respect to a Change of Control, the Indenture does not
contain provisions that permit the holders of the New Notes to require that
the Company repurchase or redeem the New Notes in the event of a takeover,
recapitalization or similar transaction.
The Senior Credit Facility contains, and instruments governing the Company's
future senior indebtedness may contain, prohibitions of certain events that
would constitute a Change of Control. In addition, the exercise by holders of
Notes of their right to require the Company to repurchase the Notes could
cause a default under such other senior indebtedness, even if the Change of
Control itself does not, due to the financial effect of such repurchase on the
Company. Finally, the Company's ability to pay cash to the holders of Notes
upon a repurchase may be limited by the Company's then existing financial
resources. See "Risk Factors--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 Notes validly tendered and not withdrawn under such
Change of Control Offer.
Asset Sales
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the
Company (or the Restricted Subsidiary, as the case may be) receives
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consideration at the time of such Asset Sale at least equal to the fair market
value (evidenced by a resolution of the Board of Directors set forth in an
Officers' Certificate delivered to the Trustee) of the assets or Equity
Interests issued or sold or otherwise disposed of and (ii) at least 75% of the
consideration therefor received by the Company or such Restricted Subsidiary is
in the form of cash or Cash Equivalents; provided that the amount of (x) any
liabilities (as shown on the Company's or such Restricted Subsidiary's most
recent balance sheet) of the Company or any Restricted Subsidiary (other than
contingent liabilities and liabilities that are by their terms subordinated to
the Notes or any Guarantee thereof) that are assumed by the transferee of any
such assets pursuant to a customary novation agreement that releases the
Company or such Restricted Subsidiary from further liability and (y) any
securities, notes or other obligations received by the Company or any such
Restricted Subsidiary from such transferee that are converted by the Company or
such Restricted Subsidiary into cash (to the extent of the cash) received
within ten business days after the consummation of such Asset Sale, shall be
deemed to be cash for purposes of this provision.
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
in respect of one or more Credit Facilities and permanently reduce the maximum
commitments thereunder (provided that such reductions shall have no effect on
the amount of Indebtedness permitted to be incurred pursuant to clause (i)(y)
of the second paragraph of the covenant described under the caption "--Certain
Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock") and/or
(b) to the acquisition of a controlling interest in, or all or substantially
all of the assets of, another business or the making of a capital expenditure
in a Permitted Business. Pending the final application of any such Net
Proceeds, the Company or such Restricted Subsidiary may temporarily reduce
Indebtedness under any Credit Facility or otherwise invest such Net Proceeds in
any manner that is not prohibited by the Indenture. Any Net Proceeds from Asset
Sales that are not applied or invested as provided in the first sentence of
this paragraph will be deemed to constitute "Excess Proceeds." When the
aggregate amount of Excess Proceeds exceeds $10.0 million, the Company will be
required to make an offer (pro rata in proportion to the principal amount (or
accreted value, if applicable) outstanding in respect of any asset sale offer
required by the terms of any pari passu Indebtedness incurred in accordance
with the Indenture) to all holders of Notes (an "Asset Sale Offer") to purchase
the maximum principal amount of Notes that may be purchased out of the Excess
Proceeds, at an offer price in cash in an amount equal to 100% of the principal
amount thereof plus accrued and unpaid interest and Liquidated Damages thereon,
if any, to the date of purchase, in accordance with the procedures set forth in
the Indenture. To the extent that the aggregate principal amount of Notes
tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds
(after giving effect to any pro rata payment with respect to pari passu
Indebtedness as aforesaid), the Company may use any remaining Excess Proceeds
for general corporate purposes. If the aggregate principal amount of Notes
surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes to be purchased on a pro rata basis. Upon
completion of such offer to purchase, the amount of Excess Proceeds shall be
reset at zero.
CERTAIN COVENANTS
Incurrence of Indebtedness and Issuance of Preferred Stock
The Indenture provides that the Company will not, and will not permit any of
its Restricted 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 Restricted Subsidiaries to
issue any shares of preferred stock; provided, however, that the Company or any
Restricted Subsidiary that is a Guarantor may incur Indebtedness (including
Acquired Debt) and the Company may 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 2.0 to
1.0, 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.
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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 Restricted Subsidiary of
Indebtedness under Credit Facilities; provided that the aggregate principal
amount of all Indebtedness (with letters of credit issued under Credit
Facilities being deemed to have a principal amount equal to the maximum
potential liability of the Company and its Restricted 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 pursuant to this
clause (i), does not exceed an amount equal to the greater of (x) (A) $20.0
million of such Indebtedness plus, if and only if the amount of such
Indebtedness includes letters of credit, an additional amount equal to the
amount of such letters of credit then outstanding, up to a maximum
additional amount of $5.0 million less (B) the aggregate amount of all Net
Proceeds of Asset Sales applied to permanently reduce the commitments with
respect to Credit Facilities pursuant to the covenant described above under
the caption "--Asset Sales" and (y) the Borrowing Base;
(ii) the incurrence by the Company and its Restricted Subsidiaries of
Existing Indebtedness;
(iii) the incurrence by the Company of Indebtedness represented by the
Notes and the incurrence by the Guarantors of the Subsidiary Guarantees;
(iv) the incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness represented by Capital Lease Obligations, mortgage
financings or purchase money obligations, in each case incurred for the
purpose of financing all or any part of the purchase price or cost of
construction or improvement of property, plant or equipment used in the
business of the Company or such Restricted Subsidiary, in an aggregate
principal amount, including all Permitted Refinancing Indebtedness incurred
to refund, refinance or replace Indebtedness incurred pursuant to this
clause (iv), not to exceed $2.5 million at any time outstanding;
(v) the incurrence by the Company or any of its Restricted Subsidiaries
of Permitted Refinancing Indebtedness in exchange for, or the net proceeds
of which are used to refund, refinance or replace, Indebtedness that was
permitted by the Indenture to be incurred under the first paragraph of this
covenant or clauses (ii) and (iii) of this paragraph;
(vi) the incurrence by the Company or any of its Restricted Subsidiaries
of intercompany Indebtedness between or among the Company and any of its
Restricted Subsidiaries; provided, however, that (i) if the Company or any
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 Notes or the Subsidiary Guarantee of such
Guarantor and (ii)(A) any subsequent issuance or transfer of Equity
Interests that results in any such Indebtedness being held by a Person
other than the Company or a Restricted Subsidiary and (B) any sale or other
transfer of any such Indebtedness to a Person that is not either the
Company or a Restricted Subsidiary that is a Guarantor shall be deemed, in
each case, to constitute an incurrence of such Indebtedness by the Company
or such Restricted Subsidiary, as the case may be, that was not permitted
solely by reason of this clause (vi);
(vii) the incurrence by the Company or any of its Restricted Subsidiaries
of Hedging Obligations that are incurred in the ordinary course of business
for the purpose of fixing or hedging currency, commodity or interest rate
risk (including with respect to any floating rate Indebtedness that is
permitted by the terms of this Indenture to be outstanding) in connection
with the conduct of their respective businesses and not for speculative
purposes;
(viii) the guarantee by the Company or any of the Guarantors of
Indebtedness of the Company or a Restricted Subsidiary that was permitted
to be incurred by another provision of this covenant;
(ix) Indebtedness incurred by the Company or any Restricted Subsidiary
under payment or performance bonds, surety bonds, letter of credit
obligations to provide security for worker's compensation claims, payment
obligations in connection with self-insurance or similar requirements and
bank overdrafts incurred in the ordinary course of business, in each case
including Indebtedness represented by reimbursement obligations incurred in
connection therewith; provided that any Obligations arising in connection
with such bank overdraft Indebtedness is extinguished within five business
days;
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(x) Indebtedness incurred by the Company or any Restricted Subsidiary
arising from Guarantees or letters of credit, surety bonds or payment or
performance bonds securing any Obligations of the Company or any Restricted
Subsidiary pursuant to agreements providing for indemnification, adjustment
of purchase price or similar obligations, in any case in connection with
the disposition of any business, assets or Subsidiary (including without
limitation an Asset Sale) other than guarantees of Indebtedness incurred by
any Person acquiring all or any portion of such business, assets or
Subsidiary (including without limitation an Asset Sale) for the purpose of
financing such acquisition, in a principal amount not to exceed the gross
proceeds (with proceeds other than cash or Cash Equivalents being valued at
the fair market value thereof as determined by the Board of Directors in
good faith) actually received by the Company or any Restricted Subsidiary
in connection with such dispositions;
(xi) the incurrence by the Company or any of the Restricted 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 (xi) and not otherwise
permitted to be incurred at the time of incurrence of any such Permitted
Refinancing Indebtedness, not to exceed $12.5 million outstanding at any
one time; and
(xii) the incurrence of Indebtedness of the Company to the estate of any
Principal, which Indebtedness is (a) subordinated in right of payment to
payment of all amounts payable with respect to the Notes, (b) matures not
earlier than 91 days after the maturity date of the Notes, (c) includes no
mandatory sinking fund or other requirement for payment of principal or
cash interest prior to the maturity date of the Notes, (d) is not subject
to redemption or prepayment at the option of the holder thereof and (e) is
in an aggregate principal amount no greater than the amount by which the
redemption price for the Equity Interests of the decedent Principal
pursuant to an agreement to which the Company is a party exceeds the
proceeds received by the Company from life insurance on the life of the
decedent Principal.
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 (xii) 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 from time to
time 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 at any given time.
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.
Restricted Payments
The Indenture will provide that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay
any dividend or make any other payment or distribution on account of the
Company's or any of its Restricted Subsidiaries' Equity Interests (including,
without limitation, any payment in connection with any merger or consolidation
involving the Company) or to the direct or indirect holders of the Company's or
any of its Restricted Subsidiaries' Equity Interests in their capacity as such
(other than dividends or distributions payable in Equity Interests (other than
Disqualified Stock) of the Company); (ii) purchase, redeem or otherwise acquire
or retire for value (including without limitation, in connection with any
merger or consolidation involving the Company) any Equity Interests of the
Company or any direct or indirect parent of the Company; (iii) make any payment
on or with respect to, or purchase, redeem, defease or otherwise acquire or
retire for value any Indebtedness that is subordinated to the Notes or the
Subsidiary Guarantees, except payments of interest and principal payments
thereon at Stated Maturity; (iv) make any payment of salary or bonus to any
Principal in excess of the amounts contemplated in the employment agreement
between such Principal and the Company (including any increases contemplated by
the terms of such employment agreement) as in effect on the Issue Date, or make
any payment of life insurance premiums in respect of life insurance policies on
one or more Principals in excess of $150,000 in the aggregate in any one year,
the proceeds of which policies are or could be required to be used in whole or
in part to redeem Equity Interests of the Company or any of its Affiliates; or
(v) make any Restricted Investment (all such payments and other actions set
forth in
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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;
(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 above under the caption "--Incurrence of Indebtedness and
Issuance of Preferred Stock"; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after the date of the Indenture (excluding Restricted Payments
permitted by clause (ii), (iii) or (iv) of the next succeeding paragraph),
is less than the sum of (i) 50% of the Consolidated Net Income of the
Company for the period (taken as one accounting period) from the beginning
of the fiscal quarter containing 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 Restricted
Subsidiary of the Company and other than Disqualified Stock or convertible
debt securities that have been converted into Disqualified Stock), plus
(iii) to the extent that any Restricted Investment that was made by the
Company or any of its Restricted Subsidiaries after the date of the
Indenture is sold for cash or otherwise liquidated for or repaid in cash,
the lesser of (A) the cash return of capital with respect to such
Restricted Investment (less the cost of disposition, if any) and (B) the
initial amount of such Restricted Investment, plus (iv) $2.0 million, minus
(v) the amount of all Clawback Payments made or, without duplication, that
are required to be made as a result of any Asset Sale theretofore made, or
with respect to which a binding agreement has been entered into.
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 Restricted 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 Restricted
Subsidiary of the Company to the holders of its common Equity Interests so long
as the Company or such Restricted Subsidiary receives at least its pro rata
share of such dividend or distribution in accordance with its Equity Interests,
or the distribution by a Permitted Joint Venture in accordance with the terms
of its governing documentation; (v) the repurchase, redemption or other
acquisition or retirement for value of any Equity Interests of the Company or
any Subsidiary of the Company held by any member of the Company's (or any of
its Subsidiaries') management pursuant to any management equity subscription
agreement or stock option agreement in effect as of the date of the Indenture;
provided that the aggregate price paid for all such repurchased, redeemed,
acquired or retired Equity Interests shall not exceed $250,000 in any twelve-
month period and no Default or Event of Default shall have occurred and be
continuing immediately after such transaction; (vi) payments in respect of the
Recapitalization Transactions on the Issue Date, and Clawback Payments, if any,
made after the Issue Date; and (vii) payments in respect of the redemption of
Equity Interests out of the proceeds of life insurance policies, which proceeds
are required to be used for such redemption pursuant to any agreement to which
the Company is a party.
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If the Company or any Wholly Owned Restricted 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 Wholly Owned Restricted Subsidiary of
the Company, the Company shall be deemed to have made an Investment on the date
of any such sale or disposition equal to the fair market value of the Equity
Interests of such Subsidiary not sold or disposed of in an amount determined as
provided in the second succeeding paragraph below.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default. For
purposes of making such determination, all outstanding Investments by the
Company and its Restricted Subsidiaries (except to the extent repaid in cash)
in the Subsidiary so designated will be deemed to be Restricted Payments at the
time of such designation and, unless such Investments are Permitted
Investments, will reduce the amount available for Restricted Payments under
clause (c) of the first paragraph of this covenant. All such outstanding
Investments will be deemed to constitute Investments in an amount equal to the
greatest of (x) the net book value of such Investments at the time of such
designation, (y) the fair market value of such Investments at the time of such
designation and (z) the original fair market value of such Investments at the
time they were made. Such designation will only be permitted if such Restricted
Payment would be permitted at such time and if such Restricted Subsidiary
otherwise meets the definition of an Unrestricted Subsidiary.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or such
Restricted 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 $2.0 million. Not later
than two Business Days after making any Restricted Payment in excess of $1.0
million, 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.
Liens
The Indenture will provide that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, create, incur,
assume or suffer to exist or become effective 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 Permitted Liens.
Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries
The Indenture will provide that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction on
the ability of any Restricted Subsidiary to (i)(a) pay dividends or make any
other distributions to the Company or any of its Restricted Subsidiaries (1) on
its Capital Stock or (2) with respect to any other interest or participation
in, or measured by, its profits, or (b) pay any Indebtedness owed to the
Company or any of its Restricted Subsidiaries, (ii) make loans or advances to
the Company or any of its Restricted Subsidiaries or (iii) transfer any of its
properties or assets to the Company or any of its Restricted Subsidiaries,
except for such encumbrances or restrictions existing under or by reason of (a)
Existing Indebtedness as in effect on the date of the Indenture, or as amended
thereafter on terms, taken as a whole, no more restrictive and no more
unfavorable to the Holders of the Notes than those contained in the Senior
Credit Facility as in effect on the date of the Indenture, (b) the Senior
Credit Facility as in effect as of the date of the Indenture, and any
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings thereof, provided that such
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings are no more restrictive and no more
unfavorable to the holders of the Notes than
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those contained in the Senior Credit Facility as in effect on the date of the
Indenture, (c) the Indenture, the Subsidiary Guarantees and the Notes, (d)
applicable law, (e) any instrument governing Indebtedness or Capital Stock of a
Person acquired by the Company or any of its Restricted Subsidiaries as in
effect at the time of such acquisition (except to the extent 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, and any amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacements or refinancings
thereof, provided that, in the case of Indebtedness, such Indebtedness was no
more restrictive and no more unfavorable to the holders of the Notes than those
contained in the Senior Credit Facility as in effect on the date of the
Indenture, (f) customary non-assignment provisions in leases entered into in
the ordinary course of business and consistent with past practices, (g)
purchase money obligations for property acquired in the ordinary course of
business that impose restrictions of the nature described in clause (iii) above
on the property so acquired, (h) Permitted Refinancing Indebtedness, provided
that the encumbrances or restrictions contained in the agreements governing
such Permitted Refinancing Indebtedness are no more restrictive and no more
unfavorable to the holders of the Notes than those contained in the
Indebtedness being refinanced, (i) secured Indebtedness otherwise permitted to
be incurred pursuant to the provisions of the covenant described under the
caption "--Liens" that limits the right of the debtor to dispose of the assets
securing such Indebtedness, (j) customary net worth provisions contained in
leases and other agreements entered into in the ordinary course of business,
(k) customary restrictions with respect to a Restricted Subsidiary pursuant to
an agreement that has been entered into for the sale or disposition of all or
substantially all of the Capital Stock or assets of such Restricted Subsidiary,
(l) provisions with respect to the disposition or distribution of assets or
property to be sold in any Asset Sale (or transaction which, but for its size,
would be an Asset Sale) pending the completion of such transaction in joint
venture agreements or other similar agreements, including any Permitted Joint
Venture, (m) any other instrument governing Indebtedness incurred on or after
the date of the Indenture or any refinancing thereof that is incurred in
accordance with the Indenture, provided that the encumbrance or restriction
contained in any such Indebtedness or any such refinancing thereof is no more
restrictive and no more unfavorable to the Holders of the Notes than that
contained in the Senior Credit Facility as in effect on the date of the
Indenture, or, in the case of any refinancing, the Indebtedness being
refinanced, (n) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business or
(o) restrictions imposed on any Foreign Subsidiary by the terms of any Credit
Facility under which such Foreign Subsidiary is the borrower.
Merger, Consolidation or Sale of Assets
The Indenture will provide 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 Notes and the Indenture pursuant to a
supplemental indenture in a form reasonably satisfactory to the Trustee; (iii)
immediately before and after such transaction no Default or Event of Default
shall have occurred and be continuing; and (iv) except in the case of a merger
of the Company with or into a Wholly Owned Restricted Subsidiary, 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 (x) will have
Consolidated Net Worth immediately after the transaction equal to or greater
than the Consolidated Net Worth of the Company immediately prior to the
transaction, and (y) 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
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$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."
Transactions with Affiliates
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries or any Unrestricted Subsidiary or Permitted Joint
Venture in which any Permitted Investment is made pursuant to clause (f) of
"Permitted Investments" to, make any payment to, or sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or Guarantee with, or for the
benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"),
unless (i) such Affiliate Transaction is on terms that are no less favorable to
the Company or the relevant Restricted Subsidiary than those that would have
been obtained in a comparable transaction by the Company or such Restricted
Subsidiary with a non-Affiliate 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 $1.5 million, a
resolution of the Board of Directors accompanied by 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 Company's 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 the Notes of such Affiliate Transaction from a
financial point of view issued by an accounting, appraisal or investment
banking firm of national standing; provided that (v) any fees and compensation
paid to, and indemnity provided on behalf of, officers, directors or employees
of the Company or any of its Restricted Subsidiaries, as determined in good
faith by the Board of Directors of the Company or any such Restricted
Subsidiary, to the extent such fees and compensation are reasonable and
customary, (w) loans to Principals that are Permitted Investments, (x) any
employment agreement or amendment thereto entered into by the Company or any of
its Restricted Subsidiaries in the ordinary course of business of the Company
or such Restricted Subsidiary, (y) transactions between or among the Company
and/or its Restricted Subsidiaries and Permitted Joint Ventures in which the
Principals and their Related Parties beneficially own less than 10% of the
Equity Interests in the aggregate (other than indirectly through their
beneficial ownership of the Company) and (z) Restricted Payments that are
permitted by the provisions of the Indenture described above under the caption
"--Restricted Payments," in each case, shall not be deemed Affiliate
Transactions.
Sale and Leaseback Transactions
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, enter into any sale and leaseback transaction;
provided that the Company may enter into a sale and leaseback transaction if
(i) the Company could have (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 the
covenant described above under the caption "--Incurrence of Indebtedness and
Issuance of Preferred Stock" and (b) incurred a Lien to secure such
Indebtedness pursuant to the covenant described above under the caption "--
Liens," (ii) the gross cash proceeds of such sale and leaseback transaction are
at least equal to the fair market value (as determined in good faith by the
Board of Directors and set forth in an Officers' Certificate delivered to the
Trustee) of the property that is the subject of such sale and leaseback
transaction and (iii) the transfer of assets in such sale and leaseback
transaction is permitted by, and the Company applies the proceeds of such
transaction in compliance with, the covenant described above under the caption
"--Asset Sales."
Additional Subsidiary Guarantees
The Indenture provides that if the Company or any of its Restricted
Subsidiaries shall acquire or create another Subsidiary after the date of the
Indenture then, unless such Subsidiary (i) is designated and remains an
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Unrestricted Subsidiary in accordance with the Indenture, or (ii) does not have
at any time assets or annual revenues (or monthly revenues annualized),
determined in accordance with GAAP, of $100,000 or more or (iii) is a Foreign
Subsidiary, and, in the case of clauses (ii) and (iii), is not a guarantor
under or in respect of any Credit Facility or other Indebtedness of the Company
or any other Restricted Subsidiary, such newly acquired or created Subsidiary
(or any other Subsidiary, upon failing to satisfy the requirements of clause
(i), (ii) or (iii)) shall execute a Subsidiary Guarantee and enter into a
Supplemental Indenture, in accordance with the terms of the Indenture.
Business Activities
The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, engage in any business other than a Permitted Business,
except to such extent as would not be material to the Company and its
Restricted Subsidiaries taken as a whole.
Payments for Consent
The Indenture provides that neither the Company nor any of its Restricted
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 Notes for or as an inducement to any consent, waiver or amendment of any of
the terms or provisions of the Indenture or the Notes unless such consideration
is offered to be paid or is paid to all holders of the 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, whether or not required by the rules and
regulations of the Securities and Exchange Commission (the "Commission")
beginning with respect to annual financial information for the fiscal year
ended December 31, 1997 and for so long as any Notes are outstanding, the
Company will furnish to the holders of Notes (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Forms 10-Q and 10-K if the Company were required to file such
Forms 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. The timely filing with the Commission of
Forms 10-Q and 10-K shall satisfy the requirements of (i) and (ii) above. 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 within the time periods specified
in the Commission's rules and regulations (unless the Commission will not
accept such a filing) and make such information available to securities
analysts and prospective investors upon request. In addition, the Company and
the Guarantors have agreed that, for so long as any Notes remain outstanding,
they will furnish to the Holders and to securities analysts and prospective
investors, upon their request, the information required to be delivered
pursuant to Rule 144A(d)(4) under the Securities Act.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages, if any, with respect to, the Notes; (ii) default in payment
when due of the principal of or premium, if any, on the Notes; (iii) failure by
the Company or any Restricted Subsidiary to comply with the provisions
described under the captions "Repurchase at the Option of the Holders--Change
of Control," "Repurchase at the Option of the Holders--Asset Sales," "Certain
Covenants--Restricted Payments," "Certain Covenants--Incurrence of Indebtedness
and Issuance of Preferred Stock" or "--Merger, Consolidation or Sale of
Assets"; (iv) failure by the Company or any Restricted Subsidiary for 60 days
after notice given by the Trustee or holders of at least 25% in principal
amount of the then outstanding Notes to comply with any of its other agreements
in the Indenture or the Notes; (v) default under any mortgage, indenture or
instrument under which there may be issued or by which there may be secured
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or evidenced any Indebtedness for money borrowed by the Company or any of its
Restricted Subsidiaries (or the payment of which is guaranteed by the Company
or any of its Restricted Subsidiaries) whether such Indebtedness or guarantee
now exists, or is created after the date of the Indenture, which default (a) is
caused by a failure to pay principal of or premium, if any, or interest on such
Indebtedness prior to the expiration of the grace period provided in such
Indebtedness on the date of such default (a "Payment Default") or (b) results
in the acceleration of such Indebtedness prior to its express maturity and, in
each case, the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated, aggregates
$5.0 million or more; (vi) failure by the Company or any of its Restricted
Subsidiaries to pay final judgments aggregating in excess of $5.0 million
(excluding amounts covered by insurance), which judgments are not paid,
discharged or stayed, for a period of 60 days; (vii) certain events of
bankruptcy or insolvency with respect to the Company or any of its Significant
Subsidiaries; and (viii) except as permitted by the Indenture, any Guarantee
given by a Significant Subsidiary shall be finally held in any judicial
proceeding to be unenforceable or invalid or shall cease for any reason to be
in full force and effect or any such Guarantor, or any Person acting on behalf
of any such Guarantor, shall deny or disaffirm its obligations under its
Guarantee (other than by reason of the terminating of the Indenture or the
release of any such Guarantee in accordance with the Indenture).
If any Event of Default occurs and is continuing, the Trustee or the holders
of at least 25% in principal amount of the then outstanding Notes may declare
all the Notes to be due and payable immediately. Notwithstanding the foregoing,
in the case of an Event of Default arising from certain events of bankruptcy or
insolvency, with respect to the Company, any Significant Subsidiary or any
group of Subsidiaries that, taken together, would constitute a Significant
Subsidiary, all outstanding Notes will become due and payable without further
action or notice. Holders of the Notes may not enforce the Indenture or the
Notes except as provided in the Indenture. Subject to certain limitations,
holders of a majority in principal amount of the then outstanding Notes may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from holders of the Notes notice of any continuing Default or Event of
Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest.
In the case of any Event of Default occurring by reason of any willful action
(or inaction) taken (or not taken) by or on behalf of the Company with the
intention of avoiding payment of the premium that the Company would have had to
pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes. If an Event of Default occurs prior to
November 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 Notes prior to November 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 Notes.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest on, or the principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company,
as such, shall have any liability for any obligations of the Company or any
Guarantor under the Notes, the Indenture or the Guarantees or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each holder of Notes by accepting a Note irrevocably waives and releases all
such liability. The aforementioned waiver and release are
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part of the consideration for issuance of the Notes and the Subsidiary
Guarantees. Such waiver may not be effective to waive liabilities under the
federal securities laws and the Company believes that it is the view of the
Commission that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance") except for (i) the rights of holders of outstanding Notes to
receive payments in respect of the principal of, premium, if any, and interest
and Liquidated Damages, if any, on such Notes when such payments are due from
the trust referred to below, (ii) the Company's obligations with respect to the
Notes concerning issuing temporary Notes, registration of Notes, mutilated,
destroyed, lost or stolen Notes and the maintenance of an office or agency for
payment and money for security payments held in trust, (iii) the rights,
powers, trusts, duties and immunities of the Trustee, and the Company's
obligations in connection therewith and (iv) the Legal Defeasance provisions of
the Indenture. In addition, the Company may, at its option and at any time,
elect to have the obligations of the Company released with respect to certain
covenants that are described in the Indenture ("Covenant Defeasance") and
thereafter any omission to comply with such obligations shall not constitute a
Default or Event of Default with respect to the Notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, rehabilitation and insolvency events) described under "Events of
Default" will no longer constitute an Event of Default with respect to the
Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the Holders of the Notes, cash in United States 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, if any, on the outstanding Notes on the stated maturity
thereof or on the applicable redemption date, as the case may be, and the
Company must specify whether the Notes are being defeased to maturity or to a
particular redemption date; (ii) in the case of Legal Defeasance, the Company
shall have delivered to the Trustee an opinion of counsel in the United States
reasonably acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of the Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such opinion of counsel shall confirm that, the holders of the
outstanding Notes will not recognize income, gain or loss for federal income
tax purposes as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Legal Defeasance had not occurred;
(iii) in the case of Covenant Defeasance, the Company shall have delivered to
the Trustee an opinion of counsel in the United States reasonably acceptable to
the Trustee confirming that the holders of the outstanding Notes will not
recognize income, gain or loss for federal income tax purposes as a result of
such Covenant Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if such Covenant Defeasance had not occurred; (iv) no Default or Event of
Default shall have occurred and be continuing on the date of such deposit
(other than a Default or Event of Default resulting from the borrowing of funds
to be applied to such deposit) 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 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
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conditions precedent provided for relating to the Legal Defeasance or the
Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A holder may transfer or exchange Notes in accordance with the Indenture. The
Registrar and the Trustee may require a holder, among other things, to furnish
appropriate endorsements and transfer documents and the Company may require a
holder to pay any taxes and fees required by law or permitted by the Indenture.
The Company is not required to transfer or exchange any Note selected for
redemption. Also, the Company is not required to transfer or exchange any Note
for a period of 15 days before a selection of Notes to be redeemed.
The registered holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture or
the Notes may be amended or supplemented with the consent of the holders of at
least a majority in principal amount of the Notes then outstanding (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, Notes), and any existing default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the holders of a majority in principal amount of the then
outstanding Notes (including consents obtained in connection with a tender
offer or exchange offer for Notes).
Without the consent of each holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting holder): (i) reduce the
principal amount of Notes whose holders must consent to an amendment,
supplement or waiver, (ii) reduce the principal of or change the fixed maturity
of any Note or alter the provisions with respect to the redemption of the Notes
(other than provisions relating to the covenants described above under the
caption "--Repurchase at the Option of Holders"), (iii) reduce the rate of or
change the time for payment of interest on any Note, (iv) waive a Default or
Event of Default in the payment of principal of or premium or Liquidated
Damages, if any, or interest on the Notes (except a rescission of acceleration
of the Notes by the holders of at least a majority in aggregate principal
amount of the Notes and a waiver of the payment default that resulted from such
acceleration), (v) make any Note payable in money other than that stated in the
Notes, (vi) make any change in the provisions of the Indenture relating to
waivers of past Defaults or the rights of holders of Notes to receive payments
of principal of or premium, if any, or interest on the Notes, (vii) waive a
redemption payment with respect to any Note (other than a payment required by
one of the covenants described above under the caption "--Repurchase at the
Option of Holders") or (viii) make any change in the foregoing amendment and
waiver provisions that is adverse to the holders of the Notes.
Notwithstanding the foregoing, without the consent of any holder of the
Notes, the Company and the Trustee may amend or supplement the Indenture or the
Notes to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Company's or any Guarantor's obligations to
holders of 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 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 upon
or after the effectiveness of a registration of the exchange or resale of the
Notes under the Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Trustee will be permitted to engage in
other transactions; however, if it acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the Commission for permission
to continue or resign.
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The holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent person in the
conduct of his or her own affairs. Subject to such provisions, the Trustee will
be under no obligation to exercise any of its rights or powers under the
Indenture at the request of any holder of Notes, unless such holder shall have
offered to the Trustee security and indemnity satisfactory to it against any
loss, liability or expense.
ADDITIONAL INFORMATION
Anyone who receives this Offering Memorandum may obtain a copy of the
Indenture and Registration Rights Agreement without charge by writing to Elgin
National Industries, Inc., 2001 Butterfield Road, Suite 1020, Downers Grove,
Illinois 60515, Attention: Chief Financial Officer.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth below, New Notes will be issued in registered, global
form in minimum denominations of $1,000 and integral multiples of $1,000 in
excess thereof. New Notes will be issued at the closing of the Exchange Offer
(the "Closing") only against the proper tender of old Notes therefore.
The New Notes will be represented by one or more global notes in registered,
global form without interest coupons (collectively, the "Rule 144A Global
Note"). The Rule 144A Global Note initially will be deposited upon issuance
with the Trustee as custodian for the Depositary, in New York, New York, and
registered in the name of the Depositary or its nominee, in each case for
credit to an account of a direct or indirect participant as described below.
The New Notes issued in offshore transactions in reliance on Regulation S
under the Securities Act initially will be represented by one or more temporary
global notes in registered, global form without interest coupons (collectively,
the "Regulation S Temporary Global Note"). The Regulation S Temporary Global
Note will be registered in the name of a nominee of the Depositary for credit
to the subscribers' respective accounts at the Euroclear System ("Euroclear")
and Cedel Bank, S.A. ("CEDEL"). Beneficial interests in the Regulation S
Temporary Global Note may be held only through Euroclear or CEDEL.
Within a reasonable time period after the expiration of the period of 40 days
commencing on the latest of the commencement of the Offering and the original
Issue Date of the Notes (such period through and including such 40th day, the
"Restricted Period"), the Regulation S Temporary Global Note will be exchanged
for one or more permanent global notes (collectively, the "Regulation S
Permanent Global Note" and, together with the Regulation S Temporary Global
Note, the "Regulation S Global Note" (the Regulation S Global Note and the 144A
Global Note, collectively being the "Global Notes")) upon delivery to the
Depositary of certification of compliance with the transfer restrictions
applicable to the Notes pursuant to Regulation S as provided in the Indenture.
During the Restricted Period, beneficial interests in the Regulation S
Temporary Global Note may be held only through Euroclear or CEDEL (as indirect
participants in the Depositary). See "--Depositary Procedures--Exchanges
between Regulation S Notes and the Rule 144A Global Note." Beneficial interests
in the 144A Global Note may not be exchanged for beneficial interests in the
Regulation S Global Note at any time except in the limited circumstances
described below. See "--Depositary Procedures--Exchanges between Regulation S
Notes and the Rule 144A Global Note."
Except as set forth below, the Global Notes may be transferred, in whole and
not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the Global Notes may not be exchanged for
Notes in certificated form except in the limited circumstances described below.
See "--Exchange of Book-Entry Notes for Certificated Notes." Except in the
limited circumstances described below, owners of beneficial interests in the
Global Notes will not be entitled to receive physical delivery of Certificated
Notes (as defined below).
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Rule 144A Notes (including beneficial interests in the Rule 144A Global
Notes) will be subject to certain restrictions on transfer and will bear a
restrictive legend as described under "Transfer Restrictions." Regulation S
Notes will also bear the legend as described under "Transfer Restrictions." In
addition, transfers of beneficial interests in the Global Notes will be subject
to the applicable rules and procedures of DTC and its direct or indirect
participants (including, if applicable, those of Euroclear and Cedel), which
may change from time to time.
Initially, the Trustee will act as Paying Agent and Registrar. The Notes may
be presented for registration of transfer and exchange at the offices of the
Registrar.
Depositary Procedures
The following description of the operations and procedures of DTC, Euroclear
and Cedel are provided solely as a matter of convenience. These operations and
procedures are solely within the control of the respective settlement systems
and are subject to changes by them from time to time. The Company takes no
responsibility for these operations and procedures and urges investors to
contact the system or their participants directly to discuss these matters.
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 its Participants. The Participants include
securities brokers and dealers (including the Initial Purchasers), banks, trust
companies, clearing corporations and certain other organizations. Access to
DTC's system is also available to other entities such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly (collectively,
the "Indirect Participants"). Persons who are not Participants may beneficially
own securities held by or on behalf of DTC only through the Participants or the
Indirect Participants. The ownership interests in, and transfers of ownership
interests in, each security held by or on behalf of DTC are recorded on the
records of the Participants and Indirect Participants.
DTC has also advised the Company that, pursuant to procedures established by
it, (i) upon deposit of the Global Notes, DTC will credit the accounts of
Participants designated by the Initial Purchasers with portions of the
principal amount of the Global Notes and (ii) ownership of such interests in
the Global Notes will be shown on, and the transfer of ownership thereof will
be effected only through, records maintained by DTC (with respect to the
Participants) or by the Participants and the Indirect Participants (with
respect to other owners of beneficial interests in the Global Notes).
Investors in the Rule 144A Global Notes may hold their interests therein
directly through DTC, if they are Participants in such system, or indirectly
through organizations (including Euroclear and Cedel) which are Participants in
such system. Investors in the Regulation S Global Notes must initially hold
their interests therein through Euroclear or Cedel, if they are participants in
such systems, or indirectly through organizations that are participants in such
systems. After the expiration of the Restricted Period (but not earlier),
investors may also hold interests in the Regulation S Global Notes through
Participants in the DTC system other than Euroclear and Cedel. Euroclear and
Cedel will hold interests in the Regulation S Global Notes on behalf of their
participants through customers' securities accounts in their respective names
on the books of their respective depositories, which are Morgan Guaranty Trust
Company of New York, Brussels office, as operator of Euroclear, and Citibank,
N.A., as operator of Cedel. All interests in a Global Note, including those
held through Euroclear or Cedel, may be subject to the procedures and
requirements of DTC. Those interests held through Euroclear or Cedel may also
be subject to the procedures and requirements of such systems. 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
interests in a Global Note to such persons will 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
beneficial interests in a Global Note to pledge such interests to persons or
entities that
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do not participate in the DTC system, or otherwise take actions in respect of
such interests, may be affected by the lack of a physical certificate
evidencing such interests.
Except as described below, owners of interests in the Global Notes will not
have Notes registered in their names, will not receive physical delivery of
Notes in certificated form and will not be considered the registered owners or
"holders" thereof under the Indenture for any purpose.
Payments in respect of the principal of, premium, if any, Liquidated Damages,
if any, and interest on a Global Note registered in the name of DTC or its
nominee will be payable to DTC in its capacity as the registered holder thereof
under the Indenture. Under the terms of the Indenture, the Company and the
Trustee will treat the persons in whose names the Notes, including the Global
Notes, are registered as the owners thereof for the purpose of receiving such
payments and for any and all other purposes whatsoever. Consequently, 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 any beneficial ownership interest in the Global Notes, or
for maintaining, supervising or reviewing any of DTC's records or any
Participant's or Indirect Participant's records relating to the beneficial
ownership interests in the Global Notes or (ii) any other matter relating to
the actions and practices of DTC or any of its Participants or Indirect
Participants. DTC has advised the Company that its current practice, upon
receipt of any payment in respect of securities such as the Notes (including
principal and interest), is to credit the accounts of the relevant Participants
with the payment on the payment date, in amounts proportionate to their
respective holdings in the principal amount of beneficial interest in the
relevant security as shown on the records of DTC unless DTC has reason to
believe it will not receive payment on such payment date. Payments by the
Participants and the Indirect Participants to the beneficial owners of Notes
will be governed by standing instructions and customary practices and will be
the responsibility of the Participants or the Indirect Participants 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 any of its
Participants in identifying the beneficial owners of the Notes, and the Company
and the Trustee may conclusively rely on and will be protected in relying on
instructions from DTC or its nominee for all purposes.
Except for trades involving only Euroclear and Cedel participants, interests
in the Global Notes are expected to be eligible to 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. See "--Same Day
Settlement and Payment."
Subject to the transfer restrictions set forth under "Transfer Restrictions,"
transfers between Participants in DTC will be effected in accordance with DTC's
procedures, and will be settled in same day funds, and transfers between
participants in Euroclear and Cedel will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
Subject to compliance with the transfer restrictions applicable to the Notes
described herein, cross-market transfers between the Participants in DTC, on
the one hand, and Euroclear or Cedel participants, on the other hand, will be
effected through DTC in accordance with DTC's rules on behalf of Euroclear or
Cedel, as the case may be, by its respective depositary; however, such cross-
market transactions will require delivery of instructions to Euroclear or
Cedel, as the case may be, by the counterparty in such system in accordance
with the rules and procedures and within the established deadlines (Brussels
time) of such system. Euroclear or Cedel, as the case may be, will, if the
transaction meets its settlement requirements, deliver instructions to its
respective depositary to take action to effect final settlement on its behalf
by delivering or receiving interests in the relevant Global Note in DTC, and
making or receiving payment in accordance with normal procedures for same-day
funds settlement applicable to DTC. Euroclear participants and Cedel
participants may not deliver instructions directly to the depositories for
Euroclear or Cedel.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Notes only at the direction of one or more Participants to
whose account DTC has credited the interests in the Global Notes
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and only in respect of such portion of the aggregate principal amount of the
Notes as to which such Participant or Participants has or have given such
direction. However, if there is an Event of Default under the Notes, DTC
reserves the right to exchange the Global Notes for legended Notes in
certificated form, and to distribute such Notes to its Participants.
Although DTC, Euroclear and Cedel have agreed to the foregoing procedures to
facilitate transfers of interests in the Regulation S Global Notes and in the
Rule 144A Global Notes among Participants in DTC, Euroclear and Cedel, they are
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 nor any of their respective agents will have any responsibility for the
performance by DTC, Euroclear or Cedel or their respective participants or
indirect participants of their respective obligations under the rules and
procedures governing their operations.
Exchange of Book-Entry Notes for Certificated Notes
A Global Note is exchangeable for definitive Notes in registered certificated
form ("Certificated Notes") if (i) DTC (x) notifies the Company that it is
unwilling or unable to continue as depositary for the Global Notes 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 Certificated Notes or (iii) there shall have occurred and be
continuing a Default or Event of Default with respect to the Notes. In
addition, beneficial interests in a Global Note may be exchanged for
Certificated Notes upon request but only upon prior written notice given to the
Trustee by or on behalf of DTC in accordance with the Indenture. In all cases,
Certificated Notes delivered in exchange for any Global Note or beneficial
interests therein will be registered in the names, and issued in any approved
denominations, requested by or on behalf of the Depositary (in accordance with
its customary procedures) and will bear the applicable restrictive legend
referred to in "Transfer Restrictions," unless the Company determines otherwise
in compliance with applicable law.
Exchange of Certificated Notes for Book-Entry Notes
Notes issued in certificated form may not be exchanged for beneficial
interests in any Global Note unless the transferor first delivers to the
Trustee a written certificate (in the form provided in the Indenture) to the
effect that such transfer will comply with the appropriate transfer
restrictions applicable to such Notes. See "Transfer Restrictions."
Exchanges Between Regulation S Notes and Rule 144A Notes
Prior to the expiration of the Restricted Period, beneficial interests in the
Regulation S Global Note may be exchanged for beneficial interests in the Rule
144A Global Note only if such exchange occurs in connection with a transfer of
the Notes pursuant to Rule 144A and the transferor first delivers to the
Trustee a written certificate (in the form provided in the Indenture) to the
effect that the Notes are being transferred to a person who the transferor
reasonably believes to be a qualified institutional buyer within the meaning of
Rule 144A, purchasing for its own account or the account of a qualified
institutional buyer in a transaction meeting the requirements of Rule 144A and
in accordance with all applicable securities laws of the states of the United
States and other jurisdictions.
Beneficial interest in a Rule 144A Global Note may be transferred to a person
who takes delivery in the form of an interest in the Regulation S Global Note,
whether before or after the expiration of the Restricted Period, only if the
transferor first delivers to the Trustee a written certificate (in the form
provided in the Indenture) to the effect that such transfer is being made in
accordance with Rule 903 or 904 of Regulation S or Rule 144 (if available) and
that, if such transfer occurs prior to the expiration of the Restricted Period,
the interest transferred will be held immediately thereafter through Euroclear
or Cedel.
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Transfers involving an exchange of a beneficial interest in the Regulation S
Global Note for a beneficial interest in a Rule 144A Global Note or vice versa
will be effected in DTC by means of an instruction originated by the Trustee
through the DTC Deposit/Withdraw at Custodian system. Accordingly, in
connection with any such transfer, appropriate adjustments will be made to
reflect a decrease in the principal amount of the Regulation S Global Note and
a corresponding increase in the principal amount of the Rule 144A Global Note
or vice versa, as applicable. Any beneficial interest in one of the Global
Notes that is transferred to a person who takes delivery in the form of an
interest in the other Global Note will, upon transfer, cease to be an interest
in such Global Note and will become an interest in the other Global Note and,
accordingly, will thereafter be subject to all transfer restrictions and other
procedures applicable to beneficial interests in such other Global Note for so
long as it remains such an interest. The policies and practices of DTC may
prohibit transfers of beneficial interests in the Regulation S Global Note
prior to the expiration of the Restricted Period.
Same Day Settlement and Payment
The Indenture will require that payments in respect of the Notes represented
by the Global Notes (including principal, premium, if any, interest and
Liquidated Damages, if any) be made by wire transfer of immediately available
funds to the accounts specified by the Global Note Holder. With respect to
Notes in certificated form, the Company will make all payments of principal,
premium, if any, interest and Liquidated Damages, if any, by wire transfer of
immediately available funds to the accounts specified by the holders thereof
or, if no such account is specified, by mailing a check to each such holder's
registered address. The Notes represented by the Global Notes are expected to
be eligible to trade in the PORTAL market and to trade in the Depositary's
Same-Day Funds Settlement System, and any permitted secondary market trading
activity in such Notes will, therefore, be required by the Depositary to be
settled in immediately available funds. The Company expects that secondary
trading in any certificated Notes will also be settled in immediately available
funds.
Because of time zone differences, the securities account of a Euroclear or
Cedel participant purchasing an interest in a Global Note from a Participant in
DTC will be credited, and any such crediting will be reported to the relevant
Euroclear or Cedel participant, during the securities settlement processing day
(which must be a business day for Euroclear and Cedel) immediately following
the settlement date of DTC. DTC has advised the Company that cash received in
Euroclear or Cedel as a result of sales of interests in a Global Note by or
through a Euroclear or Cedel participant to a Participant in DTC will be
received with value on the settlement date of DTC but will be available in the
relevant Euroclear or Cedel cash account only as of the business day for
Euroclear or Cedel following DTC's settlement date.
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 Restricted 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
Restricted 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.
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"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
(provided that the sale, lease, conveyance or other disposition of all or
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole will be governed by the provisions of the Indenture described
above under the caption "Redemption at the Option of the Holders--Change of
Control" and/or the provisions described above under the caption "--Merger,
Consolidation or Sale of Assets" and not by the provisions of the Asset Sale
covenant), and (ii) the issue or sale by the Company or any of its Restricted
Subsidiaries of Equity Interests in any of the Company's Restricted
Subsidiaries, in the case of either clause (i) or (ii), whether in a single
transaction or a series of related transactions (a) that have a fair market
value in excess of $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 Restricted Subsidiary or by a Wholly Owned Restricted
Subsidiary to the Company or to another Wholly Owned Restricted Subsidiary,
(ii) an issuance of Equity Interests by a Wholly Owned Restricted Subsidiary to
the Company or to another Wholly Owned Restricted Subsidiary and (iii) a
Restricted Payment that is permitted by the covenant described above under the
caption "Certain Covenants--Restricted Payments" 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).
"Borrowing Base" means, as of any date, an amount equal to the sum of (a) 85%
of the face amount of all accounts receivable owned by the Company and its
Restricted Subsidiaries as of such date that are not more than 90 days past
due, and (b) 65% of the book value of all inventory owned by the Company and
its Restricted Subsidiaries as of such date, 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. Capital Stock shall include outstanding preferred stock
units, as described in Note 12 to the Consolidated Financial Statements for ENI
Holding Corp. and Subsidiary Companies for the year ended December 31, 1996.
"Cash Equivalents" means (i) United States dollars, (ii) the local currency
of any jurisdiction in which any Subsidiary organized in a jurisdiction other
than the United States or any political subdivision thereof conducts business,
(iii) 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, (iv)
certificates of deposit and eurodollar time deposits with maturities of six
months or less from the date of acquisition, bankers' acceptances with
maturities not exceeding six months and overnight bank deposits, in each case
with any lender party to the Senior Credit Facility or with any domestic
commercial bank having capital and surplus in excess of $500 million and a
Keefe Bank Watch Rating of "B" or better, (v) repurchase obligations with a
term of not more than seven days for underlying securities of the types
described in clauses (iii) and (iv) above entered into with any financial
institution meeting the qualifications specified in clause (iv) above, (vi)
commercial paper having the highest rating obtainable from Moody's Investors
Service, Inc. or
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Standard & Poor's Corporation and in each case maturing within six months after
the date of acquisition and (vii) money market funds at least 95% of the assets
of which, at the time of investment, are comprised of assets specified in
clauses (i) through (vi).
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Subsidiaries taken as a
whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange
Act) other than the Principals or their Related Parties (as defined below),
(ii) the adoption of a plan relating to the liquidation or dissolution of the
Company, (iii) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
"person" (as defined above), other than the Principals and their Related
Parties, becomes the "beneficial owner" (as such term is defined in Rule 13d-3
and Rule 13d-5 under the Exchange Act, except that a person shall be deemed to
have "beneficial ownership" of all securities that such person has the right to
acquire, whether such right is currently exercisable or is exercisable only
upon the occurrence of a subsequent condition), directly or indirectly, of more
than 50% of the Voting Stock of the Company (measured by voting power rather
than number of shares), (iv) the first day on which a majority of the members
of the Board of Directors of the Company are not Continuing Directors or (v)
the Company consolidates with, or merges with or into, any Person or sells,
assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any Person, or any Person consolidates with,
or merges with or into, the Company, in any such event pursuant to a
transaction in which any of the outstanding Voting Stock of the Company is
converted into or exchanged for cash, securities or other property, other than
any such transaction where the Voting Stock of the Company outstanding
immediately prior to such transaction is converted into or exchanged for Voting
Stock (other than Disqualified Stock) of the surviving or transferee Person
constituting a majority of the outstanding shares of such Voting Stock of such
surviving or transferee Person (immediately after giving effect to such
issuance). Notwithstanding the foregoing, consummation of the Recapitalization
Transactions on the Issue Date shall not constitute a Change of Control.
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 Notes to require the Company to
repurchase such Notes as a result of a sale, lease, transfer, conveyance or
other disposition of less than all of the assets of the Company and its
Subsidiaries taken as a whole to another Person or group may be uncertain.
"Clawback Payment" means any payment required to be made to the former
shareholders of the Company, within the first 18 months after consummation of
the Recapitalization Transactions, out of the proceeds of any Asset Sale
pursuant to the Repurchase Agreement as in effect on the Issue Date, or as
amended in any manner that does not adversely affect the holders of the Notes.
"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, 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, but excluding amortization of debt issuance costs and excluding
letter of credit fees accounted for as a cost of sales in accordance with
GAAP), to the extent that any such expense was deducted in computing such
Consolidated Net Income, plus (iv) depreciation, amortization
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(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, minus (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 (other than
in the case of the Company and its Subsidiaries, Unrestricted 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 (other than in
the case of the Company and its Subsidiaries, Unrestricted Subsidiaries), (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, (iv) the cumulative effect of a
change in accounting principles shall be excluded, (v) the Consolidated Net
Income of the Company and its Subsidiaries shall include (without duplication)
the Net Income of any Unrestricted Subsidiary if, and only to the extent that,
such Net Income has been distributed in cash to the Company or any of its
Restricted Subsidiaries, and (vi) the Consolidated Net Income of the Company
shall exclude any interest paid or received by the Company or any Subsidiary of
the Company with respect to Notes owned by the Company or such Subsidiary, if
any.
"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.
"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 nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
"Credit Facilities" means, with respect to the Company or any Subsidiary, one
or more debt facilities (including, without limitation, the Senior Credit
Facility) or commercial paper facilities with banks or other institutional
lenders providing for revolving credit loans, term loans, receivables financing
(including through the sale of receivables to such lenders or to special
purpose entities formed to borrow from such lenders against such receivables)
or letters of credit, in each case, as amended, restated, modified, renewed,
refunded, replaced or refinanced in whole or in part from time to time.
Indebtedness under Credit Facilities outstanding on the date on which the Notes
are first issued and authenticated under the Indenture shall be deemed to have
been incurred
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on such date in reliance on the exception provided by clause (i) of the third
paragraph of the description of the covenant entitled "--Incurrence of
Indebtedness and Issuance of Preferred Stock."
"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 Notes mature.
"ENI" means ENI Holding Corp., a Delaware corporation.
"ENI Merger" means a merger of the Company into ENI occurring immediately
after consummation of the transactions contemplated by the Repurchase
Agreement, with ENI being the surviving entity.
"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 prior to any conversion or
exchange thereof).
"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the Senior Credit Facility) in
existence on the date of the Indenture, until such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense of such Person
and its Subsidiaries for such period, whether paid or accrued (including,
without limitation, 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, but
excluding amortization of debt issuance costs and excluding letter of credit
fees accounted for as a cost of sales in accordance with GAAP) 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 Charges shall exclude interest paid to the
Company or any Subsidiary of the Company with respect to Notes owned by the
Company or such Restricted Subsidiary, if any.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
Company or any of its Restricted Subsidiaries incurs, assumes, Guarantees or
redeems any Indebtedness (other than revolving credit borrowings) or issues
preferred stock subsequent to the commencement of the period for which the
Fixed Charge Coverage Ratio is being calculated but prior to the date on which
the event for which the calculation of the Fixed Charge Coverage Ratio is made
(the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect to such incurrence, assumption, Guarantee or
redemption of Indebtedness, or such issuance or redemption of preferred stock,
as if the same had occurred at the beginning of the applicable four-quarter
reference period. In addition, for purposes of making the computation referred
to above, (i) acquisitions that have been made by the Company or any of its
Restricted Subsidiaries, including through mergers or consolidations and
including any related financing transactions, during the four-quarter reference
period or subsequent to such reference period and on or prior to the
Calculation
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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 Subsidiary" means any Restricted Subsidiary not organized or validly
existing under the laws of the United States or any state thereof or the
District of Columbia.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect from time to time.
"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.
"Guarantors" means each of (i) Tabor Machine Company, Norris Screen and
Manufacturing, Inc., TranService, Inc., Centrifugal Services, Inc., Mining
Controls, Inc., Clinch River Corporation, Roberts & Schaefer Company and Soros
Associates, Inc. and (ii) any other Person that executes a Subsidiary Guarantee
in accordance with the provisions of the Indenture, and their respective
successors and assigns.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"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. Any amount of the Notes owned by the
Company or any of its Restricted Subsidiaries shall not be outstanding
Indebtedness for purposes of the Indenture.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including Guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Restricted Subsidiary of the Company sells or otherwise
disposes of any Equity Interests of any direct or indirect Subsidiary of the
Company such that, after giving effect to any such sale or disposition, such
Person is no longer a Restricted Subsidiary of the Company, the Company shall
be deemed to have made an Investment on the date of any such
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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 "--
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).
"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 or Cash Equivalents received
by the Company or any of its Restricted Subsidiaries in respect of any Asset
Sale (including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), amounts required to be applied to
the repayment of Indebtedness secured by a Lien on the assets that were the
subject of such Asset Sale, any reserve for adjustment in respect of the sale
price of such asset or assets established in accordance with GAAP, and net of
any required Clawback Payment.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender, and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness (other than
the Senior Credit Facility) of the Company or any of its Restricted
Subsidiaries to declare a default on such other Indebtedness or cause the
payment thereof to be accelerated or payable prior to its stated maturity; and
(iii) as to which the lenders have been notified in writing that they will not
have any recourse to the stock or assets of the Company or any of its
Restricted Subsidiaries.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Permitted Business" means any business (i) conducted by the Company or any
of its Subsidiaries on the date of the Indenture, (ii) primarily comprised of
manufacturing equipment, durable goods and/or components thereof, including
related repairs and services, or (iii) primarily composed of engineering
services, or (iv) any business reasonably related to any of the foregoing.
"Permitted Investments" means (a) any Investment in the Company or in a
Wholly Owned Restricted Subsidiary of the Company that is a Guarantor; (b) any
Investment in Cash Equivalents or purchases by the Company or any of its
Restricted Subsidiaries of any of the Notes; (c) any Investment by the Company
or any Restricted Subsidiary of the Company in a Person, if as a result of such
Investment (i) such Person becomes a Wholly Owned Restricted Subsidiary of the
Company and a 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 Restricted Subsidiary of the Company
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that is a Guarantor and that is engaged in a Permitted Business; (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) Investments in (i) Restricted Subsidiaries that are not Guarantors, (ii)
Unrestricted Subsidiaries (other than such Investments deemed to be made by
reason of the designation of a Restricted Subsidiary as an Unrestricted
Subsidiary), (iii) Foreign Subsidiaries and (iv) Permitted Joint Ventures,
having an aggregate fair market value (measured on the date each such
Investment was made and without giving effect to subsequent changes in value),
when taken together with all other Investments made pursuant to this clause (f)
that are at the time outstanding, not to exceed $10.0 million; (g) other
Investments in any Person having an aggregate fair market value (measured on
the date each such Investment was made and without giving effect to subsequent
changes in value), when taken together with all other Investments made pursuant
to this clause (g) that are at the time outstanding, not to exceed $1.5 million
and (h) full recourse loans to the Principals, in an aggregate principal amount
outstanding not to exceed $1.6 million, reduced by principal payments made
thereon.
"Permitted Joint Venture" means any joint venture, partnership or other
Person designated by the Board of Directors, and until designation by the Board
of Directors to the contrary, (i) at least 30% of whose Capital Stock with
voting power under ordinary circumstances to elect directors (or Persons having
similar or corresponding powers and responsibilities) is at the time owned
(beneficially or directly) by the Company and/or by one or more Restricted
Subsidiaries of the Company, (ii) all of whose Indebtedness is Non-Recourse
Indebtedness, and (iii) which is engaged in a Permitted Business. Any such
designation or designation to the contrary shall be evidenced to the Trustee by
promptly filing with the Trustee a copy of the resolution giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing provisions.
"Permitted Liens" means (i) Liens securing Obligations of the Company or any
Restricted Subsidiary under the Senior Credit Facility and Liens on accounts
receivable and inventory securing Obligations of the Company or any Restricted
Subsidiary under any other Credit Facility; (ii) Liens on the assets of the
Company or any of the Guarantors to secure Hedging Obligations with respect to
Indebtedness under any Credit Facility permitted by the Indenture to be
incurred; (iii) Liens on property of a Person existing at the time such Person
is merged into or consolidated with the Company or any Restricted Subsidiary of
the Company; provided that such Liens were 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;
(iv) Liens on property existing at the time of acquisition thereof by the
Company or any Restricted Subsidiary of the Company, provided that such Liens
were in existence prior to the contemplation of such acquisition; (v) Liens
existing on the date of the Indenture; (vi) Liens to secure any Permitted
Refinancing Indebtedness incurred to refinance any Indebtedness secured by any
Lien referred to in the foregoing clauses (i) through (v), provided that the
assets securing such Permitted Refinancing Indebtedness shall be the same
assets that secured the Indebtedness being refinanced; (vii) Liens to secure
the performance of statutory obligations, surety or appeal bonds, payment or
performance bonds, deposits to secure the performance of bids, trade contracts,
government contracts, leases or licenses or other obligations of a like nature
incurred in the ordinary course of business; (viii) Liens to secure
Indebtedness (including Capital Lease Obligations) permitted by clause (iv) of
the second paragraph of the covenant entitled "Incurrence of Indebtedness and
Issuance of Preferred Stock" covering only the assets acquired with such
Indebtedness; (ix) Liens in favor of the Company or any Restricted Subsidiary
that is a Guarantor; (x) 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; (xi) Liens incurred in
the ordinary course of business of the Company or any Restricted Subsidiary of
the Company with respect to obligations that do not exceed $5.0 million in the
aggregate at any one time outstanding and that (a) are not incurred in
connection with the borrowing of money or the obtaining of advances or credit
(other than trade credit in the ordinary course of business) and (b) do not in
the aggregate materially detract from the value of the property or materially
impair the use thereof in the operation of business by the Company or such
Restricted Subsidiary; (xii) Liens on assets of Unrestricted Subsidiaries that
secure Non-Recourse Debt of
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Unrestricted Subsidiaries; (xiii) carriers', warehousemen's, mechanics',
landlords' materialmen's, repairmen's or other like Liens arising in the
ordinary course of business in respect of obligations not overdue for a period
in excess of 60 days or which are being contested in good faith by appropriate
proceedings promptly instituted and diligently prosecuted; provided that any
reserve or other appropriate provision as shall be required to conform with
GAAP shall have been made therefor; (xiv) easements, rights-of-way, zoning and
similar restrictions and other similar encumbrances or title defects incurred,
or leases or subleases granted to others, in the ordinary course of business,
which do not in any case materially detract from the value of the property
subject thereto or do not interfere with or adversely affect in any material
respect the ordinary conduct of business of the Company and its Restricted
Subsidiaries taken as a whole; (xv) Liens in favor of customs and revenue
authorities to secure payment of customs duties in connection with the
importation of goods in the ordinary course of business and other similar Liens
arising in the ordinary course of business; (xvi) leases or subleases granted
to third Persons not interfering with the ordinary course of business of the
Company or any of its Restricted Subsidiaries; (xvii) Liens (other than any
Lien imposed by ERISA or any rule or regulation promulgated thereunder)
incurred or deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance, and other types of social
security; (xviii) deposits, in an aggregate amount not to exceed $2.0 million,
made in the ordinary course of business to secure liability to insurance
carriers; (xix) Liens for purchase money obligations (including refinancings
thereof permitted under the covenant entitled "incurrence of Indebtedness and
Issuance of Preferred Stock"), provided that (A) the Indebtedness secured by
such Lien is permitted under the covenant entitled "Incurrence of Indebtedness
and Issuance of Preferred Stock" and (B) any such Lien encumbers only the
assets so purchased; (xx) any attachment or judgment Lien not constituting an
Event of Default under the section entitled "Events of Default and Remedies";
(xxi) any interest or title of a lessor or sublessor under any operating lease;
(xxii) Liens under licensing agreements for use of the Company's or any
Restricted Subsidiaries' intellectual property entered into in the ordinary
course of business; (xxiii) Liens securing industrial revenue bonds; (xxiv)
Liens in favor of the Trustee under the Indenture; (xxv) Liens securing
reimbursement obligations with respect to letters of credit which encumber
documents and other property relating to such letters of credit and the
products and proceeds thereof; (xxvi) Liens arising out of consignment or
similar arrangements for the sale of goods entered into by the Company or any
Restricted Subsidiary in the ordinary course of business in accordance with
past practices; (xxvii) any interest or title of a lessor in the property
subject to any lease, whether characterized as capitalized or operating, other
than any such interest or title resulting from or arising out of a default by
the Company or any Subsidiary of its obligations under such lease; and (xxviii)
Liens arising from filing UCC financing statements for precautionary purposes
in connection with true leases of personal property that are otherwise
permitted under the applicable indenture and under which the Company or any
Subsidiary is lessee.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company or
any of its Restricted Subsidiaries issued in exchange for, or the net proceeds
of which are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of the Company or any of its Restricted Subsidiaries; provided
that: (i) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal amount of (or
accreted value, if applicable), plus accrued interest on, the Indebtedness so
extended, refinanced, renewed, replaced, defeased or refunded (plus the amount
of reasonable expenses incurred in connection therewith); (ii) such Permitted
Refinancing Indebtedness has a final maturity date 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 Notes, such Permitted
Refinancing Indebtedness has a final maturity date later than the final
maturity date of, and is subordinated in right of payment to, the Notes on
terms at least as favorable to the Holders of Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and (iv) such Indebtedness is incurred either
by the Company or by the Restricted 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 or
government or other agency or political subdivision thereof.
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"Principals" means Fred C. Schulte, Charles D. Hall and Wayne J. Conner and
SHC Investment Partnership, a Delaware general partnership, for so long as at
least 80% of the economic interests and Voting Stock therein are owned by the
other Principals or their Related Parties.
"Recapitalization Transactions" means (i) the repurchase by the Company and
ENI on the Issue Date of all common stock, preferred stock and common stock
warrants of ENI not owned by the Principals, (ii) the redemption by the Company
on the Issue Date of all outstanding senior subordinated debt of the Company,
together with accrued and unpaid interest to the Issue Date and prepayment
fees, (iii) the ENI Merger, (iv) the amendment of the certificate of
incorporation and by-laws of such surviving corporation to, among other things,
change the name of the surviving corporation to Elgin National Industries,
Inc., and (v) the entry into the Senior Credit Facility by the Company and the
Guarantors.
"Related Party" with respect to any Principal means (A) any controlling
stockholder, 80% (or more) owned Subsidiary, spouse, immediate family member or
executor (in the case of an individual) of such Principal or (B) any trust,
corporation, partnership or other entity, the beneficiaries, stockholders,
partners, owners or Persons beneficially holding an 80% or more controlling
interest of which consist of such Principal and/or such other Persons referred
to in the immediately preceding clause (A).
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Senior Credit Facility" means that certain Senior Credit Facility, to be
dated as of the Issue Date, by and among the Company, certain of the Company's
subsidiaries (as guarantors) and the lenders party thereto, providing for up to
$20.0 million of revolving credit borrowings (as such amount may be increased
as permitted under the provisions in the Indenture described in clause (i) of
the second paragraph of the covenant described under "--Incurrence of
Indebtedness and Issuance of Preferred Stock"), including any related notes,
guarantees, collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, modified, extended, renewed,
refunded, replaced or refinanced from time to time. Indebtedness under the
Senior Credit Facility outstanding on the date on which Notes are first issued
and authenticated under the Indenture shall be deemed to have been incurred on
such date in reliance on the exception provided by clause (i) of the second
paragraph of the description of the covenant entitled "--Incurrence of
Indebtedness and Issuance of Preferred Stock."
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the date hereof.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations
to repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a
combination thereof) and (ii) any partnership (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).
"Unrestricted Subsidiary" means (i) any Subsidiary (including any newly
acquired or newly formed Subsidiary) that is designated by the Board of
Directors as an Unrestricted Subsidiary pursuant to a Board
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Resolution; but only to the extent that such Subsidiary: (a) has no
Indebtedness other than Non-Recourse Debt; (b) is not party to any agreement,
contract, arrangement or understanding with the Company or any Restricted
Subsidiary of the Company unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or such
Restricted Subsidiary than those that might be obtained at the time from
Persons who are not Affiliates of the Company; (c) is a Person with respect to
which neither the Company nor any of its Restricted Subsidiaries has any direct
or indirect obligation (x) to subscribe for additional Equity Interests or (y)
to maintain or preserve such Person's financial condition or (z) to cause such
Person to achieve any specified levels of operating results; and (d) has not
guaranteed or otherwise directly or indirectly provided credit support for any
Indebtedness of the Company or any of its Restricted Subsidiaries; and (e) has
at least one director on its board of directors that is not a director or
executive officer of the Company or any of its Restricted Subsidiaries. Any
such designation by the Board of Directors shall be evidenced to the Trustee by
filing with the Trustee a certified copy of the Board Resolution giving effect
to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing conditions and was permitted by the
covenant described above under the caption "Certain Covenants--Restricted
Payments." If, at any time, any Unrestricted Subsidiary would fail to meet the
foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease
to be an Unrestricted Subsidiary for purposes of the Indenture and any
Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted
Subsidiary of the Company as of such date (and, if such Indebtedness is not
permitted to be incurred as of such date under the covenant described under the
caption "Certain Covenants--Incurrence of Indebtedness and Issuance of
Preferred Stock," the Company shall be in default of such covenant). The Board
of Directors of the Company may at any time designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided that such designation shall
be deemed to include an incurrence of Indebtedness by a Restricted Subsidiary
of the Company of any outstanding Indebtedness of such Unrestricted Subsidiary
and such designation shall only be permitted if (i) such Indebtedness is
permitted under the covenant described under the caption "Certain Covenants--
Incurrence of Indebtedness and Issuance of Preferred Stock," calculated on a
pro forma basis as if such designation had occurred at the beginning of the
four-quarter reference period, and (ii) no Default or Event of Default would be
in existence following such designation.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (ii) the then outstanding
principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person that is a Wholly Owned Subsidiary of such Person.
"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.
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CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES
The following discussion is a summary of the material United States federal
income tax considerations relevant to the acquisition, ownership and
disposition of the Notes acquired in the Offering, but does not purport to be a
complete analysis of all potential tax effects. The discussion is based upon
the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
Regulations, Internal Revenue Service (the "Service") rulings and
pronouncements and judicial decisions all in effect as of the date hereof, all
of which are subject to change at any time, and any such change may be applied
retroactively in a manner that could adversely affect a holder of the Notes.
The discussion does not address all of the federal income tax consequences that
may be relevant to a holder in light of such holder's particular circumstances
or to holders subject to special rules, such as certain financial institutions,
insurance companies, dealers in securities and persons holding the Notes as
part of a "straddle," "hedge" or "conversion transaction." Moreover, the effect
of any applicable state, local or foreign tax laws is not discussed. The
discussion deals only with Notes held as "capital assets" within the meaning of
Section 1221 of the Code.
As used herein, the term "U.S. Holder" means a beneficial owner of a Note who
or which is for U.S. federal income tax purposes (i) a citizen or resident of
the United States, (ii) a corporation or partnership created or organized in
the United States or under the laws of the United States or of any State, (iii)
an estate the income of which is subject to U.S. federal income taxation
regardless of its source, or (iv) a "U.S. Trust." A U.S. Trust is (a) for
taxable years beginning after December 31, 1996, or if the trustee of a trust
elects to apply the following definition to an earlier taxable year ending
after August 20, 1996, any trust if, and only if, (i) a court within the United
States is able to exercise primary supervision over the administration of the
trust and (ii) one or more U.S. persons have the authority to control all
substantial decisions of the trust and (b) for all other taxable years, any
trust whose income is includible in gross income for U.S. federal income tax
purposes regardless of its source. The term U.S. Holder also includes certain
former U.S. citizens whose income and gain on the Notes will be subject to U.S.
taxation. As used herein, the term "Non-U.S. Holder" means a beneficial owner
of a Note that is not a U.S. Holder. Unless otherwise indicated from the
context, "Holder" means either a U.S. Holder or a Non-U.S. Holder.
The Company has not sought and will not seek any rulings from the Service
with respect to any position of the Company discussed below. There can be no
assurance that the Service will not take a different position from the Company
concerning aspects of the tax consequences of the acquisition, ownership or
disposition of the Notes or that any such position would not be sustained.
PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH REGARD TO
THE APPLICATION OF THE TAX CONSIDERATIONS DISCUSSED BELOW TO THEIR PARTICULAR
SITUATIONS AS WELL AS THE APPLICATION OF ANY STATE, LOCAL, FOREIGN OR OTHER TAX
LAWS.
LIQUIDATED DAMAGES
The treatment of interest described below with respect to the Notes is based
in part upon the Company's determination that, as of the date of issuance of
the Notes, the possibility that Liquidated Damages would be paid to Holders of
the Notes pursuant to a Registration Default was remote. The Service may take a
different position, which could affect the timing and character of interest
income reported by Holders of the Notes. While not free from doubt, if such
Liquidated Damages are in fact paid, the Company believes the Liquidated
Damages will be taxable to a Holder as ordinary income in accordance with such
Holder's method of accounting.
U.S. HOLDERS
Interest payable on the Notes will be includible in the income of a U.S.
Holder in accordance with such Holder's regular method of accounting. If a Note
is redeemed, sold or otherwise disposed of, a U.S. Holder generally will
recognize gain or loss equal to the difference between the amount realized on
the sale or other
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disposition of such Note (to the extent such amount does not represent accrued
but unpaid interest) and such Holder's tax basis in the Note. Such gain or loss
generally will be capital gain or loss, provided that the Holder has held the
Note as a capital asset. The recently enacted Taxpayer Relief Act of 1997 made
certain changes to the Code with respect to taxation of capital gains of
taxpayers other than corporations that are U.S. Holders. In general, the
maximum tax rate for non-corporate taxpayers on long-term capital gains has
been lowered to 20% from the previous 28% rate for most capital assets
(including the Notes) held for more than 18 months. For taxpayers in the 15%
regular tax bracket, the maximum tax rate on long-term capital gains is now
10%. Capital gain on such assets having a holding period of more than one year
but not more than 18 months will be subject to a maximum tax rate of 28%.
NON-U.S. HOLDERS
On October 14, 1997, final Treasury Regulations (the "1997 Final
Regulations") were issued which affect the U.S. taxation of Non-U.S. Holders of
the Notes. The 1997 Final Regulations generally are effective for payments made
after December 31, 1998, regardless of the issue date of the Notes with respect
to which such payments are made, subject to certain transition rules. The
discussion under this heading and under "--Backup Withholding" below is for
informational purposes only and is not intended to be a complete discussion of
either the statutory and regulatory provisions that apply to payments made on
the Notes before January 1, 1999 or the provisions of the 1997 Final
Regulations. Prospective Non-U.S. Holders are urged to consult their tax
advisors with respect to the possible applicability of the various withholding
provisions of the Code and the Treasury Regulations promulgated thereunder.
Interest on the Notes. Payments of interest on the Notes by the Company or
any paying agent to a beneficial owner of a Note that is a Non-U.S. Holder will
not be subject to U.S. federal withholding tax, provided that, (i) such holder
does not own, actually or constructively, 10 percent or more of the total
combined voting power of all classes of stock of the Company entitled to vote;
(ii) such holder is not, for U.S. federal income tax purposes, a controlled
foreign corporation related, directly or indirectly, to the Company through
stock ownership; (iii) such holder is not a bank receiving interest described
in Section 881(c)(3)(A) of the Code; and (iv) certain certification
requirements (summarized below) are met (the "Portfolio Interest Exception").
If a Non-U.S. Holder of a Note is engaged in a trade or business in the United
States, and if interest on the Note is effectively connected with the conduct
of such trade or business (and, if certain tax treaties apply, is attributable
to a U.S. permanent establishment maintained by the Non-U.S. Holder), the Non-
U.S. Holder, although exempt from U.S. withholding tax, will generally be
subject to regular U.S. income tax on such interest in the same manner as if it
were a U.S. Holder. In addition, if such Non-U.S. Holder is a foreign
corporation, it may be subject to a branch profits tax equal to 30% (or such
lower rate provided by an applicable treaty) of its effectively connected
earnings and profits for the taxable year, subject to certain adjustments. For
purposes of the branch profits tax, interest on a Note will be included in the
earnings and profits of such Non-U.S. Holder if such interest is effectively
connected with the conduct by the Non-U.S. Holder of a trade or business in the
United States.
For payments of interest on the Notes made prior to January 1, 1999,
generally in order to obtain the exemption from withholding tax described in
the first sentence of the preceding paragraph, either (i) the beneficial owner
of a Note must certify on Internal Revenue Service Form W-8 or a substitute
form that is substantially similar to Form W-8, under penalties of perjury, to
the Company or a paying agent, as the case may be, that such owner is a Non-
U.S. Holder and must provide such owner's name and address or (ii) a securities
clearing organization, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or business (a
"Financial Institution") and holds the Note on behalf of the beneficial owner
thereof must certify, under penalties of perjury, to the Company or paying
agent, as the case may be, that such certificate has been received from the
beneficial owner by it or by a Financial Institution between it and the
beneficial owner and must furnish the payor with a copy thereof. A certificate
described in this paragraph is effective only with respect to payments of
interest made to the certifying Non-U.S. Holder after delivery of the
certificate in the calendar year of its delivery and the two immediately
succeeding calendar years. In lieu of the certificate described in this
paragraph, a Non-U.S. Holder engaged in a trade or business in the United
States (with which interest payments on the Note are effectively connected)
must provide to the Company a properly executed Internal Revenue Service Form
4224 in order to claim an exemption from withholding tax.
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A payment of interest on the Notes made to a foreign beneficial owner after
December 31, 1998 generally will qualify for the Portfolio Interest Exception
or, as the case may be, the exception from withholding for income effectively
connected with the conduct of a trade or business in the United States if, at
the time such payment is made, the withholding agent holds a valid Form W-8 (or
an acceptable substitute form) from the beneficial owner and can reliably
associate such payment with such Form W-8. In addition, under certain
circumstances a withholding agent is allowed under the 1997 Final Regulations
to rely on Form W-8 (or an acceptable substitute form) furnished by a financial
institution or other intermediary on behalf of one or more beneficial owners
(or other intermediaries) without having to obtain copies of the beneficial
owner's Form W-8 (or substitute thereof), provided that the financial
institution or intermediary has entered into a withholding agreement with the
Service and thus is a "qualified intermediary," and may not be required to
withhold on payments made to certain other intermediaries if certain conditions
are met.
Disposition of Notes. Under current law, a Non-U.S. Holder of a Note
generally will not be subject to U.S. federal income tax on any gain recognized
on the sale, exchange or other disposition of such Note (other than gain
attributable to accrued interest, which is subject to the rules discussed
above), unless (i) the gain is effectively connected with the conduct of a
trade or business in the United States of the Non-U.S. Holder (and, if certain
tax treaties apply, is attributable to a U.S. permanent establishment
maintained by the Non-U.S. Holder); (ii) the Non-U.S. Holder is an individual
who holds the Note as a capital asset, is present in the United States for 183
days or more in the taxable year of the disposition and either (a) such
individual has a U.S. "tax home" (as defined for U.S. federal income tax
purposes) or (b) the gain is attributable to an office or other fixed place of
business maintained in the United States by such individual; or (iii) the Non-
U.S. Holder is subject to tax pursuant to the Code provisions applicable to
certain U.S. expatriates. In the case of a Non-U.S. Holder that is described
under clause (i) above, its gain will be subject to the U.S. federal income tax
on net income that applies to U.S. persons and, in addition, if such Non-U.S.
Holder is a foreign corporation, it may be subject to the branch profits tax as
described above. An individual Non-U.S. Holder that is described under clause
(ii) above will be subject to a flat 30% tax on gain derived from the sale,
which may be offset by U.S. capital losses (notwithstanding the fact that he or
she is not considered a U.S. resident). Thus, individual Non-U.S. Holders who
have spent 183 days or more in the United States in the taxable year in which
they contemplate a sale of a Note are urged to consult their tax advisers as to
the tax consequences of such sale.
Estate Tax Consequences. A Note held by an individual who is not a U.S.
citizen or resident (as specially defined for United States federal estate tax
purposes) at the time of his death will not be subject to U.S. federal estate
tax as a result of such individual's death, provided that, at the time of such
individual's death, the individual does not own, actually or constructively, 10
percent or more of the total combined voting power of all classes of stock of
the Company entitled to vote and payments with respect to such Note would not
have been effectively connected with the conduct by such individual of a trade
or business in the United States.
BACKUP WITHHOLDING
A Holder may be subject, under certain circumstances, to backup withholding
at a 31% rate with respect to "reportable payments" on the Notes. This
withholding generally applies only if the Holder (i) fails to furnish his or
her social security or other taxpayer identification number ("TIN"); (ii)
furnishes an incorrect TIN; (iii) is notified by the Service that he or she has
failed to report properly payments of interest and dividends and the Service
has notified the Company that the Holder is subject to backup withholding; or
(iv) fails, under certain circumstances, to provide a certified statement,
signed under penalty of perjury, that the TIN provided is his or her correct
number and that he or she is not subject to backup withholding. Any amount
withheld from payment to a holder under the backup withholding rules is
allowable as a credit against such holder's federal income tax liability,
provided that the required information is furnished to the Service. Certain
Holders (including, among others, corporations and foreign individuals who
comply with certain certification requirements) are not subject to backup
withholding. Holders should consult their tax advisors as to their
qualifications for exemption from backup withholding and the procedure for
obtaining such an exemption.
91
<PAGE>
INFORMATION REPORTING
The Company is required to furnish certain information to the Service and
will furnish annually to record holders of the Notes information with respect
to interest paid on the Notes during the calendar year.
CONSEQUENCES OF THE EXCHANGE OFFER TO EXCHANGING AND NONEXCHANGING HOLDERS
The exchange of a Note for an Exchange Note pursuant to the Exchange Offer
will not be taxable to an exchanging Holder for Federal income tax purposes. As
a result (i) an exchanging Holder will not recognize any gain or loss on the
exchange; (ii) the holding period for the Exchange Note will include the
holding period for the Note; and (iii) the basis of the Exchange Note will be
the same as the basis for the Note.
The Exchange Offer will result in no Federal income tax consequences to a
nonexchanging Holder of Notes.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account as a result of
market-making activities or other trading activities in connection with the
Exchange Offer must acknowledge that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such New
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 New Notes received
in exchange for Old Notes where such Old 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 the Expiration Date, it will make available
a prospectus meeting the requirements of the Securities Act to any broker-
dealer for use in connection with any such resale. In addition, until 1997, all
dealers effecting transactions in the New Notes may be required to deliver a
prospectus.
The Company will receive no proceeds in connection with the Exchange Offer.
New 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 New Notes or a combination of such methods of resale, at market
prices prevailing at the time of resale, at prices related to such prevailing
market prices or negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer or the
purchasers of any such New Notes. Any broker-dealer that resells New 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 New Notes may be
deemed to be an "underwriter" within the meaning of the Securities Act and any
profit on any such resale of New 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.
LEGAL MATTERS
The validity of the Notes offered hereby will be passed upon for the Company
by Mayer, Brown & Platt of Chicago, Illinois.
EXPERTS
The consolidated balance sheet of the Company for the years ended December
31, 1995 and 1996 and the related consolidated statements of income (loss),
changes in shareholders' deficit and cash flows for the three years ended in
the period ended December 31, 1996 included herein have been audited by Coopers
& Lybrand, L.L.P., independent public accountants, as stated 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.
92
<PAGE>
[ENI HOLDING CORP.] AND SUBSIDIARY COMPANIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Auditors' Report.......................................................... F-2
Consolidated Balance Sheets at December 31, 1995 and December 31, 1996 and
unaudited
September 30, 1997....................................................... F-3
Consolidated Statements of income (loss) for the years ended December 31,
1994, 1995 and 1996 and for the unaudited nine months ended September 30,
1996 and 1997............................................................ F-4
Consolidated Statements of Changes in Stockholders' Deficit for the years
ended December 31, 1994, 1995 and 1996 and for the unaudited nine months
ended September 30, 1997................................................. F-5
Consolidated Statements of Cash Flows for the years ended December 31,
1994, 1995 and 1996 and for the unaudited nine months ended September 30,
1996 and 1997............................................................ F-6
Notes to Consolidated Financial Statements................................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
ENI Holding Corp.
We have audited the accompanying consolidated balance sheets of ENI Holding
Corp. and Subsidiary Companies as of December 31, 1996 and 1995 and the
related consolidated statements of income (loss), changes in stockholders'
deficit and cash flows for the years ended December 31, 1996, 1995 and 1994.
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 consolidated financial position of ENI Holding
Corp. and Subsidiary Companies as of December 31, 1996 and 1995, and the
consolidated results of their operations and their cash flows for the years
ended December 31, 1996, 1995 and 1994 in conformity with generally accepted
accounting principles.
LOGO
Chicago, Illinois
March 10, 1997
F-2
<PAGE>
ENI HOLDING CORP. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995, 1996 AND UNAUDITED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
DECEMBER 31,
---------------- SEPT. 30,
1995 1996 1997
------- ------- -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................... $ 4,506 $13,952 $ 6,093
Accounts receivable, net........................ 20,528 19,888 20,751
Inventories, net................................ 15,140 12,901 13,556
Prepaid expenses and other assets............... 877 714 752
Deferred income tax............................. 5,056 3,446 3,211
------- ------- -------
Total current assets.......................... 46,107 50,901 44,363
Property, plant and equipment, net................ 14,707 13,741 13,001
Other assets...................................... 20,059 21,053 22,888
Goodwill and intangibles.......................... 16,592 13,180 9,627
------- ------- -------
Total assets.................................. $97,465 $98,875 $89,879
======= ======= =======
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Current portion of long-term debt............... $ 4,310 $ 3,893 $ 306
Accounts payable and accrued expenses........... 25,086 31,820 24,548
------- ------- -------
Total current liabilities..................... 29,396 35,713 24,854
Long-term debt less current portion............... 33,366 22,998 20,519
Other liabilities................................. 454 965 1,113
Deferred income tax............................... 6,005 6,091 6,091
------- ------- -------
Total liabilities............................. 69,221 65,767 52,577
------- ------- -------
Preferred stock units............................. 8,924 9,651 10,196
------- ------- -------
Preferred stock................................... 23,790 25,729 27,178
------- ------- -------
Stockholders' deficit:
Common stock, (Class A, B, and C)............... -- -- --
Paid in capital................................. 1,519 1,519 1,519
Retained deficit................................ (5,989) (3,791) (1,591)
------- ------- -------
Total stockholders' deficit................... (4,470) (2,272) (72)
------- ------- -------
Total liabilities and stockholders' deficit... $97,465 $98,875 $89,879
======= ======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE>
ENI HOLDING CORP. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND
FOR THE UNAUDITED NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------- ------------------
1994 1995 1996 1996 1997
-------- -------- -------- -------- ---------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Net sales....................... $197,284 $126,839 $135,651 97,253 $ 104,510
Cost of sales................... 167,170 102,654 100,119 71,877 77,471
-------- -------- -------- -------- ---------
Gross profit................ 30,114 24,185 35,532 25,376 27,039
Selling, general and
administrative expenses........ 19,356 19,891 21,226 15,783 15,735
Amortization expense............ 3,050 3,052 3,085 2,329 2,336
-------- -------- -------- -------- ---------
Operating income............ 7,708 1,242 11,221 7,264 8,968
Other expenses (income):
Interest expense, net......... 6,270 4,807 3,340 2,574 1,536
Gain on the sale of product
line......................... -- (2,520) -- -- --
-------- -------- -------- -------- ---------
Income (loss) from continuing
operations before income taxes. 1,438 (1,045) 7,881 4,690 7,432
Provision for income taxes...... 668 124 3,191 1,776 3,238
-------- -------- -------- -------- ---------
Net income (loss) from
continuing operations.......... 770 (1,169) 4,690 2,914 4,194
Discontinued operations:
Income from discontinued
operations (less applicable
income taxes of $566, $200,
$33 and $52, respectively)... 889 281 51 102 --
Gain on sale of discontinued
operations (less applicable
income taxes of $375 and $77,
respectively)................ -- 595 123 -- --
-------- -------- -------- -------- ---------
Net income (loss)............... $ 1,659 $ (293) $ 4,864 $ 3,016 $ 4,194
======== ======== ======== ======== =========
Income (loss) per share from
continuing operations.......... $ 38.42 $ (58.33) $ 234.03 $ 145.41 $ 209.28
Income per share from
discontinued operations........ 44.36 43.71 8.68 5.09 --
-------- -------- -------- -------- ---------
Net income (loss) per share..... $ 82.78 $ (14.62) $ 242.71 $ 150.50 $ 209.28
======== ======== ======== ======== =========
Common share and common share
equivalents used in
calculation.................... 20,040 20,040 20,040 20,040 20,040
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
ENI HOLDING CORP. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND
FOR THE UNAUDITED NINE MONTHS ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
RETAINED TOTAL
COMMON PAID-IN EARNINGS STOCKHOLDERS'
STOCK CAPITAL (DEFICIT) DEFICIT
------ ------- --------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance as of December 31, 1993......... $-- $1,519 $(2,015) $ (496)
Net income for the year ended December
31, 1994............................... -- -- 1,659 1,659
Preferred stock and preferred stock unit
dividends.............................. -- -- (2,674) (2,674)
---- ------ ------- -------
Balance as of December 31, 1994......... -- 1,519 (3,030) (1,511)
Net loss for the year ended December 31,
1995................................... -- -- (293) (293)
Preferred stock and preferred stock unit
dividends.............................. -- -- (2,666) (2,666)
---- ------ ------- -------
Balance as of December 31, 1995......... -- 1,519 (5,989) (4,470)
Net income for the year ended December
31, 1996............................... -- -- 4,864 4,864
Preferred stock and preferred stock unit
dividends.............................. -- -- (2,666) (2,666)
---- ------ ------- -------
Balance as of December 31, 1996......... -- 1,519 (3,791) (2,272)
Net income for the nine months ended
September 30, 1997 (unaudited)......... -- -- 4,194 4,194
Preferred stock and preferred stock unit
dividends (unaudited).................. -- -- (1,994) (1,994)
---- ------ ------- -------
Balance as of September 30, 1997
(unaudited)............................ $-- $1,519 $(1,591) $ (72)
==== ====== ======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
ENI HOLDING CORP. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND
FOR THE UNAUDITED NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------- ------------------
1994 1995 1996 1996 1997
-------- -------- -------- -------- --------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income (loss)........... $ 1,659 $ (293) $ 4,864 $ 3,016 $ 4,194
Adjustments to reconcile net
income (loss) to net cash
provided by (used in)
operating activities:
Depreciation and
amortization............... 7,209 6,084 5,683 4,413 4,030
Provision for deferred
income taxes............... 1,021 411 1,716 1,034 2,174
Provision for doubtful
accounts................... 203 126 187 588 59
Provision for inventories... 848 648 751 128 501
Gain on sale of American
Fastener Corporation....... -- -- (200) -- --
Gain on sale of product
line....................... -- (2,520) -- -- --
Gain on sale of GC Thorsen,
Inc........................ -- (970) -- -- --
Income from pension
overfunding................ (657) (780) (758) (340) (454)
(Gain) loss on the disposal
of assets.................. 113 82 (46) (42) 11
Changes in assets and
liabilities:
(Increase) decrease in
accounts receivable........ (1,599) 13,572 (813) (7,102) (922)
(Increase) decrease in
inventories................ (1,865) 96 (633) 62 (1,155)
(Increase) decrease in
prepaid expenses and other
assets..................... 2,014 52 180 (12) (2,139)
Increase (decrease) in
accounts payable and
accrued expenses........... (909) (16,366) 6,574 7,560 (6,748)
-------- -------- -------- -------- --------
Net cash provided by (used
in) operating activities. 8,037 142 17,505 9,305 (449)
-------- -------- -------- -------- --------
Cash flows from investing
activities:
Proceeds from the sale of
assets..................... 2,431 45 214 207 --
Purchase of property, plant
and equipment.............. (1,777) (1,610) (2,153) (1,459) (969)
Purchase Centrifugal
Services, Inc.............. -- (2,334) -- -- --
Purchase assets of Process
Equipment Company.......... -- (798) -- -- --
Purchase assets of K&M Inc.. (432) -- -- -- --
Purchase Soros Associates... 500 -- -- -- --
Proceeds from the sale of
American Fastener
Corporation................ -- -- 3,874 -- --
Proceeds from the sale of
product line............... -- 5,682 -- -- --
Proceeds from the sale of GC
Thorsen, Inc............... -- 23,493 -- -- --
-------- -------- -------- -------- --------
Net cash provided by (used
in) investing activities. 722 24,478 1,935 (1,252) (969)
-------- -------- -------- -------- --------
Cash flows from financing
activities:
Payments of long-term debt.. (7,618) (23,391) (10,785) (6,715) (6,218)
Borrowings (payments) of
short-term debt............ (5,600) 2,500 -- -- --
Increase (decrease) in cash
overdrafts................. 3,002 (1,939) 791 682 (223)
-------- -------- -------- -------- --------
Net cash used in financing
activities............... (10,216) (22,830) (9,994) (6,033) (6,441)
-------- -------- -------- -------- --------
Net increase (decrease) in
cash and cash equivalents... (1,457) 1,790 9,446 2,020 (7,859)
Cash and cash equivalents at
beginning of period......... 4,173 2,716 4,506 4,506 13,952
-------- -------- -------- -------- --------
Cash and cash equivalents at
end of period............... $ 2,716 $ 4,506 $ 13,952 $ 6,526 $ 6,093
======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE>
ENI HOLDING CORP. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF COMPANY
ENI Holding Corp. ("the Company") owns and operates a diversified group of
middle-market industrial manufacturing and engineering services businesses.
The Company focuses on operating businesses with leading positions in niche
markets, consistent profitability, diverse customer bases, efficient
production capabilities and broad product lines serving stable industries. The
Company is comprised of ten business units that are organized into two
operating groups. Through its Manufactured Products Group, the Company is a
leading manufacturer and supplier of custom-designed, highly engineered
products used by a wide variety of customers in the industrial equipment,
durable goods, mining, mineral processing, and electric utility industries.
Through its Engineering Services Group, the Company provides design,
engineering, procurement and construction management services for mineral
processing and bulk materials handling systems used in the mining, mineral
processing, electric utility and the rail and marine transportation
industries. The Company's distribution operations which included American
Fastener Corporation and GC Thorsen, Inc. were sold in 1996 and 1995,
respectively. These operations have been classified and shown as discontinued
operations. See Note 20.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies of the Company are summarized below:
A) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany transactions and
balances have been eliminated in consolidation.
B) ESTIMATES
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 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.
C) REVENUES AND COST RECOGNITION ON CONTRACTS
The length of the Company's construction contracts varies, but is
typically longer than one year. However, in accordance with industry
practice, contract-related assets and liabilities are classified as current
in the accompanying consolidated balance sheets. Revenues are recognized on
the percentage-of-completion method measured by comparing costs incurred to
date with total estimated costs on each project. Contract costs include
direct material and engineering costs along with indirect costs related to
contract performance. Favorable adjustments to these cost estimates are
made and recognized in income over the remaining contract period.
Unfavorable adjustments are recorded as soon as they are apparent.
Estimated losses on uncompleted contracts are provided in full within the
period in which such losses are determinable.
D) INVENTORIES
Inventories are valued at the lower of cost or market. Cost is determined
on the first-in, first-out (FIFO) and the average cost bases.
E) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation is
computed principally using the straight-line and double declining-balance
methods over the estimated useful lives of the related assets.
F-7
<PAGE>
ENI HOLDING CORP. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Upon the sale or other disposition of an asset, the cost and related
accumulated depreciation are removed from the accounts, and the gain or
loss is included in income. Maintenance and repair costs are charged to
earnings as incurred. Costs of improvements are capitalized.
F) GOODWILL AND INTANGIBLES
The excess of cost over fair value of the net assets acquired is
reflected in the consolidated financial statements as goodwill and is being
amortized using the straight-line method over a period of twenty years.
Intangibles consist primarily of non-compete agreements and are being
amortized using the straight-line method over a period of five years.
G) INCOME TAXES
Deferred income taxes are recognized for the tax consequences in future
years of differences between the tax bases of assets and liabilities and
their financial reporting amounts at December 31, 1996 and 1995 based on
tax rates applicable to the periods in which the differences are expected
to affect taxable earnings. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected to be
realized.
H) WARRANTS SUBJECT TO PUT
Warrants were issued to the senior subordinated debt holders and are
stated at their estimated fair value. As discussed in Note 10, these
warrants are subject to a put option at a price equal to the fair value of
the underlying stock. Estimated changes in the fair value of the warrants
based on the put option are recognized as an adjustment to interest
expense.
I) CASH EQUIVALENTS
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents, which approximate
fair value.
J) ACCOUNTING PRINCIPLES TO BE ADOPTED
The Company will implement the provisions of Statement of Financial
Accounting Standards No. 128, "Earnings per Share" (SFAS No. 128), which
will be effective for interim and annual financial statements issued for
periods ending after December 15, 1997. SFAS No. 128 simplifies the
previous standards for computing earnings per share, replacing the
presentation of primary earnings per share with a presentation of basic
earnings per share. It also requires dual presentation of basic and diluted
earnings per share on the face of the income statement for all entities
with complex capital structures. Management believes that adoption of SFAS
No. 128 will not have a material effect on the Company's earnings per share
amounts.
The Company will implement the provisions of Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS No.
130), which will be effective for interim and annual financial statements
issued for periods beginning after December 15, 1997. SFAS No. 130
establishes standards for reporting and display of comprehensive income and
its components in a full set of general purpose financial statements.
Management believes that adoption of SFAS No. 130 will not have a material
effect on the Company.
The Company will implement the provisions of Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise
and Related Information" (SFAS No. 131), which will be effective for
periods beginning after December 15, 1997. SFAS No. 131 specifics revised
guidelines for determining an entity's operating segments and the type and
level of financial information to be disclosed.
F-8
<PAGE>
ENI HOLDING CORP. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
K) NET INCOME PER SHARE
Net income per share is based upon the weighted average number of shares
of common stock and common stock equivalents outstanding. Common stock
equivalents consist of stock warrants. Fully-diluted per share data,
assuming the exercise of the contingent options granted to certain
managers, is not presented as the basis for the fair market value of shares
is not determinable in the event of a qualified public stock offering or
other sale of the Company as described in Note 13.
L) UNAUDITED INTERIM FINANCIAL DATA
The interim financial data relating to the six months ended June 30, 1996
and 1997 are unaudited; however, in the opinion of Company's management,
the interim data includes all adjustments, consisting of only normal
recurring adjustments, necessary for a fair statement of the results for
the interim periods. The results for the six months ended June 30, 1997 are
not necessarily indicative of the results to be expected for the full year
or any other interim period.
M) RECLASSIFICATION
Certain amounts in the 1995 and 1994 financial statements have been
reclassified to conform to 1996 presentation.
3. ACCOUNTS RECEIVABLE
Accounts receivable consist of:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Trade accounts.............................................. $11,352 $ 8,655
------- -------
Construction contracts:
Billed.................................................... 5,244 9,551
Costs and estimated earnings in excess of billings on
contracts................................................ 2,372 436
Retainage due upon completion of contracts................ 1,785 1,558
------- -------
9,401 11,545
Other receivables........................................... 322 241
------- -------
21,075 20,441
Less allowance for doubtful accounts........................ 547 553
------- -------
$20,528 $19,888
======= =======
</TABLE>
Billings exceeded related costs and gross profit recognized on certain
contracts by $4,432,000 and $8,446,000 as of December 31, 1995 and 1996,
respectively. These amounts are classified as current liabilities in the
accompanying consolidated balance sheets.
It is estimated that all of the retention balance at December 31, 1996 will
be collected in 1997.
A significant portion of the Company's business activity is concentrated
within the coal mining industry. Accounts receivable at December 31, 1995 and
1996 from companies within the coal mining industry were $11,762,000 and
$9,601,000, respectively.
F-9
<PAGE>
ENI HOLDING CORP. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. INVENTORIES
Inventories consist of:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Finished goods.............................................. $ 5,831 $ 7,008
Work-in-process............................................. 1,181 1,260
Raw materials............................................... 9,679 6,029
------- -------
16,691 14,297
Less excess and obsolete reserve............................ 1,551 1,396
------- -------
$15,140 $12,901
======= =======
</TABLE>
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, at cost, consist of:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Land........................................................ $ 1,513 $ 1,560
Buildings and improvements.................................. 4,018 4,457
Machinery and equipment..................................... 14,962 15,057
------- -------
20,493 21,074
Less accumulated depreciation............................... 5,786 7,333
------- -------
$14,707 $13,741
======= =======
</TABLE>
Depreciation expense, including amounts related to discontinued operations,
for the years ended December 31, 1994, 1995 and 1996 was $3,475,000,
$2,737,000, and $2,479,000, respectively.
6. GOODWILL AND INTANGIBLES
The components of goodwill and intangibles are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Goodwill.................................................... $ 9,891 $ 9,891
Non-compete agreements...................................... 9,713 8,934
Financing and acquisition costs............................. 4,402 4,505
------- -------
24,006 23,330
Less accumulated amortization............................... 7,414 10,150
------- -------
$16,592 $13,180
======= =======
</TABLE>
Amortization expense, including amounts related to discontinued operations,
was $3,734,000, $3,347,000 and $3,204,000, for the years ended December 31,
1994, 1995 and 1996, respectively.
F-10
<PAGE>
ENI HOLDING CORP. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Accounts payable--trade..................................... $ 7,348 $ 8,922
Accounts payable--other..................................... 543 319
Billings on contracts in excess of costs and gross profit
recognized................................................. 4,432 8,446
Cash overdrafts............................................. 2,171 2,961
Accrued payroll and commissions............................. 2,191 2,752
Other accruals.............................................. 8,401 8,420
------- -------
$25,086 $31,820
======= =======
</TABLE>
8. INCOME TAXES
The types of temporary difference between the tax bases of assets and
liabilities and their financial reporting amounts that give rise to a
significant portion of the deferred tax liability and deferred tax asset and
their approximate tax effect are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1996
------------------ ------------------
TEMPORARY TAX TEMPORARY TAX
DIFFERENCE EFFECT DIFFERENCE EFFECT
---------- ------- ---------- -------
<S> <C> <C> <C> <C>
Accounts receivable.................. $ 547 $ 211 $ 553 $ 214
Inventories.......................... 1,929 745 1,998 772
Accrued expenses..................... 6,335 2,446 5,765 2,227
Intangibles.......................... 2,769 1,070 3,821 1,476
Alternative minimum tax payments..... -- 161 -- --
Net operating loss................... 3,259 1,571 -- 448
-------- ------- -------- -------
Total deferred tax asset........... 14,839 6,204 12,137 5,137
-------- ------- -------- -------
Prepaid pension...................... (17,275) (6,672) (18,032) (6,965)
Property, plant and equipment........ (1,246) (481) (1,766) (682)
-------- ------- -------- -------
Total deferred tax liability....... (18,521) (7,153) (19,798) (7,647)
-------- ------- -------- -------
Net deferred tax liability......... $ (3,682) $ (949) $ (7,661) $(2,510)
======== ======= ======== =======
</TABLE>
The components of the provision (benefit) for income taxes are:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1994 1995 1996
-------- ----------------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal......................................... $ -- $ 166 $ 1,167
State........................................... 213 283 573
Deferred:
Federal......................................... 1,051 300 1,473
State........................................... (30) (50) 88
-------- ------ --------
$ 1,234 $ 699 $ 3,301
======== ====== ========
</TABLE>
F-11
<PAGE>
ENI HOLDING CORP. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company's effective tax rates of 43%, 235% and 40% for the year ended
December 31, 1994, 1995 and 1996, respectively, differ from the federal
statutory tax rate of 34% primarily due to non-deductible costs and the effect
of state income taxes.
The Company made cash payments for income taxes totaling $899,000, $538,000
and $1,585,000 during the years ended December 31, 1994, 1995 and 1996,
respectively.
9. LONG TERM DEBT
The following is a summary of the carrying values of short-term and long-
term debt of the Company and its subsidiaries as of December 31,:
<TABLE>
<CAPTION>
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Revolver loan............................................... $10,500 --
Term loan................................................... 5,905 $ 6,000
Senior subordinated notes................................... 19,847 19,847
Notes payable............................................... 1,424 1,044
------- -------
Total long-term debt...................................... 37,676 26,891
Less current maturities..................................... 4,310 3,893
------- -------
Total non-current long-term debt.......................... $33,366 $22,998
======= =======
</TABLE>
Under the terms of the Bank Credit Agreement, which expires on September 30,
1998, the revolver loan has a borrowing capacity of up to $15,000,000 (less
any outstanding letters of credit) based upon a monthly variable borrowing
base. The revolver interest was at either (a) the greater of Federal Funds
Rate plus .5% or bank's prime rate, or (b) LIBOR plus 1.5%. At December 31,
1996, there were no borrowings under the revolver loan.
The term loan is payable in quarterly principal installments which increase
on an annual basis until the maturity date of September 30, 1998. Interest was
at either (a) the greater of Federal Funds Rate plus .5% or bank's prime rate,
or (b) LIBOR plus 1.5%. At December 31, 1996, $6,000,000 of the principal
balance was accruing interest at 8.25%.
The senior subordinated notes have a face value of $20,000,000 with
quarterly payments of principal commencing November 30, 1999 until the
maturity date of August 30, 2001. The notes bear interest annually at 13%.
As discussed in Note 14, the $1,044,000 of other notes relates to the
acquisition of Centrifugal Services, Inc. and selected assets of Process
Equipment Company during 1995. All of these notes have principal and interest
payments due in monthly installments until maturity on June 30, 2000. These
notes bear interest at an annual rate of 6%.
F-12
<PAGE>
ENI HOLDING CORP. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Annual principal payments on long-term debt at December 31, 1996 were as
follows (in thousands):
<TABLE>
<CAPTION>
SENIOR
TERM REVOLVING SUBORDINATED OTHER
LOAN LOAN NOTES NOTES TOTAL
------ --------- ------------ ------ -------
<S> <C> <C> <C> <C> <C>
1997............................ $3,600 -- -- $ 293 $ 3,893
1998............................ 2,400 -- -- 311 2,711
1999............................ -- -- $ 2,500 331 2,831
2000............................ -- -- 10,000 109 10,109
2001............................ -- -- 7,347 -- 7,347
------ ----- ------- ------ -------
$6,000 $ -- $19,847 $1,044 $26,891
====== ===== ======= ====== =======
</TABLE>
Under the terms of the Bank Credit Agreement, prior to amendment on April
25, 1996, the Company at December 31, 1995 could have borrowed under the
revolving loan facility up to the maximum borrowing base of $25,000,000,
determined by a percentage of the sum of eligible receivables and inventories,
less any outstanding letters of credit.
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Borrowing base.............................................. $16,452 $14,952
Less outstanding letters of credit.......................... 1,660 2,001
------- -------
Amount borrowable........................................... 14,792 12,951
Revolving credit loan....................................... 10,500 --
------- -------
Unused portion............................................ $ 4,292 $12,951
======= =======
</TABLE>
The maximum borrowing base under the revolving loan facility was amended to
$15,000,000.
A commitment fee of 3/10% per annum on unused borrowable money under the
revolving loan and a 1.5% per annum fee for outstanding letters of credit is
payable to the bank quarterly.
The Bank Credit Agreement contains certain restrictive covenants which,
among other things, limit the amount of indebtedness, prohibit the payment of
dividends and require the maintenance of certain financial ratios. The Bank
Credit Agreement requires partial prepayment of the term loan and revolving
loan upon the Company's achievement of certain cash flow levels and in the
event of certain public sales of the Company's equity or assets.
Substantially all of the Company's assets are pledged under the terms of the
Bank Credit Agreement.
The carrying amount for debt at December 31, 1995 and 1996 approximates fair
value based upon the Company's ability to obtain financing under similar
terms.
The Senior Subordinated Note Purchase Agreement also contains restrictive
covenants, none of which are more restrictive than those in the Bank Credit
Agreement.
The Company is required to make certain penalty payments in the event it
chooses to prepay the principal on the Senior Subordinated Debt. Certain
percentages of prepayment can be made without penalty after March, 1996 in the
event the Company achieves specified earnings targets or sells certain of its
assets.
F-13
<PAGE>
ENI HOLDING CORP. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company's interest expense for the year ending December 31, 1994, 1995
and 1996 was $6,413,000, $4,953,000 and $3,662,000, respectively. The Company
made cash payments for interest totaling $6,434,000, $5,084,000 and
$3,760,000, respectively, during 1994, 1995 and 1996.
10. WARRANTS SUBJECT TO PUT
The Company granted its senior subordinated debt holders warrants to
purchase in the aggregate up to 1,678 shares of Class B Common Stock,
exercisable at any time prior to the expiration date of October 1, 2003, at an
exercise price of $0.01 per share.
The warrants also have a Put option which may be exercised at any time after
September 30, 1998 or upon an event of default under the Bank Credit
Agreement, a qualified public offering or other sale of the Company. The Put
price is equal to the fair value of the underlying common stock represented by
the warrants. The estimated fair value of the warrants was $153,000 at
December 31, 1996 and 1995, and is included in other liabilities.
11. PREFERRED STOCK
The Company has 550,000 shares of $1.00 par value Preferred Stock authorized
with 193,898 shares issued and outstanding. The Preferred Stock is mandatorily
redeemable at its face value of $19,389,800 on December 31, 2001 or upon the
occurrence of an event of default as defined by the Securities Purchase
Agreement, or a qualified public offering or other sale of the Company.
The Preferred Stock has a preferential liquidation value of $100 per share
and accrues cumulative preferred dividends at 10% per annum of the liquidation
value. Dividends accrue cumulatively at a rate of 10% per annum. In the event
that any dividends accrued after December 31, 1998 are not paid in cash on the
dividend payment date, the dividend rate increases to 12% per annum until such
time as such dividend shall have been declared and paid. The Preferred Stock
is callable at any time in whole or in part by the Company at a price of $100
plus accrued dividends.
The Company had accrued dividends of $4,400,000 and $6,339,000 as of
December 31, 1995 and 1996, respectively. Under the Bank Credit Agreement, the
Company's subsidiaries are restricted from paying dividends or otherwise
distributing money to the Company prior to April, 1997. Therefore, the Company
does not anticipate paying its Preferred Stock dividends prior to that date.
12. PREFERRED STOCK UNITS
In exchange for amounts owed to certain officers, the Company granted to
them Preferred Stock Units redeemable December 31, 2001 with an aggregate
principal value of $7,274,000.
The Company had accrued dividend equivalent amounts equal to $1,650,000 and
$2,377,000 at December 31, 1995 and 1996, respectively. Principal and accrued
dividend equivalent amounts were $8,924,000 and $9,651,000 at December 31,
1995 and 1996, respectively, and will be paid in tandem with the Company's
Preferred Stock dividend and redemption payments.
F-14
<PAGE>
ENI HOLDING CORP. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13. COMMON STOCK
Following are the number of shares authorized, issued and outstanding for
each of the Company's classes of capital stock as of December 31, 1995 and
1996.
<TABLE>
<CAPTION>
COMMON COMMON COMMON
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
Par value........................................... $ 0.01 $ 0.01 $ 0.01
Shares authorized................................... 23,678 23,678 10,347
Shares issued and outstanding....................... 6,408 1,608 10,346
</TABLE>
Class A and Class C Common Stock have equal voting rights of one vote per
share. Preferred Stock and Class B Common Stock have no voting rights.
Under its Articles of Incorporation and the Securities Purchase Agreement,
the Company must maintain certain financial and other covenants. In the event
of the Company's default of those covenants, Class C Common Stock would be
entitled to 1,000 votes per share.
Class A Common Stock and Class C Common Stock are convertible share-for-
share into Class B Common Stock at any time at the option of the holder. Class
B Common Stock is similarly convertible into Class A Common Stock.
Class C Common Stock is automatically convertible share-for-share into Class
A Common Stock in the event of a certain qualified public offering of the
Company's stock or in the event that certain parties holding Class C Common
Stock on September 24, 1993 cease to hold such stock.
The Company is restricted from declaring or paying dividends to Common
Stockholders prior to the redemption of all Preferred Stock.
The Company has granted certain managers options to purchase aggregately up
to 3,332 shares of Class A Common Stock at a price of $0.01 per share,
exercisable only in the event of a qualified public stock offering or other
sale of the Company, with the number of shares granted dependent upon the
proceeds of such an offering or sale.
Certain large holders of Common Stock have the right to put to the Company
their shares after September 24, 1998. Notice of Put by a large holder
automatically grants all other holders of Common Stock rights to put a
proportion of their shares equal to the proportion put by the large holder. A
condition of putting common shares is that the holder must also put a certain
percentage of any preferred shares held. The Put price for common shares
depends on a defined market value of the Company's Common Stock at the date of
Put notice. The Put price for preferred shares is $100 per share. All such Put
rights would be voided in the event of a qualified public offering of the
Company's capital stock.
14. PENSION AND PROFIT SHARING PLANS
The Company has a noncontributory defined benefit plan which is open to all
eligible, full-time, nonunion employees and is salary related and integrated
with Social Security. The Company's funding policy for the plan is to fund the
minimum annual contribution required by applicable regulations. Pension plan
assets are primarily invested in bonds, corporate notes and common stock.
F-15
<PAGE>
ENI HOLDING CORP. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following table sets forth the funded status of the pension plan and
amounts recognized in the Company's consolidated financial statements at
December 31,:
<TABLE>
<CAPTION>
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of benefit obligations--
accumulated benefit obligations, including vested
benefits of $15,085 and $14,849, respectively.......... $15,551 $15,314
======= =======
Projected benefit obligations for service rendered...... $17,511 $17,276
Plan assets at fair value............................... 34,156 35,636
------- -------
Plan assets in excess of projected benefit obligations.. 16,645 18,360
Unrecognized prior service cost......................... (212) (191)
Unrecognized (gain) loss from experience................ 843 (135)
------- -------
Prepaid pension cost included in other assets........... $17,276 $18,034
======= =======
</TABLE>
Net pension cost included the following components for the years ended
December 31,:
<TABLE>
<CAPTION>
1994 1995 1996
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost--benefits earned during the period.. $ 853 $ 629 $ 767
Interest cost on projected benefit obligation.... 1,244 1,127 1,024
Actual return on plan assets..................... 360 (5,420) (2,524)
Net amortization and deferral.................... (3,114) 2,884 (25)
------- ------- -------
Subtotal net periodic pension income........... (657) (780) (758)
Recognition of GC Thorsen settlement and
curtailment..................................... -- 217 --
------- ------- -------
Total net periodic pension income.............. $ (657) $ (563) $ (758)
======= ======= =======
</TABLE>
In determining the actuarial present value of the projected benefit
obligations, the settlement rate used was 6.5% and 6.25% in 1996 and 1995,
respectively. For 1996 and 1995 the rate of increase in the future
compensation level was 5.5%.
The expected long-term rate of return on assets was 8.0% in 1996 and 1995.
In addition, the Company makes contributions to a union-administered pension
plan for certain employees who do not participate in the Company's pension
plan. The Company's aggregate expense for these plans for the years ended
December 31, 1994, 1995 and 1996 was $104,000, $68,000 and $56,000,
respectively.
The Company has a combined 401(k) employee savings and a profit sharing plan
for all eligible, full-time, nonunion employees.
Contributions to the plan are based upon management's discretion. The
Company's aggregate expense for these plans for the years ended December 31,
1994, 1995 and 1996 was $1,148,000, $1,024,000 and $1,241,000, respectively.
In 1995, the Company established a nonqualified supplemental employee
retirement plan ("SERP") for certain employees whose pension benefits were
limited by the Omnibus Budget Reconciliation Act of 1993.
F-16
<PAGE>
ENI HOLDING CORP. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following table sets forth the funded status of the SERP and amounts
recognized in the Company's consolidated financial statements at December 31,:
<TABLE>
<CAPTION>
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of accumulated benefit obligation
including vested benefits of none and $245,000,
respectively............................................. $ 261 $ 245
======= =======
Projected benefit obligation for service rendered......... $ (770) $ (825)
Plan assets............................................... -- --
------- -------
Projected benefit obligation in excess of plan assets..... (770) (825)
Unrecognized prior service cost........................... 545 504
Unrecognized net loss from experience..................... 96 47
------- -------
Pension liability included in other liabilities........... $ (129) $ (274)
======= =======
</TABLE>
Net SERP cost included in the following components at December 31,:
<TABLE>
<CAPTION>
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Service cost benefits earned during the period.............. $ 44 $ 56
Interest cost on projected benefit obligation............... 44 47
Net amortization and deferral............................... 41 41
------- -------
Net periodic pension cost................................. $ 129 $ 144
======= =======
</TABLE>
In determining the actuarial present value of the projected benefit
obligation, the settlement rate used was 6.25% and 6.50% in 1995 and 1996,
respectively. For 1995 and 1996, the rate of increase in the future
compensation level was 5.5%.
In addition, the Company established a non-qualified profit sharing plan for
certain employees whose 401(k) benefits were also limited by the Omnibus
Budget Reconciliation Act of 1993 during 1995. The Company's expense for this
plan in 1995 and 1996 was $50,000 and $61,000, respectively.
15. LEASES
The Company has entered into noncancelable operating leases, primarily for
office space, vehicles and equipment, that have initial or remaining terms of
more than one year.
Future minimum annual rental expenditures are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1997.......................................................... $1,243
1998.......................................................... 1,112
1999.......................................................... 1,065
2000.......................................................... 757
2001 and thereafter........................................... 2,734
------
$6,911
======
</TABLE>
Rental expense for the years ended December 31, 1994, 1995 and 1996 was
$1,850,000, $1,582,000 and $1,609,000, respectively.
F-17
<PAGE>
ENI HOLDING CORP. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
16. RELATED PARTY TRANSACTIONS
At December 31, 1996 and 1995, the Company had the following outstanding
notes receivables and note payable:
(I) Note receivable from a Limited Partnership owned by an officer with
principal due in the amount of $1,000,000, due upon redemption of the
Preferred Stock Units. Prepayment is required if the value to be paid under
the Preferred Stock Units at the time of payment is less than the aggregate
amount of the principal and interest outstanding. Interest accrues at 5.35%
and is payable at the earlier of prepayment or maturity. Interest earned
for the years ended December 31, 1996 and 1995 was $53,000 and $68,000 for
the year ended December 31, 1994. Interest earned for the six months ended
June 30, 1996 and 1997 was $26,500 and $26,500, respectively.
(II) Notes receivable from certain officers in the total principal amount
of $1,033,000 with an installment payment of $40,000 due February 28, 1996
and 1997 and subsequent payments are equal to a portion of the incentive
bonuses paid to the managers and payable immediately upon receipt of the
bonus for application to any accrued interest. Interest accrues at 5% per
annum. Interest earned was $52,000 for the years ended December 31, 1996,
1995 and 1994. Interest earned for the six months ended June 30, 1996 and
1997 was $26,000 and $26,000, respectively.
The principal and related accrued interest on terms (I) and (II) are
included in other long-term assets in the accompanying balance sheet with
the exception of the $40,000 due February 28, 1996 and 1997 which are
included in accounts receivable.
(III) Subject to an offset agreement, notes receivable and a note payable
in the amount of $1,603,000 with a limited partnership owned by an officer.
These notes accrue interest at 5.35% annually. All notes are due at the
earlier of September 24, 2003 or the date of a qualified sale as defined in
the Stock Purchase Agreement.
17. CONTINGENCIES
The Company has claims against others, and there are claims by others
against it, in a variety of matters arising out of the conduct of the
Company's business. The ultimate resolution of all such claims would not, in
the opinion of management, have a material effect on the Company's financial
position or results of operations.
18. ACQUISITIONS
In 1994, the Company purchased all the assets of K&M Electrical Products for
$432,000. In conjunction with the acquisition, $110,000 of liabilities were
assumed.
During 1994, the Company also purchased selected assets of Soros Associates
for $1. In connection with the acquisition, the Company received $500,000 to
assume certain liabilities of Soros Associates.
In 1995, the Company purchased all of the outstanding shares of Centrifugal
Services, Inc. for $2,334,000 comprised of $1,512,000 cash and $822,000 of
notes payable.
In addition, during 1995, a subsidiary of the Company purchased selected
assets of Process Equipment Company for $798,000 comprised of a note payable.
In conjunction with the acquisition of the assets, an accounts payable
liability of $52,000 was assumed.
19. SALE OF PRODUCT LINE
On March 1, 1995, the Company sold the assets related to the spoke and
nipple product line of one of its divisions. Assets with a book value of
$3,162,000 were sold resulting in a before income tax gain of $2,520,000. This
product line had sales of $1,064,000 for the two months ended February 28,
1995.
F-18
<PAGE>
ENI HOLDING CORP. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
20. DISCONTINUED OPERATIONS
On April 5, 1995, the Company sold all the outstanding shares of its
subsidiary GC Thorsen, Inc. for $23,651,000 resulting in a gain of $595,000,
net of income taxes. The results of GC Thorsen, Inc. have been reported as
discontinued operations in the Consolidated Statements of Income. Summarized
results of GC Thorsen, Inc. are as follows:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
1994 1995
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Sales, net......................................... $41,843 $10,481
Cost and expenses.................................. 40,303 10,228
------- -------
Earnings before income taxes....................... 1,540 253
Provision for taxes................................ 606 101
------- -------
Earning from discontinued operations............... 934 152
Gain on sale of GC Thorsen, Inc. (net of income
taxes of $375).................................... -- 595
------- -------
Total earnings related to discontinued GC
Thorsen, Inc. .................................. $ 934 $ 747
======= =======
</TABLE>
On December 31, 1996, the Company sold all the outstanding shares of its
subsidiary American Fastener Corporation for $3,982,000 resulting in a gain of
$123,000, net of income tax.
The results of American Fastener Corporation have been reported as
discontinued operations in the Consolidated Statements of Income. Summarized
results of American Fastener Corporation are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1994 1995 1996
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Sales, net....................................... $ 9,383 $ 10,639 $ 10,240
Cost and expenses................................ 9,468 10,411 10,156
------- -------- --------
Earnings (loss) before income taxes.............. (85) 228 84
Provision (benefit) for taxes.................... (40) 99 33
------- -------- --------
Earnings from discontinued operations............ (45) 129 51
Gain on sale of American Fastener Corporation
(net of income taxes of $77).................... -- -- 123
------- -------- --------
Total earnings (loss) related to discontinued
American Fasteners Corporation................ $ (45) $ 129 $ 174
======= ======== ========
</TABLE>
F-19
<PAGE>
ENI HOLDING CORP. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
21. SEGMENT INFORMATION
The Company operates primarily in two industries: Manufactured Products and
Engineering Services, predominantly within the United States. By 1996, the
Company had disposed of its Distribution group which comprised GC Thorsen and
American Fastener. Information about the Company by industry is presented
below:
<TABLE>
<CAPTION>
NINE MONTHS
DECEMBER 31, ENDED SEPTEMBER 30,
---------------------------- --------------------
1994 1995 1996 1996 1997
-------- -------- -------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Sales to unaffiliated
customers from continuing
operations:
Manufactured Products... $ 75,698 $ 74,859 $ 78,952 $ 59,594 $ 59,117
Engineering Services.... 121,586 51,980 56,699 37,659 45,393
-------- -------- -------- --------- ---------
Total sales from
continuing
operations........... $197,284 $126,839 $135,651 $ 97,253 $ 104,510
======== ======== ======== ========= =========
Operating income (loss)
from continuing
operations:
Manufactured Products... $ 12,741 $ 13,034 $ 14,094 $ 9,727 $ 10,481
Engineering Services.... (234) (6,879) 2,658 1,331 2,529
Corporate and other..... (11,069) (7,200) (8,871) (6,368) (5,578)
-------- -------- -------- --------- ---------
Income before taxes
from continuing
operations........... $ 1,438 $ (1,045) $ 7,881 $ 4,690 $ 7,432
======== ======== ======== ========= =========
Identifiable assets:
Manufactured Products... $ 39,278 $ 38,559 $ 36,135 $ 41,784 $ 35,956
Engineering Services.... 31,583 14,921 16,083 21,404 14,555
Corporate, eliminations
and other.............. 70,937 43,985 46,657 38,091 39,368
-------- -------- -------- --------- ---------
Total assets.......... $141,798 $ 97,465 $ 98,875 $ 101,279 $ 89,879
======== ======== ======== ========= =========
Depreciation and
amortization:
Manufactured Products... $ 2,888 $ 2,726 $ 2,532 $ 2,017 $ 1,940
Engineering Services.... 1,567 1,536 1,545 1,147 1,115
Corporate, eliminations
and other.............. 2,754 1,822 1,606 1,249 975
-------- -------- -------- --------- ---------
Total depreciation and
amortization......... $ 7,209 $ 6,084 $ 5,683 $ 4,413 $ 4,030
======== ======== ======== ========= =========
Capital expenditures:
Manufactured Products... $ 1,311 $ 1,306 $ 1,440 $ 982 $ 836
Engineering Services.... 165 165 199 140 132
Corporate and other..... 301 139 500 337 1
-------- -------- -------- --------- ---------
Total capital
expenditures......... $ 1,777 $ 1,610 $ 2,139 $ 1,459 $ 969
======== ======== ======== ========= =========
</TABLE>
F-20
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION 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 CON-
STITUTE 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. NEI-
THER 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>
Summary................................................................... 1
Risk Factors.............................................................. 13
The Recapitalization Transactions......................................... 20
Use of Proceeds........................................................... 21
Capitalization............................................................ 22
Selected Historical and Pro Forma Consolidated Financial Data............. 23
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 25
Business.................................................................. 30
Management................................................................ 44
Principal Stockholders.................................................... 47
Related Transactions...................................................... 48
Description of Senior Credit Facility..................................... 49
Description of Capital Stock.............................................. 50
The Exchange Offer........................................................ 51
Description of New Notes.................................................. 59
Certain United States Federal Tax Consequences............................ 89
Plan of Distribution...................................................... 92
Legal Matters............................................................. 92
Experts................................................................... 92
Index to Consolidated Financial Statements................................ F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
LOGO
ELGIN NATIONAL INDUSTRIES, INC.
$85,000,000
11% SERIES B SENIOR NOTES
DUE 2007
-------------------
PROSPECTUS
, 1998
-------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
(a) The Certificate of Incorporation of the registrant requires, and the By-
Laws of the registrant provides for, indemnification of directors, officers,
employees and agents to the full extent permitted by law.
The Delaware General Corporation Law (Section 145) gives Delaware
corporations broad powers to 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
by reason of the fact that the person is or was a director, officer, employee
or agent of the Company, or is or was serving at the request of the Company as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding, so long as such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best interests of
the registrant. For actions or suits by or in the right of the registrant, no
indemnification is permitted in respect of any claim, issue or matter as to
which such person is adjudged to be liable to the registrant, unless, and only
to the extent that, the Delaware Court of Chancery or the court in which such
action or suit was brought determines 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 deems proper.
Section 145 also authorizes the Company to buy directors' and officers'
liability insurance and gives a director, officer, employee or agent of the
registrant who has been successful on the merits or otherwise in defense of
any action, suit or proceeding of a type referred to in the preceding
paragraph the right to be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by such person in connection therewith.
Any indemnification (unless ordered by a court) will be made by the Company
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 the person has met the applicable standard of conduct
set forth above. Such determination shall be made (1) by a majority vote of
the directors who are not parties to such action, suit or proceeding, even
though less than a quorum, or (2) if there are no such directors, or if such
directors so direct, by independent legal counsel in a written opinion, or (3)
by the stockholders. Such indemnification is not exclusive of any other rights
to which those indemnified may be entitled under any bylaws, agreement, vote
of stockholders or otherwise.
(b) The Purchase Agreement and the Registration Rights Agreements (which are
included as exhibits to this registration statement) provide for the
indemnification under certain circumstances of the Company, its directors and
certain of its officers by the Initial Purchasers and the Noteholders.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
The exhibits filed as part of this registration statement are as follows:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S> <C>
1 Purchase Agreement dated November 3, 1997, by and among
Elgin National Industries, Inc., ENI Holding Corp., cer-
tain of their subsidiaries, BancAmerica Robertson Stephens
and CIBC Wood Gundy Securities Corp.
*3.1 Certificate of Incorporation of Elgin National Industries,
Inc.
</TABLE>
- --------
*To be filed by amendment.
II-1
<PAGE>
<TABLE>
<C> <S> <C>
*3.2 Bylaws of Elgin National Industries, Inc.
4.1 Indenture dated November 5, 1997, between Elgin National
Industries, Inc., certain of its subsidiaries and Norwest
Bank Minnesota, as Trustee.
4.2 Form of 11% Senior Note due 2007 (included in Exhibit
4.1).
*4.3 Registration Rights Agreement dated November 5, 1997, by
and among Elgin National Industries, Inc., certain of its
subsidiaries, and BancAmerica Robertson Stephens and CIBC
Wood Gundy Securities Corp.
4.4 Form of Subsidiary Guaranty (included in Exhibit 4.1).
*5 Opinion of Mayer, Brown & Platt.
10.1 Credit Agreement dated as of September 24, 1993, as
Amended and Restated as of November 5, 1997, by and among
Elgin National Industries, Inc., various financial
institutions, and Bank of America National Trust and
Savings Association, individually and as agent.
10.2 Employment and Non-Competition Agreement dated as of No-
vember 5, 1997, between Elgin National Industries, Inc.
and Fred C. Schulte.
10.3 Employment and Non-Competition Agreement dated as of No-
vember 5, 1997, between Elgin National Industries, Inc.
and Charles D. Hall.
10.4 Employment and Non-Competition Agreement dated as of No-
vember 5, 1997, between Elgin National Industries, Inc.
and Wayne J. Conner.
*10.5 The Elgin National Industries, Inc. Supplemental Retire-
ment Plan dated as of 1995, and effective January 1,
1995.
21.1 Subsidiaries of Elgin National Industries, Inc.
*23.1 Consent of Mayer, Brown & Platt.
23.2 Consent of Coopers & Lybrand, L.L.P.
24 Power of Attorney (included on the signature page hereof).
*25.1 Statement of Eligibility of Trustee.
*99 Form of Letter of Transmittal for Notes.
</TABLE>
(b) Financial Statement Schedules:
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission have been omitted
because they are not required, amounts which would otherwise be required to be
shown with respect to any item are not material, are inapplicable, or the
required information has already been provided elsewhere in the registration
statement.
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from
- --------
*To be filed by amendment.
II-2
<PAGE>
the low or high and of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table
in the effective registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
[(C) 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.]
(d) The registrant has not entered into any arrangement or understanding with
any person to distribute the securities to be received in the Exchange Offer
and to the best of the registrant's information and belief, each person
participating in the Exchange Offer is acquiring the securities in its ordinary
course of business and has no arrangement or understanding with any person to
participate in the distribution of the securities to be received in the
Exchange Offer. In this regard, the registrant will make each person
participating in the Exchange Offer aware (through the Exchange Offer
Prospectus or otherwise) that if the Exchange Offer is being registered for the
purpose of secondary resales, any securityholder using the exchange offer to
participate in a distribution of the securities to be acquired in the
registered exchange offer (1) could not rely on the staff position enunciated
in Exxon Capital Holdings Corporation (available April 13, 1989) or similar
letters and (2) must comply with registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction. The registrant acknowledges that such a secondary resale
transaction should be covered by an effective registration statement containing
the selling securityholder information required by Item 507 of Regulation S-K.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF DOWNERS
GROVE, STATE OF ILLINOIS, ON DECEMBER 30, 1997.
Elgin National Industries, Inc.
/s/ Fred C. Schulte
By __________________________________
Fred C. Schulte
Name: _____________________________
Chairman and CEO
Title: ____________________________
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS
BELOW CONSTITUTES AND APPOINTS FRED C. SCHULTE, CHARLES D. HALL AND WAYNE J.
CONNER, AND EACH OF THEM SINGLY, HIS TRUE AND LAWFUL ATTORNEY-IN-FACT AND
AGENT, WITH FULL POWER AND SUBSTITUTION AND RESUBSTITUTION, FOR HIM AND IN HIS
NAME, PLACE AND STEAD, IN ANY AND ALL CAPACITIES, TO SIGN ANY AND ALL
AMENDMENTS (INCLUDING POST-EFFECTIVE AMENDMENTS) TO THIS REGISTRATION
STATEMENT, AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO, AND ANY AND ALL
DOCUMENTS IN CONNECTION THEREWITH, WITH THE SECURITIES AND EXCHANGE
COMMISSION, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND AGENTS, AND EACH OF THEM,
FULL POWER AND AUTHORITY TO DO AND PERFORM ANY AND ALL ACTS AND THINGS
REQUISITE AND NECESSARY TO BE DONE IN AND ABOUT THE PREMISES, AS FULLY TO ALL
INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND
CONFIRMING ALL THAT SAID ATTORNEYS-IN-FACT AND AGENTS, OR ANY OF THEM, OR HIS
SUBSTITUTE OR NOMINEE, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT ON FORM S-4 HAS BEEN SIGNED BELOW BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Fred C. Schulte Chairman of the Board, Chief December 30, 1997
____________________________________ Executive Officer and
Fred C. Schulte Director
/s/ Charles D. Hall President, Chief Operating December 30, 1997
____________________________________ Officer and Director
Charles D. Hall
/s/ Wayne J. Conner Vice President, Treasurer, December 30, 1997
____________________________________ Chief Financial Officer and
Wayne J. Conner Director
/s/ Lynn C. Batory Vice President, Controller December 30, 1997
____________________________________ and Secretary
Lynn C. Batory
/s/ David Hall Vice President of December 30, 1997
____________________________________ Manufacturing
David Hall
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT DESCRIPTION
------- --------------------
<C> <S> <C>
1 Purchase Agreement dated November 3, 1997, by and among Elgin
National Industries, Inc., ENI Holding Corp., certain of their
subsidiaries, BancAmerica Robertson Stephens and CIBC Wood
Gundy Securities Corp.
*3.1 Certificate of Incorporation of Elgin National Industries,
Inc.
*3.2 Bylaws of Elgin National Industries, Inc.
4.1 Indenture dated November 5, 1997, between Elgin National In-
dustries, Inc., certain of its subsidiaries and Norwest Bank
Minnesota, as Trustee.
4.2 Form of 11% Senior Note due 2007 (included in Exhibit 4.1).
*4.3 Registration Rights Agreement dated November 5, 1997, by and
among Elgin National Industries, Inc., certain of its subsidi-
aries, and BancAmerica Robertson Stephens and CIBC Wood Gundy
Securities Corp.
4.4 Form of Subsidiary Guaranty (included in Exhibit 4.1).
*5 Opinion of Mayer, Brown & Platt.
10.1 Credit Agreement dated as of September 24, 1993, as Amended
and Restated as of November 5, 1997, by and among Elgin
National Industries, Inc., various financial institutions, and
Bank of America National Trust and Savings Association,
individually and as agent.
10.2 Employment and Non-Competition Agreement dated as of November
5, 1997, between Elgin National Industries, Inc. and Fred C.
Schulte.
10.3 Employment and Non-Competition Agreement dated as of November
5, 1997, between Elgin National Industries, Inc. and Charles
D. Hall.
10.4 Employment and Non-Competition Agreement dated as of November
5, 1997, between Elgin National Industries, Inc. and Wayne J.
Conner.
*10.5 The Elgin National Industries, Inc. Supplemental Retirement
Plan dated as of 1995, and effective January 1, 1995.
21.1 Subsidiaries of Elgin National Industries, Inc.
*23.1 Consent of Mayer, Brown & Platt.
23.2 Consent of Coopers & Lybrand, L.L.P.
24 Power of Attorney (included on the signature page hereof).
*25.1 Statement of Eligibility of Trustee.
*99 Form of Letter of Transmittal for Notes.
</TABLE>
- --------
*To be filed by amendment.
<PAGE>
EXHIBIT 1
Elgin National Industries, Inc.
$85,000,000
11% Senior Notes due 2007
Purchase Agreement
November 3, 1997
BancAmerica Robertson Stephens
CIBC Wood Gundy Securities Corp.
<PAGE>
$85,000,000
11% Senior Notes due 2007
of Elgin National Industries, Inc.
PURCHASE AGREEMENT
November 3, 1997
BancAmerica Robertson Stephens
CIBC Wood Gundy Securities Corp.
c/o BancAmerica Robertson Stephens
231 South LaSalle Street
17th Floor
Chicago, Illinois 60697
Re: Elgin National Industries, Inc.
-------------------------------
Dear Sirs:
Elgin National Industries, Inc., a Delaware corporation (the
"Company"), proposes to issue and sell to BancAmerica Robertson Stephens and
CIBC Wood Gundy Securities Corp. (each, an "Initial Purchaser" and collectively,
the "Initial Purchasers") an aggregate of $85,000,000 in principal amount of its
11% Senior Notes due 2007 (the "Senior Notes"), subject to the terms and
conditions set forth herein. The Senior Notes are to be issued pursuant to the
provisions of an indenture (the "Indenture"), to be dated as of the Closing Date
(as defined below), among the Company, the Guarantors (as defined below) and
Norwest Bank Minnesota, National Association, as trustee (the "Trustee"). The
Senior Notes and the Exchange Notes (as defined below) issuable in exchange
therefor are collectively referred to herein as the "Notes." The Notes will be
guaranteed (the "Subsidiary Guarantees") by each of the entities listed on
Schedule A, hereto (each, a "Guarantor" and collectively the "Guarantors").
Capitalized terms used but not defined herein shall have the meanings given to
such terms in the Indenture.
1. Offering Memorandum. The Senior Notes will be offered and sold to
the Initial Purchasers pursuant to one or more exemptions from the registration
requirements under the Securities Act of 1933, as amended (the "Act"). The
Company has prepared a preliminary offering memorandum, dated October 15, 1997
(the "Preliminary Offering Memorandum") and a final offering memorandum, dated
November 3, 1997 (the "Offering Memorandum"), relating to the Senior Notes and
the Subsidiary Guarantees.
Upon original issuance thereof, and until such time as the same is no
longer required pursuant to the Indenture, the Senior Notes (and all securities,
other than the Exchange
<PAGE>
Notes, issued in exchange therefor, in substitution thereof or upon conversion
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 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 OR IF OTHERWISE
REQUESTED BY THE COMPANY, 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
<PAGE>
2. Agreements to Sell and Purchase. On the basis of the
representations, warranties and covenants contained in this Agreement, and
subject to the terms and conditions contained herein, the Company agrees to
issue and sell to the Initial Purchasers, and the Initial Purchasers agree,
severally and not jointly, to purchase from the Company, the principal amounts
of Senior Notes set forth opposite the name of such Initial Purchasers on
Schedule B hereto at a purchase price equal to 97.0% of the principal amount
thereof (the "Purchase Price").
3. Terms of Offering. The Initial Purchasers have advised the
Company that they will make offers (the "Exempt Resales") of the Senior Notes
purchased hereunder on the terms set forth in the Offering Memorandum, as
amended or supplemented, solely to (i) persons whom the Initial Purchasers
reasonably believe to be "qualified institutional buyers" as defined in Rule
144A under the Act ("QIBs"), and (ii) not more than five other institutional
"accredited investors," as defined in Rule 501(a) (1), (2), (3) or (7) under the
Act, that make certain representations and agreements to the Company (each, an
"Accredited Institution") (such persons specified in clauses (i) and (ii) being
referred to herein as the "Eligible Purchasers"). The Initial Purchasers will
offer the 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.
The Initial Purchasers and their direct and indirect transferees of
the 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 substantially the form of Exhibit A hereto, for so long as such Senior
Notes constitute "Transfer Restricted Securities" (as defined in the
Registration Rights Agreement). Pursuant to the Registration Rights Agreement,
the Company and the 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 Act (the "Exchange Offer
Registration Statement") relating to the Exchange Notes, to be offered in
exchange for the Senior Notes (such offer to exchange being referred to as the
"Exchange Offer") and the Subsidiary Guarantees thereof and (ii) a shelf
registration statement pursuant to Rule 415 under the Act (the "Shelf
Registration Statement" and, together with the Exchange Offer Registration
Statement, the "Registration Statements") relating to the resale by certain
holders of the Senior Notes and to use its best efforts to cause such
Registration Statements to be declared and remain effective and usable for the
periods specified in the Registration Rights Agreement and to consummate the
Exchange Offer. This Agreement, the Indenture, the Senior Notes, the Subsidiary
Guarantees and the Registration Rights Agreement are hereinafter sometimes
referred to collectively as the "Operative Documents."
On the Closing Date, the proceeds of the Senior Notes will be used in
connection with the consummation of the Recapitalization Transactions, as
defined in the Offering Memorandum, including the repurchase from certain
holders of common stock and preferred stock of ENI Holding Corp. ("ENI") and
senior subordinated notes of the Company pursuant to the Repurchase Agreement
dated October 15, 1997 (the "Repurchase Agreement") among the Company, ENI and
the stockholders of ENI, and (ii) any other agreements and side letters
ancillary to or in connection with the transactions contemplated by the
Repurchase Agreement (the "Ancillary Agreements"). On the Closing Date, the
Company and ENI will enter into and consummate an Agreement and Plan of Merger
(the "Merger Agreement") and file a Certificate of Merger (the "Certificate of
Merger") with the Secretary of State of Delaware. The Repurchase
3
<PAGE>
Agreement, the Ancillary Agreements, the Merger Agreement and the Certificate of
Merger are hereinafter sometimes referred to collectively as the
"Recapitalization Documents."
On the Closing Date, the Company, the Guarantors and Bank of America
National Trust and Savings Association will enter into an amended and restated
Credit Agreement, on substantially the terms described in the Offering
Memorandum (the "Senior Credit Facility" and, together with any notes, security
agreement and other agreements ancillary thereto, the "Credit Documents"). The
Operative Documents, the Recapitalization Documents and the Credit Documents are
hereinafter sometimes referred to collectively as the "Transaction Documents."
4. Delivery and Payment.
(a) Delivery of, and payment of the Purchase Price for, the Senior
Notes shall be made at the offices of Mayer, Brown & Platt, 190 South LaSalle
Street, Chicago, Illinois or such other location as may be mutually acceptable.
Such delivery and payment shall be made at 9:00 a.m., Chicago time, on November
5, 1997 or at such other time as shall be agreed upon by the Initial Purchasers
and the Company. The time and date of such delivery and the payment are herein
called the "Closing Date."
(b) One or more of the Senior Notes in definitive global form,
registered in the name of Cede & Co., as nominee of the Depository Trust Company
("DTC"), having an aggregate principal amount corresponding to the aggregate
principal amount of the Senior Notes (collectively, the "Global Note"), shall be
delivered by the Company to the Initial Purchasers (or as the Initial Purchasers
direct) in each case with any transfer taxes thereon duly paid by the Company
against payment by the Initial Purchasers of the Purchase Price thereof by wire
transfer in same day funds to the order of the Company or on behalf of the
Company as the Company directs in writing prior to 12:30 p.m., Chicago time, on
the business day immediately preceding the Closing Date. The Global Note shall
be made available to the Initial Purchasers for inspection not later than 12:30
p.m., Chicago time, on the business day immediately preceding the Closing Date.
5. Agreements of the Company. The Company hereby agrees with the
Initial Purchasers as follows:
(a) To advise the Initial Purchasers promptly and, if requested by
the Initial Purchasers, confirm such advice in writing, (i) of the issuance by
any state securities commission of any stop order suspending the qualification
or exemption from qualification of any Senior Notes for offering or sale in any
jurisdiction designated by the Initial Purchasers pursuant to Section 5(e)
hereof, or the initiation of any proceeding by any state securities commission
or any other federal or state regulatory authority for such purpose and (ii) of
the happening of any event during the period referred to in Section 5(c) below
that makes any statement of a material fact made in the Offering Memorandum
untrue or that requires any additions to or changes in the Offering Memorandum
in order to make the statements therein not misleading. The Company shall use
its best efforts to prevent the issuance of any stop order or order suspending
the qualification or exemption of any Senior Notes under any state securities or
Blue Sky laws and, if at any time any state securities commission or other
federal or state regulatory authority shall issue an order suspending the
qualification or exemption of any Senior
4
<PAGE>
Notes under any state securities or Blue Sky laws, the Company shall use its
best efforts to obtain the withdrawal or lifting of such order at the earliest
possible time.
(b) To furnish the Initial Purchasers and those persons
identified by the Initial Purchasers to the Company as many copies of the
Offering Memorandum, and any amendments or supplements thereto, as the Initial
Purchasers may reasonably request for the time period specified in Section 5(c).
Subject to the Initial Purchasers' compliance with their representations and
warranties and agreements set forth in Section 7 hereof, the Company consents to
the use prior to the date hereof of the Preliminary Offering Memorandum and, on
and after the date hereof, the Offering Memorandum, and any amendments and
supplements thereto required pursuant hereto, by the Initial Purchasers in
connection with Exempt Resales.
(c) During such period as in the opinion of counsel for the
Initial Purchasers an Offering Memorandum is required by law to be delivered in
connection with Exempt Resales by the Initial Purchasers and in connection with
market-making activities of the Initial Purchasers for so long as any Senior
Notes are outstanding, (i) not to make any amendment or supplement to the
Offering Memorandum of which the Initial Purchasers shall not previously have
been advised or to which the Initial Purchasers shall reasonably object after
being so advised (unless, in the opinion of counsel to the Company, such
amendment or supplement is required by law) and (ii) to prepare promptly upon
the Initial Purchasers' reasonable request, any amendment or supplement to the
Offering Memorandum which may be necessary or advisable in connection with such
Exempt Resales or such market-making activities.
(d) If, during the period referred to in Section 5(c) above,
any event shall occur or condition shall exist as a result of which, in the
opinion of counsel to the Company or the reasonable opinion of counsel to the
Initial Purchasers, it becomes necessary to amend or supplement the Offering
Memorandum in order to make the statements therein, in the light of the
circumstances when such Offering Memorandum is delivered to an Eligible
Purchaser, not misleading, or if, in the opinion of counsel to the Initial
Purchasers, it is necessary to amend or supplement the Offering Memorandum to
comply with any applicable law, forthwith to prepare an appropriate amendment or
supplement to such Offering Memorandum so that the statements therein, as so
amended or supplemented, will not, in the light of the circumstances when it is
so delivered, be misleading, or so that such Offering Memorandum will comply
with applicable law, and to furnish to the Initial Purchasers and such other
persons as the Initial Purchasers may designate such number of copies thereof as
the Initial Purchasers may reasonably request.
(e) Prior to the sale of all Senior Notes pursuant to Exempt
Resales as contemplated hereby, to cooperate with the Initial Purchasers and
counsel to the Initial Purchasers in connection with the registration or
qualification of the Senior Notes for offer and sale to the Initial Purchasers
and pursuant to Exempt Resales under the securities or Blue Sky laws of such
jurisdictions as the Initial Purchasers may request and to continue such
registration or qualification in effect so long as required for Exempt Resales
and to file such consents to service of process or other documents as may be
necessary in order to effect such registration or qualification; provided,
however, that neither the Company nor any Guarantor shall be required in
connection therewith to qualify as a foreign corporation in any jurisdiction in
which it is not now so qualified or to take any action that would subject it to
general consent to service of
5
<PAGE>
process or taxation other than as to matters and transactions relating to the
Preliminary Offering Memorandum, the Offering Memorandum or Exempt Resales, in
any jurisdiction in which it is not now so subject.
(f) So long as the Senior Notes are outstanding and during any
period in which the Company is not subject to the reporting requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), (i) to mail and make generally available as soon as practicable
after the end of each fiscal year to the record holders of the Notes a financial
report of the Company and its subsidiaries on a consolidated basis (and a
similar financial report of all unconsolidated subsidiaries, if any), all such
financial reports to include a consolidated balance sheet, a consolidated
statement of operations, a consolidated statement of cash flows and a
consolidated statement of shareholders' equity as of the end of and for such
fiscal year, together with comparable information as of the end of and for the
preceding year, certified by the Company's independent public accountants and
(ii) to mail and make generally available as soon as practicable after the end
of each quarterly period (except for the quarter ended September 30, 1997 and
the last quarterly period of each fiscal year) to such holders, a consolidated
balance sheet, a consolidated statement of operations and a consolidated
statement of cash flows (and similar financial reports of all unconsolidated
subsidiaries, if any) as of the end of and for such period, and for the period
from the beginning of such year to the close of such quarterly period, together
with comparable information for the corresponding periods of the preceding year.
(g) So long as the Senior Notes are outstanding, to furnish to
the Initial Purchasers as soon as available copies of all publicly available
information concerning the Company and/or its subsidiaries as either of the
Initial Purchasers may reasonably request.
(h) So long as any of the Senior Notes remain outstanding and
during any period in which the Company and the Guarantors are not subject to
Section 13 or 15(d) of the Exchange Act, to make available to any holder of
Senior Notes in connection with any sale thereof and any prospective purchaser
of such Senior Notes from such holder, the information ("Rule 144A Information")
required by Rule 144A(d)(4) under the Act.
(i) Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, to pay or cause to be
paid the following expenses of the Company and the Guarantors incident to the
performance of the obligations of the Company and the Guarantors under this
Agreement, including: (i) the fees, disbursements and expenses of counsel to the
Company and the Guarantors and accountants of the Company and the Guarantors in
connection with the sale and delivery of the Senior Notes to the Initial
Purchasers and pursuant to Exempt Resales, and all other fees and expenses in
connection with the preparation, printing, filing and distribution of the
Preliminary Offering Memorandum, the Offering Memorandum and all amendments and
supplements to any of the foregoing (including financial statements), including
the mailing and delivering of copies thereof to the Initial Purchasers and
persons designated by them in the quantities specified herein, (ii) all costs
and expenses related to the transfer and delivery of the Senior Notes to the
Initial Purchasers and pursuant to Exempt Resales, including any transfer or
other taxes payable thereon, (iii) all costs of printing or producing this
Agreement, the other Operative Documents and any other agreements or documents
in connection with the offering, purchase, sale or delivery of the Senior
6
<PAGE>
Notes, (iv) all expenses in connection with the registration or qualification of
the Senior Notes and the Subsidiary Guarantees for offer and sale under the
securities or Blue Sky laws of the several states and all costs of printing or
producing any preliminary and supplemental Blue Sky memoranda in connection
therewith (including the filing fees and fees and disbursements of counsel for
the Initial Purchasers in connection with such registration or qualification and
memoranda relating thereto), (v) the cost of printing certificates representing
the Senior Notes and the Subsidiary Guarantees, (vi) all expenses and listing
fees in connection with the application for quotation of the Senior Notes in the
Private Offerings, Resales and Trading through Automated Linkages ("PORTAL")
market, (vii) any fees and expenses of the Trustee and the Trustee's counsel in
connection with the Indenture, the Notes and the Subsidiary Guarantees, (viii)
the costs and charges of any transfer agent, registrar and/or depository
(including DTC), (ix) any fees charged by rating agencies for the rating of the
Notes, (x) all costs and expenses of the Exchange Offer and any Registration
Statement, as set forth in the Registration Rights Agreement, (xi) the fees and
expenses of Houlihan, Lokey in connection with the preparation of their solvency
letter, (xii) transportation costs of the "road show" presentation, and (xiii)
all other costs and expenses incident to the performance of the obligations of
the Company and the Guarantors hereunder for which provision is not otherwise
made in this Section. Notwithstanding the foregoing, except as provided in
clause (iv) above and Sections 8 and 11 hereof, the Initial Purchasers shall be
responsible for the fees and disbursements of their counsel.
(j) To use its best efforts to effect the inclusion of the
Senior Notes in PORTAL and to maintain the listing of the Senior Notes on PORTAL
for so long as the Senior Notes are outstanding.
(k) To obtain the approval of DTC for "book-entry" transfer of
the Notes, and to comply with all of its agreements set forth in the
representation letters of the Company and the Guarantors to DTC relating to the
approval of the Notes by DTC for "book-entry" transfer.
(l) During the period beginning on the date hereof and
continuing to and including the date that is 180 days after the Closing Date,
not to offer, sell, contract to sell or otherwise transfer or dispose of any
debt securities of the Company or any Guarantor or any warrants, rights or
options to purchase or otherwise acquire debt securities of the Company or any
Guarantor substantially similar to the Senior Notes and the Subsidiary
Guarantees, without the prior written consent of BancAmerica Robertson Stephens.
(m) Not to sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the Act) that
would be integrated with the sale of the Senior Notes to the Initial Purchasers
or pursuant to Exempt Resales in a manner that would require the registration of
any such sale of the Senior Notes under the Act.
(n) Not to voluntarily claim, and to actively resist any attempts
to claim, the benefit of any usury laws against the holders of any Senior Notes.
(o) To comply with all of its agreements set forth in the
Registration Rights Agreement.
7
<PAGE>
(p) To use its best efforts to do and perform all things required or
necessary to be done and performed under this Agreement by it prior to the
Closing Date, to satisfy all conditions precedent to the delivery of the Senior
Notes and the Subsidiary Guarantees, and to file the charter amendment and enter
into the agreement contemplated by Section 9(p).
(q) To use the proceeds of the Senior Notes for the purposes
specified in the Offering Memorandum, and to enter into the Credit Documents and
to consummate the Recapitalization Transactions on substantially the terms
described in the Offering Memorandum.
(r) To enter into employment agreements with Senior Management (as
defined in the Offering Memorandum) on substantially the terms described in the
Offering Memorandum.
6. Representations, Warranties and Agreements of ENI, the Company and the
Guarantors. As of the date hereof, each of ENI, the Company and the Guarantors
represents and warrants to, and agrees with, the Initial Purchasers, jointly and
severally, that:
(a) The Offering Memorandum does not, and any supplement or amendment
to it will not, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except that the representations and warranties contained
in this paragraph (a) shall not apply to statements in or omissions from the
Offering Memorandum (or any supplement or amendment thereto) based upon
information relating to the Initial Purchasers furnished to the Company in
writing by the Initial Purchasers expressly for use therein. No stop order
preventing the use of the Offering Memorandum, or any amendment or supplement
thereto, or any order asserting that any of the transactions contemplated by
this Agreement are subject to the registration requirements of the Act, has been
issued.
(b) Each of ENI, the Company and its subsidiaries has been duly
incorporated, is validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation and has the corporate power and
authority to carry on its business as described in the Offering Memorandum and
to own, lease and operate its properties, and each is duly qualified and is in
good standing as a foreign corporation authorized to do business in each
jurisdiction in which the nature of its business or its ownership or leasing of
property requires such qualification, except where the failure to be so
qualified would not reasonably be expected to have a material adverse effect on
the business, financial condition or results of operations of the Company and
its subsidiaries, taken as a whole (a "Material Adverse Effect").
(c) All outstanding shares of capital stock of ENI and the Company
have been duly authorized and validly issued and are fully paid, non-assessable
and not subject to any preemptive or similar rights.
(d) The Company is the only direct subsidiary of ENI, and the
entities listed on Schedule C hereto are the only subsidiaries, direct or
indirect, of ENI or the Company. All of the outstanding shares of capital stock
of each such subsidiary have been duly authorized
8
<PAGE>
and validly issued and are fully paid and non-assessable, and are owned by the
Company (or, in the case of the Company, ENI), directly or indirectly through
one or more subsidiaries, free and clear of any security interest, claim, lien,
encumbrance or adverse interest of any nature (each, a "Lien"), other than Liens
granted in connection with the Company's current credit agreement or Liens to be
granted in connection with the Credit Documents and other than Roberts &
Schaefer (Mauritius) Private Limited, which is beneficially owned by the
Company.
(e) This Agreement has been duly authorized, executed and delivered
by ENI, the Company and each of the Guarantors.
(f) The Indenture has been duly authorized by the Company and each of
the Guarantors and, on the Closing Date, will have been validly executed and
delivered by the Company and each of the Guarantors. When the Indenture has been
duly executed and delivered by the Company and each of the Guarantors, the
Indenture will be a valid and binding agreement of the Company and each
Guarantor, enforceable against the Company and each Guarantor in accordance with
its terms except as (i) the enforceability thereof may be limited by bankruptcy,
insolvency, fraudulent conveyance or similar laws affecting creditors' rights
generally and (ii) rights of acceleration and the availability of equitable
remedies may be limited by equitable principles of general applicability. On the
Closing Date, the Indenture will conform in all material respects to the
requirements of the Trust Indenture Act of 1939, as amended (the "TIA" or "Trust
Indenture Act"), and the rules and regulations of the Commission applicable to
an indenture which is qualified thereunder.
(g) The Senior Notes have been duly authorized by the Company, and,
on the Closing Date, will have been validly executed and delivered by the
Company. When the Senior Notes have been issued, executed and authenticated in
accordance with the provisions of the Indenture and delivered to and paid for by
the Initial Purchasers in accordance with the terms of this Agreement, the
Senior Notes will be entitled to the benefits of the Indenture and will be valid
and binding obligations of the Company, enforceable in accordance with their
terms except as (i) the enforceability thereof may be limited by bankruptcy,
insolvency, fraudulent conveyance or similar laws affecting creditors' rights
generally and (ii) rights of acceleration and the availability of equitable
remedies may be limited by equitable principles of general applicability. On the
Closing Date, the Senior Notes will conform, in all material respects, as to
legal matters to the description thereof contained in the Offering Memorandum.
(h) The Exchange Notes have been duly authorized by the Company. When
the Exchange Notes are issued, executed and authenticated in accordance with the
terms of the Exchange Offer and the Indenture, the Exchange Notes will be
entitled to the benefits of the Indenture and will be the valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms, except as (i) the enforceability thereof may be limited by
bankruptcy, insolvency, fraudulent conveyance or similar laws affecting
creditors' rights generally and (ii) rights of acceleration and the availability
of equitable remedies may be limited by equitable principles of general
applicability.
(i) The Subsidiary Guarantee to be endorsed on the Senior Notes by
each Guarantor has been duly authorized by such Guarantor and, on the Closing
Date, will have been duly executed and delivered by each such Guarantor. When
the Senior Notes have been
9
<PAGE>
issued, executed and authenticated in accordance with the Indenture and
delivered to and paid for by the Initial Purchasers in accordance with the terms
of this Agreement, the Subsidiary Guarantee of each Guarantor endorsed thereon
will be entitled to the benefits of the Indenture and will be the valid and
binding obligation of such Guarantor, enforceable against such Guarantor in
accordance with its terms, except as (i) the enforceability thereof may be
limited by bankruptcy, insolvency, fraudulent conveyance or similar laws
affecting creditors' rights generally and (ii) rights of acceleration and the
availability of equitable remedies may be limited by equitable principles of
general applicability. On the Closing Date, the Subsidiary Guarantees to be
endorsed on the Senior Notes will conform, in all material respects, as to legal
matters to the description thereof contained in the Offering Memorandum.
(j) The Subsidiary Guarantee to be endorsed on the Exchange Notes by
each Guarantor has been duly authorized by such Guarantor and, when issued, will
have been duly executed and delivered by each such Guarantor. When the Exchange
Notes have been issued, executed and authenticated in accordance with the terms
of the Exchange Offer and the Indenture, the Subsidiary Guarantee of each
Guarantor endorsed thereon will be entitled to the benefits of the Indenture and
will be the valid and binding obligation of such Guarantor, enforceable against
such Guarantor in accordance with its terms, except as (i) the enforceability
thereof may be limited by bankruptcy, insolvency, fraudulent conveyance or
similar laws affecting creditors' rights generally and (ii) rights of
acceleration and the availability of equitable remedies may be limited by
equitable principles of general applicability. When the Exchange Notes are
issued, authenticated and delivered, the Subsidiary Guarantees to be endorsed on
the Exchange Notes will conform, in all material respects, as to legal matters
to the description thereof in the Offering Memorandum.
(k) The Registration Rights Agreement has been duly authorized by the
Company and each of the Guarantors and, on the Closing Date, will have been duly
executed and delivered by the Company and each of the Guarantors. When the
Registration Rights Agreement has been duly executed and delivered, the
Registration Rights Agreement will be a valid and binding agreement of the
Company and each of the Guarantors, enforceable against the Company and each
Guarantor in accordance with its terms except as (i) the enforceability thereof
may be limited by bankruptcy, insolvency, fraudulent conveyance or similar laws
affecting creditors' rights generally and (ii) rights of acceleration and the
availability of equitable remedies may be limited by equitable principles of
general applicability, and (iii) rights of indemnification or contribution may
be limited by public policy considerations under the Federal securities laws. On
the Closing Date, the Registration Rights Agreement will conform, in all
material respects, as to legal matters to the description thereof in the
Offering Memorandum.
(l) The Company and each Guarantor (to the extent a party thereto)
has all requisite corporate power and authority to enter into the Senior Credit
Facility and each of the other Credit Documents.
(m) Each of the Senior Credit Facility and the other Credit Documents
has been duly and validly authorized and, on the Closing Date, will be duly and
validly executed and delivered by the Company and each Guarantor party thereto
and, assuming due authorization, execution and delivery by the other parties
thereto, constitutes the valid and binding agreement of the Company and each
Guarantor party thereto, enforceable against the
10
<PAGE>
Company and each Guarantor party thereto in accordance with its terms, except as
(i) the enforceability thereof may be limited by bankruptcy, insolvency,
fraudulent conveyance or similar laws affecting creditors' rights generally and
(ii) rights of acceleration and the availability of equitable remedies may be
limited by equitable principles of general applicability. On the Closing Date,
the Subsidiary Guarantees to be endorsed on the Senior Notes will conform, in
all material respects, as to legal matters to the description thereof contained
in the Offering Memorandum.
(n) ENI and the Company each has all requisite corporate power and
authority to enter into the Recapitalization Documents.
(o) Prior to the Closing Date, each of the Recapitalization Documents
will be duly and validly authorized, and, no later than the Closing Date, will
be duly and validly executed and delivered by the Company, ENI and any Guarantor
party thereto, and, assuming due authorization, execution and delivery by the
other parties thereto, constitutes or will constitute the valid and binding
agreement of the Company, enforceable against ENI and the Company and any such
Guarantor in accordance with its terms, except as (i) the enforceability thereof
may be limited by bankruptcy, insolvency, fraudulent conveyance or similar laws
affecting creditors' rights generally and (ii) rights of acceleration and the
availability of equitable remedies may be limited by equitable principles of
general applicability. All representations and warranties made by ENI and the
Company in Section 4 of the Repurchase Agreement are true and correct in all
material respects. Upon consummation of the merger of the Company with and into
ENI, with ENI surviving, pursuant to the Merger Agreement and the Certificate of
Merger, each of the agreements to which the Company was a party immediately
prior to the consummation of such merger (including without limitation the
Senior Notes and the Indenture) will constitute the valid and binding agreements
of ENI, enforceable against ENI in accordance with their terms except (i) the
enforceability thereof may be limited by bankruptcy, insolvency, fraudulent
conveyance or similar laws affecting creditors' rights generally and (ii) rights
of acceleration and the availability of equitable remedies may be limited by
equitable principles of general applicability, and (iii) rights of
indemnification or contribution may be limited by public policy considerations
under the Federal securities laws.
(p) Neither ENI, the Company nor any of its subsidiaries is (i) in
violation of its respective charter or by-laws or (ii) in default in the
performance of any Transaction Document or any other material obligation,
agreement, covenant or condition contained in any indenture, loan agreement,
mortgage, lease or other agreement or instrument that is material to the Company
and their subsidiaries, taken as a whole, to which the Company or any of their
subsidiaries is a party or by which ENI, the Company or any of their
subsidiaries or their respective property is bound, except such default or
defaults as would not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect, or prevent or adversely affect the issuance
of the Senior Notes as contemplated by this Agreement and the Offering
Memorandum or the consummation of the Recapitalization Transactions.
(q) The execution, delivery and performance of this Agreement and
each of the other Transaction Documents by ENI, the Company and each of the
Guarantors party thereto, compliance by ENI, the Company and each of the
Guarantors with all provisions hereof and thereof and the consummation of the
transactions contemplated hereby and thereby will not
11
<PAGE>
(i) require any consent, approval, authorization or other order of, or
qualification with, any court or governmental body or agency (except such as may
be required under Federal or state securities or Blue Sky laws) (ii) conflict
with or constitute a breach of any of the terms or provisions of, or a default
under, the charter or by-laws of ENI, the Company or any of its subsidiaries or
any other Transaction Document or, except as set forth on Schedule 4.3 to the
Repurchase Agreement (consents with respect to which will be obtained prior to
the Closing Date), any other indenture, loan agreement, mortgage, lease or other
agreement or instrument that is material to ENI, the Company and their
subsidiaries, taken as a whole, to which ENI, the Company or any of their
subsidiaries is a party or by which ENI, the Company or any of their
subsidiaries or their respective property is bound, (iii) violate or conflict
with any applicable law or any rule, regulation, judgment, order or decree of
any court or any governmental body or agency having jurisdiction over ENI, the
Company, any of their subsidiaries or their respective property, (iv) result in
the imposition or creation of (or the obligation to create or impose) a Lien
(except for Permitted Liens, as defined in the Offering Memorandum) under, any
agreement or instrument (other than the Credit Documents to the extent described
in the Offering Memorandum) to which ENI, the Company or any of their
subsidiaries is a party or by which ENI, the Company or any of their
subsidiaries or their respective property is bound, or (v) result in the
termination, suspension or revocation of any material Authorization (as defined
below) of ENI, the Company or any of their subsidiaries or result in any other
impairment of the rights of the holder of any such Authorization.
(r) Other than as described in the Offering Memorandum, there are no
legal or governmental proceedings pending or threatened to which ENI, the
Company or any of their subsidiaries is or could be a party or to which any of
their respective property is or could be subject, which would reasonably be
expected to result, singly or in the aggregate, in a Material Adverse Effect, or
which could prevent or adversely affect the issuance of the Senior Notes or the
consummation of the Recapitalization Transactions.
(s) Neither ENI, the Company nor any of their subsidiaries has
violated any foreign, federal, state or local law or regulation relating to the
protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants ("Environmental Laws") or any
provisions of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or the rules and regulations promulgated thereunder, except for such
violations which, (i) singly or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect or (ii) are disclosed in the Offering
Memorandum.
(t) There are no costs or liabilities associated with Environmental
Laws (including, without limitation, any capital or operating expenditures
required for clean-up, closure of properties or compliance with Environmental
Laws or any Authorization, any related constraints on operating activities and
any potential liabilities to third parties) which (i) would, singly or in the
aggregate, reasonably be expected to have a Material Adverse Effect or (ii) are
not disclosed in the Offering Memorandum.
(u) Each of ENI, the Company and their subsidiaries has such permits,
licenses, consents, exemptions, franchises, authorizations and other approvals
(each, an "Authorization") of, and has made all filings with and notices to, all
governmental or regulatory authorities and self-regulatory organizations and all
courts and other tribunals, including without
12
<PAGE>
limitation, under any applicable Environmental Laws, as are necessary to own,
lease, license and operate its respective properties and to conduct its
business, except where the failure to have any such Authorization or to make any
such filing or notice would not, singly or in the aggregate, reasonably be
expected to have a Material Adverse Effect. Each such Authorization is valid and
in full force and effect and each of ENI, the Company and their subsidiaries is
in compliance with all the terms and conditions thereof and with the rules and
regulations of the authorities and governing bodies having jurisdiction with
respect thereto; and no event has occurred (including, without limitation, the
receipt of any notice from any authority or governing body) which allows or,
after notice or lapse of time or both, would allow, revocation, suspension or
termination of any such Authorization or results or, after notice or lapse of
time or both, would result in any other impairment of the rights of the holder
of any such Authorization; and such Authorizations contain no restrictions that
are burdensome to ENI, the Company or any of their subsidiaries; except where
such failure to be valid and in full force and effect or to be in compliance,
the occurrence of any such event or the presence of any such restriction as
would not, singly or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(v) The accountants, Coopers & Lybrand, L.L.P., that have certified
the financial statements and supporting schedules included in the Preliminary
Offering Memorandum and the Offering Memorandum are independent public
accountants with respect to ENI, the Company and the Guarantors, as required by
the Act and the Exchange Act. The historical financial statements, together with
related schedules and notes, set forth in the Preliminary Offering Memorandum
and the Offering Memorandum comply as to form in all material respects with the
requirements applicable to registration statements on Form S-1 under the Act. No
separate financial statements of the Guarantors would be required to be included
in the Offering Memorandum if the Offering Memorandum were included as a
prospectus in a registration statement on Form S-1.
(w) The historical financial statements, together with related
schedules and notes included in the Offering Memorandum (and any amendment or
supplement thereto), present fairly in all material respects the consolidated
financial position, results of operations and changes in financial position of
ENI and its subsidiaries on the basis stated in the Offering Memorandum at the
respective dates or for the respective periods to which they apply; such
statements and related schedules and notes have been prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods involved, except as disclosed therein; and the other financial and
statistical information and data set forth in the Offering Memorandum (and any
amendment or supplement thereto) are, in all material respects, accurately
presented and prepared on a basis consistent with such financial statements and
the books and records of ENI and the Company (including, with respect to
statistical information not derived from the Company's business or accounting
records, from secondary sources the Company reasonably believes to be reliable).
(x) The pro forma financial data included in the Preliminary Offering
Memorandum and the Offering Memorandum have been prepared on a basis consistent
with the historical financial statements of ENI and its subsidiaries and give
effect to assumptions used in the preparation thereof on a reasonable basis and
in good faith and present fairly in all material respects the historical
transactions, the offering of the Notes and the Recapitalization
13
<PAGE>
Transactions contemplated by the Preliminary Offering Memorandum and the
Offering Memorandum.
(y) Neither ENI, the Company nor any Guarantor is or, after giving
effect to the offering and sale of the Senior Notes and the application of the
net proceeds thereof as described the Offering Memorandum, will be, an
"investment company," as such term is defined in the Investment Company Act of
1940, as amended.
(z) Other than existing agreements with parties to the Repurchase
Agreement, which agreements are being terminated and released in accordance with
the Repurchase Agreement and Recapitalization Transactions, there are no
contracts, agreements or understandings between ENI, the Company or any
Guarantor and any person granting such person the right to require ENI, the
Company or such Guarantor to file a registration statement under the Act with
respect to any securities of ENI, the Company or such Guarantor or to require
ENI, the Company or such Guarantor to include such securities with the Notes and
Subsidiary Guarantees registered pursuant to any Registration Statement.
(aa) Neither ENI, the Company nor any of their subsidiaries nor any
agent thereof acting on the behalf of them has taken, and none of them will
take, any action that might cause this Agreement or the issuance or sale of the
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.
(bb) No "nationally recognized statistical rating organization" as
such term is defined for purposes of Rule 436(g)(2) under the Act (i) has
imposed (or has informed the Company or any Guarantor that it is considering
imposing) any condition (financial or otherwise) on the Company's or any
Guarantor's retaining any rating assigned to the Company or any Guarantor, any
securities of the Company or any Guarantor or (ii) has indicated to the Company
or any Guarantor that it is considering (a) the downgrading, suspension, or
withdrawal of, or any review for a possible change that does not indicate the
direction of the possible change in, any rating so assigned or (b) any change in
the outlook for any rating of the Company, any Guarantor or any securities of
the Company or any Guarantor.
(cc) Since the respective dates as of which information is given in
the Offering Memorandum, other than as set forth in the Offering Memorandum
(exclusive of any amendments or supplements thereto subsequent to the date of
this Agreement), (i) there has not occurred any material adverse change or any
development involving a prospective material adverse change in the condition,
financial or otherwise, or the earnings, business, management or operations of
ENI, the Company and their subsidiaries, taken as a whole, (ii) there has not
been any material adverse change or any development involving a prospective
material adverse change in the capital stock or in the long-term debt of ENI
(other than in connection with the Recapitalization Transactions), the Company
or any of their subsidiaries and (iii) neither ENI, the Company nor any of their
subsidiaries has incurred any material liability or obligation, direct or
contingent.
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(dd) Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its date, contains all the information specified in, and
meeting the requirements of, Rule 144A(d)(4) under the Act.
(ee) When the Senior Notes and the Subsidiary Guarantees are issued
and delivered pursuant to this Agreement, neither the Senior Notes nor the
Subsidiary Guarantees will be of the same class (within the meaning of Rule 144A
under the Act) as any security of the Company or any Guarantor that is listed on
a national securities exchange registered under Section 6 of the Exchange Act or
that is quoted in a United States automated inter-dealer quotation system.
(ff) No form of general solicitation or general advertising (as
defined in Regulation D under the Act) was used by ENI, the Company, the
Guarantors or any of their respective representatives (other than the Initial
Purchasers, as to whom ENI, the Company and the Guarantors make no
representation) in connection with the offer and sale of the Senior Notes
contemplated hereby, including, but not limited to, articles, notices or other
communications published in any newspaper, magazine, or similar medium or
broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or general advertising. No
securities of the same class as the Senior Notes or the Subsidiary Guarantees
have been issued and sold by the Company or any Guarantor within the six-month
period immediately prior to the date hereof.
(gg) Prior to the effectiveness of any Registration Statement, the
Indenture is not required to be qualified under the TIA.
(hh) No registration under the Act of the Senior Notes or the
Subsidiary Guarantees is required for the sale of the Senior Notes and the
Subsidiary Guarantees to the Initial Purchasers as contemplated hereby or for
the Exempt Resales assuming (i) the accuracy of the Initial Purchasers'
representations and warranties and agreements set forth in Section 7 hereof and
(ii) the accuracy of the representations made by each Accredited Institution
that purchases Senior Notes pursuant to an Exempt Resale as set forth in the
letter of representations in the form of Annex A to the Offering Memorandum.
(ii) None of ENI, the Company, the Guarantors nor any of their
respective affiliates or any person acting on its or their behalf (other than
the Initial Purchasers, as to whom the Company and the Guarantors make no
representation) has engaged or will engage in any directed selling efforts
within the meaning of Regulation S under the Act ("Regulation S") with respect
to the Senior Notes or the Subsidiary Guarantees.
(jj) Each certificate signed by any officer of the Company or any
Guarantor and delivered to the Initial Purchasers or counsel for the Initial
Purchasers shall be deemed to be a representation and warranty by ENI, the
Company or such Guarantor to the Initial Purchasers as to the matters covered
thereby.
(kk) Neither ENI, the Company nor any Guarantor (i) is insolvent, (ii)
will be rendered insolvent by the issuance of the Notes or the Subsidiary
Guarantees, as applicable, or by the consummation of the Recapitalization
Transactions, (iii) is, or immediately
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after consummation of the Recapitalization Transactions will be, engaged in a
business or transaction for which its remaining assets constitute unreasonably
small capital, or (iv) intends to incur, or believes that it will incur, debts
(including contingent obligations) beyond its ability to pay such debts as they
mature.
ENI, the Company and the Guarantors acknowledge that the Initial
Purchasers and, for purposes of the opinions to be delivered to the Initial
Purchasers pursuant to Section 9 hereof, counsel to the Company and the
Guarantors and counsel to the Initial Purchasers, will rely upon the accuracy
and truth of the foregoing representations and hereby consent to such reliance.
7. Initial Purchasers' Representations and Warranties. Each of the
Initial Purchasers, severally and not jointly, represents and warrants to ENI,
the Company and the Guarantors, and agrees that:
(a) Such Initial Purchaser is either a QIB or an Accredited
Institution, in either case, with such knowledge and experience in financial and
business matters as is necessary in order to evaluate the merits and risks of an
investment in the Senior Notes.
(b) Such Initial Purchaser (A) is not acquiring the Senior Notes with
a view to any distribution thereof or with any present intention of offering or
selling any of the Senior Notes in a transaction that would violate the Act or
the securities laws of any state of the United States or any other applicable
jurisdiction and (B) will be reoffering and reselling the Senior Notes only to
(x) QIBs in reliance on the exemption from the registration requirements of the
Act provided by Rule 144A, (y) not more than five Accredited Institutions that
execute and deliver a letter containing certain representations and agreements
in the form attached as Annex A to the Offering Memorandum.
(c) No form of general solicitation or general advertising (within
the meaning of Regulation D under the Act) has been or will be used by such
Initial Purchasers or any of their respective representatives in connection with
the offer and sale of the Senior Notes pursuant hereto, including, but not
limited to, articles, notices or other communications published in any
newspaper, magazine or similar medium or broadcast over television or radio, or
any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising.
(d) Such Initial Purchaser agrees that, in connection with Exempt
Resales, such Initial Purchaser will solicit offers to buy the Senior Notes only
from, and will offer to sell the Senior Notes only to, Eligible Purchasers. Each
Initial Purchaser further agrees that it will offer to sell the Senior Notes
only to, and will solicit offers to buy the Senior Notes only from (A) Eligible
Purchasers that the Initial Purchaser reasonably believes are QIBs, and (B)
Accredited Institutions who make the representations contained in, and execute
and return to the Initial Purchaser, a certificate in the form of Annex A
attached to the Offering Memorandum, in each case, that agree to be bound by the
limitations on transfer set forth in the Offering Memorandum under "Transfer
Restrictions."
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The Initial Purchaser acknowledges that ENI, the Company and the
Guarantors and, for purposes of the opinions to be delivered to each Initial
Purchaser pursuant to Section 9 hereof, counsel to ENI, the Company and the
Guarantors and counsel to the Initial Purchasers will rely upon the accuracy and
truth of the foregoing representations and each Initial Purchaser hereby
consents to such reliance.
8. Indemnification.
----------------
(a) The Company and each Guarantor agree, jointly and severally,
to indemnify and hold harmless each Initial Purchaser, its directors, its
officers and each person, if any, who controls such Initial Purchasers within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act, from and
against any and all losses, claims, damages, liabilities and judgments
(including, without limitation, any legal or other expenses incurred in
connection with investigating or defending any matter, including any action,
that could give rise to any such losses, claims, damages, liabilities or
judgments) caused by any untrue statement or alleged untrue statement of a
material fact contained in the Offering Memorandum (or any amendment or
supplement thereto), the Preliminary Offering Memorandum or any Rule 144A
Information provided by the Company or any Guarantor to any holder or
prospective purchaser of Senior Notes pursuant to Section 5(h) or caused by any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or judgments are
caused by any such untrue statement or omission or alleged untrue statement or
omission based upon information relating to an Initial Purchaser furnished in
writing to the Company by such Initial Purchaser, provided, however, that this
indemnity agreement with respect to the Preliminary Offering Memorandum shall
not inure to the benefit of an Initial Purchaser if the person asserting any
such losses, claims, damages, liabilities, expenses or judgments purchased Notes
from such Initial Purchaser, or any person controlling such Initial Purchaser,
if a copy of the Final Offering Memorandum (as then amended or supplemented) was
not sent or given by or on behalf of such Initial Purchaser to such person at or
prior to the written confirmation of the sale of such Notes to such person and
if it is finally determined by a court of competent jurisdiction that (x) the
Final Offering Memorandum (as so amended or supplemented) would have corrected
the defect giving rise to such loss, claim, damage, liability, expense or
judgment and (y) such person would not have been entitled to any recovery with
respect to such losses, claims, damages, liabilities, expenses or judgments had
such person received the Final Offering Memorandum.
(b) Each Initial Purchaser agrees, severally and not jointly, to
indemnify and hold harmless the Company and the Guarantors, and their respective
directors and officers and each person, if any, who controls (within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act) the Company or the
Guarantors, to the same extent as the foregoing indemnity from the Company and
the Guarantors to the Initial Purchaser but only with reference to information
furnished in writing to the Company by the Initial Purchaser expressly for use
in the Preliminary Offering Memorandum or the Offering Memorandum, as specified
in a letter to be delivered on the Closing Date.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"indemnified party"), the indemnified party shall promptly notify the person
against whom such indemnity
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may be sought (the "indemnifying party") in writing and the indemnifying party
shall assume the defense of such action, including the employment of counsel
reasonably satisfactory to the indemnified party and the payment of all fees and
expenses of such counsel, as incurred (except that in the case of any action in
respect of which indemnity may be sought pursuant to both Sections 8(a) and
8(b), the Initial Purchasers shall not be required to assume the defense of such
action pursuant to this Section 8(c), but may employ separate counsel and
participate in the defense thereof, but the fees and expenses of such counsel,
except as provided below, shall be at the expense of the Initial Purchasers).
Any indemnified party shall have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of the indemnified party unless (i) the
employment of such counsel shall have been specifically authorized in writing by
the indemnifying party, (ii) the indemnifying party shall have failed to assume
the defense of such action or employ counsel reasonably satisfactory to the
indemnified party or (iii) the named parties to any such action (including any
impleaded parties) include both the indemnified party and the indemnifying
party, and the indemnified party shall have been advised by such counsel that
there may be one or more legal defenses available to it which are different from
or additional to those available to the indemnifying party (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the indemnified party). In any such case, the indemnifying party
shall not, in connection with any one action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel) for
all indemnified parties and all such fees and expenses shall be reimbursed as
they are incurred. Such firm shall be designated in writing by BancAmerica
Robertson Stephens, in the case of the parties indemnified pursuant to Section
8(a), and by the Company, in the case of parties indemnified pursuant to Section
8(b). The indemnifying party shall indemnify and hold harmless the indemnified
party from and against any and all losses, claims, damages, liabilities and
judgments by reason of any settlement of any action (i) effected with its
written consent or (ii) effected without its written consent if the settlement
is entered into more than twenty business days after the indemnifying party
shall have received a request from the indemnified party for reimbursement for
the fees and expenses of counsel (in any case where such fees and expenses are
at the expense of the indemnifying party) and, prior to the date of such
settlement, the indemnifying party shall have failed to comply with such
reimbursement request. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement or compromise of, or
consent to the entry of judgment with respect to, any pending or threatened
action in respect of which the indemnified party is or could have been a party
and indemnity or contribution may be or could have been sought hereunder by the
indemnified party, unless such settlement, compromise or judgment (i) includes
an unconditional release of the indemnified party from all liability on claims
that are or could have been the subject matter of such action and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of the indemnified party.
(d) To the extent the indemnification provided for in this Section 8 is
unavailable to an indemnified party or insufficient in respect of any losses,
claims, damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities and judgments (i) in such
proportion as is
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<PAGE>
appropriate to reflect the relative benefits received by the Company and the
Guarantors, on the one hand, and the Initial Purchasers on the other hand from
the offering of the Senior Notes or (ii) if the allocation provided by clause
8(d)(i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
8(d)(i) above but also the relative fault of the Company and the Guarantors, on
the one hand, and the Initial Purchasers, on the other hand, in connection with
the statements or omissions which resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative benefits received by the Company and the
Guarantors, on the one hand and the Initial Purchasers, on the other hand, shall
be deemed to be in the same proportion as the total net proceeds from the
offering of the Senior Notes (before deducting expenses) received by the
Company, and the total discounts and commissions received by the Initial
Purchasers bear to the total price to investors of the Senior Notes, 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 Guarantors, on the one hand, and the
Initial Purchasers, on the other hand, shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company or the Guarantors, on the one hand, or the
Initial Purchasers, 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 Guarantors and the Initial Purchasers agree that it
would not be just and equitable if contribution pursuant to this Section 8(d)
were determined by pro rata allocation (even if the Initial Purchasers 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 or judgments
referred to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses incurred
by such indemnified party in connection with investigating or defending any
matter, including any action, that could have given rise to such losses, claims,
damages, liabilities or judgments. Notwithstanding the provisions of this
Section 8, no Initial Purchaser shall be required to contribute any amount in
excess of the amount by which the total discounts and commissions received by
such Initial Purchaser exceeds the amount of any damages which such Initial
Purchaser has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation (even if the Initial Purchasers were treated as one
entity for such purpose). The Initial Purchasers' obligations to contribute
pursuant to this Section 8(d) are several in proportion to the respective
principal amount of Senior Notes purchased by each of the Initial Purchasers
hereunder and not joint.
(e) The remedies provided for in this Section 8 are not exclusive and
shall not limit any rights or remedies which may otherwise be available to any
indemnified party at law or in equity, provided, however, that the terms of this
Section 8 supersede and replace that certain Indemnity Letter dated October 15,
1997 and such letter is terminated upon consummation of the sale of the Notes to
the Initial Purchasers on the Closing Date and, at such
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<PAGE>
date and time, shall be of no further force or effect with respect to the
offering and sale of the Notes.
9. Conditions of Initial Purchasers' Obligations. The obligations of the
Initial Purchasers to purchase the Senior Notes under this Agreement are subject
to the satisfaction of each of the following conditions:
(a) All the representations and warranties of ENI, the Company and the
Guarantors contained in this Agreement shall be true and correct on the Closing
Date with the same force and effect as if made on and as of the Closing Date.
(b) On or after the date hereof, (i) there shall not have occurred any
downgrading, suspension or withdrawal of, nor shall any notice have been given
of any potential or intended downgrading, suspension or withdrawal of, or of any
review (or of any potential or intended review) for a possible change that does
not indicate the direction of the possible change in, any rating of the Company
or any Guarantor or any securities of the Company or any Guarantor (including,
without limitation, the placing of any of the foregoing ratings on credit watch
with negative or developing implications or under review with an uncertain
direction) by any "nationally recognized statistical rating organization" as
such term is defined for purposes of Rule 436(g)(2) under the Act, (ii) there
shall not have occurred any change, nor shall any notice have been given of any
potential or intended change, in the outlook for any rating of the Company or
any Guarantor or any securities of the Company or any Guarantor by any such
rating organization and (iii) no such rating organization shall have given
notice that it has assigned (or is considering assigning) a lower rating to the
Senior Notes than that on which the Senior Notes were marketed.
(c) Since the respective dates as of which information is n in the
Offering Memorandum, other than as set forth in the Offering Memorandum
(exclusive of any amendments or supplements thereto subsequent to the date of
this Agreement), (i) there shall not have occurred any change or any development
involving a prospective change in the condition, financial or otherwise, or the
earnings, business, management or operations of ENI, the Company and their
material subsidiaries, taken as a whole, (ii) there shall not have been any
change or any development involving a prospective change in the capital stock or
in the long-term debt of the Company, ENI or any of their subsidiaries and (iii)
neither ENI, the Company nor any of their subsidiaries shall have incurred any
liability or obligation, direct or contingent, the effect of which, in any such
case described in clause 9(c)(i), 9(c)(ii) or 9(c)(iii), in the reasonable
judgment of BancAmerica Robertson Stephens, is material and adverse and, in the
reasonable judgment of BancAmerica Robertson Stephens, makes it impracticable to
market the Senior Notes on the terms and in the manner contemplated in the
Offering Memorandum.
(d) You shall have received on the Closing Date a certificate dated
the Closing Date, signed by the President and the Chief Financial Officer of the
Company and the President and the Treasurer of each of the Guarantors,
confirming the matters set forth in Sections 6(cc), 6(kk), 9(a) and 9(b) and
stating that each of the Company and the Guarantors has complied with all the
agreements and satisfied all of the conditions herein contained and required to
be complied with or satisfied on or prior to the Closing Date.
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(e) You shall have received on the Closing Date an opinion (satisfactory
to you and counsel for the Initial Purchaser), dated the Closing Date, of Mayer
Brown & Platt, counsel for ENI, the Company and the Guarantors, to the effect
that:
(i) each of ENI, the Company and the Guarantors incorporated in
Illinois or Delaware has been duly incorporated and is validly
existing and each such corporation and each other Guarantor is a
corporation in good standing under the laws of its jurisdiction of
incorporation (based solely on certificates of public officials); each
such corporation has the corporate power and authority to carry on its
business as described in the Offering Memorandum and to own, lease and
operate its properties;
(ii) based solely on certificates of public officials, each of
ENI, the Company and the Guarantors is duly qualified and is in good
standing as a foreign corporation authorized to do business in each of
the states set forth on an Annex to such opinion;
(iii) all of the outstanding shares of capital stock of each of
the Company's subsidiaries are, to the best of such counsel's
knowledge, owned by the Company, and, to the best knowledge of such
counsel, are free and clear of any Lien, other than Liens granted in
connection with the Company's current credit agreement or Liens to be
granted in connection with the Credit Documents and other than Roberts
& Schaefer (Mauritius) Private Limited, which is beneficially owned by
the Company;
(iv) the Senior Notes have been duly authorized and, when
executed and authenticated in accordance with the provisions of the
Indenture and delivered to and paid for by the Initial Purchasers in
accordance with the terms of this Agreement, will be entitled to the
benefits of the Indenture and will be valid and binding obligations of
the Company, enforceable against the Company in accordance with their
terms;
(v) the Subsidiary Guarantees have been duly authorized and, when
the Senior Notes are executed and authenticated in accordance with the
provisions of the Indenture and delivered to and paid for by the
Initial Purchasers in accordance with the terms of this Agreement, the
Subsidiary Guarantees endorsed thereon will be entitled to the
benefits of the Indenture and will be valid and binding obligations of
the Guarantors, enforceable against the Guarantors in accordance with
their terms;
(vi) the Indenture has been duly authorized, executed and
delivered by the Company and each Guarantor and is a valid and binding
agreement of the Company and each Guarantor, enforceable against the
Company and each Guarantor in accordance with its terms;
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(vii) the Repurchase Agreement and each of the Ancillary
Agreements has been duly and validly authorized, executed and
delivered by ENI and the Company, and, assuming due authorization,
execution and delivery by the other parties thereto, constitutes the
valid and binding agreement of the Company, enforceable against ENI
and the Company in accordance with its terms;
(viii) this Agreement has been duly authorized, executed and
delivered by the Company and the Guarantors;
(ix) the Registration Rights Agreement has been duly authorized,
executed and delivered by the Company and the Guarantors and is a
valid and binding agreement of the Company and each Guarantor,
enforceable against the Company and each Guarantor in accordance with
its terms;
(x) the Exchange Notes have been duly authorized and, if and when
executed, delivered and issued in the Exchange Offer pursuant to and
in the manner contemplated by the Registration Rights Agreement and
authenticated by the Trustee in accordance with the Indenture, will be
entitled to the benefits of the Indenture and will be the valid and
binding obligations of the Company and the Guarantors, enforceable
against them in accordance with their terms;
(xi) the Merger Agreement and the Certificate of Merger have been
duly authorized by all necessary corporate action by the Company and
ENI; upon filing of the Certificate of Merger with the Secretary of
State of Delaware, the merger of the Company with and into ENI will be
effective upon the terms set forth in the Merger Agreement and the
Certificate of Merger; upon effectiveness of such merger, the
Indenture and the Notes will constitute the valid and binding
agreements of ENI, enforceable against ENI in accordance with their
terms;
(xii) the statements under the captions "Certain United States
Federal Tax Consequences," "Recapitalization Transactions," and "Plan
of Distribution" in the Offering Memorandum, insofar as such
statements constitute a summary of legal matters, fairly present in
all material respects such legal matters; the Senior Notes and the
Subsidiary Guarantees conform, in all material respects, as to legal
matters to the description thereof contained in the Offering
Memorandum;
(xiii) the execution, delivery and performance of this Agreement
and each of the other Transaction Documents by ENI, the Company and
each of the Guarantors party thereto, the compliance by ENI, the
Company and each of the Guarantors with all provisions hereof and
thereof and the consummation of the transactions contemplated hereby
and thereby will not (i) require any consent, approval, authorization
or other order of, or
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qualification with, any court or governmental body or agency
(except such as may be required under federal, state or foreign
securities laws), (ii) conflict with or constitute a breach of
any of the terms or provisions of, or a default under, the
charter or by-laws of ENI as amended in connection with the
Recapitalization Transactions, the Company or any of their
subsidiaries or the other Transaction Documents or any indenture,
loan agreement, mortgage, lease or other agreement or instrument
that is identified (as set forth on a schedule to such opinion)
to such counsel as material to ENI, the Company and their
subsidiaries, taken as a whole, to which ENI, the Company or any
of their subsidiaries is a party or by which ENI, the Company or
any of their subsidiaries or their respective property is bound
(as set forth on a schedule to such opinion), (iii) violate or
conflict with any applicable law or any rule, regulation,
judgment, order or decree of any court or any governmental body
or agency of the United States, Illinois or New York having
jurisdiction over ENI, the Company, any of its subsidiaries or
their respective property, (iv) result in the imposition or
creation of (or the obligation to create or impose) a Lien (other
than Permitted Liens, as defined in the Offering Memorandum)
under, any agreement or instrument (other than the Credit
Documents) to which ENI, the Company or any of their subsidiaries
is a party or by which the Company or any of their subsidiaries
or their respective property is bound, or (v) result in the
termination, suspension or revocation of any Authorization of
ENI, the Company or any of their subsidiaries;
(xiv) other than as set forth in the Offering Memorandum,
after due inquiry, such counsel does not know of any legal or
governmental proceedings pending or threatened to which ENI, the
Company or any of their subsidiaries is or could be a party or to
which any of their respective property is or could be subject,
which could reasonably be expected to result, singly or in the
aggregate, in a Material Adverse Effect;
(xv) neither ENI, the Company nor any Guarantor is nor,
after giving effect to the offering and sale of the Senior Notes
and the application of the net proceeds thereof as described in
the Offering Memorandum, will be, an "investment company" as such
term is defined in the Investment Company Act of 1940, as
amended;
(xvi) to the best of such counsel's knowledge after due
inquiry, and other than as disclosed in Section 6 of this
Agreement, there are no contracts, agreements or understandings
between ENI, the Company or any Guarantor and any person granting
such person the right to require the Company or such Guarantor to
file a registration statement under the Act with respect to any
securities of ENI, the Company or such Guarantor or to require
ENI, the Company or such Guarantor to include such securities
with the Notes and Subsidiary Guarantees registered pursuant to
any Registration Statement;
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(xvii) it is not necessary in connection with the offer,
sale and delivery of the Senior Notes to the Initial Purchasers
in the manner contemplated by this Agreement or in connection
with the Exempt Resales to qualify the Indenture under the TIA;
and
(xviii) no registration under the Act of the Senior Notes
is required for the sale of the Senior Notes or such Guarantees
to the Initial Purchasers as contemplated by this Agreement or
for the Exempt Resales assuming that (i) each Initial Purchasers
is a QIB or an Accredited Institution, each Eligible Purchaser to
whom Senior Notes is sold is a QIB, an Accredited Institution, or
a Regulation S Purchaser, (ii) the accuracy of, and compliance
with, the Initial Purchasers' representations and agreements
contained in Section 7 of this Agreement, (iii) the accuracy of
the representations of the Company and the Guarantors and (iv)
with respect to Accredited Institutions, the accuracy of the
representations made by such Accredited Institutions as set forth
in the letter of representation executed by such Accredited
Institution in the form of Annex A to the Offering Memorandum.
Such opinion shall also include a statement of such counsel to the
effect that such counsel has no reason to believe that, as of the date of the
Offering Memorandum or as of the Closing Date, the Offering Memorandum, as
amended or supplemented, if applicable (except for the financial statements and
other financial and statistical data included therein, as to which such counsel
need not express any belief) contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
The opinion of Mayer Brown & Platt described in Section 9(e) above
shall be rendered to you at the request of the Company and the Guarantors and
shall so state therein. In giving (x) opinions with respect to enforceability,
such counsel may take reasonable exceptions with respect to the effect of
bankruptcy, insolvency, fraudulent conveyance, or similar laws, applicable
limitations on the availability of rights of acceleration or equitable remedies
and public policy considerations with respect to enforceability of
indemnification or contribution provisions under the Federal securities laws,
and (y) the statement with respect to the matters covered by the preceding
paragraph, such counsel may state that their beliefs are based upon their
participation in the preparation of the Offering Memorandum and any amendments
or supplements thereto and review and discussion of the contents thereof, but
are without independent check or verification except as specified.
The Initial Purchasers shall also have received (a) an opinion with
respect to the Guarantors incorporated in West Virginia from West Virginia
counsel reasonably satisfactory to the Initial Purchasers with respect to the
matters set forth in clauses (i), (ii), (v), (vi), (viii), (ix) and (x) with
respect to due authorization above, and (b) an opinion from Mayer, Brown & Platt
(which may be included in the opinion described above) that the Senior Credit
Facility and the other Credit Documents have been duly and validly authorized,
executed and delivered, and an opinion that the Senior Credit Facility and the
other Credit Documents constitute enforceable obligations of the Company and the
Guarantors party thereto, which opinion shall be in the form
24
<PAGE>
of, and may contain any and all exceptions taken in, the opinion of such firm
delivered on the Closing Date to the lender(s) under the Senior Credit Facility.
(f) The Initial Purchasers shall have received on the Closing Date an
opinion, dated the Closing Date, of Latham & Watkins, counsel for the Initial
Purchasers, in form and substance reasonably satisfactory to the Initial
Purchasers.
(g) The Initial Purchasers shall have received, at the time this Agreement
is executed and at the Closing Date, letters dated the date hereof or the
Closing Date, as the case may be, in form and substance reasonably satisfactory
to the Initial Purchasers from Coopers & Lybrand, L.L.P., independent public
accountants, containing the information and statements of the type ordinarily
included in accountants' "comfort letters" to the Initial Purchasers with
respect to the financial statements and certain financial information contained
in the Offering Memorandum.
(h) The Senior Notes shall have been approved by the NASD for trading and
duly listed in PORTAL and by DTC for book entry trading.
(i) The Initial Purchasers shall have received a counterpart, conformed as
executed, of the Indenture which shall have been entered into by the Company,
the Guarantors and the Trustee.
(j) The Company and the Guarantors shall have executed the Registration
Rights Agreement and the Initial Purchasers shall have received an original copy
thereof, duly executed by the Company and the Guarantors.
(k) Neither the Company nor the Guarantors shall have failed at or prior
to the Closing Date to perform or comply with any of the agreements herein
contained and required to be performed or complied with by the Company or the
Guarantors, as the case may be, at or prior to the Closing Date.
(l) All conditions to the consummation of the Recapitalization
Transactions shall have been satisfied (or, with the consent of the Initial
Purchasers in connection with any condition to the Company's obligation to close
the Recapitalization Transactions, waived) and the Recapitalization Transactions
shall be prepared, in the reasonable judgment of the Initial Purchasers and
their counsel, to close on substantially the terms described in the Offering
Memorandum immediately after the issue and sale of the Senior Notes pursuant to
this Agreement.
(m) The Credit Documents shall have been executed and delivered and shall
be effective, on substantially the terms set forth in the Offering Memorandum.
(n) The members of Senior Management (as defined in the Offering
Memorandum) shall have entered into their respective employment agreements on
substantially the terms specified in the Offering Memorandum.
(o) The Initial Purchasers shall have received a report, addressed to
them, from Houlihan, Lokey with respect to the solvency of the Company after
giving effect to
25
<PAGE>
the Recapitalization Transactions and the issuance of the Senior Notes, and such
report shall be satisfactory in form and substance to the Initial Purchasers and
their counsel.
(p) The Initial Purchasers shall have received (i) a copy of the amendment
to the Certificate of Incorporation of the Company, to be filed with the
Delaware Secretary of State on the Issue Date, setting forth the maturity date
for the Company's outstanding preferred stock, as December 31, 2007, and
eliminating any requirement for payment of any dividends prior to such date and
(ii) a copy of an agreement of the Principals for the benefit of the Trustee
amending the terms of the preferred stock units to correspond to the terms of
the preferred stock as aforesaid, each, as described in the Offering Memorandum.
10. Effectiveness of Agreement and Termination. This Agreement shall become
effective upon the execution and delivery of this Agreement by the parties
hereto.
This Agreement may be terminated at any time on or prior to the
Closing Date by the Initial Purchasers by written notice to the Company from
BancAmerica Robertson Stephens if any of the following has occurred: (i) any
outbreak or escalation of hostilities or other national or international
calamity or crisis or change in economic conditions or in the financial markets
of the United States or elsewhere that, in the judgment of BancAmerica Robertson
Stephens, is material and adverse and, in the judgment of BancAmerica Robertson
Stephens, makes it impracticable to market the Senior Notes on the terms and in
the manner contemplated in the Offering Memorandum, (ii) the suspension or
material limitation of trading in securities or other instruments on the New
York Stock Exchange, the American Stock Exchange, the Chicago Board of Options
Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade or the
NASDAQ National Market or limitation on prices for securities or other
instruments on any such exchange or the NASDAQ National Market, (iii) the
suspension of trading of any securities of the Company or any Guarantor on any
exchange or in the over-the-counter market, (iv) the enactment, publication,
decree or other promulgation of any federal or state statute, regulation, rule
or order of any court or other governmental authority which in the opinion of
BancAmerica Robertson Stephens materially and adversely affects, or will
materially and adversely affect, the business, prospects, financial condition or
results of operations of the Company and its subsidiaries, taken as a whole, (v)
the declaration of a banking moratorium by either federal or New York State
authorities or (vi) the taking of any action by any federal, state or local
government or agency in respect of its monetary or fiscal affairs which in the
opinion of BancAmerica Robertson Stephens has a material adverse effect on the
financial markets in the United States.
11. Miscellaneous. Notices given pursuant to any provision of this
Agreement shall be addressed as follows: (i) if to the Company or any Guarantor,
to Elgin National Industries, Inc., 2001 Butterfield Road, Suite 1020, Downers
Grove, Illinois 60515-1050, (630) 434-7243 and (ii) if to the Initial
Purchasers, c/o BancAmerica Robertson Stephens, 231 South LaSalle Street, 17th
Floor, Chicago, Illinois 60697, or in any case to such other address as the
person to be notified may have requested in writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company, the Guarantors and the Initial
Purchasers set forth in or made pursuant to this Agreement shall remain
operative and in full force and effect, and will
26
<PAGE>
survive, regardless of (i) any investigation, or statement as to the results
thereof, made by or on behalf of the Initial Purchaser, the officers or
directors of the Initial Purchasers, any person controlling the Initial
Purchasers, the Company, any Guarantor, the officers or directors of the Company
or any Guarantor, or any person controlling the Company or any Guarantor, (ii)
acceptance of the Senior Notes and payment for them hereunder and (iii)
termination of this Agreement.
If for any reason the Senior Notes are not delivered by or on behalf
of the Company as provided herein (other than as a result of any termination of
this Agreement pursuant to Section 10), the Company and each Guarantor, jointly
and severally, agree to reimburse the Initial Purchasers for all out-of-pocket
expenses (including the reasonable fees and disbursements of counsel) incurred
by them, subject to the fee limitations set forth in that certain letter
agreement between BankAmerica Robertson Stephens and the Company dated October
15, 1997. Notwithstanding any termination of this Agreement, the Company shall
be liable for all expenses which it has agreed to pay pursuant to Section 5(i)
hereof. The Company and each Guarantor also agree, jointly and severally, to
reimburse each of Initial Purchasers and its officers, directors and each
person, if any, who controls such Initial Purchasers within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act for any and all
reasonable fees and expenses (including without limitation the fees and expenses
of counsel) incurred by them in connection with enforcing their rights under
this Agreement (including without limitation its rights under Section 8).
Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon the Company, the Guarantors,
the Initial Purchasers, the Initial Purchasers' directors and officers, any
controlling persons referred to herein, the directors of the Company and the
Guarantors 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 Senior Notes from the Initial Purchasers
merely because of such purchase.
This Agreement shall be governed and construed in accordance with the
laws of the State of New York.
This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument.
27
<PAGE>
Please confirm that the foregoing correctly sets forth the purchase
agreement among the Company, the Guarantors and the Initial Purchasers.
Very truly yours,
ELGIN NATIONAL INDUSTRIES, INC.
By: /s/ Fred C. Schulte
------------------------------
Name: Fred C. Schulte
Title: Chairman and CEO
ENI HOLDING CORP.
By: /s/ Fred C. Schulte
------------------------------
Name: Fred C. Schulte
Title: Chairman, President and CEO
TABOR MACHINE COMPANY
By: /s/ Fred C. Schulte
------------------------------
Name: Fred C. Schulte
Title: Senior Vice President
NORRIS SCREEN AND
MANUFACTURING, INC.
By: /s/ Fred C. Schulte
------------------------------
Name: Fred C. Schulte
Title: Senior Vice President
<PAGE>
TRANSERVICE INC.
By: /s/ Fred C. Schulte
------------------------------
Name: Fred C. Schulte
Title: Senior Vice President
CENTRIFUGAL SERVICES, INC.
By: /s/ Fred C. Schulte
------------------------------
Name: Fred C. Schulte
Title: Chairman, President and CEO
MINING CONTROLS, INC.
By: /s/ Fred C. Schulte
------------------------------
Name: Fred C. Schulte
Title: Senior Vice President
CLINCH RIVER CORPORATION
By: /s/ Fred C. Schulte
------------------------------
Name: Fred C. Schulte
Title: Senior Vice President
ROBERTS & SCHAEFER COMPANY
By: /s/ Fred C. Schulte
------------------------------
Name: Fred C. Schulte
Title: Chairman and CEO
2
<PAGE>
SOROS ASSOCIATES, INC.
By: /s/ Fred C. Schulte
------------------------------
Name: Fred C. Schulte
Title: President
BANCAMERICA ROBERTSON STEPHENS
By: /s/ Thomas J. McGrath
-----------------------------
Name: Thomas J. McGrath
Title: Managing Director
CIBC WOOD GUNDY SECURITIES CORP.
By: /s/ Edward Levy
-----------------------------
Name: Edward Levy
Title: Managing Director
3
<PAGE>
SCHEDULE A
Guarantors State of Incorporation
---------- ----------------------
Tabor Machine Company West Virginia
Norris Screen and Manufacturing, Inc. West Virginia
TranService Inc. Delaware
Centrifugal Services, Inc. Illinois
Mining Controls, Inc. Delaware
Clinch River Corporation Virginia
Roberts & Schaefer Company Delaware
Soros Associates, Inc. Delaware
S-1
<PAGE>
SCHEDULE B
<TABLE>
<CAPTION>
Initial Purchasers Principal Amount
------------------ of Notes
----------------
<S> <C>
BancAmerica Robertson Stephens................................... $59,500,000
CIBC Wood Gundy Securities Corp.................................. $25,500,000
-----------
Total......................................................... $85,000,000
===========
</TABLE>
S-2
<PAGE>
SCHEDULE C
SUBSIDIARIES OF ENI HOLDING CORPORATION
Elgin National Industries, Inc. Delaware
GUARANTORS
Tabor Machine Company West Virginia
Norris Screen and Manufacturing, Inc. West Virginia
TranService Inc. Delaware
Centrifugal Services, Inc. Illinois
Mining Controls, Inc. Delaware
Clinch River Corporation Virginia
Roberts & Schaefer Company Delaware
Soros Associates, Inc. Delaware
OTHER SUBSIDIARIES
Cabell Construction Company (inactive) Delaware
Centrifugal and Mechanical Industries Inc.(inactive) Delaware
Chandler Products, Inc. (inactive) Delaware
ENI International, Inc. Barbados
Ohio Rod Products Company (inactive) Delaware
Roberts & Schaefer Australia Pty Ltd Australia
Roberts & Schaefer Company, Ltd. (inactive) Canada
Roberts & Schaefer Engineering Private Ltd. India Offshore company
Roberts & Schaefer (Mauritius) Private Limited Mauritius company
Thompson-Starrett Construction Company, Inc.(inactive) New York
A-1
<PAGE>
EXHIBIT 4.1
$85,000,000
ELGIN NATIONAL INDUSTRIES, INC.
As Issuer
The Parties Listed on Schedule G hereto
As Guarantors
Series A and Series B
11% Senior Notes due 2007
______________________________
INDENTURE
Dated as of November 5, 1997
______________________________
Norwest Bank Minnesota, National Association
As Trustee
<PAGE>
CROSS-REFERENCE TABLE
(a) Trust Indenture
Act Section Indenture Section
310 (a)(1)......................................................7.10
(a)(2)..........................................................7.10
(a)(3)..........................................................N.A.
(a)(4)..............................................................N.A.
(a)(5)..............................................................7.10
(i)(b)..............................................................7.10
(ii)(c).............................................................N.A.
311(a)..............................................................7.11
(b).................................................................7.11
(iii(c).............................................................N.A.
312 (a).............................................................2.05
(b).................................................................11.03
(iv)(c).............................................................11.03
313(a)..............................................................7.06
(b)(1)..............................................................10.03
(b)(2)..............................................................7.07
(v)(c)..............................................................7.06;
11.02
(vi)(d).............................................................7.06
314(a)..............................................................4.03;
11.02
(A)(b)..............................................................10.02
(c)(1)..............................................................11.04
(c)(2)..............................................................11.04
(c)(3)..............................................................N.A.
(d).................................................................10.03,
10.04, 10.05
(vii)(e)............................................................11.05
(f).................................................................NA
315 (a).............................................................7.01
(b).................................................................7.05,
11.02
(B)(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)(c)..............................................................2.12
317 (a)(1)..........................................................6.08
<PAGE>
(a)(2)..........................................................6.09
(b).............................................................2.04
318 (a).........................................................11.01
(b).............................................................N.A.
(c).............................................................11.01
N.A. means not applicable.
2
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE...................... 1
Section 1.01. Definitions................................................. 1
Section 1.02. Other Definitions........................................... 16
Section 1.03. ............................................................ 17
Section 1.04. Rules of Construction....................................... 17
ARTICLE 2. THE NOTES....................................................... 18
Section 2.01. Form and Dating............................................. 18
Section 2.02. Execution and Authentication................................ 19
Section 2.03. Registrar and Paying Agent.................................. 19
Section 2.04. Paying Agent to Hold Money in Trust......................... 20
Section 2.05. Holder Lists................................................ 20
Section 2.06. Transfer and Exchange....................................... 20
Section 2.07. Replacement Notes........................................... 32
Section 2.08. Outstanding Notes........................................... 32
Section 2.09. Treasury Notes.............................................. 33
Section 2.10. Temporary Notes............................................. 33
Section 2.11. Cancellation................................................ 33
Section 2.12. Defaulted Interest.......................................... 33
ARTICLE 3. REDEMPTION AND PREPAYMENT....................................... 34
Section 3.01. Notices to Trustee.......................................... 34
Section 3.02. Selection of Notes to Be Redeemed........................... 34
Section 3.03. Notice of Redemption........................................ 34
Section 3.04. Effect of Notice of Redemption.............................. 35
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Section 3.05. Deposit of Redemption Price................................. 35
Section 3.06. Notes Redeemed in Part...................................... 35
Section 3.07. Optional Redemption......................................... 35
Section 3.08. Mandatory Redemption........................................ 36
Section 3.09. Offer to Purchase by Application of Excess Proceeds......... 36
ARTICLE 4. COVENANTS....................................................... 38
Section 4.01. Payment of Notes............................................ 38
Section 4.02. Maintenance of Office or Agency............................. 38
Section 4.03. Reports..................................................... 39
Section 4.04. Compliance Certificate...................................... 39
Section 4.05. Taxes....................................................... 40
Section 4.06. Stay, Extension and Usury Laws.............................. 40
Section 4.07. Restricted Payments......................................... 40
Section 4.08. Dividend and Other Payment Restrictions Affecting
Subsidiaries................................................ 42
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock.. 43
Section 4.10. Asset Sales................................................. 46
Section 4.11. Transactions with Affiliates................................ 46
Section 4.12. Liens....................................................... 47
Section 4.13. Business Activities......................................... 47
Section 4.14. Corporate Existence......................................... 47
Section 4.15. Offer to Repurchase Upon Change of Control.................. 48
Section 4.16. Sale and Leaseback Transactions............................. 48
Section 4.17. Limitation on Issuances of Guarantees of Indebtedness....... 48
Section 4.18. Payments for Consent........................................ 49
ARTICLE 5. SUCCESSORS...................................................... 49
Section 5.01. Merger, Consolidation, or Sale of Assets.................... 49
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
Section 5.02. Successor Corporation Substituted........................... 49
ARTICLE 6. DEFAULTS AND REMEDIES........................................... 50
Section 6.01. Events of Default........................................... 50
Section 6.02. Acceleration................................................ 51
Section 6.03. Other Remedies.............................................. 52
Section 6.04. Waiver of Past Defaults..................................... 52
Section 6.05. Control by Majority......................................... 53
Section 6.06. Limitation on Suits......................................... 53
Section 6.07. Rights of Holders of Notes to Receive Payment............... 53
Section 6.08. Collection Suit by Trustee.................................. 53
Section 6.09. Trustee May File Proofs of Claim............................ 54
Section 6.10. Priorities.................................................. 54
Section 6.11. Undertaking for Costs....................................... 54
ARTICLE 7. TRUSTEE......................................................... 55
Section 7.01. Duties of Trustee........................................... 55
Section 7.02. Rights of Trustee........................................... 56
Section 7.03. Individual Rights of Trustee................................ 56
Section 7.04. Trustee's Disclaimer........................................ 56
Section 7.05. Notice of Defaults.......................................... 56
Section 7.06. Reports by Trustee to Holders of the Notes.................. 57
Section 7.07. Compensation and Indemnity.................................. 57
Section 7.08. Replacement of Trustee...................................... 58
Section 7.09. Successor Trustee by Merger, etc. .......................... 59
Section 7.10. Eligibility; Disqualification............................... 59
Section 7.11. Preferential Collection of Claims Against Company........... 59
ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE........................ 59
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance.... 59
Section 8.02. Legal Defeasance and Discharge.............................. 59
Section 8.03. Covenant Defeasance......................................... 60
Section 8.04. Conditions to Legal or Covenant Defeasance.................. 60
Section 8.05. Deposited Money and Government Securities to be Held
in Trust; Other Miscellaneous Provisions.................... 61
Section 8.06. Repayment to Company........................................ 62
Section 8.07. Reinstatement............................................... 62
ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER................................ 62
Section 9.01. Without Consent of Holders of Notes......................... 62
Section 9.02. With Consent of Holders of Notes............................ 63
Section 9.03. Compliance with Trust Indenture Act......................... 64
Section 9.04. Revocation and Effect of Consents........................... 65
Section 9.05. Notation on or Exchange of Notes............................ 65
Section 9.06. Trustee to Sign Amendments, etc. ........................... 65
ARTICLE 10. SUBSIDIARY GUARANTEES.......................................... 65
Section 10.01. Guarantee.................................................. 65
Section 10.02. Limitation on Guarantor Liability.......................... 66
Section 10.03. Execution and Delivery of Subsidiary Guarantee............. 66
Section 10.04. Guarantors May Consolidate, etc., on Certain Terms......... 67
Section 10.05. Releases Following Sale of Assets.......................... 68
ARTICLE 11. MISCELLANEOUS.................................................. 68
Section 11.01. Trust Indenture Act Controls.............................. 68
Section 11.02. Notices.................................................... 68
Section 11.03. Communication by Holders of Notes with Other Holders
of Notes................................................... 69
Section 11.04. Certificate and Opinion as to Conditions Precedent......... 69
</TABLE>
iv
<PAGE>
<TABLE>
<S> <C>
Section 11.05. Statements Required in Certificate or Opinion.............. 70
Section 11.06. Rules by Trustee and Agents................................ 70
Section 11.07. No Personal Liability of Directors, Officers, Employees
and Stockholders........................................... 70
Section 11.08. Governing Law.............................................. 71
Section 11.09. No Adverse Interpretation of Other Agreements.............. 71
Section 11.10. Successors................................................. 71
Section 11.11. Severability............................................... 71
Section 11.12. Counterpart Originals...................................... 71
Section 11.13. Table of Contents, Headings, etc. ......................... 71
</TABLE>
EXHIBITS
Exhibit A FORMS OF NOTE
Exhibit B FORM OF CERTIFICATE OF TRANSFER
Exhibit C FORM OF CERTIFICATE OF EXCHANGE
Exhibit D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Exhibit E FORM OF SUBSIDIARY GUARANTEE
Exhibit F FORM OF SUPPLEMENTAL INDENTURE
Exhibit G LIST OF GUARANTORS
v
<PAGE>
INDENTURE dated as of November 5, 1997 between Elgin National
Industries, Inc. ("Elgin" or the "Company"), a Delaware corporation, and Norwest
Bank Minnesota, National Association, as trustee (the "Trustee") and the
Guarantors listed on Exhibit G hereto.
The Company and the Trustee agree as follows for the benefit of each
other and for the equal and ratable benefit of the Holders of the Series A 11%
Senior Notes due 2007 (the "Series A Notes) and the 11% Series B Senior Notes
due 2007 (the "Series B Notes" and, together with the Series A Notes, the
"Notes"):
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions.
"144A Global Note" means a global note in the form of Exhibit A-1
hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of, and registered in the name of, the Depositary or
its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Notes sold in reliance on Rule 144A.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Restricted 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
Restricted 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.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer or
exchange of or for beneficial interests in any Global Note, the rules and
procedures of the Depositary, Euroclear and Cedel that apply to such transfer or
exchange.
"Asset Sale" means (i) the sale, lease, conveyance or other
disposition 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 (provided that the sale, lease, conveyance or other disposition of all
or substantially all of the assets of the Company and its Restricted
Subsidiaries taken as a whole will be governed by the provisions of Section 4.15
hereof and/or the provisions of Section 5.01 hereof and not by the provisions of
the Asset Sale covenant), and (ii) the issue or sale by the Company or any of
its Restricted Subsidiaries of Equity Interests in any of the Company's
Restricted Subsidiaries, in the case of
<PAGE>
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 Restricted
Subsidiary or by a Wholly Owned Restricted Subsidiary to the Company or to
another Wholly Owned Restricted Subsidiary, (ii) an issuance of Equity Interests
by a Wholly Owned Restricted Subsidiary to the Company or to another Wholly
Owned Restricted Subsidiary and (iii) a Restricted Payment that is permitted by
Section 4.07 hereof 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).
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or
state law for the relief of debtors.
"Board of Directors" means the Board of Directors of the Company, or
any authorized committee of the Board of Directors.
"Borrowing Base" means, as of any date, an amount equal to the sum of
(a) 85% of the face amount of all accounts receivable owned by the Company and
its Restricted Subsidiaries as of such date that are not more than 90 days past
due, and (b) 65% of the book value of all inventory owned by the Company and its
Restricted Subsidiaries as of such date, 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.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital lease
that would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership or limited
liability company, partnership or membership interests (whether general or
limited) and (iv) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person. Capital Stock shall include outstanding preferred
stock units, as described in Note 12 to the Consolidated Financial Statements
for ENI Holding Corp. and Subsidiary Companies for the year ended December 31,
1996.
"Cash Equivalents" means (i) United States dollars, (ii) the local
currency of any jurisdiction in which any Subsidiary organized in a jurisdiction
other than the United States or any political subdivision thereof conducts
business, (iii) 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, (iv)
certificates of deposit and eurodollar time deposits with maturities of six
months or less from the date of acquisition, bankers' acceptances with
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maturities not exceeding six months and overnight bank deposits, in each case
with any lender party to the Senior Credit Facility or with any domestic
commercial bank having capital and surplus in excess of $500 million and a Keefe
Bank Watch Rating of "B" or better, (v) repurchase obligations with a term of
not more than seven days for underlying securities of the types described in
clauses (iii) and (iv) above entered into with any financial institution meeting
the qualifications specified in clause (iv) above, (vi) 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 and (vii) money market funds at least 95% of the assets of which, at
the time of investment, are comprised of assets specified in clauses (i) through
(vi).
"Cedel" means Cedel Bank, SA.
"Change of Control" means the occurrence of any of the following: (i)
the sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Subsidiaries taken as a
whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange
Act) other than the Principals or their Related Parties (as defined below), (ii)
the adoption of a plan relating to the liquidation or dissolution of the
Company, (iii) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
"person" (as defined above), other than the Principals and their Related
Parties, becomes the "beneficial owner" (as such term is defined in Rule 13d-3
and Rule 13d-5 under the Exchange Act, except that a person shall be deemed to
have "beneficial ownership" of all securities that such person has the right to
acquire, whether such right is currently exercisable or is exercisable only upon
the occurrence of a subsequent condition), directly or indirectly, of more than
50% of the Voting Stock of the Company (measured by voting power rather than
number of shares), (iv) the first day on which a majority of the members of the
Board of Directors of the Company are not Continuing Directors or (v) the
Company consolidates with, or merges with or into, any Person or sells, assigns,
conveys, transfers, leases or otherwise disposes of all or substantially all of
its assets to any Person, or any Person consolidates with, or merges with or
into, the Company, in any such event pursuant to a transaction in which any of
the outstanding Voting Stock of the Company is converted into or exchanged for
cash, securities or other property, other than any such transaction where the
Voting Stock of the Company outstanding immediately prior to such transaction is
converted into or exchanged for Voting Stock (other than Disqualified Stock) of
the surviving or transferee Person constituting a majority of the outstanding
shares of such Voting Stock of such surviving or transferee Person (immediately
after giving effect to such issuance). Notwithstanding the foregoing,
consummation of the Recapitalization Transactions on the Issue Date shall not
constitute a Change of Control.
"Clawback Payment" means any payment required to be made to the former
shareholders of the Company, within the first 18 months after consummation of
the Recapitalization Transactions, out of the proceeds of any Asset Sale
pursuant to the Repurchase Agreement as in effect on the Issue Date, or as
amended in any manner that does not adversely affect the holders of the Notes.
"Company" means Elgin National Industries, Inc., and any and all
successors thereto.
"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
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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,
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, but excluding amortization of debt
issuance costs and excluding letter of credit fees accounted for as a cost of
sales in accordance with GAAP), 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, minus (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
(other than in the case of the Company and its Subsidiaries, Unrestricted
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 (other
than in the case of the Company and its Subsidiaries, Unrestricted
Subsidiaries), (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, (iv) the
cumulative effect of a change in accounting principles shall be excluded, (v)
the Consolidated Net Income of the Company and its Subsidiaries shall include
(without duplication) the Net Income of any Unrestricted Subsidiary if, and only
to the extent that, such Net Income has been distributed in cash to the Company
or any of its Restricted Subsidiaries, and (vi) the Consolidated Net Income of
the Company shall exclude any interest paid or received by the Company or any
Subsidiary of the Company with respect to Notes owned by the Company or such
Subsidiary, if any.
"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
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Subsidiaries (except, in each case, Permitted Investments), and (z) all
unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the date of the Indenture or (ii) was nominated for
election or elected to such Board of Directors with the approval of a majority
of the Continuing Directors who were members of such Board at the time of such
nomination or election.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 11.02 hereof or such other address as to which the
Trustee may give notice to the Company.
"Credit Facilities" means, with respect to the Company or any
Subsidiary, one or more debt facilities (including, without limitation, the
Senior Credit Facility) or commercial paper facilities with banks or other
institutional lenders providing for revolving credit loans, term loans,
receivables financing (including through the sale of receivables to such lenders
or to special purpose entities formed to borrow from such lenders against such
receivables) or letters of credit, in each case, as amended, restated, modified,
renewed, refunded, replaced or refinanced in whole or in part from time to time.
Indebtedness under Credit Facilities outstanding on the date on which the Notes
are first issued and authenticated under the Indenture shall be deemed to have
been incurred on such date in reliance on the exception provided by clause (a)
of Section 4.09 hereof.
"Custodian" means the Trustee, as custodian with respect to the Notes
in global form, or any successor entity thereto.
"Damages Payment Date" means each Interest Payment Date (as defined in
the Notes) on which Liquidated Damages are accrued and unpaid.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Definitive Note" means a certificated Note registered in the name of
the Holder thereof and issued in accordance with Section 2.06 hereof, in the
form of Exhibit A-1 hereto except that such Note shall not bear the Global Note
Legend and shall not have the "Schedule of Exchanges of Interests in the Global
Note" attached thereto.
"Depositary" means, with respect to the Notes issuable or issued in
whole or in part in global form, the Person specified in Section 2.03 hereof as
the Depositary with respect to the Notes, and any and all successors thereto
appointed as depositary hereunder and having become such pursuant to the
applicable provision of this Indenture.
"Disqualified Stock" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the Holder thereof, in whole or in part, on or prior to the date
that is 91 days after the date on which the Notes mature.
"ENI" means ENI Holding Corp., a Delaware corporation.
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"ENI Merger" means a merger of the Company into ENI occurring
immediately after consummation of the transactions contemplated by the
Repurchase Agreement, with ENI being the surviving entity.
"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 prior to any conversion or
exchange thereof).
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Notes" means the Notes issued in the Exchange Offer pursuant
to Section 2.06(f) hereof.
"Exchange Offer" has the meaning set forth in the Registration Rights
Agreement. Include in all offerings except public and "private private"
offerings.
"Exchange Offer Registration Statement" has the meaning set forth in
the Registration Rights Agreement.
"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the Senior Credit Facility) in
existence on the date of the Indenture, until such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any period, the
sum, without duplication, of (i) the consolidated interest expense of such
Person and its Subsidiaries for such period, whether paid or accrued (including,
without limitation, 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, but excluding
amortization of debt issuance costs and excluding letter of credit fees
accounted for as a cost of sales in accordance with GAAP) 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 Charges shall exclude interest paid to the
Company or any Subsidiary of the Company with respect to Notes owned by the
Company or such Restricted Subsidiary, if any.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
Company or any of its Restricted Subsidiaries incurs, assumes,
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Guarantees or redeems any Indebtedness (other than revolving credit borrowings)
or issues preferred stock subsequent to the commencement of the period for which
the Fixed Charge Coverage Ratio is being calculated but prior to the date on
which the event for which the calculation of the Fixed Charge Coverage Ratio is
made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect to such incurrence, assumption, Guarantee or
redemption of Indebtedness, or such issuance or redemption of preferred stock,
as if the same had occurred at the beginning of the applicable four-quarter
reference period. In addition, for purposes of making the computation referred
to above, (i) acquisitions that have been made by the Company or any of its
Restricted Subsidiaries, including through mergers or consolidations and
including any related financing transactions, during the four-quarter reference
period or subsequent to such reference period and on or prior to the Calculation
Date shall be 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 Subsidiary" means any Restricted Subsidiary not organized or
validly existing under the laws of the United States or any state thereof or the
District of Columbia.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect from time to time.
"Global Notes" means, individually and collectively, each of the
Restricted Global Notes and the Unrestricted Global Notes, in the form of
Exhibit A-1 hereto issued in accordance with Sections 2.01 and 2.06 hereof.
"Global Note Legend" means the legend set forth in Section
2.06(g)(ii), which is required to be placed on all Global Notes issued under
this Indenture.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America, and the payment for which the
United States pledges its full faith and credit.
"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.
"Guarantors" means each of (i) Tabor Machine Company, Norris Screen
and Manufacturing, Inc., TranService, Inc., Centrifugal Services, Inc., Mining
Controls, Inc., Clinch River Corporation, Roberts & Schaefer Company and Soros
Associates, Inc. and (ii) any other Person that executes a Subsidiary Guarantee
in accordance with the provisions of the Indenture, and their respective
successors and assigns.
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"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates.
"Holder" means a Person in whose name a Note is registered.
"IAI Global Note" means the global Note in the form of Exhibit A-1
hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of and registered in the name of the Depositary or
its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Notes sold to Institutional Accredited Investors.
"Indebtedness" means, with respect to any Person, any indebtedness of
such Person, 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. Any amount of the Notes owned by the Company or any of its
Restricted Subsidiaries shall not be outstanding Indebtedness for purposes of
the Indenture.
"Indenture" means this Indenture, as amended or supplemented from time
to time.
"Indirect Participant" means a Person who holds a beneficial interest
in a Global Note through a Participant.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act, who are not also QIBs.
"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including Guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Restricted Subsidiary of the Company sells or otherwise
disposes of any Equity Interests of any direct or indirect Subsidiary of the
Company such that, after giving effect to any such sale or disposition, such
Person is no longer a Restricted Subsidiary of the Company, the Company shall be
deemed to have made an Investment on the date of any such sale or disposition
equal to the fair market value of the Equity Interests of such Subsidiary not
sold or disposed of in an amount determined as provided in the final paragraph
of Section 4.07 hereof.
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"Issue Date" means November 5, 1997.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York 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 may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue on
such payment for the intervening period.
"Letter of Transmittal" means the letter of transmittal to be prepared
by the Company and sent to all Holders of the Notes for use by such Holders in
connection with the Exchange Offer.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Liquidated Damages" means all liquidated damages then owing pursuant
to Section 5 of the Registration Rights Agreement.
"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 or Cash Equivalents
received by the Company or any of its Restricted Subsidiaries in respect of any
Asset Sale (including, without limitation, any cash received upon the sale or
other disposition of any non-cash consideration received in any Asset Sale), net
of the direct costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), amounts required to be applied to
the repayment of Indebtedness secured by a Lien on the assets that were the
subject of such Asset Sale, any reserve for adjustment in respect of the sale
price of such asset or assets established in accordance with GAAP, and net of
any required Clawback Payment.
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the
Company nor any of its Restricted Subsidiaries (a) provides credit support of
any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor
or otherwise), or (c) constitutes the lender, and (ii) no default with respect
to which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness
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(other than the Senior Credit Facility) of the Company or any of its Restricted
Subsidiaries to declare a default on such other Indebtedness or cause the
payment thereof to be accelerated or payable prior to its stated maturity; and
(iii) as to which the lenders have been notified in writing that they will not
have any recourse to the stock or assets of the Company or any of its Restricted
Subsidiaries.
"Notes" has the meaning assigned to it in the preamble to this
Indenture.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering" means the offering of the Notes by the Company.
"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 11.05 hereof.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Section
11.05 hereof. The counsel may be an employee of or counsel to the Company, any
Subsidiary of the Company or the Trustee.
"Participant" means, with respect to the Depositary, Euroclear or
Cedel, a Person who has an account with the Depositary, Euroclear or Cedel,
respectively (and, with respect to The Depository Trust Company, shall include
Euroclear and Cedel).
"Participating Broker-Dealer" has the meaning set forth in the
Registration Rights Agreement.
"Permitted Business" means any business (i) conducted by the Company
or any of its Subsidiaries on the date of the Indenture, (ii) primarily
comprised of manufacturing equipment, durable goods and/or components thereof,
including related repairs and services, or (iii) primarily comprised of
engineering services, or (iv) any business reasonably related to any of the
foregoing.
"Permitted Investments" means (a) any Investment in the Company or in
a Wholly Owned Restricted Subsidiary of the Company that is a Guarantor; (b) any
Investment in Cash Equivalents or purchases by the Company or any of its
Restricted Subsidiaries of any of the Notes; (c) any Investment by the Company
or any Restricted Subsidiary of the Company in a Person, if as a result of such
Investment (i) such Person becomes a Wholly Owned Restricted Subsidiary of the
Company and a 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 Restricted Subsidiary of the Company that is a Guarantor and
that is engaged in a Permitted Business; (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) Investments in (i) Restricted
Subsidiaries that are not
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Guarantors, (ii) Unrestricted Subsidiaries (other than such Investments deemed
to be made by reason of the designation of a Restricted Subsidiary as an
Unrestricted Subsidiary), (iii) Foreign Subsidiaries and (iv) Permitted Joint
Ventures having an aggregate fair market value (measured on the date each such
Investment was made and without giving effect to subsequent changes in value),
when taken together with all other Investments made pursuant to this clause (f)
that are at the time outstanding, not to exceed $10.0 million; (g) other
Investments in any Person having an aggregate fair market value (measured on the
date each such Investment was made and without giving effect to subsequent
changes in value), when taken together with all other Investments made pursuant
to this clause (g) that are at the time outstanding, not to exceed $1.5 million
and (h) full recourse loans to the Principals, in an aggregate principal amount
outstanding not to exceed $1.6 million, reduced by principal payments made
thereon.
"Permitted Joint Venture" means any joint venture, partnership or other
Person designated by the Board of Directors, and until designation by the Board
of Directors to the contrary, (i) at least 30% of whose Capital Stock with
voting power under ordinary circumstances to elect directors (or Persons having
similar or corresponding powers and responsibilities) is at the time owned
(beneficially or directly) by the Company and/or by one or more Restricted
Subsidiaries of the Company, (ii) all of whose Indebtedness is Non-Recourse
Indebtedness, and (iii) which is engaged in a Permitted Business. Any such
designation or designation to the contrary shall be evidenced to the Trustee by
promptly filing with the Trustee a copy of the resolution giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing provisions.
"Permitted Liens" means (i) Liens securing Obligations of the Company or
any Restricted Subsidiary under the Senior Credit Facility and Liens on accounts
receivable and inventory securing Obligations of the Company or any Restricted
Subsidiary under any other Credit Facility; (ii) Liens on the assets of the
Company or any of the Guarantors to secure Hedging Obligations with respect to
Indebtedness under any Credit Facility permitted by the Indenture to be
incurred; (iii) Liens on property of a Person existing at the time such Person
is merged into or consolidated with the Company or any Restricted Subsidiary of
the Company; provided that such Liens were 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;
(iv) Liens on property existing at the time of acquisition thereof by the
Company or any Restricted Subsidiary of the Company, provided that such Liens
were in existence prior to the contemplation of such acquisition; (v) Liens
existing on the date of the Indenture; (vi) Liens to secure any Permitted
Refinancing Indebtedness incurred to refinance any Indebtedness secured by any
Lien referred to in the foregoing clauses (i) through (v), as the case may be,
provided that the assets securing such Lien shall be the same assets that, or
fewer assets that, secured the Indebtedness refinanced; (vii) Liens to secure
the performance of statutory obligations, surety or appeal bonds, payment or
performance bonds, deposits to secure the performance of bids, trade contracts,
government contracts, leases or licenses or other obligations of a like nature
incurred in the ordinary course of business; (viii) Liens to secure Indebtedness
(including Capital Lease Obligations) permitted by clause (d) of the second
paragraph of Section 4.09 covering only the assets acquired with such
Indebtedness; (ix) Liens in favor of the Company or any Restricted Subsidiary
that is a Guarantor; (x) 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; (xi) Liens incurred in the
ordinary course of business of the Company or any Restricted Subsidiary of the
Company with respect to obligations that do not exceed $5.0 million in the
aggregate 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
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<PAGE>
impair the use thereof in the operation of business by the Company or such
Restricted Subsidiary; (xii) Liens on assets of Unrestricted Subsidiaries that
secure Non-Recourse Debt of Unrestricted Subsidiaries; (xiii) carriers',
warehousemen's, mechanics', landlords' materialmen's, repairmen's or other like
Liens arising in the ordinary course of business in respect of obligations not
overdue for a period in excess of 60 days or which are being contested in good
faith by appropriate proceedings promptly instituted and diligently prosecuted;
provided that any reserve or other appropriate provision as shall be required to
conform with GAAP shall have been made therefor; (xiv) easements, rights-of-way,
zoning and similar restrictions and other similar encumbrances or title defects
incurred, or leases or subleases granted to others, in the ordinary course of
business, which do not in any case materially detract from the value of the
property subject thereto or do not interfere with or adversely affect in any
material respect the ordinary conduct of business of the Company and its
Restricted Subsidiaries taken as a whole; (xv) Liens in favor of customs and
revenue authorities to secure payment of customs duties in connection with the
importation of goods in the ordinary course of business and other similar Liens
arising in the ordinary course of business; (xvi) leases or subleases granted to
third Persons not interfering with the ordinary course of business of the
Company or any of its Restricted Subsidiaries; (xvii) Liens (other than any Lien
imposed by ERISA or any rule or regulation promulgated thereunder) incurred or
deposits made in the ordinary course of business in connection with workers'
compensation, unemployment insurance, and other types of social security;
(xviii) deposits, in an aggregate amount not to exceed $2.0 million, made in the
ordinary course of business to secure liability to insurance carriers; (xix)
Liens for purchase money obligations (including refinancings thereof) permitted
under Section 4.09 hereof; provided that (A) the Indebtedness secured by such
Lien is permitted under Section 4.09 hereof and (B) any such Lien encumbers only
the assets so purchased; (xx) any attachment or judgment Lien not constituting
an Event of Default under Section 6.01 hereof; (xxi) any interest or title of a
lessor or sublessor under any operating lease; (xxii) Liens under licensing
agreements for use of the Company's or any Restricted Subsidiaries' intellectual
property entered into in the ordinary course of business; (xxiii) Liens securing
industrial revenue bonds; (xxiv) Liens in favor of the Trustee under the
Indenture; (xxv) Liens securing reimbursement obligations with respect to
letters of credit which encumber documents and other property relating to such
letters of credit and the products and proceeds thereof; (xxvi) Liens arising
out of consignment or similar arrangements for the sale of goods entered into by
the Company or any Restricted Subsidiary in the ordinary course of business in
accordance with past practices; (xxvii) any interest or title of a lessor in the
property subject to any lease, whether characterized as capitalized or
operating, other than any such interest or title resulting from or arising out
of a default by the Company or any Subsidiary of its obligations under such
lease; and (xxviii) Liens arising from filing UCC financing statements for
precautionary purposes in connection with true leases of personal property that
are otherwise permitted under the applicable indenture and under which the
Company or any Subsidiary is lessee.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries;
provided that: (i) the principal amount (or accreted value, if applicable) of
such Permitted Refinancing Indebtedness does not exceed the principal amount of
(or accreted value, if applicable), plus accrued interest on, the Indebtedness
so extended, refinanced, renewed, replaced, defeased or refunded (plus the
amount of reasonable expenses incurred in connection therewith); (ii) such
Permitted Refinancing Indebtedness has a final maturity date 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 Notes, such Permitted Refinancing
Indebtedness has a final maturity date later
12
<PAGE>
than the final maturity date of, and is subordinated in right of payment to, the
Notes on terms at least as favorable to the Holders of Notes as those contained
in the documentation governing the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded; and (iv) such Indebtedness is incurred
either by the Company or by the Restricted 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 or
government or other agency or political subdivision thereof.
"Principals" means Fred C. Schulte, Charles D. Hall and Wayne J.
Conner and SHC Investment Partnership, a Delaware general partnership, for so
long as at least 80% of the economic interests and Voting Stock therein are
owned by the other Principals or their Related Parties.
"Private Placement Legend" means the legend set forth in Section
2.06(g)(i) to be placed on all Notes issued under this Indenture except where
otherwise permitted by the provisions of this Indenture.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Recapitalization Transactions" means (i) the repurchase by the
Company and ENI on the Issue Date of all common stock, preferred stock and
common stock warrants of ENI not owned by the Principals, (ii) the redemption by
the Company on the Issue Date of all outstanding senior subordinated debt of the
Company, together with accrued and unpaid interest to the Issue Date and
prepayment fees, (iii) the ENI Merger, (iv) the amendment of the certificate of
incorporation and by-laws of such surviving corporation to, among other things,
change the name of the surviving corporation to Elgin National Industries, Inc.,
and (v) the entry into the Senior Credit Facility by the Company and the
Guarantors.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of November 5, 1997, by and among the Company and the other
parties named on the signature pages thereof, as such agreement may be amended,
modified or supplemented from time to time.
"Regulation S" means Regulation S promulgated 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 Note in
the form of Exhibit A-1 hereto bearing the Global Note Legend and the Private
Placement Legend and deposited with or on behalf of and registered in the name
of the Depositary or its nominee, issued in a denomination equal to the
outstanding principal amount of the Regulation S Temporary Global Note upon
expiration of the Restricted Period.
"Regulation S Temporary Global Note" means a temporary global Note in
the form of Exhibit A-2 hereto bearing the Private Placement Legend and
deposited with or on behalf of and registered in the name of the Depositary or
its nominee, issued in a denomination equal to the outstanding principal amount
of the Notes initially sold in reliance on Rule 903 of Regulation S.
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<PAGE>
"Related Party" with respect to any Principal means (A) any
controlling stockholder, 80% (or more) owned Subsidiary, spouse, immediate
family member or executor (in the case of an individual) of such Principal or
(B) any trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or Persons beneficially holding an 80% or more
controlling interest of which consist of such Principal and/or such other
Persons referred to in the immediately preceding clause (A).
"Responsible Officer," when used with respect to the Trustee, means
any officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restricted Definitive Note" means a Definitive Note bearing the
Private Placement Legend.
"Restricted Global Note" means a Global Note bearing the Private
Placement Legend.
"Restricted Investment" means any Investment other than a Permitted
Investment.
"Restricted Period" means the 40-day restricted period as defined in
Regulation S.
"Restricted Subsidiary" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 903" means Rule 903 promulgated under the Securities Act.
"Rule 904" means Rule 904 promulgated the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Credit Facility" means that certain Senior Credit Facility,
dated as of November 5, 1997, by and among the Company, certain of the Company's
subsidiaries (as guarantors) and the lenders party thereto, providing for up to
$20.0 million of revolving credit borrowings (as such amount may be increased as
permitted in clause (a) of the second paragraph of Section 4.09 hereof),
including any related notes, guarantees, collateral documents, instruments and
agreements executed in connection therewith, and in each case as amended,
modified, extended, renewed, refunded, replaced or refinanced from time to time.
Indebtedness under the Senior Credit Facility outstanding on the date on which
Notes are first issued and authenticated under the Indenture shall be deemed to
have been incurred on such date in reliance on the exception provided by clause
(a) of the second paragraph of Section 4.09 hereof.
"Shelf Registration Statement" means the Shelf Registration Statement
as defined in the Registration Rights Agreement.
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<PAGE>
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Act, as such Regulation is in effect on the date
hereof.
"Stated Maturity" means, with respect to any installment of interest
or principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (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 Guarantee" means the Guarantee by each Guarantor of the
Company's payment obligations under this Indenture and the Notes, executed
pursuant to the provisions of this Indenture.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-
77bbbb) as in effect on the date on which this Indenture is qualified under the
TIA.
"Trustee" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.
"Unrestricted Global Note" means a permanent global Note in the form
of Exhibit A-1 attached hereto that bears the Global Note Legend and that has
the "Schedule of Exchanges of Interests in the Global Note" attached thereto,
and that is deposited with or on behalf of and registered in the name of the
Depositary, representing a series of Notes that do not bear the Private
Placement Legend.
"Unrestricted Definitive Note" means one or more Definitive Notes that
do not bear and are not required to bear the Private Placement Legend.
"Unrestricted Subsidiary" means (i) any Subsidiary (including any
newly acquired or newly formed Subsidiary) that is designated by the Board of
Directors as an Unrestricted Subsidiary pursuant to a Board Resolution; but only
to the extent that such Subsidiary: (a) has no Indebtedness other than Non-
Recourse Debt; (b) is not party to any agreement, contract, arrangement or
understanding with the Company or any Restricted Subsidiary of the Company
unless the terms of any such agreement, contract, arrangement or understanding
are no less favorable to the Company or such Restricted Subsidiary than those
that might be obtained at the time from Persons who are not Affiliates of the
Company; (c) is a Person with respect to which neither the Company nor any of
its Restricted Subsidiaries has any direct or indirect obligation (x) to
subscribe for additional Equity Interests or (y) to maintain or preserve such
Person's financial condition or (z) to cause such Person to achieve any
specified levels of operating results; and (d) has not guaranteed or otherwise
directly or indirectly
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<PAGE>
provided credit support for any Indebtedness of the Company or any of its
Restricted Subsidiaries; and (e) has at least one director on its board of
directors that is not a director or executive officer of the Company or any of
its Restricted Subsidiaries. Any such designation by the Board of Directors
shall be evidenced to the Trustee by filing with the Trustee a certified copy of
the Board Resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
conditions and is permitted under Section 4.07 hereof. If, at any time, any
Unrestricted Subsidiary would fail to meet the foregoing requirements as an
Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of the Indenture and any Indebtedness of such Subsidiary
shall be deemed to be incurred by a Restricted Subsidiary of the Company as of
such date (and, if such Indebtedness is not permitted to be incurred as of such
date under Section 4.09 hereof, the Company shall be in default of such
covenant). The Board of Directors of the Company may at any time designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such
designation shall be deemed to include an incurrence of Indebtedness by a
Restricted Subsidiary of the Company of any outstanding Indebtedness of such
Unrestricted Subsidiary and such designation shall only be permitted if (i) such
Indebtedness is permitted under Section 4.09 hereof, calculated on a pro forma
basis as if such designation had occurred at the beginning of the four-quarter
reference period, and (ii) no Default or Event of Default would be in existence
following such designation.
"U.S. Person" means a U.S. person as defined in Rule 902(o) under the
Securities Act.
"Voting Stock" by 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 Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person that is a Wholly Owned Subsidiary of such Person.
"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.
Section 1.02. Other Definitions.
<TABLE>
<CAPTION>
Defined in
Term Section
<S> <C>
"Affiliate Transaction"......................... 4.11
"Asset Sale".................................... 4.10
"Asset Sale Offer".............................. 3.09
"Authentication Order".......................... 2.02
"Change of Control Offer"....................... 4.15
"Change of Control Payment"..................... 4.15
"Change of Control Payment Date"................ 4.15
</TABLE>
16
<PAGE>
<TABLE>
<S> <C>
"Covenant Defeasance"........................... 8.03
"Event of Default".............................. 6.01
"Excess Proceeds"............................... 4.10
"incur"......................................... 4.09
"Legal Defeasance".............................. 8.02
"Offer Amount".................................. 3.09
"Offer Period".................................. 3.09
"Paying Agent".................................. 2.03
"Permitted Debt"................................ 4.09
"Purchase Date"................................. 3.09
"Registrar"..................................... 2.03
"Restricted Payments"........................... 4.07
</TABLE>
Section 1.03.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the Notes and the Subsidiary Guarantees means the Company
and the Guarantors, respectively, and any successor obligor upon the Notes and
the Subsidiary Guarantees, respectively.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
Section 1.04. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular;
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(5) provisions apply to successive events and transactions; and
(6) references to sections of or rules under the Securities Act
shall be deemed to include substitute, replacement of successor sections or
rules adopted by the SEC from time to time.
ARTICLE 2.
THE NOTES
Section 2.01. Form and Dating.
(a) General. The Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibits A, A-1 and A-2 hereto. The Notes
may have notations, legends or endorsements required by law, stock exchange rule
or usage. Each Note shall be dated the date of its authentication. The Notes
shall be in denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall constitute, and
are hereby expressly made, a part of this Indenture and the Company, the
Guarantors and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound thereby. However,
to the extent any provision of any Note conflicts with the express provisions of
this Indenture, the provisions of this Indenture shall govern and be
controlling.
(b) Global Notes. Notes issued in global form shall be substantially in
the form of Exhibits A, A-1 and A-2 attached hereto (including the Global Note
Legend thereon and the "Schedule of Exchanges of Interests in the Global Note"
attached thereto). Notes issued in definitive form shall be substantially in the
form of Exhibit A-1 attached hereto (but without the Global Note Legend thereon
and without the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Each Global Note shall represent such of the outstanding Notes as
shall be specified therein and each shall provide that it shall represent the
aggregate principal amount of outstanding Notes from time to time endorsed
thereon and that the aggregate principal amount of outstanding Notes represented
thereby may from time to time be reduced or increased, as appropriate, to
reflect exchanges and redemptions. Any endorsement of a Global Note to reflect
the amount of any increase or decrease in the aggregate principal amount of
outstanding Notes represented thereby shall be made by the Trustee or the Note
Custodian, at the direction of the Trustee, in accordance with instructions
given by the Holder thereof as required by Section 2.06 hereof.
(c) Temporary Global Notes. 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 Notes
represented thereby with the Trustee, at its New York office, as custodian for
the Depositary, and registered in the name of the Depositary or the nominee of
the Depositary for the accounts of designated agents holding on behalf of
Euroclear or Cedel Bank, duly executed by the Company and authenticated by the
Trustee as hereinafter provided. The Restricted Period shall be terminated upon
the receipt by the Trustee of (i) a written certificate from the Depositary,
together with copies of certificates from Euroclear and Cedel Bank 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 during the Restricted Period 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 or an IAI Global Note bearing a Private
Placement Legend, all as contemplated by Section
18
<PAGE>
2.06(a)(ii) hereof), and (ii) an Officers' Certificate from the Company.
Following the termination of the 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 Depositary or its
nominee, as the case may be, in connection with transfers of interest as
hereinafter provided.
(d) Euroclear and Cedel Procedures Applicable. The provisions of the
"Operating Procedures of the Euroclear System" and "Terms and Conditions
Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank"
and "Customer Handbook" of Cedel Bank shall be applicable to transfers of
beneficial interests in the Regulation S Temporary Global Note and the
Regulation S Permanent Global Notes that are held by Participants through
Euroclear or Cedel Bank.
Section 2.02. Execution and Authentication.
Two Officers shall sign the Notes for the Company by manual or
facsimile signature. The Company's seal may, but shall not be required to, be
reproduced on the Notes and may be in facsimile form.
If an Officer whose signature is on a Note no longer holds that office
at the time a Note is authenticated, the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature
of the Trustee. The signature shall be conclusive evidence that the Note has
been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by two
Officers (an "Authentication Order"), authenticate Notes for original issue up
to the aggregate principal amount stated in paragraph 4 of the Notes. The
aggregate principal amount of Notes outstanding at any time may not exceed such
amount except as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. An authenticating agent may authenticate Notes
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with Holders or an
Affiliate of the Company.
Section 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency where Notes may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent"). The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Company may appoint one or more co-registrars and one or more additional
paying agents. The term "Registrar" includes any co-registrar and the term
"Paying Agent" includes any additional paying agent. The Company may change any
Paying Agent or Registrar without notice to any Holder. The Company shall notify
the Trustee in writing of the name and address of any Agent not a party to this
Indenture. If the Company fails to appoint or maintain another entity as
Registrar or Paying
19
<PAGE>
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 Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as 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 will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium or Liquidated Damages, if any, or interest on the Notes, and
will 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 by it as Paying Agent. Upon
any bankruptcy or reorganization proceedings relating to the Company, the
Trustee shall serve as Paying Agent for the Notes.
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 (S) 312(a). If the Trustee is
not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders of
Notes and the Company shall otherwise comply with TIA (S) 312(a).
Section 2.06. Transfer and Exchange.
(a) Transfer and Exchange of Global Notes. A Global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary,
by a nominee of the Depositary to the Depositary or to another nominee of the
Depositary, the Depositary or any such nominee to a successor Depositary or a
nominee of such successor Depositary. All Global Notes will be exchanged by the
Company for Definitive Notes if (i) the Company delivers to the Trustee notice
from the Depositary that it is unwilling or unable to continue to act as
Depositary or that it is no longer a clearing agency registered under the
Exchange Act and, in either case, a successor Depositary is not appointed by the
Company within 120 days after the date of such notice from the Depositary or
(ii) the Company in its sole discretion determines that the Global Notes (in
whole but not in part) should be exchanged for Definitive Notes and delivers a
written notice to such effect to the Trustee; provided that in no event shall
the Regulation S Temporary Global Note be exchanged by the Company for
Definitive Notes prior to (x) the expiration of the Restricted Period and (y)
the receipt by the Registrar of any certificates required pursuant to Rule
903(c)(3)(ii)(B) under the Securities Act. Upon the occurrence of either of the
preceding events in (i) or (ii) above, Definitive Notes shall be issued in such
names as the Depositary shall instruct the Trustee. Global Notes also may be
exchanged or replaced, in whole or in part, as
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provided in Sections 2.07 and 2.10 hereof. Every Note authenticated and
delivered in exchange for, or in lieu of, a Global Note or any portion thereof,
pursuant to this Section 2.06 or Section 2.07 or 2.10 hereof, shall be
authenticated and delivered in the form of, and shall be, a Global Note. A
Global Note may not be exchanged for another Note other than as provided in this
Section 2.06(a), however, beneficial interests in a Global Note may be
transferred and exchanged as provided in Section 2.06(b),(c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global Notes. The
transfer and exchange of beneficial interests in the Global Notes shall be
effected through the Depositary, in accordance with the provisions of this
Indenture and the Applicable Procedures. Beneficial interests in the Restricted
Global Notes shall be subject to restrictions on transfer comparable to those
set forth herein to the extent required by the Securities Act. Transfers of
beneficial interests in the Global Notes also shall require compliance with
either subparagraph (i) or (ii) below, as applicable, as well as one or more of
the other following subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same Global Note. Beneficial
interests in any Restricted Global Note may be transferred to Persons who
take delivery thereof in the form of a beneficial interest in the same
Restricted Global Note in accordance with the transfer restrictions set forth
in the Private Placement Legend; provided, however, that prior to the
expiration of the Restricted Period, transfers of beneficial interests in the
Temporary Regulation S Global Note may not be made to a U.S. Person or for
the account or benefit of a U.S. Person (other than an Initial Purchaser).
Beneficial interests in any Unrestricted Global Note may be transferred to
Persons who take delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note. No written orders or instructions shall be required
to be delivered to the Registrar to effect the transfers described in this
Section 2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests in Global
Notes. In connection with all transfers and exchanges of beneficial interests
that are not subject to Section 2.06(b)(i) above, the transferor of such
beneficial interest must deliver to the Registrar either (A) (1) a written
order from a Participant or an Indirect Participant given to the Depositary
in accordance with the Applicable Procedures directing the Depositary to
credit or cause to be credited a beneficial interest in another Global Note
in an amount equal to the beneficial interest to be transferred or exchanged
and (2) instructions given in accordance with the Applicable Procedures
containing information regarding the Participant account to be credited with
such increase or (B) (1) a written order from a Participant or an Indirect
Participant given to the Depositary in accordance with the Applicable
Procedures directing the Depositary to cause to be issued a Definitive Note
in an amount equal to the beneficial interest to be transferred or exchanged
and (2) instructions given by the Depositary to the Registrar containing
information regarding the Person in whose name such Definitive Note shall be
registered to effect the transfer or exchange referred to in (1) above;
provided that in no event shall Definitive Notes be issued upon the transfer
or exchange of beneficial interests in the Regulation S Temporary Global Note
prior to (x) the expiration of the Restricted Period and (y) the receipt by
the Registrar of any certificates required pursuant to Rule 903 under the
Securities Act. Upon consummation of an Exchange Offer by the Company in
accordance with Section 2.06(f) hereof, the requirements of this Section
2.06(b)(ii) shall be deemed to have been satisfied upon receipt by the
Registrar of the instructions contained in the Letter of Transmittal
delivered by the Holder of such beneficial interests in the Restricted Global
Notes. Upon satisfaction of all of the requirements for transfer or exchange
of beneficial interests in Global Notes contained in this Indenture and the
Notes or otherwise applicable under the Securities Act, the Trustee shall
adjust the principal amount of the relevant Global Note(s) pursuant to
Section 2.06(h) hereof.
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(iii) Transfer of Beneficial Interests to Another Restricted Global Note. A
beneficial interest in any Restricted Global Note may be transferred to a
Person who takes delivery thereof in the form of a beneficial interest in
another Restricted Global Note if the transfer complies with the requirements
of Section 2.06(b)(ii) above and the Registrar receives the following:
(A) if the transferee will take delivery in the form of a beneficial
interest in the 144A Global Note, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the certifications
in item (1) thereof;
(B) if the transferee will take delivery in the form of a beneficial
interest in the Regulation S Temporary Global Note or the Regulation S
Global Note, then the transferor must deliver a certificate in the form
of Exhibit B hereto, including the certifications in item (2) thereof;
and
(C) if the transferee will take delivery in the form of a beneficial
interest in the IAI Global Note, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the certifications
and certificates and Opinion of Counsel required by item (3) thereof, if
applicable.
(iv) Transfer and Exchange of Beneficial Interests in a Restricted Global
Note for Beneficial Interests in the Unrestricted Global Note. A beneficial
interest in any Restricted Global Note may be exchanged by any holder thereof
for a beneficial interest in an Unrestricted Global Note or transferred to a
Person who takes delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note if the exchange or transfer complies with the
requirements of Section 2.06(b)(ii) above and:
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Rights Agreement and the holder
of the beneficial interest to be transferred, in the case of an exchange,
or the transferee, in the case of a transfer, certifies in the applicable
Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Notes or (3) a Person
who is an affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance with
the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a beneficial
interest in an Unrestricted Global Note, a certificate from such holder in
the form of Exhibit C hereto, including the certifications in item (1)(a)
thereof; or
(2) if the holder of such beneficial interest in a Restricted
Global Note proposes to transfer such beneficial interest to a Person who
shall take delivery thereof in
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the form of a beneficial interest in an Unrestricted Global Note, a
certificate from such holder in the form of Exhibit B hereto, including the
certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Registrar
so requests or if the Applicable Procedures so require, an Opinion of
Counsel in form reasonably acceptable to the Registrar to the effect that
such exchange or transfer is in compliance with the Securities Act and that
the restrictions on transfer contained herein and in the Private Placement
Legend are no longer required in order to maintain compliance with the
Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or (D)
above at a time when an Unrestricted Global Note has not yet been issued, the
Company shall issue and, upon receipt of an Authentication Order in accordance
with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
aggregate principal amount of beneficial interests transferred pursuant to
subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof in the form
of, a beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for Definitive Notes.
(i) Beneficial Interests in Restricted Global Notes to Restricted
Definitive Notes. If any holder of a beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a Restricted
Definitive Note or to transfer such beneficial interest to a Person who takes
delivery thereof in the form of a Restricted Definitive Note, then, upon
receipt by the Registrar of the following documentation:
(A) if the holder of such beneficial interest in a Restricted Global
Note proposes to exchange such beneficial interest for a Restricted
Definitive Note, a certificate from such holder in the form of Exhibit C
hereto, including the certifications in item (2)(a) thereof;
(B) if such beneficial interest is being transferred to a QIB in
accordance with Rule 144A under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the certifications in
item (1) thereof;
(C) if such beneficial interest is being transferred to a Non-U.S.
Person in an offshore transaction in accordance with Rule 903 or Rule 904
under the Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (2) thereof;
(D) if such beneficial interest is being transferred pursuant to an
exemption from the registration requirements of the Securities Act in
accordance with Rule 144 under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the certifications in
item (3)(a) thereof;
(E) if such beneficial interest is being transferred to an
Institutional Accredited Investor in reliance on an exemption from the
registration requirements of the Securities Act other than those listed
in subparagraphs (B) through (D) above,
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a certificate to the effect set forth in Exhibit B hereto, including the
certifications, certificates and Opinion of Counsel required by item (3)
thereof, if applicable;
(F) if such beneficial interest is being transferred to the Company or
any of its Subsidiaries, a certificate to the effect set forth in Exhibit
B hereto, including the certifications in item (3)(b) thereof; or
(G) if such beneficial interest is being transferred pursuant to an
effective registration statement under the Securities Act, a certificate
to the effect set forth in Exhibit B hereto, including the certifications
in item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the applicable
Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof,
and the Company shall execute and the Trustee shall authenticate and
deliver to the Person designated in the instructions a Definitive Note in
the appropriate principal amount. Any Definitive Note issued in exchange
for a beneficial interest in a Restricted Global Note pursuant to this
Section 2.06(c) shall be registered in such name or names and in such
authorized denomination or denominations as the holder of such beneficial
interest shall instruct the Registrar through instructions from the
Depositary and the Participant or Indirect Participant. The Trustee shall
deliver such Definitive Notes to the Persons in whose names such Notes are
so registered. Any Definitive Note issued in exchange for a beneficial
interest in a Restricted Global Note pursuant to this Section 2.06(c)(i)
shall bear the Private Placement Legend and shall be subject to all
restrictions on transfer contained therein.
Notwithstanding Sections 2.06(c)(i)(A) and (C) hereof, a beneficial
interest in the Regulation S Temporary Global Note may not be exchanged for a
Definitive Note or transferred to a Person who takes delivery thereof in the
form of a Definitive Note prior to (x) the expiration of the Restricted Period
and (y) the receipt by the Registrar of any certificates required pursuant to
Rule 903(c)(3)(ii)(B) under the Securities Act, except in the case of a
transfer pursuant to an exemption from the registration requirements of the
Securities Act other than Rule 903 or Rule 904.
(ii) Beneficial Interests in Restricted Global Notes to Unrestricted
Definitive Notes. A holder of a beneficial interest in a Restricted Global
Note may exchange such beneficial interest for an Unrestricted Definitive Note
or may transfer such beneficial interest to a Person who takes delivery
thereof in the form of an Unrestricted Definitive Note only if:
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Rights Agreement and the holder
of such beneficial interest, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the applicable Letter
of Transmittal that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Notes or (3) a Person
who is an affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance with
the Registration Rights Agreement; or
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(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a Restricted Global
Note proposes to exchange such beneficial interest for a Definitive Note
that does not bear the Private Placement Legend, a certificate from such
holder in the form of Exhibit C hereto, including the certifications in
item (1)(b) thereof; or
(2) if the holder of such beneficial interest in a Restricted Global
Note proposes to transfer such beneficial interest to a Person who shall
take delivery thereof in the form of a Definitive Note that does not bear
the Private Placement Legend, a certificate from such holder in the form of
Exhibit B hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Registrar
so requests or if the Applicable Procedures so require, an Opinion of
Counsel in form reasonably acceptable to the Registrar to the effect that
such exchange or transfer is in compliance with the Securities Act and that
the restrictions on transfer contained herein and in the Private Placement
Legend are no longer required in order to maintain compliance with the
Securities Act.
(iii) Beneficial Interests in Unrestricted Global Notes to Unrestricted
Definitive Notes. If any holder of a beneficial interest in an Unrestricted
Global Note proposes to exchange such beneficial interest for a Definitive Note
or to transfer such beneficial interest to a Person who takes delivery thereof
in the form of a Definitive Note, then, upon satisfaction of the conditions set
forth in Section 2.06(b)(ii) hereof, the Trustee shall cause the aggregate
principal amount of the applicable Global Note to be reduced accordingly
pursuant to Section 2.06(h) hereof, and the Company shall execute and the
Trustee shall authenticate and deliver to the Person designated in the
instructions a Definitive Note in the appropriate principal amount. Any
Definitive Note issued in exchange for a beneficial interest pursuant to this
Section 2.06(c)(iii) shall be registered in such name or names and in such
authorized denomination or denominations as the holder of such beneficial
interest shall instruct the Registrar through instructions from the Depositary
and the Participant or Indirect Participant. The Trustee shall deliver such
Definitive Notes to the Persons in whose names such Notes are so registered. Any
Definitive Note issued in exchange for a beneficial interest pursuant to this
Section 2.06(c)(iii) shall not bear the Private Placement Legend.
(d) Transfer and Exchange of Definitive Notes for Beneficial Interests.
(i) Restricted Definitive Notes to Beneficial Interests in Restricted
Global Notes. If any Holder of a Restricted Definitive Note proposes to exchange
such Note for a beneficial interest in a Restricted Global Note or to transfer
such Restricted Definitive Notes to a Person who takes delivery thereof in the
form of a beneficial interest in a Restricted Global Note, then, upon receipt by
the Registrar of the following documentation:
(A) if the Holder of such Restricted Definitive Note proposes to
exchange such Note for a beneficial interest in a Restricted Global Note, a
certificate from such Holder in the form of Exhibit C hereto, including the
certifications in item (2)(b) thereof;
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(B) if such Restricted Definitive Note is being transferred to a QIB
in accordance with Rule 144A under the Securities Act, a certificate to
the effect set forth in Exhibit B hereto, including the certifications
in item (1) thereof;
(C) if such Restricted Definitive Note is being transferred to a
Non-U.S. Person in an offshore transaction in accordance with Rule 903
or Rule 904 under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item (2)
thereof;
(D) if such Restricted Definitive Note is being transferred pursuant
to an exemption from the registration requirements of the Securities Act
in accordance with Rule 144 under the Securities Act, a certificate to
the effect set forth in Exhibit B hereto, including the certifications
in item (3)(a) thereof;
(E) if such Restricted Definitive Note is being transferred to an
Institutional Accredited Investor in reliance on an exemption from the
registration requirements of the Securities Act other than those listed
in subparagraphs (B) through (D) above, a certificate to the effect set
forth in Exhibit B hereto, including the certifications, certificates
and Opinion of Counsel required by item (3) thereof, if applicable;
(F) if such Restricted Definitive Note is being transferred to the
Company or any of its Subsidiaries, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item (3)(b)
thereof; or
(G) if such Restricted Definitive Note is being transferred pursuant
to an effective registration statement under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Note, increase or cause
to be increased the aggregate principal amount of, in the case of clause
(A) above, the appropriate Restricted Global Note, in the case of clause
(B) above, the 144A Global Note, in the case of clause (c) above, the
Regulation S Global Note, and in all other cases, the IAI Global Note.
(ii) Restricted Definitive Notes to Beneficial Interests in Unrestricted
Global Notes. A Holder of a Restricted Definitive Note may exchange such Note
for a beneficial interest in an Unrestricted Global Note or transfer such
Restricted Definitive Note to a Person who takes delivery thereof in the form of
a beneficial interest in an Unrestricted Global Note only if:
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Rights Agreement and the
Holder, in the case of an exchange, or the transferee, in the case of a
transfer, certifies in the applicable Letter of Transmittal that it is
not (1) a broker-dealer, (2) a Person participating in the distribution
of the Exchange Notes or (3) a Person who is an affiliate (as defined in
Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
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(C) such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance with
the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Notes proposes to exchange such
Notes for a beneficial interest in the Unrestricted Global Note, a
certificate from such Holder in the form of Exhibit C hereto, including the
certifications in item (1)(c) thereof; or
(2) if the Holder of such Definitive Notes proposes to transfer such
Notes to a Person who shall take delivery thereof in the form of a
beneficial interest in the Unrestricted Global Note, a certificate from
such Holder in the form of Exhibit B hereto, including the certifications
in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Registrar
so requests or if the Applicable Procedures so require, an Opinion of
Counsel in form reasonably acceptable to the Registrar to the effect that
such exchange or transfer is in compliance with the Securities Act and that
the restrictions on transfer contained herein and in the Private Placement
Legend are no longer required in order to maintain compliance with the
Securities Act.
Upon satisfaction of the conditions of any of the subparagraphs in this
Section 2.06(d)(ii), the Trustee shall cancel the Definitive Notes and
increase or cause to be increased the aggregate principal amount of the
Unrestricted Global Note.
(iii) Unrestricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global Note or
transfer such Definitive Notes to a Person who takes delivery thereof in the
form of a beneficial interest in an Unrestricted Global Note at any time. Upon
receipt of a request for such an exchange or transfer, the Trustee shall
cancel the applicable Unrestricted Definitive Note and increase or cause to be
increased the aggregate principal amount of one of the Unrestricted Global
Notes.
If any such exchange or transfer from a Definitive Note to a
beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or
(iii) above at a time when an Unrestricted Global Note has not yet been issued,
the Company shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
principal amount of Definitive Notes so transferred.
(e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon
request by a Holder of Definitive Notes and such Holder's compliance with the
provisions of this Section 2.06(e), the Registrar shall register the transfer or
exchange of Definitive Notes. Prior to such registration of transfer or
exchange, the requesting Holder shall present or surrender to the Registrar the
Definitive Notes duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar duly executed by such Holder or
by his attorney, duly authorized in writing. In addition, the requesting Holder
shall provide any additional certifications, documents and information, as
applicable, required pursuant to the following provisions of this Section
2.06(e).
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(i) Restricted Definitive Notes to Restricted Definitive Notes. Any
Restricted Definitive Note may be transferred to and registered in the name of
Persons who take delivery thereof in the form of a Restricted Definitive Note
if the Registrar receives the following:
(A) if the transfer will be made pursuant to Rule 144A under the
Securities Act, then the transferor must deliver a certificate in the
form of Exhibit B hereto, including the certifications in item (1)
thereof;
(B) if the transfer will be made pursuant to Rule 903 or Rule 904,
then the transferor must deliver a certificate in the form of Exhibit B
hereto, including the certifications in item (2) thereof; and
(C) if the transfer will be made pursuant to any other exemption from
the registration requirements of the Securities Act, then the transferor
must deliver a certificate in the form of Exhibit B hereto, including the
certifications, certificates and Opinion of Counsel required by item (3)
thereof, if applicable.
(ii) Restricted Definitive Notes to Unrestricted Definitive Notes. Any
Restricted Definitive Note may be exchanged by the Holder thereof for an
Unrestricted Definitive Note or transferred to a Person or Persons who take
delivery thereof in the form of an Unrestricted Definitive Note if:
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Rights Agreement and the
Holder, in the case of an exchange, or the transferee, in the case of a
transfer, certifies in the applicable Letter of Transmittal that it is
not (1) a broker-dealer, (2) a Person participating in the distribution
of the Exchange Notes or (3) a Person who is an affiliate (as defined in
Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) any such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance with
the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted Definitive Notes proposes to
exchange such Notes for an Unrestricted Definitive Note, a certificate from
such Holder in the form of Exhibit C hereto, including the certifications
in item (1)(d) thereof; or
(2) if the Holder of such Restricted Definitive Notes proposes to
transfer such Notes to a Person who shall take delivery thereof in the form
of an Unrestricted Definitive Note, a certificate from such Holder in the
form of Exhibit B hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Registrar
so requests, an Opinion of Counsel in form reasonably acceptable to the
Company to the effect that such exchange or transfer is in compliance with
the Securities Act and that the restrictions on transfer contained
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herein and in the Private Placement Legend are no longer required in order
to maintain compliance with the Securities Act.
(iii) Unrestricted Definitive Notes to Unrestricted Definitive Notes. A
Holder of Unrestricted Definitive Notes may transfer such Notes to a Person
who takes delivery thereof in the form of an Unrestricted Definitive Note.
Upon receipt of a request to register such a transfer, the Registrar shall
register the Unrestricted Definitive Notes pursuant to the instructions from
the Holder thereof.
(f) Exchange Offer. Upon the occurrence of the Exchange Offer in accordance
with the Registration Rights Agreement, the Company shall issue and, upon
receipt of an Authentication Order in accordance with Section 2.02, the Trustee
shall authenticate (i) one or more Unrestricted Global Notes in an aggregate
principal amount equal to the principal amount of the beneficial interests in
the Restricted Global Notes tendered for acceptance by Persons that certify in
the applicable Letters of Transmittal to the effect that (x) they are not
broker-dealers, (y) they are not participating in a distribution of the Exchange
Notes and (z) they are not affiliates (as defined in Rule 144) of the Company,
and accepted for exchange in the Exchange Offer and (ii) Definitive Notes in an
aggregate principal amount equal to the principal amount of the Restricted
Definitive Notes accepted for exchange in the Exchange Offer. Concurrently with
the issuance of such Notes, the Trustee shall cause the aggregate principal
amount of the applicable Restricted Global Notes to be reduced accordingly, and
the Company shall execute and the Trustee shall authenticate and deliver to the
Persons designated by the Holders of Definitive Notes so accepted Definitive
Notes in the appropriate principal amount.
(g) Legends. The following legends shall appear on the face of all Global
Notes and Definitive Notes issued under this Indenture unless specifically
stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below, each Global Note
and each Definitive Note (and all Notes issued in exchange therefor or
substitution thereof) shall bear the legend in substantially the
following form:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE 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
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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 OR IF
OTHERWISE REQUESTED BY THE COMPANY, 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."
(B) Notwithstanding the foregoing, any Global Note or Definitive Note
issued pursuant to subparagraphs (b)(iv), (c)(ii), (c)(iii), (d)(ii),
(d)(iii), (e)(ii), (e)(iii) or (f) to this Section 2.06 (and all Notes
issued in exchange therefor or substitution thereof) shall not bear the
Private Placement Legend.
(ii) Global Note Legend. Each Global Note shall bear a legend in
substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS
MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL
NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a)
OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE
FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS
GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR
WRITTEN CONSENT OF THE COMPANY."
(iii) Regulation S Temporary Global Note Legend. The Regulation S
Temporary Global Note shall bear a legend in substantially the following form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES,
ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER
NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL
BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON."
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(h) Cancellation and/or Adjustment of Global Notes. At such time as all
beneficial interests in a particular Global Note have been exchanged for
Definitive Notes or a particular Global Note has been redeemed, repurchased or
cancelled in whole and not in part, each such Global Note shall be returned to
or retained and cancelled by the Trustee in accordance with Section 2.11 hereof.
At any time prior to such cancellation, if any beneficial interest in a Global
Note is exchanged for or transferred to a Person who will take delivery thereof
in the form of a beneficial interest in another Global Note or for Definitive
Notes, the principal amount of Notes represented by such Global Note shall be
reduced accordingly and an endorsement shall be made on such Global Note by the
Trustee or by the Depositary at the direction of the Trustee to reflect such
reduction; and if the beneficial interest is being exchanged for or transferred
to a Person who will take delivery thereof in the form of a beneficial interest
in another Global Note, such other Global Note shall be increased accordingly
and an endorsement shall be made on such Global Note by the Trustee or by the
Depositary at the direction of the Trustee to reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the Company shall
execute and the Trustee shall authenticate Global Notes and Definitive Notes
upon the Company's order or at the Registrar's request.
(ii) No service charge shall be made to a holder of a beneficial interest
in a Global Note or to a Holder of a Definitive Note for any registration of
transfer or exchange, but the Company may require payment of a sum sufficient
to cover any transfer tax or similar governmental charge payable in connection
therewith (other than any such transfer taxes or similar governmental charge
payable upon exchange or transfer pursuant to Sections 2.10, 3.06, 3.09, 4.10,
4.15 and 9.05 hereof).
(iii) The Registrar shall not be required to register the transfer of or
exchange any Note selected for redemption in whole or in part, except the
unredeemed portion of any Note being redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any registration of
transfer or exchange of Global Notes or Definitive Notes shall be the valid
obligations of the Company, evidencing the same debt, and entitled to the same
benefits under this Indenture, as the Global Notes or Definitive Notes
surrendered upon such registration of transfer or exchange.
(v) The Company shall not be required (A) to issue, to register the
transfer of or to exchange any Notes during a period beginning at the opening
of business 15 days before the day of any selection of Notes for redemption
under Section 3.02 hereof and ending at the close of business on the day of
selection, (B) to register the transfer of or to exchange any Note so selected
for redemption in whole or in part, except the unredeemed portion of any Note
being redeemed in part or (c) to register the transfer of or to exchange a
Note between a record date and the next succeeding Interest Payment Date.
(vi) Prior to due presentment for the registration of a transfer of any
Note, the Trustee, any Agent and the Company may deem and treat the Person in
whose name any Note is registered as the absolute owner of such Note for the
purpose of receiving payment of principal of and interest on such Notes and
for all other purposes, and none of the Trustee, any Agent or the Company
shall be affected by notice to the contrary.
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(vii) The Trustee shall authenticate Global Notes and Definitive Notes in
accordance with the provisions of Section 2.02 hereof.
(viii) All certifications, certificates and Opinions of Counsel required
to be submitted to the Registrar pursuant to this Section 2.06 to effect a
registration of transfer or exchange may be submitted by facsimile.
Section 2.07. Replacement Notes.
If any mutilated Note is surrendered to the Trustee or the Company and
the Trustee receives evidence to its satisfaction of the destruction, loss or
theft of any Note, the Company shall issue and the Trustee, upon receipt of an
Authentication Order, shall authenticate a replacement Note if the Trustee's
requirements are met. If required by the Trustee or the Company, an indemnity
bond must be supplied by the Holder that is sufficient in the judgment of the
Trustee and the Company to protect the Company, the Trustee, any Agent and any
authenticating agent from any loss that any of them may suffer if a Note is
replaced. The Company may charge for its expenses in replacing a Note.
Every replacement Note is an additional obligation of the Company and
shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Notes duly issued hereunder.
Section 2.08. Outstanding Notes.
The Notes outstanding at any time are all the Notes authenticated by
the Trustee except for those cancelled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Note effected by the
Trustee in accordance with the provisions hereof, and those described in this
Section as not outstanding. Except as set forth in Section 2.09 hereof and in
the last sentence of the definition of "Indebtedness", a Note does not cease to
be outstanding because the Company or an Affiliate of the Company holds the
Note; however, Notes held by the Company or a Subsidiary of the Company shall
not be deemed to be outstanding for purposes of Section 3.07(b) hereof.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section
4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary or an
Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Notes payable on that date, then on and after that date such
Notes shall be deemed to be no longer outstanding and shall cease to accrue
interest.
Section 2.09. Treasury Notes.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company, or by any Person directly or indirectly controlling or controlled by or
under direct or indirect common control with the Company, shall be considered as
though not outstanding, except that for the purposes of determining whether the
Trustee shall be protected in relying on any such direction, waiver or consent,
only Notes that the Trustee knows are so owned shall be so disregarded.
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Section 2.10. Temporary Notes.
Until certificates representing Notes are ready for delivery, the
Company may prepare and the Trustee, upon receipt of an Authentication Order,
shall authenticate temporary Notes. Temporary Notes shall be substantially in
the form of certificated Notes but may have variations that the Company
considers appropriate for temporary Notes and as shall be reasonably acceptable
to the Trustee. Without unreasonable delay, the Company shall prepare and the
Trustee shall authenticate definitive Notes in exchange for temporary Notes.
Holders of temporary Notes shall be entitled to all of the benefits of
this Indenture.
Section 2.11. Cancellation.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall destroy
cancelled Notes (subject to the record retention requirement of the Exchange
Act). Certification of the destruction of all cancelled Notes shall be delivered
to the Company. The Company may not issue new Notes to replace Notes that it has
paid or that have been delivered to the Trustee for cancellation.
Section 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the Notes, it
shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate provided
in the Notes and in Section 4.01 hereof. The Company shall notify the Trustee in
writing of the amount of defaulted interest proposed to be paid on each Note and
the date of the proposed payment. The Company shall fix or cause to be fixed
each such special record date and payment date, provided that no such special
record date shall be less than 10 days prior to the related payment date for
such defaulted interest. At least 15 days before the special record date, the
Company (or, upon the written request of the Company, the Trustee in the name
and at the expense of the Company) shall mail or cause to be mailed to Holders a
notice that states the special record date, the related payment date and the
amount of such interest to be paid.
ARTICLE 3.
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 30 days but not more than 60 days before a redemption date, an
Officers' Certificate setting forth (i) the clause of this Indenture pursuant to
which the redemption shall occur, (ii) the redemption date, (iii) the principal
amount of Notes to be redeemed and (iv) the redemption price.
Section 3.02. Selection of Notes to Be Redeemed.
If less than all of the Notes are to be redeemed at any time, the
Trustee shall select the Notes to be redeemed or purchased among the Holders of
the Notes in compliance with the requirements
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of the principal national securities exchange, if any, on which the Notes are
listed or, if the Notes are not so listed, on a pro rata basis, by lot or in
accordance with any other method the Trustee considers fair and appropriate. In
the event of partial redemption by lot, the particular Notes to be redeemed
shall be selected, unless otherwise provided herein, not less than 30 nor more
than 60 days prior to the redemption date by the Trustee from the outstanding
Notes not previously called for redemption.
The Trustee shall promptly notify the Company in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 or whole multiples of $1,000;
except that if all of the Notes of a Holder are to be redeemed, the entire
outstanding amount of Notes held by such Holder, even if not a multiple of
$1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
Section 3.03. Notice of Redemption.
Subject to the provisions of Section 3.09 hereof, at least 30 days but
not more than 60 days before a redemption date, the Company shall mail or cause
to be mailed, by first class mail, a notice of redemption to each Holder whose
Notes are to be redeemed at its registered address.
The notice shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the principal
amount of such Note to be redeemed and that, after the redemption date upon
surrender of such Note, a new Note or Notes in principal amount equal to the
unredeemed portion shall be issued upon cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption payment,
interest on Notes called for redemption ceases to accrue on and after the
redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture pursuant
to which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or accuracy of
the CUSIP number, if any, listed in such notice or printed on the Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however, that the
Company shall have delivered to the Trustee, at least 45 days prior to the
redemption date, an Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in such notice as provided
in the preceding paragraph.
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Section 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.03
hereof, Notes called for redemption become irrevocably due and payable on the
redemption date at the redemption price. A notice of redemption may not be
conditional.
Section 3.05. Deposit of Redemption Price.
One Business Day prior to the redemption date, the Company shall
deposit with the Trustee or with the Paying Agent money sufficient to pay the
redemption price of and accrued interest on all Notes to be redeemed on that
date. The Trustee or the Paying Agent shall promptly return to the Company any
money deposited with the Trustee or the Paying Agent by the Company in excess of
the amounts necessary to pay the redemption price of, and accrued interest on,
all Notes to be redeemed.
If the Company complies with the provisions of the preceding
paragraph, on and after the redemption date, interest shall cease to accrue on
the Notes or the portions of Notes called for redemption. If a Note is redeemed
on or after an interest record date but on or prior to the related interest
payment date, then any accrued and unpaid interest shall be paid to the Person
in whose name such Note was registered at the close of business on such record
date. If any Note called for redemption shall not be so paid upon surrender for
redemption because of the failure of the Company to comply with the preceding
paragraph, interest shall be paid on the unpaid principal, from the redemption
date until such principal is paid, and to the extent lawful on any interest not
paid on such unpaid principal, in each case at the rate provided in the Notes
and in Section 4.01 hereof.
Section 3.06. Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, the Company shall
issue and, upon the Company's written request, the Trustee shall authenticate
for the Holder at the expense of the Company a new Note equal in principal
amount to the unredeemed portion of the Note surrendered.
Section 3.07. Optional Redemption.
(a) Except as set forth in clause (b) of this Section 3.07, the Company
shall not have the option to redeem the Notes pursuant to this Section 3.07
prior to November 1, 2002. Thereafter, the Company shall have the option, upon
not less than 30 nor more than 60 days' notice, to redeem the Notes, in whole or
in part, at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest and Liquidated Damages thereon,
if any, to the applicable redemption date, if redeemed during the twelve-month
period beginning on November 1 of the years indicated below:
Year Percentage
---- ----------
2002......................................105.500%
2003......................................103.667%
2004......................................101.000%
2005 and thereafter.......................100.000%
(b) Notwithstanding the provisions of clause (a) of this Section 3.07, at
any time prior to November 1, 2000, the Company may redeem up to an aggregate of
$25.0 million in aggregate principal amount of Notes, at a redemption price of
111.000% of the principal amount thereof, plus accrued and
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unpaid interest and Liquidated Damages thereon, if any, to the redemption date,
with the net cash proceeds of one or more public offerings of common stock of
the Company; provided that at least $60.0 million in aggregate principal amount
of Notes remains outstanding immediately after the occurrence of such
redemption; and provided, further, that such redemption shall occur within 45
days of the date of the closing of each such public offering.
(c) Any redemption pursuant to this Section 3.07 shall be made pursuant to
the provisions of Section 3.01 through 3.06 hereof.
Section 3.08. Mandatory Redemption.
The Company shall not be required to make mandatory redemption
payments with respect to the Notes.
Section 3.09. Offer to Purchase by Application of Excess Proceeds.
In the event that, pursuant to Section 4.10 hereof, the Company shall
be required to commence an offer to all Holders to purchase Notes (an "Asset
Sale Offer"), it shall follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20 Business
Days following its commencement and no longer, except to the extent that a
longer period is required by applicable law (the "Offer Period"). No later than
five Business Days after the termination of the Offer Period (the "Purchase
Date"), the Company shall purchase the principal amount of Notes required to be
purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less than
the Offer Amount has been tendered, all Notes tendered in response to the Asset
Sale Offer. Payment for any Notes so purchased shall be made in the same manner
as interest payments are made.
If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest shall
be paid to the Person in whose name a Note is registered at the close of
business on such record date, and no additional interest shall be payable to
Holders who tender Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company shall send,
by first class mail, a notice to the Trustee and each of the Holders, with a
copy to the Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Notes pursuant to the Asset Sale
Offer. The Asset Sale Offer shall be made to all Holders. The notice, which
shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this Section 3.09
and Section 4.10 hereof and the length of time the Asset Sale Offer shall remain
open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall continue to
accrue interest;
(d) that, unless the Company defaults in making such payment, any Note
accepted for payment pursuant to the Asset Sale Offer shall cease to accrue
interest after the Purchase Date;
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(e) that Holders electing to have a Note purchased pursuant to an Asset
Sale Offer may only elect to have all of such Note purchased and may not elect
to have only a portion of such Note purchased;
(f) that Holders electing to have a Note purchased pursuant to any Asset
Sale Offer shall be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note completed, or
transfer by book-entry transfer, to the Company, a depositary, if appointed by
the Company, or a Paying Agent at the address specified in the notice at least
three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if the
Company, the Depositary or the Paying Agent, as the case may be, receives, not
later than the expiration of the Offer Period, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Note the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such Note purchased;
(h) that, if the aggregate principal amount of Notes surrendered by Holders
exceeds the Offer Amount, the Company shall select the Notes to be purchased on
a pro rata basis (with such adjustments as may be deemed appropriate by the
Company so that only Notes in denominations of $1,000, or integral multiples
thereof, shall be purchased); and
(i) that Holders whose Notes were purchased only in part shall be issued
new Notes equal in principal amount to the unpurchased portion of the Notes
surrendered (or transferred by book-entry transfer).
On or before the Purchase Date, the Company shall, to the extent
lawful, accept for payment, on a pro rata basis to the extent necessary, the
Offer Amount of Notes or portions thereof tendered pursuant to the Asset Sale
Offer, or if less than the Offer Amount has been tendered, all Notes tendered,
and shall deliver to the Trustee an Officers' Certificate stating that such
Notes or portions thereof were accepted for payment by the Company in accordance
with the terms of this Section 3.09. The Company, the Depositary or the Paying
Agent, as the case may be, shall promptly (but in any case not later than five
days after the Purchase Date) mail or deliver to each tendering Holder an amount
equal to the purchase price of the Notes tendered by such Holder and accepted by
the Company for purchase, and the Company shall promptly issue a new Note, and
the Trustee, upon written request from the Company shall authenticate and mail
or deliver such new Note to such Holder, in a principal amount equal to any
unpurchased portion of the Note surrendered. Any Note not so accepted shall be
promptly mailed or delivered by the Company to the Holder thereof. The Company
shall publicly announce the results of the Asset Sale Offer on the Purchase
Date.
Other than as specifically provided in this Section 3.09, any purchase
pursuant to this Section 3.09 shall be made pursuant to the provisions of
Sections 3.01 through 3.06 hereof.
ARTICLE 4.
COVENANTS
Section 4.01. Payment of Notes.
The Company shall pay or cause to be paid the principal of, premium,
if any, and interest on the Notes on the dates and in the manner provided in the
Notes. Principal, premium, if any, and
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interest shall be considered paid on the date due if the Paying Agent, if other
than the Company or a Subsidiary thereof, holds as of 10:00 a.m. Eastern Time on
the due date money deposited by the Company in immediately available funds and
designated for and sufficient to pay all principal, premium, if any, and
interest then due. The Company shall pay all Liquidated Damages, if any, in the
same manner on the dates and in the amounts set forth in the Registration Rights
Agreement.
The Company shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue principal at the rate equal
to 1% per annum in excess of the then applicable interest rate on the Notes to
the extent lawful; it shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace period) at the same
rate to the extent lawful.
Section 4.02. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, the City of
New York, an office or agency (which may be an office or agent of the Trustee or
an affiliate of the Trustee, Registrar or co-registrar) where Notes may be
surrendered for registration of transfer or for exchange and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may be
served. The Company shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee.
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, the City of New York for such purposes. The Company shall give
prompt written notice to the Trustee of any such designation or rescission and
of any change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the
Trustee as one such office or agency of the Company in accordance with Section
2.03.
Section 4.03. Reports.
(a) Whether or not required by the rules and regulations of the SEC,
beginning with respect to annual financial information for the fiscal year ended
December 31, 1997 and so long as any Notes are outstanding, the Company shall
furnish to the Holders of Notes (i) all quarterly and annual financial
information that would be required to be contained in a filing with the SEC on
Forms 10-Q and 10-K if the Company were required to file such forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the annual information only, a report thereon
by the Company's certified independent accountants and (ii) all current reports
that would be required to be filed with the SEC on Form 8-K if the Company were
required to file such reports, in each case, within the time periods specified
in the SEC's rules and regulations. In addition, whether or not required by the
rules and regulations of the SEC, the Company shall file a copy of all such
information and reports with the SEC for public availability within the time
periods specified in the SEC's rules and regulations (unless the SEC will not
accept such a filing) and make such information available to securities analysts
and prospective investors upon request.
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(b) For so long as any Notes remain outstanding, the Company and the
Guarantors shall furnish to the Holders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
Section 4.04. Compliance Certificate.
(a) The Company and each Guarantor (to the extent that such Guarantor is so
required under the TIA) shall deliver to the Trustee, within 90 days after the
end of each fiscal year, an Officers' Certificate stating that a review of the
activities of the Company and its Subsidiaries during the preceding fiscal year
has been made under the supervision of the signing Officers with a view to
determining whether the Company has kept, observed, performed and fulfilled its
obligations under this Indenture, and further stating, as to each such Officer
signing such certificate, that to the best of his or her knowledge the Company
has kept, observed, performed and fulfilled each and every covenant contained in
this Indenture and is not in default in the performance or observance of any of
the terms, provisions and conditions of this Indenture (or, if a Default or
Event of Default shall have occurred, describing all such Defaults or Events of
Default of which he or she may have knowledge and what action the Company is
taking or proposes to take with respect thereto) and that to the best of his or
her knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest, if any, on the Notes is
prohibited or if such event has occurred, a description of the event and what
action the Company is taking or proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) above shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Company has violated
any provisions of Article 4 or Article 5 hereof or, if any such violation has
occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Notes are outstanding, deliver
to the Trustee, forthwith upon any Officer becoming aware of any Default or
Event of Default, an Officers' Certificate specifying such Default or Event of
Default and what action the Company is taking or proposes to take with respect
thereto.
Section 4.05. Taxes.
The Company shall pay, and shall cause each of its Subsidiaries to
pay, prior to delinquency, all material taxes, assessments, and governmental
levies except such as are contested in good faith and by appropriate proceedings
or where the failure to effect such payment is not adverse in any material
respect to the Holders of the Notes.
Section 4.06. Stay, Extension and Usury Laws.
The Company and each of the Guarantors 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
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of the Guarantors (to the extent that it may lawfully do so) hereby expressly
waives all benefit or advantage of any such law, and covenants that it shall
not, by resort to any such law, hinder, delay or impede the execution of any
power herein granted to the Trustee, but shall suffer and permit the execution
of every such power as though no such law has been enacted.
Section 4.07. Restricted Payments.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make
any other payment or distribution on account of the Company's or any of its
Restricted Subsidiaries' Equity Interests (including, without limitation, any
payment in connection with any merger or consolidation involving the Company) or
to the direct or indirect holders of the Company's or any of its Restricted
Subsidiaries' Equity Interests in their capacity as such (other than dividends
or distributions payable in Equity Interests (other than Disqualified Stock) of
the Company); (ii) purchase, redeem or otherwise acquire or retire for value
(including without limitation, in connection with any merger or consolidation
involving the Company) any Equity Interests of the Company or any direct or
indirect parent of the Company; (iii) make any payment on or with respect to, or
purchase, redeem, defease or otherwise acquire or retire for value any
Indebtedness that is subordinated to the Notes or the Subsidiary Guarantees,
except payments of interest and principal payments thereon at Stated Maturity;
(iv) make any payment of salary or bonus to any Principal in excess of the
amounts contemplated in the employment agreement between such Principal and the
Company (including any increases contemplated by the terms of such employment
agreement) as in effect on the Issue Date or make any payment of life insurance
premiums in respect of life insurance policies on one or more Principals in
excess of $150,000, in the aggregate in any one year, the proceeds of which
policies are or could be required to be used, in whole or in part, to redeem
Equity Interests of the Company or any Affiliate; 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;
(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; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted Subsidiaries
after the date of the Indenture (excluding Restricted Payments permitted by
clause (ii), (iii) or (iv) of the next succeeding paragraph), is less than the
sum of (i) 50% of the Consolidated Net Income of the Company for the period
(taken as one accounting period) from the beginning of the fiscal quarter
containing 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
Restricted Subsidiary of the Company and other than Disqualified Stock or
convertible debt securities that have been converted
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into Disqualified Stock), plus (iii) to the extent that any Restricted
Investment that was made by the Company or any of its Restricted Subsidiaries
after the date of the Indenture is sold for cash or otherwise liquidated for
or repaid in cash, the lesser of (A) the cash return of capital with respect
to such Restricted Investment (less the cost of disposition, if any) and (B)
the initial amount of such Restricted Investment, plus (iv) $2.0 million,
minus (v) the amount of all Clawback Payments made or, without duplication,
that are required to be made as a result of any Asset Sale theretofore made,
or with respect to which a binding agreement has been entered into.
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 Restricted 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 Restricted Subsidiary of the Company to the holders
of its common Equity Interests so long as the Company or such Restricted
Subsidiary receives at least its pro rata share of such dividend or distribution
in accordance with its Equity Interests, or the distribution by a Permitted
Joint Venture in accordance with the terms of its governing documentation; (v)
the repurchase, redemption or other acquisition or retirement for value of any
Equity Interests of the Company or any Subsidiary of the Company held by any
member of the Company's (or any of its Subsidiaries') management pursuant to any
management equity subscription agreement or stock option agreement in effect as
of the date of the Indenture; provided that the aggregate price paid for all
such repurchased, redeemed, acquired or retired Equity Interests shall not
exceed $250,000 in any twelve-month period and no Default or Event of Default
shall have occurred and be continuing immediately after such transaction; (vi)
payments in respect of the Recapitalization Transactions on the Issue Date, and
Clawback Payments, if any, made after the Issue Date; and (vii) payments in
respect of the redemption of Equity Interests out of the proceeds of keyman life
insurance policies, which proceeds are required to be used for such redemption
pursuant to any agreement to which the Company is a party.
If the Company or any Wholly Owned Restricted 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 Wholly Owned Restricted
Subsidiary of the Company, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Equity Interests of such Subsidiary not sold or disposed of in an
amount determined as provided in the second succeeding paragraph below.
The Board of Directors may designate any Restricted Subsidiary to be
an Unrestricted Subsidiary if such designation would not cause a Default. For
purposes of making such determination, all outstanding Investments by the
Company and its Restricted Subsidiaries (except to the extent repaid in cash) in
the Subsidiary so designated will be deemed to be Restricted Payments at the
time of such designation and, unless such Investments are Permitted Investments,
will reduce the amount available for Restricted Payments under clause (c) of the
first paragraph of this covenant. All such outstanding Investments will be
deemed to constitute Investments in an amount equal to the greatest of (x) the
net book value of such Investments at the time of such designation, (y) the fair
market value of such Investments at the time of such designation and (z) the
original fair market value of such Investments at
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the time they were made. Such designation will only be permitted if such
Restricted Payment would be permitted at such time and if such Restricted
Subsidiary otherwise meets the definition of an Unrestricted Subsidiary.
The amount of all Restricted Payments (other than cash) shall be the
fair market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or such
Restricted 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 $2.0 million. Not later than two
Business Days after making any Restricted Payment in excess of $1.0 million, 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 the Indenture.
Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (i)(a) pay dividends or make any other distributions to
the Company or any of its Restricted Subsidiaries (1) on its Capital Stock or
(2) with respect to any other interest or participation in, or measured by, its
profits, or (b) pay any Indebtedness owed to the Company or any of its
Restricted Subsidiaries, (ii) make loans or advances to the Company or any of
its Restricted Subsidiaries or (iii) transfer any of its properties or assets to
the Company or any of its Restricted Subsidiaries, except for such encumbrances
or restrictions existing under or by reason of (a) Existing Indebtedness as in
effect on the date of the Indenture, or as amended thereafter on terms, taken as
a whole, no more restrictive and no more unfavorable to the Holders of the Notes
than those contained in the Senior Credit Facility as in effect on the date of
the Indenture, (b) the Senior Credit Facility as in effect as of the date of the
Indenture, and any amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings thereof, provided that
such amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings are no more restrictive and no more
unfavorable to the holders of the Notes than those contained in the Senior
Credit Facility as in effect on the date of the Indenture, (c) the Indenture,
the Subsidiary Guarantees and the Notes, (d) applicable law, (e) any instrument
governing Indebtedness or Capital Stock of a Person acquired by the Company or
any of its Restricted Subsidiaries as in effect at the time of such acquisition
(except to the extent 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, and any
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings thereof, provided that, in the case of
Indebtedness, such Indebtedness was no more restrictive and no more unfavorable
to the holders of the Notes than those contained in the Senior Credit Facility
as in effect on the date of the Indenture, (f) customary non-assignment
provisions in leases entered into in the ordinary course of business and
consistent with past practices, (g) purchase money obligations for property
acquired in the ordinary course of business that impose restrictions of the
nature described in clause (iii) above on the property so acquired, (h)
Permitted Refinancing Indebtedness, provided that the encumbrances or
restrictions contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive and no more unfavorable to the holders of
the Notes than those contained in the Indebtedness being refinanced, (i) secured
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Indebtedness otherwise permitted to be incurred pursuant to the provisions of
Section 4.12 hereof that limits the right of the debtor to dispose of the assets
securing such Indebtedness, (j) customary net worth provisions contained in
leases and other agreements entered into in the ordinary course of business, (k)
customary restrictions with respect to a Restricted Subsidiary pursuant to an
agreement that has been entered into for the sale or disposition of all or
substantially all of the Capital Stock or assets of such Restricted Subsidiary,
(l) provisions with respect to the disposition or distribution of assets or
property to be sold in any Asset Sale (or transaction which, but for its size,
would be an Asset Sale) pending the completion of such transaction, or in joint
venture agreements or other similar agreements, including any Permitted Joint
Venture, (m) any other instrument governing Indebtedness incurred on or after
the date of the Indenture or any refinancing thereof that is incurred in
accordance with the Indenture, provided that the encumbrance or restriction
contained in any such Indebtedness or any such refinancing thereof is no more
restrictive and no more unfavorable to the Holders of the Notes than that
contained in the Senior Credit Facility as in effect on the date of the
Indenture, or, in the case of any refinancing, the Indebtedness being
refinanced, (n) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business or (o)
restrictions imposed on any Foreign Subsidiary by the terms of any Credit
Facility under which such Foreign Subsidiary is the borrower.
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries directly or indirectly to, 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 Restricted Subsidiaries to issue any shares of preferred
stock; provided, however, that the Company or any Restricted Subsidiary that is
a Guarantor may incur Indebtedness (including Acquired Debt) and the Company may
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 2.0 to 1.0, 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 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"):
(a) the incurrence by the Company or any Restricted Subsidiary of
Indebtedness under Credit Facilities; provided that the aggregate principal
amount of all Indebtedness (with letters of credit issued under Credit
Facilities being deemed to have a principal amount equal to the maximum
potential liability of the Company and its Restricted 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 pursuant to this clause (a), does not exceed
an amount equal to the greater of (x) (A) $20.0 million of such Indebtedness
plus, if and only if the amount of such Indebtedness includes letters of credit,
an additional amount equal to the amount of such letters of credit then
outstanding, up to a maximum additional amount of $5.0 million less (B) the
aggregate amount of all Net Proceeds of Asset Sales applied to permanently
reduce the commitments with respect to Credit Facilities pursuant to Section
4.10 hereof and (y) the Borrowing Base;
(b) the incurrence by the Company and its Restricted Subsidiaries of
Existing Indebtedness;
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(c) the incurrence by the Company of Indebtedness represented by the Notes
and the incurrence by the Guarantors of the Subsidiary Guarantees;
(d) the incurrence by the Company or any of its Restricted Subsidiaries of
Indebtedness represented by Capital Lease Obligations, mortgage financings or
purchase money obligations, in each case incurred for the purpose of financing
all or any part of the purchase price or cost of construction or improvement of
property, plant or equipment used in the business of the Company or such
Restricted Subsidiary, in an aggregate principal amount, including all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace Indebtedness
incurred pursuant to this clause (d), not to exceed $2.5 million at any time
outstanding;
(e) the incurrence by the Company or any of its Restricted Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which
are used to refund, refinance or replace, Indebtedness that was permitted by the
Indenture to be incurred under the first paragraph of this covenant or clauses
(b) and (c) of this paragraph;
(f) the incurrence by the Company or any of its Restricted Subsidiaries of
intercompany Indebtedness between or among the Company and any of its Restricted
Subsidiaries; provided, however, that (i) if the Company or any 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 Notes or
the Subsidiary Guarantee of such Guarantor and (ii)(A) any subsequent issuance
or transfer of Equity Interests that results in any such Indebtedness being held
by a Person other than the Company or a Restricted Subsidiary and (B) any sale
or other transfer of any such Indebtedness to a Person that is not either the
Company or a Restricted Subsidiary that is a Guarantor shall be deemed, in each
case, to constitute an incurrence of such Indebtedness by the Company or such
Restricted Subsidiary, as the case may be, that was not permitted solely by
reason of this clause (f);
(g) the incurrence by the Company or any of its Restricted Subsidiaries of
Hedging Obligations that are incurred in the ordinary course of business for the
purpose of fixing or hedging currency, commodity or interest rate risk
(including with respect to any floating rate Indebtedness that is permitted by
the terms of this Indenture to be outstanding) in connection with the conduct of
their respective businesses and not for speculative purposes;
(h) the guarantee by the Company or any of the Guarantors of Indebtedness
of the Company or a Restricted Subsidiary that was permitted to be incurred by
another provision of this covenant;
(i) Indebtedness incurred by the Company or any Restricted Subsidiary under
payment or performance bonds, surety bonds, letter of credit obligations to
provide security for worker's compensation claims, payment obligations in
connection with self-insurance or similar requirements and bank overdrafts
incurred in the ordinary course of business, in each case including Indebtedness
represented by reimbursement obligations incurred in connection therewith;
provided that any Obligations arising in connection with such bank overdraft
Indebtedness is extinguished within five business days;
(j) Indebtedness incurred by the Company or any Restricted Subsidiary
arising from Guarantees or letters of credit, surety bonds or payment or
performance bonds securing any Obligations of the Company or any Restricted
Subsidiary pursuant to agreements providing for indemnification, adjustment of
purchase price or similar obligations, in any case in connection with the
disposition of any business, assets or Subsidiary (including without limitation
an Asset Sale) other than guarantees of
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Indebtedness incurred by any Person acquiring all or any portion of such
business, assets or Subsidiary (including without limitation an Asset Sale) for
the purpose of financing such acquisition, in a principal amount not to exceed
the gross proceeds (with proceeds other than cash or Cash Equivalents being
valued at the fair market value thereof as determined by the Board of Directors
in good faith) actually received by the Company or any Restricted Subsidiary in
connection with such dispositions;
(k) the incurrence by the Company or any of the Restricted 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 (k) and not otherwise permitted to be incurred
at the time of incurrence of any such Permitted Refinancing Indebtedness, not to
exceed $12.5 million outstanding at any one time; and
(l) the incurrence of Indebtedness of the Company to the estate of any
Principal, which Indebtedness is (a) subordinated in right of payment to payment
of all amounts payable with respect to the Notes, (b) matures not earlier than
91 days after the maturity date of the Notes, (c) includes no mandatory sinking
fund or other requirement for payment of principal or cash interest prior to the
maturity date of the Notes, (d) is not subject to redemption or prepayment at
the option of the holder thereof, and (e) is in an aggregate principal amount no
greater than the amount by which the redemption price for the Equity Interests
of the decedent Principal pursuant to an agreement to which the Company is a
party exceeds the proceeds received by the Company on the life of the decedent
Principal.
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 (a) through (k) 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 from
time to time 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 at any given time.
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.
Section 4.10. Asset Sales.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless (i) the Company (or the
Restricted Subsidiary, as the case may be) receives consideration at the time of
such Asset Sale at least equal to the fair market value (evidenced by a
resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Trustee) of the assets or Equity Interests issued or sold or
otherwise disposed of and (ii) at least 75% of the consideration therefor
received by the Company or such Restricted Subsidiary is in the form of cash or
Cash Equivalents; provided that the amount of (x) any liabilities (as shown on
the Company's or such Restricted Subsidiary's most recent balance sheet) of the
Company or any Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Notes or any Guarantee
thereof) that are assumed by the transferee of any such assets pursuant to a
customary novation agreement that releases the Company or such Restricted
Subsidiary from further liability and (y) any securities, notes or other
obligations received by the Company or any such Restricted Subsidiary from such
transferee that are converted by the Company or such Restricted Subsidiary into
cash (to the extent of the cash) received within ten business days after the
consummation of such Asset Sale, shall be deemed to be cash for purposes of this
provision.
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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 in respect of one or more Credit Facilities and permanently reduce
the maximum commitments thereunder (provided that such reductions shall have no
effect on the amount of Indebtedness permitted to be incurred pursuant to clause
(a)(y) of the second paragraph of Section 4.09 hereof) and/or (b) to the
acquisition of a controlling interest in, or all or substantially all of the
assets of, another business or the making of a capital expenditure in a
Permitted Business. Pending the final application of any such Net Proceeds, the
Company or such Restricted Subsidiary may temporarily reduce Indebtedness under
any Credit Facility or otherwise invest such Net Proceeds in any manner that is
not prohibited by the Indenture. Any Net Proceeds from Asset Sales that are not
applied or invested as provided in the first sentence of this paragraph will be
deemed to constitute "Excess Proceeds." When the aggregate amount of Excess
Proceeds exceeds $10.0 million, the Company will be required to make an offer
(pro rata in proportion to the principal amount (or accreted value, if
applicable) outstanding in respect of any asset sale offer required by the terms
of any pari passu Indebtedness incurred in accordance with the Indenture) to all
holders of Notes (an "Asset Sale Offer") to purchase the maximum principal
amount of Notes that may be purchased out of the Excess Proceeds, at an offer
price in cash in an amount equal to 100% of the principal amount thereof plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the date
of purchase, in accordance with the procedures set forth in the Indenture. To
the extent that the aggregate principal amount of Notes tendered pursuant to an
Asset Sale Offer is less than the Excess Proceeds (after giving effect to any
pro rata payment with respect to pari passu Indebtedness as aforesaid), the
Company may use any remaining Excess Proceeds for general corporate purposes. If
the aggregate principal amount of Notes surrendered by Holders thereof exceeds
the amount of Excess Proceeds, the Trustee shall select the Notes to be
purchased on a pro rata basis. Upon completion of such offer to purchase, the
amount of Excess Proceeds shall be reset at zero.
Section 4.11. Transactions with Affiliates.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries or any Unrestricted Subsidiary or Permitted Joint Venture in which
any Permitted Investment is made pursuant to clause (f) of "Permitted
Investments" to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or Guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless
(i) such Affiliate Transaction is on terms that are no less favorable to the
Company or the relevant Restricted Subsidiary than those that would have been
obtained in a comparable transaction by the Company or such Restricted
Subsidiary with a non-Affiliate 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 $1.5 million, a
resolution of the Board of Directors accompanied by 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 Company's 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 the Notes of such Affiliate Transaction from a
financial point of view issued by an accounting, appraisal or investment banking
firm of national standing; provided that (v) any fees and compensation paid to,
and indemnity provided on behalf of, officers, directors or employees of the
Company or any of its Restricted Subsidiaries, as determined in good faith by
the Board of Directors of the Company or any such Restricted Subsidiary, to the
extent such fees and compensation are reasonable and customary, (w) loans to
Principals that are Permitted Investments, (x) any employment agreement or
amendment thereto entered into by the Company or any of its Restricted
Subsidiaries in the ordinary course of business of
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the Company or such Restricted Subsidiary, (y) transactions between or among the
Company and/or its Restricted Subsidiaries and Permitted Joint Ventures in which
the Principals and their Related Parties beneficially own less than 10% of the
Equity Interests in the aggregate (other than indirectly through their
beneficial ownership in the Company) and (z) Restricted Payments that are
permitted by the provisions of Section 4.07, in each case, shall not be deemed
Affiliate Transactions.
Section 4.12. Liens.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist or become effective 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 Permitted Liens.
Section 4.13. Business Activities.
The Company shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, engage in any business other than a Permitted
Business, except to such extent as would not be material to the Company and its
Restricted Subsidiaries taken as a whole.
Section 4.14. Corporate Existence.
Subject to Article 5 hereof, the Company shall do or cause to be done
all things necessary to preserve and keep in full force and effect (i) its
corporate existence, and the corporate, partnership or other existence of each
of its Restricted Subsidiaries, in accordance with the respective organizational
documents (as the same may be amended from time to time) of the Company or any
such Restricted Subsidiary and (ii) the rights (charter and statutory), licenses
and franchises of the Company and its Restricted Subsidiaries; provided,
however, that the Company shall not be required to preserve any such right,
license or franchise, or the corporate, partnership or other existence of any of
its Restricted Subsidiaries, if the Board of Directors shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Company and its Restricted Subsidiaries, taken as a whole, and that the loss
thereof is not adverse in any material respect to the Holders of the Notes.
Section 4.15. Offer to Repurchase Upon Change of Control.
(a) Upon the occurrence of a Change of Control, each holder of Notes will
have the right to require the Company to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of such holder's Notes pursuant to the
offer described below (the "Change of Control Offer") at an offer price in cash
equal to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the date of purchase (the
"Change of Control Payment"). Within 20 days following any Change of Control,
the Company will mail a notice to each holder describing the transaction or
transactions that constitute the Change of Control and offering to repurchase
Notes on the date specified in such notice, which date shall be no earlier than
30 days and no later than 60 days from the date such notice is mailed (the
"Change of Control Payment Date"), pursuant to the procedures required by the
Indenture and described in such notice. The Company will comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Notes as a result of a
Change of Control.
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(b) On the Change of Control Payment Date, the Company shall, to the extent
lawful, (1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent will promptly mail to each holder of Notes so tendered
the Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any; provided that each such new Note will be in a principal
amount of $1,000 or an integral multiple thereof. The Company will publicly
announce the results of the Change of Control Offer on or as soon as practicable
after the Change of Control Payment Date.
Section 4.16. Sale and Leaseback Transactions.
The Company shall not and shall not permit any of its Restricted
Subsidiaries to, enter into any sale and leaseback transaction; provided that
the Company may enter into a sale and leaseback transaction if (i) the Company
could have (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 and (b)
incurred a Lien to secure such Indebtedness pursuant to Section 4.12, (ii) the
gross cash proceeds of such sale and leaseback transaction are at least equal to
the fair market value (as determined in good faith by the Board of Directors and
set forth in an Officers' Certificate delivered to the Trustee) of the property
that is the subject of such sale and leaseback transaction and (iii) the
transfer of assets in such sale and leaseback transaction is permitted by, and
the Company applies the proceeds of such transaction in compliance with, Section
4.10.
Section 4.17. Limitation on Issuances of Guarantees of Indebtedness.
If the Company or any of its Restricted Subsidiaries shall acquire or
create another Subsidiary after the date of the Indenture then, unless such
Subsidiary (i) is designated and remains an Unrestricted Subsidiary in
accordance with the Indenture, or (ii) does not have at any time assets or
annual revenues (or monthly revenues annualized) , determined in accordance with
GAAP, of $100,000 or more or (iii) is a Foreign Subsidiary, and, in the case of
clauses (ii) and (iii), is not a guarantor under or in respect of any Credit
Facility or other Indebtedness of the Company or any other Restricted
Subsidiary, such newly acquired or created Subsidiary (or any other Subsidiary,
upon failing to satisfy the requirements of clause (i), (ii) or (iii)) shall
execute a Subsidiary Guarantee and enter into a Supplemental Indenture, in
accordance with the terms of this Indenture.
Section 4.18. Payments for Consent.
Neither the Company, nor any of its Restricted Subsidiaries shall,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, to any holder of any Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of the Indenture or the Notes unless such consideration is offered to be paid or
is paid to all holders of the 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.
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ARTICLE 5.
SUCCESSORS
Section 5.01. Merger, Consolidation, or 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 Notes
and the Indenture pursuant to a supplemental indenture in a form reasonably
satisfactory to the Trustee; (iii) immediately before and after such transaction
no Default or Event of Default shall have occurred and be continuing; and (iv)
except in the case of a merger of the Company with or into a Wholly Owned
Restricted Subsidiary, 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 (x) will have Consolidated Net Worth immediately after the
transaction equal to or greater than the Consolidated Net Worth of the Company
immediately prior to the transaction, and (y) 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. The
foregoing shall not apply to the ENI Merger.
Section 5.02. Successor Corporation Substituted.
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the assets
of the Company in accordance with Section 5.01 hereof, the successor corporation
formed by such consolidation or into or with which the Company is merged or to
which such sale, assignment, transfer, lease, conveyance or other disposition is
made shall succeed to, and be substituted for (so that from and after the date
of such consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the "Company" shall refer instead to
the successor corporation and not to the Company), and may exercise every right
and power of the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein; provided, however, that
the predecessor Company shall not be relieved from the obligation to pay the
principal of and interest on the Notes except in the case of a sale of all of
the Company's assets that meets the requirements of Section 5.01 hereof.
ARTICLE 6.
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
An "Event of Default" occurs if:
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(a) the Company defaults in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes and such default continues for a
period of 30 days;
(b) the Company defaults in the payment when due of principal of or
premium, if any, on the Notes when the same becomes due and payable at maturity,
upon redemption (including in connection with an offer to purchase) or
otherwise;
(c) the Company fails to comply with any of the provisions of Sections
4.07, 4.09, 4.10, 4.15 or 5.01 hereof;
(d) the Company fails to observe or perform any other covenant,
representation, warranty or other agreement in this Indenture or the Notes for
60 days after notice to the Company by the Trustee or the Holders of at least
25% in aggregate principal amount of the Notes then outstanding voting as a
single class;
(e) a default occurs under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any of its
Restricted Subsidiaries), whether such Indebtedness or guarantee now exists, or
is created after the date of this Indenture, which default (a) is caused by a
failure to pay principal of or premium, if any, or interest on such Indebtedness
prior to the expiration of the grace period provided in such Indebtedness on the
date of such default (a "Payment Default") or (b) results in the acceleration of
such Indebtedness prior to its express maturity and, in each case, the principal
amount of any such Indebtedness, together with the principal amount of any other
such Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $5.0 million or more;
(f) a final judgment or final judgments for the payment of money are
entered by a court or courts of competent jurisdiction against the Company or
any of its Significant Subsidiaries or any group of Subsidiaries that, taken as
a whole, would constitute a Significant Subsidiary and such judgment or
judgments remain undischarged for a period (during which execution shall not be
effectively stayed) of 60 days, provided that the aggregate of all such
undischarged judgments exceeds $5 million (excluding amounts covered by
insurance);
(g) the Company or any of its Significant Subsidiaries or any group of
Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary
pursuant to or within the meaning of Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it in an
involuntary case,
(iii) consents to the appointment of a Custodian of it or for all or
substantially all of its property,
(iv) makes a general assignment for the benefit of its creditors, or
(v) generally is not paying its debts as they become due; or
(h) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:
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(vi) is for relief against the Company or any of its Significant
Subsidiaries or any group of Subsidiaries that, taken as a whole, would
constitute a Significant Subsidiary in an involuntary case;
(vii) appoints a Custodian of the Company or any of its Significant
Subsidiaries or any group of Subsidiaries that, taken as a whole, would
constitute a Significant Subsidiary or for all or substantially all of the
property of the Company or any of its Significant Subsidiaries or any group
of Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary; or
(viii) orders the liquidation of the Company or any of its Significant
Subsidiaries or any group of Subsidiaries that, taken as a whole, would
constitute a Significant Subsidiary;
and the order or decree remains unstayed and in effect for 60 consecutive days;
or
(i) except as permitted by this Indenture, any Subsidiary Guarantee is held
in any judicial proceeding to be unenforceable or invalid or shall cease for any
reason to be in full force and effect or any Guarantor, or any Person acting on
behalf of any Guarantor, shall deny or disaffirm its obligations under such
Guarantor's Subsidiary Guarantee.
Section 6.02. Acceleration.
If any Event of Default (other than an Event of Default specified in
clause (g) or (h) of Section 6.01 hereof with respect to the Company, any
Significant Subsidiary or any group of Significant Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary) occurs and is continuing, the
Trustee or the Holders of at least 25% in principal amount of the then
outstanding Notes may declare all the Notes to be due and payable immediately.
Notwithstanding the foregoing, if an Event of Default specified in clause (g) or
(h) of Section 6.01 hereof occurs with respect to the Company, any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a whole,
would constitute a Significant Subsidiary, all outstanding Notes shall be due
and payable immediately without further action or notice. The Holders of a
majority in aggregate principal amount of the then outstanding Notes by written
notice to the Trustee may on behalf of all of the Holders rescind an
acceleration and its consequences if the rescission would not conflict with any
judgment or decree and if all existing Events of Default (except nonpayment of
principal, interest or premium that has become due solely because of the
acceleration) have been cured or waived. The Trustee may withhold from holders
of the Notes notice of any continuing Default or Event of Default (except a
Default or Event of Default relating to the payment of principal or interest) if
it determines that withholding notice is in their interest. The Trustee may
withhold from holders of the Notes notice of any continuing Default or Event of
Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes. If an Event of Default occurs prior to
November 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 Notes prior to November 1, 2002, then the
premium specified below shall become immediately due and payable if such Event
of Default occurs prior to November 1 of the years indicated below, to the
extent permitted by law, upon the acceleration of the Notes:
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<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
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, and interest on the Notes or to enforce the performance of any provision of
the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of a Note in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies
are cumulative to the extent permitted by law.
Section 6.04. Waiver of Past Defaults.
Holders of not less than a majority in aggregate principal amount of
the then outstanding Notes by notice to the Trustee may on behalf of the Holders
of all of the Notes waive an existing Default or Event of Default and its
consequences hereunder, except a continuing Default or Event of Default in the
payment of the principal of, premium and Liquidated Damages, if any, or interest
on, the Notes (including in connection with an offer to purchase); provided,
however, that the Holders of a majority in aggregate principal amount of the
then outstanding Notes may rescind an acceleration and its consequences,
including any related payment default that resulted from such acceleration.
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
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 Notes or that may involve the
Trustee in personal liability.
Section 6.06. Limitation on Suits.
A Holder of a Note may pursue a remedy with respect to this Indenture
or the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
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(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the remedy;
(c) such Holder of a Note or Holders of Notes offer and, if requested,
provide to the Trustee indemnity satisfactory to the Trustee against any loss,
liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Notes do not give the Trustee a direction
inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the rights
of another Holder of a Note or to obtain a preference or priority over another
Holder of a Note.
Section 6.07. Rights of Holders of Notes to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Note to receive payment of principal, premium and Liquidated
Damages, if any, and interest on the Note, on or after the respective due dates
expressed in the Note (including in connection with an offer to purchase), or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of such Holder.
Section 6.08. Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(a) or (b) occurs and
is continuing, the Trustee is authorized to recover judgment in its own name and
as trustee of an express trust against the Company for the whole amount of
principal of, premium and Liquidated Damages, if any, and interest remaining
unpaid on the Notes and interest on overdue principal and, to the extent lawful,
interest and such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
Section 6.09. Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the claims
of the Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Company
(or any other obligor upon the Notes), its creditors or its property and shall
be entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any such
judicial proceeding is hereby authorized by each Holder to make such payments to
the Trustee, and in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due to
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.07 hereof out of the estate in
any such proceeding, shall be denied for any reason, payment of the same shall
be secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties that the Holders may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or
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otherwise. Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder, or to authorize the Trustee to vote in respect of the
claim of any Holder in any such proceeding.
Section 6.10. Priorities.
If the Trustee collects any money pursuant to this Article, it shall
pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due under
Section 7.07 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the Notes
for principal, premium and Liquidated Damages, if any, and interest, ratably,
without preference or priority of any kind, according to the amounts due and
payable on the Notes for principal, premium and Liquidated Damages, if any and
interest, respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.10.
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder of a
Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in
principal amount of the then outstanding Notes.
ARTICLE 7.
TRUSTEE
Section 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in its exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the
express provisions of this Indenture and the Trustee need perform only
those duties that are specifically set forth in this
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Indenture and no others, and no implied covenants or obligations shall be
read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to paragraphs (a),
(b), and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture at the
request of any Holder, 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 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. The Trustee may consult with
counsel and the written advice of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection from liability in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
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(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any demand,
request, direction or notice from the Company shall be sufficient if signed by
an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
the Holders unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities that might be
incurred by it in compliance with such request or direction.
Section 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company or any
Affiliate of the Company with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest it must eliminate such conflict within 90 days, apply to the SEC for
permission to continue as trustee or resign. Any Agent may do the same with
like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11
hereof.
Section 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company's direction under any provision of this
Indenture, it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Notes or
any other document in connection with the sale of the Notes or pursuant to this
Indenture other than its certificate of authentication.
Section 7.05. Notice of Defaults.
If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the
Default or Event of Default within 90 days after it occurs. Except in the case
of a Default or Event of Default in payment of principal of, premium, if any, or
interest on any Note, the Trustee may withhold the notice if and so long as a
committee of its Responsible Officers in good faith determines that withholding
the notice is in the interests of the Holders of the Notes.
Section 7.06. Reports by Trustee to Holders of the Notes.
Within 60 days after each May 15 beginning with the May 15 following
the date of this Indenture, and for so long as Notes remain outstanding, the
Trustee shall mail to the Holders of the Notes a brief report dated as of such
reporting date that complies with TIA (S) 313(a) (but if no event described in
TIA (S) 313(a) has occurred within the twelve months preceding the reporting
date, no report need be transmitted). The Trustee also shall comply with TIA
(S) 313(b)(2). The Trustee shall also transmit by mail all reports as required
by TIA (S) 313(c).
A copy of each report at the time of its mailing to the Holders of
Notes shall be mailed to the Company and filed with the SEC and each stock
exchange on which the Notes are listed in
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accordance with TIA (S) 313(d). The Company shall promptly notify the Trustee
when the Notes are listed on any stock exchange.
Section 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee promptly
upon request for all reasonable disbursements, advances and expenses incurred or
made by it in addition to the compensation for its services. Such expenses
shall include the reasonable compensation, disbursements and expenses of the
Trustee's agents and counsel.
The Company 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 (including
this Section 7.07) and defending itself against any claim (whether asserted by
the Company or any Holder or any other person) or liability in connection with
the exercise or performance of any of its powers or duties hereunder, except to
the extent any such loss, liability or expense may be attributable to its
negligence or bad faith. The Trustee shall notify the Company promptly of any
claim for which it may seek indemnity. Failure by the Trustee to so notify the
Company shall not relieve the Company of its obligations hereunder. The Company
shall defend the claim and the Trustee shall cooperate in the defense. The
Trustee may have separate counsel and the Company shall pay the reasonable fees
and expenses of such counsel. The Company need not pay for any settlement made
without its consent, which consent shall not be unreasonably withheld.
The obligations of the Company under this Section 7.07 shall survive
the satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section, the
Trustee shall have a Lien prior to the Notes on all money or property held or
collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes. Such Lien shall survive the satisfaction and
discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(g) or (h) 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 (S) 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.
The Trustee may resign in writing at any time and be discharged from
the trust hereby created by so notifying the Company. The Holders of Notes of a
majority in principal amount of the then outstanding Notes may remove the
Trustee by so notifying the Trustee and the Company in writing. The Company may
remove the Trustee if:
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(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of Notes of at least 10% in principal amount of the then outstanding
Notes may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee, after written request by any Holder of a Note who has
been a Holder of a Note for at least six months, fails to comply with Section
7.10, such Holder of a Note may petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders of the Notes. The retiring Trustee shall promptly
transfer all property held by it as Trustee to the successor Trustee, provided
all sums owing to the Trustee hereunder have been paid and subject to the Lien
provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee
pursuant to this Section 7.08, the Company's obligations under Section 7.07
hereof shall continue for the benefit of the retiring Trustee.
Section 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or transfers all
or substantially all of its corporate trust business to, another corporation,
the successor corporation without any further act shall be the successor
Trustee.
Section 7.10. Eligibility; Disqualification.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities and that has a combined capital and surplus of at least $100 million
as set forth in its most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA (S) 310(a)(1), (2) and (5). The Trustee is subject to TIA
(S) 310(b).
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Section 7.11. Preferential Collection of Claims Against Company.
The Trustee is subject to TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated therein.
ARTICLE 8.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance.
The Company may, at the option of its Board of Directors evidenced by
a resolution set forth in an Officers' Certificate, at any time, elect to have
either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon
compliance with the conditions set forth below in this Article Eight.
Section 8.02. Legal Defeasance and Discharge.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be deemed to have been
discharged from its obligations with respect to all outstanding Notes on the
date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall
be deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be "outstanding" only for
the purposes of Section 8.05 hereof and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions which shall survive
until otherwise terminated or discharged hereunder: (a) the rights of Holders
of outstanding Notes to receive solely from the trust fund described in Section
8.04 hereof, and as more fully set forth in such Section, payments in respect of
the principal of, premium, Liquidated Damages, if any, and interest on such
Notes when such payments are due, (b) the Company's obligations with respect to
such Notes under Article 2 and Section 4.02 hereof, (c) the rights, powers,
trusts, duties and immunities of the Trustee hereunder and the Company's
obligations in connection therewith and (d) this Article Eight. Subject to
compliance with this Article Eight, the Company may exercise its option under
this Section 8.02 notwithstanding the prior exercise of its option under Section
8.03 hereof.
Section 8.03. Covenant Defeasance.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be released from its
obligations under the covenants contained in Sections 4.03, 4.04, 4.05, 4.07,
4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.15, 4.16, 4.17, and 4.18 hereof with
respect to the outstanding Notes on and after the date the conditions set forth
in Section 8.04 are satisfied (hereinafter, "Covenant Defeasance"), and the
Notes shall thereafter be deemed not "outstanding" for the purposes of any
direction, waiver, consent or declaration or act of Holders (and the
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder (it being
understood that such Notes shall not be deemed outstanding for accounting
purposes). For this purpose, Covenant Defeasance means that, with respect to the
outstanding Notes, the Company may omit to comply with and shall have no
liability in respect of any term, condition or
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limitation set forth in any such covenant, whether directly or indirectly, by
reason of any reference elsewhere herein to any such covenant or by reason of
any reference in any such covenant to any other provision herein or in any other
document and such omission to comply shall not constitute a Default or an Event
of Default under Section 6.01 hereof, but, except as specified above, the
remainder of this Indenture and such Notes shall be unaffected thereby. In
addition, upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03 hereof, subject to the satisfaction of the
conditions set forth in Section 8.04 hereof, Sections 6.01(d) through 6.01(f)
hereof shall not constitute Events of Default.
Section 8.04. Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of either
Section 8.02 or 8.03 hereof to the outstanding Notes: In order to exercise
either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in trust, for
the benefit of the Holders, cash in United States 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 and Liquidated Damages, if any,
and interest on the outstanding Notes on the stated date for payment thereof or
on the applicable redemption date, as the case may be, and the Company shall
specify whether the Notes are being defeased to maturity or to a particular
redemption date.
(b) in the case of an election under Section 8.02 hereof, the Company shall
have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of this Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Legal Defeasance had not occurred;
(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 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;
(d) no Default or Event of Default shall have occurred and be continuing on
the date of such deposit (other than a Default or Event of Default resulting
from the incurrence of Indebtedness all or a portion of the proceeds of which
will be used to defease the Notes pursuant to this Article Eight concurrently
with such incurrence) or insofar as Sections 6.01(g) or 6.01(h) hereof is
concerned, at any time in the period ending on the 91st day after the date of
deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, any material agreement or
instrument (other than this Indenture) to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound;
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(f) the Company shall have delivered to the Trustee an Opinion of Counsel
(which may be subject to customary exceptions) to the effect that on 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;
(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 over any other creditors of the Company or with the
intent of defeating, hindering, delaying or defrauding any other creditors of
the Company; and
(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 or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
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 Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest, but
such money need not be segregated from other funds except to the extent required
by law.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the cash or non-callable
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 Notes.
Anything in this Article Eight to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the request
of the Company any money or non-callable 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.
Section 8.06. Repayment to Company.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, premium, if any,
or interest on any Note and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable shall be
paid to the Company on its request or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Note shall thereafter, as a
secured creditor, look only to the Company for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money,
and all liability of the Company as trustee thereof, shall thereupon cease;
provided, however, that the Trustee or such Paying Agent, before being required
to make any such repayment, may
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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 will be repaid to the Company.
Section 8.07. Reinstatement.
If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 8.02 or
8.03 hereof, as the case may be, by reason of any order or judgment of any court
or governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 8.02 or 8.03
hereof, as the case may be; provided, however, that, if the Company makes any
payment of principal of, premium, if any, or interest on any Note following the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money held by the
Trustee or Paying Agent.
ARTICLE 9.
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes.
Notwithstanding Section 9.02 of this Indenture, the Company, the
Guarantors and the Trustee may amend or supplement this Indenture, the
Subsidiary Guarantees or the Notes without the consent of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place of
certificated Notes or to alter the provisions of Article 2 hereof (including the
related definitions) in a manner that does not materially adversely affect any
Holder;
(c) to provide for the assumption of the Company's or a Guarantor's
obligations to the Holders of the Notes by a successor to the Company or a
Guarantor pursuant to Article 5 or Article 10 hereof;
(d) to make any change that would provide any additional rights or benefits
to the Holders of the Notes or that does not adversely affect the legal rights
hereunder of any Holder of the Notes;
(e) to comply with requirements of the SEC in order to effect or maintain
the qualification of this Indenture under the TIA; and
(f) to allow any Guarantor to execute a supplemental indenture to the
Indenture and/or a Subsidiary Guarantee with respect to the Notes.
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon receipt by the Trustee of the documents described in Section
7.02 hereof, the Trustee shall join with the Company and the Guarantors in the
execution of any amended or supplemental Indenture authorized or permitted by
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the terms of this Indenture and to make any further appropriate agreements and
stipulations that may be therein contained, but the Trustee shall not be
obligated to enter into such amended or supplemental Indenture that affects its
own rights, duties or immunities under this Indenture or otherwise.
Section 9.02. With Consent of Holders of Notes.
Except as provided below in this Section 9.02, the Company and the
Trustee may amend or supplement this Indenture (including Sections 3.09, 4.10
and 4.15 hereof), the Subsidiary Guarantees and the Notes may be amended or
supplemented with the consent of the Holders of at least a majority in principal
amount of the Notes then outstanding voting as a single class (including
consents obtained in connection with a tender offer or exchange offer for, or
purchase of, the Notes), and, subject to Sections 6.04 and 6.07 hereof, 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, or interest on the Notes,
except a payment default resulting from an acceleration that has been rescinded)
or compliance with any provision of this Indenture, the Subsidiary Guarantees or
the Notes may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding Notes voting as a single class
(including consents obtained in connection with a tender offer or exchange offer
for, or purchase of, the Notes).
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by
the Trustee of the documents described in Section 7.02 hereof, the Trustee shall
join with the Company in the execution of such amended or supplemental Indenture
unless such amended or supplemental Indenture directly affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise, in which case
the Trustee may in its discretion, but shall not be obligated to, enter into
such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of Notes
under this Section 9.02 to approve the particular form of any proposed amendment
or waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a
majority in aggregate principal amount of the Notes then outstanding voting as a
single class may waive compliance in a particular instance by the Company with
any provision of this Indenture or the Notes. However, without the consent of
each Holder affected, an amendment or waiver under this Section 9.02 may not
(with respect to any Notes held by a non-consenting Holder):
(a) reduce the principal amount of Notes whose Holders must consent to an
amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any Note or
alter or waive any of the provisions with respect to the redemption of the Notes
except as provided above with respect to Sections 3.09, 4.10 and 4.15.
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(c) reduce the rate of or change the time for payment of interest,
including default interest, on any Note;
(d) waive a Default or Event of Default in the payment of principal of or
premium or Liquidated Damages, if any, or interest on the Notes (except a
rescission of acceleration of the Notes by the Holders of at least a majority in
aggregate principal amount of the then outstanding Notes and a waiver of the
payment default that resulted from such acceleration);
(e) make any Note payable in money other than that stated in the Notes;
(f) make any change in the provisions of this Indenture relating to waivers
of past Defaults or the rights of Holders of Notes to receive payments of
principal of or interest on the Notes;
(g) make any change in Section 6.04 or 6.07 hereof or in the foregoing
amendment and waiver provisions that is adverse to the holders of the Notes;
(h) release any Guarantor from any of its obligations under its Subsidiary
Guarantee or this Indenture, except in accordance with the terms of this
Indenture; or
(i) make any change to the foregoing amendment or waiver provisions that is
adverse to any Holder of the Notes.
Section 9.03. Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the Notes shall be
set forth in a amended or supplemental Indenture that complies with the TIA as
then in effect.
Section 9.04. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder of a Note is a continuing consent by the Holder of a Note and
every subsequent Holder of a Note or portion of a Note that evidences the same
debt as the consenting Holder's Note, even if notation of the consent is not
made on any Note. However, any such Holder of a Note or subsequent Holder of a
Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
Section 9.05. Notation on or Exchange of Notes.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall, upon receipt of an
Authentication Order, authenticate new Notes that reflect the amendment,
supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
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Section 9.06. Trustee to Sign Amendments, etc.
The Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article Nine if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
The Company may not sign an amendment or supplemental Indenture until the Board
of Directors approves it. In executing any amended or supplemental indenture,
the Trustee shall be entitled to receive and (subject to Section 7.01 hereof)
shall be fully protected in relying upon, in addition to the documents required
by Section 11.04 hereof, an Officer's Certificate and an Opinion of Counsel
stating that the execution of such amended or supplemental indenture is
authorized or permitted by this Indenture.
ARTICLE 10.
SUBSIDIARY GUARANTEES
Section 10.01. Guarantee.
Subject to this Article 10, each of the Guarantors hereby, jointly and
severally, unconditionally guarantees to each Holder of a Note authenticated and
delivered by the Trustee and to the Trustee and its successors and assigns that:
(a) the principal of, premium and Liquidated Damages, if any, and interest on
the Notes will be promptly paid in full when due, whether at maturity, by
acceleration, redemption or otherwise, and interest on the overdue principal of
and interest on the Notes, if any, if lawful, and all other obligations of the
Company to the Holders or the Trustee hereunder or thereunder will be promptly
paid in full or performed, all in accordance with the terms hereof and thereof;
and (b) in case of any extension of time of payment or renewal of any Notes or
any of such other obligations, that same will be promptly paid in full when due
or performed in accordance with the terms of the extension or renewal, whether
at stated maturity, by acceleration or otherwise. Failing payment when due of
any amount so guaranteed or any performance so guaranteed for whatever reason,
the Guarantors shall be jointly and severally obligated to pay the same
immediately. Each Guarantor agrees that this is a guarantee of payment and not
a guarantee of collection.
The Guarantors hereby agree that their obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability of the
Notes or this Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Notes with respect to any provisions
hereof or thereof, the recovery of any judgment against the Company, any action
to enforce the same or any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of a guarantor. Each Guarantor hereby
waives diligence, presentment, demand of payment, filing of claims with a court
in the event of insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company, protest, notice and all demands whatsoever
and covenant that this Subsidiary Guarantee shall not be discharged except by
complete performance of the obligations contained in the Notes and this
Indenture.
If any Holder or the Trustee is required by any court or otherwise to
return to the Company, the Guarantors or any custodian, trustee, liquidator or
other similar official acting in relation to either the Company or the
Guarantors, any amount paid by either to the Trustee or such Holder, this
Subsidiary Guarantee, to the extent theretofore discharged, shall be reinstated
in full force and effect.
Each Guarantor agrees that it shall not be entitled to any right of
subrogation in relation to the Holders in respect of any obligations guaranteed
hereby until payment in full of all obligations guaranteed hereby. Each
Guarantor further agrees that, as between the Guarantors, on the one hand, and
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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 this Subsidiary Guarantee, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of the
obligations guaranteed hereby, and (y) in the event of any declaration of
acceleration of such obligations as provided in Article 6 hereof, such
obligations (whether or not due and payable) shall forthwith become due and
payable by the Guarantors for the purpose of this Subsidiary Guarantee. The
Guarantors shall have the right to seek contribution from any non-paying
Guarantor so long as the exercise of such right does not impair the rights of
the Holders under the Guarantee.
Section 10.02. Limitation on Guarantor Liability.
Each Guarantor, and by its acceptance of Notes, each Holder, hereby
confirms that it is the intention of all such parties that the Subsidiary
Guarantee of such Guarantor not constitute a fraudulent transfer or conveyance
for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the
Uniform Fraudulent Transfer Act or any similar federal or state law to the
extent applicable to any Subsidiary Guarantee. To effectuate the foregoing
intention, the Trustee, the Holders and the Guarantors hereby irrevocably agree
that the obligations of such Guarantor under its Subsidiary Guarantee and this
Article 10 shall be limited to the maximum amount as will, after giving effect
to such maximum amount and all other contingent and fixed liabilities of such
Guarantor that are relevant under such laws, and after giving effect to any
collections from, rights to receive contribution from or payments made by or on
behalf of any other Guarantor in respect of the obligations of such other
Guarantor under this Article 10, result in the obligations of such Guarantor
under its Subsidiary Guarantee not constituting a fraudulent transfer or
conveyance.
Section 10.03. Execution and Delivery of Subsidiary Guarantee.
To evidence its Subsidiary Guarantee set forth in Section 10.01, each
Guarantor hereby agrees that a notation of such Subsidiary Guarantee
substantially in the form included in Exhibit E shall be endorsed by an Officer
of such Guarantor on each Note authenticated and delivered by the Trustee and
that this Indenture shall be executed on behalf of such Guarantor by its
President or one of its Vice Presidents.
Each Guarantor hereby agrees that its Subsidiary Guarantee set forth
in Section 10.01 shall remain in full force and effect notwithstanding any
failure to endorse on each 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 Note on which a Subsidiary Guarantee is endorsed, the
Subsidiary Guarantee shall be valid nevertheless.
The delivery of any 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 Guarantors.
In the event that the Company creates or acquires any new Subsidiaries
subsequent to the date of this Indenture, if required by Section 4.17 hereof,
the Company shall cause such Subsidiaries to execute supplemental indentures to
this Indenture and Subsidiary Guarantees in accordance with Section 4.17 hereof
and this Article 10, to the extent applicable.
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Section 10.04. Guarantors May Consolidate, etc., on Certain Terms.
No Guarantor may consolidate with or merge with or into (whether or
not such Guarantor is the surviving Person) another Person or entity whether or
not affiliated with such Guarantor unless:
(a) subject to Section 10.04 hereof, the Person formed by or surviving any
such consolidation or merger (if other than a Guarantor or the Company) assumes
all the obligations of such Guarantor, pursuant to a supplemental indenture in
form and substance reasonably satisfactory to the Trustee, under the Notes, the
Indenture and the Subsidiary Guarantee on the terms set forth herein or therein;
(b) immediately after giving effect to such transaction, no Default or
Event of Default exists;
(c) except for a merger between Guarantors or between the Company and any
Guarantor, the Company would be permitted, immediately after giving effect to
such transaction, 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
(d) except for a merger between Guarantors or between the Company and any
Guarantor, such 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 Guarantor immediately preceding the transaction.
In 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 satisfactory in form to the Trustee, of the
Subsidiary Guarantee endorsed upon the Notes and the due and punctual
performance of all of the covenants and conditions of this Indenture to be
performed by the Guarantor, such successor Person shall succeed to and be
substituted for the Guarantor with the same effect as if it had been named
herein as a Guarantor. Such successor Person thereupon may cause to be signed
any or all of the Subsidiary Guarantees to be endorsed upon all of the Notes
issuable hereunder which theretofore shall not have been signed by the Company
and delivered to the Trustee. All the 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.
Except as set forth in Articles 4 and 5 hereof, and notwithstanding
clauses (a) and (b) above, nothing contained in this Indenture or in any of the
Notes shall prevent any consolidation or merger of a Guarantor with or into the
Company or another Guarantor, or shall prevent any sale or conveyance of the
property of a Guarantor as an entirety or substantially as an entirety to the
Company or another Guarantor.
Section 10.05. Releases Following Sale of Assets.
In the event of a sale or other disposition of all of the assets of
any Guarantor, by way of merger, consolidation or otherwise, or a sale or other
disposition of all of the capital stock of any Guarantor, then such Guarantor
(in the event of a sale or other disposition, by way of merger,
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consolidation or otherwise, of all of the capital stock of such Guarantor) or
the corporation acquiring the property (in the event of a sale or other
disposition of all or substantially all of the assets of such Guarantor) will be
released and relieved of any obligations under its Subsidiary Guarantee;
provided that the Net Proceeds of such sale or other disposition are applied in
accordance with the applicable provisions of this Indenture, including without
limitation Section 4.10 hereof. Upon delivery by the Company to the Trustee of
an Officers' Certificate and an Opinion of Counsel to the effect that such sale
or other disposition was made by the Company in accordance with the applicable
provisions of this Indenture, including without limitation Section 4.10 hereof,
the Trustee shall execute any documents reasonably required in order to evidence
the release of any Guarantor from its obligations under its Subsidiary
Guarantee.
Any Guarantor not released from its obligations under its Subsidiary
Guarantee shall remain liable for the full amount of principal of and interest
on the Notes and for the other obligations of any Guarantor under this Indenture
as provided in this Article 10.
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 (S) 318(c), the imposed duties shall control.
Section 11.02. Notices.
Any notice or communication by the Company, any 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),
telex, telecopier or overnight air courier guaranteeing next day delivery, to
the others' address
If to the Company and/or any Guarantor:
Elgin National Industries, Inc.
2001 Butterfield Road, Suite 1020
Downers Grove, Illinois 60515-1050
Telecopier No.: (630) 434-7272
Attention: Wayne Conner
With a copy to:
Mayer, Brown & Platt
190 LaSalle Street, Suite 3100
Chicago, Illinois 60603
Telecopier No.: (312) 701-7711
Attention: Paul Theiss
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If to the Trustee:
Norwest Bank Minnesota, National Association
6th & Marquette
Minneapolis, Minnesota 55479-0069
Telecopier No.:(612) 667-9825
Attention: Trust Department
The Company, any 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 Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar. Any notice or communication shall also be so mailed to any
Person described in TIA (S) 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.
Section 11.03. Communication by Holders of Notes with Other Holders of Notes.
Holders may communicate pursuant to TIA (S) 312(b) with other Holders
with respect to their rights under this Indenture or the Notes. The Company,
the Trustee, the Registrar and all other lessors shall have the protection of
TIA (S) 312(c).
Section 11.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 11.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; 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.
69
<PAGE>
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 (S) 314(a)(4)) shall comply with the provisions of TIA
(S) 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 past, present or future director, officer, employee, incorporator
or stockholder of the Company or any Guarantor, as such, shall have any
liability for any obligations of the Company or such Guarantor under the Notes,
the Subsidiary Guarantees, this Indenture or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each Holder by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the Notes.
Section 11.08. Governing Law.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES WITHOUT GIVING
EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
Section 11.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret any other indenture, loan
or debt agreement of the Company or its Subsidiaries or of any other Person.
Any such indenture, loan or debt agreement may not be used to interpret this
Indenture.
70
<PAGE>
Section 11.10. Successors.
All agreements of the Company in this Indenture and the Notes shall
bind its successors. All agreements of the Trustee in this Indenture shall bind
its successors.
Section 11.11. Severability.
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 11.12. Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
Section 11.13. Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part of this Indenture and shall in
no way modify or restrict any of the terms or provisions hereof.
[Signatures on following page]
71
<PAGE>
SIGNATURES
Dated as of November 5, 1997
Elgin National Industries, Inc.
By: /s/ Charles D. Hall
-----------------------------
Name: Charles D. Hall
Title: President and Chief Operating
Officer
Attest:
/s/ Lynn C. Batory
- -----------------------------
Name: Lynn C. Batory
Title: Vice President and
Secretary
Tabor Machine Company
By: /s/ Charles D. Hall
-----------------------------
Name: Charles D. Hall
Title: Senior Vice President
Attest:
/s/ Lynn C. Batory
- -----------------------------
Name: Lynn C. Batory
Title: Assistant Secretary
Norris Screen and Manufacturing, Inc.
By: /s/ Charles D. Hall
-----------------------------
Name: Charles D. Hall
Title: Senior Vice President
Attest:
/s/ Lynn C. Batory
- -----------------------------
Name: Lynn C. Batory
Title: Assistant Secretary
72
<PAGE>
TranService, Inc.
By: /s/ Charles D. Hall
----------------------------
Name: Charles D. Hall
Title: Senior Vice President
Attest:
/s/ Lynn C. Batory
_________________________
Name: Lynn C. Batory
Title: Assistant Secretary
Centrifugal Services, Inc.
By: /s/ Charles D. Hall
----------------------------
Name: Charles D. Hall
Title: Senior Vice President and
Chief Operating Officer
Attest:
/s/ Lynn C. Batory
_________________________
Name: Lynn C. Batory
Title: Vice President and Secretary
Mining Controls, Inc.
By: /s/ Charles D. Hall
----------------------------
Name: Charles D. Hall
Title: Senior Vice President
Attest:
/s/ Lynn C. Batory
_________________________
Name: Lynn C. Batory
Title: Assistant Secretary
Clinch River Corporation.
By: /s/ Charles D. Hall
----------------------------
Name: Charles D. Hall
Title: Senior Vice President
Attest:
/s/ Lynn C. Batory
_________________________
Name: Lynn C. Batory
Title: Secretary
73
<PAGE>
Roberts & Schaefer Company
By: /s/ Charles D. Hall
----------------------------
Name: Charles D. Hall
Title: Senior Vice President
Attest:
/s/ Lynn C. Batory
_________________________
Name: Lynn C. Batory
Title: Assistant Secretary
Soros Associates, Inc.
By: /s/ Charles D. Hall
----------------------------
Name: Charles D. Hall
Title: Senior Vice President
Attest:
/s/ Lynn C. Batory
_________________________
Name: Lynn C. Batory
Title: Assistant Secretary
Norwest Bank Minnesota, National
Association, as Trustee
By: /s/ Curtis D. Schwegman
----------------------------
Name: Curtis D. Schwegman
Title: Assistant Vice President
The undersigned, by its duly authorized officer, hereby agrees that,
upon the effectiveness of the ENI Merger, the undersigned assumes all
obligations of Elgin National Industries, Inc. under the Notes and the Indenture
and shall be substituted for Elgin National Industries, Inc. for all purposes of
the Indenture, as contemplated by Section 5.02 hereof.
ENI Holding Corp.
By: /s/ Charles D. Hall
----------------------------
Name: Charles D. Hall
Title: Vice President and Chief
Operating Officer
74
<PAGE>
EXHIBIT A-1
(Face of Note)
================================================================================
CUSIP/CINS
11% [Series A] [Series B] Senior Notes due 2007
No.______ $________
ELGIN NATIONAL INDUSTRIES, INC.
promises to pay to ________________________________________________
or registered assigns,
the principal sum of ________________________________________________
Dollars on November 1, 2007.
Interest Payment Dates: May 1 and November 1
Record Dates: April 15 and October 15
Dated: November 5, 1997
ELGIN NATIONAL INDUSTRIES, INC.
By:
-------------------------------
Name:
Title:
By:
-------------------------------
Name:
Title:
This is one of the Global
Notes referred to in the
within-mentioned Indenture:
Norwest Bank Minnesota, National Association
as Trustee
By:___________________________________
================================================================================
A1-1
<PAGE>
(Back of Note)
11% [Series A] [Series B] Senior Notes due 2007
[Insert the Global Note Legend, if applicable pursuant to the provisions of the
Indenture]
[Insert the Private Placement Legend, if applicable pursuant to the provisions
of the Indenture]
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. Interest. Elgin National Industries, Inc., a Delaware corporation
(the "Company"), promises to pay interest on the principal amount of this Note
at 11% per annum from November 5, 1997 until maturity and shall pay the
Liquidated Damages payable pursuant to Section 5 of the Registration Rights
Agreement referred to below. The Company will pay interest and Liquidated
Damages, if any, semi-annually on May 1 and November 1 of each year, or if any
such day is not a Business Day, on the next succeeding Business Day (each an
"Interest Payment Date"). Interest on this Notes will accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from the date of issuance; provided that if there is no existing Default in the
payment of interest, and if this Note is authenticated between a record date
referred to on the face hereof and the next succeeding Interest Payment Date,
interest shall accrue from such next succeeding Interest Payment Date; provided,
further, that the first Interest Payment Date shall be May 1, 1998. The Company
shall pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time on
demand at a rate that is 1% per annum in excess of the rate then in effect; it
shall pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Liquidated Damage, if
any (without regard to any applicable grace periods), from time to time on
demand at the same rate to the extent lawful. Interest will be computed on the
basis of a 360-day year of twelve 30-day months.
2. Method of Payment. The Company will pay interest on this Notes
(except defaulted interest) and Liquidated Damages, if any, to the Persons who
are registered Holders of Notes at the close of business on the 15th of April or
15th of October next preceding the Interest Payment Date, even if this Note is
cancelled after such record date and on or before such Interest Payment Date,
except as provided in Section 2.12 of the Indenture with respect to defaulted
interest. This Notes will be payable as to principal, premium, 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 will be required with respect to principal of and interest,
premium and Liquidated Damages, if any, on all Global Notes and all other Notes
the Holders of which shall have provided wire transfer instructions to the
Company or the Paying Agent. Such payment shall be in such coin or currency of
the United States of America as at the time of payment is legal tender for
payment of public and private debts.
3. Paying Agent and Registrar. Initially, Norwest Bank Minnesota,
National Association, the Trustee under the Indenture, will 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.
A1-2
<PAGE>
4. Indenture. The Company issued this Note under an Indenture dated
as of November 5, 1997 ("Indenture") between the Company and the Trustee. The
terms of this Note include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939, as amended (15
U.S. Code (S)(S) 77aaa-77bbbb). This Note are subject to all such terms, and
Holders are referred to the Indenture and such Act for a statement of such
terms. To the extent any provision of this Note conflicts with the express
provisions of the Indenture, the provisions of the Indenture shall govern and be
controlling. The Notes are obligations of the Company limited to $85,000,000.00
in aggregate principal amount.
5. Optional Redemption.
(a) Except as set forth in subparagraph (b) of this Paragraph 5, the
Company shall not have the option to redeem the Notes prior to November 1, 2002.
Thereafter, the Company shall have the option, upon not less than 30 and not
more than 60 days' notice, to redeem the Notes, in whole or in part, at the
redemption prices (expressed as percentages of principal amount) set forth below
plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the
applicable redemption date, if redeemed during the twelve-month period beginning
on November 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>
(b) Notwithstanding the provisions of subparagraph (a) of this
Paragraph 5, at any time prior to November 1, 2000, the Company may redeem Notes
up to an aggregate of $25.0 million in aggregate principal amount of Notes, at a
redemption price of 111.000% of the principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the redemption date,
with the net cash proceeds of one or more public offerings of common stock of
the Company; provided that at least $60.0 million in aggregate principal amount
of Notes remains outstanding immediately after the occurrence of such
redemption; and provided, further, that such redemption shall occur within 45
days of the date of the closing of each such public offering.
6. Mandatory Redemption.
Except as set forth in paragraph 7 below, the Company shall not be
required to make mandatory redemption payments with respect to this Note.
7. Repurchase at Option of Holder.
(a) If there is a Change of Control, the Company shall be required to
make an offer (a "Change of Control Offer") to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of each Holder's Notes at a purchase
price equal to 101% of the aggregate principal amount thereof plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the date of purchase
(the "Change of Control Payment"). Within 20 days following any Change of
Control, the Company shall mail a notice to each Holder setting forth the
procedures governing the Change of Control Offer as required by the Indenture.
A1-3
<PAGE>
(b) If the Company or a Restricted Subsidiary consummates any Asset
Sales, within five days of each date on which the aggregate amount of Excess
Proceeds exceeds $10 million, the Company shall commence an offer (pro rata in
proportion to the principal amount (or accreted value, if applicable)
outstanding in respect of any asset sale offer required by the terms of any pari
passu Indebtedness incurred in accordance with the Indenture) to all Holders of
Notes (an "Asset Sale Offer"), pursuant to Section 3.09 of the Indenture to
purchase the maximum principal amount of Notes that may be purchased out of the
Excess Proceeds, at an offer price in cash in an amount equal to 100% of the
principal amount thereof plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the date fixed for the closing of such offer, in accordance
with the procedures set forth in the Indenture. To the extent that the aggregate
amount of Notes tendered pursuant to an Asset Sale Offer is less than the Excess
Proceeds, the Company (or such Restricted Subsidiary) may use such deficiency
for general corporate purposes. If the aggregate principal amount of Notes
surrendered by Holders thereof exceeds the amount of Excess Proceeds (after
giving effect to any pro rata payment with respect to pari passu Indebtedness as
aforesaid), the Trustee shall select the Notes to be purchased on a pro rata
basis. Holders of Notes that are the subject of an offer to purchase will
receive an Asset Sale Offer from the Company prior to any related purchase date
and may elect to have such Notes purchased by completing the form entitled
"Option of Holder to Elect Purchase" on the reverse of this Note.
8. Notice of Redemption. Notice of redemption will be mailed at least
30 days but not more than 60 days before the redemption date to each Holder
whose Notes are to be redeemed at its registered address. Notes in denominations
larger than $1,000 may be redeemed in part but only in whole multiples of
$1,000, unless all of the Notes held by a Holder are to be redeemed. On and
after the redemption date interest ceases to accrue on Notes or portions thereof
called for redemption.
9. Denominations, Transfer, Exchange. The Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of the Notes may be registered and this Note may be
exchanged as provided in the Indenture. The Registrar and the Trustee may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and the Company may require a Holder to pay any taxes and
fees required by law or permitted by the Indenture. The Company need not
exchange or register the transfer of any Note or portion of a Note selected for
redemption, except for the unredeemed portion of any Note being redeemed in
part. Also, the Company need not exchange or register the transfer of any Notes
for a period of 15 days before a selection of Notes to be redeemed or during the
period between a record date and the corresponding Interest Payment Date.
10. Persons Deemed Owners. The registered Holder of a Note may be
treated as its owner for all purposes.
11. Amendment, Supplement and Waiver. Subject to certain exceptions,
the Indenture, the Subsidiary Guarantees or the Notes may be amended or
supplemented with the consent of the Holders of at least a majority in principal
amount of the then outstanding Notes voting as a single class, and any existing
default or compliance with any provision of the Indenture, the Subsidiary
Guarantees or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes voting as a single
class. Without the consent of any Holder of a Note, the Indenture, the
Subsidiary Guarantees or the Notes may be amended or supplemented to cure any
ambiguity, defect or inconsistency, to provide for uncertificated Notes in
addition to or in place of certificated Notes, to provide for the assumption of
the Company's or Guarantor's obligations to Holders of the Notes in case of a
merger or consolidation, to make any change that would provide any additional
rights or benefits to the Holders of the Notes or that does not adversely affect
the legal rights under the
A1-4
<PAGE>
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 Guarantor to execute a supplemental
indenture to the Indenture and/or a Subsidiary Guarantee with respect to the
Notes.
12. Defaults and Remedies. Events of Default include: (i) default for
30 days in the payment when due of interest or Liquidated Damages on the Notes;
(ii) default in payment when due of principal of or premium, if any, on the
Notes when the same becomes due and payable at maturity, upon redemption
(including in connection with an offer to purchase) or otherwise, (iii) failure
by the Company to comply with Section 4.07, 4.09, 4.10, 4.15 or 5.01 of the
Indenture, which failure remains uncured for 30 days; (iv) failure by the
Company for 60 days after notice to the Company by the Trustee or the Holders of
at least 25% in principal amount of the Notes then outstanding voting as a
single class to comply with certain other agreements in the Indenture or the
Notes; (v) default under certain other agreements relating to Indebtedness of
the Company which default results in the acceleration of such Indebtedness prior
to its express maturity; (vi) certain final judgments for the payment of money
that remain undischarged for a period of 60 days; (vii) certain events of
bankruptcy or insolvency with respect to the Company or any of its Significant
Subsidiaries; and (viii) except as permitted by the Indenture, any Subsidiary
Guarantee shall be held in any judicial proceeding to be unenforceable or
invalid or shall cease for any reason to be in full force and effect or any
Guarantor or any Person acting on its behalf shall deny or disaffirm its
obligations under such Guarantor's 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 Notes may declare all the Notes to be
due and payable. Notwithstanding the foregoing, in the case of an Event of
Default arising from certain events of bankruptcy or insolvency, all outstanding
Notes will become due and payable without further action or notice. Holders may
not enforce the Indenture or the Notes except as provided in the Indenture.
Subject to certain limitations, Holders of a majority in principal amount of the
then outstanding Notes may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Holders of the Notes notice of any
continuing Default or Event of Default (except a Default or Event of Default
relating to the payment of principal or interest) if it determines that
withholding notice is in their interest. The Holders of a majority in aggregate
principal amount of the Notes then outstanding by notice to the Trustee may, on
behalf of the Holders of all of the Notes, waive any existing Default or Event
of Default and its consequences under the Indenture except a continuing Default
or Event of Default in the payment of the principal of, premium and Liquidated
Damages, if any, or interest on the Notes. The Company is required to deliver to
the Trustee annually a statement regarding compliance with the Indenture, and
the Company is required upon becoming aware of any Default or Event of Default,
to deliver to the Trustee a statement specifying such Default or Event of
Default.
13. Trustee Dealings with Company. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
14. No Recourse Against Others. A director, officer, employee,
incorporator or stockholder, of the Company or any of the Guarantors, as such,
shall not have any liability for any obligations of the Company or such
Guarantor under this Note, the Subsidiary Guarantees or the Indenture or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of this Note.
A1-5
<PAGE>
15. Authentication. This Note shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
16. Abbreviations. Customary abbreviations may be used in the name of
a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
17. Additional Rights of Holders of Restricted Global Notes and
Restricted Definitive Notes. In addition to the rights provided to Holders of
Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the Registration Rights
Agreement.
18. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will 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:
If to the Company and/or any Guarantor:
Elgin National Industries, Inc.
2001 Butterfield Road, Suite 1020
Downers Grove, Illinois 60515-1050
Telecopier No.: (630) 434-7272
Attention: Wayne Conner
If to the Trustee:
Norwest Bank Minnesota, National Association
6th & Marquette
Minneapolis, Minnesota 55479-0069
Telecopier No.:(612) 667-9825
Attention: Trust Department
A1-6
<PAGE>
Assignment Form
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
--------------------------------------------------------
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date:
----------------
Your Signature:
-----------------------------
(Sign exactly as your name appears on the
face of this Note)
Signature Guarantee.
A1-7
<PAGE>
Option of Holder to Elect Purchase
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10 or Section 4.15 of the Indenture, check the box below:
[_] Section 4.10 [_] Section 4.15
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.15 of the Indenture, state the amount you elect to
have purchased: $________
Date: Your Signature:
---------- --------------------------
(Sign exactly as your name
appears on the Note)
Tax Identification No:
---------------------
Signature Guarantee.
A1-8
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE
The following exchanges of a part of this Global Note for an interest
in another Global Note or for a Definitive Note, or exchanges of a part of
another Global Note or Definitive Note for an interest in this Global Note, have
been made:
<TABLE>
<CAPTION>
Principal Amount
Amount of Amount of increase of
decrease in in Principal this Global Note Signature of
Principal Amount Amount following such authorized officer
of of decrease (or of Trustee or
Date of Exchange this Global Note this Global Note increase) Note Custodian
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
A1-9
<PAGE>
EXHIBIT A-2
(Face of Regulation S Temporary Global Note)
================================================================================
CUSIP/CINS
========
11% [Series A] [Series B] Senior Notes due 2007
No. $
------- -----------
ELGIN NATIONAL INDUSTRIES, INC.
promises to pay to
-------------------------------------------
or registered assigns,
the principal sum of
-----------------------------------------
Dollars on November 1, 2007.
Interest Payment Dates: May 1 and November 1
Record Dates: April 15 and October 15
DATED: November 5, 1997
ELGIN NATIONAL INDUSTRIES, INC.
By:
----------------------------
Name:
Title:
By:
----------------------------
Name:
Title:
This is one of the Global
Notes referred to in the
within-mentioned Indenture:
Norwest Bank Minnesota, National Association
as Trustee
By:
----------------------------
================================================================================
A2-1
<PAGE>
(Back of Regulation S Temporary Global Note)
11% [Series A] [Series B] Senior Notes due 2007
[Insert the Global Note Legend, if applicable pursuant to the provisions of the
Indenture]
[Insert the Private Placement Legend, if applicable pursuant to the provisions
of the Indenture]
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. Interest. Elgin National Industries, Inc., a Delaware corporation
(the "Company"), promises to pay interest on the principal amount of this Note
at 11% per annum from November 5, 1997 until maturity and shall pay the
Liquidated Damages payable pursuant to Section 5 of the Registration Rights
Agreement referred to below. The Company will pay interest and Liquidated
Damages, if any, semi-annually on May 1 and November 1, of each year, or if any
such day is not a Business Day, on the next succeeding Business Day (each an
"Interest Payment Date"). Interest on this Note will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from the
date of issuance; provided that if there is no existing Default in the payment
of interest, and if this Note is authenticated between a record date referred to
on the face hereof and the next succeeding Interest Payment Date, interest shall
accrue from such next succeeding Interest Payment Date; provided, further, that
the first Interest Payment Date shall be May 1, 1998. The Company shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time on
demand at a rate that is 1% per annum in excess of the rate then in effect; it
shall pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Liquidated Damages, if
any (without regard to any applicable grace periods), from time to time on
demand at the same rate to the extent lawful. Interest will be computed on the
basis of a 360-day year of twelve 30-day months.
Until this Regulation S Temporary Global Note is exchanged for one or
more Regulation S Permanent Global Notes, the Holder hereof shall not be
entitled to receive payments of interest hereon; 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 Subordinated Notes under the Indenture.
2. Method of Payment. The Company will pay interest on this Note
(except defaulted interest) and Liquidated Damages, if any, to the Persons who
are registered Holders of Notes at the close of business on the 15th of April or
15th of October next preceding the Interest Payment Date, even if the Notes are
cancelled after such record date and on or before such Interest Payment Date,
except as provided in Section 2.12 of the Indenture with respect to defaulted
interest. This Note will be payable as to principal, premium, 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 will be required with respect to principal of and interest,
premium and Liquidated Damages, if any, on, all Global Notes and all other Notes
the Holders of which shall have provided wire transfer instructions to the
Company or the Paying Agent. Such payment shall be in such coin or currency of
the United States of America as at the time of payment is legal tender for
payment of public and private debts.
A2-2
<PAGE>
3. Paying Agent and Registrar. Initially, Norwest Bank, National
Association, the Trustee under the Indenture, will 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 this Note under an Indenture dated
as of November 5, 1997 ("Indenture") between the Company and the Trustee. The
terms of this Note include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939, as amended (15
U.S. Code (S)(S) 77aaa-77bbbb). This Note is subject to all such terms, and
Holders are referred to the Indenture and such Act for a statement of such
terms. To the extent any provision of this Note conflicts with the express
provisions of the Indenture, the provisions of the Indenture shall govern and be
controlling. The Notes are obligations of the Company limited to $85,000,000.00
in aggregate principal amount.
5. Optional Redemption.
(a) Except as set forth in subparagraph (b) of this Paragraph 5, the
Company shall not have the option to redeem the Notes prior to November 1, 2002.
Thereafter, the Company shall have the option, upon not less than 30 and not
more than 60 days' notice, to redeem the Notes, in whole or in part, at the
redemption prices (expressed as percentages of principal amount) set forth below
plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the
applicable redemption date, if redeemed during the twelve-month period beginning
on November 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>
(b) Notwithstanding the provisions of subparagraph (a) of this
Paragraph 5, at any time prior to November 1, 2000, the Company may redeem Notes
up to an aggregate of $25.0 million in aggregate principal amount of Notes, at a
redemption price of 111.000% of the principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the redemption date,
with the net cash proceeds of one or more public offerings of common stock of
the Company; provided that at least $60.0 million in aggregate principal amount
of Notes remains outstanding immediately after the occurrence of such
redemption; and provided, further, that such redemption shall occur within 45
days of the date of the closing of each such public offering.
6. Mandatory Redemption.
Except as set forth in paragraph 7 below, the Company shall not be
required to make mandatory redemption payments with respect to this Notes.
7. Repurchase at Option of Holder.
(a) If there is a Change of Control, the Company shall be required to
make an offer (a "Change of Control Offer") to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of each Holder's Notes at a purchase
price equal to 101% of the aggregate principal amount thereof plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the date of purchase
A2-3
<PAGE>
(the "Change of Control Payment"). Within 20 days following any Change of
Control, the Company shall mail a notice to each Holder setting forth the
procedures governing the Change of Control Offer as required by the Indenture.
(b) If the Company or a Restricted Subsidiary consummates any Asset
Sales, within five days of each date on which the aggregate amount of Excess
Proceeds exceeds $10 million, the Company shall commence an offer (pro rata in
proportion to the principal amount (or accreted value, if applicable)
outstanding in respect of any asset sale offer required by the terms of any pari
passu Indebtedness incurred in accordance with the Indenture) to all Holders of
Notes (an "Asset Sale Offer"), pursuant to Section 3.09 of the Indenture, to
purchase the maximum principal amount of Notes that may be purchased out of the
Excess Proceeds at an offer price in cash in an amount equal to 100% of the
principal amount thereof plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the date fixed for the closing of such offer, in accordance
with the procedures set forth in the Indenture. To the extent that the aggregate
amount of Notes tendered pursuant to an Asset Sale Offer is less than the Excess
Proceeds, the Company (or such Restricted Subsidiary) may use such deficiency
for general corporate purposes. If the aggregate principal amount of Notes
surrendered by Holders thereof exceeds the amount of Excess Proceeds (after
giving effect to any pro rata payment with respect to pari passu Indebtedness as
aforesaid), the Trustee shall select the Notes to be purchased on a pro rata
basis. Holders of Notes that are the subject of an offer to purchase will
receive an Asset Sale Offer from the Company prior to any related purchase date
and may elect to have such Notes purchased by completing the form entitled
"Option of Holder to Elect Purchase" on the reverse of this Note.
8. Notice of Redemption. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the redemption date to each
Holder whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on Notes or
portions thereof called for redemption.
9. Denominations, Transfer, Exchange. This Note is in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Notes may be registered and this Note may be exchanged
as provided in the Indenture. The Registrar and the Trustee may require a
Holder, among other things, to furnish appropriate endorsements and transfer
documents and the Company may require a Holder to pay any taxes and fees
required by law or permitted by the Indenture. The Company need not exchange or
register the transfer of any Note or portion of a Note selected for redemption,
except for the unredeemed portion of any Note being redeemed in part. Also, the
Company need not exchange or register the transfer of any Notes for a period of
15 days before a selection of Notes to be redeemed or during the period between
a record date and the corresponding Interest Payment Date.
This Regulation S Temporary Global Note is exchangeable in whole or in
part for one or more 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 Global Notes, the Trustee shall cancel this
Regulation S Temporary Global Note.
10. Persons Deemed Owners. The registered Holder of a Note may be
treated as its owner for all purposes.
A2-4
<PAGE>
11. Amendment, Supplement and Waiver. Subject to certain exceptions,
the Indenture, the Subsidiary Guarantees or the Notes may be amended or
supplemented with the consent of the Holders of at least a majority in principal
amount of the then outstanding Notes voting as a single class, and any existing
default or compliance with any provision of the Indenture, the Subsidiary
Guarantees or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes voting as a single
class. Without the consent of any Holder of a Note, the Indenture, the
Subsidiary Guarantees or the Notes may be amended or supplemented to cure any
ambiguity, defect or inconsistency, to provide for uncertificated Notes in
addition to or in place of certificated Notes, to provide for the assumption of
the Company's obligations to Holders of the Notes in case of a merger or
consolidation, to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights under the Indenture of any such Holder, to comply with the requirements
of the Commission in order to effect or maintain the qualification of the
Indenture under the Trust Indenture Act or to allow any Guarantor to execute a
supplemental indenture to the Indenture and/or a Subsidiary Guarantee with
respect to the Notes.
12. Defaults and Remedies. Events of Default include: (i) default
for 30 days in the payment when due of interest or Liquidated Damages on the
Notes; (ii) default in payment when due of principal of or premium, if any, on
the Notes when the same becomes due and payable at maturity, upon redemption
(including in connection with an offer to purchase) or otherwise, (iii) failure
by the Company to comply with Section 4.07, 4.09, 4.10, 4.15 or 5.01 of the
Indenture, which failure remains uncured for 30 days; (iv) failure by the
Company for 60 days after notice to the Company by the Trustee or the Holders of
at least 25% in principal amount of the Notes then outstanding to comply with
certain other agreements in the Indenture or the Notes; (v) default under
certain other agreements relating to Indebtedness of the Company which default
results in the acceleration of such Indebtedness prior to its express maturity;
(vi) certain final judgments for the payment of money that remain undischarged
for a period of 60 days; (vii) certain events of bankruptcy or insolvency with
respect to the Company or any of its Significant Subsidiaries; and (viii) except
as permitted by the Indenture, any Subsidiary Guarantee shall be held in any
judicial proceeding to be unenforceable or invalid or shall cease for any reason
to be in full force and effect or any Guarantor or any Person acting on its
behalf shall deny or disaffirm its obligations under the Guarantor's 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 Notes may
declare all the Notes to be due and payable. Notwithstanding the foregoing, in
the case of an Event of Default arising from certain events of bankruptcy or
insolvency, all outstanding Notes will become due and payable without further
action or notice. Holders may not enforce the Indenture or the Notes except as
provided in the Indenture. Subject to certain limitations, Holders of a majority
in principal amount of the then outstanding Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of the
Notes notice of any continuing Default or Event of Default (except a Default or
Event of Default relating to the payment of principal or interest) if it
determines that withholding notice is in their interest. The Holders of a
majority in aggregate principal amount of the Notes then outstanding by notice
to the Trustee may, on behalf of the Holders of all of the Notes, waive any
existing Default or Event of Default and its consequences under the Indenture
except a continuing Default or Event of Default in the payment of the principal
of, premium and Liquidated Damages, if any, or interest on the Notes. The
Company is required to deliver to the Trustee annually a statement regarding
compliance with the Indenture, and the Company is required upon becoming aware
of any Default or Event of Default, to deliver to the Trustee a statement
specifying such Default or Event of Default.
A2-5
<PAGE>
13. Trustee Dealings with Company. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
14. No Recourse Against Others. A director, officer, employee,
incorporator or stockholder, of the Company or any of the Guarantors, as such,
shall not have any liability for any obligations of the Company or such
Guarantor under this Note, the Subsidiary Guarantees or the Indenture or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of this Note.
15. Authentication. This Note shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
16. Abbreviations. Customary abbreviations may be used in the name
of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
17. Additional Rights of Holders of Restricted Global Notes and
Restricted Definitive Notes. In addition to the rights provided to Holders of
Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the Registration Rights
Agreement.
18. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will 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:
If to the Company and/or any Guarantor:
Elgin National Industries, Inc.
2001 Butterfield Road, Suite 1020
Downers Grove, Illinois 60515-1050
Telecopier No.: (630) 434-7272
Attention: Wayne Conner
A2-6
<PAGE>
If to the Trustee:
Norwest Bank Minnesota, National Association
6th & Marquette
Minneapolis, Minnesota 55479-0069
Telecopier No.:(612) 667-9825
Attention: Trust Department
A2-7
<PAGE>
Assignment Form
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
---------------------------------------------------------
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
- --------------------------------------------------------------------------------
Date:
------------------------
Your Signature:
----------------------------
(Sign exactly as your name appears on the face of this Note)
Signature Guarantee.
A2-8
<PAGE>
Option of Holder to Elect Purchase
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10 or Section 4.15 of the Indenture, check the appropriate
box below:
[_] Section 4.10 [_] Section 4.15
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.15 of the Indenture, state the amount you elect to
have purchased: $
------------
- --------------------------------------------------------------------------------
Date: Your Signature:
----------------- ----------------------------
(Sign exactly as your name appears on the Note)
Tax Identification No.:
-------------------
Signature Guarantee.
A2-9
<PAGE>
SCHEDULE OF EXCHANGES OF REGULATION S TEMPORARY GLOBAL NOTE
The following exchanges of a part of this Regulation S Temporary
Global Note for an interest in another Global Note, or of other Restricted
Global Notes for an interest in this Regulation S Temporary Global Note, have
been made:
<TABLE>
<CAPTION>
Amount of Principal Amount
decrease in Amount of increase of this Signature of
Principal Amount in Principal Amount Global Note authorized officer
of of following such of Trustee or Note
Date of Exchange this Global Note this Global Note decrease (or increase) Custodian
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
A2-10
<PAGE>
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Elgin National Industries, Inc.
2001 Butterfield Road, Suite 1020
Downers Grove, Illinois 60515-1050
[Registrar address block]
Re: 11% Senior Notes due 2007 of Elgin National Industries, Inc.
------------------------------------------------------------
Reference is hereby made to the Indenture, dated as of November 5,
1997 (the "Indenture"), between Elgin National Industries, Inc., as issuer (the
"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.
______________, (the "Transferor") owns and proposes to transfer the
Note[s] or interest in such Note[s] specified in Annex A hereto, in the
principal amount of $___________ in such Note[s] or interests (the "Transfer"),
to __________ (the "Transferee"), as further specified in Annex A hereto. In
connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. [_] Check if Transferee will take delivery of a beneficial interest in the
144A Global Note or a Definitive Note Pursuant to Rule 144A. The Transfer is
being effected pursuant to and in accordance with Rule 144A under the United
States Securities Act of 1933, as amended (the "Securities Act"), and,
accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Note is being transferred to a Person that the Transferor
reasonably believed and believes is purchasing the beneficial interest or
Definitive Note for its own account, or for one or more accounts with respect to
which such Person exercises sole investment discretion, and such Person and each
such account is a "qualified institutional buyer" within the meaning of Rule
144A in a transaction meeting the requirements of Rule 144A and such Transfer is
in compliance with any applicable blue sky securities laws of any state of the
United States. Upon consummation of the proposed Transfer in accordance with
the terms of the Indenture, the transferred beneficial interest or Definitive
Note will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the 144A Global Note and/or the Definitive Note and
in the Indenture and the Securities Act.
2. [_] Check if Transferee will take delivery of a beneficial interest in the
Temporary Regulation S Global Note, the Regulation S Global Note or a Definitive
Note pursuant to Regulation S. The Transfer is being effected pursuant to and
in accordance with Rule 903 or Rule 904 under the Securities Act and,
accordingly, the Transferor hereby further certifies that (i) the Transfer is
not being made to a person in the United States and (x) at the time the buy
order was originated, the Transferee was outside the United States or such
Transferor and any Person acting on its behalf reasonably believed and believes
that the Transferee was outside the United States or (y) the transaction was
executed in, on or through the facilities of a designated offshore securities
market and neither such Transferor nor any Person acting on its behalf knows
that the transaction was prearranged with a buyer in the United States, (ii) no
directed selling efforts have been made in contravention of the requirements of
B-1
<PAGE>
Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act and, (iii)
the transaction is not part of a plan or scheme to evade the registration
requirements of the Securities Act and (iv) if the proposed transfer is being
made prior to the expiration of the Restricted Period, the transfer is not being
made to a U.S. Person or for the account or benefit of a U.S. Person (other than
an Initial Purchaser). Upon consummation of the proposed transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will be subject to the restrictions on Transfer enumerated in
the Private Placement Legend printed on the Regulation S Global Note, the
Temporary Regulation S Global Note and/or the Definitive Note and in the
Indenture and the Securities Act.
3. [ ] Check and complete if Transferee will take delivery of a beneficial
interest in the IAI Global Note or a Definitive Note pursuant to any provision
of the Securities Act other than Rule 144A or Regulation S. The Transfer is
being effected in compliance with the transfer restrictions applicable to
beneficial interests in Restricted Global Notes and Restricted Definitive Notes
and pursuant to and in accordance with the Securities Act and any applicable
blue sky securities laws of any state of the United States, and accordingly the
Transferor hereby further certifies that (check one):
(a) [ ] such Transfer is being effected pursuant to and in accordance
with Rule 144 under the Securities Act;
or
(b) [ ] such Transfer is being effected to the Company or a
subsidiary thereof;
or
(c) [ ] such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance with the
prospectus delivery requirements of the Securities Act;
or
(d) [ ] such Transfer is being effected to an Institutional
Accredited Investor and pursuant to an exemption from the registration
requirements of the Securities Act other than Rule 144A, Rule 144 or Rule 904,
and the Transferor hereby further certifies that it has not engaged in any
general solicitation within the meaning of Regulation D under the Securities Act
and the Transfer complies with the transfer restrictions applicable to
beneficial interests in a Restricted Global Note or Restricted Definitive Notes
and the requirements of the exemption claimed, which certification is supported
by (1) a certificate executed by the Transferee in the form of Exhibit D to the
Indenture and (2) if such Transfer is in respect of a principal amount of Notes
at the time of transfer of less than $250,000, an Opinion of Counsel provided by
the Transferor or the Transferee (a copy of which the Transferor has attached to
this certification), to the effect that such Transfer is in compliance with the
Securities Act. Upon consummation of the proposed transfer in accordance with
the terms of the Indenture, the transferred beneficial interest or Definitive
Note will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the IAI Global Note and/or the Definitive Notes and
in the Indenture and the Securities Act.
B-2
<PAGE>
4. [ ] Check if Transferee will take delivery of a beneficial interest in an
Unrestricted Global Note or of an Unrestricted Definitive Note.
(a) [ ] Check if Transfer is pursuant to Rule 144. (i) The Transfer is
being effected pursuant to and in accordance with Rule 144 under the Securities
Act and in compliance with the transfer restrictions contained in the Indenture
and any applicable blue sky securities laws of any state of the United States
and (ii) the restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act. Upon consummation of the proposed Transfer in accordance with
the terms of the Indenture, the transferred beneficial interest or Definitive
Note will no longer be subject to the restrictions on transfer enumerated in the
Private Placement Legend printed on the Restricted Global Notes, on Restricted
Definitive Notes and in the Indenture.
(b) [ ] Check if Transfer is Pursuant to Regulation S. (i) The
Transfer is being effected pursuant to and in accordance with Rule 903 or Rule
904 under the Securities Act and in compliance with the transfer restrictions
contained in the Indenture and any applicable blue sky securities laws of any
state of the United States and (ii) the restrictions on transfer contained in
the Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act. Upon consummation of the proposed
Transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will no longer be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the Restricted Global Notes, on Restricted Definitive Notes and in the
Indenture.
(c) [ ] Check if Transfer is Pursuant to Other Exemption. (i) The
Transfer is being effected pursuant to and in compliance with an exemption from
the registration requirements of the Securities Act other than Rule 144, Rule
903 or Rule 904 and in compliance with the transfer restrictions contained in
the Indenture and any applicable blue sky securities laws of any State of the
United States and (ii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will not be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes or Restricted Definitive Notes and in the Indenture.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
_____________________________
[Insert Name of Transferor]
By: _________________________
Name:
Title:
Dated:____________, ________
B-3
<PAGE>
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) [_] a beneficial interest in the:
(i) [_] 144A Global Note (CUSIP _________), or
(ii) [_] Regulation S Global Note (CUSIP _________), or
(iii) [_] IAI Global Note (CUSIP ________); or
(b) [_] a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) [_] a beneficial interest in the:
(i) [_] 144A Global Note (CUSIP ________), or
(ii) [_] Regulation S Global Note (CUSIP ________), or
(iii) [_] IAI Global Note (CUSIP ________); or
(iv) [_] Unrestricted Global Note (CUSIP ________); or
(b) [_] a Restricted Definitive Note; or
(c) [_] an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
B-4
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Elgin National Industries, Inc.
2001 Butterfield Road, Suite 1020
Downers Grove, Illinois 60515-1050
[Registrar address block]
Re: 11% Senior Notes due 2007 of Elgin National Industries, Inc.
------------------------------------------------------------
(CUSIP______________)
Reference is hereby made to the Indenture, dated as of (the
"Indenture"), between Elgin National Industries, Inc., as issuer (the
"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.
____________, (the "Owner") owns and proposes to exchange the Note[s]
or interest in such Note[s] specified herein, in the principal amount of
$____________ in such Note[s] or interests (the "Exchange"). In connection with
the Exchange, the Owner hereby certifies that:
1. Exchange of Restricted Definitive Notes or Beneficial Interests in a
Restricted Global Note for Unrestricted Definitive Notes or Beneficial Interests
in an Unrestricted Global Note
(a) [_] Check if Exchange is from beneficial interest in a Restricted
Global Note to beneficial interest in an Unrestricted Global Note. In
connection with the Exchange of the Owner's beneficial interest in a Restricted
Global Note for a beneficial interest in an Unrestricted Global Note in an equal
principal amount, the Owner hereby certifies (i) the beneficial interest is
being acquired for the Owner's own account without transfer, (ii) such Exchange
has been effected in compliance with the transfer restrictions applicable to the
Global Notes and pursuant to and in accordance with the United States Securities
Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
beneficial interest in an Unrestricted Global Note is being acquired in
compliance with any applicable blue sky securities laws of any state of the
United States.
(b) [_] Check if Exchange is from beneficial interest in a Restricted
Global Note to Unrestricted Definitive Note. In connection with the Exchange of
the Owner's beneficial interest in a Restricted Global Note for an Unrestricted
Definitive Note, the Owner hereby certifies (i) the Definitive Note is being
acquired for the Owner's own account without transfer, (ii) such Exchange has
been effected in compliance with the transfer restrictions applicable to the
Restricted Global Notes and pursuant to and in accordance with the Securities
Act, (iii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act and (iv) the Definitive Note is being acquired in compliance
with any applicable blue sky securities laws of any state of the United States.
C-1
<PAGE>
(c) [_] Check if Exchange is from Restricted Definitive Note to
beneficial interest in an Unrestricted Global Note. In connection with the
Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an
Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Notes and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the beneficial interest is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(d) [_] Check if Exchange is from Restricted Definitive Note to
Unrestricted Definitive Note. In connection with the Owner's Exchange of a
Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby
certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's
own account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
Unrestricted Definitive Note is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.
2. Exchange of Restricted Definitive Notes or Beneficial Interests in
Restricted Global Notes for Restricted Definitive Notes or Beneficial Interests
in Restricted Global Notes
(a) [_] Check if Exchange is from beneficial interest in a Restricted
Global Note to Restricted Definitive Note. In connection with the Exchange of
the Owner's beneficial interest in a Restricted Global Note for a Restricted
Definitive Note with an equal principal amount, the Owner hereby certifies that
the Restricted Definitive Note is being acquired for the Owner's own account
without transfer. Upon consummation of the proposed Exchange in accordance with
the terms of the Indenture, the Restricted Definitive Note issued will continue
to be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Restricted Definitive Note and in the Indenture
and the Securities Act.
(b) [_] Check if Exchange is from Restricted Definitive Note to
beneficial interest in a Restricted Global Note. In connection with the Exchange
of the Owner's Restricted Definitive Note for a beneficial interest in the
[CHECK ONE] "144A Global Note, "Regulation S Global Note, "IAI Global Note with
an equal principal amount, the Owner hereby certifies (i) the beneficial
interest is being acquired for the Owner's own account without transfer and (ii)
such Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Notes and pursuant to and in accordance with
the Securities Act, and in compliance with any applicable blue sky securities
laws of any state of the United States. Upon consummation of the proposed
Exchange in accordance with the terms of the Indenture, the beneficial interest
issued will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the relevant Restricted Global Note and in the
Indenture and the Securities Act.
C-2
<PAGE>
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
-----------------------------------------
[Insert Name of Owner]
By:
-------------------------------------
Name:
Title:
Dated: ________________, ____
C-3
<PAGE>
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Elgin National Industries, Inc.
2001 Butterfield Road, Suite 1020
Downers Grove, Illinois 60515-1050
[Registrar address block]
Re: 11% Senior Notes due 2007 of Elgin National Industries, Inc.
------------------------------------------------------------
Reference is hereby made to the Indenture, dated as of November 5,
1997 (the "Indenture"), between Elgin National Industries, Inc., as issuer (the
"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) [_] a beneficial interest in a Global Note, or
(b) [_] a Definitive Note,
we confirm that:
1. We understand that any subsequent transfer of the Notes or any
interest therein is subject to certain restrictions and conditions set forth in
the Indenture and the undersigned agrees to be bound by, and not to resell,
pledge or otherwise transfer the Notes or any interest therein except in
compliance with, such restrictions and conditions and the United States
Securities Act of 1933, as amended (the "Securities Act").
2. We understand that the offer and sale of the Notes have not been
registered under the Securities Act, and that the Notes and any interest therein
may not be offered or sold except as permitted in the following sentence. We
agree, on our own behalf and on behalf of any accounts for which we are acting
as hereinafter stated, that if we should sell the Notes or any interest therein,
we will do so only (A) to the Company or any subsidiary thereof, (B) in
accordance with Rule 144A under the Securities Act to a "qualified institutional
buyer" (as defined therein), (c) to an institutional "accredited investor" (as
defined below) that, prior to such transfer, furnishes (or has furnished on its
behalf by a U.S. broker-dealer) to you and to the Company a signed letter
substantially in the form of this letter and, if such transfer is in respect of
a principal amount of Notes, at the time of transfer of less than $100,000, or
if otherwise requested by the Company, an Opinion of Counsel in form reasonably
acceptable to the Company to the effect that such transfer is in compliance with
the Securities Act, (D) outside the United States in accordance with Rule 904 of
Regulation S under the Securities Act, (E) pursuant to the provisions of Rule
144(k) under the Securities Act or (F) pursuant to an effective registration
statement under the Securities Act, and we further agree to provide to any
person purchasing
D-1
<PAGE>
the Definitive Note or beneficial interest in a Global Note from us in a
transaction meeting the requirements of clauses (A) through (E) of this
paragraph a notice advising such purchaser that resales thereof are restricted
as stated herein.
3. We understand that, on any proposed resale of the Notes or
beneficial interest therein, or we will be required to furnish to you and the
Company such certifications, legal opinions and other information as you and the
Company may reasonably require to confirm that the proposed sale complies with
the foregoing restrictions. We further understand that the Notes purchased by
us will bear a legend to the foregoing effect. We further understand that any
subsequent transfer by us of the Notes or beneficial interest therein acquired
by us must be effected through one of the Placement Agents.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Notes, and we and
any accounts for which we are acting are each able to bear the economic risk of
our or its investment.
5. We are acquiring the Notes or beneficial interest therein
purchased by us for our own account or for one or more accounts (each of which
is an institutional "accredited investor") as to each of which we exercise sole
investment discretion.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.
-----------------------------------------
[Insert Name of Accredited Investor]
By:
-------------------------------------
Name:
Title:
Dated: __________________, ____
D-2
<PAGE>
EXHIBIT E
FORM OF NOTATION OF GUARANTEE
For value received, each Guarantor (which term includes any successor
Person under the Indenture) has, jointly and severally, unconditionally
guaranteed, to the extent set forth in the Indenture and subject to the
provisions in the Indenture dated as of November 5, 1997 (the "Indenture") among
ELGIN NATIONAL INDUSTRIES, INC. (the "Company"), the Guarantors listed on
Schedule G thereto and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as trustee
(the "Trustee"), (a) the due and punctual payment of the principal of, premium,
if any, and interest on the Notes (as defined in the Indenture), whether at
maturity, by acceleration, redemption or otherwise, the due and punctual payment
of interest on overdue principal and premium, and, to the extent permitted by
law, interest, and the due and punctual performance of all other obligations of
the Company to the Holders or the Trustee all in accordance with the terms of
the Indenture and (b) in case of any extension of time of payment or renewal of
any Notes or any of such other obligations, that the same will be promptly paid
in full when due or performed in accordance with the terms of the extension or
renewal, whether at stated maturity, by acceleration or otherwise. The
obligations of the Guarantors to the Holders of Notes and to the Trustee
pursuant to the Subsidiary Guarantee and the Indenture are expressly set forth
in Article 10 of the Indenture and reference is hereby made to the Indenture for
the precise terms of the Subsidiary Guarantee.
Tabor Machine Company
By:
-------------------------------------
Name:
Title:
Norris Screen and Manufacturing, Inc.
By:
-------------------------------------
Name:
Title:
TranService, Inc.
By:
-------------------------------------
Name:
Title:
Centrifugal Services, Inc.
By:
-------------------------------------
Name:
Title:
E-1
<PAGE>
Mining Controls, Inc.
By:
-------------------------------------
Name:
Title:
Clinch River Corporation
By:
-------------------------------------
Name:
Title:
Roberts & Schaefer Company
By:
-------------------------------------
Name:
Title:
Soros Associates, Inc.
By:
-------------------------------------
Name:
Title:
E-2
<PAGE>
EXHIBIT F
FORM OF SUPPLEMENTAL INDENTURE
TO BE DELIVERED BY SUBSEQUENT GUARANTORS
Supplemental Indenture (this "Supplemental Indenture"), dated as of
________________, among __________________ (the "Guaranteeing Subsidiary"), a
subsidiary of ELGIN NATIONAL INDUSTRIES, INC. (or its permitted successor), a
Delaware corporation (the "Company"), the Company, the other Guarantors (as
defined in the Indenture referred to herein) and NORWEST BANK, NATIONAL
ASSOCIATION, as trustee under the indenture referred to below (the "Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to the
Trustee an indenture (the "Indenture"), dated as of November 5, 1997 providing
for the issuance of an aggregate principal amount of up to $85,000,000.00 of 11%
Notes due 2007 (the "Notes");
WHEREAS, the Indenture provides that under certain circumstances the
Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental
indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally
guarantee all of the Company's Obligations under the Notes and the Indenture on
the terms and conditions set forth herein (the "Subsidiary Guarantee"); and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the
equal and ratable benefit of the Holders of the Notes as follows:
1. Capitalized Terms. Capitalized terms used herein without
definition shall have the meanings assigned to them in the Indenture.
2. Agreement to Guarantee. The Guaranteeing Subsidiary hereby agrees
as follows:
(a) Along with all Guarantors named in the Indenture, to jointly and
severally Guarantee to each Holder of a Note authenticated and
delivered by the Trustee and to the Trustee and its successors
and assigns, irrespective of the validity and enforceability of
the Indenture, the Notes or the obligations of the Company
hereunder or thereunder, that:
(i) the principal of and interest on the Notes will be promptly
paid in full when due, whether at maturity, by acceleration,
redemption or otherwise, and interest on the overdue
principal of and interest on the Notes, if any, if lawful,
and all other obligations of the Company to the Holders or
the Trustee hereunder or thereunder will be promptly paid in
full or performed, all in accordance with the terms hereof
and thereof; and
F-1
<PAGE>
(ii) in case of any extension of time of payment or renewal of
any Notes or any of such other obligations, that same will
be promptly paid in full when due or performed in accordance
with the terms of the extension or renewal, whether at
stated maturity, by acceleration or otherwise. Failing
payment when due of any amount so guaranteed or any
performance so guaranteed for whatever reason, the
Guarantors shall be jointly and severally obligated to pay
the same immediately.
(b) The obligations hereunder shall be unconditional, irrespective of
the validity, regularity or enforceability of the Notes or the
Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Notes with respect to
any provisions hereof or thereof, the recovery of any judgment
against the Company, any action to enforce the same or any other
circumstance which might otherwise constitute a legal or
equitable discharge or defense of a guarantor.
(c) The following is hereby waived: diligence presentment, demand
of payment, filing of claims with a court in the event of
insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company, protest, notice and all
demands whatsoever.
(d) This Subsidiary Guarantee shall not be discharged except by
complete performance of the obligations contained in the Notes
and the Indenture.
(e) If any Holder or the Trustee is required by any court or
otherwise to return to the Company, the Guarantors, or any
Custodian, Trustee, liquidator or other similar official acting
in relation to either the Company or the Guarantors, any amount
paid by either to the Trustee or such Holder, this Subsidiary
Guarantee, to the extent theretofore discharged, shall be
reinstated in full force and effect.
(f) The Guaranteeing Subsidiary shall not be entitled to any right of
subrogation in relation to the Holders in respect of any
obligations guaranteed hereby until payment in full of all
obligations guaranteed hereby.
(g) As between the Guarantors, on the one hand, and the Holders and
the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in
Article 6 of the Indenture for the purposes of this Subsidiary
Guarantee, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the
obligations guaranteed hereby, and (y) in the event of any
declaration of acceleration of such obligations as provided in
Article 6 of the Indenture, such obligations (whether or not due
and payable) shall forthwith become due and payable by the
Guarantors for the purpose of this Subsidiary Guarantee.
(h) The Guarantors shall have the right to seek contribution from any
non-paying Guarantor so long as the exercise of such right does
not impair the rights of the Holders under the Guarantee.
F-2
<PAGE>
(i) Pursuant to Section 10.02 of the Indenture, after giving effect
to any maximum amount and any other contingent and fixed
liabilities that are relevant under any applicable Bankruptcy or
fraudulent conveyance laws, and after giving effect to any
collections from, rights to receive contribution from or payments
made by or on behalf of any other Guarantor in respect of the
obligations of such other Guarantor under Article 10 of the
Indenture shall result in the obligations of such Guarantor under
its Subsidiary Guarantee not constituting a fraudulent transfer
or conveyance.
3 Execution and Delivery. Each Guaranteeing Subsidiary agrees that
the Subsidiary Guarantees shall remain in full force and effect notwithstanding
any failure to endorse on each Note a notation of such Subsidiary Guarantee.
4. Guaranteeing Subsidiary May Consolidate, Etc. on Certain Terms.
(a) The Guaranteeing Subsidiary may not consolidate with or merge with or
into (whether or not such Guarantor is the surviving Person) another
corporation, Person or entity whether or not affiliated with such
Guarantor unless:
(i) subject to Section 10.04 of the Indenture, the Person formed by
or surviving any such consolidation or merger (if other than a
Guarantor or the Company) unconditionally assumes all the
obligations of such Guarantor, pursuant to a supplemental
indenture in form and substance reasonably satisfactory to the
Trustee, under the Notes, the Indenture and the Subsidiary
Guarantee on the terms set forth herein or therein; and
(ii) immediately after giving effect to such transaction, no Default
or Event of Default exists.
(iii) except for a merger between guarantors or between the Company
and any guarantor, the Company would be permitted, immediately
after giving effect to such transaction, to incur at least
$1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in the first paragraph of Section
4.09 of the Indenture; and
(iv) except for a merger between Guarantors or between the Company
and any Guarantor, such 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 Guarantor immediately preceding the transaction
(b) In case of any such consolidation, merger, sale or conveyance and upon
the assumption by the successor corporation, by supplemental
indenture, executed and delivered to the Trustee and satisfactory in
form to the Trustee, of the Subsidiary Guarantee endorsed upon the
Notes and the due and punctual performance of all of the covenants and
conditions of the Indenture to be performed by the Guarantor, such
successor corporation shall succeed to and be substituted for the
Guarantor with the same effect as if it had been named herein as a
Guarantor. Such successor corporation thereupon may cause to be signed
any or all of the Subsidiary Guarantees to be endorsed upon all of the
Notes issuable hereunder which theretofore shall not have been signed
by the Company and
F-3
<PAGE>
delivered to the Trustee. All the Subsidiary Guarantees so issued
shall in all respects have the same legal rank and benefit under the
Indenture as the Subsidiary Guarantees theretofore and thereafter
issued in accordance with the terms of the Indenture as though all of
such Subsidiary Guarantees had been issued at the date of the
execution hereof.
(c) Except as set forth in Articles 4 and 5 of the Indenture, and
notwithstanding clauses (a) and (b) above, nothing contained in the Indenture or
in any of the Notes shall prevent any consolidation or merger of a Guarantor
with or into the Company or another Guarantor, or shall prevent any sale or
conveyance of the property of a Guarantor as an entirety or substantially as an
entirety to the Company or another Guarantor.
5. Releases.
(a) In the event of a sale or other disposition of all of the assets of
any Guarantor, by way of merger, consolidation or otherwise, or a sale
or other disposition of all to the capital stock of any Guarantor,
then such Guarantor (in the event of a sale or other disposition, by
way of merger, consolidation or otherwise, of all of the capital stock
of such Guarantor) or the corporation acquiring the property (in the
event of a sale or other disposition of all or substantially all of
the assets of such Guarantor) will be released and relieved of any
obligations under its Subsidiary Guarantee; provided that the Net
Proceeds of such sale or other disposition are applied in accordance
with the applicable provisions of the Indenture, including without
limitation Section 4.10 of the Indenture. Upon delivery by the Company
to the Trustee of an Officers' Certificate and an Opinion of Counsel
to the effect that such sale or other disposition was made by the
Company in accordance with the provisions of the Indenture, including
without limitation Section 4.10 of the Indenture, the Trustee shall
execute any documents reasonably required in order to evidence the
release of any Guarantor from its obligations under its Subsidiary
Guarantee.
(b) Any Guarantor not released from its obligations under its Subsidiary
Guarantee shall remain liable for the full amount of principal of and
interest on the Notes and for the other obligations of any Guarantor
under the Indenture as provided in Article 10 of the Indenture.
6. No Recourse Against Others. No past, present or future director,
officer, employee, incorporator, stockholder or agent of the Guaranteeing
Subsidiary, as such, shall have any liability for any obligations of the Company
or any Guaranteeing Subsidiary under the Notes, any 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 of the
Notes by accepting a Note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Notes. Such waiver may
not be effective to waive liabilities under the federal securities laws and it
is the view of the Commission that such a waiver is against public policy.
7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK
SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
F-4
<PAGE>
8. Counterparts. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
9. Effect of Headings. The Section headings herein are for
convenience only and shall not affect the construction hereof.
10. The Trustee. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplemental
Indenture or for or in respect of the recitals contained herein, all of which
recitals are made solely by the Guaranteeing Subsidiary and the Company.
F-5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.
Dated:
----------------, ----
[Guaranteeing Subsidiary]
By:
---------------------------------
Name:
Title:
[COMPANY]
By:
---------------------------------
Name:
Title:
[EXISTING GUARANTORS]
By:
---------------------------------
Name:
Title
[TRUSTEE]
as Trustee
By:
---------------------------------
Name:
Title:
F-6
<PAGE>
Schedule I
EXHIBIT G
SCHEDULE OF GUARANTORS
The following schedule lists each Guarantor under the Indenture as of the
Issue Date:
Tabor Machine Company
Norris Screen and Manufacturing, Inc.
TranService, Inc.
Centrifugal Services, Inc.
Mining Controls, Inc.
Clinch River Corporation
Roberts & Schaefer Company
Soros Associates, Inc.
G-1
<PAGE>
EXHIBIT 10.1
EXECUTED
--------
================================================================================
CREDIT AGREEMENT
dated as of September 24, 1993
as Amended and Restated as of
November 5, 1997
among
ELGIN NATIONAL INDUSTRIES, INC.,
VARIOUS FINANCIAL INSTITUTIONS,
and
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
individually and as Agent
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
Page
<S> <C>
SECTION 1 DEFINITIONS............................................................ 2
SECTION 2 COMMITMENTS OF THE BANKS; TYPES OF LOANS; LETTER OF CREDIT,
BORROWING PROCEDURES........................................................... 23
2.1 Commitments................................................................ 23
2.2 Various Types of Loans..................................................... 24
2.3 Borrowing Procedures....................................................... 24
2.4 Procedures for Conversion of Type of Loan.................................. 25
2.5 Letter of Credit Procedures................................................ 25
2.6 Participations in Letters of Credit........................................ 25
2.7 Reimbursement Obligations.................................................. 26
2.8 Limitation on BofA's Obligations........................................... 26
2.9 Funding by Banks to BofA................................................... 26
2.10 Warranty.................................................................. 27
2.11 Conditions................................................................ 27
2.12 Commitments Several....................................................... 27
SECTION 3 NOTES EVIDENCING LOANS................................................. 28
3.1 Notes...................................................................... 28
3.2 Recordkeeping.............................................................. 28
SECTION 4 INTEREST............................................................... 28
4.1 Interest Rates............................................................. 28
4.2 Interest Payment Dates..................................................... 29
4.3 Interest Periods........................................................... 29
4.4 Setting and Notice of Eurodollar Rates..................................... 29
4.5 Computation of Interest.................................................... 30
SECTION 5 FEES................................................................... 30
5.1 Upfront Fee................................................................ 30
5.2 Non-Use Fee................................................................ 30
5.3 Letter of Credit Fees...................................................... 30
5.4 Additional Fees............................................................ 31
SECTION 6 REDUCTION OR TERMINATION OF THE REVOLVING COMMITMENTS; PREPAYMENTS..... 31
6.1 Voluntary Reduction or Termination......................................... 31
6.2 Prepayments................................................................ 31
SECTION 7 MAKING AND PRORATION OF PAYMENTS; SETOFF; TAXES........................ 32
7.1 Making of Payments......................................................... 32
7.2 Application of Certain Payments............................................ 32
7.3 Due Date Extension......................................................... 33
7.4 Setoff..................................................................... 33
7.5 Proration of Payments...................................................... 33
7.6 Net Payments; Tax Exemptions............................................... 33
</TABLE>
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<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 8 INCREASED COSTS; SPECIAL PROVISIONS FOR EURODOLLAR LOANS.............. 34
8.1 Increased Costs........................................................... 34
8.2 Basis for Determining Interest Rate Inadequate or Unfair.................. 36
8.3 Changes in Law Rendering Eurodollar Loans Unlawful........................ 37
8.4 Funding Losses............................................................ 37
8.5 Right of Banks to Fund through Other Offices.............................. 37
8.6 Discretion of Banks as to Manner of Funding............................... 38
8.7 Mitigation of Circumstances; Replacement of Affected Bank................. 38
8.8 Conclusiveness of Statements; Survival of Provisions...................... 39
SECTION 9 WARRANTIES............................................................ 39
9.1 Organization, etc......................................................... 39
9.2 Authorization; No Conflict................................................ 39
9.3 Validity and Binding Nature............................................... 40
9.4 Financial Information..................................................... 40
9.5 No Material Adverse Change................................................ 41
9.6 Litigation and Contingent Liabilities..................................... 41
9.7 Ownership of Properties; Liens............................................ 41
9.8 Subsidiaries.............................................................. 41
9.9 Pension and Welfare Plans................................................. 41
9.10 Investment Company Act................................................... 42
9.11 Public Utility Holding Company Act....................................... 42
9.12 Regulation U............................................................. 42
9.13 Taxes.................................................................... 42
9.14 Solvency, etc............................................................ 42
9.15 Insurance................................................................ 42
9.16 Contracts; Labor Matters................................................. 43
9.17 Environmental and Safety and Health Matters.............................. 43
9.18 Recapitalization......................................................... 44
9.19 Real Property............................................................ 45
9.20 Information.............................................................. 45
9.21 Proceeds................................................................. 45
SECTION 10 COVENANTS............................................................ 45
10.1 Reports, Certificates and Other Information.............................. 45
10.1.1 Annual Report............................................. 45
10.1.2 Monthly Reports........................................... 46
10.1.3 Certificates.............................................. 46
10.1.4 Reports to SEC and to Shareholders........................ 47
10.1.5 Notice of Default, Litigation and ERISA Matters........... 47
10.1.6 Subsidiaries.............................................. 48
10.1.7 Management Reports........................................ 48
10.1.8 Insurance Information..................................... 48
10.1.9 Other Information......................................... 48
10.2 Books, Records and Inspections........................................... 48
10.3 Insurance................................................................ 49
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
10.4 Compliance with Laws; Maintenance of Property; Payment of Taxes
and Liabilities....................................................... 49
10.5 Maintenance of Existence, etc........................................... 50
10.6 Financial Covenants..................................................... 50
10.6.1 Funded Debt to Cash Flow Ratio........................... 50
10.6.2 Interest Coverage Ratio.................................. 50
10.6.3 Fixed Charge Coverage Ratio.............................. 50
10.6.4 Underbillings Ratio...................................... 51
10.7 Limitations on Debt..................................................... 51
10.8 Liens................................................................... 51
10.9 Capital Expenditures.................................................... 52
10.10 Dividends, etc......................................................... 53
10.11 Investments............................................................ 53
10.12 Mergers, Consolidations, Sales......................................... 54
10.13 [Reserved]............................................................. 55
10.14 Use of Proceeds........................................................ 55
10.15 Transactions with Affiliates........................................... 55
10.16 Employee Benefit Plans................................................. 55
10.17 Environmental Covenants................................................ 56
10.17.1 Environmental Response Obligation....................... 56
10.17.2 Environmental Liabilities............................... 56
10.17.3 Environmental Assessments............................... 56
10.18 Unconditional Purchase Obligations..................................... 57
10.19 Inconsistent Agreements................................................ 57
10.20 Further Assurances..................................................... 57
10.21 Amendments to Certain Documents........................................ 57
10.22 Intentionally deleted.................................................. 58
10.23 Capital Leases......................................................... 58
10.24 Operating Leases....................................................... 58
10.25 Underbillings.......................................................... 58
10.26 Conduct of Business.................................................... 58
10.27 Third Party Lien Restrictions.......................................... 58
10.28 Payments on Senior Notes............................................... 58
10.29 Collateral............................................................. 58
10.30 Subsidiaries........................................................... 59
10.31 Non-Significant Subsidiaries........................................... 59
SECTION 11 CONDITIONS TO EFFECTIVENESS OF RESTATED AGREEMENT, ETC.............. 59
11.1 Documentary Conditions to Effectiveness................................. 59
11.1.1 Notes.................................................... 60
11.1.2 Resolutions.............................................. 60
11.1.3 Consents, etc............................................ 60
11.1.4 Incumbency and Signature Certificates.................... 60
11.1.5 Guaranty................................................. 60
11.1.6 Security Agreement, etc.................................. 60
11.1.7 Pledge Agreements........................................ 61
11.1.8 Assumption and Affirmation............................... 61
11.1.9 Recapitalization Documents............................... 61
11.1.10 Good Standing Certificates.............................. 61
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
11.1.11 Solvency Certificate....................................... 61
11.1.12 Opinions of Counsel for the Company and the Guarantors..... 61
11.1.13 Other Legal Opinions....................................... 61
11.1.14 [Reserved]................................................. 61
11.1.15 Insurance.................................................. 61
11.1.16 Other...................................................... 62
11.2 Additional Conditions to Effectiveness..................................... 62
11.2.1 Debt to be Repaid, etc...................................... 62
11.2.2 Fees........................................................ 62
11.2.3 Recapitalization............................................ 62
11.3 Additional Conditions to All Loans and Letters of Credit................... 62
11.3.1 No Default, etc............................................. 62
11.3.2 Confirmatory Certificate.................................... 63
11.4 Release.................................................................... 63
SECTION 12 EVENTS OF DEFAULT AND THEIR EFFECT..................................... 63
12.1 Events of Default.......................................................... 63
12.1.1 Non-Payment of the Loans, etc............................... 63
12.1.2 Default under Other Debt.................................... 63
12.1.3 Other Material Obligations.................................. 64
12.1.4 Bankruptcy, Insolvency, etc................................. 64
12.1.5 Non-Compliance with Provisions of This Agreement............ 64
12.1.6 Warranties.................................................. 64
12.1.7 Pension Plans............................................... 65
12.1.8 Judgments................................................... 65
12.1.9 Invalidity of Guaranty, etc................................. 65
12.1.10 Invalidity of Collateral Documents, etc.................... 65
12.1.11 Change in Control.......................................... 65
12.1.12 Bonding Arrangements....................................... 66
12.1.13 Material Adverse Change.................................... 66
12.1.14 Default under Recapitalization Documents................... 66
12.2 Effect of Event of Default................................................. 66
SECTION 13 THE AGENT.............................................................. 67
13.1 Appointment and Authorization; "Agent"..................................... 67
13.2 Delegation of Duties....................................................... 68
13.3 Liability of Agent......................................................... 68
13.4 Reliance by Agent.......................................................... 68
13.5 Funding Reliance........................................................... 69
13.6 Notice of Default.......................................................... 70
13.7 Credit Decision............................................................ 70
13.8 Indemnification of Agent................................................... 71
13.9 Agent in Individual Capacity............................................... 71
13.10 Collateral Matters........................................................ 71
13.11 Successor Agent........................................................... 72
13.12 Withholding Tax........................................................... 72
</TABLE>
-iv-
<PAGE>
<TABLE>
<S> <C>
SECTION 14 GENERAL............................................................... 74
14.1 Waiver; Amendments........................................................ 74
14.2 Confirmations............................................................. 75
14.3 Notices................................................................... 75
14.4 Computations.............................................................. 75
14.5 Regulation U.............................................................. 76
14.6 Costs, Expenses and Taxes................................................. 76
14.7 Subsidiary References..................................................... 76
14.8 Captions.................................................................. 76
14.9 Assignments; Participations............................................... 76
14.9.1 Assignments................................................ 76
14.9.2 Participations............................................. 78
14.10 Governing Law............................................................ 79
14.11 Counterparts............................................................. 79
14.12 Successors and Assigns................................................... 79
14.13 Indemnification by the Company........................................... 79
14.14 Confidentiality.......................................................... 80
14.15 Forum Selection and Consent to Jurisdiction.............................. 81
14.16 Waiver of Jury Trial..................................................... 81
14.17 Reaffirmation, Restatement and Waivers................................... 81
14.18 BofA as Agent............................................................ 82
</TABLE>
-v-
<PAGE>
EXHIBITS
--------
EXHIBIT A Form of Note
EXHIBIT B Form of Compliance Certificate
EXHIBIT C Form of Guaranty
EXHIBIT D Form of Security Agreement
EXHIBIT E-1 Form of Company Pledge Agreement
EXHIBIT E-2 Form of Subsidiary Pledge Agreement
EXHIBIT F Form of Opinion of Mayer, Brown & Platt
EXHIBIT G Form of Assignment Agreement
EXHIBIT H Form of Bailee's Consent
EXHIBIT I Form of Landlord's Consent
EXHIBIT J [Reserved]
EXHIBIT K Form of Solvency Certificate
EXHIBIT L Form of Warehousemen's Consent
EXHIBIT M Form of Borrowing Base Certificate
EXHIBIT N Form of Assumption
EXHIBIT O Form of Affirmation of Collateral Documents
SCHEDULES
---------
SCHEDULE 1(a) Commitments and Percentages
SCHEDULE 1(b) Existing Collateral Documents
SCHEDULE 1(c) Existing Letters of Credit
SCHEDULE 9.6 Litigation and Contingent Liabilities
SCHEDULE 9.8 Subsidiaries
SCHEDULE 9.9 Welfare Plans
SCHEDULE 9.15 Insurance
SCHEDULE 9.16 Contracts; Labor Matters
SCHEDULE 9.17 Environmental and Safety and Health Matters
SCHEDULE 10.7 Debt
SCHEDULE 10.8 Liens
SCHEDULE 10.11 Investments
SCHEDULE 10.26 Businesses
-vi-
<PAGE>
CREDIT AGREEMENT
----------------
This CREDIT AGREEMENT, dated as of September 24, 1993 as hereby amended and
restated as of November 5, 1997 (as amended or otherwise modified from time to
time, this "Agreement"), is entered into among ELGIN NATIONAL INDUSTRIES, INC.,
a Delaware corporation ("ENI"), the undersigned financial institutions (together
with their respective successors and assigns, collectively the "Banks" and
individually each a "Bank"), and BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION (in its individual capacity, "BofA"), as agent for the Banks.
Capitalized terms are used as defined in Section 1 below.
R E C I T A L S
---------------
WHEREAS, ENI is a party to a Credit Agreement dated as of September 24,
1993, among the Company, the Banks and BofA (as heretofore amended or modified,
the "Existing Credit Agreement") pursuant to which the Banks have made the
existing Loans and/or BofA has issued the Existing Letters of Credit; and
WHEREAS, the Company warrants that no loans (other than Existing Revolving
Loans) are outstanding under the Existing Credit Agreement;
WHEREAS, ENI and the Parent desire to effect a recapitalization
("Recapitalization") as follows: (i) pursuant to the Offering Memorandum and
the Indenture, ENI will issue $85,000,000 in principal amount of Senior Notes,
(ii) concurrently with the issuance of the Senior Notes, ENI will redeem all
$20,000,000 in principal amount of Debt issued under the Subordinated Note
Agreement, together with accrued and unpaid interest and prepayment fees and
make a dividend of approximately $56,000,000 to the Parent, (iii) concurrently
with the receipt of such dividend, the Parent shall, pursuant to the Repurchase
Agreement, repurchase from the Selling Shareholders, certain equity interests in
the Parent (representing approximately 68% of the total outstanding common
stock, warrants, and preferred stock of the Parent), (iv) immediately after such
repurchase and redemption, ENI will merge into the Parent, with the Parent being
the surviving entity, assuming all obligations and liabilities of ENI, and
changing its name to "Elgin National Industries, Inc." and (v) following such
Merger, the Company (as successor by merger with ENI) will hold approximately
$5,203,000 of Management Notes. As a result of the Recapitalization, Principals
will own all of the issued and outstanding capital stock of the Company; and
WHEREAS, the Company, the Banks and BofA now desire to amend and restate
the Existing Credit Agreement in certain respects so as to, among other things,
(i) revise the commitment of the Banks
<PAGE>
and various terms relating thereto, (ii) permit the Recapitalization, (iii) and
make certain other changes to the Existing Credit Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree that as
of the Restatement Effective Date, the Existing Credit Agreement is hereby
amended and restated in its entirety as follows:
SECTION 1 DEFINITIONS. When used herein the following terms shall have
the following meaning (such definitions to be applicable to both the singular
and plural forms of such terms):
Accounts means, with respect to any Person, any right of such Person to
--------
payment for goods sold or leased or for services rendered, whether or not
evidenced by an instrument or chattel paper and whether or not yet earned by
performance.
Account Debtor means any Person who is obligated to the Company or any
--------------
Guarantor under, with respect to, or on account of an Account Receivable.
Accounts Receivable has the meaning assigned thereto in the Security
-------------------
Agreement.
Affected Bank means any Bank that has given notice to the Company (which
-------------
has not been rescinded) of (i) any obligation by the Company to pay any amount
pursuant to Section 7.6 or 8.1 or (ii) the occurrence of any circumstances of
----------- ---
the nature described in Section 8.2 or 8.3.
----------- ---
Affected Loan - see Section 8.3.
------------- -----------
Affiliate of any Person means any other Person which, directly or
---------
indirectly, controls or is controlled by or is under common control with such
Person.
Affirmation of Collateral Documents means the Affirmation of Collateral
-----------------------------------
Documents in the form of Exhibit O.
Agent means BofA in its capacity as agent for the Banks hereunder and any
-----
successor thereto in such capacity.
Agent-Related Persons means BofA and any successor agent arising under
---------------------
Section 13.11 and any successor letter of credit issuing bank hereunder,
together with their respective Affiliates, and the officers, directors,
employees, agents and attorneys-in-fact of such Persons and Affiliates.
-2-
<PAGE>
Agreement - see the Preamble.
--------- --------
Alternate Reference Rate means at any time the greater of (a) the Federal
------------------------
Funds Rate plus 1/2 of 1% and (b) the rate per annum then most recently
announced by BofA as its reference rate at Chicago, Illinois.
Assignee - see Section 14.9.1.
-------- --------------
Assumption means the assumption by the Parent of all obligations and
----------
liabilities of ENI pursuant to the Recapitalization Merger such assumption to be
in the form of Exhibit N.
Assignment Agreement - see Section 14.9.1.
-------------------- --------------
Available Commitment means the amount by which the Revolving Commitment
--------------------
exceeds the sum of the principal amount of all outstanding Revolving Loans plus
the Stated Amount of all outstanding Letters of Credit.
BofA means Bank of America National Trust and Savings Association (f/k/a
----
Bank of America Illinois), in its individual or agency capacity, as the case may
be.
Bailee's Consent means a document substantially in the form of Exhibit M,
---------------- ---------
with appropriate insertions, or such other form as shall be acceptable to the
Required Banks.
Bank - see the Preamble.
---- --------
Bank Parties means Agent-Related Persons, and each Bank and each of its
------------
respective officers, directors, employees, counsel, agents and attorneys-in-
fact.
Borrowing Base means the sum of (a) 85% (or 50% in the case of Accounts
--------------
owed to any member of the Engineering and Construction Group) of the face amount
(less (x) any portion thereof which represents unpaid sales tax and (y) the
credit memo reserve and, to the extent not included in the credit memo reserve,
the maximum discounts, credits and allowances which may be taken by or have been
granted to Account Debtors in connection therewith) of all Eligible Accounts,
plus (b) the lesser of (i) 60% of all Eligible Inventory, valued at the lesser
of market or FIFO cost, and (ii) the amount determined pursuant to clause (a) of
----------
this definition, less (c) the aggregate amount of Secured Third Party Letters of
Credit; provided, however, that not more than 25% of the total Borrowing Base
-------- -------
shall be attributable to Eligible Accounts owed to any member of the Engineering
and Construction Group.
-3-
<PAGE>
Borrowing Base Certificate - see Section 10.1.3.
-------------------------- --------------
Business Day means any day on which commercial banks are open for
------------
commercial banking business in Chicago and New York and, in the case of a
Business Day which relates to a Eurodollar Loan, on which dealings are carried
on in the interbank eurodollar market.
Capital Expenditures means all expenditures which, in accordance with
--------------------
generally accepted accounting principles, would be required to be capitalized
and shown on the consolidated balance sheet of the Company, but excluding
(excluding building expansions undertaken by Mining Controls, Inc., Clinch River
Corporation, Ohio Rod Products Company, Tabor Machine Company and Norris Screen
and Manufacturing, Inc. not to exceed, in the aggregate, $3,500,000 in Fiscal
Year 1998 and $3,500,000 in Fiscal Year 1999 for all such expansions)
expenditures made in connection with the replacement, substitution or
restoration of assets to the extent financed (i) from insurance proceeds (or
other similar recoveries) paid on account of the loss of or damage to the assets
being replaced or restored or (ii) with awards of compensation arising from the
taking by eminent domain or condemnation of the assets being replaced.
Capital Lease means, with respect to any Person, any lease of (or other
-------------
agreement conveying the right to use) any real or personal property by such
Person which, in conformity with generally accepted accounting principles, is
accounted for as a capital lease on the balance sheet of such Person.
Cash Equivalent Investment means, at any time:
--------------------------
(a) any evidence of Debt, maturing not more than one year after such
time, issued or guaranteed by the United States Government;
(b) commercial paper, maturing not more than one year from the date
of issue, which is issued by
(i) a corporation (except an Affiliate of the Company)
organized under the laws of any State of the United States of America
or of the District of Columbia and rated at least A-1 by Standard &
Poor's Corporation or P-1 by Moody's Investors Service, Inc., at the
time of investment, or
(ii) any Bank (or its holding company);
-4-
<PAGE>
(c) any certificate of deposit or bankers' acceptance or eurodollar
time deposit, maturing not more than one year after the date of issue,
which is issued by either
(i) a financial institution that is a member of the Federal
Reserve System and has a combined capital and surplus and undivided
profits of not less than $500,000,000, or
(ii) any Bank; or
(d) any repurchase agreement with a term of one year or less which
(i) is entered into with
(A) any Bank, or
(B) any other commercial banking institution of the
stature referred to in clause (c)(i),
-------------
(ii) is secured by a fully perfected Lien in any obligation of
the type described in any of clauses (a) through (c), and
----------- ---
(iii) has a market value at the time such repurchase agreement
is entered into of not less than 100% of the repurchase obligation of
such Bank (or other commercial banking institution) thereunder;
(e) investments in money market funds that invest solely in Cash
Equivalent Investments described in clauses (a) through (d); or
----------- ---
(f) investments in short-term asset management accounts offered by
any Bank for the purpose of investing in loans to any corporation (other
than an Affiliate of the Company) organized under the laws of any state of
the United States or of the District of Columbia and rated at least A-1 by
Standard & Poor's Corporation or P-1 by Moody's Investors Service, Inc.
Collateral Document means each of the Security Agreement, each Pledge
-------------------
Agreement, the Affirmation of Collateral Documents, and any other document
required to be furnished pursuant to Section 10.20 or 10.29.
------------- -----
Commitment means, as to any Bank, such Bank's Revolving Commitment.
----------
-5-
<PAGE>
Company means (i) prior to the Recapitalization Merger, ENI, and (ii) after
-------
the Recapitalization Merger, the Parent as survivor of the Recapitalization
Merger.
Company Pledge Agreement - see Section 11.1.7.
------------------------ --------------
Computation Period means any period of four consecutive Fiscal Quarters
------------------
ending on or after September 30, 1997.
Consolidated Net Income means, with respect to the Company and its
-----------------------
Subsidiaries for any Computation Period, the consolidated net income (or loss)
of the Company and its Subsidiaries for such period; provided that there shall
--------
be excluded therefrom the income of any Subsidiary to the extent that the
declaration or payment of dividends or similar distributions by such Subsidiary
of such income is not at the time permitted by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to such Subsidiary.
Contingent Liability means any agreement, undertaking or arrangement by
--------------------
which any Person guarantees, endorses or otherwise becomes or is contingently
liable upon (by direct or indirect agreement, contingent or otherwise, to
provide funds for payment, to supply funds to or otherwise to invest in a
debtor, or otherwise to assure a creditor against loss) any indebtedness,
obligation or other liability of any other Person (other than by endorsements of
instruments in the course of collection), or guarantees the payment of dividends
or other distributions upon the shares of any other Person. The amount of any
Person's obligation under any Contingent Liability shall (subject to any
limitation set forth therein) be deemed to be the outstanding principal amount
of the debt, obligation or other liability guaranteed thereby.
Credit Party means each of the Company, ENI, the Parent, the Guarantor and
------------
each Subsidiary of the Company, the Parent or the Guarantor which is a signatory
to any Loan Document or Recapitalization Document.
Debt of any Person means, without duplication, (a) all indebtedness of such
----
Person for borrowed money, whether or not evidenced by bonds, debentures, notes
or similar instruments, (b) all obligations of such Person as lessee under
Capital Leases which have been recorded as liabilities on a balance sheet of
such Person, (c) all obligations of such Person to pay the deferred purchase
price of property or services (other than current accounts payable in the
ordinary course of business), (d) all indebtedness secured by a Lien on the
property of such Person, whether or not such indebtedness shall have been
assumed
-6-
<PAGE>
by such Person (it being understood that if such Person has not assumed or
otherwise become personally liable for any such indebtedness, the amount of the
Debt of such Person in connection therewith shall be limited to the lesser of
the face amount of such indebtedness or the fair market value of all property of
such Person securing such indebtedness), (e) all obligations, contingent or
otherwise, with respect to the face amount of all letters of credit (whether or
not drawn) and banker's acceptances issued for the account of such Person
(including, without limitation, the Letters of Credit), (f) liabilities of such
Person in respect of Hedging Agreements, and (g) all Contingent Liabilities of
such Person.
Debt to be Repaid means (i) all Debt issued under the Subordinated Note
-----------------
Agreement, and (ii) all other Debt listed on Schedule 10.7 under the heading
-------------
"Debt to be Repaid."
Dollar and the sign "$" mean lawful money of the United States of America.
------ -
Domestic as to any Subsidiary means a Subsidiary which is created or
-----------------------------
organized under the laws of one of the United States of America or its
territories; and "United States" means the United States of America (including
the states and the District of Columbia).
Eligible Accounts means an Account owing to the Company or any Domestic
-----------------
Guarantor which meets the following requirements:
(1) it arises from either (a) the performance of services by the
Company or the applicable Guarantor, which services have been fully
performed and, if applicable, acknowledged and/or accepted by the Account
Debtor with respect thereto; or (b) the sale or lease of goods by the
Company or the applicable Guarantor; and if it arises from the sale or
lease of goods, (i) such goods comply with such Account Debtor's
specifications (if any) and have been shipped to, or delivered to and
accepted by, such Account Debtor, and (ii) the Company or such Guarantor
has possession of, or if requested by the Agent has delivered to the Agent,
shipping and delivery receipts evidencing such shipment, delivery and
acceptance;
(2) it is evidenced by an invoice rendered to the Account Debtor with
respect thereto which is dated not earlier than the date of shipment or
performance;
(3) it (a) is subject to a first and prior perfected Lien in favor of
the Agent and (b) is not subject to any
-7-
<PAGE>
other assignment, claim or Lien other than Liens consented to by the
Required Banks;
(4) it is a valid, legally enforceable and unconditional obligation
of the Account Debtor with respect thereto, and is not subject to setoff,
counterclaim, credit, allowance, discount (except any credit, allowance or
discount which has been deducted in computing the net amount of the
applicable invoice as shown in the original schedule or Borrowing Base
Certificate furnished to the Banks identifying or including such Account)
or adjustment by the Account Debtor with respect thereto, or to any claim
by such Account Debtor denying liability thereunder in whole or in part,
and such Account Debtor has not refused to accept any of the goods or
services which are the subject of such Account or offered or attempted to
return any of such goods;
(5) neither the Company nor the applicable Guarantor has knowledge of
any bankruptcy, insolvency or similar proceeding by or against the Account
Debtor with respect thereto or of any other proceeding or action which is
threatened or pending against such Account Debtor or to which such Account
Debtor is a party which is likely to result in any material adverse change
in such Account Debtor's financial condition or in its ability to pay any
Account in full when due;
(6) it does not arise out of a contract or order which, by its terms,
forbids, restricts or makes void or unenforceable the assignment by the
Company or the applicable Guarantor to the Agent of the Account arising
with respect thereto;
(7) the Account Debtor with respect thereto is not an Affiliate of
the Company or the applicable Guarantor or a director, officer, employee or
agent of the any such entity;
(8) the Account Debtor with respect thereto is a resident or citizen
of, and is located within, the United States of America, unless the sale of
goods giving rise to such Account is on letter of credit, banker's
acceptance or other credit support terms satisfactory to the Required
Banks;
(9) it is not an Account arising from a "sale on approval," "sale or
return" or "consignment," or subject to any other repurchase or return
agreement;
(10) it is not an Account with respect to which possession and/or
control of the goods sold giving rise
-8-
<PAGE>
thereto is held, maintained or retained by the Company or any Subsidiary
(or by any agent or custodian of the Company or any Subsidiary) for the
account of or subject to further and/or future direction from the Account
Debtor with respect thereto;
(11) the Account Debtor with respect thereto is not located in the
State of Indiana, New Jersey or Minnesota, provided, however, that such
restriction shall not apply if (a) the Company or the applicable Guarantor
has filed and has effective a current Notice of Business Activities Report
with the appropriate office or agency of the State of Indiana, New Jersey
or Minnesota, as applicable, for the then current year, or (b) the Company
or the applicable Guarantor is exempt from the filing of such Report and
has provided the Agent with satisfactory evidence thereof, provided that no
Account shall be ineligible solely due to this clause (11) until 60 days
-----------
after the Original Effective Date;
(12) it arises in the ordinary course of the Company's or the
applicable Guarantor's business and does not arise out of a project which
has been bonded by any bonding company or other surety;
(13) if the Account Debtor is the United States of America or any
department, agency or instrumentality thereof, the Company or the
applicable Guarantor has assigned its right to payment of such Account to
the Agent pursuant to the Assignment of Claims Act of 1940, as amended;
(14) if the Required Banks in their sole and absolute discretion have
established (by not less than five Business Days' notice to the Company) a
credit limit for an Account Debtor, the aggregate dollar amount of Accounts
due from such Account Debtor, including such Account, does not exceed such
credit limit;
(15) if the Account is evidenced by chattel paper or an instrument,
(a) only payments then due and payable under such chattel paper or
instrument shall be included as an Eligible Account and (b) the originals
of such chattel paper or instrument shall have been endorsed and/or
assigned and delivered to the Agent in a manner satisfactory to the Agent;
(16) the Account Debtor with respect thereto is not a supplier to or
creditor of the Company or the applicable
-9-
<PAGE>
Guarantor unless it has signed a letter satisfactory to the Agent waiving
its rights of offset;
(17) such Account is not more than (a) 60 days past the due date
thereof or (b) 90 days past the original invoice date thereof, in each case
according to the original terms of sale; and
(18) not more than 25% of the amount of all Accounts owing by such
Debtor to the Company and the Guarantors remains unpaid 90 days past the
original invoice date thereof according to the original terms of sale.
An Account which is at any time an Eligible Account, but which subsequently
fails to meet any of the foregoing requirements, shall forthwith cease to be an
Eligible Account. Further, with respect to any Account, if the Required Banks
at any time hereafter determine in their reasonable (from the perspective of a
prudent lender administering credit facilities of a similar type extended to
borrowers of comparable credit quality) discretion that the prospect of payment
or performance by the Account Debtor with respect thereto is or will be
materially impaired for any reason whatsoever, notwithstanding anything to the
contrary contained above, such Account shall cease to be an Eligible Account
five Business Days after notice of such determination is given to the Company.
Eligible Inventory means Inventory which meets the following requirements:
------------------
(1) it (a) is subject to a first and prior perfected Lien in favor of
the Agent and (b) is not subject to any assignment, claim or Lien other
than Liens consented to by the Required Banks;
(2) if held for sale or lease or furnishing under contracts of
service, it is (except as the Required Banks may otherwise consent in
writing) new, unused and in first-class condition;
(3) except as provided in clause (4) below or as the Required Banks
----------
may otherwise consent, it is in the possession and control of the Company
or the applicable Guarantor; provided, however, that if it is stored on
-------- -------
premises leased by the Company or such Guarantor, the Agent is in
possession of a Landlord's Consent duly executed by the owner of such
premises; provided, further, that no Inventory stored on leased premises
-------- -------
shall be ineligible solely due to the failure of the Agent to have a
Landlord's Consent with respect to such premises until 60 days after
-10-
<PAGE>
the Original Effective Date so long as no default exists under the lease
for such leased premises;
(4) if it is in the possession or control of a bailee, warehouseman,
processor or other Person other than the Company or the applicable
Guarantor, the Agent is in possession of a Bailee's Consent, Warehousemen's
Consent and/or such other agreements, instruments and documents as the
Agent may require, including but not limited to warehouse receipts in the
Agent's name covering such Inventory, provided that no Inventory shall be
ineligible solely due to this clause (4) until 60 days after the Original
----------
Effective Date;
(5) it is not Inventory which is dedicated to, identifiable with, or
is otherwise specifically to be used in the manufacture of, goods which are
to be sold or leased to the United States of America or any department,
agency or instrumentality thereof, and in respect of which Inventory the
Company or the applicable Guarantor shall have received any progress or
other advance payment which is or may be credited against any Account
generated upon the sale or lease of any such goods;
(6) it is not Inventory produced in violation of the Fair Labor
Standards Act and subject to the "hot goods" provisions contained in Title
29 U.S.C. (S)215 or any successor statute or section;
(7) it is not Inventory bearing a servicemark, trademark or name of
any Person other than the Company or the applicable Guarantor, or with
respect to which the use by the Company or the applicable Guarantor or the
manufacture or sale thereof by the Company or the applicable Guarantor is
subject to any licensing, patent, royalty, trademark, tradename or
copyright agreement with any other Person, and such Inventory is not
subject to any agreement which would restrict the Agent's ability to sell
or otherwise dispose of such Inventory;
(8) it is not (i) packaging or shipping materials, (ii) goods used in
connection with maintenance or repair of the Company's or the applicable
Guarantor's business, properties or assets, (iii) work in process, (iv) raw
material castings or (v) general supplies;
(9) it is located in the United States of America;
-11-
<PAGE>
(10) it is not held for sale at a "close-out" or otherwise offered
generally at a discount as part of a discontinued line;
(11) the Required Banks shall not have determined (which determination
shall be effective only upon five Business Days' notice to the Company) in
their sole and absolute discretion (which discretion shall not be exercised
in a manner which is arbitrary or capricious) that it is unacceptable due
to age, type, category, quality and/or quantity.
Inventory of the Company or any Guarantor which is at any time Eligible
Inventory but which subsequently fails to meet any of the foregoing requirements
shall forthwith cease to be Eligible Inventory.
ENI - see Preamble.
---
Engineering and Construction Group means Roberts & Schaefer, a Delaware
----------------------------------
corporation, Soros Associates, Inc. a Delaware corporation, and TransService,
Inc., a Delaware corporation.
Environmental Laws means the Resource Conservation and Recovery Act, the
------------------
Comprehensive Environmental Response, Compensation and Liability Act, any so-
called "Superfund" or "Superlien" law, the Toxic Substances Control Act, and any
other applicable federal, state or local statute, law, ordinance, code, rule,
regulation, order, decree or other requirement regulating, relating to, or
imposing liability or standards of conduct (including, but not limited to,
permit requirements and emission or effluent restrictions) concerning any
Hazardous Materials, as now or at any time hereafter in effect.
ERISA means the Employee Retirement Income Security Act of 1974, as
-----
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA also refer to any successor sections.
Eurocurrency Reserve Percentage means, with respect to any Eurodollar Loan
-------------------------------
for any Interest Period, a percentage (expressed as a decimal) equal to the
daily average during such Interest Period of the percentage in effect on each
day of such Interest Period, as prescribed by the Board of Governors of the
Federal Reserve System (or any successor), for determining the aggregate maximum
reserve requirements applicable to "Eurocurrency Liabilities" pursuant to
Regulation D or any other then applicable regulation of such Board of Governors
which prescribes
-12-
<PAGE>
reserve requirements applicable to "Eurocurrency Liabilities" as presently
defined in Regulation D.
Eurodollar Loan means any Loan which bears interest at a rate determined by
---------------
reference to the Eurodollar Rate (Reserve Adjusted).
Eurodollar Office means with respect to any Bank the office or offices of
-----------------
such Bank which shall be making or maintaining the Eurodollar Loans of such Bank
hereunder or such other office or offices through which such Bank determines its
Eurodollar Rate. A Eurodollar Office of any Bank may be, at the option of such
Bank, either a domestic or foreign office.
Eurodollar Rate means, with respect to any Eurodollar Loan for any Interest
---------------
Period, the rate per annum at which Dollar deposits in immediately available
funds are offered to the Eurodollar Office of BofA two Business Days prior to
the beginning of such Interest Period by major banks in the interbank eurodollar
market as at or about 10:00 A.M., Chicago time, for delivery on the first day of
such Interest Period, for the number of days comprised therein and in an amount
equal or comparable to the amount of the Eurodollar Loan of BofA for such
Interest Period.
Eurodollar Rate (Reserve Adjusted) means, with respect to any Eurodollar
----------------------------------
Loan for any Interest Period, a rate per annum (rounded upwards, if necessary,
to the nearest 1/100 of 1%) determined pursuant to the following formula:
Eurodollar Rate = Eurodollar Rate
---------------
(Reserve Adjusted) 1-Eurocurrency
Reserve Percentage
Event of Default means any of the events described in Section 12.1.
---------------- ------------
Existing Collateral Documents means the documents listed in Schedule 1(b).
-----------------------------
Existing Credit Agreement - see Recitals.
-------------------------
Existing Letters of Credit means the letters of credit issued by BofA under
--------------------------
the Existing Credit Agreement prior to the Restatement Effective Date and listed
on Schedule 1(c).
Existing Revolving Loans means, Revolving Loans made under the Existing
------------------------
Credit Agreement prior to the Restatement Effective Date.
-13-
<PAGE>
Existing Revolving Notes means the Notes issues under the Existing Credit
------------------------
Agreement prior to the Restatement Effective Date.
Federal Funds Rate means, for any day, the rate set forth in the daily
------------------
statistical release designated as the Composite 3:30 P.M. Quotations for U.S.
Government Securities, or any successor publication, published by the Federal
Reserve Bank of New York (including any such successor publication, the
"Composite 3:30 P.M. Quotations") for such day under the caption "Federal Funds
Effective Rate". If such rate is not published in the Composite 3:30 P.M.
Quotations for any Business Day, the rate for such day will be the arithmetic
mean of the rates for the last transaction in overnight Federal funds arranged
prior to 9:00 A.M., New York City time, on such day by each of three leading
brokers of Federal funds transactions in New York City, selected by the Agent.
The rate for any day which is not a Business Day shall be the rate for the
immediately preceding Business Day.
Fiscal Quarter means a fiscal quarter of a Fiscal Year.
--------------
Fiscal Year means the fiscal year of the Company and its Restricted
-----------
Subsidiaries, which period shall be the 12-month period ending on December 31 of
each year. References to a Fiscal Year with a number corresponding to any
calendar year (e.g., "Fiscal Year 1997") refer to the Fiscal Year ending on
December 31 of such calendar year.
Fixed Charge Coverage Ratio means, for any Computation Period, the ratio of
---------------------------
(a) the sum, without duplication, of
(i) Consolidated Net Income for such Computation Period,
plus
----
(ii) Interest Expense for such Computation Period,
plus
----
(iii) all depreciation and amortization of assets (including
goodwill and other intangible assets) of the Company and its
Subsidiaries deducted in determining Consolidated Net Income for such
Computation Period,
plus
----
-14-
<PAGE>
(iv) all federal, state, local and foreign income taxes
(whether paid or deferred) of the Company and its Subsidiaries
deducted in determining Consolidated Net Income for such Computation
Period,
minus
-----
(v) all federal, state, local and foreign income taxes paid by
the Company and Subsidiaries during such Computation Period;
to
--
(b) the sum, without duplication, of
(i) repayments of principal of the Senior Notes made during
such Computation Period (excluding Senior Notes permitted to be held
by the Company for its own account pursuant to Section 10.28),
-------------
regularly scheduled principal payments with respect to any other long-
term Debt of the Company and its Subsidiaries made during such
Computation Period, and the portion of any payments with respect to
Capital Leases allocable to principal made during such Computation
Period,
plus
----
(ii) Interest Expense for such Computation Period,
plus
----
(iii) Capital Expenditures for such Computation Period.
Floating Rate Loan means any Loan which bears interest at or by reference
------------------
to the Alternate Reference Rate.
Foreign as to any Subsidiary means a Subsidiary which is not created or
----------------------------
organized under the laws of the United States of America or its territories; and
"United States" means the United States of America (including the states and the
District of Columbia).
Funded Debt means all Debt of the Company and its Subsidiaries, excluding
-----------
(i) Contingent Liabilities incurred in the ordinary course of business (except
to the extent constituting Contingent Liabilities in respect of any Funded Debt
of a Person other than the Company or any Subsidiary), (ii) liabilities in
respect of Hedging Agreements and (iii) Debt of
-15-
<PAGE>
the Company to Subsidiaries and Debt of Subsidiaries to the Company or to other
Subsidiaries.
Funded Debt to Cash Flow Ratio means the ratio of (i) Funded Debt as of the
------------------------------
last day of any Computation Period to (ii) Consolidated Net Income for such
Computation Period plus, to the extent deducted in determining such Consolidated
----
Net Income, Interest Expense, income tax expense, depreciation and amortization
minus Capital Expenditures for such Computation Period.
- -----
Group - see Section 2.2.
----- -----------
Guarantor means (a) as of the Restatement Effective Date, each Subsidiary
---------
listed on Schedule 9.8 that is a party to the Guaranty, and (b) thereafter, the
------------
Persons referred to in clause (a) and each other Person which from time to time
----------
executes and delivers a counterpart of the Guaranty.
Guaranty - see Section 11.1.5.
-------- --------------
Hazardous Materials means any toxic substance, hazardous substance,
-------------------
hazardous material, hazardous chemical or hazardous waste defined or qualifying
as such in (or for the purposes of) any Environmental Law, or any pollutant or
contaminant, and shall include, but not be limited to, petroleum, including
crude oil or any fraction thereof which is liquid at standard conditions of
temperature or pressure (60 degrees fahrenheit and 14.7 pounds per square inch
absolute), any radioactive material, including, but not limited to, any source,
special nuclear or by-product material as defined at 42 U.S.C. section 2011 et.
--
seq., as amended from time to time, polychlorinated biphenyls and asbestos in
- ---
any form or condition.
Hedging Agreement means any interest rate, currency or commodity swap
-----------------
agreement, interest rate cap agreement, interest rate collar agreement, or other
agreement or arrangement designed to protect a Person against fluctuations in
interest rates, currency exchange rates or commodity prices.
Indemnified Liabilities means all liabilities, obligations, losses,
-----------------------
damages, penalties, actions, judgments, suits, costs, charges, expenses and
disbursements (including reasonable attorney costs) of any kind or nature
whatsoever which may at any time (including at any time following repayment of
the Loans, the termination of the Letters of Credit and the termination,
resignation or replacement of the Agent or replacement of any Bank) be imposed
on, incurred by or asserted against any such Person in any way relating to or
arising out of this Agreement or any document contemplated by or referred to
herein, or the
-16-
<PAGE>
transactions contemplated hereby, or any action taken or omitted by any such
Person under or in connection with any of the foregoing, including with respect
to any investigation, litigation or proceeding (including any insolvency
proceeding or appellate proceeding) related to or arising out of this Agreement
or the Loans or Letters of Credit or the use of the proceeds thereof, whether or
not any Bank Party is a party thereto.
Indenture means Indenture dated as of November 5, 1997 between the Company
---------
and Norwest Bank Minnesota, National Association, as Trustee, as such Indenture
may be amended or modified from time to time pursuant to Section 10.21.
-------------
Interest Coverage Ratio means, as of the last day of any Computation
-----------------------
Period, the ratio of (a) Consolidated Net Income before deducting Interest
Expense, taxes and amortization for the Computation Period ending on such day to
(b) Interest Expense for such Computation Period.
Interest Expense means for any Computation Period the consolidated interest
----------------
expense of the Company and its Subsidiaries for such Computation Period
(including, without limitation, all imputed interest on Capital Leases, but
excluding (i) amortization of fees and expenses in connection with the
Recapitalization, and (ii) any interest paid on Senior Notes held by the Company
for its own account).
Interest Period - see Section 4.3.
--------------- -----------
Inventory means any and all of the goods of the Company or a Domestic
---------
Subsidiary (including, without limitation, goods in transit) wheresoever
located, which are or may at any time be leased by the Company or a Domestic
Subsidiary to a lessee, held for sale or lease, furnished under any contract of
service, or held as raw materials, work in process, or supplies or materials
used or consumed in the business of the Company or a Domestic Subsidiary, or
which are held for use in connection with the manufacture, packing, shipping,
advertising, selling or finishing of such goods, together with all general
intangibles related to such goods.
Investment means, with respect to any Person:
----------
(a) any loan or advance made by such Person to any other Person; and
(b) any ownership or similar interest held by such Person in any
other Person.
-17-
<PAGE>
The amount of any Investment shall be the original principal or capital
amount thereof less all returns of principal or equity thereon (and without
adjustment by reason of the financial condition of such other Person) and shall,
if made by the transfer or exchange of property other than cash, be deemed to
have been made in an original principal or capital amount equal to the fair
market value of such property.
Landlord's Consent means a document substantially in the form of Exhibit I,
------------------ ---------
with appropriate insertions, or such other form as shall be acceptable to the
Required Banks.
Letter of Credit means a standby or commercial letter of credit having
----------------
terms and provisions which are permitted by the Agreement and which otherwise
are reasonably satisfactory to BofA (and shall include the Existing Letters of
Credit).
Letter of Credit Application means a letter of credit application in the
----------------------------
form then used by BofA for the type of letter of credit requested (with
appropriate adjustments to indicate that any letter of credit issued thereunder
is to be issued pursuant to, and subject to the terms and conditions of, this
Agreement).
Lien means, when used with respect to any Person, any interest of any other
----
Person in any real or personal property, asset or other right owned or being
purchased or acquired by such Person which secures payment or performance of any
obligation and shall include any mortgage, lien, encumbrance, charge or other
security interest of any kind, whether arising by contract, as a matter of law,
by judicial process or otherwise.
Loans mean Revolving Loans.
-----
Loan Documents means this Agreement, the Notes, the Letter of Credit
--------------
Applications, the Guaranty, the Collateral Documents and the Affirmation of
Collateral Documents.
Management Notes means (together with extensions, renewals, substitutes and
----------------
replacements thereof) (a) (i) the promissory note dated September 24, 1993
issued by Wayne J. Conner to Parent in the original principal amount of
$516,500; and (ii) the promissory note dated September 24, 1993 issued by
Charles D. Hall to Parent in the original principal amount of $516,500, which
notes were contributed to the Company on the Original Effective Date (iii) the
promissory note dated September 24, 1993 issued by Fern Limited Partnership to
the Parent in the original principal amount of $1,000,000, and (iv) the
promissory note dated September 24, 1993 issued by Fern Limited Partnership to
the Parent in the original principal amount of $1,603,000 and (b)
-18-
<PAGE>
ten year promissory notes issued by the Principals in an original principal
amount of approximately $1,600,000 on or after the Restatement Effective Date.
Margin means 1.50% in the case of any Eurodollar Loan.
------
Margin Stock means any "margin stock" as defined in Regulation U of the
------------
Board of Governors of the Federal Reserve System.
Material Adverse Effect means a material adverse effect on (a) the
-----------------------
condition (financial or otherwise), operations, business, properties or assets
of the Company and its Subsidiaries taken as a whole or (b) the ability of the
Company or any Material Guarantor to timely and fully perform any of its payment
or other material obligations under this Agreement or any other Loan Document to
which it is a party. For purposes of the foregoing, "Material Guarantor" means
any Subsidiary which, as of the last day of the most recent Fiscal Quarter, (i)
owned more than 10% of the consolidated assets of the Company and its
Subsidiaries or (ii) had more than 10% of the consolidated revenues of the
Company and its Subsidiaries for the 12-month period ending on such date.
Note - means each of the Existing Notes and the Replacement Notes.
----
Occupational Safety and Health Law means the Occupational Safety and Health
----------------------------------
Act of 1970 and any other federal, state or local statute, law, ordinance, code,
rule, regulation, order or decree regulating, relating to on imposing liability
or standards of conduct concerning employee health and/or safety.
Offering Memorandum means the Offering Memorandum dated November 5, 1997 of
-------------------
the Company in connection with the issuance of the Senior Notes.
Original Effective Date means September 24, 1993.
-----------------------
Parent means ENI Holding Corp., a Delaware corporation.
------
Participant - see Section 14.9.
----------- ------------
PBGC means the Pension Benefit Guaranty Corporation and any entity
----
succeeding to any or all of its functions under ERISA.
Pension Plan means a "pension plan", as such term is defined in section
------------
3(2) of ERISA, which is subject to title IV of ERISA (other than a multiemployer
plan as defined in section 4001(a)(3) of ERISA), and to which the Company or any
corporation, trade or
-19-
<PAGE>
business that is, along with the Company, a member of a controlled group of
corporations or a controlled group of trades or businesses, as described in
section 414 of the Internal Revenue Code of 1986, as amended, or section 4001 of
ERISA, may have any liability, including any liability by reason of having been
a substantial employer within the meaning of section 4063 of ERISA at any time
during the preceding five years or by reason of being deemed to be a
contributing sponsor under section 4069 of ERISA.
Person means any natural person, corporation, partnership, trust,
------
association, governmental authority or unit, or any other entity, whether acting
in an individual, fiduciary or other capacity.
Pledge Agreements means the Company Pledge Agreement and each Subsidiary
-----------------
Pledge Agreement.
Principals means Fred C. Schulte, Charles D. Hall, and Wayne J. Conner.
----------
Public Offering means any public offering of the capital stock of the
---------------
Company or any Subsidiary.
Recapitalization Documents means the Indenture, the Senior Notes, the
--------------------------
Repurchase Agreement, the Recapitalization Merger Agreement, and any and all
other documents related to the foregoing.
Recapitalization Merger - means the merger of ENI into the Parent, with the
-----------------------
Parent being the surviving entity, assuming all obligations and liabilities of
ENI.
Recapitalization Merger Agreement means the Certificate of Ownership and
---------------------------------
Merger dated November 5, 1997 between ENI and the Parent.
Reference Rate means, at any time, the rate of interest then most recently
--------------
announced by BofA at Chicago, Illinois as its reference rate.
Replacement Note - means a promissory note, substantially in the form of
----------------
Exhibit A, with appropriate insertions, as the same may be amended,
supplemented, replaced or otherwise modified from time to time. Replacement
Notes means collectively the Replacement Note of each of the Banks.
Repurchase Agreement means the Repurchase Agreement dated October 15, 1997
--------------------
among the Parent, ENI, and the Parent
-20-
<PAGE>
Institutional Investors, as the same may be amended or modified from time to
time with the consent of the Required Banks.
Required Banks means Banks having an aggregate Revolving Percentage of more
--------------
than 662/3%.
Restatement Effective Date - see Section 11.1.
-------------------------- ------------
Revolving Commitment means as to any Bank the commitment of such Bank to
--------------------
make Revolving Loans and to issue or participate in Letters of Credit pursuant
to Section 2.1. The initial amount of the Revolving Commitment of each Bank is
-----------
set forth on Schedule 1.
----------
Revolving Loan - see Section 2.1.
-------------- -----------
Revolving Percentage means as to any Bank the percentage which (a) the
--------------------
aggregate amount of such Bank's Revolving Commitment is of (b) the aggregate
amount of the Revolving Commitments of all Banks; provided that after the
--------
Revolving Commitments have been terminated, "Revolving Percentage" shall mean as
to any Bank the percentage which (x) the aggregate principal amount of such
Bank's Loans is of the aggregate principal amount of all Loans. The initial
Revolving Percentage for each Bank is set forth opposite such Bank's name on
Schedule 1.
- ----------
Revolving Termination Date means November 5, 2000 or such other date on
--------------------------
which the Revolving Commitments shall terminate pursuant to Section 12.
------- --
SEC means the Securities and Exchange Commission.
---
Secured Third Party Letters of Credit means any letter of credit issued by
-------------------------------------
any person other than a Bank which is secured by cash or cash equivalents.
Security Agreement - see Section 11.1.6.
------------------ --------------
Selling Stockholders means all holders of common stock, preferred stock and
--------------------
common stock warrants of Parent other than the Principals.
Senior Notes means the $85,000,000 in original principal amount of 11%
------------
Senior Notes due 2007 issued by the Company (as ENI) pursuant to the Indenture.
Significant as to any Subsidiary means any Subsidiary (i) with assets in
--------------------------------
excess of $1,500,000, as determined as of the end of the then most recent Fiscal
Year of the Company, or (ii) with net income for the then most recent Fiscal
Year of the Company
-21-
<PAGE>
that constitutes five percent (5%) or more of the total net income of the
Borrower and all Subsidiaries for the most recent Fiscal Year of the Company, or
(iii) with equity of more than $500,000, as determined as of the end of the then
most recent Fiscal Year of the Company.
Stated Amount means with respect to any Letter of Credit at any date of
-------------
determination, the maximum aggregate amount available thereunder at any time
during the then ensuing term of such Letter of Credit under any and all
circumstances, plus the aggregate amount of all unreimbursed payments and
disbursements under such Letter of Credit.
Subordinated Debt means any Debt of the Company having maturities and
-----------------
terms, and which is subordinated to the obligations of the Company hereunder in
a manner, satisfactory to the Banks.
Subordinated Note Agreement means the Senior Subordinated Note Purchase
---------------------------
Agreement dated September 24, 1993 by and among (Parent), the Company, Fiduciary
Capital Partners, L.P., Fiduciary Capital Pension Partners, L.P., Massachusetts
Mutual Life Insurance Company and Midwest Mezzanine Fund, L.P., as amended or
otherwise modified from time to time in accordance with Section 10.21.
-------------
Subsidiary means, with respect to any Person, a corporation of which such
----------
Person and/or its other Subsidiaries own, directly or indirectly, such number of
outstanding shares as have more than 50%. of the ordinary voting power for the
election of directors. Unless the context otherwise requires, each reference to
Subsidiaries herein shall be a reference to Subsidiaries of the Company.
Subsidiary Pledge Agreement - see Section 11.1.7.
--------------------------- --------------
Taxes relative to any Person means taxes, assessments or other governmental
-----
charges or levies imposed upon such Person, its income or any of its properties,
franchises or assets (excluding, in the case of payments made to a Bank or the
Agent, the following taxes (all of the following taxes being "Excluded Taxes"):
taxes imposed upon the overall net income of such Bank or the Agent, franchise
taxes imposed upon such Bank or the Agent with respect to its net income by the
jurisdiction under the laws of which such Bank or the Agent, as the case may be,
is organized or any political subdivision thereof, and franchise taxes imposed
upon such Bank or the Agent with respect to its net income by the jurisdiction
in which such Bank's or the Agent's Eurodollar Office is located or any
political subdivision thereof).
-22-
<PAGE>
Type of Loan or Borrowing - see Section 2.2. The types of Loans or
------------------------- -----------
borrowings under this Agreement are as follows: Floating Rate Loans or
borrowings and Eurodollar Loans or borrowings.
Underbillings means the costs and estimated earnings of the Engineering and
-------------
Construction Group in excess of customer billings on completed and uncompleted
contracts.
Underbillings Ratio means, as of the last day of any Computation Period,
-------------------
the ratio of (a) Underbillings as of the last day of such Computation Period to
(b) all revenues booked, with respect to continuing operations in the ordinary
course of business, by the Engineering and Construction Group during such
Computation Period.
Unmatured Event of Default means any event which if it continues uncured
--------------------------
will, with lapse of time or notice or lapse of time and notice, constitute an
Event of Default.
Voting Stock - see Section 12.1.11.
------------ ---------------
Warehousemen's Consent means a document substantially in the form of
----------------------
Exhibit O, with appropriate insertions, or such other form as shall be
- ---------
acceptable to the Required Banks.
Welfare Plan means a "welfare plan", as such term is defined in section
------------
3(1) of ERISA.
Wholly-Owned Subsidiary means a Subsidiary of which the Company and/or its
-----------------------
Subsidiaries own, directly or indirectly, all of the outstanding shares of
capital stock (other than directors' qualifying shares).
SECTION 2 COMMITMENTS OF THE BANKS; TYPES OF LOANS; LETTER
OF CREDIT, BORROWING PROCEDURES.
2.1 Commitments. On and subject to the terms and conditions of this
-----------
Agreement, each of the Banks, severally and for itself alone, agrees to make
loans on a revolving basis ("Revolving Loans") from time to time before the
Revolving Termination Date in such Bank's Revolving Percentage of such aggregate
amounts as the Company may from time to time request from all Banks under the
Revolving Commitments, provided that the aggregate principal amount of all
--------
Revolving Loans which all Banks shall be committed to have outstanding at any
one time shall not exceed an amount equal to the lesser of the aggregate amount
of the Revolving Commitments or the Borrowing Base less the Stated Amount of all
----
outstanding Letters of Credit; and (b) BofA agrees
-23-
<PAGE>
to issue Letters of Credit at the request of and for the account of the Company
from time to time before the Revolving Termination Date and, as more fully set
forth in Section 2.6, each Bank agrees to purchase a participation in each such
Letter of Credit, provided that the aggregate Stated Amount of all Letters of
--------
Credit shall not at any time exceed the lesser of (i) $5,000,000 or (ii) an
amount equal to the lesser of the aggregate amount of the Revolving Commitments
or the Borrowing Base less the aggregate principal amount of all outstanding
----
Revolving Loans.
2.2 Various Types of Loans. Each Revolving Loan shall be either a
----------------------
Floating Rate Loan or a Eurodollar Loan (each a "type" of Loan), as the Company
shall specify in the related notice of borrowing or conversion pursuant to
Section 2.3 or 2.4. Eurodollar Loans having the same Interest Period are
- ----------- ---
sometimes called a "Group" or collectively "Groups". Floating Rate Loans and
Eurodollar Loans may be outstanding at the same time, provided that (i) not more
--------
than eight different Groups of Loans shall be outstanding at any one time and
(ii) the aggregate principal amount of each Group of Eurodollar Loans shall at
all times be at least $1,000,000 and an integral multiple of $100,000. All
borrowings, conversions and repayments of Loans shall be effected so that each
Bank will have a pro rata share (according to its Revolving Percentage) of all
types and Groups of Revolving Loans.
2.3 Borrowing Procedures. The Company shall give written or telephonic
--------------------
notice to the Agent of each proposed borrowing not later than (a) in the case of
a Floating Rate borrowing, 11:00 A.M., Chicago time, on the proposed date of
such borrowing, and (b) in the case of a Eurodollar borrowing, 11:00 A.M.,
Chicago time, at least three Business Days prior to the proposed date of such
borrowing. Each such notice shall be effective upon receipt by the Agent, shall
be irrevocable, and shall specify the date, amount and type of borrowing and, in
the case of a Eurodollar borrowing, the initial Interest Period therefor.
Promptly upon receipt of such notice, the Agent shall advise each Bank thereof.
Not later than 1:00 P.M., Chicago time, on the date of a proposed borrowing,
each Bank shall provide the Agent at the principal office of the Agent in
Chicago with immediately available funds covering such Bank's Revolving
Percentage of such borrowing and, subject to the satisfaction of the conditions
precedent set forth in Section 11 with respect to such borrowing, the Agent
----------
shall pay over the requested amount to the Company on the requested borrowing
date. Each borrowing shall be on a Business Day. Each Floating Rate borrowing
shall be in an aggregate amount of at least $100,000 and an integral multiple of
$100,000. Unless the Company shall otherwise direct in writing, the proceeds of
all borrowings shall be deposited to the
-24-
<PAGE>
Company's demand deposit account no. 7304781 maintained with BofA.
2.4 Procedures for Conversion of Type of Loan. Subject to the provisions
-----------------------------------------
of Section 2.2, the Company may convert all or any part of any outstanding Loan
-----------
into a Loan of a different type by giving written or telephonic notice to the
Agent not later than (a) in the case of conversion into a Floating Rate Loan,
11:00 A.M., Chicago time, on the proposed date of such conversion, and (b) in
the case of a conversion into a Eurodollar Loan, 11:00 A.M., Chicago time, at
least three Business Days prior to the proposed date of such conversion. Each
such notice shall be effective upon receipt by the Agent, shall be irrevocable,
and shall specify the date and amount of such conversion, the Loan to be so
converted, the type of Loan to be converted into and, in the case of a
conversion into a Eurodollar Loan, the initial Interest Period therefor.
Promptly upon receipt of such notice, the Agent shall advise each Bank thereof.
Subject to Sections 2.11 and 2.12, such Loan shall be so converted on the
------------- ----
requested date of conversion. Each conversion shall be on a Business Day.
2.5 Letter of Credit Procedures. The Company shall give notice to BofA of
---------------------------
the proposed issuance of each Letter of Credit on a Business Day which is at
least three Business Days (or such lesser period as BofA may agree) prior to the
proposed date of issuance of such Letter of Credit. Each such notice shall be
accompanied by a Letter of Credit Application, duly executed by the Company and
in all respects satisfactory to BofA, together with such other documentation as
BofA may request in support thereof, it being understood that each Letter of
Credit Application shall specify, among other things, the date on which the
proposed Letter of Credit is to be issued, the expiration date of such Letter of
Credit (which shall not be later than the then-scheduled Revolving Termination
Date) and whether such Letter of Credit is to be transferable in whole or in
part. Subject to the satisfaction of the conditions precedent set forth in
Section 11 with respect to the issuance of such Letter of Credit, BofA shall
- ----------
issue such Letter of Credit on the requested issuance date.
2.6 Participations in Letters of Credit. Concurrently with the issuance
-----------------------------------
of each Letter of Credit (or, in the case of the Existing Letters of Credit, on
the Original Effective Date), BofA shall be deemed to have sold and transferred
to each other Bank, and each other Bank shall be deemed irrevocably and
unconditionally to have purchased and received from BofA, without recourse or
warranty, an undivided interest and participation, to the extent of such other
Bank's Revolving Percentage, in such Letter of Credit and the Company's
reimbursement obligations with
-25-
<PAGE>
respect thereto. For the purposes of this Agreement, the unparticipated portion
of each Letter of Credit shall be deemed to be BofA's "participation" therein.
BofA hereby agrees, upon request of any Bank, to deliver to such Bank a list of
all outstanding Letters of Credit, together with such information related
thereto as such other Bank may reasonably request.
2.7 Reimbursement Obligations. The Company hereby unconditionally and
-------------------------
irrevocably agrees to reimburse BofA for each payment or disbursement made by
BofA under any Letter of Credit honoring any demand for payment made by the
beneficiary thereunder, in each case on the date that such payment or
disbursement is made. Any amount not reimbursed on the date of such payment or
distribution shall bear interest from and including the date of such payment or
disbursement to but not including the date that BofA is reimbursed by the
Company therefor, payable on demand, at a rate per annum equal to the sum of the
Reference Rate from time to time in effect plus the Margin applicable to
----
Floating Rate Loans (plus, at any time an Event of Default exists, 2%). BofA
shall notify the Company whenever any demand for payment is made under any
Letter of Credit by the beneficiary thereunder; provided, however, that the
-------- -------
failure of BofA to so notify the Company shall not affect the rights of BofA or
the Banks in any manner whatsoever.
2.8 Limitation on BofA's Obligations. In determining whether to pay under
--------------------------------
any Letter of Credit, BofA shall have no obligation to the Company or any Bank
other than to confirm that any documents required to be delivered under such
Letter of Credit appear to have been delivered and appear to comply on their
face with the requirements of such Letter of Credit. Any action taken or
omitted to be taken by BofA under or in connection with any Letter of Credit, if
taken or omitted in the absence of gross negligence and willful misconduct,
shall not impose upon BofA any liability to the Company or any Bank and shall
not reduce or impair the Company's reimbursement obligations set forth in
Section 2.7 or the obligations of the Banks pursuant to Section 2.9.
- ----------- -----------
2.9 Funding by Banks to BofA. If BofA makes any payment or disbursement
------------------------
under any Letter of Credit and the Company has not reimbursed BofA in full for
such payment or disbursement by 11:00 A.M., Chicago time, on the date of such
payment or disbursement, or if any reimbursement received by BofA from the
Company is or must be returned or rescinded upon or during any bankruptcy or
reorganization of the Company or otherwise, each other Bank shall be obligated
to pay to BofA, in full or partial payment of the purchase price of its
participation in such Letter of Credit, its pro rata share (according to its
Revolving Percentage) of such payment or disbursement (but no such payment shall
diminish the
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<PAGE>
obligations of the Company under Section 2.7), and the Agent shall promptly
-----------
notify each other Bank thereof. Each other Bank irrevocably and unconditionally
agrees, severally and for itself alone, to so pay to the Agent in immediately
available funds for BofA's account the amount of such other Bank's Revolving
Percentage of such payment or disbursement. If and to the extent any Bank shall
not have made such amount available to the Agent by 2:00 P.M., Chicago time, on
the Business Day on which such Bank receives notice from the Agent of such
payment or disbursement (it being understood that any such notice received after
noon, Chicago time, on any Business Day shall be deemed to have been received on
the next following Business Day), such Bank agrees to pay interest on such
amount to the Agent for BofA's account forthwith on demand for each day from and
including the date such amount was to have been delivered to the Agent to but
excluding the date such amount is paid, at a rate per annum equal to (a) for the
first three days after demand, the Federal Funds Rate from time to time in
effect and (b) thereafter, the Alternate Reference Rate from time to time in
effect. Any Bank's failure to make available to the Agent its Revolving
Percentage of any such payment or disbursement shall not relieve any other Bank
of its obligation hereunder to make available to the Agent such other Bank's
Revolving Percentage of such payment, but no Bank shall be responsible for the
failure of any other Bank to make available to the Agent such other Bank's
Revolving Percentage of any such payment or disbursement.
2.10 Warranty. Each notice of borrowing and/or of conversion pursuant to
--------
Section 2.3 or 2.4, and the delivery of each Letter of Credit Application
- ----------- ---
pursuant to Section 2.5 shall automatically constitute a warranty by the Company
-----------
to the Agent and each Bank to the effect that on the date of such requested
borrowing or conversion or the issuance of the requested Letter of Credit, as
the case may be, (a) the warranties of the Company contained in Section 9
---------
(excluding Sections 9.4, 9.6, 9.8 and 9.15 through 9.19) of this Agreement shall
------------ --- --- ---- ----
be true and correct as of such requested date as though made on the date thereof
and (b) no Event of Default or Unmatured Event of Default shall have then
occurred and be continuing or will result therefrom.
2.11 Conditions. Notwithstanding any other provision of this Agreement,
----------
(a) no Bank shall be obligated to make any Loan, (b) no Bank shall be obligated
to convert into or permit the continuation at the end of the applicable Interest
Period of any Eurodollar Loan, and (c) BofA shall not be obligated to issue any
Letter of Credit if, in any such case, an Event of Default or Unmatured Event of
Default exists or would result therefrom.
2.12 Commitments Several. The failure of any Bank to make a requested
-------------------
Loan on any date shall not relieve any other Bank of
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<PAGE>
its obligation to make a Loan on such date, but no Bank shall be responsible for
the failure of any other Bank to make any Loan to be made by such other Bank.
SECTION 3 NOTES EVIDENCING LOANS.
3.1 Notes. The Loans of each Bank under the Existing Credit Agreement
-----
were evidenced by the Existing Notes. After the Restatement Effective Date, the
Loans of each Bank (including the Existing Loans) shall be evidenced by a
Replacement Note dated the Restatement Effective Date (or such other date as
shall be satisfactory to the Agent), payable to the order of such Bank in an
amount equal to the sum of such Bank's Revolving Commitment (or, if less, in the
aggregate unpaid principal amount of all of such Bank's Revolving Loans) in full
on the Revolving Termination Date. The Replacement Notes shall be in
substitution for the Existing Notes.
3.2 Recordkeeping. Each Bank shall record in its records the date and
-------------
amount of each Loan made by such Bank, each repayment or conversion thereof and,
in the case of each Eurodollar Loan, the dates on which each Interest Period for
such Loan shall begin and end. The aggregate unpaid principal amount so
recorded shall be rebuttable presumptive evidence of the principal amount owing
and unpaid on such Bank's Note. The failure to so record any such amount or any
error in so recording any such amount shall not, however, limit or otherwise
affect the obligations of the Company hereunder or under any Note to repay the
principal amount of the Loans evidenced by such Note together with all interest
accruing thereon.
SECTION 4 INTEREST.
4.1 Interest Rates. The Company promises to pay interest on the unpaid
--------------
principal amount of each Loan for the period commencing on the date of such Loan
until such Loan is paid in full, as follows:
(a) at all times while such Loan is a Floating Rate Loan, at a rate
per annum equal to the Alternate Reference Rate from time to time in
effect; and
(b) at all times while such Loan is a Eurodollar Loan, at a rate per
annum equal to the sum of the Eurodollar Rate (Reserve Adjusted) applicable
to each Interest Period for such Loan plus the Margin;
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<PAGE>
provided, however, that at any time an Event of Default exists, the interest
- -------- -------
rate applicable to each Loan shall be increased by 2%.
4.2 Interest Payment Dates. Accrued interest on each Floating Rate Loan
----------------------
shall be payable in arrears on the last day of each calendar quarter and at
maturity, commencing with the first of such dates to occur after the date of
such Loan. Accrued interest on each Eurodollar Loan shall be payable on the
last day of each Interest Period relating to such Loan and at maturity. After
maturity, accrued interest on all Loans shall be payable on demand.
4.3 Interest Periods. Each "Interest Period" for a Eurodollar Loan shall
----------------
commence on the date such Eurodollar Loan is made or converted from a Floating
Rate Loan, or on the expiration of the immediately preceding Interest Period for
such Eurodollar Loan, and shall end on the date which is one, two or three
months thereafter, as the Company may specify:
(a) in the case of an Interest Period which commences on the date a
Eurodollar Loan is made or converted from a Floating Rate Loan, in the
related notice of borrowing or conversion pursuant to Section 2.3 or 2.4,
----------- ---
or
(b) in the case of a succeeding Interest Period with respect to any
Eurodollar Loan, by written or telephonic notice to the Agent not later
than 10:00 A.M., Chicago time, at least three Business Days prior to the
first day of such succeeding Interest Period, it being understood that (i)
each such notice shall be effective upon receipt by the Agent and (ii) if
the Company fails to give such notice, such Loan shall automatically become
a Floating Rate Loan at the end of its then-current Interest Period.
Each Interest Period that begins on the last day of a calendar month (or on a
day for which there is no numerically corresponding day in the appropriate
subsequent calendar month) shall end on the last Business Day of the appropriate
subsequent calendar month. Each Interest Period which would otherwise end on a
day which is not a Business Day shall end on the immediately succeeding Business
Day (unless such immediately succeeding Business Day is the first Business Day
of a calendar month, in which case such Interest Period shall end on the
immediately preceding Business Day).
4.4 Setting and Notice of Eurodollar Rates. The applicable Eurodollar
--------------------------------------
Rate for each Interest Period shall be determined by the Agent, and notice
thereof shall be given by the Agent promptly to the Company and each Bank. Each
determination of the
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<PAGE>
applicable Eurodollar Rate by the Agent shall be conclusive and binding upon the
parties hereto, in the absence of demonstrable error. The Agent shall, upon
written request of the Company or any Bank, deliver to the Company or such Bank
a statement showing the computations used by the Agent in determining any
applicable Eurodollar Rate hereunder.
4.5 Computation of Interest. Interest shall be computed for the actual
-----------------------
number of days elapsed on the basis of a year of 360 days. The applicable
interest rate for each Floating Rate Loan shall change simultaneously with each
change in the Alternate Reference Rate.
SECTION 5 FEES.
5.1 Upfront Fee. The Company agrees to pay to the Agent for the account
-----------
of each Bank an upfront fee of $52,500 on the amount of the Revolving
Commitment. Such upfront fee shall be payable on or before the Restatement
Effective Date.
5.2 Non-Use Fee. The Company agrees to pay to the Agent for the account
-----------
of each Bank a non-use fee for the period from and including the Restatement
Effective Date to but excluding the Revolving Termination Date of 3/10 of 1% per
annum on the daily average of the unused amount of such Bank's Revolving
Commitment. Such non-use fee shall be payable in arrears on the last day of
each calendar quarter and on the Revolving Termination Date, in each case for
the period then ending for which such non-use fee shall not have been
theretofore paid. The non-use fee shall be computed for the actual number of
days elapsed on the basis of a year of 360 days.
5.3 Letter of Credit Fees. (a) The Company agrees to pay to the Agent for
---------------------
the account of the Banks pro rata according to their respective Revolving
Percentages a letter of credit fee for each Letter of Credit in an amount equal
to 1-1/2% per annum of the daily average of the aggregate Stated Amount of such
Letter of Credit (excluding any unreimbursed payment or disbursement
thereunder).
(b) The Company agrees to pay to BofA a fronting fee in an amount equal to
1/4 of 1% per annum of the daily average of the aggregate Stated Amount of each
Letter of Credit (excluding any unreimbursed payment or disbursement
thereunder).
(c) The fees payable pursuant to clauses (a) and (b) above shall be
----------- ---
computed for the actual number of days elapsed on the basis of a year of 360
days and shall be payable in arrears on the last day of each calendar quarter
and on the Revolving
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<PAGE>
Termination Date for the period from and including the date of the issuance of
the applicable Letter of Credit to but excluding the date such payment is due
or, if earlier, the date on which such Letter of Credit expired or was
terminated.
(d) In addition, with respect to each Letter of Credit, the Company agrees
to pay to BofA such fees and expenses as BofA customarily requires in connection
with the issuance, amendment, transfer, negotiation, processing and/or
administration of letters of credit.
5.4 Additional Fees. The Company agrees to pay to the Agent such
---------------
additional fees, in each case at such times and in such amounts, as are mutually
agreed upon by the Company and the Agent.
SECTION 6 REDUCTION OR TERMINATION OF THE REVOLVING COMMITMENTS;
PREPAYMENTS.
6.1 Voluntary Reduction or Termination. The Company may from time to time
----------------------------------
prior to the Revolving Termination Date, on at least five Business Days' prior
written notice received by the Agent (which shall promptly advise each Bank
thereof), permanently reduce the amount of the Revolving Commitments to an
amount not less than the sum of (a) the aggregate principal amount of all
outstanding Revolving Loans and (b) the Stated Amount of all outstanding Letters
of Credit. Any such reduction shall be in an aggregate amount of $100,000 or a
higher integral multiple of $100,000. The Company may at any time on like
notice prior to the Revolving Termination Date terminate the Revolving
Commitments upon payment in full of the Revolving Notes and all other
obligations of the Company hereunder pertaining to Revolving Loans and Revolving
Commitments and the expiration or cancellation of all outstanding Letters of
Credit. Each reduction of the Revolving Commitments shall be pro rata among the
Banks according to their Revolving Percentages.
6.2 Prepayments.
-----------
6.2.1 Mandatory Prepayments due to Borrowing Base Deficiency.If at
------------------------------------------------------
any time (a) the sum of (i) the aggregate principal amount of all
outstanding Revolving Loans plus (ii) the Stated Amount of all outstanding
Letters of Credit exceeds (b) the Borrowing Base, the Company will make an
immediate repayment of Revolving Loans in an amount equal to such excess
(rounded upward, if necessary, to an integral multiple of $100,000).
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<PAGE>
6.2.2 Mandatory Prepayments due to Commitment Reductions. If, after
--------------------------------------------------
giving effect to any reduction of the Revolving Commitments pursuant to
Section 6.1, (a) the sum of (i) the aggregate principal amount of all
-----------
outstanding Revolving Loans plus (ii) the Stated Amount of all outstanding
Letters of Credit exceeds (b) the aggregate amount of the Revolving
Commitments, the Company will make an immediate repayment of Revolving
Loans in an amount equal to such excess (rounded upward, if necessary, to
an integral multiple of $100,000).
6.2.3 Voluntary Prepayments. The Company may from time to time
---------------------
prepay the Loans in whole or in part, provided that (a) the Company shall
give the Agent (which shall promptly advise each Bank) prior written notice
thereof no later than 11:00 A.M. on the date of prepayment, specifying the
Loans to be prepaid and the date and amount of prepayment, (b) each partial
prepayment shall be in a principal amount of at least $100,000 and an
integral multiple of $100,000, and (c) any prepayment of a Eurodollar Loan
on a day other than the last day of an Interest Period therefor shall be
subject to Section 8.4.
-----------
6.2.4 All Prepayments. All prepayments of Revolving Loans shall be
---------------
pro rata among the Banks according to their Revolving Percentages.
SECTION 7 MAKING AND PRORATION OF PAYMENTS; SETOFF; TAXES.
7.1 Making of Payments. All payments of principal of or interest on the
------------------
Loans, and of all fees, shall be made by the Company to the Agent in immediately
available funds at its office in Chicago not later than noon, Chicago time, on
the date due; and funds received after that hour shall be deemed to have been
received by the Agent on the next following Business Day. The Company hereby
authorizes the Agent to charge the Company's demand deposit account no. 7304781
maintained with BofA for the amount of any such payment on the due date
therefor, but the Agent's failure to so charge such account shall in no way
affect the obligation of the Company to make any such payment. The Agent shall
promptly remit to each Bank its share of all such payments received in collected
funds by the Agent for the account of such Bank.
All payments under Sections 8.1 and 8.4 shall be made by the Company
------------ ---
directly to the Bank or Banks entitled thereto.
7.2 Application of Certain Payments. Except as otherwise expressly
-------------------------------
provided herein, each payment of principal shall be
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<PAGE>
applied to such Loans as the Company shall direct by notice to be received by
the Agent on or before the date of such payment or, in the absence of such
notice, as the Agent shall determine in its reasonable discretion. Concurrently
with each remittance to any Bank of its share of any such payment, the Agent
shall advise such Bank as to the application of such payment.
7.3 Due Date Extension. If any payment of principal or interest with
------------------
respect to any of the Notes, or of any fees, falls due on a day which is not a
Business Day, then such due date shall be extended to the next following
Business Day and, in the case of principal, additional interest shall accrue and
be payable for the period of any such extension.
7.4 Setoff. The Company agrees that the Agent and each Bank have all
------
rights of set-off and bankers' lien provided by applicable law, and in addition
thereto, the Company agrees that at any time any Unmatured Event of Default
under Section 12.1.4 or any Event of Default exists, the Agent and each Bank may
--------------
apply to any obligation of the Company hereunder, whether or not then due, any
and all balances, credits, deposits, accounts or moneys of the Company then or
thereafter with the Agent or such Bank.
7.5 Proration of Payments. If any Bank shall obtain any payment or other
---------------------
recovery (whether voluntary, involuntary, by application of offset or otherwise)
on account of principal of or interest on any Loan (or on account of its
participation in any Letter of Credit) in excess of its pro rata share of
payments and other recoveries obtained by all Banks on account of principal of
and interest on Loans (or such participations) then held by them (other than any
non-pro rata interest payment resulting from a Loan being an Affected Loan or
any payment resulting from replacement of a Bank pursuant to Section 8.7), such
-----------
Bank shall purchase from the other Banks such participation in the Loans (or
sub-participations in Letters of Credit) held by them as shall be necessary to
cause such purchasing Bank to share the excess payment or other recovery ratably
with each of them; provided, however, that if all or any portion of the excess
-------- -------
payment or other recovery is thereafter recovered from such purchasing Bank, the
purchase shall be rescinded and the purchase price restored to the extent of
such recovery.
7.6 Net Payments; Tax Exemptions.
----------------------------
(a) All payments by the Company of principal, interest, fees, indemnities
and other amounts payable hereunder and under the Notes shall be made to the
recipient thereof without setoff or counterclaim and free and clear of, and
without withholding or deduction for or on account of, any present or future
Taxes (other than Excluded Taxes) now or hereafter imposed on such
-33-
<PAGE>
recipient or its income, property, assets or franchises (such recipient's
"Recipient Taxes"), except to the extent that such withholding or deduction (i)
is required by applicable law, (ii) results from the breach by such recipient of
its Exemption Agreement (as defined below) or (iii) would not be required if
such recipient's Exemption Representation (as defined below) were true. If any
such withholding or deduction is required by applicable law, the Company will:
(A) pay to the relevant authorities the full amount so required to be
withheld or deducted;
(B) promptly forward to the Agent an official receipt or other
documentation satisfactory to the Agent evidencing such payment to such
authorities; and
(C) except to the extent that such withholding or deduction results
from the breach, by the recipient of a payment, of its Exemption Agreement
or would not be required if such recipient's Exemption Representation were
true, pay to the Agent for the account of the relevant recipient such
additional amount as is necessary to ensure that the net amount actually
received by such recipient will equal the full amount such recipient would
have received had no such withholding or deduction been required.
(b) Intentionally deleted.
(c) Each Bank hereby represents and warrants (such Bank's "Exemption
Representation") to the Company that on the Original Effective Date (or, if
later, the date it becomes a party to this Agreement) it is entitled to receive
payments of principal of, and interest on, Loans made by such Bank without
withholding or deduction for or on account of such Bank's Recipient Taxes
imposed by the United States of America or any political subdivision thereof.
SECTION 8 INCREASED COSTS; SPECIAL PROVISIONS FOR
EURODOLLAR LOANS.
8.1 Increased Costs. (a) If, after the date hereof, the adoption of any
---------------
applicable law, rule or regulation, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Bank (or any Eurodollar Office of such Bank) with
any request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency
-34-
<PAGE>
(A) shall subject any Bank (or any Eurodollar Office of such Bank) to
any tax, duty or other charge with respect to its Eurodollar Loans, its
Note or its obligation to make Eurodollar Loans, or shall change the basis
of taxation of payments to any Bank of the principal of or interest on its
Eurodollar Loans or any other amounts due under this Agreement in respect
of its Eurodollar Loans or its obligation to make Eurodollar Loans (except
for changes in the rate of tax on the overall net income of such Bank or
its Eurodollar Office imposed by the jurisdiction in which such Bank's
principal executive office or Eurodollar Office is located); or
(B) shall impose, modify or deem applicable any reserve (including,
without limitation, any reserve imposed by the Board of Governors of the
Federal Reserve System, but excluding any reserve included in the
determination of interest rates pursuant to Section 4), special deposit or
---------
similar requirement against assets of, deposits with or for the account of,
or credit extended by any Bank (or any Eurodollar Office of such Bank); or
(C) shall impose on any Bank (or its Eurodollar Office) any other
condition affecting its Eurodollar Loans, its Note or its obligation to
make Eurodollar Loans;
and the result of any of the foregoing is to increase the cost to (or in the
case of Regulation D of the Board of Governors of the Federal Reserve System, to
impose a cost on) such Bank (or any Eurodollar Office of such Bank) of making or
maintaining any Eurodollar Loan, or to reduce the amount of any sum received or
receivable by such Bank (or its Eurodollar Office) under this Agreement or under
its Note with respect thereto, then within 10 days after demand by such Bank
(which demand shall be accompanied by a statement setting forth in reasonable
detail the basis for and a calculation of the amount of such demand, a copy of
which shall be furnished to the Agent), the Company shall pay directly to such
Bank such additional amount or amounts as will compensate such Bank for such
increased cost or such reduction.
(b) If any Bank shall reasonably determine that the adoption or phase-in
of any applicable law, rule or regulation regarding capital adequacy, or any
change therein, or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Bank (or its
Eurodollar Office) or any Person controlling such Bank with any request or
directive regarding capital adequacy (whether or not having the force of law) of
any such authority, central bank or comparable agency, has or would have
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<PAGE>
the effect of reducing the rate of return on such Bank's or such controlling
Person's capital as a consequence of such Bank's obligations hereunder
(including, without limitation, such Bank's obligations under the Revolving
Commitment) to a level below that which such Bank or such controlling Person
could have achieved but for such adoption, change or compliance (taking into
consideration such Bank's or such controlling Person's policies with respect to
capital adequacy) by an amount deemed by such Bank or such controlling Person to
be material, then from time to time, within 10 days after demand by such Bank
(which demand shall be accompanied by a statement setting forth in reasonable
detail the basis for and a calculation of the amount of such demand, a copy of
which shall be furnished to the Agent), the Company shall pay to such Bank such
additional amount or amounts as will compensate such Bank or such controlling
Person for such reduction.
8.2 Basis for Determining Interest Rate Inadequate or Unfair. If with
--------------------------------------------------------
respect to any Interest Period:
(a) deposits in Dollars (in the applicable amounts) are not being
offered to the Agent in the interbank eurodollar market for such Interest
Period, or the Agent otherwise reasonably determines (which determination
shall be binding and conclusive on the Company) that by reason of
circumstances affecting the interbank eurodollar market adequate and
reasonable means do not exist for ascertaining the applicable Eurodollar
Rate;
(b) two or more Banks having an aggregate Revolving Percentage of 30%
or more advise the Agent that the Eurodollar Rate (Reserve Adjusted) as
determined by the Agent will not adequately and fairly reflect the cost to
such Banks of maintaining or funding such Loans for such Interest Period
(taking into account any amount to which such Banks may be entitled under
Section 8.1); or
-----------
(c) Banks having an aggregate Revolving Percentage of 30% or more
advise the Agent, that the making or funding of Eurodollar Loans has become
impracticable as a result of an event occurring after the date of this
Agreement which in the opinion of such Banks materially affects such Loans;
then the Agent shall promptly notify the other parties thereof and, so long as
- ----
such circumstances shall continue, (i) no Bank shall be under any obligation to
make or convert into Eurodollar Loans and (ii) on the last day of the current
Interest Period for each Eurodollar Loan, such Loan shall, unless then repaid in
full, automatically convert to a Floating Rate Loan.
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<PAGE>
8.3 Changes in Law Rendering Eurodollar Loans Unlawful. In the event that
--------------------------------------------------
any change in (including the adoption of any new) applicable laws or
regulations, or any change in the interpretation of applicable laws or
regulations by any governmental or other regulatory body charged with the
administration thereof, should make it (or in the good faith judgment of any
Bank cause a substantial question as to whether it is) unlawful for any Bank to
make, maintain or fund Eurodollar Loans, then such Bank shall promptly notify
each of the other parties hereto and, so long as such circumstances shall
continue, (a) such Bank shall have no obligation to make or convert into
Eurodollar Loans (but shall make Floating Rate Loans concurrently with the
making of or conversion into Eurodollar Loans by the Banks which are not so
affected, in each case in an amount equal to such Bank's pro rata share of all
Eurodollar Loans which would be made or converted into at such time in the
absence of such circumstances) and (b) on the last day of the current Interest
Period for each Eurodollar Loan of such Bank (or, in any event, on such earlier
date as may be required by the relevant law, regulation or interpretation), such
Eurodollar Loan shall, unless then repaid in full, automatically convert to a
Floating Rate Loan. Each Floating Rate Loan made by a Bank which, but for the
circumstances described in the foregoing sentence, would be a Eurodollar Loan
(an "Affected Loan") shall remain outstanding for the same period as the Group
of Eurodollar Loans of which such Affected Loan would be a part absent such
circumstances.
8.4 Funding Losses. The Company hereby agrees that upon demand by any
--------------
Bank (which demand shall be accompanied by a statement setting forth the basis
for the calculations of the amount being claimed, a copy of which shall be
furnished to the Agent) the Company will indemnify such Bank against any net
loss or expense which such Bank may sustain or incur (including, without
limitation, any net loss or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by such Bank to fund or
maintain any Eurodollar Loan), as reasonably determined by such Bank, as a
result of (a) any payment or prepayment or conversion of any Eurodollar Loan of
such Bank on a date other than the last day of an Interest Period for such Loan
(including, without limitation, any conversion pursuant to Section 8.3) or (b)
-----------
any failure of the Company to borrow or convert any Loans on a date specified
therefor in a notice of borrowing or conversion pursuant to this Agreement. For
this purpose, all notices to the Agent pursuant to this Agreement shall be
deemed to be irrevocable.
8.5 Right of Banks to Fund through Other Offices. Each Bank may, if it so
--------------------------------------------
elects, fulfill its commitment as to any Eurodollar Loan by causing a foreign
branch or affiliate of such Bank to make such Loan, provided that in such event
--------
for the
-37-
<PAGE>
purposes of this Agreement such Loan shall be deemed to have been made by such
Bank and the obligation of the Company to repay such Loan shall nevertheless be
to such Bank and shall be deemed held by it, to the extent of such Loan, for the
account of such branch or affiliate.
8.6 Discretion of Banks as to Manner of Funding. Notwithstanding any
-------------------------------------------
provision of this Agreement to the contrary, each Bank shall be entitled to fund
and maintain its funding of all or any part of its Loans in any manner it sees
fit, it being understood, however, that for the purposes of this Agreement all
determinations hereunder shall be made as if such Bank had actually funded and
maintained each Eurodollar Loan during each Interest Period for such Loan
through the purchase of deposits having a maturity corresponding to such
Interest Period and bearing an interest rate equal to the Eurodollar Rate for
such Interest Period.
8.7 Mitigation of Circumstances; Replacement of Affected Bank. (a) Each
---------------------------------------------------------
Bank shall promptly notify the Company and the Agent of any event of which it
has knowledge which will result in, and will use reasonable commercial efforts
available to it (and not, in such Bank's good faith judgment, otherwise
disadvantageous to such Bank) to mitigate or avoid, (i) any obligation by the
Company to pay any amount pursuant to Section 7.6 or 8.1 (ii) the occurrence of
----------- ---
any circumstances of the nature described in Section 8.2 or 8.3 (and, if any
----------- ---
Bank has given notice of any such event described in clause (i) or (ii) above
---------- ----
and thereafter such event ceases to exist, such Bank shall promptly so notify
the Company and the Agent). Without limiting the foregoing, each Bank will
designate a different funding office if such designation will avoid (or reduce
the cost to the Company of) any event described in clause (i) or (ii) of the
---------- ----
preceding sentence and such designation will not, in such Bank's sole judgment,
be otherwise disadvantageous to such Bank.
(b) At any time any Bank is an Affected Bank, the Company may replace such
Affected Bank as a party to this Agreement with one or more other bank(s) or
financial institution(s) reasonably satisfactory to the Agent (and upon notice
from the Company such Affected Bank shall assign pursuant to an Assignment
Agreement, and without recourse or warranty, its Revolving Commitment, if any,
its Loans, its Note, its participation in Letters of Credit, if any, and all of
its other rights and obligations hereunder to such replacement bank(s) or other
financial institution(s) for a purchase price equal to the sum of the principal
amount of the Loans so assigned, all accrued and unpaid interest thereon, its
ratable share of all accrued and unpaid non-use fees and Letter of Credit fees,
any amounts payable under Section 8.4 as a result of such Bank receiving payment
-----------
of any Eurodollar Loan prior to
-38-
<PAGE>
the end of an Interest Period therefor and all other obligations owed to such
Affected Bank hereunder).
8.8 Conclusiveness of Statements; Survival of Provisions. Determinations
----------------------------------------------------
and statements of any Bank pursuant to Section 8.1, 8.2, 8.3 or 8.4 shall be
----------- --- --- ---
conclusive absent demonstrable error. Banks may use reasonable averaging and
attribution methods in determining compensation under Sections 8.1 and 8.4, and
------------ ---
the provisions of such Sections shall survive repayment of the Loans,
cancellation of the Notes, cancellation or expiration of the Letters of Credit
and any termination of this Agreement.
SECTION 9 WARRANTIES.
To induce the Agent and the Banks to enter into this Agreement, BofA to
issue Letters of Credit hereunder and the Banks to make Loans and purchase
participations in Letters of Credit hereunder, the Company warrants to the Agent
and the Banks that:
9.1 Organization, etc. Prior to the Recapitalization Merger, ENI will be
-----------------
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. After the Recapitalization Merger, the Company
(as successor by merger of ENI into the Parent with the Parent as the survivor)
will be a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. Each Subsidiary is a corporation duly
organized, validly existing and in good standing under the state of its
incorporation. The Company and each Subsidiary is duly qualified to do business
in each jurisdiction where the nature of its business makes such qualification
necessary, except where the failure to be so qualified would not have a Material
Adverse Effect. The Company and each Subsidiary has full power and all
governmental licenses and approvals necessary to own its property and conduct
its business as presently conducted by it, except where the failure to obtain
such licenses and approvals would not have a material adverse effect on the
entity in question.
9.2 Authorization; No Conflict. The execution, delivery and performance
--------------------------
of each Loan Document and each Recapitalization Document to which a Credit Party
is a party, are within the corporate powers of such Credit Party, have been duly
authorized by all necessary corporate action on the part of such Credit Party
(including any necessary shareholder action), have received all necessary
governmental approval (if any shall be required), and do not and will not (a)
violate any provision of law or any order, decree or judgment of any court or
other government agency which is binding on such Credit Party, (b) contravene or
conflict
-39-
<PAGE>
with, or result in a breach of, any provision of the Certificate of
Incorporation, By-Laws or other organizational documents of such Credit Party or
of any agreement, indenture, instrument or other document, or any judgment,
order or decree, which is binding on such Credit Party or (c) result in, or
require, the creation or imposition of any Lien on any property of such Credit
Party (other than pursuant to the Loan Documents).
9.3 Validity and Binding Nature. Each of the Loan Documents and the
---------------------------
Recapitalization Documents to which a Credit Party is a party are, or upon the
execution and delivery thereof will be, as the case may be, the legal, valid and
binding obligation of such Credit Party, enforceable against such Credit Party
in accordance with its terms, except that enforceability may be limited by
bankruptcy, insolvency, fraudulent conveyance, fraudulent transfer,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and by general principles of equity
(regardless of whether enforcement is sought in equity or at law).
9.4 Financial Information. (a) The audited consolidated financial
---------------------
statements of the Company and its Subsidiaries as at December 31, 1996, and the
unaudited, year-to-date consolidated financial statements of the Company and its
Subsidiaries for the 9 months ended September 30, 1997, (i) are true and correct
in all material respects, (ii) have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
involved (except as disclosed therein and, in the case of interim financial
statements, for the absence of footnote disclosures and year-end adjustments)
and (iii) present fairly the consolidated financial condition of the Company and
its Subsidiaries at such dates and the results of their operations for the
periods then ended.
(b) The unaudited proforma consolidated balance sheet of Parent and its
Subsidiaries as of June 30, 1997 (giving effect to the Recapitalization), a copy
of which has been delivered to each Bank, was prepared by the Company in
accordance with generally accepted accounting principles.
(c) The forecasted consolidated (i) balance sheet, (ii) profit and loss
statement, (iii) cash flow statement and (iv) capitalization statement, together
with supporting details and a statement of underlying assumptions, copies of
which have been delivered to each Bank, have been prepared by the Company in
light of the past operations of the business of the Company and its Subsidiaries
and represent, as of the date of this Agreement, the good faith estimate of the
Company and its senior management of the most probable course of the business of
the Company and its Subsidiaries.
-40-
<PAGE>
9.5 No Material Adverse Change. Since December 31, 1996, except for the
--------------------------
Recapitalization no event or events have occurred which, individually or in the
aggregate, has had or is reasonably likely to have a Material Adverse Effect.
9.6 Litigation and Contingent Liabilities. No litigation (including,
-------------------------------------
without limitation, derivative actions), arbitration proceeding or governmental
proceeding is pending or, to the Company's knowledge, threatened against the
Company or any Subsidiary which, if adversely determined, might have a Material
Adverse Effect, except as set forth in Schedule 9.6. Other than any liability
------------
incident to such litigation or proceedings, neither the Company nor any
Subsidiary has any material contingent liabilities not provided for or disclosed
in the financial statements referred to in clause (a) of Section 9.4 or listed
---------- -----------
in Schedule 9.6.
------------
9.7 Ownership of Properties; Liens. Each of the Company and each
------------------------------
Subsidiary owns good and marketable title to, or a valid leasehold interest in,
all of its properties and assets, real and personal, tangible and intangible, of
any nature whatsoever (including patents, trademarks, trade names, service marks
and copyrights), free and clear of all Liens, charges and claims (including
infringement claims with respect to patents, trademarks, copyrights and the
like) except as permitted pursuant to Section 10.8.
------------
9.8 Subsidiaries. The Company has no Subsidiaries except those listed in
------------
Schedule 9.8.
- ------------
9.9 Pension and Welfare Plans. Except as disclosed to the Banks in
-------------------------
writing prior to the date of this Agreement, during the twelve-consecutive-month
period prior to the Restatement Effective Date or the making of any Loan
hereunder, (a) no steps have been taken to terminate any Pension Plan which
would be reasonably likely to result in the Company being required to make a
contribution to such Pension Plan, or incurring a liability or obligation to
such Pension Plan, in excess of $100,000, and (b) no contribution failure has
occurred with respect to any Pension Plan sufficient to give rise to a Lien
under Section 302(f) of ERISA. No condition exists or event or transaction has
occurred with respect to any Pension Plan which could result in the incurrence
by the Company of any material liability, fine or penalty under ERISA or the
Internal Revenue Code. Except as set forth on Schedule 9.9, the Company has no
------------
Contingent Liability with respect to any post-retirement benefit under a Welfare
Plan, other than liability for continuation coverage described in Part 6 of
subtitle B of title I of ERISA.
-41-
<PAGE>
9.10 Investment Company Act. Neither the Company nor any Subsidiary is an
----------------------
"investment company" or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended.
9.11 Public Utility Holding Company Act. Neither the Company nor any
----------------------------------
Subsidiary is a "holding company", or a "subsidiary company" of a "holding
company", or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company", within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
9.12 Regulation U. The Company is not engaged principally, or as one of
------------
its important activities, in the business of extending credit for the purpose of
purchasing or carrying Margin Stock.
9.13 Taxes. Each of the Company and each Subsidiary has filed all tax
-----
returns and reports required by law to have been filed by it and has paid all
taxes and governmental charges thereby shown to be owing, except (a) as
disclosed on Schedule 9.6 and (b) for any such taxes or charges which are being
------------
diligently contested in good faith by appropriate proceedings and for which
adequate reserves in accordance with generally accepted accounting principles
shall have been set aside on its books.
9.14 Solvency, etc. After giving effect to the Recapitalization on the
-------------
Restatement Effective Date (or, in the case of any Person which becomes a
Guarantor after the Restatement Effective Date, on the date such Person becomes
a Guarantor), and immediately prior to and after giving effect to the issuance
of each Letter of Credit and each borrowing hereunder and the use of the
proceeds thereof, (a) each of the Company's and each Guarantor's assets will
exceed its liabilities and (b) each of the Company and each Guarantor will be
solvent, will be able to pay its debts as they mature, will own property with
fair saleable value greater than the amount required to pay its debts and will
have capital sufficient to carry on its business as then constituted.
9.15 Insurance. Set forth on Schedule 9.15 is a complete and accurate
--------- -------------
summary of the property and casualty insurance program carried by the Company
and its Subsidiaries on the date of this Agreement, including the insurer's(s')
name(s), policy number(s), expiration date(s), amount(s) of coverage, type(s) of
coverage, the annual premium(s), Best's policyholder's and financial size
ratings of the insurer(s), exclusions, deductibles and self-insured retention
and a description in reasonable detail of (a) any retrospective rating plan,
fronting arrangement or other self-insurance or risk assumption agreed to by the
Company
-42-
<PAGE>
or any Subsidiary or imposed upon the Company or any Subsidiary by any such
insurer and (b) any self-insurance program that is in effect.
9.16 Contracts; Labor Matters. Except as disclosed on Schedule 9.16: (a)
------------------------ -------------
neither the Company nor any Subsidiary is a party to any contract or agreement,
or is subject to any charge, corporate restriction, judgment, decree or order,
which materially and adversely affects its business, property, assets,
operations or condition, financial or otherwise; (b) no labor contract to which
the Company or any Subsidiary is a party or is otherwise subject is scheduled to
expire prior to the Revolving Termination Date; (c) neither the Company nor any
Subsidiary has, within the two-year period preceding the date of this Agreement,
taken any action which would have constituted or resulted in a "plant closing"
or "mass layoff" within the meaning of the Federal Worker Adjustment and
Retraining Notification Act of 1988 or any similar applicable federal, state or
local law, and the Company has no reasonable expectation that any such action is
or will be required at any time prior to the Revolving Termination Date; and (d)
on the date of this Agreement (i) neither the Company nor any Subsidiary is a
party to any labor dispute and (ii) there are no strikes or walkouts relating to
any labor contracts to which the Company or any Subsidiary is a party or is
otherwise subject.
9.17 Environmental and Safety and Health Matters. Except as disclosed on
-------------------------------------------
Schedule 9.17, the Company and each of its Subsidiaries and each property,
- -------------
operation and facility that the Company or any Subsidiary may own, operate or
control (i) complies in all material respects with (A) all applicable
Environmental Laws and (B) all applicable Occupational Safety and Health Laws;
(ii) is not subject to any judicial or administrative proceeding alleging the
violation of any Environmental Law or Occupational Safety and Health Law; (iii)
has not received any notice (A) that it may be in violation of any Environmental
Law or Occupational Safety and Health Law, or (B) threatening the commencement
of any proceeding relating to allegedly unlawful, unsafe or unhealthy conditions
or (C) alleging that it is or may be responsible for any response, cleanup, or
corrective action, including but not limited to any remedial
investigation/feasibility study, under any Environmental Law or Occupational
Safety and Health Law; (iv) is not the subject of federal or state investigation
evaluating whether any investigation, remedial action or other response is
needed to respond to (A) a spillage, disposal or release or threatened release
into the environment of any Hazardous Material, or (B) any allegedly unsafe or
unhealthful condition; (v) has not filed any notice under or relating to any
Environmental Law or Occupational Safety and Health Law indicating or reporting
-43-
<PAGE>
(A) any past or present spillage, disposal or release into the environment of,
or treatment, storage or disposal of, any Hazardous Material, or (B) any
potentially unsafe or unhealthful condition, and to the best of the Company's
knowledge there exists no basis for such notice irrespective of whether such
notice was actually filed and (vi) has no material Contingent Liability in
connection with (A) any actual or potential spillage, disposal or release into
the environment of, or otherwise with respect to, any Hazardous Material,
whether on any premises owned or occupied by the Company or any Subsidiary or on
any other premises or (B) any unsafe or unhealthful condition. Except as
disclosed on Schedule 9.17, there are no Hazardous Materials on, in or under any
-------------
property or facilities owned, operated or controlled by the Company or any
Subsidiary, including but not limited to such Hazardous Materials that may be
contained in underground storage tanks, but excepting Hazardous Materials used
in the ordinary course of the business of the Company and its Subsidiaries and
used, stored, handled, treated and disposed in all material respects in
accordance with all applicable laws, including Environmental Laws and
Occupational Safety and Health Laws.
9.18 Recapitalization.
----------------
(a) On the Recapitalization Effective Date, the Recapitalization will be
consummated in accordance with the terms of the Recapitalization Documents.
(b) The Recapitalization has complied and will comply in all respects with
all applicable legal requirements, and all necessary governmental, regulatory,
shareholder and other consents and approvals required for the consummation of
the Recapitalization were, prior to the consummation thereof, duly obtained and
in full force and effect.
(c) The execution and delivery of the Recapitalization Documents, and the
consummation of the transactions contemplated therein, does not and will not
violate any statute or regulation of the United States or of any state or other
applicable jurisdiction, or any order, judgment or decree of any court or
governmental body, or result in a breach of, or constitute a default under, any
agreement, indenture, order or decree affecting ENI, the Parent, the Company or
any of their respective Subsidiaries.
(d) The Company has furnished to the Agent and each Bank a true and
correct copy of the Recapitalization Documents and the Offering Memorandum.
-44-
<PAGE>
(e) All of the representations and warranties of ENI and the Parent
contained in the Recapitalization Documents and the Offering Memorandum are true
and correct as of the date hereof.
9.19 Real Property. Set forth on Schedule 9.19 is a complete and accurate
------------- -------------
list, as of the date of this Agreement and after giving effect to the
Recapitalization, of the address and legal description of any real property
owned or leased by the Company or any Subsidiary, together with, in the case of
leased property, the name and mailing address of the lessor of such property.
9.20 Information. All written information heretofore or contemporaneously
-----------
herewith furnished by the Company or any Subsidiary to any Bank for purposes of
or in connection with this Agreement (including, without limitation, all
information contained in the Offering Memorandum) and the transactions
contemplated hereby is, and all written information hereafter furnished by or on
behalf of the Company or any Subsidiary to any Bank pursuant hereto or in
connection herewith will be, true and accurate in every material respect on the
date as of which such information is dated or certified, and none of such
information is or will be incomplete by omitting to state any material fact
necessary to make such information not misleading.
9.21 Proceeds. The proceeds of the Loans will be used for general working
--------
capital purposes, other general corporate purposes and other activities to the
extent permitted by this Agreement.
SECTION 10 COVENANTS.
Until the expiration or termination of the Commitments and thereafter until
all obligations of the Company hereunder and under the other Loan Documents are
paid in full and all Letters of Credit have been terminated, the Company agrees
that, unless at any time the Required Banks shall otherwise expressly consent in
writing, it will:
10.1 Reports, Certificates and Other Information. Furnish to each Bank:
-------------------------------------------
10.1.1 Annual Report. Promptly when available and in any event within 90
-------------
days after the close of each Fiscal Year, (a) a copy of the annual report of the
Company and its Subsidiaries for such Fiscal Year, including therein
consolidated balance sheets of the Company and its Subsidiaries as of the end of
such Fiscal Year and consolidated statements of earnings and cash flow of the
Company and its Subsidiaries for such Fiscal Year, which report
-45-
<PAGE>
(i) shall be certified by Coopers & Lybrand, or other independent auditors of
recognized national standing selected by the Company and reasonably acceptable
to the Required Banks, in an audit report which shall be without qualification
as to going concern or scope and (ii) shall be accompanied by a written
statement from such auditors to the effect that in making the examination
necessary for the signing of such audit report they have not become aware of any
Event of Default or Unmatured Event of Default that has occurred and is
continuing or, if they have become aware of any such event, describing it in
reasonable detail; and (b) a copy of the consolidating balance sheets of the
Company and its Subsidiaries as of the end of such Fiscal Year and consolidating
statements of earnings for the Company and its Subsidiaries for such Fiscal
Year, together with a certificate of the chief executive officer, the chief
financial officer, the chief operating officer or the controller of the Company
certifying that such financial statements fairly present the financial condition
and results of operations of the Company and its Subsidiaries as of the dates
and periods indicated.
10.1.2 Monthly Reports. Promptly when available and in any event within
---------------
30 days after the end of each month of each Fiscal Year, consolidated and
consolidating balance sheets of the Company and its Subsidiaries as of the end
of such calendar month and consolidated and consolidating statements of earnings
and consolidated statements of cash flow for such month and for the period
beginning with the first day of such Fiscal Year and ending on the last day of
such month, including a comparison with the corresponding month and period of
the previous Fiscal Year and a comparison with the budget for such month and for
such period of such Fiscal Year, together with (a) a certificate of the chief
executive officer, the chief financial officer, the chief operating officer or
the controller of the Company to the effect that such financial statements
fairly present the financial condition and results of operations of the Company
and its Subsidiaries as of the dates and periods indicated, subject to changes
resulting from normal year-end adjustments, and (b) an earned sales report and a
schedule (by entity) of property, plant and equipment, in each case
substantially in the form customarily prepared by the Company immediately prior
to the Restatement Effective Date (or such other form as the Agent may
reasonably approve).
10.1.3 Certificates. (a) Contemporaneously with the furnishing of a copy
------------
of each annual audit report pursuant to Section 10.1.1, and each set of monthly
--------------
statements pursuant to Section 10.1.2, a duly completed certificate in the form
--------------
of Exhibit B, with appropriate insertions, dated the date of such annual report
---------
or such monthly statements and signed by the chief executive officer, the chief
financial officer, the chief
-46-
<PAGE>
operating officer or the controller of the Company, containing a computation of
each of the financial ratios and restrictions set forth in this Section 10 and
----------
to the effect that such officer has not become aware of any Event of Default or
Unmatured Event of Default that has occurred and is continuing or, if there is
any such event, describing it and the steps, if any, being taken to cure it; and
(b) promptly when available and in any event within 30 days after the end of
each month, a certificate (a "Borrowing Base Certificate") in the form of
Exhibit M, with appropriate insertions, signed by the chief executive officer,
- ---------
the chief financial officer, the chief operating officer or the controller of
the Company.
10.1.4 Reports to SEC and to Shareholders. Promptly upon the filing or
----------------------------------
sending thereof, a copy of (a) any annual, periodic or special report or
registration statement (inclusive of exhibits thereto) filed with the SEC or any
securities exchange and (b) any report, proxy statement or similar communication
to the Company's shareholders generally.
10.1.5 Notice of Default, Litigation and ERISA Matters. Promptly (and in
-----------------------------------------------
any event within one Business Day in the case of clause (a) and within five days
----------
in the case of clauses (b) through (e)) after any officer of the Company learns
----------- ---
of any of the following, written notice describing the same and the steps being
taken by the Company or the Subsidiary affected thereby with respect thereto:
(a) the occurrence of an Event of Default or an Unmatured Event of Default; (b)
any litigation, arbitration or governmental investigation or proceeding not
previously disclosed by the Company to the Banks which has been instituted or,
to the knowledge of the Company, is threatened against the Company or any
Subsidiary or to which any of the properties of any thereof is subject which has
had or is reasonably likely to have a Material Adverse Effect; (c) any material
adverse development which occurs in any litigation, arbitration or governmental
investigation or proceeding previously disclosed on Schedule 9.6 or pursuant to
------------
clause (b); (d) the institution of any steps by the Company, any of its
- ----------
Subsidiaries or any other Person to terminate any Pension Plan, or the failure
to make a required contribution to any Pension Plan if such failure is
sufficient to give rise to a Lien under Section 302(f) of ERISA, or the taking
of any action with respect to a Pension Plan which could result in the
requirement that the Company furnish a bond or other security to the PBGC or
such Pension Plan, or the occurrence of any event with respect to any Pension
Plan which could result in the incurrence by the Company of any material
liability, fine or penalty, or any material increase in the Contingent Liability
of the Company with respect to any post-retirement Welfare Plan benefit; and (e)
the occurrence of any
-47-
<PAGE>
other event or circumstance which has had or is reasonably likely to have a
Material Adverse Effect.
10.1.6 Subsidiaries. Promptly upon the occurrences thereof, a written
------------
report of any change in the list of its Subsidiaries.
10.1.7 Management Reports. Promptly upon the request of the Agent or any
------------------
Bank, copies of all detailed financial and management reports submitted to the
Company by independent auditors in connection with any annual or interim audit
made by such auditors of the books of the Company.
10.1.8 Insurance Information. Not later than 90 days after the end of
---------------------
each Fiscal Year, a complete and accurate summary of the property and casualty
insurance program of the Company, containing substantially the same information
with respect to such insurance program as the information set forth on Schedule
--------
9.15; promptly upon the occurrence thereof, a written report of any change in
the Company's insurance program which will materially reduce the amount or scope
of coverage.
10.1.9 Other Information. Promptly from time to time, such other
-----------------
information concerning the Company and its Subsidiaries as any Bank or the Agent
may reasonably request.
10.2 Books, Records and Inspections. Keep, and cause each Subsidiary to
------------------------------
keep, its books and records in accordance with sound business practices
sufficient to allow the preparation of financial statements in accordance with
generally accepted accounting principles; permit, and cause each Subsidiary to
permit, on reasonable notice and at reasonable times and intervals (or at any
time without notice during the existence of an Event of Default) any Bank or the
Agent or any representative thereof to inspect the properties and operations of
the Company and of such Subsidiary; and permit, and cause each Subsidiary to
permit, on reasonable notice and at reasonable times and intervals (or at any
time without notice during the existence of an Event of Default) any Bank or the
Agent or any representative thereof to visit any or all of its offices, to
perform appraisals of the Company's or such Subsidiary's real and/or personal
property, to discuss its financial matters with its officers and its independent
auditors (and the Company hereby authorizes such independent auditors to discuss
such financial matters with any Bank or the Agent or any representative thereof,
provided that the Company shall have the right to be present at any such
discussions so long as no Event of Default or Unmatured Event of Default
exists), and to examine (and, at the expense of the Company or the applicable
Subsidiary, photocopy extracts from) any of its books or other corporate
records. All such visits,
-48-
<PAGE>
appraisals, discussions, and examinations shall be at the Company's expense,
provided that so long as no Event of Default or Unmatured Event of Default
exists, the Company shall not be required to pay for more than one appraisal of
the Company's equipment or one appraisal of any item of real property in any
calendar year. It is understood that on or before March 31, 1998, the Agent
intends to conduct a Collateral evaluation and that the Company shall fully
cooperate with the Agent in connection therewith and shall pay all expenses of
the Agent, including appraisals related thereto (on an estimated basis such
expenses to approximate $10,000).
10.3 Insurance.
---------
(a) Maintain, and cause each Subsidiary to maintain, with reputable,
financially sound insurance companies (rated at least A- by A.M. Best & Co.)
acceptable to the Agent, insurance to such extent and against such hazards and
liabilities as is customarily maintained by companies similarly situated (and,
in any event, such insurance as may be required by any law or governmental
regulation or any court order or decree) and, upon request of the Agent or any
Bank, furnish to the Agent or such Bank a certificate setting forth in
reasonable detail the nature and extent of all insurance maintained by the
Company and its Subsidiaries. Such certification shall be executed by the
insurer or by an authorized representative of the insurer or by the broker of
such insurer where it is not practical for such insurer to execute the
certificate itself. Such certification shall identify underwriters, the type of
insurance, the insurance limits and the policy term. Upon request of the Agent
or any Bank, the Company shall furnish the Agent or any Bank with copies of all
insurance policies, binders and cover notes or other evidence of such insurance
obtained by it and its Subsidiaries.
(b) The Company further agrees as follows: (1) Each policy for liability
insurance shall show the Agent as an additional insured; and (2) Each insurance
policy shall provide that the carrier shall endeavor to give the Agent 30 days'
prior written notice before the policy is cancelled or amended.
10.4 Compliance with Laws; Maintenance of Property; Payment of Taxes and
-------------------------------------------------------------------
Liabilities. (a) Comply, and cause each Subsidiary to comply, in all material
- -----------
respects with all applicable laws, rules, regulations and orders the
noncompliance with which would be reasonably likely to have a Material Adverse
Effect; (b) maintain or cause to be maintained, and cause each Subsidiary to
maintain or cause to be maintained, in good repair, working order and condition
all material properties used in its business, and make, and cause each
Subsidiary to make, all appropriate repairs, renewals and replacements of such
properties; (c) pay, and cause
-49-
<PAGE>
each Subsidiary to pay, prior to delinquency, all taxes and other governmental
charges against it or any of its property; provided, however, that the foregoing
-------- -------
shall not require the Company or any Subsidiary to pay any such tax or charge so
long as it shall contest the validity thereof in good faith by appropriate
proceedings and shall set aside on its books adequate reserves with respect
thereto; and (d) not, and not permit any Subsidiary to, file or consent to the
filing of any consolidated income tax return with any Person other than Parent
and its Subsidiaries.
10.5 Maintenance of Existence, etc. Maintain and preserve, and (subject
------------------------------
to Section 10.12) cause each Subsidiary to maintain and preserve, (a) its
-------------
existence and good standing in the jurisdiction of its incorporation and (b) its
qualification and good standing as a foreign corporation in each jurisdiction
where the nature of its business makes such qualification necessary (except in
those instances in which the failure to be qualified or in good standing would
not be reasonably likely to result in a Material Adverse Effect).
10.6 Financial Covenants.
-------------------
10.6.1 Funded Debt to Cash Flow Ratio. Not permit Funded Debt to Cash
------------------------------
Flow Ratio to exceed the following ratios as of the end of any Fiscal Quarter
during the following years:
<TABLE>
<CAPTION>
Fiscal Funded Debt to
Year: Cash Flow Ratio:
------ ----------------
<S> <C>
1997 6.00:1.0
1998 6.00:1.0
1999 5.50:1.0
2000 5.25:1.0.
</TABLE>
10.6.2 Interest Coverage Ratio. Not permit the Interest Coverage Ratio to
-----------------------
be less than the following ratios as of the end of any Fiscal Quarter during the
following years:
<TABLE>
<CAPTION>
Fiscal Interest
Year Ending: Coverage Ratio
------------ --------------
<S> <C>
1997 1.50:1.00
1998 1.50:1.00
1999 1.75:1.00
2000 1.75:1.00.
</TABLE>
10.6.3 Fixed Charge Coverage Ratio. Not permit the Fixed Charge Coverage
---------------------------
Ratio to be less than the following ratios as of the end of any Fiscal Quarter
during the following years:
-50-
<PAGE>
<TABLE>
<CAPTION>
Fiscal Fixed Charge
Year Ending: Coverage Ratio
------------ --------------
<S> <C>
1997 1.10:1.00
1998 1.15:1.00
1999 1.20:1.00
2000 1.25:1.00
</TABLE>
10.6.4 Underbillings Ratio. Not permit the Underbillings Ratio as of the
-------------------
last day of any Computation Period to be greater than 5%.
10.7 Limitations on Debt. Not, and not permit any Subsidiary to, create,
-------------------
incur, assume or suffer to exist any Debt, except (a) obligations arising under
the Loan Documents; (b) Debt in respect of Capital Leases; (c) Debt of
Subsidiaries to the Company or to other Subsidiaries; (d) unsecured Debt of the
Company to Subsidiaries; (e) Hedging Agreements entered into by the Company or
any Subsidiary; (f) Contingent Liabilities in respect of any obligation of the
Company or any Subsidiary incurred in the ordinary course of business; (g) Debt
in respect of taxes, assessments or governmental charges to the extent that
payment thereof shall not at the time be required to be made in accordance with
Section 10.4; (h) other Debt outstanding on the date hereof and listed under the
- ------------
heading "Continuing Debt" in Schedule 10.7 or hereafter incurred in connection
-------------
with Liens permitted by Section 10.8, and extensions, renewals and refinancings
------------
of any Debt described in this clause (h) so long as the principal amount thereof
----------
is not increased; (i) Subordinated Debt; (j) Debt to be Repaid (provided that
--------
all such Debt shall be paid on or before the Restatement Effective Date); (k)
other Debt outstanding on the Restatement Effective Date listed under the
heading "Continuing Debt" on Schedule 10.7; (l) the Senior Notes, and (m) other
Debt, in addition to Debt permitted by the foregoing clauses of this Section
-------
10.7, not to exceed $5,000,000 in the aggregate of which not more than
- ----
$2,500,000 shall consist of Capital Leases, mortgage financings or purchase
money obligations permitted under the Indenture.
10.8 Liens. Not, and not permit any Subsidiary to, create or permit to
-----
exist any Lien on any of its real or personal properties, assets or rights of
whatsoever nature (whether now owned or hereafter acquired), except (a) Liens
for taxes or other governmental charges not at the time delinquent or thereafter
payable without penalty or being contested in good faith by appropriate
proceedings and, in each case, for which it maintains adequate reserves; (b)
Liens arising in the ordinary course of business (such as (i) Liens of carriers,
warehousemen, mechanics and materialmen and other similar Liens imposed by law
and (ii) Liens incurred in connection with worker's compensation,
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<PAGE>
unemployment compensation and other types of social security (excluding Liens
arising under ERISA) or in connection with surety and appeal bonds, bids,
statutory obligations, payment or performance bonds, deposits to secure the
performance of bids, trade contracts, government contracts, leases, licenses or
other obligations of a like nature incurred in the ordinary course of business)
for sums not overdue or being contested in good faith by appropriate proceedings
and not involving any deposits or advances or borrowed money or the deferred
purchase price of property or services, and, in each case, for which it
maintains adequate reserves; (c) Liens identified on Schedule 10.8; (d) Liens in
-------------
connection with Capital Leases; (e) any Lien arising in connection with the
acquisition, construction or improvement of property after the date hereof, and
attaching only to the property being acquired, constructed or improved, if the
Debt secured thereby does not exceed 90% of the fair market value of the
property acquired at the time of acquisition thereof or 90% of the cost of such
construction or improvement, as the case may be, nor $2,500,000 in the aggregate
for all such Debt of the Company and all Subsidiaries at any one time
outstanding; (f) attachments, judgments and other similar Liens, for sums not
exceeding $500,000 (excluding any portion thereof which is covered by insurance
so long as the insurer is reasonably likely to be able to pay and has accepted a
tender of defense and indemnification without reservation of rights) arising in
connection with court proceedings, provided the execution or other enforcement
of such Liens is effectively stayed and claims secured thereby are being
actively contested in good faith and by appropriate proceedings; (g) easements,
rights of way, restrictions, minor defects or irregularities in title and other
similar Liens not interfering in any material respect with the ordinary conduct
of the business of the Company and its Subsidiaries taken as a whole; (h) leases
or subleases granted by the Company or any Subsidiary in the ordinary course of
its business; (i) extensions, renewals or replacements of any Lien permitted by
the foregoing provisions of this Section 10.8, but only if the principal amount
------------
of the Debt secured thereby immediately prior to such extension, renewal or
replacement is not increased and such Lien is not extended to any other
property; (j) Liens on cash of the Company and its Subsidiaries in connection
with Secured Third Party Letters of Credit securing amounts not to exceed
$2,000,000 in the aggregate; (k) Liens in favor of the Agent to secure the
Liabilities; and (l) Liens in favor of the trustee under the Indenture to secure
expenses of the trustee.
10.9 Capital Expenditures. Not, and not permit any Subsidiary to, make or
--------------------
commit to make any Capital Expenditures in any Fiscal Year unless, after giving
effect to such Capital Expenditure, the aggregate amount of all Capital
Expenditures
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<PAGE>
(excluding Capital Expenditures pursuant to Capital Leases permitted by Section
-------
10.23) made by the Company and its Subsidiaries during such Fiscal Year shall
- -----
not exceed $3,000,000.00.
10.10 Dividends, etc. Not, and not permit any Subsidiary to, (a) declare
--------------
or pay any dividends on any of its capital stock (other than stock dividends),
(b) purchase or redeem any capital stock of the Company or any Subsidiary or any
warrants, options or other rights in respect of such stock, (c) make any other
distribution to shareholders of the Company or any Subsidiary, (d) prepay,
purchase or redeem any Subordinated Debt or (e) set aside funds for any of the
foregoing; except that:
(i) any Subsidiary may pay dividends to the Company or to any other
Wholly-Owned Subsidiary;
(ii) so long as no Event of Default or Unmatured Event of Default exists
or would result therefrom, to the extent and only to the extent
permitted under the Indenture, the Company may declare or pay
dividends on its capital stock or may purchase or redeem stock of
the Company from any individual (or the estate or heirs of any
individual); provided that (a) the Company shall not use the
proceeds of any Loans to make any such declaration or payment of
dividends or purchase or redemption of stock, and (b) prior to
making any such declaration or payment of dividends or purchase or
redemption of stock, the aggregate unused amount of the Revolving
Commitments (taking into account any Borrowing Base limitation)
shall equal or exceed $10,000,000; and
(iii) subject to satisfaction of the conditions in Section 11.1, 11.2 and
------------ ----
11.3, a dividend of $56,000,000 to effect the Recapitalization.
----
10.11 Investments. The Company will not, nor will it permit any
-----------
Subsidiary to, make, incur, assume or suffer to exist any Investment in any
other Person, except:
(a) Investments existing on the Restatement Effective Date and
identified in Schedule 10.11;
--------------
(b) Cash Equivalent Investments;
(c) Investments by the Company in its Subsidiaries or by any
Subsidiary in any other Subsidiary, in the form of contributions to capital
or loans or advances; provided that, immediately before and after giving
--------
effect to such
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<PAGE>
Investment, no Event of Default or Unmatured Event of Default shall have
occurred and be continuing;
(d) Investments by the Company or any Subsidiary in any Subsidiary,
in the form of capital contributions existing on the date hereof;
(e) loans or advances made by any Subsidiary to the Company;
(f) loans evidenced by the Management Notes and other loans or
advances to officers and employees of the Company or of any Subsidiary for
travel or other ordinary business expenses not in excess of $300,000 in the
aggregate at any time;
(g) loans or advances to, or deposits with, contractors and suppliers
in the ordinary course of business not in excess of $200,000 in the
aggregate at any time;
(h) bank deposits in the ordinary course of business with any Bank or
with any other commercial banking institution; in the ordinary course of
business;
(i) extensions of credit in the nature of Accounts Receivable or
notes receivable arising from the sale or lease of goods and services in
the ordinary course of business;
(j) shares of stock, obligations or other securities received in
settlement of claims arising in the ordinary course of business; and
(k) Investments not otherwise permitted by the foregoing clauses (a)
-----------
through (j) so long as no Event of Default or Unmatured Event of Default
---
has occurred and is continuing or would result therefrom.
10.12 Mergers, Consolidations, Sales. Not, and not permit any Subsidiary
------------------------------
to, be a party to any merger or consolidation, liquidate or dissolve, or
purchase or otherwise acquire all or substantially all of the assets or any
stock of any class of, or any partnership or joint venture interest in, any
other Person, or, except in the ordinary course of its business, sell, transfer,
convey or lease any of its assets, or sell or assign with or without recourse
any receivables, except for (i) any such merger or consolidation, sale,
transfer, conveyance, lease, liquidation, dissolution, or assignment of or by
any Wholly-Owned Subsidiary into the Company or into, with or to any other
Wholly-Owned Subsidiary, (ii) any such purchase or other acquisition by
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<PAGE>
the Company or any Wholly-Owned Subsidiary of the assets or stock of any Wholly-
Owned Subsidiary, (iii) subject to compliance with the conditions in Section
-------
11.1, 11.2 and 11.3, the Recapitalization Merger, (iv) Investments (including
- ---- ---- ----
Investments by way of merger) permitted by Section 10.11; (v) so long as no
-------------
Event of Default or Unmatured Event of Default has occurred and is continuing or
would result therefrom, the sale of assets (including the sale of stock of any
Subsidiary); provided that the aggregate proceeds of all sales of assets in any
one Fiscal Year shall not exceed an amount equal to 10% of the consolidated book
value of the assets of the Company and its Subsidiaries, as of the beginning of
such Fiscal Year, and, in the case of the sale of stock of a Subsidiary or the
sale of substantially all of the assets of a Subsidiary or division, the
consolidated net income of the Company for the prior Fiscal Year attributable to
such Subsidiary or division shall not exceed an amount equal to 5% of the total
consolidated net income of the Company and its Subsidiaries, for the prior
Fiscal Year.
10.13 [Reserved].
10.14 Use of Proceeds. Not use or permit any proceeds of any Loan to be
---------------
used, either directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of (a) "purchasing or carrying" any Margin Stock; or (b)
purchasing or otherwise acquiring any stock of any Person if such Person (or its
board of directors) has (i) announced that it will oppose such purchase or other
acquisition or (ii) commenced any litigation which alleges that such purchase or
other acquisition violates, or will violate, applicable law.
10.15 Transactions with Affiliates. Not, and not permit any Subsidiary
----------------------------
to, enter into or cause, suffer or permit to exist any transaction, arrangement
or contract with any of its other Affiliates (other than the Company or any
Subsidiary) which is on terms which are less favorable than are obtainable from
any Person which is not one of its Affiliates. Without limiting the foregoing,
the Company will not, and will not permit any Subsidiary to, pay any management,
consulting or similar fee to any Affiliate (other than to the Company or a
Subsidiary), provided that the Company may reimburse BancBoston Ventures Inc.
--------
(or an Affiliate thereof) and The KB Mezzanine Fund (or an Affiliate thereof)
for reasonable out-of-pocket expenses arising out of services actually rendered.
10.16 Employee Benefit Plans. Maintain, and cause each Subsidiary to
----------------------
maintain, each Pension Plan in compliance in all material respects with all
applicable requirements of law and regulations, and, without limiting the
generality of the foregoing, not at any time permit the aggregate accumulated
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<PAGE>
benefit obligations of all Pension Plans to exceed the aggregate assets of all
Pension Plans (as shown on the most recent Form 5500 filed with the Internal
Revenue Service with respect to each such Pension Plan).
10.17 Environmental Covenants.
-----------------------
10.17.1 Environmental Response Obligation. (a) Comply, and cause each
---------------------------------
Subsidiary to comply, with any Federal or state judicial or administrative order
requiring the performance at any real property owned, operated or leased by the
Company or any Subsidiary of activities in response to the release or threatened
release of a Hazardous Material, except for the period of time that the Company
or such Subsidiary is diligently in good faith contesting such order; (b) notify
the Agent within ten days of the receipt of any written claim, demand,
proceeding, action or notice of liability by any Person arising out of or
relating to the release or threatened release of a Hazardous Material; and (c)
notify the Agent within ten days of any release, threat of release, or disposal
of Hazardous Material reported by the Company or any Subsidiary to any
governmental or regulatory authority at any real property owned, operated, or
leased by the Company or any Subsidiary.
10.17.2 Environmental Liabilities. (a) Comply, and cause each Subsidiary
-------------------------
to comply, in all material respects with all material Environmental Laws; (b)
without limiting clause (a), not commence disposal of any Hazardous Material
----------
into or onto any real property owned, operated or leased by the Company or any
Subsidiary; and (c) without limiting clause (a), not allow any Lien imposed
----------
pursuant to any law, regulation or order relating to Hazardous Materials or the
disposal thereof to remain on any real property owned, operated or leased by the
Company or any Subsidiary.
10.17.3 Environmental Assessments. Without limiting any other provision
-------------------------
of this Agreement, permit, and cause each Subsidiary to permit, the Agent or any
Bank to investigate the environmental aspects of the properties, facilities and
operations of the Company or such Subsidiary (including taking samples and
conducting such other activities as the Agent or such Bank deems appropriate).
If the Agent decides to cause such an environmental assessment of any property
to be conducted because of (a) the Agent's considering taking possession of or
title to such property after the occurrence of an Event of Default or (b) a
material change in the use of the property which, in the opinion of the Required
Banks, increases the risk of non-compliance with Environmental Laws or increases
the risk of cost or liabilities thereunder, then the Company shall pay upon
demand all costs and expenses (including reasonable attorney's fees)
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<PAGE>
connected with such assessment. Nothing in this Section 10.17.3, and no actions
---------------
taken by the Agent or any Bank pursuant hereto, shall give, or be construed as
giving, to the Banks the right or obligation to direct or control the conduct or
action or inaction of the Company or any Subsidiary with respect to any
environmental matters, including but not limited to those pertaining to
compliance with any Environmental Law.
10.18 Unconditional Purchase Obligations. Not, and not permit any
----------------------------------
Subsidiary to, enter into or be a party to any contract for the purchase of
materials, supplies or other property or services, if such contract requires
that payment be made by it regardless of whether or not delivery is ever made of
such materials, supplies or other property or services.
10.19 Inconsistent Agreements. Not, and not permit any Subsidiary to,
-----------------------
enter into any agreement containing any provision which would be violated or
breached by any borrowing by the Company hereunder or by the performance by the
Company or any Subsidiary of any of its obligations hereunder or under any other
Loan Document.
10.20 Further Assurances. Take, and cause each Subsidiary to take, such
------------------
actions as the Agent may reasonably request from time to time (including,
without limitation, the execution and delivery of guaranties, security
agreements, pledge agreements, mortgages, Landlord's Consents, stock powers,
financing statements, lien searches, and other documents, the filing or
recording of any of the foregoing, and the delivery of stock certificates and
other collateral with respect to which perfection is obtained by possession) to
ensure that (a) the obligations of the Company hereunder and under the other
Loan Documents are secured by all Accounts Receivable and Inventory of the
Company and guaranteed by all Domestic Significant Subsidiaries (including,
promptly upon the acquisition or creation thereof, any Domestic Significant
Subsidiary created or acquired after the date hereof) and (b) the obligations of
each Domestic Significant Subsidiary under the Guaranty are secured by all
Accounts Receivable and Inventory of such Domestic Significant Subsidiary
(subject, in the case of both clause (a) and clause (b) above, to such
---------- ----------
exceptions as the Agent or the Required Banks may permit from time to time).
10.21 Amendments to Certain Documents. Not make or agree to any amendment
-------------------------------
to or modification, or waive any of its rights under, any of the terms of the
Management Notes or the Recapitalization Documents, except for any such
amendment, modification or waiver (i) as to which the Company shall have given
the Banks 30 days prior written notice, and (ii) which does not in any way
adversely affect the interests of the Banks.
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<PAGE>
10.22 Intentionally deleted.
10.23 Capital Leases. Not permit the aggregate amount of all payments by
--------------
the Company and its Subsidiaries as lessee under Capital Leases to exceed
$2,500,000 in any Fiscal Year.
10.24 Operating Leases. Not permit the aggregate amount of all payments
----------------
by the Company and its Subsidiaries as lessee under operating leases to exceed
$3,000,000 in any Fiscal Year.
10.25 Underbillings. Not at any time permit the Underbillings with
-------------
respect to any project to be greater than $3,000,000.
10.26 Conduct of Business. Not, and not permit any Subsidiary to, engage
-------------------
in any business other than business of the type (or similar or related types)
described in Schedule 10.26.
--------------
10.27 Third Party Lien Restrictions. Not, and not permit any Subsidiary
-----------------------------
to, permit any Person to restrict the Company's or any Subsidiary's ability to
grant a Lien on any of its real or personal properties, assets or rights of
whatsoever nature (whether now owned or hereafter acquired) to the Agent, for
the benefit of the Banks.
10.28 Payments on Senior Notes. Not, and not permit any Subsidiary to,
------------------------
purchase, redeem, prepay or make any other payment on the Senior Notes other
than payments required to be made under the Indenture or the Senior Notes;
provided, however, that the Company may purchase Senior Notes for its own
- -------- -------
account so long as (i) no Event of Default or Unmatured Event of Default shall
exist immediately before or after giving effect to such purchase, and (ii) the
Company shall not use the proceeds of any Loans to make any such purchase, and
(iii) prior to making any such purchase, the aggregate unused amount of the
Revolving Commitments (taking into account any Borrowing Base limitation) shall
equal or exceed $10,000,000.
10.29 Collateral. Upon request of Agent following the occurrence of any
----------
Event of Default or Unmatured Event of Default, the Company shall, and shall
cause each Domestic Subsidiary, to grant to the Agent, for the benefit of the
Banks, a first priority perfected lien on all the assets constituting property,
plant and equipment of the Company and its Domestic Subsidiaries, such Lien to
be accompanied by such documentation (including security agreements, mortgages,
UCC financing statements, certificates, resolutions and opinions) as the Agent
shall reasonably require.
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<PAGE>
10.30 Subsidiaries. Not, and not permit any Subsidiary to, create,
------------
acquire or otherwise permit to exist any Significant Subsidiary unless (w) in
the case of any Domestic Significant Subsidiary, the equity interests owned
directly or indirectly by the Company or its Subsidiaries are pledged to the
Agent for the benefit of the Banks pursuant to the Company Pledge Agreement or
the Subsidiary Pledge Agreement, as applicable, (x) in the case of any Foreign
Significant Subsidiary, 65% of the equity interests owned directly or indirectly
by the Company or its Subsidiaries are pledged to the Banks pursuant to the
Company Pledge Agreement or the Subsidiary Pledge Agreement, (y) in the case of
any Foreign Significant Subsidiary created after the Restatement Effective Date,
such Subsidiary is owned by a wholly-owned Subsidiary of the Company, and (z)
each such Domestic Significant Subsidiary shall have executed Guaranties in
favor of the Agent and shall have granted to the Agent for the benefit of the
Banks a perfected security interest in all of such Subsidiary's assets
consisting of Accounts Receivable and Inventory pursuant to such Collateral
Documents as may be reasonably required by the Agent.
10.31 Non-Significant Subsidiaries. Not permit (i) in any Fiscal Year the
----------------------------
aggregate net income of all non-Significant Subsidiaries to exceed 5% of total
consolidated net income of the Company and its Subsidiaries for such Fiscal Year
or (ii) the aggregate book value of the assets of all non-Significant
Subsidiaries to exceed 5% of the consolidated book value of the assets of the
Company and its Subsidiaries. Upon any Event of Default under this Section
-------
10.31, the Agent shall have, in addition to all other rights and remedies, the
- -----
right to take a lien on property, plant and equipment of all Domestic
Subsidiaries pursuant to Section 10.29.
-------------
SECTION 11 CONDITIONS TO EFFECTIVENESS OF RESTATED AGREEMENT, ETC.
The effectiveness of this Agreement and the obligation of each Bank to make
any Loan and of BofA to issue any Letter of Credit is subject to the following
conditions precedent:
11.1 Documentary Conditions to Effectiveness. The effectiveness of this
---------------------------------------
Agreement and the obligation of each Bank to make its initial Loan and of BofA
to issue the initial Letter of Credit under this Agreement, whichever first
occurs, is, in addition to the conditions precedent specified in Sections 11.2
-------------
and 11.3, subject to the conditions precedent (and the date on which all such
----
conditions precedent have been satisfied or waived in writing by the Banks is
called the "Restatement Effective Date") that the Agent shall have received, on
or prior to
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November 15, 1997, all of the following, each duly executed and dated the
Restatement Effective Date (or such earlier date as shall be satisfactory to the
Agent), in form and substance satisfactory to the Agent, and each (except for
the Notes, of which only the originals shall be signed) in sufficient number of
signed counterparts to provide one for each Bank:
11.1.1 Notes. The Replacement Notes.
-----
11.1.2 Resolutions. Certified copies of resolutions of the Board of
-----------
Directors of the Company authorizing or ratifying the execution, delivery and
performance by the Company of this Agreement, the Notes and the other Loan
Documents to which the Company is a party; and certified copies of resolutions
of the Board of Directors of each Guarantor authorizing or ratifying the
execution, delivery and performance by such Guarantor of the Guaranty and the
other Loan Documents to which such Guarantor is a party.
11.1.3 Consents, etc. Certified copies of all documents evidencing any
-------------
necessary corporate action, consents and governmental approvals (if any)
required for the execution, delivery and performance of the Loan Documents by
the Company and each Guarantor.
11.1.4 Incumbency and Signature Certificates. A certificate of the
-------------------------------------
Secretary or an Assistant Secretary of the Company and each Guarantor certifying
the names of the officer or officers of such entity authorized to sign the Loan
Documents to which such entity is a party, together with a sample of the true
signature of each such officer (it being understood that the Agent and each Bank
may conclusively rely on each such certificate until formally advised by a like
certificate of any changes therein).
11.1.5 Guaranty. A guaranty, substantially in the form of Exhibit C,
-------- ---------
executed by the Guarantors (as amended, supplemented or otherwise modified from
time to time, the "Guaranty").
11.1.6 Security Agreement, etc. A security agreement, substantially in
-----------------------
the form of Exhibit D (as amended, supplemented or otherwise modified from time
---------
to time, the "Security Agreement") issued by the Company and each Guarantor,
together with such fully-executed UCC-1 forms as the Agent may require.
11.1.7 Pledge Agreements. A pledge agreement, substantially in the form
-----------------
of Exhibit E, issued by the Company (as amended, supplemented or otherwise
---------
modified from time to time, the "Pledge Agreement"), and a pledge agreement,
substantially in the form of Exhibit E-2, issued by Roberts & Schaefer Company
-----------
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(such pledge agreement, together with any other pledge agreement executed in the
future by a Subsidiary pursuant hereto, in each case as amended, supplemented or
otherwise modified from time to time, each a "Subsidiary Pledge Agreement"),
together with the stock certificates to be pledged thereunder and stock powers
executed in blank.
11.1.8 Assumption and Affirmation. (i) The Assumption duly executed by
--------------------------
the Company (as successor by merger of ENI into the Parent), substantially in
the form of Exhibit N, and (ii) the Affirmation of Collateral Documents duly
---------
executed by each applicable Credit Party, substantially in the form of Exhibit
-------
O.
- -
11.1.9 Recapitalization Documents. A copy, certified as true and correct
--------------------------
by the Secretary or an Assistant Secretary of the Company, of each of (a) the
Recapitalization Documents (including all exhibits and schedules thereto) and
(b) the Management Notes.
11.1.10 Good Standing Certificates. To the extent requested by the Agent,
--------------------------
a certificate of the due incorporation, legal existence and good standing of the
Company and its Subsidiaries in their respective state of incorporation, issued
by the appropriate authorities of such jurisdictions.
11.1.11 Solvency Certificate. A certificate of the chief executive
--------------------
officer or the chief financial officer of the Company and each Guarantor as to
the solvency of each such entity, substantially in the form of Exhibit K, with
---------
appropriate insertions.
11.1.12 Opinions of Counsel for the Company and the Guarantors. The
------------------------------------------------------
opinion of Mayer, Brown & Platt, counsel for the Company and the Guarantors, in
the form of Exhibit F .
----------
11.1.13 Other Legal Opinions. To the extent requested by the Agent, the
--------------------
legal opinions required under the Recapitalization Documents.
11.1.14 [Reserved]
11.1.15 Insurance. To the extent requested by the Agent, evidence of
---------
insurance required under Section 10.3.
------------
11.1.16 Other. Such other documents as the Agent or any Bank may
-----
reasonably request (including a certificate signed by a duly authorized
representative of the Company certifying that all conditions set forth in
Sections 11.1.1 through 11.1.16 have been satisfied).
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<PAGE>
11.2 Additional Conditions to Effectiveness. The effectiveness of this
--------------------------------------
Agreement and the obligation of each Bank to make its initial Loan and of BofA
to issue the initial Letter of Credit, whichever first occurs, is, in addition
to the conditions precedent specified in Sections 11.1 and 11.3, subject to the
------------- ----
following conditions precedent:
11.2.1 Debt to be Repaid, etc. The Agent shall have received evidence,
----------------------
reasonably satisfactory to the Agent, that (a) all Debt to be Repaid has been,
or concurrently with the making of such Loan or the issuance of such Letter of
Credit will be, paid in full; and (b) all commitments under the agreements
relating to such Debt, and all Liens securing such Debt, have been terminated.
11.2.2 Fees. The Company shall have paid (or shall have made arrangements
----
to pay with the proceeds of the initial Loan) all fees and expenses then due and
payable to the Agent or any Bank (including, to the extent then billed, all
amounts payable pursuant to Section 14.6).
------------
11.2.3 Recapitalization. The Agent shall have received evidence,
----------------
reasonably satisfactory to the Agent, that the Recapitalization has been
completed (without giving effect to the waiver of any conditions precedent set
forth in the Recapitalization Documents unless consented to by all Banks).
11.3 Additional Conditions to All Loans and Letters of Credit. The
--------------------------------------------------------
effectiveness of this Agreement and the obligation of each Bank to make each
Loan and of BofA to issue each Letter of Credit is subject to the following
further conditions precedent that:
11.3.1 No Default, etc. (a) No Event of Default or Unmatured Event of
----------------
Default has occurred and is continuing or will result from the making of such
Loan, (b) the warranties of the Company contained in Section 9 (excluding
---------
Sections 9.4, 9.6, 9.8 and 9.15 through 9.20) are true and correct as of the
- ------------ --- --- ---- ----
date of such requested Loan or the issuance of such Letter of Credit, with the
same effect as though made on such date and (c) since the date of the financial
statements described in Section 9.4 or, if later, the date of the most recent
-----------
financial statements delivered to the Banks pursuant to Section 10.1.1 or
--------------
10.1.2, no event has occurred which, in the reasonable credit judgment of the
- ------
Required Banks, may have a Material Adverse Effect.
11.3.2 Confirmatory Certificate. If requested by the Agent or any Bank,
------------------------
the Agent shall have received (in sufficient counterparts to provide one to each
Bank) a certificate dated the date of such requested Loan or Letter of Credit
and signed by a
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duly authorized representative of the Company as to the matters set out in
clauses (a) and (b) of Section 11.3.1 (it being understood that each request by
- ----------- --- --------------
the Company for the making of a Loan or the issuance of a Letter of Credit shall
be deemed to constitute a warranty by the Company that the conditions precedent
set forth in Section 11.3.1 will be satisfied at the time of the making of such
--------------
Loan or the issuance of such Letter of Credit), together with such other
documents as the Agent or any Bank may reasonably request in support thereof.
11.4 Release. The Agent agrees that it has released its Lien on all
-------
property, plant and equipment of the Company and its Subsidiaries and promptly
following the Restatement Effective Date, the Agent agrees to execute, at the
expense of the Company, releases of all Liens other than Liens granted under the
Security Agreement and the Pledge Agreements, such release to be without
representation or warranty of any kind.
SECTION 12 EVENTS OF DEFAULT AND THEIR EFFECT.
12.1 Events of Default. Each of the following shall constitute an Event
-----------------
of Default under this Agreement:
12.1.1 Non-Payment of the Loans, etc. Default in the payment when due of
-----------------------------
the principal of any Loan; or default, and continuance thereof for two Business
Days, in the payment when due of any interest on any Loan, any reimbursement
obligation with respect to any Letter of Credit or any fee or other amount
payable by the Company hereunder or under any other Loan Document.
12.1.2 Default under Other Debt. Any default shall occur under the terms
------------------------
applicable to any Debt of the Company or any Subsidiary in an aggregate amount
(for all Debt so affected) exceeding $500,000 and such default shall (a) consist
of the failure to pay such Debt when due (subject to any applicable grace
period), whether by acceleration or otherwise, (b) accelerate the maturity of
such Debt or (c) permit the holder or holders of such Debt, or any trustee or
agent for such holder or holders, to cause such Debt to become due and payable
prior to its expressed maturity.
12.1.3 Other Material Obligations. Default in the payment when due,
--------------------------
whether by acceleration or otherwise, or in the performance or observance of,
any material obligation of, or condition agreed to by, the Company or any
Subsidiary with respect to any material purchase or lease of goods or services
(except only to the extent that the existence of any such default is being
contested by the Company or such Subsidiary in good
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faith and by appropriate proceedings and appropriate reserves have been made in
respect of such default); but only if the aggregate liability of the Company and
its Subsidiaries in respect of all such purchases and leases so affected shall
exceed $500,000.
12.1.4 Bankruptcy, Insolvency, etc. The Company or any Subsidiary becomes
---------------------------
insolvent or generally fails to pay, or admits in writing its inability or
refusal to pay, debts as they become due; or the Company or any Subsidiary
applies for, consents to, or acquiesces in the appointment of a trustee,
receiver or other custodian for the Company or such Subsidiary or any property
thereof, or makes a general assignment for the benefit of creditors; or, in the
absence of such application, consent or acquiescence, a trustee, receiver or
other custodian is appointed for the Company or any Subsidiary or for a
substantial part of the property of any thereof and is not discharged within 30
days; or any bankruptcy, reorganization, debt arrangement, or other case or
proceeding under any bankruptcy or insolvency law, or any dissolution or
liquidation proceeding (except the voluntary dissolution, not under any
bankruptcy or insolvency law, of a Subsidiary), is commenced in respect of the
Company or any Subsidiary, and if such case or proceeding is not commenced by
the Company or such Subsidiary, it is consented to or acquiesced in by the
Company or such Subsidiary, or remains for 30 days undismissed; or the Company
or any Subsidiary takes any corporate action to authorize, or in furtherance of,
any of the foregoing.
12.1.5 Non-Compliance with Provisions of This Agreement. Failure by the
------------------------------------------------
Company to comply with or to perform any covenant set forth in Section 10.3,
------------
10.5 through 10.12, 10.14, 10.15, 10.21 or 10.22; failure by the Company to
- ---- ----- ----- ----- ----- -----
comply with or to perform any covenant set forth in Section 10.13 or 10.20 and
------------- -----
continuance of such failure for five days after notice thereof to the Company
from the Agent or any Bank; or failure by the Company to comply with or to
perform any other provision of this Agreement (and not constituting an Event of
Default under any of the other provisions of this Section 12) and continuance of
----------
such failure for 30 days after notice thereof to the Company from the Agent or
any Bank.
12.1.6 Warranties. Any warranty made by the Company herein is breached or
----------
is false or misleading in any material respect, or any schedule, certificate,
financial statement, report, notice or other writing furnished by the Company to
the Agent or any Bank is false or misleading in any material respect on the date
as of which the facts therein set forth are stated or certified.
12.1.7 Pension Plans. (i) Institution of any steps by the Company or any
-------------
other Person to terminate a Pension Plan if as a
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result of such termination the Company could be required to make a contribution
to such Pension Plan, or could incur a liability or obligation to such Pension
Plan, in excess of $500,000 or (ii) a contribution failure occurs with respect
to any Pension Plan sufficient to give rise to a Lien under section 302(f) of
ERISA.
12.1.8 Judgments. Final judgments which exceed an aggregate of $500,000
---------
(excluding any portion thereof which is covered by insurance so long as the
insurer is reasonably likely to be able to pay and has accepted a tender of
defense and indemnification without reservation of rights) shall be rendered
against the Company or any Subsidiary and shall not have been discharged or
vacated or had execution thereof stayed pending appeal within 30 days after
entry or filing of such judgments.
12.1.9 Invalidity of Guaranty, etc. The Guaranty shall cease to be in
----------------------------
full force and effect with respect to any Guarantor (other than as expressly
permitted hereunder), any Guarantor shall fail (subject to any applicable grace
period) to comply with or to perform any applicable provision of the Guaranty,
or any Guarantor (or any Person by, through or on behalf of such Guarantor)
shall contest in any manner the validity, binding nature or enforceability of
the Guaranty with respect to such Guarantor.
12.1.10 Invalidity of Collateral Documents, etc. Any Collateral Document
----------------------------------------
shall cease to be in full force and effect with respect to the Company or any
Guarantor (other than as expressly permitted hereunder), the Company or any
Guarantor shall fail (subject to any applicable grace period) to comply with or
to perform any applicable provision of any Collateral Document, or the Company
or any Guarantor (or any Person by, through or on behalf of the Company or any
Guarantor) shall contest in any manner the validity, binding nature or
enforceability of any Collateral Document or the Agent's Lien granted under any
Collateral Document shall cease to be a first-priority Lien subject only to such
exceptions as are permitted in this Agreement or any applicable Collateral
Document.
12.1.11 Change in Control. After the Recapitalization, the Principals (or
-----------------
any successor as a result of death of any one, but not more than one, of the
Principals) shall fail to beneficially own 80% of the issued and outstanding
voting Stock of the Company.
12.1.12 Bonding Arrangements. (a) Any Person executing bonds,
--------------------
undertakings or instruments of guaranty as surety for the Company or any
Subsidiary with respect to any contracts to be entered into by the Company or
such Subsidiary for any reason generally ceases to issue such bonds,
undertakings or instruments
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of guaranty and such cessation could reasonably be expected to have a Material
Adverse Effect; or (b) the Company or any of its Subsidiaries breaches or
defaults with respect to any term of any bonded contract if the effect of such
breach or default is to cause any Person executing bonds, undertakings or
instruments of guaranty as surety for the Company or such Subsidiary to take
possession of the work under such bonded contract and such possession could
reasonably be expected to have a Material Adverse Effect.
12.1.13 Material Adverse Change. The Required Banks shall have determined
-----------------------
in good faith that an event has occurred or a condition exists that has had or
is reasonably likely to have a Material Adverse Effect.
12.1.14 Default under Recapitalization Documents. Any default shall occur
----------------------------------------
under the terms of the Recapitalization Documents.
12.2 Effect of Event of Default. If any Event of Default described in
--------------------------
Section 12.1.4 shall occur, the Commitments (if they have not theretofore
- --------------
terminated) shall immediately terminate and the Notes and all other obligations
hereunder shall become immediately due and payable and the Company shall become
immediately obligated to deliver to the Agent cash collateral in an amount equal
to the outstanding face amount of all Letters of Credit, all without
presentment, demand, protest or notice of any kind; and, in the case of any
other Event of Default, the Agent may (and upon written request of the Banks
shall) declare the Commitments (if they have not theretofore terminated) to be
terminated and/or declare all Notes and all other obligations hereunder to be
due and payable and/or demand that the Company immediately deliver to the Agent
cash collateral in an amount equal to the outstanding face amount of all Letters
of Credit, whereupon the Commitments (if they have not theretofore terminated)
shall immediately terminate and/or all Notes and all other obligations hereunder
shall become immediately due and payable and/or the Company shall immediately
become obligated to deliver to the Agent cash collateral in an amount equal to
the face amount of all Letters of Credit, all without presentment, demand,
protest or notice of any kind. The Agent shall promptly advise the Company of
any such declaration, but failure to do so shall not impair the effect of such
declaration. Notwithstanding the foregoing, the effect as an Event of Default
of any event described in Section 12.1.1 or Section 12.1.4 may be waived by the
-------------- --------------
written concurrence of all of the Banks, and the effect as an Event of Default
of any other event described in this Section 12 may be waived by the written
----------
concurrence of the Required Banks. Any cash collateral delivered hereunder
shall be held by the Agent and applied to obligations arising in connection with
any
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drawing under a Letter of Credit. After the expiration or termination of all
Letters of Credit, such cash collateral shall be applied by the Agent to any
remaining obligations hereunder and any excess shall be delivered to the Company
or as a court of competent jurisdiction may direct.
SECTION 13 THE AGENT.
13.1 Appointment and Authorization; "Agent".
-------------------------------------
(a) Each Bank hereby irrevocably (subject to Section 13.11) appoints,
-------------
designates and authorizes the Agent to take such action on its behalf under the
provisions of this Agreement and each other Loan Document and to exercise such
powers and perform such duties as are expressly delegated to it by the terms of
this Agreement or any other Loan Document, together with such powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
contained elsewhere in this Agreement or in any other Loan Document, the Agent
shall not have any duties or responsibilities, except those expressly set forth
herein, nor shall the Agent have or be deemed to have any fiduciary relationship
with any Bank, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or any other Loan
Document or otherwise exist against the Agent. Without limiting the generality
of the foregoing sentence, the use of the term "agent" in this Agreement with
reference to the Agent is not intended to connote any fiduciary or other implied
(or express) obligations arising under agency doctrine of any applicable law.
Instead, such term is used merely as a matter of market custom, and is intended
to create or reflect only an administrative relationship between independent
contracting parties.
(b) In the event that BofA issues a letter of credit it shall act on
behalf of the Banks with respect to such letters of credit issued by it and the
documents associated therewith until such time and except for so long as the
Agent may agree at the request of the Required Banks to act for BofA with
respect thereto; provided, however, that BofA shall have all of the benefits and
-------- -------
immunities (i) provided to the Agent in this Section 13 with respect to any acts
----------
taken or omissions suffered by BofA in connection with letters of credit issued
by it or proposed to be issued by it and the application and agreements for
letters of credit pertaining to the letters of credit as fully as if the term
"Agent", as used in this Section 13, included BofA with respect to such acts or
----------
omissions, and (ii) as additionally provided in this Agreement with respect to
BofA.
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13.2 Delegation of Duties. The Agent may execute any of its duties under
--------------------
this Agreement or any other Loan Document by or through agents, employees or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects with
reasonable care.
13.3 Liability of Agent. None of the Agent-Related Persons shall (i) be
------------------
liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct),
or (ii) other than as expressly provided in clause (i) above, be responsible in
any manner to any of the Banks for any recital, statement, representation or
warranty made by the Company or any Subsidiary or Affiliate of the Company, or
any officer thereof, contained in this Agreement or in any other Loan Document,
or in any certificate, report, statement or other document referred to or
provided for in, or received by the Agent under or in connection with, this
Agreement or any other Loan Document, or the validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document, or for any failure of the Company or any other party to any Loan
Document to perform its obligations hereunder or thereunder. No Agent-Related
Person shall be under any obligation to any Bank to ascertain or to inquire as
to the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any other Loan Document, or to inspect the
properties, books or records of the Company or any of the Company's Subsidiaries
or Affiliates.
13.4 Reliance by Agent.
-----------------
(a) The Agent shall be entitled to rely, and shall be fully protected in
relying, upon any writing, resolution, notice, consent, certificate, affidavit,
letter, telegram, facsimile, telex or telephone message, statement or other
document or conversation reasonably believed by it to be genuine and correct and
to have been signed, sent or made by the proper Person or Persons, and upon
advice and statements of legal counsel (including counsel to the Company),
independent accountants and other experts selected by the Agent. The Agent
shall be fully justified in failing or refusing to take any action under this
Agreement or any other Loan Document unless it shall first receive such advice
or concurrence of the Required Banks or all of the Banks, as the case may be, as
it deems appropriate and, if it so reasonably requests, it shall first be
indemnified to its satisfaction by the Banks against any and all liability and
expense which may be incurred by it by reason of taking or
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continuing to take any such action. The Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement or any
other Loan Document in accordance with a request or consent of the Required
Banks and such request and any action taken or failure to act pursuant thereto
shall be binding upon all of the Banks.
(b) For purposes of determining compliance with the conditions
specified in Section 11, each Bank that has executed this Agreement shall be
deemed to have consented to, approved or accepted or to be satisfied with, each
document or other matter either sent by the Agent to such Bank for consent,
approval, acceptance or satisfaction, or required thereunder to be consented to
or approved by or acceptable or satisfactory to the Bank.
13.5 Funding Reliance.
----------------
(a) Unless the Agent receives notice from a Bank by 11:00 A.M., Chicago
time, on the day of a proposed borrowing that such Bank will not make available
to the Agent the amount which would constitute its Revolving Percentage of such
borrowing in accordance with Section 2.3, the Agent may assume that such Bank
-----------
has made such amount available to the Agent and, in reliance upon such
assumption, may in its sole discretion, make a corresponding amount available to
the Company. If and to the extent such Bank has not made any such amount
available to the Agent, such Bank and the Company jointly and severally agree to
repay such amount to the Agent forthwith on demand, together with interest
thereon at the interest rate applicable to Loans comprising such borrowing (or,
in the case of any Bank which repays such amount within three Business Days, the
Federal Funds Rate). Nothing set forth in this clause (a) shall relieve any
----------
Bank of any obligation it may have to make any Loan hereunder.
(b) Unless the Agent receives notice from the Company prior to the due date
for any payment hereunder that the Company does not intend to make such payment,
the Agent may assume that the Company has made such payment and, in reliance
upon such assumption, may in its sole discretion, make available to each Bank
its share of such payment. If and to the extent that the Company has not made
any such payment to the Agent, each Bank which received a share of such payment
shall repay such share (or the relevant portion thereof) to the Agent forthwith
on demand, together with interest thereon at the Federal Funds Rate. Nothing
set forth in this clause (b) shall relieve the Company of any obligation it may
----------
have to make any payment hereunder.
13.6 Notice of Default. The Agent shall not be deemed to have knowledge
-----------------
or notice of the occurrence of any Event of
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Default, except with respect to defaults in the payment of principal, interest
and fees required to be paid to the Agent for the account of the Banks, unless
the Agent shall have received written notice from a Bank or the Company
referring to this Agreement, describing such Event of Default and stating that
such notice is a "notice of default". The Agent will notify the Banks of its
receipt of any such notice. The Agent shall take such action with respect to
such Event of Default as may be requested by the Required Banks or Banks, as the
case may be, in accordance with Section 12; provided, however, that unless and
-------- -------
until the Agent has received any such request, the Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Event of Default as it shall deem advisable or in the best interest of
the Banks.
13.7 Credit Decision. Each Bank acknowledges that none of the Agent-
---------------
Related Persons has made any representation or warranty to it, and that no act
by the Agent hereinafter taken, including any review of the affairs of the
Company and its Subsidiaries, shall be deemed to constitute any representation
or warranty by any Agent-Related Person to any Bank. Each Bank represents to
the Agent that it has, independently and without reliance upon any Agent-Related
Person and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business, prospects,
operations, property, financial and other condition and creditworthiness of the
Company and its Subsidiaries, and all applicable bank regulatory laws relating
to the transactions contemplated hereby, and made its own decision to enter into
this Agreement and to extend credit to the Company and its Subsidiaries
hereunder. Each Bank also represents that it will, independently and without
reliance upon any Agent-Related Person and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Loan Documents, and to make such investigations as
it deems necessary to inform itself as to the business, prospects, operations,
property, financial and other condition and creditworthiness of the Company.
Except for notices, reports and other documents expressly herein required to be
furnished to the Banks by the Agent, the Agent shall not have any duty or
responsibility to provide any Bank with any credit or other information
concerning the business, prospects, operations, property, financial and other
condition or creditworthiness of the Company which may come into the possession
of any of the Agent-Related Persons.
13.8 Indemnification of Agent. Whether or not the transactions
------------------------
contemplated hereby are consummated, the Banks shall indemnify upon demand the
Agent-Related Persons (to the extent
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not reimbursed by or on behalf of the Company and without limiting the
obligation of the Company to do so), pro rata, from and against any and all
Indemnified Liabilities; provided, however, that no Bank shall be liable for the
-------- -------
payment to the Agent-Related Persons of any portion of such Indemnified
Liabilities resulting from such Person's gross negligence or willful misconduct.
Without limitation of the foregoing, each Bank shall reimburse the Agent upon
demand for its ratable share of any costs or out-of-pocket expenses (including
attorneys' fees) incurred by the Agent in connection with the preparation,
execution, delivery, administration, modification, amendment or enforcement
(whether through negotiations, legal proceedings or otherwise) of, or legal
advice in respect of rights or responsibilities under, this Agreement, any other
Loan Document, or any document contemplated by or referred to herein, to the
extent that the Agent is not reimbursed for such expenses by or on behalf of the
Company. The undertaking in this Section shall survive the payment of all Loans
hereunder and the resignation or replacement of the Agent.
13.9 Agent in Individual Capacity. BofA and its Affiliates (and any other
----------------------------
Bank and its Affiliates) may make loans to, issue letters of credit for the
account of, accept deposits from, acquire equity interests in and generally
engage in any kind of banking, trust, financial advisory, underwriting or other
business with the Company and its Subsidiaries and Affiliates as though BofA
were not the Agent hereunder (or in the case of any other Bank, as though such
Bank were not a party hereto) and without notice to or consent of the Banks.
The Banks acknowledge that, pursuant to such activities, BofA or its Affiliates
may receive information regarding the Company or its Affiliates (including
information that may be subject to confidentiality obligations in favor of the
Company or such Subsidiary) and acknowledge that the Agent shall be under no
obligation to provide such information to them. With respect to its Loans, BofA
shall have the same rights and powers under this Agreement as any other Bank and
may exercise the same as though it were not the Agent.
13.10 Collateral Matters. The Banks irrevocably authorize the Agent, at
------------------
its option and in its discretion, to release any Lien granted to or held by the
Agent upon any Collateral (a) upon termination of the Commitments and payment in
full of all Loans and all other obligations of the Company under this Agreement
and under any other Loan Document; (b) constituting property sold or to be sold
or disposed of as part of or in connection with any disposition permitted
hereunder; (c) constituting property in which the Company or any Subsidiary
owned no interest at the time the Lien was granted or at any time thereafter;
(d) constituting property leased to the Company or any Subsidiary under a lease
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which has expired or been terminated in a transaction permitted under this
Agreement or is about to expire and which has not been, and is not intended by
the Company or such Subsidiary to be, renewed or extended; or (e) subject to the
penultimate sentence of Section 14.1, if approved, authorized or ratified in
------------
writing by the Required Banks. Upon request by the Agent at any time, the Banks
will confirm in writing the Agent's authority to release particular types or
items of Collateral pursuant to this Section 13.10.
-------------
13.11 Successor Agent. The Agent may, and at the request of the Required
---------------
Banks shall, resign as Agent upon 30 days' notice to the Banks. If the Agent
resigns under this Agreement, the Required Banks shall appoint from among the
Banks a successor agent for the Banks. If no successor agent is appointed prior
to the effective date of the resignation of the Agent, the Agent may appoint,
after consulting with the Banks and the Company, a successor agent from among
the Banks. Upon the acceptance of its appointment as successor agent hereunder,
such successor agent shall succeed to all the rights, powers and duties of the
retiring Agent and the term "Agent" shall mean such successor agent and the
retiring Agent's appointment, powers and duties as Agent shall be terminated.
After any retiring Agent's resignation hereunder as Agent, the provisions of
this Section 13 and Section 14.6 shall inure to its benefit as to any actions
---------- ------------
taken or omitted to be taken by it while it was Agent under this Agreement. If
no successor agent has accepted appointment as Agent by the date which is 30
days following a retiring Agent's notice of resignation, the retiring Agent's
resignation shall nevertheless thereupon become effective and the Banks shall
perform all of the duties of the Agent hereunder until such time, if any, as the
Required Banks appoint a successor agent as provided for above. Notwithstanding
the foregoing, however, BofA may not be removed as the Agent at the request of
the Required Banks unless BofA shall also simultaneously be replaced as "Issuing
Bank" hereunder pursuant to documentation in form and substance reasonably
satisfactory to BofA.
13.12 Withholding Tax.
---------------
(a) If any Bank is a "foreign corporation, partnership or trust" within the
meaning of the Code and such Bank claims exemption from, or a reduction of, U.S.
withholding tax under Sections 1441 or 1442 of the Code, such Bank agrees with
and in favor of the Agent, to deliver to the Agent:
(i) if such Bank claims an exemption from, or a reduction of,
withholding tax under a United States tax treaty, two properly completed
and executed copies of IRS Form 1001 before the payment of any interest in
the first
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calendar year and before the payment of any interest in each third
succeeding calendar year during which interest may be paid under this
Agreement;
(ii) if such Bank claims that interest paid under this Agreement is
exempt from United States withholding tax because it is effectively
connected with a United States trade or business of such Bank, two properly
completed and executed copies of IRS Form 4224 before the payment of any
interest is due in the first taxable year of such Bank and in each
succeeding taxable year of such Bank during which interest may be paid
under this Agreement; and
(iii) such other form or forms as may be required under the Code or
other laws of the United States as a condition to exemption from, or
reduction of, United States withholding tax.
Such Bank agrees to promptly notify the Agent of any change in circumstances
which would modify or render invalid any claimed exemption or reduction.
(b) If any Bank claims exemption from, or reduction of, withholding tax
under a United States tax treaty by providing IRS Form 1001 and such Bank sells,
assigns, grants a participation in, or otherwise transfers all or part of the
Loans of the Company to such Bank, such Bank agrees to notify the Agent of the
percentage amount in which it is no longer the beneficial owner of Loans of the
Company to such Bank. To the extent of such percentage amount, the Agent will
treat such Bank's IRS Form 1001 as no longer valid.
(c) If any Bank claiming exemption from United States withholding tax by
filing IRS Form 4224 with the Agent sells, assigns, grants a participation in,
or otherwise transfers all or part of the Loans of the Company to such Bank,
such Bank agrees to undertake sole responsibility for complying with the
withholding tax requirements imposed by Sections 1441 and 1442 of the Code.
(d) If any Bank is entitled to a reduction in the applicable withholding
tax, the Agent may withhold from any interest payment to such Bank an amount
equivalent to the applicable withholding tax after taking into account such
reduction. However, if the forms or other documentation required by subsection
(a) of this Section are not delivered to the Agent, then the Agent may withhold
from any interest payment to such Bank not providing such forms or other
documentation an amount equivalent to the applicable withholding tax imposed by
Sections 1441 and 1442 of the Code, without reduction.
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(e) If the IRS or any other Governmental Authority of the United States or
other jurisdiction asserts a claim that the Agent did not properly withhold tax
from amounts paid to or for the account of any Bank (because the appropriate
form was not delivered or was not properly executed, or because such Bank failed
to notify the Agent of a change in circumstances which rendered the exemption
from, or reduction of, withholding tax ineffective, or for any other reason)
such Bank shall indemnify the Agent fully for all amounts paid, directly or
indirectly, by the Agent as tax or otherwise, including penalties and interest,
and including any taxes imposed by any jurisdiction on the amounts payable to
the Agent under this Section, together with all costs and expenses (including
Attorney Costs). The obligation of the Banks under this subsection shall
survive the payment of all Loans and the resignation or replacement of the
Agent.
SECTION 14 GENERAL.
14.1 Waiver; Amendments. No delay on the part of the Agent or any Bank in
------------------
the exercise of any right, power or remedy shall operate as a waiver thereof,
nor shall any single or partial exercise by any of them of any right, power or
remedy preclude other or further exercise thereof, or the exercise of any other
right, power or remedy. No amendment, modification or waiver of, or consent
with respect to, any provision of this Agreement or the Notes shall in any event
be effective unless the same shall be in writing and signed and delivered by the
Company and by Banks having an aggregate Revolving Percentage of not less than
the aggregate Revolving Percentage expressly designated herein with respect
thereto or, in the absence of such designation as to any provision of this
Agreement or the Notes, by the Required Banks, and then any such amendment,
modification, waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given. No amendment, modification,
waiver or consent (a) shall amend, modify or waive any condition precedent to
any Revolving Loan without the consent of Banks holding 100% of the Revolving
Commitments or (b) shall (i) extend or increase the amount of any Commitment,
(ii) extend the date for payment of any principal of or interest on the Loans or
any fees payable hereunder, (iii) reduce the principal amount of any Loan, the
rate of interest thereon or any fees payable hereunder, (iv) release any Person
from its obligations under the Guaranty or release any substantial part of the
collateral granted under the Collateral Documents or (v) change the aggregate
Revolving Percentage required to effect an amendment, modification, waiver or
consent without, in each case, the consent of all Banks. No provisions of
Section 13 shall be amended, modified or waived without the consent of the
- ----------
Agent.
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14.2 Confirmations. The Company and each holder of a Note agree from time
-------------
to time, upon written request received by it from the other, to confirm to the
other in writing (with a copy of each such confirmation to the Agent) the
aggregate unpaid principal amount of the Loans then outstanding under such Note.
14.3 Notices. Except as otherwise provided in Sections 2.3, 2.4 and 4.3,
------- ------------ --- ---
all notices hereunder shall be in writing (including, without limitation,
facsimile transmission) and shall be sent to the applicable party at its address
shown below its signature hereto or at such other address as such party may, by
written notice received by the other parties hereto, have designated as its
address for such purpose. Notices sent by facsimile transmission shall be
deemed to have been given when sent; notices sent by mail shall be deemed to
have been given three Business Days after the date when sent by registered or
certified mail, postage prepaid; and notices sent by hand delivery shall be
deemed to have been given when received. For purposes of Sections 2.3, 2.4 and
-----------------
4.3, the Agent shall be entitled to rely on telephonic instructions from any
- ---
person that the Agent in good faith believes is an authorized officer or
employee of the Company, and the Company shall hold the Agent and each Bank
harmless from any loss, cost or expense resulting from any such reliance.
14.4 Computations. (a) Where the character or amount of any asset or
------------
liability or item of income or expense is required to be determined, or any
consolidation or other accounting computation is required to be made, for the
purpose of this Agreement, such determination or calculation shall, to the
extent applicable and except as otherwise specified in this Agreement, be made
in accordance with generally accepted accounting principals applied on a basis
consistent with those used in the preparation of the Company's audited financial
statements referred to in Section 9.4(a); provided, however, that all financial
-------------- -------- -------
ratios and restrictions (including the ratios and restrictions set forth in
Section 10.6 and Section 10.10) shall be calculated without giving effect to the
- ------------ -------------
purchase accounting adjustments resulting from the Purchase (as defined in the
Existing Credit Agreement), it being understood for purposes of this proviso
that depreciation expense included in net income shall be calculated on the
fixed asset basis and useful lives that existed prior to any step-up (increase)
in basis as required by purchase accounting.
14.5 Regulation U. Each Bank represents that it in good faith is not
------------
relying, either directly or indirectly, upon any Margin Stock as collateral
security for the extension or maintenance by it of any credit provided for in
this Agreement.
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14.6 Costs, Expenses and Taxes. The Company agrees to pay on demand (a)
-------------------------
all reasonable out-of-pocket costs and expenses of the Agent (including the fees
and charges of counsel for the Agent and of local counsel, if any, who may be
retained by said counsel) in connection with the preparation, execution,
delivery and administration of this Agreement, the other Loan Documents and all
other documents provided for herein or delivered or to be delivered hereunder or
in connection herewith (including, without limitation, any amendment, supplement
or waiver to any Loan Document), and (b) all reasonable out-of-pocket costs and
expenses (including reasonable attorneys' fees, court costs and other legal
expenses) incurred by the Agent, and each Bank after an Event of Default in
connection with the enforcement of this Agreement, the other Loan Documents or
any such other documents. Each Bank agrees to reimburse the Agent for such
Bank's pro rata share (based on its respective Revolving Percentage) of any such
costs and expenses of the Agent not paid by the Company. In addition, the
Company agrees to pay, and to save the Agent, and the Banks harmless from all
liability for, any stamp or other taxes which may be payable in connection with
the execution and delivery of this Agreement, the borrowings hereunder, the
issuance of the Notes or the execution and delivery of any other Loan Document
or any other document provided for herein or delivered or to be delivered
hereunder or in connection herewith. All obligations provided for in this
Section 14.6 shall survive repayment of the Loans, cancellation of the Notes and
- ------------
any termination of this Agreement.
14.7 Subsidiary References. The provisions of this Agreement relating to
---------------------
Subsidiaries shall apply only during such times as the Company has one or more
Subsidiaries.
14.8 Captions. Section captions used in this Agreement are for
--------
convenience only and shall not affect the construction of this Agreement.
14.9 Assignments; Participations.
---------------------------
14.9.1 Assignments. Any Bank may, with the prior written consent of the
-----------
Agent (and, provided no Event of Default shall exist, with the prior written
consent of the Company, which consent shall not be unreasonably delayed or
withheld), at any time assign and delegate to one or more commercial banks or
other Persons (any Person to whom such an assignment and delegation is to be
made being herein called an "Assignee"), all or any fraction of such Bank's
Loans and Revolving Commitment (which assignment and delegation shall be of a
constant, and not a varying, percentage of all the assigning Bank's Revolving
Commitment and Loans) in a minimum aggregate amount equal to the lesser of (i)
the sum of the assigning Bank's remaining Loans and
-76-
<PAGE>
(to the extent not used) Revolving Commitment and (ii) $5,000,000; provided,
--------
however, that (a) no assignment and delegation may be made to any Person if, at
- -------
the time of such assignment and delegation, the Company would be obligated to
pay any greater amount under Section 7.6 or 8 to the Assignee than the Company
----------- -
is then obligated to pay to the assigning Bank under such Section and (b) the
Company and the Agent shall be entitled to continue to deal solely and directly
with such Bank in connection with the interests so assigned and delegated to an
Assignee until the date when all of the following conditions shall have been
met:
(x) five Business Days (or such lesser period of time as the Agent
and the assigning Bank shall agree) shall have passed after written notice
of such assignment and delegation, together with payment instructions,
addresses and related information with respect to such Assignee, shall have
been given to the Company and the Agent by such assigning Bank and the
Assignee,
(y) the assigning Bank and the Assignee shall have executed and
delivered to the Company and the Agent an assignment agreement
substantially in the form of Exhibit G (an "Assignment Agreement"),
---------
together with any documents required to be delivered thereunder, which
Assignment Agreement shall have been accepted by the Agent, and
(z) the assigning Bank or the Assignee shall have paid the Agent a
processing fee of $2,500.
From and after the date on which the conditions described above have been met,
(x) such Assignee shall be deemed automatically to have become a party hereto
and, to the extent that rights and obligations hereunder have been assigned and
delegated to such Assignee pursuant to such Assignment Agreement, shall have the
rights and obligations of a Bank hereunder, and (y) the assigning Bank, to the
extent that rights and obligations hereunder have been assigned and delegated by
it pursuant to such Assignment Agreement, shall be released from its obligations
hereunder. Within five Business Days after the effectiveness of any assignment
and delegation, the Company shall execute and deliver to the Agent (for delivery
to the Assignee and the Assignor, as applicable) a new Note in a principal
amount equal to the Assignee's Revolving Commitment (if any) and, if the
assigning Bank has retained a Revolving Commitment or Loans hereunder, a
replacement Note in the principal amount equal to the Revolving Commitment (if
any) retained by the assigning Bank (such Note to be in exchange for, but not in
payment of, the predecessor Note held by such assigning Bank). Each such Note
shall be dated the effective date of such assignment. The assigning Bank shall
mark
-77-
<PAGE>
the predecessor Note "exchanged" and deliver it to the Company. Accrued
interest on that part of the predecessor Note being assigned shall be paid as
provided in the Assignment Agreement. Accrued interest and fees on that part of
the predecessor Note not being assigned shall be paid to the assigning Bank.
Accrued interest and accrued fees shall be paid at the same time or times
provided in the predecessor Note and in this Agreement. Any attempted
assignment and delegation not made in accordance with this Section 14.9.1 shall
--------------
be null and void.
Notwithstanding the foregoing provisions of this Section 14.9.1 or any
--------------
other provision of this Agreement, any Bank may at any time assign all or any
portion of its Loans and its Note to a Federal Reserve Bank (but no such
assignment shall release any Bank from any of its obligations hereunder).
14.9.2 Participations. Any Bank may at any time sell to one or more
--------------
commercial banks or other Persons participating interests in any Loan owing to
such Bank, the Note held by such Bank, the Revolving Commitment of such Bank,
the direct or participation interest of such Bank in any Letter of Credit or any
other interest of such Bank hereunder (any Person purchasing any such
participating interest being herein called a "Participant"). In the event of a
sale by a Bank of a participating interest to a Participant, (x) such Bank shall
remain the holder of its Note for all purposes of this Agreement, (y) the
Company and the Agent shall continue to deal solely and directly with such Bank
in connection with such Bank's rights and obligations hereunder and (z) all
amounts payable by the Company shall be determined as if such Bank had not sold
such participation and shall be paid directly to such Bank. No Participant
shall have any direct or indirect voting rights hereunder except with respect to
any of the events described in the penultimate sentence of Section 14.1. Each
------------
Bank agrees to incorporate the requirements of the preceding sentence into each
participation agreement which such Bank enters into with any Participant. The
Company agrees that if amounts outstanding under this Agreement and the Notes
are due and payable (as a result of acceleration or otherwise), each Participant
shall be deemed to have the right of setoff in respect of its participating
interest in amounts owing under this Agreement and any Note and with respect to
any Letter of Credit to the same extent as if the amount of its participating
interest were owing directly to it as a Bank under this Agreement; provided that
--------
such right of setoff shall be subject to the obligation of each Participant to
share with the Banks, and the Banks agree to share with each Participant, as
provided in Section 7.5. The Company also agrees that each Participant shall be
-----------
entitled to the benefits of Section 8 as if it were a Bank (provided that no
---------
Participant shall receive any greater compensation pursuant to
-78-
<PAGE>
Section 8 than would have been paid to the participating Bank if no
- ---------
participation had been sold).
14.10 Governing Law. This Agreement and each Note shall be a contract
-------------
made under and governed by the internal laws of the State of Illinois. Whenever
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. All obligations of the Company and rights of the Agent and the Banks
expressed herein or in any other Loan Document shall be in addition to and not
in limitation of those provided by applicable law.
14.11 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the different parties hereto on separate counterparts and
each such counterpart shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same Agreement. When
counterparts executed by all of the parties hereto shall have been lodged with
the Agent (or, in the case of any Bank as to which an executed counterpart shall
not have been so lodged, the Agent shall have received confirmation from such
Bank of execution of a counterpart hereof by such Bank), this Agreement shall
become effective as of the date hereof, and at such time the Agent shall notify
the Company and each Bank.
14.12 Successors and Assigns. This Agreement shall be binding upon the
----------------------
Company, the Banks and the Agent and their respective successors and assigns,
and shall inure to the benefit of the Company, the Banks and the Agent and the
permitted successors and assigns of the Banks and the Agent.
14.13 Indemnification by the Company.
------------------------------
(a) In consideration of the execution and delivery of this Agreement by
the Agent and the Banks and the agreement to extend the Commitments provided
hereunder, the Company hereby agrees to indemnify, exonerate and hold the Agent,
each Bank and each of the officers, directors, employees and agents of the Agent
and each Bank (collectively the "Bank Parties" and individually each a "Bank
Party") free and harmless from and against any and all actions, causes of
action, suits, losses, liabilities, damages and expenses, including, without
limitation, reasonable attorneys' fees and charges (collectively therein called
the "Indemnified Liabilities"), incurred by the Bank Parties or any of them as a
result of, or arising out of, or relating to (i) any
-79-
<PAGE>
tender offer, merger, purchase of stock, purchase of assets or other similar
transaction financed or proposed to be financed in whole or in part, directly or
indirectly, with the proceeds of any of the Loans or (ii) the execution,
delivery, performance or enforcement of this Agreement or any other Loan
Document by any of the Bank Parties, except for any such Indemnified Liabilities
arising on account of such Bank Party's bad faith, gross negligence or willful
misconduct. If and to the extent that the foregoing undertaking may be
unenforceable for any reason, the Company hereby agrees to make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. Nothing set forth above
shall be construed to relieve any Bank Party from any obligation it may have
under this Agreement.
(b) Without limiting the provisions of clause (a) above, the Company
----------
agrees to reimburse each Bank Party for, and indemnify each Bank Party against,
any and all losses, claims, damages, penalties, judgments, liabilities and
expenses (including reasonable attorneys' and consultant's fees) which any Bank
Party may pay, incur or become subject to arising out of or relating to the use,
handling, release, emission, discharge, transportation, storage, treatment or
disposal of any Hazardous Material at any real property owned or leased by the
Company or any Subsidiary or used by the Company or any Subsidiary in its
business or operations, except to the extent caused by the acts or omissions of
such Bank Party.
(c) All obligations provided for in this Section 14.13 shall survive
-------------
repayment of the Loans, cancellation of the Notes and any termination of this
Agreement.
14.14 Confidentiality. The Agent and the Banks shall hold all non-public
---------------
information obtained pursuant to the requirements of this Agreement which has
been identified as such by the Company in accordance with their customary
procedures for handling confidential information of this nature and in
accordance with safe and sound banking practices and, in any event, may make
disclosure on the same confidential basis as provided for herein that is
reasonably required by any actual or bona fide potential transferee or
participant in connection with the contemplated transfer of any Note or
participation therein or in any Letter of Credit or as required or requested by
any governmental agency or representative thereof or pursuant to legal process;
provided that, unless prohibited by applicable law or court order, each of the
- --------
Agent and each Bank shall promptly notify the Company of any request by any
governmental agency or representative thereof (other than any such request in
connection with an examination of the financial condition of the Agent or
-80-
<PAGE>
such Bank by such governmental agency) for disclosure of any such non-public
information prior to disclosure of such information.
14.15 FORUM SELECTION AND CONSENT TO JURISDICTION. ANY LITIGATION BASED
-------------------------------------------
HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT, SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS
OF THE STATE OF ILLINOIS OR IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN
DISTRICT OF ILLINOIS; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT
-------- -------
AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE AGENT'S OPTION,
IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE
FOUND. EACH OF THE COMPANY, THE AGENT AND EACH BANK HEREBY EXPRESSLY AND
IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF ILLINOIS
AND OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS
FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE. EACH OF THE COMPANY,
THE AGENT AND EACH BANK FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS
BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT
THE STATE OF ILLINOIS. THE COMPANY HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT
REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
14.16 WAIVER OF JURY TRIAL. EACH OF THE COMPANY, THE AGENT AND EACH BANK
--------------------
HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO
ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, ANY NOTE, ANY OTHER LOAN
DOCUMENT AND ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH
MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING
FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH ANY OF THE FOREGOING,
AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND
NOT BEFORE A JURY.
14.17 Reaffirmation, Restatement and Waivers. This Agreement constitutes
--------------------------------------
an amendment and restatement of the Existing Credit Agreement and the
indebtedness evidenced by the Existing Credit Agreement is continuing
indebtedness, and nothing herein shall be deemed to constitute a payment,
settlement or novation of the indebtedness evidenced by the Existing Credit
Agreement except to the extent provided herein, or to release or otherwise
adversely affect any lien, mortgage or security interest securing such
indebtedness or any rights of BofA or any Bank against any guarantor, surety or
other party primarily or secondarily liable for such indebtedness.
14.18 BofA as Agent. Notwithstanding any other provision in this
-------------
Agreement to the contrary, all references to Agent and
-81-
<PAGE>
Banks shall be deemed to refer to BofA in its individual capacity until such
time as BofA executes this Agreement in its capacity as Agent.
-82-
<PAGE>
CREDIT AGREEMENT
Delivered at Chicago, Illinois, as of the day and year first above written.
ELGIN NATIONAL INDUSTRIES, INC.
By: /s/ Wayne J. Conner
-----------------------------------------------
Title: Vice President
--------------------------------------------
Address: 2001 Butterfield Road
Suite 1020
Downers Grove, Illinois 60515
Attention: Wayne J. Conner
Facsimile: 630-434-7272
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
individually
By: /s/ Tracy Alfery
-----------------------------------------------
Vice President
Address: 231 South LaSalle Street
Chicago, Illinois 60697
Attention: Tracy Alfery
Facsimile: 312-828-1974
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
as Agent
By: /s/ Jay McKewon
-----------------------------------------------
Title: Assistant Vice President
--------------------------------------------
Address: 231 South LaSalle Street
Chicago, Illinois 60697
Attention: Agency Group
Facsimile: 312-828-3555
<PAGE>
SCHEDULE 1(a)
COMMITMENTS AND PERCENTAGES
<TABLE>
<CAPTION>
Amount of Revolving
Name of Bank Revolving Percentage
------------ Commitment ----------
----------
<S> <C> <C>
Bank of America National
Trust and Savings Association $20,000,000.00 100.0000000%
- ----------------------------- -------------- ------------
TOTALS $20,000,000.00 100%
</TABLE>
-1-
<PAGE>
EXHIBIT 10.2
EXECUTION COPY
--------------
EMPLOYMENT AND NON-COMPETITION AGREEMENT
----------------------------------------
Fred C. Schulte
This EMPLOYMENT AND NON-COMPETITION AGREEMENT (this "Agreement"), dated as
of November 5, 1997, is between Elgin National Industries, Inc., a Delaware
corporation, and all related and affiliated entities, successors and assigns now
in existence or hereinafter created ("ENI"), and Fred C. Schulte ("Schulte").
WHEREAS, Schulte is currently employed pursuant to an employment agreement
as the Chairman and Chief Executive Officer of ENI;
WHEREAS, as a result of a recapitalization, ENI will be merged into ENI
Holding Corp., ("recapitalization"), and Schulte will be, either directly or
through entities controlled by him, one of three partners of SHC Investment
Partnership ("Partnership"), which partnership shall, in turn, own the common
stock of ENI Holding Corp.; and
WHEREAS, in connection with the foregoing, ENI wishes to employ Schulte as
the Chairman and Chief Executive Officer of ENI, and Schulte wishes to work as
the Chairman and Chief Executive Officer of ENI, on the terms set forth below.
NOW, THEREFORE, it is hereby agreed as follows:
(S)1. EMPLOYMENT. ENI hereby employs Schulte as the Chairman and Chief
----------
Executive Officer of ENI and Schulte hereby accepts such employment, upon the
terms and subject to the conditions hereinafter set forth.
(S)2. DUTIES. While Schulte is employed by ENI, he shall serve as its
------
Chairman and Chief Executive Officer. In such capacity, Schulte shall have such
executive responsibilities and duties as are assigned by ENI's Board of
Directors (the "Board") as are consistent with his position as Chairman and
Chief Executive Officer of ENI. Schulte agrees that, while he is employed by
ENI, he shall devote his full time and best efforts to the performance of his
duties for ENI. Schulte will have such authority and power as are inherent to
the undertakings applicable to his positions and necessary to carry out his
responsibilities and the duties required of him hereunder.
Subject to the foregoing provisions of this Section 2, while Schulte is
employed by ENI, Schulte may engage in activities other than those required
under this Agreement, such as activities involving professional, charitable,
educational, religious and similar types of organizations, speaking engagements,
membership on the boards of directors of other
<PAGE>
organizations, and similar type activities to the extent that such other
activities do not inhibit or prohibit the performance of Schulte's duties under
this Agreement, or conflict in any material way with the business of ENI.
Subject to the terms of this Agreement, Schulte shall not be required to
perform services under this Agreement during any period that he is Disabled (as
defined in Section 6(a)(i)).
(S)3. TERM. The initial term of employment of Schulte hereunder shall be
----
a five (5) year period commencing on the date of the closing of the
recapitalization and ending five (5) years thereafter (the "Initial Term"),
unless earlier terminated pursuant to Section 6. The term of Schulte's
employment hereunder shall be automatically renewed for additional successive
one (1) year terms (the Initial Term and each such additional one (1) year
terms, hereinafter referred to collectively as, the "Term") unless either party
hereto delivers written notice of its intent to terminate Schulte's employment
hereunder at least one hundred eighty (180) days prior to the last day of the
Term. Such notice from ENI will require the written consent of Common Partners
representing at least 66% of the Common Percentage of the Partnership (as such
terms are defined in the SHC Partnership Agreement).
(S)4. COMPENSATION AND BENEFITS. In consideration for the services of
------------ --- --------
Schulte hereunder, ENI shall compensate Schulte as follows:
(a) BASE SALARY. During the Term of the Agreement, ENI shall pay
---- ------
Schulte a base salary (the "Base Salary"), which shall be paid periodically in
accordance with ENI's then current payroll practices. The Base Salary will be
paid at an annual rate of $303,876 until December 31, 1997, and shall be
increased at the commencement of each calendar year during the term of Schulte's
employment hereunder by the greater of:
(i) five percent (5%) of Base Salary for the preceding year, or
(ii) the percentage increase in the consumers price index for the
preceding four (4) calendar quarters for which information has been
published by the U.S. Department of Commerce over the comparable prior four
(4) calendar quarters.
The Base Salary shall be in addition to the other benefits set forth herein.
(b) ANNUAL MANAGEMENT INCENTIVE BONUS. During the Term of this
----------------- --------- -----
Agreement, ENI shall pay Schulte each fiscal year a management incentive bonus
(the "Incentive Bonus") in accordance with this Section 4(b). For the fiscal
years of ENI from 1997 through 2002, Schulte shall be entitled to receive an
Incentive Bonus equal to 1.50% of ENI's EBITA (as defined below) for such fiscal
year. Ninety percent (90%) of the Incentive Bonus for each fiscal year shall be
paid within thirty (30) days after the end of the fiscal year. The remaining
amount of the bonus shall be paid upon completion of ENI's audited financial
statements for such fiscal year. As used in this Agreement, "EBITA" means, with
respect to any fiscal year, the sum of the consolidated net income (or loss) of
ENI and its Subsidiaries, if any, for such fiscal year,
2
<PAGE>
calculated in accordance with generally accepted accounting principles
consistently applied but excluding any extraordinary items of income or loss or
proceeds of life insurance, plus all amounts deducted in the computation thereof
----
on account of (A) income taxes, (B) interest expense, (C) amortization, and (D)
the amount of any Incentive Bonus paid to Schulte hereunder or any like amount
paid to Wayne J. Conner and Charles D. Hall under their respective employment
agreements with ENI.
(c) INSURANCE; OTHER BENEFITS. Except as otherwise expressly provided
--------- ----- --------
in this Agreement, during the Term of the Agreement Schulte shall be provided
with pension benefits, welfare benefits and other fringe benefits, including
without limitation, vacations and holidays, to the same extent and on the same
terms as those benefits are provided by ENI from time to time to Common Partners
in the Partnership of ENI (including spouse and dependent coverage); provided,
--------
that Schulte shall, at all times while he is employed by ENI, be provided with a
commercially reasonable level of accident, life and health benefit coverage;
and, provided further, that, subject to the annual review and approval by Common
-------- -------
Partners representing at least 66% of the Common Percentages of the Partnership,
ENI shall maintain disability income replacement coverage or another acceptable
arrangement for Schulte, which will provide replacement of income at a
commercially reasonable rate during any period in which Schulte is Disabled if
the disability arose during Schulte's employment with ENI.
(d) OFFICERS LIABILITY. ENI shall maintain directors and officers
-------- ---------
liability insurance in commercially reasonable amounts (as reasonably determined
by the Board), and Schulte shall be covered under such insurance to the same
extent as the other Common Partners of the Partnership of ENI. Schulte shall be
eligible for indemnification by ENI under the terms of its by-laws. ENI agrees
that it shall not adopt or modify its by-laws in any respect which could
effectively reduce or limit Schulte's rights to such indemnification.
(S)5. EXPENSES. During his employment, Schulte is authorized to incur
--------
reasonable expenses, chargeable to ENI, in connection with his services and
employment hereunder, including expenses for travel, entertainment and similar
items. Such expenses shall be reimbursed by ENI in accordance with its
practices and policies for the Common Partners in the Partnership.
(S)6. TERMINATION.
-----------
(a) REASONS FOR TERMINATION. Schulte's employment hereunder shall
------- --- -----------
commence on the Commencement Date and continue until the expiration of the Term,
except that Schulte's employment hereunder shall be terminated upon the
occurrence of any of the events set forth below:
(i) DEATH OR DISABILITY. Upon the death of Schulte during the
----- -- ----------
Term of his employment hereunder or, at the option of ENI, in the event of
Schulte's disability, upon thirty (30) days' written notice from ENI.
Schulte shall be deemed "Disabled" if an independent medical doctor
(selected by ENI's health or disability insurer) certifies that
3
<PAGE>
Schulte has for four (4) consecutive months in any twelve (12) month period
been disabled in a manner which seriously interferes with his ability to
perform his responsibilities under this Agreement. Any refusal by Schulte
to submit to a medical examination for the purpose of certifying disability
under this Section 6(a)(i) shall be deemed to constitute conclusive
evidence of Schulte being Disabled.
(ii) FOR CAUSE. For "Cause" upon written notice by ENI to Schulte,
--- -----
which notice sets forth in reasonable detail the facts and circumstances
claimed to constitute "Cause". For purposes of this Agreement, the term
"Cause" shall mean (A) with respect to ENI's business, Schulte shall have
embezzled or misappropriated funds or other property of ENI or offered,
paid, solicited or accepted any unlawful bribe or kickback; or (B) any of
the following actions or omissions which has a material adverse effect on
ENI:
(w) Schulte shall have committed a willful violation of a fiduciary duty
owed by Schulte to ENI.
(x) the willful and continued failure by Schulte to substantially
perform his duties to ENI (other than any such failure resulting
from Schulte being Disabled), within a reasonable period of time
after a written demand for substantial performance is delivered to
Schulte by the Board, which demand specifically identifies the
manner in which the Board believes that Schulte has not
substantially performed his duties; or
(y) Schulte shall have breached the provisions of paragraph 10 of this
Agreement.
For purposes of this paragraph (ii), no act, or failure to act, on
Schulte's part shall be deemed "willful" unless done, or omitted to be
done, by Schulte not in good faith and knowing that such act or failure to
act was in violation of this Agreement.
(iii) BREACH BY ENI. In the event that Schulte (x) provides written
------ -- ---
notice to ENI of the occurrence of a material breach of this Agreement by
ENI, which specifically identifies the manner in which Schulte believes
that such material breach has occurred; (y) ENI fails to correct such
material breach within thirty (30) days after such notice; and (z) Schulte
resigns within the 120-day period following the end of the 30 day period at
clause (y) above, then, for purposes of this Agreement, such resignation by
Schulte shall be considered to have been involuntary. A material breach of
this Agreement by ENI shall include, without limitation:
(I) assignment by ENI of duties to Schulte that are inconsistent
in any substantial respect with the position, authority, or
responsibilities associated with the position of Chairman and
Chief Executive Officer of ENI;
4
<PAGE>
(II) the failure by ENI to accord to Schulte the title, authority
and responsibilities of Chief Executive Officer of ENI;
(III) the failure of ENI to provide any portion of the compensation
or benefits required under the terms of this Agreement within
thirty (30) days of the date such compensation is due.
Notwithstanding any provision of this Section 6(a)(iii) to the contrary, no
action or omission taken by ENI with the approval of Schulte as a director
of ENI shall constitute a material breach of this Agreement.
(iv) OPTIONAL TERMINATION. On the last day of any Term, in the
-------- -----------
event that either party hereto delivers a notice to the other party to the
effect that such party wishes to terminate Schulte's employment hereunder
(a "Termination Notice") on or before one hundred eighty (180) days prior
to the last day of such Term.
(v) SALE OF SHARES. This Agreement shall automatically terminate
--------------
upon the sale or transfer of Schulte's direct or indirect interest in the
common stock of ENI or the equity interest in the Partnership, in either
case that is not permitted by the SHC Partnership Agreement.
(b) RIGHTS AND REMEDIES ON TERMINATION. Upon termination, Schulte
------ --- -------- -- -----------
shall be entitled to the following payments:
(i) Upon the termination of Schulte pursuant to this Sections
6(a)(i) or (iii), ENI shall remain obligated to Schulte, or to his estate
in the event of his death, during the Initial Term of this Agreement, or
the remainder of a successive one (1) year term if the termination occurs
during such one year term, for the payments and benefits set forth in
Sections 4(a), (b), (c), (d) herein, and for expense reimbursements
outstanding at the time of termination.
(ii) Upon termination of Schulte's employment pursuant to Section
6(a)(ii) or the voluntary resignation of Schulte, ENI shall be obligated to
Schulte as follows:
(A) payment of any portion of his Base Salary owed with
respect to the period prior to his termination,
(B) payment of any expense reimbursements under Section 5
hereof for expenses incurred in the performance of his duties prior
to his termination, and payment for any accrued and unused vacation
days for such fiscal year, and
(C) an "Incentive Bonus" payment equal to the amount of the
Incentive Bonus which would have been due to Schulte with respect to
such fiscal year but for the termination of his employment
multiplied by a fraction the numerator of
----------
5
<PAGE>
which is the number of days elapsed in such fiscal year prior to the
termination of employment and the denominator of which is 365.
Payment of any prorated Incentive Bonus owed pursuant to this
Section 6(b)(ii)(C) shall be made as and when the corresponding
payments of such Incentive Bonus would have been made to Schulte
pursuant to Section 4(b) hereto had Schulte not been terminated.
(iii) If Schulte's employment is terminated in accordance with
Section 6(a)(iv) and 6(a)(v), then, in addition to the amounts payable in
accordance with Sections 6(b)(i) and 6(b)(ii), and in consideration of
Schulte's non-competition obligations set forth in Section 10 hereof,
Schulte shall receive from ENI for a period of one (1) year from of the
date of his termination, severance payments at a rate equal to his then
current Base Salary, in monthly or more frequent installments as is
required under Section 4(a). ENI's obligation to make severance payments at
the annual rate of Schulte's Base Salary under this Section 6(b)(iii) shall
cease as of the date, if any, of a material breach by Schulte of the
provisions of Sections 9 or 10 hereof.
(iv) Schulte shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or
otherwise, and ENI shall not be entitled to set off against the amounts
payable to Schulte under this Agreement any amounts owed to ENI by Schulte,
any amounts earned by Schulte in other employment after termination of his
employment with ENI, or any amounts which might have been earned by Schulte
in other employment had he sought such other employment.
Upon termination, Schulte shall not be entitled to severance or other
compensation based on termination except as provided in this Agreement.
(S)7. GUARANTEED FUNDING. Within thirty (30) days of the date of this
------------------
Agreement, ENI will acquire and maintain during the period Schulte is employed
and during any period of disability pursuant to this Agreement and for a period
of twelve (12) months following Schulte's voluntary resignation or expiration
of the Term of this Agreement or the sale, transfer or assignment of Fern
Limited Partnership's interest in the Partnership of his shares not permitted by
the SHC Partnership Agreement, whichever occurs first, an insurance policy or
policies providing coverage payable to ENI in the event of the death of Schulte
("Insurance Policies"). The terms and issuers of the Insurance Policies shall be
subject to the annual review and approval by Common Partners representing at
least 66% of the Common Percentage of the Partnership. Subject to such annual
review and approval of the Partnership, the Insurance Policies for Schulte shall
initially provide $20,000,000 of coverage, and shall thereafter increase each
year in an amount equal to the increases in (a) Fern Limited Partnership's
Common Percentage in the Partnership, (b) accrued and unpaid dividends on, and
liquidation value of Fern Limited Partnership's preferred stock and preferred
stock units in ENI and (c) Fern Limited Partnership's Unrealized Preferred
Capital Contribution and unpaid Preferred Return (each as defined in the SHC
Partnership Agreement). The Company agrees to use the proceeds of such life
insurance in accordance with the redemption provisions of the SHC Partnership
Agreement, to the extent permitted by the Indenture (defined at Section 12(i)
-------------
below). The Company agrees to effect the redemption transactions contemplated
in the SHC Partnership Agreement, subject to any restrictions in the Indenture.
6
<PAGE>
(S)8. INVENTIONS; ASSIGNMENT. All rights to discoveries, inventions,
---------- ----------
improvements and innovations (including all data and records pertaining thereto)
related to ENI whether or not patentable, copyrightable, registrable as a
trademark, or reduced to writing, that Schulte may discover, invent or originate
during the Term of his employment hereunder, either alone or with others and
whether or not during working hours or by the use of the facilities of ENI,
which result from work which Schulte may do for or at the request of ENI
("Inventions"), shall be the exclusive property of ENI. Schulte shall promptly
disclose all Inventions to ENI, shall execute at the request of any of ENI any
assignments or other documents such as ENI may deem necessary to protect or
perfect its rights therein, and shall assist ENI, at the expense of ENI, in
obtaining, defending and enforcing the rights of any of ENI therein. Schulte
hereby appoints ENI as his attorney-in-fact to execute on his behalf any
assignments or other documents deemed necessary by any of ENI to protect or
perfect its rights to any Inventions.
(S)9. CONFIDENTIAL INFORMATION. Schulte recognizes and acknowledges that
------------ -----------
certain assets of ENI, including without limitation information regarding
customers, pricing policies, methods of operation, proprietary computer
programs, sales, products, profits, costs, markets, key personnel, formulae,
product applications, technical processes, and trade secrets (hereinafter called
"Confidential Information") are valuable, special, and unique assets of ENI.
Schulte shall not, during his term of employment and the Period of Restriction
as provided in Section 10 hereof, disclose any or any part of the Confidential
Information to any person, firm, corporation, association, or any other entity
for any reason or purpose whatsoever, directly or indirectly, except as may be
required pursuant to his employment hereunder, unless and until such
Confidential Information becomes publicly available other than as a consequence
of the breach by Schulte of his confidentiality obligations hereunder. In the
event of the termination of his employment, whether voluntary or involuntary and
whether by ENI or Schulte, Schulte shall deliver to ENI all documents and data
pertaining to the Confidential Information and shall not take with him any
documents or data of any kind or any reproductions (in whole or in part) or
extracts of any items relating to the Confidential Information.
(S)10. NON-COMPETITION. Schulte acknowledges that the covenants and
---------------
agreements in this Section 10 are in consideration of Schulte's employment with
ENI under this Agreement and Schulte's opportunity to increase his direct and
indirect shareholdings in ENI as a result of the recapitalization, and are
necessary to protect the legitimate interests of ENI, its employees, and the
other shareholders of ENI. During the Period of Restriction (as hereinafter
defined), Schulte will not (a) engage, directly or indirectly, anywhere in North
America, alone or as a shareholder (other than as a holder of less than five
percent (5%) of the common stock of any publicly traded corporation), partner,
officer, director, employee or consultant of any other business organization
that is engaged or becomes engaged in a business the Designated Industry (as
hereinafter defined), (b) divert to any competitor of ENI, any customer of ENI,
or (c) solicit or encourage any officer, key employee or consultant of ENI to
leave its employ for alternative employment in the Designated Industry. For
purposes of this Section 10, the term "Designated Industry" shall mean any
business activity that ENI is conducting at the time of the termination of
Schulte's employment with ENI or of which Schulte has or should have knowledge
that ENI then proposes to conduct, including but not limited to (i) engineering,
procurement and construction management services relating to coal processing
facilities, mineral processing facilities or environmental projects to the
extent that such services are competitive with any
7
<PAGE>
services offered or provided by ENI, (ii) the design or manufacture of machinery
and equipment for use in coal processing or the processing of other minerals to
the extent that such machinery or equipment would be competitive with any
machinery and equipment designed, manufactured or distributed by ENI, and (iii)
the design, manufacture or distribution of any industrial threaded fasteners or
similar products that are competitive with any products designed, manufactured
or distributed by ENI.
For purposes of this Agreement, the "Period of Restriction" shall be the
period commencing on the Commencement Date and ending three (3) years from the
last day of the Term of this Agreement.
If at any time the provisions of this Section 10 shall be determined to be
invalid or unenforceable, by reason of being vague or unreasonable as to area,
duration or scope of activity, this Section 10 shall be considered divisible and
shall become and be immediately amended to only such area, duration and scope of
activity as shall be determined to be reasonable and enforceable by the court or
other body having jurisdiction over the matter; and Schulte agrees that this
Section 10 as so amended shall be valid and binding as though any invalid or
unenforceable provision had not been included herein.
(S)11. TECHNICAL RECORDS. Immediately upon ENI's request and promptly
--------- -------
upon termination or resignation of Schulte's employment hereunder, Schulte shall
deliver to ENI all memoranda, notes, records, reports, photographs, drawings,
plans, papers or other documents made or compiled by Schulte or made available
to Schulte during the course of the provision of services under this Agreement,
and any copies of abstracts thereof, whether or not of a secret or confidential
nature, and all of such memoranda or other documents shall, during and after the
termination of Schulte's employment hereunder, be and shall be deemed to be the
property of ENI.
(S)12. GENERAL.
-------
(a) NOTICES. All notices and other communications hereunder shall be in
-------
writing or by written telecommunication, and shall be deemed to have been duly
given if delivered personally or if mailed by certified mail, return receipt
requested, postage prepaid or sent by written telecommunication or telecopy, to
the relevant address set forth below, or to such other address as the recipient
of such notice or communication shall have specified to the other party hereto
in accordance with this Section 12(a):
IF TO ENI, TO:
Elgin National Industries, Inc.
2001 Butterfield Rd.
Suite 1020
Downers Grove, Illinois 60515-1050
8
<PAGE>
WITH A COPY TO:
Paul Theiss, Esq.
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
If to Schulte, to:
Mr. Fred C. Schulte
c/o Elgin National Industries
2001 Butterfield Road
Suite 1020
Downers Grove, Illinois 60515-1050
(b) EQUITABLE REMEDIES. Each of the parties hereto acknowledges and
--------- --------
agrees that upon any breach by the other party of its or his obligations
hereunder, the non-breaching party will have no adequate remedy at law, and
accordingly will be entitled to specific performance and other appropriate
injunctive and equitable relief.
(c) SEVERABILITY. If any provision of this Agreement is or becomes
------------
invalid, illegal or unenforceable in any respect under any law, the validity,
legality and enforceability of the remaining provisions hereof shall not in any
way be affected or impaired.
(d) WAIVERS. No delay or omission by either party hereto in
-------
exercising any right, power or privilege hereunder shall impair such right,
power or privilege, nor shall any single or partial exercise of any such right,
power or privilege preclude any further exercise thereof or the exercise of any
other right, power or privilege.
(e) COUNTERPARTS. This Agreement may be executed in multiple
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(f) ASSIGNS. This Agreement shall be binding upon and inure to the
-------
benefit of the heirs and successors of each of the parties hereto.
(g) ENTIRE AGREEMENT. This Agreement contains the entire understanding
------ ---------
of the parties, supersedes and replaces all prior agreements and understandings
relating to the subject matter hereof, including without limitation the
employment agreement between Schulte and ENI dated September 24, 1993, and shall
not be amended except by a written instrument hereafter signed by each of the
parties hereto.
9
<PAGE>
(h) GOVERNING LAW. This Agreement and the performance hereof shall be
--------- ---
construed and governed in accordance with the laws of the State of Delaware.
(i) LIMITATION. Notwithstanding any contrary provision herein, any
----------
failure by the Company to make any payment, or incur any cost, to the extent due
to restrictions in the Company's Indenture dated November 5, 1997 and governing
its 11% Senior Notes due 2007, (the "Indenture"), shall not constitute a breach
of or default by the Company under this Agreement.
(j) COUNSEL. Schulte acknowledges that he has been advised to obtain
-------
separate legal counsel to review this Agreement and advise him regarding the
legal consequences of the same. Mayer, Brown & Platt has drafted this Agreement
as counsel for ENI with Schulte's consent. Although Mayer, Brown & Platt has
represented Schulte previously in other matters, Mayer, Brown & Platt is not
acting as attorney for Schulte with respect to this Agreement or the
transactions contemplated herein. Mayer, Brown & Platt shall be under no
obligation to maintain the confidentiality from ENI of any matter communicated
to it by Schulte with respect to this Agreement.
IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties
hereto have caused this Agreement to be duly executed as of the date and year
first above written.
ELGIN NATIONAL INDUSTRIES, INC.
By: /s/ Wayne J. Conner
----------------------------------------------
Title: Vice President
-------------------------------------------
/s/ Fred C. Schulte
--------------------------------------------------
Fred C. Schulte
10
<PAGE>
EXHIBIT 10.3
EXECUTION COPY
--------------
EMPLOYMENT AND NON-COMPETITION AGREEMENT
----------------------------------------
Charles D. Hall
This EMPLOYMENT AND NON-COMPETITION AGREEMENT (this "Agreement"), dated as
of November 5, 1997, is between Elgin National Industries, Inc., a Delaware
corporation, and all related and affiliated entities, successors and assigns now
in existence or hereinafter created ("ENI"), and Charles D. Hall ("Hall").
WHEREAS, Hall is currently employed pursuant to an employment agreement as
the President and Chief Operating Officer of ENI;
WHEREAS, as a result of a recapitalization, ENI will be merged into ENI
Holding Corp., ("recapitalization"), and Hall will be one of three partners of
SHC Investment Partnership ("Partnership"), which Partnership shall, in turn,
own the Common stock of ENI Holding Corp.; and
WHEREAS, in connection with the foregoing, ENI wishes to employ Hall as the
President and Chief Operating Officer of ENI, and Hall wishes to work as the
President and Chief Operating Officer of ENI, on the terms set forth below.
NOW, THEREFORE, it is hereby agreed as follows:
(S)1. EMPLOYMENT. ENI hereby employs Hall as the President and Chief
----------
Operating Officer of ENI and Hall hereby accepts such employment, upon the terms
and subject to the conditions hereinafter set forth.
(S)2. DUTIES. While Hall is employed by ENI, he shall serve as its
------
President and Chief Operating Officer. In such capacity, Hall shall have such
executive responsibilities and duties as are assigned by ENI's Board of
Directors (the "Board") and Chairman and Chief Executive Officer and as are
consistent with his position as President and Chief Operating Officer of ENI.
Hall agrees that, while he is employed by ENI, he shall devote his full time and
best efforts to the performance of his duties for ENI. Hall will have such
authority and power as are inherent to the undertakings applicable to his
positions and necessary to carry out his responsibilities and the duties
required of him hereunder.
Subject to the foregoing provisions of this Section 2, while Hall is
employed by ENI, Hall may engage in activities other than those required under
this Agreement, such as activities involving professional, charitable,
educational, religious and similar types of organizations, speaking engagements,
membership on the boards of directors of other organizations, and similar
<PAGE>
type activities to the extent that such other activities do not inhibit or
prohibit the performance of Hall's duties under this Agreement, or conflict in
any material way with the business of ENI.
Subject to the terms of this Agreement, Hall shall not be required to
perform services under this Agreement during any period that he is Disabled (as
defined in Section 6(a)(i)).
(S)3. TERM. The initial term of employment of Hall hereunder shall be a
----
five (5) year period commencing on the date of the closing of the
recapitalization and ending five (5) years thereafter (the "Initial Term"),
unless earlier terminated pursuant to Section 6. The term of Hall's employment
hereunder shall be automatically renewed for additional successive one (1) year
terms (the Initial Term and each such additional one (1) year terms, hereinafter
referred to collectively as, the "Term") unless either party hereto delivers
written notice of its intent to terminate Hall's employment hereunder at least
one hundred eighty (180) days prior to the last day of the Term. Such notice
from ENI will require the written consent of Common Partners representing at
least 66% of the Common Percentage of the Partnership (as such terms are defined
in the SHC Partnership Agreement).
(S)4. COMPENSATION AND BENEFITS. In consideration for the services of
------------ --- --------
Hall hereunder, ENI shall compensate Hall as follows:
(a) BASE SALARY. During the Term of the Agreement, ENI shall pay Hall a
---- ------
base salary (the "Base Salary"), which shall be paid periodically in accordance
with ENI's then current payroll practices. The Base Salary will be paid at an
annual rate of $273,489 until December 31, 1997, and shall be increased at the
commencement of each calendar year during the term of Hall's employment
hereunder by the greater of:
(i) five percent (5%) of Base Salary for the preceding year, or
(ii) the percentage increase in the consumer price index for the
preceding four (4) calendar quarters for which information has been
published by the U.S. Department of Commerce over the comparable prior four
(4) calendar quarters.
The Base Salary shall be in addition to the other benefits set forth herein.
(b) ANNUAL MANAGEMENT INCENTIVE BONUS. During the Term of this
----------------- --------- -----
Agreement, ENI shall pay Hall each fiscal year a management incentive bonus (the
"Incentive Bonus") in accordance with this Section 4(b). For the fiscal years of
ENI from 1997 through 2002, Hall shall be entitled to receive an Incentive Bonus
equal to 1.50% of ENI's EBITA (as defined below) for such fiscal year. Ninety
percent (90%) of the Incentive Bonus for each fiscal year shall be paid within
thirty (30) days after the end of the fiscal year. The remaining amount of the
bonus shall be paid upon completion of ENI's audited financial statements for
such fiscal year. As used in this Agreement, "EBITA" means, with respect to any
fiscal year, the sum of the consolidated net income (or loss) of ENI and its
Subsidiaries, if any, for such fiscal year, calculated in accordance with
generally accepted accounting principles consistently applied but
2
<PAGE>
excluding any extraordinary items of income or loss or proceeds of life
insurance, plus all amounts deducted in the computation thereof on account of
----
(A) income taxes, (B) interest expense, (C) amortization, and (D) the amount of
any Incentive Bonus paid to Hall hereunder or any like amount paid to Fred C.
Schulte and Wayne J. Conner under their respective employment agreements with
ENI.
(c) INSURANCE; OTHER BENEFITS. Except as otherwise expressly provided
--------- ----- --------
in this Agreement, during the Term of the Agreement Hall shall be provided with
pension benefits, welfare benefits and other fringe benefits, including without
limitation, vacations and holidays, to the same extent and on the same terms as
those benefits are provided by ENI from time to time to Schulte or the other
Common Partners in the Partnership (including spouse and dependent coverage);
provided, that Hall shall, at all times while he is employed by ENI, be provided
- --------
with a commercially reasonable level of accident, life and health benefit
coverage, and, provided, further, that subject to the annual review and approval
--------
of Common Partners representing at least 66% of the Common Percentages of the
Partnership, ENI shall maintain disability income replacement coverage or
another acceptable arrangement for Hall which will provide replacement of income
at a commercially reasonable rate during any period in which Hall is Disabled if
the disability arose during Hall's employment with ENI.
(d) OFFICERS LIABILITY. ENI shall maintain directors and officers
-------- ---------
liability insurance in commercially reasonable amounts (as reasonably determined
by the Board), and Hall shall be covered under such insurance to the same extent
as the other Common Partners in the Partnership of ENI. Hall shall be eligible
for indemnification by ENI under the terms of its by-laws. ENI agrees that it
shall not adopt or modify its by-laws in any respect which could effectively
reduce or limit Hall's rights to such indemnification.
(S)5. EXPENSES. During his employment, Hall is authorized to incur
--------
reasonable expenses, chargeable to ENI, in connection with his services and
employment hereunder, including expenses for travel, entertainment and similar
items. Such expenses shall be reimbursed by ENI in accordance with its
practices and policies for Schulte or the other Common Partners in the
Partnership.
(S)6. TERMINATION.
-----------
(a) REASONS FOR TERMINATION. Hall's employment hereunder shall
------- --- -----------
commence on the Commencement Date and continue until the expiration of the Term,
except that Hall's employment hereunder shall be terminated upon the occurrence
of any of the events set forth below:
(i) DEATH OR DISABILITY. Upon the death of Hall during the Term
----- -- ----------
of his employment hereunder or, at the option of ENI, in the event of
Hall's disability, upon thirty (30) days' written notice from ENI. Hall
shall be deemed "Disabled" if an independent medical doctor (selected by
ENI's health or disability insurer) certifies that Hall has for four (4)
consecutive months in any twelve (12) month period been disabled
3
<PAGE>
in a manner which seriously interferes with his ability to perform his
responsibilities under this Agreement. Any refusal by Hall to submit to a
medical examination for the purpose of certifying disability under this
Section 6(a)(i) shall be deemed to constitute conclusive evidence of Hall
being Disabled.
(ii) FOR CAUSE. For "Cause" upon written notice by ENI to Hall,
--- -----
which notice sets forth in reasonable detail the facts and circumstances
claimed to constitute "Cause". For purposes of this Agreement, the term
"Cause" shall mean (A) with respect to ENI's business, Hall shall have
embezzled or misappropriated funds or other property of ENI or offered,
paid, solicited or accepted any unlawful bribe or kickback; or (B) any of
the following actions or omissions which has a material adverse effect on
ENI:
(w) Hall shall have committed a willful violation of a fiduciary duty
owed by Hall to ENI.
(x) the willful and continued failure by Hall to substantially perform
his duties to ENI (other than any such failure resulting from Hall
being Disabled), within a reasonable period of time after a written
demand for substantial performance is delivered to Hall by the
Board, which demand specifically identifies the manner in which the
Board believes that Hall has not substantially performed his duties;
or
(y) Hall shall have breached the provisions of paragraph 10 of this
Agreement.
For purposes of this paragraph (ii), no act, or failure to act, on Hall's
part shall be deemed "willful" unless done, or omitted to be done, by Hall
not in good faith and knowing that such act or failure to act was in
violation of this Agreement.
(iii) BREACH BY ENI. In the event that Hall (x) provides written
------ -- ---
notice to ENI of the occurrence of a material breach of this Agreement by
ENI, which specifically identifies the manner in which Hall believes that
such material breach has occurred; (y) ENI fails to correct such material
breach within thirty (30) days after such notice; and (z) Hall resigns
within the 120-day period following the end of the 30 day period at clause
(y) above, then, for purposes of this Agreement, such resignation by Hall
shall be considered to have been involuntary. A material breach of this
Agreement by ENI shall include, without limitation:
(I) assignment by ENI of duties to Hall that are inconsistent in
any substantial respect with the position, authority, or
responsibilities associated with the position of President
and Chief Operating Officer of ENI;
(II) the failure by ENI to accord to Hall the title, authority and
responsibilities of President and Chief Operating Officer of
ENI;
4
<PAGE>
(III) the failure of ENI to provide any portion of the compensation
or benefits required under the terms of this Agreement within
thirty (30) days of the date such compensation is due.
Notwithstanding any provision of this Section 6(a)(iii) to the contrary, no
action or omission taken by ENI with the approval of Hall as a director of
ENI shall constitute a material breach of this Agreement.
(iv) OPTIONAL TERMINATION. On the last day of any Term, in the
-------- -----------
event that either party hereto delivers a notice to the other party to the
effect that such party wishes to terminate Hall's employment hereunder (a
"Termination Notice") on or before one hundred eighty (180) days prior to
the last day of such Term.
(v) SALE OF SHARES. This Agreement shall automatically terminate
--------------
upon the sale or transfer of Hall's direct or indirect interest in the
common stock of ENI or the equity interest in the Partnership, in either
case that is not permitted by the SHC Partnership Agreement.
(b) RIGHTS AND REMEDIES ON TERMINATION. Upon termination, Hall shall be
------ --- -------- -- -----------
entitled to the following payments:
(i) Upon the termination of Hall pursuant to this Sections 6(a)(i)
or (iii), ENI shall remain obligated to Hall, or to his estate in the event
of his death, during the Initial Term of this Agreement, or the remainder
of a successive one (1) year term if the termination occurs during such one
year term, for the payments and benefits set forth in Sections 4(a), (b),
(c), (d) herein, and for expense reimbursements outstanding at the time of
termination. In addition, in the event of Hall's disability as defined in
Section 6(a)(i), and the failure of ENI to satisfy its obligations under
Section 4(c) above payment if his base salary shall continue until Hall
------------
reaches age sixty-five (65).
(ii) Upon termination of Hall's employment pursuant to Section
6(a)(ii) or the voluntary resignation of Hall, ENI shall be
obligated to Hall as follows:
(A) payment of any portion of his Base Salary owed with
respect to the period prior to his termination,
(B) payment of any expense reimbursements under Section 5
hereof for expenses incurred in the performance of his duties prior
to his termination, and payment for any accrued and unused vacation
days for such fiscal year, and
(C) an "Incentive Bonus" payment equal to the amount of the
Incentive Bonus which would have been due to Hall with respect to
such fiscal year but for the termination of his employment
multiplied by a fraction the numerator of
----------
5
<PAGE>
which is the number of days elapsed in such fiscal year prior to the
termination of employment and the denominator of which is 365.
Payment of any prorated Incentive Bonus owed pursuant to this
Section 6(b)(ii)(C) shall be made as and when the corresponding
payments of such Incentive Bonus would have been made to Hall
pursuant to Section 4(b) hereto had Hall not been terminated.
(iii) If Hall's employment is terminated in accordance with Section
6(a)(iv) and 6(a)(v), then, in addition to the amounts payable in
accordance with Sections 6(b)(i) and 6(b)(ii), and in consideration of
Hall's non-competition obligations set forth in Section 10 hereof, Hall
shall receive from ENI for a period of one (1) year from of the date of his
termination, severance payments at a rate equal to his then current Base
Salary, in monthly or more frequent installments as is required under
Section 4(a). ENI's obligation to make severance payments at the annual
rate of Hall's Base Salary under this Section 6(b)(iii) shall cease as of
the date, if any, of a material breach by Hall of the provisions of
Sections 9 or 10 hereof.
(iv) Hall shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or
otherwise, and ENI shall not be entitled to set off against the amounts
payable to Hall under this Agreement any amounts owed to ENI by Hall, any
amounts earned by Hall in other employment after termination of his
employment with ENI, or any amounts which might have been earned by Hall in
other employment had he sought such other employment.
Upon termination, Hall shall not be entitled to severance or other
compensation based on termination except as provided in this Agreement.
(S)7. GUARANTEED FUNDING. Within thirty (30) days of the date of this
------------------
Agreement, ENI will acquire and maintain during the period Hall is employed and
during any period of disability pursuant to this Agreement and for a period of
twelve (12) months following Hall's voluntary resignation or expiration of the
Term of this Agreement or the sale, transfer or assignment of his interest in
the Partnership not permitted by the SHC Partnership Agreement, whichever occurs
first, an insurance policy or policies providing coverage payable to ENI in the
event of the death of Hall ("Insurance Policies"). The terms and issuers of the
Insurance Policies shall be subject to the annual review and approval by Common
Partners representing at least 66% of the Common Percentage of the Partnership.
Subject to such annual review and approval of the Partnership, the Insurance
Policies for Hall shall initially provide $4,000,000 of coverage, and shall
thereafter increase each year in an amount equal to the increase in Hall's (a)
Common Percentage in the Partnership and (b) preferred stock and preferred stock
units in ENI. The Company agrees to use the proceeds of such life insurance in
accordance with the redemption provisions of the SHC Partnership Agreement, to
the extent permitted by the Indenture (defined below at Section 12(i) below).
-------------
The Company agrees to effect the redemption transactions contemplated in the SHC
Partnership Agreement, subject to any restrictions in the Indenture.
(S)8. INVENTIONS; ASSIGNMENT. All rights to discoveries, inventions,
---------- ----------
improvements and innovations (including all data and records pertaining thereto)
related to ENI whether or not patentable, copyrightable, registrable as a
trademark, or reduced to writing, that
6
<PAGE>
Hall may discover, invent or originate during the Term of his employment
hereunder, either alone or with others and whether or not during working hours
or by the use of the facilities of ENI, which result from work which Hall may do
for or at the request of ENI ("Inventions"), shall be the exclusive property of
ENI. Hall shall promptly disclose all Inventions to ENI, shall execute at the
request of any of ENI any assignments or other documents such as ENI may deem
necessary to protect or perfect its rights therein, and shall assist ENI, at the
expense of ENI, in obtaining, defending and enforcing the rights of any of ENI
therein. Hall hereby appoints ENI as his attorney-in-fact to execute on his
behalf any assignments or other documents deemed necessary by any of ENI to
protect or perfect its rights to any Inventions.
(S)9. CONFIDENTIAL INFORMATION. Hall recognizes and acknowledges that
------------ -----------
certain assets of ENI, including without limitation information regarding
customers, pricing policies, methods of operation, proprietary computer
programs, sales, products, profits, costs, markets, key personnel, formulae,
product applications, technical processes, and trade secrets (hereinafter called
"Confidential Information") are valuable, special, and unique assets of ENI.
Hall shall not, during his term of employment and the Period of Restriction as
provided in Section 10 hereof, disclose any or any part of the Confidential
Information to any person, firm, corporation, association, or any other entity
for any reason or purpose whatsoever, directly or indirectly, except as may be
required pursuant to his employment hereunder, unless and until such
Confidential Information becomes publicly available other than as a consequence
of the breach by Hall of his confidentiality obligations hereunder. In the
event of the termination of his employment, whether voluntary or involuntary and
whether by ENI or Hall, Hall shall deliver to ENI all documents and data
pertaining to the Confidential Information and shall not take with him any
documents or data of any kind or any reproductions (in whole or in part) or
extracts of any items relating to the Confidential Information.
(S)10. NON-COMPETITION. Hall acknowledges that the covenants and
---------------
agreements in this Section 10 are in consideration of Hall's employment with ENI
under this Agreement and Hall's opportunity to increase his shareholdings in ENI
as a result of the recapitalization, and are necessary to protect the legitimate
interests of ENI, its employees, and the other shareholders of ENI. During the
Period of Restriction (as hereinafter defined), Hall will not (a) engage,
directly or indirectly, anywhere in North America, alone or as a shareholder
(other than as a holder of less than five percent (5%) of the common stock of
any publicly traded corporation), partner, officer, director, employee or
consultant of any other business organization that is engaged or becomes engaged
in a business the Designated Industry (as hereinafter defined), (b) divert to
any competitor of ENI, any customer of ENI, or (c) solicit or encourage any
officer, key employee or consultant of ENI to leave its employ for alternative
employment in the Designated Industry. For purposes of this Section 10, the term
"Designated Industry" shall mean any business activity that ENI is conducting at
the time of the termination of Hall's employment with ENI or of which Hall has
or should have knowledge that ENI then proposes to conduct, including but not
limited to (i) engineering, procurement and construction management services
relating to coal processing facilities, mineral processing facilities or
environmental projects to the extent that such services are competitive with any
services offered or provided by ENI, (ii) the design or manufacture of machinery
and equipment for use in coal processing or the processing of other minerals to
the extent that such machinery or equipment would be competitive with any
machinery and equipment designed, manufactured or distributed by ENI, and (iii)
the design,
7
<PAGE>
manufacture or distribution of any industrial threaded fasteners or similar
products that are competitive with any products designed, manufactured or
distributed by ENI.
For purposes of this Agreement, the "Period of Restriction" shall be the
period commencing on the Commencement Date and ending three (3) years from the
last day of the Term of this Agreement.
If at any time the provisions of this Section 10 shall be determined to be
invalid or unenforceable, by reason of being vague or unreasonable as to area,
duration or scope of activity, this Section 10 shall be considered divisible and
shall become and be immediately amended to only such area, duration and scope of
activity as shall be determined to be reasonable and enforceable by the court or
other body having jurisdiction over the matter; and Hall agrees that this
Section 10 as so amended shall be valid and binding as though any invalid or
unenforceable provision had not been included herein.
(S)11. TECHNICAL RECORDS. Immediately upon ENI's request and promptly upon
--------- -------
upon termination or resignation of Hall's employment hereunder, Hall shall
deliver to ENI all memoranda, notes, records, reports, photographs, drawings,
plans, papers or other documents made or compiled by Hall or made available to
Hall during the course of the provision of services under this Agreement, and
any copies of abstracts thereof, whether or not of a secret or confidential
nature, and all of such memoranda or other documents shall, during and after the
termination of Hall's employment hereunder, be and shall be deemed to be the
property of ENI.
(S)12. GENERAL.
-------
(a) NOTICES. All notices and other communications hereunder shall be in
-------
writing or by written telecommunication, and shall be deemed to have been duly
given if delivered personally or if mailed by certified mail, return receipt
requested, postage prepaid or sent by written telecommunication or telecopy, to
the relevant address set forth below, or to such other address as the recipient
of such notice or communication shall have specified to the other party hereto
in accordance with this Section 12(a):
IF TO ENI, TO:
Elgin National Industries, Inc.
2001 Butterfield Rd.
Suite 1020
Downers Grove, Illinois 60515-1050
WITH A COPY TO:
Paul Theiss, Esq.
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
8
<PAGE>
IF TO HALL, TO:
Mr. Charles D. Hall
c/o Elgin National Industries
2001 Butterfield Road
Suite 1020
Downers Grove, Illinois 60515-1050
(b) EQUITABLE REMEDIES. Each of the parties hereto acknowledges and
--------- --------
agrees that upon any breach by the other party of its or his obligations
hereunder, the non-breaching party will have no adequate remedy at law, and
accordingly will be entitled to specific performance and other appropriate
injunctive and equitable relief.
(c) SEVERABILITY. If any provision of this Agreement is or becomes
------------
invalid, illegal or unenforceable in any respect under any law, the validity,
legality and enforceability of the remaining provisions hereof shall not in any
way be affected or impaired.
(d) WAIVERS. No delay or omission by either party hereto in exercising
-------
any right, power or privilege hereunder shall impair such right, power or
privilege, nor shall any single or partial exercise of any such right, power or
privilege preclude any further exercise thereof or the exercise of any other
right, power or privilege.
(e) COUNTERPARTS. This Agreement may be executed in multiple
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(f) ASSIGNS. This Agreement shall be binding upon and inure to the
-------
benefit of the heirs and successors of each of the parties hereto.
(g) ENTIRE AGREEMENT. This Agreement contains the entire understanding
------ ---------
of the parties, supersedes and replaces all prior agreements and understandings
relating to the subject matter hereof, including without limitation the
employment agreement between Hall and ENI dated September 24, 1993, and shall
not be amended except by a written instrument hereafter signed by each of the
parties hereto.
(h) GOVERNING LAW. This Agreement and the performance hereof shall be
--------- ---
construed and governed in accordance with the laws of the State of Delaware.
(i) LIMITATION. Notwithstanding any contrary provision herein, any
----------
failure by the Company to make any payment, or to incur any cost, to the extent
such failure is due to restrictions in the Company's Indenture dated November 5,
1997 and governing its 11% Senior Notes due 2007, (the "Indenture"), shall not
constitute a breach of or default by the Company under this Agreement.
9
<PAGE>
(j) COUNSEL. Hall acknowledges that he has been advised to obtain
-------
separate legal counsel to review this Agreement and advise him regarding the
legal consequences of the same. Mayer, Brown & Platt has drafted this Agreement
as counsel for ENI with Hall's consent. Although Mayer, Brown & Platt has
represented Hall previously in other matters, Mayer, Brown & Platt is not acting
as attorney for Hall with respect to this Agreement or the transactions
contemplated herein. Mayer, Brown & Platt shall be under no obligation to
maintain the confidentiality from ENI of any matter communicated to it by Hall
with respect to this Agreement.
IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties
hereto have caused this Agreement to be duly executed as of the date and year
first above written.
ELGIN NATIONAL INDUSTRIES, INC.
By: /s/ Fred C. Schulte
-----------------------------------------------
Title: Chairman and CEO
--------------------------------------------
/s/ Charles D. Hall
--------------------------------------------------
Charles D. Hall
10
<PAGE>
EXHIBIT 10.4
EXECUTION COPY
--------------
EMPLOYMENT AND NON-COMPETITION AGREEMENT
----------------------------------------
Wayne J. Conner
This EMPLOYMENT AND NON-COMPETITION AGREEMENT (this "Agreement"), dated as
of November 5, 1997, is between Elgin National Industries, Inc., a Delaware
corporation, and all related and affiliated entities, successors and assigns now
in existence or hereinafter created ("ENI"), and Wayne J. Conner ("Conner").
WHEREAS, Conner is currently employed pursuant to an employment agreement
as the Chief Financial Officer of ENI;
WHEREAS, as a result of a recapitalization, ENI will be merged into ENI
Holding Corp., ("recapitalization"), and Conner will be one of three partners of
SHC Investment Partnership ("Partnership"), which Partnership shall, in turn,
own the Common Stock of ENI Holding Corp.; and
WHEREAS, in connection with the foregoing, ENI wishes to employ Conner as
the Chief Financial Officer of ENI, and Conner wishes to work as the Chief
Financial Officer of ENI, on the terms set forth below.
NOW, THEREFORE, it is hereby agreed as follows:
(S)1. EMPLOYMENT. ENI hereby employs Conner as the Chief Financial
----------
Officer of ENI and Conner hereby accepts such employment, upon the terms and
subject to the conditions hereinafter set forth.
(S)2. DUTIES. While Conner is employed by ENI, he shall serve as its Vice
------
President and Chief Financial Officer. In such capacity, Conner shall have such
executive responsibilities and duties as are assigned by ENI's Board of
Directors (the "Board") and Chairman and Chief Executive Officer and as are
consistent with his position as Chief Financial Officer of ENI. Conner agrees
that, while he is employed by ENI, he shall devote his full time and best
efforts to the performance of his duties for ENI. Conner will have such
authority and power as are inherent to the undertakings applicable to his
positions and necessary to carry out his responsibilities and the duties
required of him hereunder.
Subject to the foregoing provisions of this Section 2, while Conner is
employed by ENI, Conner may engage in activities other than those required under
this Agreement, such as activities involving professional, charitable,
educational, religious and similar types of organizations, speaking engagements,
membership on the boards of directors of other
<PAGE>
organizations, and similar type activities to the extent that such other
activities do not inhibit or prohibit the performance of Conner's duties under
this Agreement, or conflict in any material way with the business of ENI.
Subject to the terms of this Agreement, Conner shall not be required to
perform services under this Agreement during any period that he is Disabled (as
defined in Section 6(a)(i)).
(S)3. TERM. The initial term of employment of Conner hereunder shall be a
----
five (5) year period commencing on the date of the closing of the
recapitalization and ending five (5) years thereafter (the "Initial Term"),
unless earlier terminated pursuant to Section 6. The term of Conner's
employment hereunder shall be automatically renewed for additional successive
one (1) year terms (the Initial Term and each such additional one (1) year
terms, hereinafter referred to collectively as, the "Term") unless either party
hereto delivers written notice of its intent to terminate Conner's employment
hereunder at least one hundred eighty (180) days prior to the last day of the
Term. Such notice from ENI will require the written consent of Common Partners
representing at least 66% of the Common Percentage of the Partnership (as such
terms are defined in the SHC Partnership Agreement).
(S)4. COMPENSATION AND BENEFITS. In consideration for the services of
------------ --- --------
Conner hereunder, ENI shall compensate Conner as follows:
(a) BASE SALARY. During the Term of the Agreement, ENI shall pay Conner
---- ------
a base salary (the "Base Salary"), which shall be paid periodically in
accordance with ENI's then current payroll practices. The Base Salary will be
paid at an annual rate of $158,016 until December 31, 1997, and shall be
increased at the commencement of each calendar year during the term of Conner's
employment hereunder by the greater of:
(i) five percent (5%) of Base Salary for the preceding year, or
(ii) the percentage increase in the consumers price index for the
preceding four (4) calendar quarters for which information has been
published by the U.S. Department of Commerce over the comparable prior four
(4) calendar quarters.
The Base Salary shall be in addition to the other benefits set forth herein.
(b) ANNUAL MANAGEMENT INCENTIVE BONUS. During the Term of this
----------------- --------- -----
Agreement, ENI shall pay Conner each fiscal year a management incentive bonus
(the "Incentive Bonus") in accordance with this Section 4(b). For the fiscal
years of ENI from 1997 through 2002, Conner shall be entitled to receive an
Incentive Bonus equal to 1.50% of ENI's EBITA (as defined below) for such fiscal
year. Ninety percent (90%) of the Incentive Bonus for each fiscal year shall be
paid within thirty (30) days after the end of the fiscal year. The remaining
amount of the bonus shall be paid upon completion of ENI's audited financial
statements for such fiscal year. As used in this Agreement, "EBITA" means, with
respect to any fiscal year, the sum of the consolidated net income (or loss) of
ENI and its Subsidiaries, if any, for such fiscal year,
-2-
<PAGE>
calculated in accordance with generally accepted accounting principles
consistently applied but excluding any extraordinary items of income or loss or
proceeds of life insurance, plus all amounts deducted in the computation thereof
----
on account of (A) income taxes, (B) interest expense, (C) amortization, and (D)
the amount of any Incentive Bonus paid to Conner hereunder or any like amount
paid to Fred C. Schulte and Charles D. Hall under their respective employment
agreements with ENI.
(c) INSURANCE; OTHER BENEFITS. Except as otherwise expressly provided
--------- ----- --------
in this Agreement, during the Term of the Agreement Conner shall be provided
with pension benefits, welfare benefits and other fringe benefits, including
without limitation, vacations and holidays, to the same extent and on the same
terms as those benefits are provided by ENI from time to time to other Common
Partners in the Partnership of ENI (including spouse and dependent coverage);
provided, that Conner shall, at all times while he is employed by ENI, be
- --------
provided with a commercially reasonable level of accident, life and health
benefit coverage; and, provided further, that, subject to the annual review and
-------- -------
approval by a two thirds vote of the Partnership, ENI shall maintain disability
income replacement coverage for Conner, which will provide replacement of income
at a commercially reasonable rate during any period in which Conner is Disabled
if the disability arose during Conner's employment with ENI.
(d) OFFICERS LIABILITY. ENI shall maintain directors and officers
-------- ---------
liability insurance in commercially reasonable amounts (as reasonably determined
by the Board), and Conner shall be covered under such insurance to the same
extent as Schulte or the other Common Partners in the Partnership. Conner shall
be eligible for indemnification by ENI under the terms of its by-laws. ENI
agrees that it shall not adopt or modify its by-laws in any respect which could
effectively reduce or limit Conner's rights to such indemnification.
(S)5. EXPENSES. During his employment, Conner is authorized to incur
--------
reasonable expenses, chargeable to ENI, in connection with his services and
employment hereunder, including expenses for travel, entertainment and similar
items. Such expenses shall be reimbursed by ENI in accordance with its
practices and policies for Schulte or the other Common Partners in the
Partnership.
(S)6. TERMINATION.
-----------
(a) REASONS FOR TERMINATION. Conner's employment hereunder shall
------- --- -----------
commence on the Commencement Date and continue until the expiration of the Term,
except that Conner's employment hereunder shall be terminated upon the
occurrence of any of the events set forth below:
(i) DEATH OR DISABILITY. Upon the death of Conner during the
----- -- ----------
Term of his employment hereunder or, at the option of ENI, in the event of
Conner's disability, upon thirty (30) days' written notice from ENI. Conner
shall be deemed "Disabled" if an independent medical doctor (selected by
ENI's health or disability insurer) certifies that Conner has for four (4)
consecutive months in any twelve (12) month period been
-3-
<PAGE>
disabled in a manner which seriously interferes with his ability to perform
his responsibilities under this Agreement. Any refusal by Conner to submit
to a medical examination for the purpose of certifying disability under
this Section 6(a)(i) shall be deemed to constitute conclusive evidence of
Conner being Disabled.
(ii) FOR CAUSE. For "Cause" upon written notice by ENI to Conner,
--- -----
which notice sets forth in reasonable detail the facts and circumstances
claimed to constitute "Cause". For purposes of this Agreement, the term
"Cause" shall mean (A) with respect to ENI's business, Conner shall have
embezzled or misappropriated funds or other property of ENI or offered,
paid, solicited or accepted any unlawful bribe or kickback; or (B) any of
the following actions or omissions which has a material adverse effect on
ENI:
(w) Conner shall have committed a willful violation of a fiduciary duty
owed by Conner to ENI.
(x) the willful and continued failure by Conner to substantially perform
his duties to ENI (other than any such failure resulting from Conner
being Disabled), within a reasonable period of time after a written
demand for substantial performance is delivered to Conner by the
Board, which demand specifically identifies the manner in which the
Board believes that Conner has not substantially performed his
duties; or
(y) Conner shall have breached the provisions of paragraph 10 of this
Agreement.
For purposes of this paragraph (ii), no act, or failure to act, on Conner's
part shall be deemed "willful" unless done, or omitted to be done, by
Conner not in good faith and knowing that such act or failure to act was in
violation of this Agreement.
(iii) BREACH BY ENI. In the event that Conner (x) provides written
------ -- ---
notice to ENI of the occurrence of a material breach of this Agreement by
ENI, which specifically identifies the manner in which Conner believes
that such material breach has occurred; (y) ENI fails to correct such
material breach within thirty (30) days after such notice; and (z) Conner
resigns within the 120-day period following the end of the 30 day period at
clause (y) above, then, for purposes of this Agreement, such resignation by
Conner shall be considered to have been involuntary. A material breach of
this Agreement by ENI shall include, without limitation:
(I) assignment by ENI of duties to Conner that are inconsistent
in any substantial respect with the position, authority, or
responsibilities associated with the position of Chief
Financial Officer of ENI;
(II) the failure by ENI to accord to Conner the title, authority
and responsibilities of Chief Financial Officer of ENI;
-4-
<PAGE>
(III) the failure of ENI to provide any portion of the
compensation or benefits required under the terms of this
Agreement within thirty (30) days of the date such
compensation is due.
Notwithstanding any provision of this Section 6(a)(iii) to the contrary, no
action or omission taken by ENI with the approval of Conner as a director
of ENI shall constitute a material breach of this Agreement.
(iv) OPTIONAL TERMINATION. On the last day of any Term, in the
-------- -----------
event that either party hereto delivers a notice to the other party to the
effect that such party wishes to terminate Conner's employment hereunder (a
"Termination Notice") on or before one hundred eighty (180) days prior to
the last day of such Term.
(v) SALE OF SHARES. This Agreement shall automatically terminate
--------------
upon the sale or transfer of Conner's direct or indirect interest in the
common stock of ENI or the equity interest in the Partnership, in either
case that is not permitted by the SHC Partnership Agreement.
(b) RIGHTS AND REMEDIES ON TERMINATION. Upon termination, Conner shall
------ --- -------- -- -----------
be entitled to the following payments:
(i) Upon the termination of Conner pursuant to this Sections
6(a)(i) or (iii), ENI shall remain obligated to Conner, or to his estate in
the event of his death, during the Initial Term of this Agreement, or the
remainder of a successive one (1) year term if the termination occurs
during such one year term, for the payments and benefits set forth in
Sections 4(a), (b), (c), (d) herein, and for expense reimbursements
outstanding at the time of termination.
(ii) Upon termination of Conner's employment pursuant to Section
6(a)(ii) or the voluntary resignation of Conner, ENI shall be obligated to
Conner as follows:
(A) payment of any portion of his Base Salary owed with
respect to the period prior to his termination,
(B) payment of any expense reimbursements under Section 5
hereof for expenses incurred in the performance of his duties prior
to his termination, and payment for any accrued and unused vacation
days for such fiscal year, and
(C) an "Incentive Bonus" payment equal to the amount of the
Incentive Bonus which would have been due to Conner with respect to
such fiscal year but for the termination of his employment
multiplied by a fraction the numerator of which is the number of
----------
days elapsed in such fiscal year prior to the termination of
employment and the denominator of which is 365. Payment of any
prorated
-5-
<PAGE>
Incentive Bonus owed pursuant to this Section 6(b)(ii)(C) shall be
made as and when the corresponding payments of such Incentive Bonus
would have been made to Conner pursuant to Section 4(b) hereto had
Conner not been terminated.
(iii) If Conner's employment is terminated in accordance with
Section 6(a)(iv) and 6(a)(v), then, in addition to the amounts payable in
accordance with Sections 6(b)(i) and 6(b)(ii), and in consideration of
Conner's non-competition obligations set forth in Section 10 hereof, Conner
shall receive from ENI for a period of one (1) year from of the date of his
termination, severance payments at a rate equal to his then current Base
Salary, in monthly or more frequent installments as is required under
Section 4(a). ENI's obligation to make severance payments at the annual
rate of Conner's Base Salary under this Section 6(b)(iii) shall cease as of
the date, if any, of a material breach by Conner of the provisions of
Sections 9 or 10 hereof.
(iv) Conner shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or
otherwise, and ENI shall not be entitled to set off against the amounts
payable to Conner under this Agreement any amounts owed to ENI by Conner,
any amounts earned by Conner in other employment after termination of his
employment with ENI, or any amounts which might have been earned by Conner
in other employment had he sought such other employment.
Upon termination, Conner shall not be entitled to severance or other
compensation based on termination except as provided in this Agreement.
(S)7. GUARANTEED FUNDING. Within thirty (30) days of the date of this
------------------
Agreement, ENI will acquire and maintain during the period Conner is employed
and during any period of disability pursuant to this Agreement and for a period
of twelve (12) months following Conner's voluntary resignation or expiration of
the Term of this Agreement or the sale, transfer or assignment of his interest
in the Partnership whichever occurs first, an insurance policy or policies
providing coverage payable to ENI in the event of the death of Conner
("Insurance Policies"). The terms and issuers of the Insurance Policies shall
be subject to the annual review and approval by Common Partners representing at
least 66% of the Common Percentage of the Partnership. Subject to such annual
review and approval of the Partnership, the Insurance Policies for Conner shall
initially provide $4,000,000 of coverage, and shall thereafter increase each
year in an amount equal to the increase in Conner's (a) Common Percentage in the
Partnership and (b) preferred stock and preferred stock units in ENI. The
Company agrees to apply any proceeds of such life insurance in accordance with
the redemption provisions of the SHC Partnership Agreement, to the extent
permitted by the Indenture (defined at Section 12(i) below). The Company agrees
-------------
to effect the redemption transactions contemplated in the SHC Partnership
Agreement, subject to any restrictions in the Indenture.
(S)8. INVENTIONS; ASSIGNMENT. All rights to discoveries, inventions,
---------- ----------
improvements and innovations (including all data and records pertaining thereto)
related to ENI whether or not patentable, copyrightable, registrable as a
trademark, or reduced to writing, that Conner may discover, invent or originate
during the Term of his employment hereunder, either alone or with others and
whether or not during working hours or by the use of the facilities of
-6-
<PAGE>
ENI, which result from work which Conner may do for or at the request of ENI
("Inventions"), shall be the exclusive property of ENI. Conner shall promptly
disclose all Inventions to ENI, shall execute at the request of any of ENI any
assignments or other documents such as ENI may deem necessary to protect or
perfect its rights therein, and shall assist ENI, at the expense of ENI, in
obtaining, defending and enforcing the rights of any of ENI therein. Conner
hereby appoints ENI as his attorney-in-fact to execute on his behalf any
assignments or other documents deemed necessary by any of ENI to protect or
perfect its rights to any Inventions.
(S)9. CONFIDENTIAL INFORMATION. Conner recognizes and acknowledges that
------------ -----------
certain assets of ENI, including without limitation information regarding
customers, pricing policies, methods of operation, proprietary computer
programs, sales, products, profits, costs, markets, key personnel, formulae,
product applications, technical processes, and trade secrets (hereinafter called
"Confidential Information") are valuable, special, and unique assets of ENI.
Conner shall not, during his term of employment and the Period of Restriction as
provided in Section 10 hereof, disclose any or any part of the Confidential
Information to any person, firm, corporation, association, or any other entity
for any reason or purpose whatsoever, directly or indirectly, except as may be
required pursuant to his employment hereunder, unless and until such
Confidential Information becomes publicly available other than as a consequence
of the breach by Conner of his confidentiality obligations hereunder. In the
event of the termination of his employment, whether voluntary or involuntary and
whether by ENI or Conner, Conner shall deliver to ENI all documents and data
pertaining to the Confidential Information and shall not take with him any
documents or data of any kind or any reproductions (in whole or in part) or
extracts of any items relating to the Confidential Information.
(S)10. NON-COMPETITION. Conner acknowledges that the covenants and
---------------
agreements in this Section 10 are in consideration of Conner's employment with
ENI under this Agreement and Conner's opportunity to increase his shareholdings
in ENI as a result of the recapitalization, and are necessary to protect the
legitimate interests of ENI, its employees, and the other shareholders of ENI.
During the Period of Restriction (as hereinafter defined), Conner will not (a)
engage, directly or indirectly, anywhere in North America, alone or as a
shareholder (other than as a holder of less than five percent (5%) of the common
stock of any publicly traded corporation), partner, officer, director, employee
or consultant of any other business organization that is engaged or becomes
engaged in a business the Designated Industry (as hereinafter defined), (b)
divert to any competitor of ENI, any customer of ENI, or (c) solicit or
encourage any officer, key employee or consultant of ENI to leave its employ for
alternative employment in the Designated Industry. For purposes of this Section
10, the term "Designated Industry" shall mean any business activity that ENI is
conducting at the time of the termination of Conner's employment with ENI or of
which Conner has or should have knowledge that ENI then proposes to conduct,
including but not limited to (i) engineering, procurement and construction
management services relating to coal processing facilities, mineral processing
facilities or environmental projects to the extent that such services are
competitive with any services offered or provided by ENI, (ii) the design or
manufacture of machinery and equipment for use in coal processing or the
processing of other minerals to the extent that such machinery or equipment
would be competitive with any machinery and equipment designed, manufactured or
distributed by ENI, and (iii) the design, manufacture or distribution of any
industrial threaded fasteners or
-7-
<PAGE>
similar products that are competitive with any products designed, manufactured
or distributed by ENI.
For purposes of this Agreement, the "Period of Restriction" shall be the
period commencing on the Commencement Date and ending three (3) years from the
last day of the Term of this Agreement.
If at any time the provisions of this Section 10 shall be determined to be
invalid or unenforceable, by reason of being vague or unreasonable as to area,
duration or scope of activity, this Section 10 shall be considered divisible and
shall become and be immediately amended to only such area, duration and scope of
activity as shall be determined to be reasonable and enforceable by the court or
other body having jurisdiction over the matter; and Conner agrees that this
Section 10 as so amended shall be valid and binding as though any invalid or
unenforceable provision had not been included herein.
(S)11. TECHNICAL RECORDS. Immediately upon ENI's request and promptly
--------- -------
upon termination or resignation of Conner's employment hereunder, Conner shall
deliver to ENI all memoranda, notes, records, reports, photographs, drawings,
plans, papers or other documents made or compiled by Conner or made available to
Conner during the course of the provision of services under this Agreement, and
any copies of abstracts thereof, whether or not of a secret or confidential
nature, and all of such memoranda or other documents shall, during and after the
termination of Conner's employment hereunder, be and shall be deemed to be the
property of ENI.
(S)12. GENERAL.
-------
(a) NOTICES. All notices and other communications hereunder shall be in
-------
writing or by written telecommunication, and shall be deemed to have been duly
given if delivered personally or if mailed by certified mail, return receipt
requested, postage prepaid or sent by written telecommunication or telecopy, to
the relevant address set forth below, or to such other address as the recipient
of such notice or communication shall have specified to the other party hereto
in accordance with this Section 12(a):
IF TO ENI, TO:
Elgin National Industries, Inc.
2001 Butterfield Rd.
Suite 1020
Downers Grove, Illinois 60515-1050
WITH A COPY TO:
Paul Theiss, Esq.
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
-8-
<PAGE>
IF TO CONNER, TO:
Mr. Wayne J. Conner
c/o Elgin National Industries
2001 Butterfield Road
Suite 1020
Downers Grove, Illinois 60515-1050
(b) EQUITABLE REMEDIES. Each of the parties hereto acknowledges and
--------- --------
agrees that upon any breach by the other party of its or his obligations
hereunder, the non-breaching party will have no adequate remedy at law, and
accordingly will be entitled to specific performance and other appropriate
injunctive and equitable relief.
(c) SEVERABILITY. If any provision of this Agreement is or becomes
------------
invalid, illegal or unenforceable in any respect under any law, the validity,
legality and enforceability of the remaining provisions hereof shall not in any
way be affected or impaired.
(d) WAIVERS. No delay or omission by either party hereto in
-------
exercising any right, power or privilege hereunder shall impair such right,
power or privilege, nor shall any single or partial exercise of any such right,
power or privilege preclude any further exercise thereof or the exercise of any
other right, power or privilege.
(e) COUNTERPARTS. This Agreement may be executed in multiple
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(f) ASSIGNS. This Agreement shall be binding upon and inure to the
-------
benefit of the heirs and successors of each of the parties hereto.
(g) ENTIRE AGREEMENT. This Agreement contains the entire
------ ---------
understanding of the parties, supersedes and replaces all prior agreements and
understandings relating to the subject matter hereof, including without
limitation the employment agreement between Conner and ENI dated September 24,
1993, and shall not be amended except by a written instrument hereafter signed
by each of the parties hereto.
(h) GOVERNING LAW. This Agreement and the performance hereof shall be
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construed and governed in accordance with the laws of the State of Delaware.
-9-
<PAGE>
(i) COUNSEL. Conner acknowledges that he has been advised to obtain
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separate legal counsel to review this Agreement and advise him regarding the
legal consequences of the same. Mayer, Brown & Platt has drafted this Agreement
as counsel for ENI with Conner's consent. Although Mayer, Brown & Platt has
represented Conner previously in other matters, Mayer, Brown & Platt is not
acting as attorney for Conner with respect to this Agreement or the transactions
contemplated herein. Mayer, Brown & Platt shall be under no obligation to
maintain the confidentiality from ENI of any matter communicated to it by Conner
with respect to this Agreement.
(j) LIMITATION. Notwithstanding any contrary provision herein, any
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failure by the Company to make any payment, or to incur any cost, to the extent
such failure is due to restrictions in the Company's Indenture dated November 5,
1997 and governing its 11% Senior Notes due 2007, (the "Indenture"), shall not
constitute a breach of or default by the Company under this Agreement.
IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties
hereto have caused this Agreement to be duly executed as of the date and year
first above written.
ELGIN NATIONAL INDUSTRIES, INC.
By: /s/ Fred C. Schulte
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Title: Chairman and CEO
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/s/ Wayne J. Conner
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Wayne J. Conner
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<PAGE>
EXHIBIT 21.1
SUBSIDIARIES
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Elgin National Industries, Inc. Jurisdiction
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Cabell Construction Company Delaware
Centrifugal Services, Inc. Illinois
Clinch River Corporation Virginia
ENI International, Inc. Barbados
Mining Controls, Inc. Delaware
Norris Screen & Manufacturing, Inc. West Virginia
Roberts & Schaefer Company Delaware
Roberts & Schaefer Company, Ltd. British Columbia
Soros Associates, Inc. Delaware
Tabor Machine Company West Virginia
Thompson-Starrett Construction Company, Inc. New York
TranService, Inc. Delaware
Roberts & Schaefer Company
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Roberts & Schaefer (Mauritius) Private Limited Mauritius
R&S Engineering (India) Private Limited India
(Title to shares held by local agent for Elgin benefit)
Roberts & Schaefer Australia PTY. Ltd. Australia
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 (File No.
) of our report dated March 10, 1997, on our audits of the financial
statement and financial statement schedules of ENI Holding Corp. and Subsidiary
Companies. We also consent to the references to our firm under the captions
"Independent Auditors" and "Selected Historical Financial Data".
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Chicago, Illinois
December 30, 1997
