<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 23, 1998
REGISTRATION NO. 333-43523
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
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 JANUARY 23, 1998
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.
22
<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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<PAGE>
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
37
<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
51
<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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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.......... $ (95.01) $(191.36) $ 101.00 $ 45.91 $ 109.78
Income per share from
discontinued operations........ 44.86 43.71 8.68 5.09 --
-------- -------- -------- ------- ---------
Net income (loss) per share..... $ (50.15) $(147.65) $ 109.68 $ 51.00 $ 109.78
======== ======== ======== ======= =========
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>
- --------
*Filed herewith.
**Previously filed.
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 (includes as a part of Ex-
hibit 5).
**23.2 Consent of Coopers & Lybrand, L.L.P.
**24 Power of Attorney.
*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
- --------
*Filed herewith.
**Previously filed.
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 AMENDMENT NO. 1 TO REGISTRATION STATEMENT ON
FORM S-4 TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF DOWNERS GROVE, STATE OF ILLINOIS, ON JANUARY 23,
1998.
Elgin National Industries, Inc.
/s/ Wayne J. Conner
By __________________________________
Wayne J. Conner
Name: _____________________________
Vice President, Treasurer and
CFO
Title: ____________________________
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
AMENDMENT NO. 1 TO 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>
* Chairman of the Board, Chief January 23, 1998
____________________________________ Executive Officer and
Fred C. Schulte Director
* President, Chief Operating January 23, 1998
____________________________________ Officer and Director
Charles D. Hall
/s/ Wayne J. Conner Vice President, Treasurer, January 23, 1998
____________________________________ Chief Financial Officer and
Wayne J. Conner Director
* Vice President, Controller January 23, 1998
____________________________________ and Secretary
Lynn C. Batory
* Vice President of January 23, 1998
____________________________________ Manufacturing
David Hall
</TABLE>
*/s/ Wayne J. Conner
___________________________
Wayne J. Conner
Attorney-in-fact
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 (included as a part of Exhibit
5).
**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>
- --------
*Filed herewith.
**Previously filed.
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
ENI HOLDING CORP.
-----------------------------
ENI HOLDING CORP., a corporation organized and existing under and by virtue
of the General Corporation Law of the State of Delaware (the "Corporation") DOES
HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation by the unanimous
written consent of its members adopted a resolution proposing and declaring
advisable the following amendments to the Certificate of Incorporation of the
Corporation:
RESOLVED, that Article First of the Corporation's Certificate of
Incorporation be amended to read as follows:
"FIRST: The name of the Corporation is Elgin National Industries, Inc."
RESOLVED, that Article Fourth of the Corporation's Certificate of
Incorporation be amended to read in its entirety as follows:
"FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 573,678, consisting solely of:
550,000 shares of preferred stock, $1.00 par value per shares (the
"Preferred Stock"); and
23,678 shares of Class A Voting Common Stock, $0.01 par value per
share (the "Common Stock").
As used in this Article Fourth:
"Dividend Payment Date" has the meaning set forth in Part A, Section 1.1(a)
of this Article Fourth.
"Junior Stock" has the meaning set forth in Part A, Section 1.1(b) of this
Article Fourth.
<PAGE>
"Liquidation" has the meaning set forth in Part A, Section 1.2(a) of this
Article Fourth.
"Liquidation Value" has the meaning set forth in Part A, Section 1.2(a) of
this Article Fourth.
"Person" means an individual, partnership, corporation, association, trust,
joint venture, limited liability company, unincorporated organization, or any
government, governmental department or agency or political subdivision thereof.
"Redemption Event" means either (a) the occurrence of any liquidation,
merger, or consolidation of the Corporation or sale of the majority of the
Corporation's assets or any other similar corporate actions pursuant to which
any holder of Common Stock (or the Corporation) receives cash, securities or
other property or any transaction in which the Corporation is acquired by
purchase of a majority of its Common Stock, or (b) the occurrence of any public
offering of Common Stock under the Securities Act of 1933, as amended.
The following is a statement of the designations, powers, privileges and
rights, and the qualifications, limitations and restrictions, in respect of each
class of capital stock of the Corporation.
A. PREFERRED STOCK.
---------------
1. Terms Applicable to Preferred Stock.
-----------------------------------
1.1 Dividends.
---------
(a) The Corporation will pay preferential dividends to the
holders of the Preferred Stock as provided in this Section 1.1.
Dividends on each outstanding share of Preferred Stock will accrue
cumulatively on a daily basis during each fiscal quarter of the
Corporation at a rate of ten percent (10%) per annum on the
Liquidation Value (as defined in Section 1.2 below) thereof, and, if
declared by the Board of Directors, will be payable in cash on the
last day of each fiscal quarter.
(b) Dividends on each share of Preferred Stock will accrue from
and including the date of issuance of such share to and including the
date on which the Liquidation Value (plus all then accrued but unpaid
dividends thereon) of such share is paid, whether or not they have
been declared and whether or not there are profits, surplus or other
funds of the Corporation legally available for the payment of
dividends. The
2
<PAGE>
date on which the Corporation initially issues any shares of Preferred
Stock will be deemed to be its "date of issuance", regardless of the
number of times transfer of such share is made on the stock records
maintained by or for the Corporation and regardless of the number of
certificates which may be issued to evidence such share.
(c) If at any time the Corporation pays less than the total
amount of dividends then accrued with respect to the Preferred Stock,
such payment will be distributed ratably among the holders of the
Preferred Stock based upon the aggregate accrued but unpaid dividends
on the shares of Preferred Stock held by each such holder.
1.2 Liquidation.
-----------
(a) Upon any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation (each such event being hereafter
referred to as a "Liquidation"), the holders of Preferred Stock will
be entitled to be paid, before any payment shall be made to the
holders of Junior Stock, an amount in cash equal to $100 per shares of
Preferred Stock, subject to appropriate adjustment in the event of any
stock dividend, stock split, combination of other similar
recapitalization affecting the Preferred Stock (as so adjusted, the
"Liquidation Value"), plus all then accrued and unpaid dividends to
the date of payment, and the holders of Preferred Stock will not be
entitled to any further payment. If, upon any Liquidation, the
Corporation's assets to be distributed among the holders of the
Preferred Stock are insufficient to permit payment to such holders of
the full amount to which they are entitled hereunder, then the entire
assets to be distributed will be distributed ratably among such
holders based upon the then aggregate Liquidation Value (plus all then
accrued but unpaid dividends) of the Preferred Stock held by each such
holder.
(b) After the payment of all preferential amounts required to be
paid to the holders of Preferred Stock and any other class or series
of stock of the Corporation ranking on liquidation on a parity with
the Preferred Stock, the holders of Junior Stock then outstanding
shall be entitled to receive the remaining assets of the Corporation
available for distribution to its stockholders.
3
<PAGE>
1.3 Voting Rights.
-------------
(a) Except as otherwise required by law or as set forth below in
Section 1.3(b), the Preferred Stock will have no right to vote on any
matter submitted to stockholders of the Corporate for vote, consent or
approval.
(b) The Corporation will not amend, alter or repeal the
preferences, special rights or other powers of the Preferred Stock so
as to affect adversely the Preferred Stock without the written consent
or affirmative vote of the holders of at least two-thirds (2/3) of the
then outstanding shares of Preferred Stock, given in writing or by
vote at a meeting, consenting or voting (as the case may be)
separately as a class. For this purpose, without limiting the
generality of the foregoing, the increase in the number of authorized
shares of Preferred Stock or the authorization or issuance of any
series of preferred stock with either preference or priority over the
Preferred Stock or parity with the Preferred Stock as to the right to
receive either dividends or amounts distributable upon a Liquidation
of the Corporation shall be deemed to affect adversely the Preferred
Stock.
1.4 Redemptions.
-----------
(a) Mandatory Redemption. The holders of the shares of Preferred
Stock shall be entitled to have such Preferred Stock redeemed or
repurchased by the Corporation as provided herein. The Corporation
will, on the first to occur of a Redemption Event and December 31,
2007, redeem all of the Preferred Stock then outstanding at a price
per share equal to the Liquidation Value thereof (plus all then
accrued but unpaid dividends thereon), unless, (i) in the case of any
Redemption Event, the holders of two-thirds (2/3) of the then
outstanding shares of Preferred Stock advise the Corporation in
writing that they do not wish to be redeemed in connection with such
Redemption Event, in which case none of the Preferred Stock shall be
redeemed by the Company in connection with such Redemption Event and
(ii) in any case, any of the Corporation's 11% Senior Notes due 2007
remain outstanding, in which case the date of redemption shall be
postponed until the 91st day after the last of the Corporation's 11%
Senior Notes due 2007 have been retired or such earlier date that the
redemption is permitted under the Indenture governing the
4
<PAGE>
Corporations 11% Senior Notes due 2007. The Corporation will mail
written notice of a redemption pursuant to this Section 1.4(a) to each
record holder of Preferred Stock not more than sixty (60) nor less
than thirty (30) days prior to the date on which such redemption is to
occur.
(b) Redemption Price and Priority of Payment. For each share of
Preferred Stock which is to be redeemed, the Corporation will be
obligated on the applicable Redemption Date to pay to the holder
thereof (upon surrender by such holder at the Corporation's principal
office of the certificate representing such share of Preferred Stock),
in immediately available funds, an amount equal to the Liquidation
Value thereof (plus all then accrued but unpaid dividends thereon). If
the funds of the Corporation legally available for redemption of
shares of Preferred Stock on any Redemption Date are insufficient to
redeem the total number of shares of Preferred Stock to be redeemed on
such date, those funds which are legally available will be used to
redeem the maximum possible number of shares of Preferred Stock
ratably among the holders of such shares to be redeemed based upon the
aggregate Liquidation Value of such shares (plus all then accrued but
unpaid dividends thereon) held by each such holder. At any time
thereafter when additional funds of the Corporation are legally
available for the redemption of Preferred Stock, such funds will
immediately be used to redeem the balance of the shares which the
Corporation has become obligated to redeem on any Redemption Date, but
which it has not redeemed. In case fewer than the total number of
shares of Preferred Stock represented by any certificate are redeemed,
a new certificate representing the number of unredeemed shares will be
issued to the holder thereof without cost to such holder within seven
(7) business days after surrender of the certificate representing the
redeemed shares of Preferred Stock.
(c) Pro Rata Treatment of Preferred Stock. The number of shares
of Preferred Stock to be redeemed from each holder thereof in
redemptions hereunder will be the number of shares of Preferred Stock
determined by multiplying the total number of shares of Preferred
Stock to be redeemed by a fraction, the numerator of which will be the
total number of shares of Preferred Stock then held by such holder and
the denominator of which will be the total number of shares of
Preferred Stock then outstanding. The Corporation shall not redeem,
repurchase or otherwise acquire any Preferred
5
<PAGE>
Stock except as expressly authorized herein or pursuant to a purchase
offer made pro rata to all holders of Preferred Stock on the basis of
the aggregate Liquidation Value (plus all then accrued but unpaid
dividends thereon) of shares of Preferred Stock owned by each such
holder.
(d) Dividends After Redemption Date. No share of Preferred Stock
is entitled to any dividends accruing after the date on which the
Liquidation Value (plus all then accrued but unpaid dividends thereon)
of such share is paid. On such date all rights of the holder of such
share of Preferred Stock will cease, and such share of Preferred Stock
will be deemed not to be outstanding.
B. COMMON STOCK.
------------
1. Terms Applicable in Common Stock.
--------------------------------
1.1 Dividends and Other Rights of Common Stock.
------------------------------------------
(a) Except as specifically otherwise provided herein, all shares
of Common Stock shall be identical and shall entitle the holders
thereof to the same rights and privileges. The Corporation shall not
subdivide or combine any shares of Common Stock, or pay any dividend
or retire any shares or make any other distribution on any share of
Common Stock, or accord any other payment, benefit or preference to
any share of Common Stock, except by extending such subdivision,
combination, distribution, payment, benefit or preference equally to
all shares of Common Stock.
(b) The holders of Common Stock shall be entitled to dividends
out of funds legally available therefor, when declared by the Board of
Directors in respect of Common Stock, and, upon a Liquidation, to
share ratably in the assets of the Corporation available for
distribution to the holders of Common Stock.
1.2 Voting Rights of Common Stock.
-----------------------------
(a) Except as otherwise provided by law, the holders of Common
Stock shall have full voting rights and powers to vote on all matters
submitted to stockholder of the Corporation for vote, consent or
approval, and each holder of Common Stock shall be entitled to one
vote for each share of Common Stock held of record by such holder.
6
<PAGE>
C. GENERAL.
-------
1. Provisions of Common Applications.
---------------------------------
1.1 Registration of Transfer. The Corporation will keep at its
principal office or at the office of its legal counsel a register for the
registration of Preferred Stock and all classes of Common Stock. Upon the
surrender of any certificate representing Preferred Stock or Common Stock
at such place, the Corporation will, at the request of the record holder of
such certificate, execute and deliver a new certificate or certificates in
exchange therefore representing in the aggregate the number of shares of
Preferred Stock or Common Stock represented by the surrendered certificate.
Each such new certificate will be registered in such name and will
represent such number of shares of Preferred Stock or Common Stock as is
requested by the holder of the surrendered certificate and will be
substantially identical in form to the surrendered certificate, and, with
respect to Preferred Stock, dividends will accrue on the Preferred Stock
represented by such new certificate from the date to which dividends have
been fully paid on such Preferred Stock represented by the surrendered
certificate. The issuance of new certificates will be made without charge
to the holders of the surrendered certificate. The issuance of new
certificates will be made without charge to the holders of the surrendered
certificates for any issuance tax in respect thereof or other cost incurred
by the Corporation in connection with such issuance, unless such issuance
is made in connection with a transfer of Preferred Stock or Common Stock,
in which case the transferring holder will pay all taxes arising from such
transfer.
1.2 Replacement. Upon receipt of evidence reasonably satisfactory to
the Corporation (an affidavit of the registered holder will be
satisfactory) of the ownership and the loss, theft, destruction or
mutilation of any certificate evidencing shares of Preferred Stock or
Common Stock, and in the case of any such loss, theft or destruction upon
receipt of indemnity reasonably satisfactory to the Corporation, or, in the
case of any such mutilation upon surrender of such certificate, the
Corporation will (at its expense) execute and deliver in lieu of such
certificate a new certificate of like kind representing the number of
shares of Preferred Stock or number of shares and class of Common Stock
represented by such lost, stolen, destroyed or mutilated certificate and
dated the date of such lost, stolen, destroyed or mutilated certificate,
and, with respect to Preferred Stock, dividends will accrue on the
Preferred Stock represented by such new
7
<PAGE>
certificate from the date to which dividends have been fully paid on such
lost, stolen, destroyed or mutilated certificate.
1.3 Notices. Except as otherwise expressly provided, all notices
referred to herein will be in writing and will be deemed properly delivered
if either personally delivered or sent by overnight courier or telecopied
or mailed certified or registered mail, return receipt requested, postage
prepaid, to the recipient (a) in the case of any stockholder, at such
holder's address as it appears in the stock records of the Corporation
(unless otherwise indicated by any such holder) and (b) in the case of the
Corporation, at its principal office. Any such notice shall be effective
(a) if delivered personally or by telecopier, when received, (b) if sent by
overnight courier, when receipted for, and (c) if mailed, three (3)
business days after being mailed as described above."
SECOND: That in lieu of a meeting and vote of stockholders, the
stockholders have given unanimous written consent to said amendment in
accordance with the provisions of Section 228 of the General Corporation Law of
the State of Delaware.
THIRD: That the aforesaid amendment was duly adopted in accordance with the
applicable provisions of Sections 242 and 228 of the General Corporation Law of
the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by its Chief Executive Offier, this 5th day of November, 1997.
ENI HOLDING CORP.
By:/s/Fred C. Schulte
--------------------------------
Name: Fred C. Schulte
Title: Chief Executive Officer
8
<PAGE>
ENI HOLDING CORP.
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
ENI HOLDING CORP., a Delaware corporation (the "Corporation"), does hereby
certify, pursuant to Section 241 of the General Corporation Law of the State of
Delaware, that:
FIRST: The Corporation has not received any payment for any of its stock.
SECOND: Pursuant to Section 141(f) of the General Corporation Law of the
State of Delaware and Section 3.17 of the Corporation's By-Laws, by written
consent of the Board of Directors of the Corporation dated September 22, 1993,
the Amendment to the Corporation's Certificate of Incorporation changing Article
Fourth of the Certificate of Incorporation and referred to in the following
resolutions was duly adopted:
RESOLVED: That it is deemed advisable and in the best interest of the
Corporation to amend Article Fourth of its Certificate of
Incorporation to read as set forth in Annex A, attached hereto.
RESOLVED: That the Corporation be and it hereby is authorized and directed
to amend its Certificate of Incorporation as set forth in the
foregoing resolution, and that the appropriate officers of the
Corporation be and they hereby are authorized and directed to
execute and deliver any and all documents or certificates deemed
necessary to effectuate the proposed amendment outlined above,
including a Certificate of Amendment to the Certificate of
Incorporation for filing with the Delaware Secretary of State.
Accordingly, Article Fourth of the Certificate of Incorporation of the
Corporation is hereby amended to read as set forth in Annex A, attached hereto.
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IN WITNESS WHEREOF, ENI Holding Corp. has caused this Certificate of
Amendment to its Certificate of Incorporation to be executed by Michael F.
Gilligan, its President, and attested by T. Brook Parker, its Secretary, this
22nd day of September, 1993.
ENI HOLDING CORP.
By: /s/ Michael F. Gilligan
------------------------------
Michael F. Gilligan
President
Attest:
By: /s/ T. Brook Parker
--------------------------
T. Brook Parker
Secretary
[Attachment: Annex A]
<PAGE>
Annex A
AMENDMENT TO CERTIFICATE OF INCORPORATION
OF
ENI HOLDING CORP.
* * * * * * * *
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 607,703, consisting solely of:
550,000 shares of preferred stock, $1.00 par value per share (the
"Preferred Stock");
23,678 shares of Class A Voting Common Stock, $0.01 par value per share
(the "Class A Common Stock");
23,678 shares of Class B Non-Voting Common Stock, $0.01 par value per share
(the "Class B Common Stock"); and
10,347 shares of Class C Voting Common Stock, $0.01 par value per share
(the "Class C Common Stock").
As used in this Article Fourth:
"Common Stock" means, collectively, the Class A Common Stock, Class B
Common Stock and Class C Common Stock.
"Default Period" has the meaning set forth in Part B, Section 1.2(c)(i) of
this Article Fourth.
"Dividend Payment Date" has the meaning set forth in Part A, Section 1.1(a)
of this Article Fourth.
"Family Members" means, as applied to any individual, any parent, spouse,
child, spouse of a child, brother or sister of the individual, and any trust or
partnership created for the benefit of one or more of such Persons and
controlled by such Person and each custodian of a property of one or more such
Persons to whom any such Person has transferred any Common Stock.
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"Junior Stock" has the meaning set forth in Part A, Section 1.1(b) of this
Article Fourth.
"Liquidation" has the meaning set forth in Part A, Section 1.2(a) of this
Article Fourth.
"Liquidation Value" has the meaning set forth in Part A, Section 1.2(a) of
this Article Fourth.
"Mandatory Redemption Date" as to any share of Preferred Stock, means the
mandatory redemption date for such share of Preferred Stock specified in Part A,
Section 1.4(a) of this Article Fourth.
"Person" means an individual, partnership, corporation, association, trust,
joint venture, unincorporated organization, or any government, governmental
department or agency or political subdivision thereof.
"Qualified Public Offering" has the meaning set forth in Part B, Section
2(d) of this Article Fourth.
"Redemption Date" has the meaning set forth in Part A, Section 1.4(b) of
this Article Fourth.
"Redemption Event" means either (a) the occurrence of any Special Event of
Default if the Significant Holders (or the Majority Holders of Preferred Shares
(as defined in the Securities Purchase Agreement) pursuant to Section 18.2 of
the Securities Purchase Agreement) elect to have outstanding Preferred Shares
redeemed pursuant to Section 8.2 (b)(iii) of the Securities Purchase Agreement,
or (b) the occurrence of any liquidation, merger, or consolidation of the
Corporation or sale of the majority of the Corporation's assets or any other
similar corporate actions pursuant to which any holder of Common Stock (or the
Corporation) receives cash, securities or other property or any transaction in
which the Corporation is acquired by purchase of a majority of its Common Stock,
or (c) the occurrence of any public offering of Common Stock under the
Securities Act of 1933, as amended.
"SBA" has the meaning is set forth in Part B, Section 1.2(c)(i) of this
Article Fourth.
"SBIC Plan" has the meaning set forth in Part B, Section 1.2(c)(i) of this
Article Fourth.
"Securities Purchase Agreement" means the Securities Purchase Agreement,
dated as of September 23, 1993, between
<PAGE>
-3-
the Corporation and certain investors, as the same may be amended, restated,
modified or supplemented and in effect from time to time.
"Significant Holders of Common Shares" has the meaning specified in the
Securities Purchase Agreement.
"Significant Holders of Preferred Shares" has the meaning specified in the
Securities Purchase Agreement.
"Special Event of Default" means the occurrence of any "Special Event of
Default" as defined in Section 8.2(b) of the Securities Purchase Agreement.
"Special Rights Notice" has the meaning set forth in Part B, Section
1.2(c)(i) of this Article Fourth.
"Stockholders Agreement" means the Stockholders Agreement, dated as of
September 23, 1993, among the Corporation and its stockholders as the same may
be amended, restated, modified or supplemented and in effect from time to time
in accordance with the terms of the Securities Purchase Agreement.
"Subsidiary" means any Person of which the Corporation or other specified
Person now or hereafter shall at the time own directly or indirectly through a
Subsidiary at least a majority of the outstanding capital stock (or other shares
of beneficial interest) ordinarily entitled to vote for the election of such
Person's directors (or, in the case of a Person that is not a corporation, for
those Persons exercising functions similar to directors of a corporation).
"Warrants" means the Class B Common Stock Warrants issued by the
Corporation pursuant to the Senior Subordinated Note Purchase Agreement, dated
as of September 23, 1993.
The following is a statement of the designations, powers, privileges and
rights, and the qualifications, limitations and restrictions, in respect of each
class of capital stock of the Corporation.
A. PREFERRED STOCK.
1. Terms Applicable to Preferred Stock.
1.1 Dividends.
(a) The Corporation will pay preferential dividends to the holders of the
Preferred Stock as provided in this
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Section 1.1. Dividends on each outstanding share of Preferred Stock will accrue
cumulatively on a daily basis during each fiscal quarter of the Corporation at
the rate of ten percent (10%) per annum on the Liquidation Value (as defined in
Section 1.2 below) thereof, and will be payable in cash on the last day of each
fiscal quarter (each such date, a "Dividend Payment Date"). In the event that
any dividends accrued during any fiscal quarter ending after December 31, 1998,
are not paid in cash on the Dividend Payment Date with respect thereto, or, in
the case of any Dividend Payment Date that is not a business day, on the next
succeeding business day, the dividend rate on each share of Preferred Stock
shall be increased to the rate of twelve percent (12%) per annum until such time
as such dividends shall have been declared and paid as provided herein.
(b) Dividends on each share of Preferred Stock will accrue from and
including the date of issuance of such share to and including the date on which
the Liquidation Value (plus all then accrued but unpaid dividends thereon) of
such share is paid, whether or not they have been declared and whether or not
there are profits, surplus or other funds of the Corporation legally available
for the payment of dividends. The date on which the Corporation initially issues
any share of Preferred Stock will be deemed to be its "date of issuance",
regardless of the number of times transfer of such share is made on the stock
records maintained by or for the Corporation and regardless of the number of
certificates which may be issued to evidence such share. Except for repurchasing
of shares of Common Stock pursuant to Section 9 of the Securities Purchase
Agreement, repurchases of any Warrants in accordance with Sections 13 or 14
thereof, or repurchases or redemptions of shares of Common Stock from any former
employee of the Corporation or such employee's Family Members upon or after
termination of such employee's Family Members upon or after termination of such
employee's employment, no dividends or other distributions will be paid,
declared or set apart with respect to the Common Stock or any other shares of
capital stock of the Corporation ranking on liquidation junior to the Preferred
Stock (together with the Common Stock, "Junior Stock") without the prior written
consent of the holders of two-thirds (2/3) of the outstanding shares of
Preferred Stock, unless all accrued but unpaid dividends on the Preferred Stock
shall have been paid.
(c) If at any time the Corporation pays less than the total amount of
dividends then accrued with respect to the Preferred Stock, such payment will be
distributed ratably among the holders of the Preferred Stock based upon the
<PAGE>
-5-
aggregate accrued but unpaid dividends on the shares of Preferred Stock held by
each such holder.
1.2 Liquidation.
(a) Upon any voluntary or involuntary liquidation, dissolution or winding
up of the Corporation (each such event being hereafter referred to as a
"Liquidation"), the holders of Preferred Stock will be entitled to be paid,
before any payment shall be made to the holders of Junior Stock, an amount in
cash equal to $100 per share of Preferred Stock, subject to appropriate
adjustment in the event of any stock dividend, stock split, combination or other
similar recapitalization affecting the Preferred Stock (as so adjusted, the
"Liquidation Value"), plus all then accrued and unpaid dividends to the date of
payment, and the holders of Preferred Stock will not be entitled to any further
payment. If, upon any Liquidation, the Corporation's assets to be distributed
among the holders of the Preferred Stock are insufficient to permit payment to
such holders of the full amount to which they are entitled hereunder, then the
entire assets to be distributed will be distributed ratably among such holders
based upon the then aggregate Liquidation Value (plus all then accrued but
unpaid dividends) of the Preferred Stock held by each such holder.
(b) After the payment of all preferential amounts required to be paid to
the holders of Preferred Stock and any other class or series of stock of the
Corporation ranking on liquidation on a parity with the Preferred Stock, the
holders of Junior Stock then outstanding shall be entitled to receive the
remaining assets of the Corporation available for distribution to its
stockholders.
1.3 Voting Rights.
(a) Except as otherwise required by law or as set forth below in Section
1.3(b), the Preferred Stock will have no right to vote on any matter submitted
to stockholders of the Corporation for vote, consent or approval.
(b) The Corporation will not amend, alter or repeal the preferences,
special rights or other powers of the Preferred Stock so as to affect adversely
the Preferred Stock without the written consent or affirmative vote of the
holders of at least two-thirds (2/3) of the then outstanding shares of Preferred
Stock, given in writing or by vote at a meeting, consenting or voting (as the
case may be) separately as a class. For this purpose, without limiting
<PAGE>
-6-
the generality of the foregoing, the increase in the number of authorized shares
of Preferred Stock or the authorization or issuance of any series of preferred
stock with either preference or priority over the Preferred Stock or parity with
the Preferred Stock as to the right to receive either dividends or amounts
distributable upon a Liquidation of the Corporation shall be deemed to affect
adversely the Preferred Stock.
1.4 Redemptions.
(a) Mandatory Redemption. The holders of the shares of Preferred Stock
shall be entitled to have such Preferred Stock redeemed or repurchased by the
Corporation as provided herein or in the Securities Purchase Agreement. The
Corporation will, on the first to occur of (i) a Redemption Event and (ii)
December 31, 2001, redeem all of the Preferred Stock then outstanding at a price
per share equal to the Liquidation Value thereof (plus all then accrued but
unpaid dividends thereon), unless, in the case of any Redemption Event, the
holders of two-thirds (2/3) of the then outstanding shares of Preferred Stock
advise the Corporation in writing that they do not wish to be redeemed in
connection with such Redemption Event in which case none of the Preferred Stock
shall be redeemed by the Company in connection with such Redemption Event. The
Corporation will mail written notice of a redemption pursuant to this Section
1.4(a) to each record holder of Preferred Stock not more than sixty (60) nor
less then thirty (30) days prior to the date on which such redemption is to
occur. If any share of Preferred Stock is not redeemed on the date scheduled for
redemption pursuant to this Section 1.4(a) (other than because of the election
by the holders of two-thirds (2/3) of the then outstanding shares of Preferred
Stock not to be redeemed), the dividend rate applicable to such share shall be
increased to twelve percent (12%) per annum, compounded quarterly, accruing from
such scheduled redemption date to the date on which such share actually shall be
redeemed.
(b) Optional Redemption. The Corporation may at its option at any time by
giving written notice as provided below redeem all or any portion of the
Preferred Stock then outstanding at a price per share equal to the Liquidation
Value thereof (plus all then accrued but unpaid dividends thereon). In order to
effect such an optional redemption, the Corporation shall mail written notice
of such redemption pursuant to this Section 1.4(b) to each record holder of
Preferred Stock not more than sixty (60) nor less than thirty (30) days prior to
the date on which such redemption is to occur (with the date selected by the
Corporation for
<PAGE>
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redemption and the total number of shares of Preferred Stock to be redeemed to
be set forth in such notice). Any Mandatory Redemption Date and any optional
redemption date pursuant to this Section 1.4(b) are collectively referred to as
"Redemption Dates".
(c) Redemption Price and Priority of Payment. For each share of Preferred
Stock which is to be redeemed, the Corporation will be obligated on the
applicable Redemption Date to pay to the holder thereof (upon surrender by such
holder at the Corporation's principal office of the certificate representing
such share of Preferred Stock), in immediately available funds, an amount equal
to the Liquidation Value thereof (plus all then accrued but unpaid dividends
thereon). If the funds of the Corporation legally available for redemption of
shares of Preferred Stock on any Redemption Date are insufficient to redeem the
total number of shares of Preferred Stock to be redeemed on such date, those
funds which are legally available will be used to redeem the maximum possible
number of shares of Preferred Stock ratably among the holders of such shares to
be redeemed based upon the aggregate Liquidation Value of such shares (plus all
then accrued but unpaid dividends thereon) held by each such holder. At any time
thereafter when additional funds of the Corporation are legally available for
the redemption of Preferred Stock, such funds will immediately be used to redeem
the balance of the shares which the Corporation has become obligated to redeem
on any Redemption Date, but which it has not redeemed. In case fewer than the
total number of shares of Preferred Stock represented by any certificate are
redeemed, a new certificate representing the number of unredeemed shares will be
issued to the holder thereof without cost to such holder within seven (7)
business days after surrender of the certificate representing the redeemed
shares of Preferred Stock.
(d) Pro Rata Treatment of Preferred Stock. The number of shares of
Preferred Stock to be redeemed from each holder thereof in redemptions hereunder
will be the number of shares of Preferred Stock determined by multiplying the
total number of shares of Preferred Stock to be redeemed by a fraction, the
numerator of which will be the total number of shares of Preferred Stock then
held by such holder and the denominator of which will be the total number of
shares of Preferred Stock then outstanding. The Corporation shall not redeem,
repurchase or otherwise acquire any Preferred Stock except as expressly
authorized herein or pursuant to a purchase offer made pro rata to all holders
of Preferred Stock on the basis of the aggregate Liquidation Value (plus
<PAGE>
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all then accrued but unpaid dividends thereon) of shares of Preferred Stock
owned by each such holder.
(e) Dividends after Redemption Date. No share of Preferred Stock is
entitled to any dividends accruing after the date on which the Liquidation Value
(plus all then accrued but unpaid dividends thereon) of such share is paid. On
such date all rights of the holder of such share of Preferred Stock will cease,
and such share of Preferred Stock will be deemed not to be outstanding.
(f) Payments on Junior Stock. If and so long as there are any shares of
Preferred Stock outstanding which the Corporation has become obligated to redeem
pursuant to this Section 1.4, until the Corporation has redeemed all such shares
of Preferred Stock, the Corporation shall not redeem, repurchase or otherwise
acquire for value, or declare or pay and dividend or distribution on or with
respect to, any Junior Stock.
B. COMMON STOCK.
1. Terms Applicable to Common Stock.
1.1 Dividend and Other Rights of Common Stock.
(a) Except as specifically otherwise provided herein, all shares of Common
Stock shall be identical and shall entitle the holders thereof to the same
rights and privileges. The Corporation shall not subdivide or combine any shares
of Common Stock, or pay any dividend or retire any share or make any other
distribution on any share of Common Stock, or accord any other payment, benefit
or preference to any share of Common Stock, except by extending such
subdivision, combination, distribution, payment, benefit or preference equally
to all shares of Common Stock. If dividends are declared which are payable in
shares of Common Stock, such dividends shall be payable in shares of Class A
Common Stock to holders of Class A Common Stock, in shares of Class B Common
Stock to holders of Class B Common Stock, and in shares of Class C Common Stock
to holders of Class C Common Stock.
(b) The holders of Common Stock shall be entitled to dividends out of
funds legally available therefor, when declared by the Board of Directors in
respect of Common Stock, and, upon a Liquidation, to share ratably in the assets
of the Corporation available for distribution to the holders of Common Stock.
<PAGE>
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1.2 Voting Rights of Common Stock.
(a) Except as otherwise provided by law, the holders of Class A Common
Stock shall have full voting rights and powers to vote on all matters submitted
to stockholders of the Corporation for vote, consent or approval, and each
holder of Class A Common Stock shall be entitled to one vote for each share of
Class A Common Stock held of record by such holder. Except as otherwise provided
by law, the holders of Class C Common Stock shall have full voting rights and
powers to vote on all matters submitted to stockholders of the Corporation for
vote, consent or approval. Except as provided in Section 1.2(c) below, each
holder of Class C Common Stock shall be entitled to one vote for each share of
Class C Common Stock held of record by such holder, and holders of Class A
Common Stock and Class C Common Stock shall vote together as a single class.
(b) Except as otherwise provided by law, the holders of Class B Common
Stock shall have no right to vote on any matter submitted to stockholders of the
Corporation for vote, consent or approval, and the Class B Common Stock shall
not be included in determining the number of shares voting or entitled to vote
on such matters.
(c) (i) So long as any Special Event of Default shall have occurred and be
continuing, the holders of not less than two-thirds (2/3) of the then
outstanding shares of Class C Common Stock shall be entitled to deliver a
written notice to the Corporation at its principal office stating that a Special
Event of Default has occurred and its continuing and specifying the nature of
such default (a "Special Rights Notice"), which Special Rights Notice, in the
event any of the holders delivering the Special Rights Notice is a Small
Business Investment Company, as defined in the Small Business Investment Act of
1958, as amended, and in the event required by such Act, shall be accompanied by
a written plan (an "SBIC Plan") prepared for the purpose of complying with the
requirements of 13 CFR 107.801(d) (or any successor rule or regulation
promulgated by the Small Business Administration (the "SBA") pursuant to the
Small Business Investment Act of 1958, as amended) to be filed with the SBA and
with the records of the Corporation, as provided in such regulation or any
successor rule or regulation. Upon delivery of a Special Rights Notice and
during that period (a "Default Period") commencing on delivery to the
Corporation at its principal office of such Special Rights Notice and ending on
the first to occur of (a) the last day of the second full fiscal quarter of the
Corporation thereafter during which no Special Event of
<PAGE>
-10-
Default exists, (b) the seventh anniversary of delivery of a Special Rights
Notice, or (c) the date on which the holders of at least two-thirds (2/3) of
the then outstanding shares of Class C Common Stock notify the Corporation in
writing that they are terminating such Default Period, each holder of Class C
Common Stock shall be entitled to have 1,000 votes for each share of Class C
Common Stock held of record by such holder. During a Default Period, the holders
of Class C Common Stock shall be entitled to the rights with respect to the
election of directors set forth in Section 1.2(c)(ii) below and shall be
entitled to vote with the holders of Class A Common Stock, voting together as a
single class, on all matters, other than the election or removal of directors,
submitted to stockholders of the Corporation for vote, consent or approval, but
no such note shall be effective unless it also receives the approval of the
holders of not less than two-thirds (2/3) of the outstanding shares of Class C
Common Stock, voting separately as a class. Within ten (10) days after any
delivery of a Special Rights Notice, the Board of Directors shall call a special
meeting of stockholders for the removal and subsequent election of directors
(and if such Special Rights Notice is accompanied by an SBIC Plan, the approval
of the SBIC Plan) to be held upon not less than fifteen (15) nor more than
thirty (30) days' notice to such holders. If such notice of meeting is not given
within the ten (10) days required above, those holders of Class C Common Stock
delivering the Special Rights Notice may also call such meeting and shall have
access to the stock books and records of the Corporation for such purpose. At
any meeting so called or at any other meeting held (or consent action taken)
during a Default Period, holders of Class C Common Stock shall be entitled to
the number of votes per share provided in this Section 1.2(c)(i). At any such
meeting during a Default Period, the holders of a majority of the aggregate
number of the then outstanding shares of Class A Common Stock and Class C
Common Stock, taken together as a single class, whether present in person or by
proxy, shall be sufficient to constitute a quorum.
(ii) At any meeting of stockholders for the purpose of election of
directors called as provided in Section 1.2(c)(i) above, holders of a majority
of the outstanding Class C Common Stock, voting together as a separate class,
shall be entitled to (A) remove the entire Board of Directors without cause, (B)
increase or decrease the size of the Board of Directors and (C) elect the
smallest number of directors to the Board of Directors that shall constitute a
majority of the authorized number of directors on the Board of Directors. In
each such election, holders of
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Class C Common Stock shall vote together as a separate class and not with
holders of Class A Common Stock; and holders of Class A Common Stock, voting as
a separate class, shall be entitled to elect the remaining members of the Board
of Directors. Upon the removal of the then directors and the election by holders
of Class C Common Stock and Class A Common Stock, each voting as a separate
class, of the respective directors they are entitled to elect as provided above,
the terms of office of all persons who were previously directors of the
Corporation shall immediately terminate.
(iii) In case of any vacancy in the office of any director occurring among
the directors elected by holders of Class C Common Stock pursuant to the
provisions of the foregoing paragraph (ii), the remaining directors elected by
holders of Class C Common Stock, by affirmative vote of a majority thereof, or
the remaining director so elected if there be but one, may, if permitted by law
and subject to the provisions of paragraph (ii) above, elect a successor or
successors to hold office for the unexpired terms of the director or directors
whose place or places shall be vacant. Any director who shall have been elected
by holders of Class C Common Stock (or by any directors so elected by directors
elected by the holders of Class C Common Stock as provided in this paragraph
(iii)) may be removed during his or her term of office, either with or without
cause, by, and only by, the affirmative vote of holders of Class C Common Stock
voting as a separate class given at a special meeting of such stockholders
duly called for that purpose.
(iv) In the case of any vacancy in the office of any director occurring
among the directors elected by holders of Class A Common Stock pursuant to the
provision of the foregoing paragraph (ii), the remaining directors elected by
holders of Class A Common Stock, by affirmative vote of a majority thereof, or
the remaining director so elected if there by but one, may, if permitted by law
and subject to the provisions of paragraph (ii) above, elect a successor or
successors to hold office for the unexpired terms of the director or directors
whose place or places shall be vacant. Any director who shall have been elected
by holders of Class A Common Stock (or by any directors so elected by directors
elected by the holders of Class A Common Stock as provided in this paragraph
(iv)) may be removed during his or her term of office, either with or without
cause, by, and only by, the affirmative vote of holders of Class A Common Stock
voting as a separate class given at a special meeting of such stockholders duly
called for that purpose.
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(v) The provisions of paragraphs (i), (ii), (iii) or the first sentence of
paragraph (v) of this Section 1.2(c) shall not be amended, modified or waived
without the written consent of affirmative vote of the holders of at least
two-thirds (2/3) of the then outstanding shares of Class C Common Stock, given
in writing or by vote at a meeting, consenting or voting (as the case may be)
separately as a class. The provisions of paragraph (iv) and the second sentence
of paragraph (v) of this Section 1.2(c) shall not be amended, modified or waived
without the written consent or affirmative vote of the holders of at least
two-thirds (2/3) of the then outstanding shares of Class A Common Stock, given
in writing or by vote at a meeting, consenting or voting (as the case may be)
separately as a class.
(vi) The provisions of paragraphs (iv) and (v) above are subject to any
applicable voting agreements contained in Sections 3.2 and 5 of the Stockholders
Agreement.
2. Conversion.
(a) Conversion of Class B Common Stock. Subject to and upon compliance with
the provisions of this Section, each record holder of Class B Common Stock shall
be entitled at any time and from time to time to convert any and all of the
shares of Class B Common Stock held by it into the same number of shares of
Class A Common Stock.
(b) Conversion of Class A Common Stock. Subject to and upon compliance with
the provisions of this Section, each record holder of Class A Common Stock is
entitled at any time and from time to time to convert any or all of the
shares of Class A Common Stock held by it into the same number of shares of
Class B Common Stock.
(c) Conversion of Class C Common Stock. Subject to and upon compliance with
the provisions of this Section, each record holder of Class C Common Stock is
entitled at any time and from time to time to convert any or all of the shares
of Class C Common Stock held by it into the same number of shares of Class B
Common Stock.
(d) Automatic Conversion. All shares of Class C Common Stock then issued
and outstanding shall be converted, without any further action by the holders
thereof, into shares of Class A Common Stock upon the earlier of (i) the date
on which there are no longer any Significant Holders of Common Shares under
the Securities Purchase Agreement, or (ii) the closing of the first
underwritten public offering pursuant to an effective registration statement
under the
<PAGE>
-13-
Securities Act of 1933, as amended, covering the offer and sale of shares of
Common Stock in which not less than $25,000,000 of gross proceeds from such
public offering (before deduction of underwriters' commissions and registration
expenses) shall be received by the Corporation for the account of the
Corporation (a "Qualified Public Offering").
(e) Conversion Procedure.
(i) Each conversion of shares of Class A Common Stock, shares of Class
B Common Stock or shares of Class C Common Stock will be effected by the
surrender to the Corporation of the certificate or certificates
representing the shares to be converted, duly endorsed or assigned in
blank, with signatures guaranteed if reasonably requested by the
Corporation, at the principal office of the Corporation (or such other
office or agency of the Corporation as the Corporation may designate in
writing to the holder or holders of the Common Stock) at any time during
its usual business hours, and by the giving of written notice (except in
the case of an automatic conversion pursuant to Section 2(d) above) by the
holder of such Class A Common Stock, Class B Common Stock or Class C Common
Stock stating that such holder desires to convert all or a stated number of
the shares of Class B Common Stock represented by such certificate or
certificates into Class A Common Stock or to convert all or a stated number
of the shares of Class A Common Stock or Class C Common Stock represented
by such certificate or certificates into Class B Common Stock, which notice
will also state the name or names (with addresses) and denominations in
which the certificate or certificates for the Class A Common Stock or Class
B Common Stock, as the case may be, will be issued and will include
instructions for delivery thereof.
(ii) Promptly after such surrender and the receipt of such written
notice and statement, the Corporation will issue and deliver in accordance
with such instructions the certificate or certificates for the Class A
Common Stock or Class B Common Stock issuable upon such conversion. In
addition, the Corporation will deliver to the converting holder a
certificate representing any portion of the shares of Class A Common Stock,
Class B Common Stock or Class C Common Stock which had been represented by
the certificate or certificates delivered to the Corporation in connection
with such conversion but
<PAGE>
-14-
which were not converted. Such conversion, to the extent permitted by law,
will be deemed to have been effected as of the close of business on the
date on which such certificate or certificates have been surrendered in
accordance herewith and such notice has been received, and at such time the
rights of the holder of such Class A Common Stock, Class B Common Stock or
Class C Common Stock, as the case may be (or specified portion thereof), as
such holder will cease, and the person or persons in whose name or names
the certificate or certificates for shares of Class A Common Stock or Class
B Common Stock are to be issued upon such conversion will be deemed to have
become the holder or holders of record of the shares of Class A Common
Stock or Class B Common Stock represented thereby.
(iii) The Corporation will at all times (A) reserve and keep available
out of its authorized but unissued shares of Class A Common Stock or its
treasury shares of Class A Common Stock, solely for the purpose of issuance
upon the conversion of the Class B Common Stock as provided in this
Section, such number of shares of Class A Common Stock as are then issuable
upon the conversion of all shares of Class B Common Stock either then
outstanding or then issuable upon conversion into Class B Common Stock of
all Class C Common Stock then outstanding, and (B) reserve and keep
available out of its authorized but unissued shares of Class B Common Stock
or its treasury shares of Class B Common Stock, solely for the purpose of
issuance upon conversion of the Class A Common Stock and Class C Common
Stock as provided in this Section, such number of shares of Class B Common
Stock as are then issuable upon conversion of all then outstanding shares
of Class A Common Stock and Class C Common Stock into shares of Class B
Common Stock hereunder. Notwithstanding the foregoing, if, at any time,
there shall be an insufficient number of authorized or treasury shares of
Class A Common Stock available for issuance upon conversion of Class B
Common Stock, or an insufficient number of authorized or treasury shares of
Class B Common Stock available for issuance upon conversion of Class A
Common Stock or Class C Common Stock, the Corporation will take all action
necessary to propose and recommend to the stockholders of the Corporation
that this Certificate of Incorporation be amended to authorize additional
shares in an amount sufficient to provide adequate reserves of shares for
issuance upon such conversion, including the diligent
<PAGE>
-15-
solicitation of votes and proxies to vote in favor of such an amendment.
All shares of Class A Common Stock and Class B Common Stock which are
issuable upon conversion hereunder will, when issued, be duly and validly
issued, fully paid and nonassessable.
(iv) The issuance of certificates for shares of Class A Common Stock
upon conversion of shares of Class B Common Stock (and Class A Common Stock
upon automatic conversion of Class C Common Stock) and for shares of Class
B Common Stock upon conversion of shares of Class A Common Stock and Class
C Common Stock will be made without charge to any original holder of any
shares of Common Stock for any issuance tax in respect thereof, or other
cost incurred by the Corporation in connection with such conversion and the
related issuance of Class A Common Stock or Class B Common Stock; provided,
that the Corporation will not be required to pay any such taxes or costs
which may be payable in respect of any such conversion by any other person
or in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than that of the registered holder of the
shares converted.
C. PROVISIONS OF COMMON APPLICATION.
1.1 Registration of Transfer. The Corporation will keep at its principal
office or at the office of its legal counsel a register for the registration of
Preferred Stock and all classes of Common Stock. Upon the surrender of any
certificate representing Preferred Stock or Common Stock at such place, the
Corporation will, at the request of the record holder of such certificate,
execute and deliver a new certificate or certificates in exchange therefor
representing in the aggregate the number of shares of Preferred Stock or Common
Stock represented by the surrendered certificate. Each such new certificate will
be registered in such name and will represent such number of shares of Preferred
Stock or Common Stock as is requested by the holder of the surrendered
certificate and will be substantially identical in form to the surrendered
certificate, and, with respect to Preferred Stock, dividends will accrue on the
Preferred Stock represented by such new certificate from the date to which
dividends have been fully paid on such Preferred Stock represented by the
surrendered certificate. The issuance of new certificates will be made without
charge to the holders of the surrendered certificates for any issuance tax in
respect thereof or other cost incurred by the Corporation in connection with
<PAGE>
-16-
such issuance, unless such issuance is made in connection with a transfer of
Preferred Stock or Common Stock, in which case the transferring holder will pay
all taxes arising from such transfer.
1.2 Replacement. Upon receipt of evidence reasonably satisfactory to the
Corporation (an affidavit of the registered holder will be satisfactory) of the
ownership and the loss, theft, destruction or mutilation of any certificate
evidencing shares of Preferred Stock or Common Stock, and in the case of any
such loss, theft or destruction upon receipt of indemnity reasonably
satisfactory to the Corporation, or, in the case of any such mutilation upon
surrender of such certificate, the Corporation will (at its expense) execute and
deliver in lieu of such certificate a new certificate of like kind representing
the number of shares of Preferred Stock or number of shares and class of Common
Stock represented by such lost, stolen, destroyed or mutilated certificate and
dated the date of such lost, stolen, destroyed or mutilated certificate, and,
with respect to Preferred Stock, dividends will accrue on the Preferred Stock
represented by such new certificate from the date to which dividends have been
fully paid on such lost, stolen, destroyed or mutilated certificate.
1.3 Notices. Except as otherwise expressly provided, all notices referred
to herein will be in writing and will be deemed properly delivered if either
personally delivered or sent by overnight courier or telecopied or mailed
certified or registered mail, return receipt requested, postage prepaid, to the
recipient (a) in the case of any stockholder, at such holder's address as it
appears in the stock records of the Corporation (unless otherwise indicated by
any such holder) and (b) in the case of the Corporation, at its principal
office. Any such notice shall be effective (a) if delivered personally or by
telecopier, when received, (b) if sent by overnight courier, when receipted for,
and (c) if mailed, three (3) days after being mailed as described above.
<PAGE>
CERTIFICATE OF INCORPORATION
OF
ENI HOLDING CORP.
FIRST: The name of the corporation is:
ENI Holding Corp.
SECOND: The address of its registered office in the State of Delaware is
1013 Centre Road, in the City of Wilmington, County of New Castle. The name of
its registered agent at such address is Corporation Service Company.
THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares of capital stock which the corporation
shall have authority to issue is Three Thousand (3,000), and the par value of
each of such shares is the One Cent ($0.01), amounting in the aggregate to
Thirty Dollars ($30.00) of capital stock.
FIFTH: The name and mailing address of the sole incorporator is as
follows:
NAME MAILING ADDRESS
---- ---------------
Pamela A. Stiglitz c/o Bingham, Dana & Gould
150 Federal Street
Boston, Massachusetts 02110
SIXTH: The following provisions are inserted for the management of the
business and for the conduct of the affairs of the corporation and for defining
and regulating the powers of the corporation and its directors and
<PAGE>
-2-
stockholders and are in furtherance and not in limitation of the powers
conferred upon the corporation by statute:
(a) The election of directors need not be by written ballot.
(b) The Board of Directors shall have the power and authority:
(1) to adopt, amend or repeal bylaws of the corporation, subject
only to such limitation, if any, as may be from time to time imposed
by law or by the bylaws; and
(2) to the full extent permitted or not prohibited by law, and
without the consent of or other action by the stockholders, to
authorize or create mortgages, pledges or other liens or encumbrances
upon any or all of the assets, real, personal or mixed, and franchises
of the corporation, including after-acquired property, and to exercise
all of the powers of the corporation in connection therewith; and
(3) subject to any provision of the bylaws, to determine whether,
to what extent, at what times and places and under what conditions and
regulations the accounts, books and papers of the corporation (other
than the stock ledger), or any of them, shall be open to the
inspection of the stockholders, and no stockholder shall have any
right to inspect any account, book or paper of the corporation except
as conferred by statute or authorized by the bylaws or by the Board of
Directors.
SEVENTH: No director of the corporation shall be personally liable to the
corporation or to any of its stockholders for monetary damages for breach of
fiduciary duty as a director, notwithstanding any provision of law imposing such
liability; provided, however, that to the extent required from time to time by
applicable law, this Article Seventh shall not eliminate or limit the liability
of a director, to the extent such liability is provided by applicable law, (a)
for any breach of the director's duty of loyalty to the corporation or its
stockholders, (b) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (c) under Section 174 of
Title 8 of the Delaware Code, or (d) for any transaction from which the director
derived an improper
<PAGE>
personal benefit. No amendment to or repeal of this Article Seventh shall apply
to or have any effect on the liability or alleged liability of any director for
or with respect to any acts or omissions of such director occurring prior to the
effective date of such amendment or repeal.
THE UNDERSIGNED, being the sole incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, does make this certificate, hereby declaring and certifying
that this is my act and deed and the facts stated herein are true, and
accordingly have hereunto set my hand this 10th day of September, 1993.
Pamela A. Stiglitz
-------------------------
Pamela A. Stiglitz
<PAGE>
EXHIBIT 3.2
ELGIN NATIONAL INDUSTRIES, INC.
BY-LAWS
TABLE OF CONTENTS
-----------------
Title Page
- ----- ----
Article I - General....................................................... 1
Section 1.1. Offices.................................................. 1
Section 1.2. Seal..................................................... 1
Section 1.3. Fiscal Year.............................................. 1
Article II - Stockholders................................................. 1
Section 2.1. Place of Meetings........................................ 1
Section 2.2. Annual Meeting........................................... 1
Section 2.3. Quorum................................................... 1
Section 2.4. Right to Vote; Proxies................................... 2
Section 2.5. Voting................................................... 2
Section 2.6. Notice of Annual Meetings................................ 3
Section 2.7. Stockholders List........................................ 3
Section 2.8. Special Meetings......................................... 3
Section 2.9. Notice of Special Meetings............................... 3
Section 2.10. Inspectors............................................... 4
Section 2.11. Stockholders' Consent in Lieu of Meeting................. 4
Article III - Directors................................................... 5
Section 3.1. Number of Directors...................................... 5
Section 3.2. Change in Number of Directors; Vacancies................. 5
Section 3.3. Resignation.............................................. 6
Section 3.4. Removal.................................................. 6
Section 3.5. Place of Meetings and Books.............................. 6
Section 3.6. General Powers........................................... 6
Section 3.7. Executive Committee...................................... 6
Section 3.8. Other Committees......................................... 6
Section 3.9. Powers Denied to Committees.............................. 7
Section 3.10. Substitute Committee Member.............................. 7
Section 3.11. Compensation of Directors................................ 8
Section 3.12. Annual Meeting........................................... 8
Section 3.13. Regular Meetings......................................... 8
Section 3.14. Special Meetings......................................... 8
Section 3.15. Quorum................................................... 8
Section 3.16. Telephonic Participation in Meetings..................... 9
Section 3.17. Action by Consent........................................ 9
<PAGE>
-2-
Title Page
- ----- ----
Article IV - Officers..................................................... 9
Section 4.1. Selection; Statutory Officers............................. 9
Section 4.2. Time of Election.......................................... 9
Section 4.3. Additional Officers....................................... 9
Section 4.4. Terms of Office........................................... 9
Section 4.5. Compensation of Officers.................................. 10
Section 4.6. Chairman of the Board..................................... 10
Section 4.7. President................................................. 10
Section 4.8. Vice-Presidents........................................... 10
Section 4.9. Treasurer................................................. 10
Section 4.10. Secretary................................................. 11
Section 4.11. Assistant Secretary....................................... 11
Section 4.12. Assistant Treasurer....................................... 11
Section 4.13. Subordinate Officers...................................... 12
Article V - Stock......................................................... 12
Section 5.1. Stock..................................................... 12
Section 5.2. Fractional Share Interests................................ 12
Section 5.3. Transfers of Stock........................................ 13
Section 5.4. Record Date............................................... 13
Section 5.5. Transfer Agent and Registrar.............................. 14
Section 5.6. Dividends................................................. 14
1. Power to Declare.................................................. 14
2. Reserves.......................................................... 14
Section 5.7. Lost, Stolen or Destroyed Certificates.................... 15
Section 5.8. Inspection of Books....................................... 15
Article VI - Miscellaneous Management Provisions.......................... 15
Section 6.1. Checks, Drafts and Notes.................................. 15
Section 6.2. Notices................................................... 15
Section 6.3. Conflict of Interest...................................... 16
Section 6.4. Voting of Securities Owned by this Corporation............ 16
Article VII - Indemnification............................................. 17
Section 7.1. Right to Indemnification.................................. 17
Section 7.2. Right of Indemnitee to Bring Suit......................... 18
Section 7.3. Non-Exclusivity of Rights................................. 19
Section 7.4. Insurance................................................. 19
Section 7.5. Indemnification of Employees and Agents of the
Corporation............................................. 19
Article VIII - Amendments................................................. 19
Section 8.1. Amendments................................................ 19
<PAGE>
ELGIN NATIONAL INDUSTRIES, INC.
B Y - L A W S
- - - - - -
Article I - General
-------------------
Section 1.1. Offices. The registered office shall be in the City of
Wilmington, County of New Castle, State of Delaware. The Corporation may also
have offices at such other places both within and without the State of Delaware
as the Board of Directors may from time to time determine or the business of the
Corporation may require.
Section 1.2. Seal. The seal of the Corporation shall be in the form of a
circle and shall have inscribed thereon the name of the Corporation, the year of
its organization and the words "Corporate Seal, Delaware".
Section 1.3. Fiscal Year. The fiscal year of the Corporation shall be the
period from January 1 through December 31.
Article II - Stockholders
-------------------------
Section 2.1. Place of Meetings. All meetings of the stockholders shall be
held at the office of the Corporation in the State of Illinois except such
meetings as the Board of Directors expressly determine shall be held elsewhere,
in which case meetings may be held upon notice as hereinafter provided at such
other place or places within or without the State of Illinois as the Board of
Directors shall have determined and as shall be stated in such notice.
Section 2.2. Annual Meeting. The annual meeting of the stockholders shall
be held in the month of March of each year on such date and at such time as the
Board of Directors may determine. At each annual meeting the stockholders
entitled to vote shall elect a Board of Directors by plurality vote by ballot,
and they may transact such other corporate business as may properly be brought
before the meeting. At the annual meeting any business may be transacted,
irrespective of whether the notice calling such meeting shall have contained a
reference thereto, except where notice is required by law, the Certificate of
Incorporation, or these by-laws.
Section 2.3. Quorum. At all meetings of the stockholders the holders of a
majority of the stock issued and outstanding and entitled to vote thereat,
present in person or represented by proxy, shall constitute a quorum
<PAGE>
-2-
requisite for the transaction of business except as otherwise provided by law,
by the Certificate of Incorporation or by these by-laws. If, however, such
majority shall not be present or represented at any meeting of the stockholders,
the stockholders entitled to vote thereat, present in person or by proxy, by a
majority vote, shall have power to adjourn the meeting from time to time without
notice other than announcement at the meeting until the requisite amount of
voting stock shall be present. If the adjournment is for more than thirty (30)
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote at the meeting. At such adjourned meeting, at which the
requisite amount of voting stock shall be represented, any business may be
transacted which might have been transacted if the meeting had been held as
originally called.
Section 2.4. Right to Vote; Proxies. Each holder of a share or shares of
capital stock of the Corporation having the right to vote at any meeting shall
be entitled to one vote for each such share of stock held by him. Any
stockholder entitled to vote at any meeting of stockholders may vote either in
person or by proxy, but no proxy which is dated more than three years prior to
the meeting at which it is offered shall confer the right to vote thereat unless
the proxy provides that it shall be effective for a longer period. A proxy may
be granted by a writing executed by the stockholder or his authorized officer,
director, employee or agent or by transmission or authorization of transmission
of a telegram, cablegram, or other means of electronic transmission to the
person who will be the holder of the proxy or to a proxy solicitation firm,
proxy support service organization or like agent duly authorized by the person
who will be the holder of the proxy to receive such transmission, subject
to the conditions set forth in Section 212 of the Delaware General
Corporation Law, as it may be amended from time to time (the "Delaware GCL").
Section 2.5. Voting. At all meetings of stockholders, except as otherwise
expressly provided for by statute, the Certificate of Incorporation or these by-
laws, (a) in all matters other than the election of directors, the affirmative
vote of a majority of shares present in person or represented by proxy at the
meeting and entitled to vote on such matter shall be the act of the stockholders
and (b) directors shall be elected by a plurality of the votes of the shares
present in person or represented by proxy at the meeting and entitled to vote on
the election of directors. Except as otherwise expressly provided by law, the
<PAGE>
-3-
Certificate of Incorporation or these by-laws, at all meetings of stockholders
the voting shall be by voice vote, but any stockholder qualified to vote on the
matter in question may demand a stock vote, by shares of stock, upon such
question, whereupon such stock vote shall be taken by ballot, each of which
shall state the name of the stockholder voting and the number of shares voted by
him, and, if such ballot be cast by a proxy, it shall also state the name of the
proxy.
Section 2.6. Notice of Annual Meetings. Written notice of the annual
meeting of the stockholders shall be mailed to each stockholder entitled to vote
thereat at such address as appears on the stock books of the Corporation at
least ten (10) days (and not more than sixty (60) days) prior to the meeting. It
shall be the duty of every stockholder to furnish to the Secretary of the
Corporation or to the transfer agent, if any, of the class of stock owned by
him, his post-office address and to notify said Secretary or transfer agent of
any change therein.
Section 2.7. Stockholders' List. A complete list of the stockholders
entitled to vote at any meeting of stockholders, arranged in alphabetical order
and showing the address of each stockholder, and the number of shares registered
in the name of each stockholder, shall be prepared by the Secretary and filed
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not so specified, at the
place where the meeting is to be held, at least ten days before such meeting,
and shall at all times during the usual hours for business, and during the whole
time of said election, be open to the examination of any stockholder for a
purpose germane to the meeting.
Section 2.8. Special Meetings. Special meetings of the stockholders for any
purpose or purposes, unless otherwise provided by statute, may be called by the
Board of Directors, the Chairman of the Board, if any, the President or any Vice
President.
Section 2.9. Notice of Special Meetings. Written notice of a special
meeting of stockholders, stating the time and place and object thereof shall be
mailed, postage prepaid, not less than ten (10) nor more than sixty (60) days
before such meeting, to each stockholder entitled to vote thereat, at such
address as appears on the books of the Corporation. No business may be
transacted at such meeting except that referred to in said notice, or in a
supplemental
<PAGE>
-4-
notice given also in compliance with the provisions hereof, or such other
business as may be germane or supplementary to that stated in said notice or
notices.
Section 2.10. Inspectors.
1. One or more inspectors may be appointed by the Board of Directors
before or at any meeting of stockholders, or, if no such appointment shall
have been made, the presiding officer may make such appointment at the
meeting. At the meeting for which the inspector or inspectors are
appointed, he or they shall open and close the polls, receive and take
charge of the proxies and ballots, and decide all questions touching on the
qualifications of voters, the validity of proxies and the acceptance and
rejection of votes. If any inspector previously appointed shall fail to
attend or refuse or be unable to serve, the presiding officer shall appoint
an inspector in his place.
2. At any time at which the Corporation has a class of voting stock
that is (a) listed on a national securities exchange, (b) authorized for
quotation on an inter-dealer quotation system of a registered national
securities association, or (c) held of record by more than 2,000
stockholders, the provisions of Section 231 of the Delaware GCL with
respect to inspectors of election and voting procedures shall apply, in
lieu of the provisions of paragraph (1) of this Section 2.10.
Section 2.11. Stockholders' Consent in Lieu of Meeting. Unless otherwise
provided in the Certificate of Incorporation, any action required by law to be
taken at any annual or special meeting of stockholders of the Corporation, or
any action which may be taken at any annual or special meeting of such
stockholders, may be taken without a meeting without prior notice and without a
vote, if a consent or consents in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and voted
and shall be delivered to the Corporation by delivery to its registered office
in the State of Delaware, its principal place of business, or an officer or
agent of the Corporation having custody of the book in which proceedings of
meetings of stockholders are recorded. Delivery made to the Corporation's
registered office shall be by hand or by certified or registered mail, return
receipt requested. Every written consent shall bear
<PAGE>
-5-
the date of signature of each stockholder who signs the consent and no written
consent shall be effective to take the corporate action referred to therein
unless, within sixty days of the earliest dated consent delivered in the manner
required by this Section 2.11 to the Corporation, written consents signed by a
sufficient number of stockholders to take action are delivered to the
Corporation by delivery to its registered office in the State of Delaware, its
principal place of business, or an officer or agent of the Corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the Corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested. Prompt notice of
the taking of the corporate action without a meeting by less than unanimous
written consent shall be given to those stockholders who have not consented in
writing.
Article III - Directors
-----------------------
Section 3.1. Number of Directors. Except as otherwise provided by law, the
Certificate of Incorporation or these by-laws, the property and business of the
Corporation shall be managed by or under the direction of a board of not less
than one nor more than thirteen directors. Within the limits specified, the
number of directors shall be determined by resolution of the Board of Directors
or by the stockholders at the annual meeting. Directors need not be
stockholders, residents of Delaware or citizens of the United States. The
directors shall be elected by ballot at the annual meeting of the stockholders
and each director shall be elected to serve until his successor shall be elected
and shall qualify or until his earlier resignation or removal; provided that in
the event of failure to hold such meeting or to hold such election at such
meeting, such election may be held at any special meeting of the stockholders
called for that purpose. If the office of any director becomes vacant by reason
of death, resignation, disqualification, removal, failure to elect, or
otherwise, the remaining directors, although more or less than a quorum, by a
majority vote of such remaining directors may elect a successor or successors
who shall hold office for the unexpired term. So long as the Stockholders
Agreement, dated September, 1993 (as in effect from time to time, the
"Stockholders Agreement"), among the Company and its Stockholders is in effect,
the number of directors shall be fixed as provided therein and no director shall
be considered to have been duly elected as a director unless elected in
accordance with the provisions of the Stockholders Agreement.
<PAGE>
-6-
Section 3.2. Change in Number of Directors; Vacancies. The maximum number
of directors may be increased by an amendment to these by-laws adopted by a
majority vote of the Board of Directors or by a majority vote of the capital
stock having voting power, and if the number of directors is so increased by
action of the Board of Directors or of the stockholders or otherwise, then the
additional directors may be elected in the manner provided above for the filling
of vacancies in the Board of Directors or at the annual meeting of stockholders
or at a special meeting called for that purpose.
Section 3.3. Resignation. Any director of this Corporation may resign at
any time by giving written notice to the Chairman of the Board, if any, the
President or the Secretary of the Corporation. Such resignation shall take
effect at the time specified therein, at the time of receipt if no time is
specified therein and at the time of acceptance if the effectiveness of such
resignation is conditioned upon its acceptance. Unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
Section 3.4. Removal. Any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors.
Section 3.5. Place of Meetings and Books. The Board of Directors may hold
their meetings and keep the books of the Corporation outside the State of
Delaware, at such places as they may from time to time determine.
Section 3.6. General Powers. In addition to the powers and authority
expressly conferred upon them by these by-laws, the board may exercise all such
powers of the Corporation and do all such lawful acts and things as are not by
statute or by the Certificate of Incorporation or by these by-laws directed or
required to be exercised or done by the stockholders.
Section 3.7. Executive Committee. There may be an executive committee of
one or more directors designated by resolution passed by a majority of the whole
board. The act of a majority of the members of such committee shall be the act
of the committee. Said committee may meet at stated times or on notice to all by
any of their own number, and shall have and may exercise those powers of the
Board of Directors in the management of the business affairs of the Company as
are provided by law and may authorize the seal of
<PAGE>
-7-
the Corporation to be affixed to all papers which may require it. Vacancies in
the membership of the committee shall be filled by the Board of Directors at a
regular meeting or at a special meeting called for that purpose.
Section 3.8. Other Committees. The Board of Directors may also designate
one or more committees in addition to the executive committee, by resolution or
resolutions passed by a majority of the whole board; such committee or
committees shall consist of one or more directors of the Corporation, and to the
extent provided in the resolution or resolutions designating them, shall have
and may exercise specific powers of the Board of Directors in the management of
the business and affairs of the Corporation to the extent permitted by statute
and shall have power to authorize the seal of the Corporation to be affixed to
all papers which may require it. Such committee or committees shall have such
name or names as may be determined from time to time by resolution adopted by
the Board of Directors.
Section 3.9. Powers Denied to Committees. Committees of the Board of
Directors shall not, in any event, have any power or authority to amend the
Certificate of Incorporation (except that a committee may, to the extent
authorized in the resolution or resolutions providing for the issuance of shares
adopted by the Board of Directors as provided in Section 151(a) of the Delaware
GCL, fix the designations and any of the preferences or rights of such shares
relating to dividends, redemption, dissolution, any distribution of assets of
the Corporation or the conversion into, or the exchange of such shares for,
shares of any other class or classes or any other series of the same or any
other class or classes of stock of the Corporation or fix the number of shares
of any series of stock or authorize the increase or decrease of the shares of
any series), adopt an agreement of merger or consolidation, recommend to the
stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, recommend to the stockholders a dissolution
of the Corporation or a revocation of a dissolution or to amend the by-laws of
the Corporation. Further, no committee of the Board of Directors shall have the
power or authority to declare a dividend, to authorize the issuance of stock or
to adopt a certificate of ownership and merger pursuant to Section 253 of the
Delaware GCL, unless the resolution or resolutions designating such committee
expressly so provides.
Section 3.10. Substitute Committee Member. In the absence or on the
disqualification of a member of a committee, the member or members thereof
present at any
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meeting and not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in the place of such absent or disqualified member. Any
committee shall keep regular minutes of its proceedings and report the same to
the board as may be required by the board.
Section 3.11. Compensation of Directors. The Board of Directors shall have
the power to fix the compensation of directors and members of committees of the
Board. The directors may be paid their expenses, if any, of attendance at each
meeting of the Board of Directors and may be paid a fixed sum for attendance at
each meeting of the Board of Directors or a stated salary as director. No such
payment shall preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor. Members of special or standing
committees may be allowed like compensation for attending committee meetings.
Section 3.12. Annual Meeting. The newly elected board may meet at such
place and time as shall be fixed and announced by the presiding officer at the
annual meeting of stockholders, for the purpose of organization or otherwise,
and no further notice of such meeting shall be necessary to the newly elected
directors in order legally to constitute the meeting, provided a quorum shall be
present, or they may meet at such place and time as shall be stated in a notice
given to such directors two (2) days prior to such meeting, or as shall be fixed
by the consent in writing of all the directors.
Section 3.13. Regular Meetings. Regular meetings of the board may be held
without notice at such time and place as shall from time to time be determined
by the board.
Section 3.14. Special Meetings. Special meetings of the board may be called
by the Chairman of the Board, if any, or the President, on two (2) days' notice
to each director, or such shorter period of time before the meeting as will
nonetheless be sufficient for the convenient assembly of the directors so
notified; special meetings shall be called by the Secretary in like manner
and on like notice, on the written request of two or more directors.
Section 3.15. Ouorum. At all meetings of the Board of Directors, a majority
of the total number of directors shall be necessary and sufficient to constitute
a quorum for the transaction of business; provided that at any time while any
directors have been designated pursuant to clauses (ii) or
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(iii) of Section 5.1(a) of the Stockholders Agreement, such majority must
include at least one director designated pursuant to each of such clauses in
order to constitute a quorum to consider any action subject to Schedule 2 of the
Stockholders Agreement. The act of a majority of the directors present at any
meeting at which there is a quorum shall be the act of the Board of Directors,
except (a) for any action set forth in Schedule 2 of the Stockholders Agreement,
as to which the act of a majority of the directors must include the affirmative
vote of directors designated pursuant to clauses (ii) and (iii) of Section
5.1(a) of the Stockholders Agreement at any time while a director so designated
is serving on the Board of Directors or (b) without limiting the effect of
clause (a), as may be otherwise specifically permitted or provided by statute,
or by the Certificate of Incorporation, or by these by-laws. If at any meeting
of the board there shall be less than a quorum present, a majority of those
present may adjourn the meeting from time to time until a quorum is obtained,
and no further notice thereof need be given other than by announcement at said
meeting which shall be so adjourned.
Section 3.16. Telephonic Participation in Meetings. Members of the Board of
Directors or any committee designated by such board may participate in a meeting
of the board or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
section shall constitute presence in person at such meeting.
Section 3.17. Action by Consent. Unless otherwise restricted by the
Certificate of Incorporation or these by-laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if written consent thereto is signed by all
members of the board or of such committee as the case may be and such written
consent is filed with the minutes of proceedings of the board or committee.
Article IV - Officers
---------------------
Section 4.1. Selection; Statutory Officers. The officers of the
Corporation shall be chosen by the Board of Directors. There shall be a
President, a Secretary and a Treasurer, and there may be a Chairman of the Board
of Directors, one or more Vice Presidents, one or more; Assistant
Secretaries, and one or more Assistant Treasurers, as the Board of Directors may
elect. Any number of offices
<PAGE>
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may be held by the same person, except that the offices of President and
Secretary shall not be held by the same person simultaneously.
Section 4.2. Time of Election. The officers above named shall be chosen by
the Board of Directors at its first meeting after each annual meeting of
stockholders. None of said officers need be a director.
Section 4.3. Additional Officers. The board may appoint such other officers
and agents as it shall deem necessary, who shall hold their offices for such
terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the board.
Section 4.4. Terms of Office. Each officer of the Corporation shall hold
office until his successor is chosen and qualified, or until his earlier
resignation or removal. Any officer elected or appointed by the Board of
Directors may be removed at any time by the Board of Directors.
Section 4.5. Compensation of Officers. The Board of Directors shall have
power to fix the compensation of all officers of the Corporation. It may
authorize any officer, upon whom the power of appointing subordinate officers
may have been conferred, to fix the compensation of such subordinate officers.
Section 4.6. Chairman of the Board. The Chairman of the Board of Directors
shall preside at all meetings of the stockholders and directors, and shall have
such other duties as may be assigned to him from time to time by the Board of
Directors.
Section 4.7. President. Unless the Board of Directors otherwise determines,
the President shall be the chief executive officer and head of the Corporation.
Unless there is a Chairman of the Board, the President shall preside at all
meetings of directors and stockholders. Under the supervision of the Board of
Directors and of the executive committee, the President shall have the general
control and management of its business and affairs, subject, however, to the
right of the Board of Directors and of the executive committee to confer any
specific power, except such as may be by statute exclusively conferred on the
President, upon any other officer or officers of the Corporation. The President
shall perform and do all acts and things incident to the position of President
and such other duties as may be assigned to him from time to time by the Board
of Directors or the executive committee.
<PAGE>
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Section 4.8. Vice-Presidents. The Vice-Presidents shall perform such of the
duties of the President on behalf of the Corporation as may be respectively
assigned to them from time to time by the Board of Directors or by the executive
committee or by the President. The Board of Directors or the executive committee
may designate one of the Vice-Presidents as the Executive Vice-President, and in
the absence or inability of the President to act, such Executive Vice-President
shall have and possess all of the powers and discharge all of the duties of the
President, subject to the control of the board and of the executive committee.
Section 4.9. Treasurer. The Treasurer shall have the care and custody of
all the funds and securities of the Corporation which may come into his hands as
Treasurer, and the power and authority to endorse checks, drafts and other
instruments for the payment of money for deposit or collection when necessary or
proper and to deposit the same to the credit of the Corporation in such bank or
banks or depository as the Board of Directors or the executive committee, or the
officers or agents to whom the Board of Directors or the executive committee may
delegate such authority, may designate, and he may endorse all commercial
documents requiring endorsements for or on behalf of the Corporation. He may
sign all receipts and vouchers for the payments made to the Corporation. He
shall render an account of his transactions to the Board of Directors or to the
executive committee as often as the board or the committee shall require the
same. He shall enter regularly in the books to be kept by him for that purpose
full and adequate account of all moneys received and paid by him on account of
the Corporation. He shall perform all acts incident to the position of
Treasurer, subject to the control of the Board of Directors and of the executive
committee. He shall when requested, pursuant to vote of the Board of Directors
or the executive committee, give a bond to the Corporation conditioned for the
faithful performance of his duties, the expense of which bond shall be borne by
the Corporation.
Section 4.10. Secretary. The Secretary shall keep the minutes of all
meetings of the Board of Directors and of the stockholders; he shall attend to
the giving and serving of all notices of the Corporation. Except as otherwise
ordered by the Board of Directors or the executive committee, he shall attest
the seal of the Corporation upon all contracts and instruments executed under
such seal and shall affix the seal of the Corporation thereto and to all
certificates of shares of capital stock of the Corporation. He shall have
<PAGE>
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charge of the stock certificate book, transfer book and stock ledger, and such
other books and papers as the Board of Directors or the executive committee may
direct. He shall, in general, perform all the duties of Secretary, subject to
the control of the Board of Directors and of the executive committee.
Section 4.11. Assistant Secretary. The Board of Directors or any two of the
officers of the Corporation acting jointly may appoint or remove one or more
Assistant Secretaries of the Corporation. Any Assistant Secretary upon his
appointment shall perform such duties of the Secretary, and also any and all
such other duties as the executive committee or the Board of Directors or the
President or the Executive Vice-President or the Treasurer or the Secretary may
designate.
Section 4.12. Assistant Treasurer. The Board of Directors or any two of the
officers of the Corporation acting jointly may appoint or remove one or more
Assistant Treasurers of the Corporation. Any Assistant Treasurer upon his
appointment shall perform such of the duties of the Treasurer, and also any and
all such other duties as the executive committee or the Board of Directors or
the President or the Executive Vice-President or the Treasurer or the
Secretary may designate.
Section 4.13. Subordinate Officers. The Board of Directors may select such
subordinate officers as it may deem desirable. Each such officer shall hold
office for such period, have such authority, and perform such duties as the
Board of Directors may prescribe. The Board of Directors may, from time to
time, authorize any officer to appoint and remove subordinate officers and to
prescribe the powers and duties thereof.
Article V - Stock
-----------------
Section 5.1. Stock. Each stockholder shall be entitled to a certificate or
certificates of stock of the Corporation in such form as the Board of Directors
may from time to time prescribe. The certificates of stock of the Corporation
shall be numbered and shall be entered in the books of the Corporation as they
are issued. They shall certify the holder's name and number and class of shares
and shall be signed by both of (a) either the President or a Vice-President, and
(b) any one of the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary, and shall be sealed with the corporate seal of the
Corporation. If such certificate is countersigned (1)
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by a transfer agent other than the Corporation or its employee, or, (2) by a
registrar other than the Corporation or its employee, the signature of the
officers of the Corporation and the corporate seal may be facsimiles. In case
any officer or officers who shall have signed, or whose facsimile signature or
signatures shall have been used on, any such certificate or certificates shall
cease to be such officer or officers of the Corporation, whether because of
death, resignation or otherwise, before such certificate or certificates shall
have been delivered by the Corporation, such certificate or certificates may
nevertheless be adopted by the Corporation and be issued and delivered as though
the person or persons who signed such certificate or certificates or whose
facsimile signature shall have been used thereon had not ceased to be such
officer or officers of the Corporation.
Section 5.2. Fractional Share Interests. The Corporation may, but shall not
be required to, issue fractions of a share. If the Corporation does not issue
fractions of a share, it shall (a) arrange for the disposition of fractional
interests by those entitled thereto, (b) pay in cash the fair value of fractions
of a share as of the time when those entitled to receive such fractions are
determined, or (c) issue scrip or warrants in registered or bearer form which
shall entitle the holder to receive a certificate for a full share upon the
surrender of such scrip or warrants aggregating a full share. A certificate for
a fractional share shall, but scrip or warrants shall not unless otherwise
provided therein, entitle the holder to exercise voting rights, to receive
dividends thereon, and to participate in any of the assets of the Corporation in
the event of liquidation. The Board of Directors may cause scrip or warrants to
be issued subject to the conditions that they shall become void if not exchanged
for certificates representing full shares before a specified date, or subject to
the conditions that the shares for which scrip or warrants are exchangeable may
be sold by the Corporation and the proceeds thereof distributed to the holders
of scrip or warrants, or subject to any other conditions which the Board of
Directors may impose.
Section 5.3. Transfers of Stock. Subject to any transfer restrictions then
in force, the shares of stock of the Corporation shall be transferable only upon
its books by the holders thereof in person or by their duly authorized attorneys
or legal representatives and upon such transfer the old certificates shall be
surrendered to the Corporation by the delivery thereof to the person in charge
of the stock and transfer books and ledgers or to such other person as
<PAGE>
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the directors may designate by whom they shall be cancelled and new certificates
shall thereupon be issued. The Corporation shall be entitled to treat the
holder of record of any share or shares of stock as the holder in fact thereof
and accordingly shall not be bound to recognize any equitable or other claim
to or interest in such share on the part of any other person whether or not it
shall have express or other notice thereof save as expressly provided by the
laws of Delaware.
Section 5.4. Record Date. For the purpose of determining the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or the allotment of any rights, or entitled to exercise any rights
in respect of any change, conversion, or exchange of stock or for the purpose of
any other lawful action, the Board of Directors may fix, in advance, a record
date, which shall not be more than sixty (60) days nor less than ten (10) days
before the date of such meeting, nor more than sixty (60) days prior to any
other action. If no such record date is fixed by the Board of Directors, the
record date for determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held; the record date for determining stockholders entitled to express consent
to corporate action in writing without a meeting, when no prior action by the
Board of Directors is necessary, shall be the day on which the first written
consent is expressed; and the record date for determining stockholders for any
other purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto. A determination of
stockholders of record entitled to notice of or to vote at any meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
Section 5.5. Transfer Agent and Registrar. The Board of Directors may
appoint one or more transfer agents or transfer clerks and one or more
registrars and may require all certificates of stock to bear the signature or
signatures of any of them.
<PAGE>
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Section 5.6. Dividends.
1. Power to Declare. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation,
if any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or
in shares of the capital stock, subject to the provisions of the
Certificate of Incorporation and the laws of Delaware.
2. Reserves. Before payment of any dividend, there may be set aside
out of any funds of the Corporation available for dividends such sum or
sums as the directors from time to time, in their absolute discretion,
think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
Corporation, or for such other purpose as the directors shall think
conducive to the interest of the Corporation, and the directors may modify
or abolish any such reserve in the manner in which it was created.
Section 5.7. Lost, Stolen or Destroyed Certificates. No certificates for
shares of stock of the Corporation shall be issued in place of any certificate
alleged to have been lost, stolen or destroyed, except upon production of such
evidence of the loss, theft or destruction and upon indemnification of the
Corporation and its agents to such extent and in such manner as the Board of
Directors may from time to time prescribe.
Section 5.8. Inspection of Books. The stockholders of the Corporation, by a
majority vote at any meeting of stockholders duly called, or in case the
stockholders shall fail to act, the Board of Directors shall have power from
time to time to determine whether and to what extent and at what times and
places and under what conditions and regulations the accounts and books of the
Corporation (other than the stock ledger) or any of them, shall be open to
inspection of stockholders; and no stockholder shall have any right to inspect
any account or book or document of the Corporation except as conferred by
statute or authorized by the Board of Directors or by a resolution of the
stockholders.
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Article VI - Miscellaneous Management Provisions
------------------------------------------------
Section 6.1. Checks, Drafts and Notes. All checks, drafts or orders for the
payment of money, and all notes and acceptances of the Corporation shall be
signed by such officer or officers, agent or agents as the Board of Directors
may designate.
Section 6.2. Notices.
1. Notices to directors may, and notices to stockholders shall, be
in writing and delivered personally or mailed to the directors or
stockholders at their addresses appearing on the books of the Corporation.
Notice by mail shall be deemed to be given at the time when the same shall
be mailed. Notice to directors may also be given by telegram, telecopy or
orally, by telephone or in person.
2. Whenever any notice is required to be given under the provisions
of the statutes or of the Certificate of Incorporation of the Corporation
of the Corporation or of these by-laws, a written waiver of notice, signed
by the person or persons entitled to said notice, whether before or after
the time stated therein or the meeting or action to which such notice
relates, shall be deemed equivalent to notice. Attendance of a person at a
meeting shall constitute a waiver of notice of such meeting except when the
person attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened.
Section 6.3. Conflict of Interest. No contract or transaction between the
Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the board of or committee thereof which
authorized the contract or transaction, or solely because his or their votes are
counted for such purpose, if: (a) the material facts as to his relationship or
interest and as to the contract or transaction are disclosed or are known to the
Board of Directors or the committee and the board or committee in good faith
authorizes the contract or transaction by the affirmative
<PAGE>
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vote of a majority of the disinterested directors, even though the disinterested
directors be less than a quorum; or (b) the material facts as to his
relationship or interest and as to the contract or transaction are disclosed or
are known to the stockholders of the Corporation entitled to vote thereon, and
the contract or transaction as specifically approved in good faith by vote of
such stockholders; or (c) the contract or transaction is fair as to the
Corporation as of the time it is authorized, approved or ratified, by the Board
of Directors, a committee or the stockholders. Common or interested directors
may be counted in determining the presence of a quorum at a meeting of the
Board of Directors or of a committee which authorizes the contract or
transaction.
Section 6.4. Voting of Securities owned by this Corporation. Subject always
to the specific directions of the Board of Directors, (a) any shares or other
securities issued by any other Corporation and owned or controlled by this
Corporation may be voted in person at any meeting of security holders of such
other corporation by the President of this Corporation if he is present at such
meeting, or in his absence by the Treasurer of this Corporation if he is present
at such meeting, and (b) whenever, in the judgment of the President, it is
desirable for this Corporation to execute a proxy or written consent in
respect to any shares or other securities issued by any other Corporation and
owned by this Corporation, such proxy or consent shall be executed in the name
of this Corporation by the President, without the necessity of any authorization
by the Board of Directors, affixation of corporate seal or countersignature or
attestation by another officer, provided that if the President is unable to
execute such proxy or consent by reason of sickness, absence from the United
States or other similar cause, the Treasurer may execute such proxy or consent.
Any person or persons designated in the manner above stated as the proxy or
proxies of this Corporation shall have full right, power and authority to vote
the shares or other securities issued by such other corporation and owned by
this Corporation the same as such shares or other securities might be voted by
this Corporation.
Article VII - Indemnification
-----------------------------
Section 7.1. Right to Indemnification. Each person who was or is made a
party or is threatened to be made a party to or is otherwise involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (a "Proceeding"), by reason of being or having
<PAGE>
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been a director or officer of the Corporation or serving or having served at the
request of the Corporation as a director, trustee, officer, employee or agent of
another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to an employee benefit plan (an
"Indemnitee"), whether the basis of such proceeding is alleged action or failure
to act in an official capacity as a director, trustee, officer, employee or
agent or in any other capacity while serving as a director, trustee, officer,
employee or agent, shall be indemnified and held harmless by the Corporation to
the fullest extent authorized by the Delaware General Corporation Law, as the
same exists or may hereafter be amended (but, in the case of any such amendment,
only to the extent that such amendment permits the Corporation to provide
broader indemnification rights than permitted prior thereto) (as used in this
Article VII, the "Delaware Law"), against all expense, liability and loss
(including attorneys' fees, judgments, fines, ERISA excise taxes or penalties
and amounts paid in settlement) reasonably incurred or suffered by such
Indemnitee in connection therewith and such indemnification shall continue as to
an Indemnitee who has ceased to be a director, trustee, officer, employee or
agent and shall inure to the benefit of the Indemnitee's heirs, executors and
administrators; provided, however, that, except as provided in Section 7.2
hereof with respect to Proceedings to enforce rights to indemnification, the
Corporation shall indemnify any such Indemnitee in connection with a Proceeding
(or part thereof) initiated by such Indemnitee only if such Proceeding (or part
thereof) was authorized by the board of directors of the Corporation. The right
to indemnification conferred in this Article VII shall be a contract right and
shall include the right to be paid by the Corporation the expenses (including
attorneys' fees) incurred in defending any such Proceeding in advance of its
final disposition (an "Advancement of Expenses"); provided, however, that, if
the Delaware Law so requires, an Advancement of Expenses incurred by an
Indemnitee shall be made only upon delivery to the Corporation of an undertaking
(an "Undertaking"), by or on behalf of such Indemnitee, to repay all amounts so
advanced if it shall ultimately be determined by final judicial decision from
which there is no further right to appeal (a "Final Adjudication") that such
Indemnitee is not entitled to be indemnified for such expenses under this
Article VII or otherwise.
Section 7.2. Right of Indemnitee to Bring Suit. If a claim under Section
7.1 hereof is not paid in full by the Corporation within sixty days after a
written claim has been
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received by the Corporation, except in the case of a claim for an Advancement of
Expenses, in which case the applicable period shall be twenty days, the
Indemnitee may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim. If successful in whole or in part in any
such suit, or in a suit brought by the Corporation to recover an Advancement of
Expenses pursuant to the terms of an Undertaking, the Indemnitee shall be
entitled to be paid also the expense of prosecuting or defending such suit. In
(i) any suit brought by the Indemnitee to enforce a right to indemnification
hereunder (but not in a suit brought by the Indemnitee to enforce a right to an
Advancement of Expenses) it shall be a defense that, and (ii) in any suit by the
Corporation to recover an Advancement of Expenses pursuant to the terms of an
Undertaking the Corporation shall be entitled to recover such expenses upon a
Final Adjudication that, the Indemnitee has not met the applicable standard of
conduct set forth in the Delaware Law. Neither the failure of the Corporation
(including its board of directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
suit that indemnification of the Indemnitee is proper in the circumstances
because the Indemnitee has met the applicable standard of conduct set forth in
the Delaware Law, nor an actual determination by the Corporation (including
its board of directors, independent legal counsel, or its stockholders) that the
Indemnitee has not met such applicable standard of conduct, shall create a
presumption that the Indemnitee has not met the applicable standard of conduct
or, in the case of such a suit brought by the Indemnitee, be a defense to such
suit. In any suit brought by the Indemnitee to enforce a right to
indemnification or to an Advancement of Expenses hereunder, or by the
Corporation to recover an Advancement of Expenses pursuant to the terms of an
Undertaking, the burden of proving that the Indemnitee is not entitled to be
indemnified, or to such Advancement of Expenses, under this Article VII or
otherwise shall be on the Corporation.
Section 7.3. Non-Exclusivity of Rights. The rights to indemnification and
to the Advancement of Expenses conferred in this Article VII shall not be
exclusive of any other right which any person may have or hereafter acquire
under any statute, the Corporation's Certificate or Incorporation, by-law,
agreement, vote of stockholders or disinterested directors or otherwise.
Section 7.4. Insurance. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Corporation or
<PAGE>
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another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability or loss
under this Article VII or under the Delaware Law.
Section 7.5. Indemnification of Employees and Agents of the Corporation.
The Corporation may, to the extent authorized from time to time by the board of
directors, grant rights to indemnification, and to the Advancement of Expenses,
to any employee or agent of the Corporation to the fullest extent of the
provisions of this Article VII with respect to the indemnification and
Advancement of Expenses of directors and officers of the Corporation.
Article VIII--Amendments
Section 8.1. Amendments. The by-laws of the Corporation may be altered,
amended or repealed at any meeting of the Board of Directors upon notice thereof
in accordance with these by-laws, or at any meeting of the stockholders by the
vote of the holders of the majority of the stock issued and outstanding and
entitled to vote at such meeting, in accordance with the provisions of the
Certificate of Incorporation of the Corporation and of the laws of Delaware.
<PAGE>
EXHIBIT 4.3
================================================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of November 5, 1997
by and among
Elgin National Industries, Inc.
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.
and
BancAmerica Robertson Stephens
CIBC Wood Gundy Securities Corp.
================================================================================
<PAGE>
This Registration Rights (this "Agreement") is made and entered into as of
November 5, 1997, by and among Elgin National Industries, Inc., a Delaware
corporation (the "Company"), 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. (the "Guarantors"), and BancAmerica Robertson Stephens and CIBC
Wood Gundy Securities Corp. (each an "Initial Purchaser" and, collectively, the
"Initial Purchasers"), each of whom has agreed to purchase the Company's 11%
Senior Notes due 2007 (the "Senior Notes" and, together with the Exchange Notes
(as defined), the "Notes") pursuant to the Purchase Agreement (as defined
below).
This Agreement is made pursuant to the Purchase Agreement, dated November
3, 1997 (the "Purchase Agreement"), by and among the Company, ENI Holdings
Corp., the Guarantors and the Initial Purchasers. In order to induce the
Initial Purchasers to purchase the Senior Notes, the Company has agreed to
provide the registration rights set forth in this Agreement. The execution and
delivery of this Agreement is a condition to the obligations of the Initial
Purchasers set forth in Section 7 of the Purchase Agreement. Capitalized terms
used herein and not otherwise defined shall have the meaning assigned to them in
the Indenture, dated the date hereof, between the Company and Norwest Bank,
National Association, as Trustee, relating to the Senior Notes and the Exchange
Notes (the "Indenture").
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have the
following meanings:
Act: The Securities Act of 1933, as amended.
Affiliate: As defined in Rule 144 of the Act.
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
Certificated Securities: Definitive Notes, as defined in the Indenture.
Closing Date: The date hereof.
Commission: The Securities and Exchange Commission.
Consummate: An Exchange Offer shall be deemed "Consummated" for purposes
of this Agreement upon the occurrence of (a) the filing and effectiveness under
the Act of the Exchange Offer Registration Statement relating to the Exchange
Notes to be issued in the Exchange Offer, (b) the maintenance of such Exchange
Offer Registration Statement continuously effective and the keeping of the
Exchange Offer open for a period not less than the period required pursuant
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to Section 3(b) hereof and (c) the delivery by the Company to the Registrar
under the Indenture of Exchange Notes in the same aggregate principal amount as
the aggregate principal amount of Series A Notes tendered by Holders thereof
pursuant to the Exchange Offer.
Effectiveness Deadline: As defined in Section 3(a) and 4(a) hereof.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Exchange Offer: The exchange and issuance by the Company of a principal
amount of Exchange Notes (which shall be registered pursuant to the Exchange
Offer Registration Statement) equal to the outstanding principal amount of
Series A Notes that are tendered by such Holders in connection with such
exchange and issuance.
Exchange Offer Registration Statement: The Registration Statement relating
to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Initial Purchasers propose
to sell the Series A Notes to certain "qualified institutional buyers," as such
term is defined in Rule 144A under the Act, to certain "accredited investors,"
as such term is defined in Rule 501 (a)(1), (2), (3), (5) and (7) of Regulation
D under the Act and pursuant to Regulation S under the Act.
Filing Deadline: As defined in Sections 3(a) and 4(a) hereof.
Holders: As defined in Section 2 hereof.
Indemnified Holder: As defined in Section 8(a) hereof.
Prospectus: The prospectus included in a Registration Statement at the
time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.
Recommencement Date: As defined in Section 6(d) hereof.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of the Company and the
Guarantors relating to (a) an offering of Exchange Notes pursuant to an Exchange
Offer or (b) the registration for resale of Transfer Restricted Securities
pursuant to the Shelf Registration Statement, in each case, (i) that is filed
pursuant to the provisions of this Agreement and (ii) including the Prospectus
included therein, all amendments and supplements thereto (including post-
effective amendments) and all exhibits and material incorporated by reference
therein.
Regulation S: Regulation S promulgated under the Act.
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Restricted Broker-Dealer: Any Broker-Dealer that holds Exchange Notes that
were acquired in the Exchange Offer in exchange for Series A Notes that such
Broker-Dealer acquired for its own account as a result of market making
activities or other trading activities (other than Series A Notes acquired
directly from the Company or any of its affiliates).
Rule 144: Rule 144 promulgated under the Act.
Exchange Notes: The Company's 11% Series B Senior Notes due 2007 to be
issued pursuant to the Indenture: (i) in the Exchange Offer or (ii) as
contemplated by Section 4 hereof.
Shelf Registration Statement: As defined in Section 4 hereof.
Suspension Notice: As defined in Section 6(d) hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as
in effect on the date of the Indenture.
Transfer Restricted Securities: Each Note, until the earliest to occur of
(a) the date on which such Note is exchanged in the Exchange Offer and entitled
to be resold to the public by the Holder thereof without complying with the
prospectus delivery requirements of the Act, (b) the date on which such Note has
been disposed of in accordance with a Shelf Registration Statement, (c) the date
on which such Note is disposed of by a Broker-Dealer pursuant to the "Plan of
Distribution" contemplated by the Exchange Offer Registration Statement
(including delivery of the Prospectus contained therein) or (d) the date on
which such Note is distributed to the public pursuant to Rule 144 under the Act.
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities (each,
a "Holder") whenever such Person owns Transfer Restricted Securities, provided
that Transfer Restricted Securities representing a beneficial interest in a
Global Note may be transferred only pursuant to the Applicable Procedures (as
defined in the Indenture). The Company may treat the record owner of the
Transfer Restricted Securities as the Holder for all purposes.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable federal
law (after the procedures set forth in Section 6(a)(i) below have been complied
with), the Company and the Guarantors shall (i) cause the Exchange Offer
Registration Statement to be filed with the Commission as soon as practicable
after the Closing Date (the "Exchange Offer Filing Date"), but in no event later
than 60 days after the Closing Date (such 60th day being the "Filing Deadline"),
(ii) use its reasonable best efforts to cause such Exchange Offer Registration
Statement to become effective at the earliest possible time, but in no event
later than 150 days after the Closing Date (such 150th day being the
"Effectiveness Deadline"), (iii) in connection
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with the foregoing, (A) file all pre-effective amendments to such Exchange Offer
Registration Statement as may be necessary in order to cause it to become
effective, (B) file, if applicable, any necessary post-effective amendment to
such Exchange Offer Registration Statement and (C) cause all necessary filings,
if any, in connection with the registration and qualification of the Exchange
Notes to be made under the Blue Sky laws of such jurisdictions as are necessary
to permit Consummation of the Exchange Offer, and (iv) upon the effectiveness of
such Exchange Offer Registration Statement, commence and Consummate the Exchange
Offer. The Exchange Offer shall be on the appropriate form permitting
registration of the Exchange Notes to be offered in exchange for the Series A
Notes that are Transfer Restricted Securities and to permit resales of Exchange
Notes by Broker-Dealers that tendered into the Exchange Offer for Series A Notes
that such Broker-Dealer acquired for its own account as a result of market
making activities or other trading activities (other than Series A Notes
acquired directly from the Company or any of its Affiliates) as contemplated by
Section 3(c) below.
(b) The Company and the Guarantors shall use their respective reasonable
best efforts to cause the Exchange Offer Registration Statement to be effective
continuously, and shall keep the Exchange Offer open for a period of not less
than the minimum period required under applicable federal and state securities
laws to Consummate the Exchange Offer; provided, however, that in no event shall
such period be less than 20 Business Days. The Company and the Guarantors shall
cause the Exchange Offer to comply with all applicable federal and state
securities laws. No securities other than the Exchange Notes (and the related
Subsidiary Guarantees) shall be included in the Exchange Offer Registration
Statement. The Company and the Guarantors shall use their respective reasonable
best efforts to cause the Exchange Offer to be Consummated no later than 30
Business Days after the Exchange Offer Registration Statement becomes effective.
(c) The Company shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and shall
contain language to the effect that any Broker-Dealer who holds Transfer
Restricted Securities that were acquired for the account of such Broker-Dealer
as a result of market-making activities or other trading activities (other than
Transfer Restricted Securities acquired directly from the Company or any
Affiliate of the Company), may exchange such Transfer Restricted Securities
pursuant to the Exchange Offer; however, such Broker-Dealer may be deemed to be
an "underwriter" within the meaning of the Act and must, therefore, deliver a
prospectus meeting the requirements of the Act in connection with its initial
sale of any Exchange Notes received by such Broker-Dealer in the Exchange Offer
and that the Prospectus contained in the Exchange Offer Registration Statement
may be used to satisfy such prospectus delivery requirement. Such "Plan of
Distribution" section shall also contain all other information with respect to
such sales by such Broker-Dealers that the Commission may require in order to
permit such sales pursuant thereto, but such "Plan of Distribution" shall not
name any such Broker-Dealer or disclose the amount of Transfer Restricted
Securities held by any such Broker-Dealer, except to the extent required by the
Commission.
To the extent necessary to ensure that the Exchange Offer Registration
Statement is available for sales of Exchange Notes by Broker-Dealers, the
Company and the Guarantors agree
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to use their respective reasonable best efforts to keep the Exchange Offer
Registration Statement continuously effective, supplemented and amended in
conformity with the requirements of the Act and the policies, rules and
regulations of the Commission as announced from time to time, for a period of
one year from the date on which the Exchange Offer is Consummated, or such
shorter period as will terminate when all Transfer Restricted Securities covered
by such Registration Statement have been sold pursuant thereto. The Company and
the Guarantors shall promptly provide sufficient copies of the latest version of
such Prospectus to such Broker-Dealers promptly upon request, and in no event
later than one day after such request, at any time during such period.
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Exchange Offer is not permitted by
applicable law (after the Company and the Guarantors have complied with the
procedures set forth in Section 6(a)(i) below) or (ii) if any Holder of Transfer
Restricted Securities shall notify the Company within 20 days following the
Consummation of the Exchange Offer that (A) such Holder was prohibited by law or
Commission policy from participating in the Exchange Offer or (B) such Holder
may not resell the Exchange Notes acquired by it in the Exchange Offer to the
public without delivering a prospectus and the Prospectus contained in the
Exchange Offer Registration Statement is not appropriate or available for such
resales by such Holder or (C) such Holder is a Broker-Dealer and holds Series A
Notes acquired directly from the Company or any of its Affiliates, then the
Company and the Guarantors shall:
(x) cause to be filed, on or prior to 30 days after the earlier of (i) the
earlier of (A) the date of a public announcement to such effect by the
Commission, and (B) the date on which the Company's Board of Directors
determines that the Exchange Offer Registration Statement cannot be filed as a
result of clause (a)(i) above and (ii) the date on which the Company receives
the notice specified in clause (a)(ii) above (such earlier date, the "Filing
Deadline"), a shelf registration statement pursuant to Rule 415 under the Act
(which may be an amendment to the Exchange Offer Registration Statement (the
"Shelf Registration Statement")), relating to all Transfer Restricted
Securities, and
(y) shall use their respective reasonable best efforts to cause such Shelf
Registration Statement to become effective on or prior to 90 days after the
Filing Deadline (such 90th day the "Effectiveness Deadline").
If, after the Company has filed an Exchange Offer Registration Statement
that satisfies the requirements of Section 3(a) above, the Company is required
to file and make effective a Shelf Registration Statement solely because the
Exchange Offer is not permitted under applicable federal law, then the filing of
the Exchange Offer Registration Statement shall be deemed to satisfy the
requirements of clause (x) above; provided that, in such event, the Company
shall remain obligated to meet the Effectiveness Deadline set forth in clause
(y).
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The Company and the Guarantors shall use their respective best efforts to
keep any Shelf Registration Statement required by this Section 4(a) continuously
effective, supplemented and amended as required by and subject to the provisions
of Sections 6(b) and (c) hereof to the extent necessary to ensure that it is
available for sales of Transfer Restricted Securities by the Holders thereof
entitled to the benefit of this Section 4(a), and to ensure that it conforms
with the requirements of this Agreement, the Act and the policies, rules and
regulations of the Commission as announced from time to time, for a period of at
least two years following the date on which such Shelf Registration Statement
first becomes effective under the Act, or such shorter period as will terminate
when all Transfer Restricted Securities covered by such Registration Statement
have been sold pursuant thereto.
(b) Provision by Holders of Certain Information in Connection with the
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 days after receipt of a request therefor, the
information specified in Item 507 or 508 of Regulation S-K, as applicable,
promulgated under the Act for use in connection with any Shelf Registration
Statement or Prospectus or preliminary Prospectus included therein. No Holder
of Transfer Restricted Securities shall be entitled to liquidated damages to
which such Holder is entitled pursuant to Section 5 hereof unless and until such
Holder shall have provided all such information. Each selling Holder agrees to
promptly furnish additional information required to be disclosed in order to
make the information previously furnished to the Company by such Holder not
materially misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement is not filed
with the Commission on or prior to the applicable Filing Deadline, (ii) any such
Registration Statement has not been declared effective by the Commission on or
prior to the applicable Effectiveness Deadline, (iii) the Exchange Offer has not
been Consummated within 30 Business Days after the applicable Effectiveness
Deadline or (iv) any Registration Statement required by this Agreement is filed
and declared effective but shall thereafter cease to be effective or fail to be
usable for its intended purpose without being succeeded immediately by a post-
effective amendment to such Registration Statement that cures such failure and
that is itself declared effective immediately (each such event referred to in
clauses (i) through (iv), a "Registration Default"), then the Company and the
Guarantors hereby jointly and severally agree to pay to each Holder of Transfer
Restricted Securities affected thereby liquidated damages in an amount equal to
$.05 per week per $1,000 in principal amount of Transfer Restricted Securities
held by such Holder for each week that the Registration Default continues for
the first 90-day period immediately following the occurrence of such
Registration Default. The amount of the liquidated damages shall increase by an
additional $.05 per week per $1,000 in principal amount of Transfer Restricted
Securities with respect to each subsequent 90-day period until all Registration
Defaults have been cured, up to a maximum amount of liquidated damages of $.25
per week per $1,000 in principal amount of Transfer Restricted Securities;
provided that the Company and the Guarantors shall in no event
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<PAGE>
be required to pay liquidated damages for more than one Registration Default at
any given time. Notwithstanding anything to the contrary set forth herein, (1)
upon filing of the Exchange Offer Registration Statement (and/or, if applicable,
the Shelf Registration Statement), in the case of (i) above, (2) upon the
effectiveness of the Exchange Offer Registration Statement (and/or, if
applicable, the Shelf Registration Statement), in the case of (ii) above, (3)
upon Consummation of the Exchange Offer, in the case of (iii) above or (4) upon
the filing of a post-effective amendment to the Registration Statement or an
additional Registration Statement that causes the Exchange Offer Registration
Statement (and/or, if applicable, the Shelf Registration Statement) to again be
declared effective or made usable in the case of (iv) above, the accrual of
liquidated damages payable with respect to the Transfer Restricted Securities as
a result of such clause (i), (ii), (iii) or (iv), as applicable, shall cease.
All accrued liquidated damages shall be paid to the Holders entitled
thereto, in the manner provided for the payment of interest in the Indenture, on
each Interest Payment Date, as more fully set forth in the Indenture and the
Notes. All obligations of the Company and the Guarantors set forth in the
preceding paragraph that are outstanding with respect to any Transfer Restricted
Security at the time such security ceases to be a Transfer Restricted Security
shall survive until such time as all such obligations with respect to such
Security shall have been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the Exchange
Offer, the Company and the Guarantors shall comply with all applicable
provisions of Section 6(c) below, shall use their respective reasonable best
efforts to effect such exchange and to permit the resale of Exchange Notes by
Broker-Dealers that tendered in the Exchange Offer Series A Notes that such
Broker-Dealer acquired for its own account as a result of its market making
activities or other trading activities (other than Series A Notes acquired
directly from the Company or any of its Affiliates) being sold in accordance
with the intended method or methods of distribution thereof, and shall comply
with all of the following provisions:
(i) As a condition to its Participation in the Exchange Offer, each
Holder of Transfer Restricted Securities (including, without limitation,
any Holder who is a Broker Dealer) will be required to furnish, upon the
request of the Company, prior to the Consummation of the Exchange Offer, a
written representation to the Company and the Guarantors (which may be
contained in the letter of transmittal contemplated by the Exchange Offer
Registration Statement) to the effect that (A) it is not an Affiliate of
the Company, (B) it is not engaged in, and does not intend to engage in,
and has no arrangement or understanding with any person to participate in,
a distribution of the Exchange Notes to be issued in the Exchange Offer and
(C) it is acquiring the Exchange Notes in the ordinary course of its
business. Each Holder using the Exchange Offer to participate in a
distribution of the Exchange Notes will be required to acknowledge and
agree that, if the resales are of Exchange Notes obtained by such Holder in
exchange for Series A Notes acquired directly from the Company or an
Affiliate thereof, it (1) could not, under Commission policy as in effect
on the date of this Agreement, rely on the
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position of the Commission enunciated in Morgan Stanley and Co., Inc.
(available June 5, 1991) and Exxon Capital Holdings Corporation (available
May 13, 1988), as interpreted in the Commission's letter to Shearman &
Sterling dated July 2, 1993, and similar no-action letters, and (2) must
comply with the registration and prospectus delivery requirements of the
Act in connection with a secondary resale transaction and that such a
secondary resale transaction must be covered by an effective registration
statement containing the selling security holder information required by
Item 507 or 508, as applicable, of Regulation S-K.
(ii) If and for so long as required by Commission rule or policy,
prior to effectiveness of the Exchange Offer Registration Statement, the
Company and the Guarantors shall provide a supplemental letter to the
Commission (A) stating that the Company and the Guarantors are registering
the Exchange Offer in reliance on the position of the Commission enunciated
in Exxon Capital Holdings Corporation (available May 13, 1988), Morgan
Stanley and Co., Inc. (available June 5, 1991) as interpreted in the
Commission's letter to Shearman & Sterling dated July 2, 1993, (B)
including a representation that neither the Company nor any Guarantor has
entered into any arrangement or understanding with any Person to distribute
the Exchange Notes to be received in the Exchange Offer and that, to the
best of the Company's and each Guarantor's information and belief, each
Holder participating in the Exchange Offer is acquiring the Exchange Notes
in its ordinary course of business and has no arrangement or understanding
with any Person to participate in the distribution of the Exchange Notes
received in the Exchange Offer and (C) any other undertaking or
representation required by the Commission as set forth in any no-action
letter obtained pursuant to clause (i) above, if applicable.
(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement, the Company and the Guarantors shall comply with all the
provisions of Section 6(c) below and shall use their respective reasonable best
efforts to effect such registration to permit the sale of the Transfer
Restricted Securities being sold in accordance with the intended method or
methods of distribution thereof (as indicated in the information furnished to
the Company pursuant to Section 4(b) hereof), and pursuant thereto the Company
and the Guarantors will prepare and file with the Commission a Registration
Statement relating to the registration on any appropriate form under the Act,
which form shall be available for the sale of the Transfer Restricted Securities
in accordance with the intended method or methods of distribution thereof within
the time periods and otherwise in accordance with the provisions hereof.
(c) General Provisions. In connection with any Registration Statement and
any related Prospectus required by this Agreement, the Company and the
Guarantors shall:
(i) use their respective reasonable best efforts to keep such
Registration Statement continuously effective for the period specified in
Section 3 or 4 of this Agreement, as applicable. Upon the occurrence of
any event that would cause any such Registration Statement or the
Prospectus contained therein (A) to contain a material
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misstatement or omission or (B) not to be effective and usable for resale
of Transfer Restricted Securities during the period required by this
Agreement, the Company and the Guarantors shall file promptly an
appropriate amendment to such Registration Statement for the purpose of
curing such defect, and, if Commission review is required, use their
respective reasonable best efforts to cause such amendment to be declared
effective as soon as practicable;
(ii) prepare and file with the Commission such amendments and post-
effective amendments to the applicable Registration Statement as may be
necessary to keep such Registration Statement effective for the applicable
period set forth in Section 3 or 4 hereof, as the case may be; cause the
Prospectus to be supplemented by any required Prospectus supplement, and as
so supplemented to be filed pursuant to Rule 424 under the Act, and to
comply fully with Rules 424, 430A and 462, as applicable, under the Act in
a timely manner; and comply with the provisions of the Act with respect to
the disposition of all securities covered by such Registration Statement
during the applicable period in accordance with the intended method or
methods of distribution by the sellers thereof set forth in such
Registration Statement or supplement to the Prospectus;
(iii) advise the selling Holders promptly and, if requested by such
Persons, confirm such advice in writing, (A) in connection with any Shelf
Registration Statement in which such selling Holder is identified by name,
when the Prospectus or any Prospectus supplement or post-effective
amendment has been filed, and, with respect to any applicable Registration
Statement or any post-effective amendment thereto, when the same has become
effective, (B) in connection with any Shelf Registration Statement in which
such selling Holder is identified by name, of any request by the Commission
for amendments to the Registration Statement or amendments or supplements
to the Prospectus or for additional information relating thereto, (C) of
the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement under the Act or of the
suspension by any state securities commission of the qualification of the
Transfer Restricted Securities for offering or sale in any jurisdiction, or
the initiation of any proceeding for any of the preceding purposes, or (D)
of the existence of any fact or the happening of any event that makes any
statement of a material fact made in the Registration Statement, the
Prospectus, any amendment or supplement thereto or any document
incorporated by reference therein untrue, or that requires the making of
any additions to or changes in the Registration Statement in order to make
the statements therein not misleading, or that requires the making of any
additions to or changes in the Prospectus in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. If at any time the Commission shall issue any stop order
suspending the effectiveness of the Registration Statement, or any state
securities commission or other regulatory authority shall issue an order
suspending the qualification or exemption from qualification of the
Transfer Restricted Securities under state securities or Blue Sky laws, the
Company and the Guarantors shall use their respective reasonable best
efforts to obtain the withdrawal or lifting of such order at the earliest
possible time;
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(iv) subject to Section 6(d), if any fact or event contemplated by
Section 6(c)(iii)(D) above shall exist or have occurred, prepare a
supplement or post-effective amendment to the Registration Statement or
related Prospectus or any document incorporated therein by reference or
file any other required document so that, as thereafter delivered to the
purchasers of Transfer Restricted Securities, the Prospectus will not
contain an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(v) furnish to each selling Holder specifically named in any
Registration Statement or Prospectus, or any Broker-Dealer that has
requested the Prospectus in writing for delivery upon resale of Exchange
Notes, in connection with such resale, before filing with the Commission,
copies of any Registration Statement or any Prospectus included therein or
any amendments or supplements to any such Registration Statement or
Prospectus (including all documents incorporated by reference after the
initial filing of such Registration Statement), which documents will be
subject to the review and comment of such selling Holders or Broker-
Dealers, as applicable, in connection with such resale, for a period of at
least three Business Days, and the Company will not file any such
Registration Statement or Prospectus or any amendment or supplement to any
such Registration Statement or Prospectus (including all such documents
incorporated by reference) to which the selling Holders or Broker-Dealers,
as applicable, in connection with such sale, if any, shall reasonably
object within three Business Days after the receipt thereof. A selling
Holder or Broker-Dealer, as applicable, shall be deemed to have reasonably
objected to such filing if such Registration Statement, amendment,
Prospectus or supplement, as applicable, as proposed to be filed, contains
a material misstatement or omission or fails to comply with the applicable
requirements of the Act;
(vi) if requested by any selling Holders in connection with such sale,
if any, promptly include in any Registration Statement or Prospectus,
pursuant to a supplement or post-effective amendment if necessary, such
information as such selling Holders may reasonably request to have included
therein, including, without limitation, information relating to the "Plan
of Distribution" of the Transfer Restricted Securities; and make all
required filings of such Prospectus supplement or post-effective amendment
as soon as practicable after the Company is notified of the matters to be
included in such Prospectus supplement or post-effective amendment;
(vii) furnish to each selling Holder in connection with such sale, if
any, without charge, at least one copy of the Registration Statement, as
first filed with the Commission, and of each amendment thereto, including
all documents incorporated by reference therein and all exhibits (including
exhibits incorporated therein by reference);
(viii) deliver to each selling Holder, without charge, as many copies
of the Prospectus (including each preliminary prospectus) and any amendment
or supplement
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thereto as such Persons reasonably may request; the Company and the
Guarantors hereby consent to the use (in accordance with law and only as
required by law) of the Prospectus and any amendment or supplement thereto
by each of the selling Holders in connection with the offering and the sale
of the Transfer Restricted Securities covered by the Prospectus or any
amendment or supplement thereto;
(ix) in connection with any Shelf Registration Statement in which
selling Holders specifically named therein are eligible to resell more than
$25.0 million of Transfer Restricted Securities in the aggregate, upon the
request of any such selling Holder, enter into such agreements (including
underwriting agreements) and make such representations and warranties and
take all such other actions in connection therewith in order to expedite or
facilitate the disposition of the Transfer Restricted Securities pursuant
to any applicable Registration Statement contemplated by this Agreement as
may be reasonably requested by any Holder of Transfer Restricted Securities
in connection with any sale or resale pursuant to such Shelf Registration
Statement and in such connection, the Company and the Guarantors shall:
(A) upon request of any such selling Holder, furnish (or in the
case of paragraphs (2) and (3), use its best efforts to cause to be
furnished) to each such selling Holder, upon the effectiveness of the
Shelf Registration Statement or upon Consummation of the Exchange
Offer, as the case may be:
(1) a certificate, dated such date, signed on behalf of the
Company and each Guarantor by (x) the President or any Vice
President and (y) a principal financial or accounting officer of
the Company and such Guarantor, confirming, as of the date
thereof, the matters set forth in paragraph (d) of Section 9 of
the Purchase Agreement and such other similar matters as the
selling Holders may reasonably request;
(2) an opinion, dated the date of Consummation of the
Exchange Offer, or the date of effectiveness of the Shelf
Registration Statement, as the case may be, of counsel for the
Company and the Guarantors covering matters similar to those set
forth in paragraph (e) of Section 9 of the Purchase Agreement;
(3) a customary comfort letter, dated the date of
Consummation of the Exchange Offer, or as of the date of
effectiveness of the Shelf Registration Statement, as the case
may be, from the Company's independent accountants, in the
customary form and covering matters of the type customarily
covered in comfort letters to underwriters in connection with
underwritten offerings, and affirming the matters set forth in
the comfort letters delivered pursuant to Section 9(g) of the
Purchase Agreement; and
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(B) deliver such other documents and certificates as may be
reasonably requested by the selling Holders to evidence compliance
with clause (A) above and with any customary conditions contained in
any agreement entered into by the Company and the Guarantors pursuant
to this clause (ix);
(x) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders and their counsel in
connection with the registration and qualification of the Transfer
Restricted Securities under the securities or Blue Sky laws of such
jurisdictions as the selling Holders may request and do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Transfer Restricted Securities covered by the
applicable Registration Statement; provided, however, that neither the
Company nor any Guarantor shall be required to register or qualify as a
foreign corporation where it is not now so qualified or to take any action
that would subject it to the service of process in suits or to taxation,
other than as to matters and transactions relating to the Registration
Statement, in any jurisdiction where it is not now so subject;
(xi) issue, and cause the Trustee to authenticate pursuant to the
Indenture, upon the request of any Holder of Series A Notes covered by any
Shelf Registration Statement contemplated by this Agreement, Exchange Notes
having an aggregate principal amount equal to the aggregate principal
amount of Series A Notes surrendered to the Company by such Holder in
exchange therefor or being sold by such Holder; such Exchange Notes to be
registered in the name of such Holder or in the name of the purchaser(s) of
such Exchange Notes, as the case may be; in return, the Series A Notes held
by such Holder shall be surrendered to the Company for cancellation;
(xii) in connection with any sale of Transfer Restricted Securities
that will result in such securities no longer being Transfer Restricted
Securities, cooperate with the selling Holders to facilitate the timely
preparation and delivery of certificates representing Transfer Restricted
Securities to be sold and not bearing any restrictive legends; and to
register such Transfer Restricted Securities in such denominations and such
names as the selling Holders may request at least two Business Days prior
to such sale of Transfer Restricted Securities;
(xiii) use their respective reasonable best efforts to cause the
disposition of the Transfer Restricted Securities covered by the
Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the
seller or sellers thereof to consummate the disposition of such Transfer
Restricted Securities, subject to the proviso contained in clause (xi)
above;
(xiv) provide a CUSIP number for all Transfer Restricted Securities
not later than the effective date of a Registration Statement covering such
Transfer Restricted Securities and provide the Trustee under the Indenture
with certificates for the Transfer Restricted Securities which are in a
form eligible for deposit with the Depository Trust Company;
12
<PAGE>
(xv) otherwise use their respective reasonable best efforts to
comply with all applicable rules and regulations of the Commission, and
make generally available to its security holders with regard to any
applicable Registration Statement, as soon as practicable, a consolidated
earnings statement meeting the requirements of Rule 158 (which need not be
audited) covering a twelve-month period beginning after the effective date
of the Registration Statement (as such term is defined in paragraph (c) of
Rule 158 under the Act);
(xvi) upon the request of any selling Holder specifically identified
in any Shelf Registration statement, make appropriate officers of the
Company available to the selling Holders for discussions with prospective
purchasers of the Transfer Restricted Securities;
(xvii) cause the Indenture to be qualified under the TIA not later
than the effective date of the first Registration Statement required by
this Agreement and, in connection therewith, effect such changes to the
Indenture as may be required for such Indenture to be so qualified in
accordance with the terms of the TIA; and execute and use its reasonable
best efforts to cause the Trustee to execute, all documents that may be
required to effect such changes and all other forms and documents required
to be filed with the Commission to enable such Indenture to be so qualified
in a timely manner; and
(xviii) provide promptly to each Holder upon request each document
filed with the Commission pursuant to the requirements of Section 13 or
Section 15(d) of the Exchange Act.
(d) Restrictions on Holders. 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. Each Holder
receiving a Suspension Notice (as defined below) hereby agrees that it will
either destroy any Prospectuses, other than permanent file copies, then in such
Holder's possession which have been replaced by the Company with more recently
dated Prospectuses or (ii) deliver to the Company (at the Company's expense) all
copies, other than permanent file copies, then in such Holder's possession of
the Prospectus covering such Transfer Restricted Securities that was current at
the time of receipt of the Suspension Notice. Each Holder agrees by acquisition
of a Transfer Restricted Security that, upon receipt of the notice referred to
in Section 6(c)(i) or any notice from the Company of the existence of any fact
of the kind described in Section 6(c)(iii)(D) hereof (in each case, a
"Suspension Notice"), such Holder will forthwith discontinue disposition of
Transfer Restricted Securities pursuant to the applicable Registration Statement
until (i) such Holder has received copies of the supplemented or amended
Prospectus contemplated by Section 6(c)(iv) hereof, or (ii) such Holder is
advised in writing by the Company that the use of the Prospectus may be resumed,
and has received copies of any additional or supplemental filings that are
incorporated by reference in the Prospectus (in each case, the "Recommencement
Date").
13
<PAGE>
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's and the Guarantors' performance
of or compliance with this Agreement will be borne by the Company, regardless of
whether a Registration Statement becomes effective, including without
limitation: (i) all registration and filing fees and expenses; (ii) all fees and
expenses of compliance with federal securities and state Blue Sky or securities
laws; (iii) all expenses of printing (including printing certificates for the
Exchange Notes to be issued in the Exchange Offer and printing of Prospectuses),
messenger and delivery services and telephone; (iv) all fees and disbursements
of counsel for the Company and the Guarantors; (v) all application and filing
fees in connection with listing the Exchange Notes on a national securities
exchange or automated quotation system pursuant to the requirements hereof; and
(vi) all fees and disbursements of independent certified public accountants of
the Company and the Guarantors (including the expenses of any special audit and
comfort letters required by or incident to such performance).
The Company will, in any event, bear its and the Guarantors' internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expenses of
any annual audit and the fees and expenses of any Person, including special
experts, retained by the Company or the Guarantors.
(b) In connection with any Shelf Registration Statement required by this
Agreement, the Company and the Guarantors will reimburse the Holders of Transfer
Restricted Securities being registered pursuant to the Shelf Registration
Statement, as applicable, for the reasonable fees and disbursements of not more
than one counsel, who shall be chosen by the Holders of a majority in principal
amount of the Transfer Restricted Securities for whose benefit such Registration
Statement is being prepared.
SECTION 8. INDEMNIFICATION
(a) The Company and the Guarantors, jointly and severally, agree to
indemnify and hold harmless (i) each Holder and (ii) each person, if any, who
controls (within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act) any Holder (any of the persons referred to in this clause (ii)
being hereinafter referred to as a "controlling person") and (iii) the
respective officers, directors, partners, employees, representatives and agents
of any Holder or any controlling person (any person referred to in clause (i),
(ii) or (iii) may hereinafter be referred to as an "Indemnified Holder"), from
and against any and all losses, claims, damages, liabilities, judgments,
(including without limitation, any legal or other expenses incurred in
connection with investigating or defending any matter, including any action that
could give rise to any such losses, claims, damages, liabilities or judgments)
caused by any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement, preliminary prospectus or Prospectus
(or any amendment or supplement thereto) provided by the Company to any holder
or any prospective purchaser of Exchange Notes, or caused by any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, except insofar as
such losses, claims, damages, liabilities or judgments
14
<PAGE>
are caused by an untrue statement or omission or alleged untrue statement or
omission that is based upon information furnished in writing to the Company by
any of the Holders.
(b) As a condition to its being named as a selling holder in any Shelf
Registration Statement, each Holder of Transfer Restricted Securities shall be
required to agree, 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 each of
the Indemnified Holders, but only with reference to information furnished in
writing to the Company by such Indemnified Holder expressly for use in any
Registration Statement. In no event shall any Indemnified Holder be liable or
responsible for any amount in excess of the amount by which the total amount
received by such Indemnified Holder with respect to its sale of Transfer
Restricted Securities pursuant to a Registration Statement exceeds (i) the
amount paid by such Indemnified Holder for such Transfer Restricted Securities
and (ii) the amount of any damages that such Indemnified Holder has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission.
(c) In case any action shall be commenced involving any person in respect
of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"indemnified party"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "indemnifying person") in writing
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as incurred (except that
in the case of any action in respect of which indemnity may be sought pursuant
to both Sections 8(a) and 8(b), an Indemnified Holder shall not be required to
assume the defense of such action pursuant to this Section 8(c), but may employ
separate counsel and participate in the defense thereof, but the fees and
expenses of such counsel, except as provided below, shall be at the expense of
the Indemnified Holder). Any indemnified party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of the indemnified
party unless (i) the employment of such counsel shall have been specifically
authorized in writing by the indemnifying party, (ii) the indemnifying party
shall have failed to assume the defense of such action or employ counsel
reasonably satisfactory to the indemnified party or (iii) the named parties to
any such action (including any impleaded parties) include both the indemnified
party and the indemnifying party, and the indemnified party shall have been
advised by such counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the
indemnifying party (in which case the indemnifying party shall not have the
right to assume the defense of such action on behalf of the indemnified party).
In any such case, the indemnifying party shall not, in connection with any one
action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel) for all indemnified parties and all such fees and
expenses shall be reimbursed as they are incurred. Such firm shall be designated
in writing by a majority of the Indemnified Holders, in the case of the
15
<PAGE>
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 20 Business Days
after the indemnifying party shall have received a request from the indemnified
party for reimbursement for the fees and expenses of counsel (in any case where
such fees and expenses are at the expense of the indemnifying party) and, prior
to the date of such settlement, the indemnifying party shall have failed to
comply with such reimbursement request. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement or
compromise of, or consent to the entry of judgment with respect to, any pending
or threatened action in respect of which the indemnified party is or could have
been a party and indemnity or contribution may be or could have been sought
hereunder by the indemnified party, unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from all
liability on claims that are or could have been the subject matter of such
action and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of the indemnified party.
(d) To the extent that the indemnification provided for in this Section 8
is unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or judgments referred to therein, then each indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities or judgment (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Guarantors, on the one hand, and the Holders, on the other hand, from their sale
of Transfer Restricted Securities or (ii) if the allocation provided by clause
8(d)(i) is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause 8(d)(i) above
but also the relative fault of the Company and the Guarantors, on the one hand,
and of the Indemnified Holder, on the other hand, in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative fault of the Company and the Guarantors, on the one
hand, and of the Indemnified Holder, on the other hand, shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or such Guarantor, on the one
hand, or by the Indemnified Holder, on the other hand, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The amount paid or payable by a party as a result of
the losses, claims, damages, liabilities and judgments referred to above shall
be deemed to include, subject to the limitations set forth in the second
paragraph of Section 8(a), any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any action
or claim.
The Company, the Guarantors and each Holder agree that it would not be just
and equitable if contribution pursuant to this Section 8(d) were determined by
pro rata allocation (even if the Holders were treated as one entity for such
purpose) or by any other method of
16
<PAGE>
allocation which does not take account of the equitable considerations referred
to in the immediately preceding paragraph. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages, liabilities or
judgments referred to in the immediately preceding paragraph shall be deemed to
include, subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any matter, including any action that could have given rise to such
losses, claims, damages, liabilities or judgments. Notwithstanding the
provisions of this Section 8, no Holder or its related Indemnified Holders shall
be required to contribute, in the aggregate, any amount in excess of the amount
by which the total received by such Holder with respect to the sale of its
Transfer Restricted Securities pursuant to a Registration Statement exceeds the
sum of (A) the amount paid by such Holder for such Transfer Restricted
Securities plus (B) the amount of any damages which such Holder has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Holders' obligations to contribute pursuant to this
Section 8(d) are several in proportion to the respective principal amount of
Transfer Restricted Securities held by each of the Holders hereunder and not
joint.
SECTION 9. MISCELLANEOUS
(a) Remedies. The Company and the Guarantors acknowledge and agree that
any failure by the Company and/or the Guarantors to comply with their respective
obligations under Sections 3 and 4 hereof may result in material irreparable
injury to the Initial Purchasers or the Holders for which there is no adequate
remedy at law, that it will not be possible to measure damages for such injuries
precisely and that, in the event of any such failure, the Initial Purchasers or
any Holder may obtain such relief as may be required to specifically enforce the
Company's and the Guarantor's obligations under Sections 3 and 4 hereof. The
Company and the Guarantors further agree to waive the defense in any action for
specific performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor any Guarantor
will, on or after the date of this Agreement, enter into any agreement with
respect to its securities that is inconsistent with the rights granted to the
Holders in this Agreement or otherwise conflicts with the provisions hereof.
Neither the Company nor any Guarantor has previously entered into any agreement
granting any registration rights with respect to its securities to any Person.
The rights granted to the Holders hereunder do not in any way conflict with and
are not inconsistent with the rights granted to the holders of the Company's and
the Guarantors' securities under any agreement in effect on the date hereof.
(c) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless (i) in the case of Section 5
hereof and this Section 9(c), the Company has obtained the written consent of
Holders of all outstanding Transfer Restricted
17
<PAGE>
Securities and (ii) in the case of all other provisions hereof, the Company has
obtained the written consent of Holders of a majority of the outstanding
principal amount of Transfer Restricted Securities (excluding Transfer
Restricted Securities held by the Company of its Affiliates). Notwithstanding
the foregoing, a waiver or consent to departure from the provisions hereof that
relates exclusively to the rights of Holders whose securities are being tendered
pursuant to the Exchange Offer and that does not affect directly or indirectly
the rights of other Holders whose securities are not being tendered pursuant to
such Exchange Offer may be given by the Holders of a majority of the outstanding
principal amount of Transfer Restricted Securities subject to such Exchange
Offer.
(d) Third Party Beneficiary. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company and the
Guarantors, on the one hand, and the Initial Purchasers, on the other hand, and
shall have the right to enforce such agreements directly to the extent they may
deem such enforcement necessary or advisable to protect its rights or the rights
of Holders hereunder.
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of the
Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
(ii) if to the Company or the Guarantors:
Elgin National Industries, Inc.
2001 Butterfield Road, Suite 1020
Downers Grove, Illinois
Telecopier No.: (630) 434-7272
Attention: Chief Financial Officer
With a copy to:
Mayer, Brown & Platt
190 South LaSalle Street
Suite 3100
Chicago, Illinois 60603
Telecopier No.: (312) 701-7711
Attention: Paul Theiss, Esq.
All such notices and communications shall be deemed to have been duly given: at
the time delivered by hand, if personally delivered; three Business Days after
being deposited in the mail,
18
<PAGE>
postage prepaid, if mailed; when receipt acknowledged, if telecopied; and on the
next business day, if timely delivered to an air courier guaranteeing overnight
delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
Holders of Transfer Restricted Securities; provided, that nothing herein shall
be deemed to permit any assignment, transfer or other disposition of Transfer
Restricted Securities in violation of the terms hereof or of the Purchase
Agreement or the Indenture. If any transferee of any Holder shall acquire
Transfer Restricted Securities in any manner, whether by operation of law or
otherwise, such Transfer Restricted Securities shall be held subject to all of
the terms of this Agreement, and by taking and holding such Transfer Restricted
Securities such Person shall be conclusively deemed to have agreed to be bound
by and to perform all of the terms and provisions of this Agreement, including
the restrictions on resale set forth in this Agreement and, if applicable, the
Purchase Agreement, and such Person shall be entitled to receive the benefits
hereof.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall be affected or impaired thereby.
(k) Entire Agreement. This Agreement is intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
19
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
ELGIN NATIONAL INDUSTRIES, INC.
By: /s/ Fred C. Schulte
---------------------------------------------
Name: Fred C. Schulte
Title: Chairman and Chief Executive Officer
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
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: Senior Vice President and
Chief Executive Officer
20
<PAGE>
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
SOROS ASSOCIATES, INC.
By: /s/ Fred C. Schulte
------------------------------------
Name: Fred C. Schulte
Title: President
21
<PAGE>
BANCAMERICA ROBERTSON STEPHENS
By: /s/ Mark Dawley
--------------------------------------
Name: Mark Dawley
Title: Senior Managing Director
CIBC WOOD GUNDY SECURITIES CORP.
By: /s/ Edward Levy
--------------------------------------
Name: Edward Levy
Title: Managing Director
22
<PAGE>
EXHIBIT 5
January 23, 1998
Elgin National Industries, Inc.
2001 Butterfield Road, Suite 1020
Downers Grove, IL 60515
Re: $85 million 11% Senior Notes due 2007
Ladies and Gentlemen:
We have acted as counsel to Elgin National Industries, Inc., a Delaware
corporation ("Elgin"), in connection with the registration under the Securities
Act of 1933, as amended (the "Act"), of an Exchange Offer (the "Exchange Offer")
relating to $85 million principal amount of 11% Series A Senior Notes due 2007
(the "Old Notes"). The Old Notes were issued under an Indenture between Elgin,
certain of its subsidiaries and Norwest Bank Minnesota, National Association, as
trustee. We have participated in the preparation and filing with the Securities
and Exchange Commission under the Act of a registration statement on Form S-4
(the "Registration Statement"), Registration No. 333-43523, relating to $85
million principal amount of 11% Series B Senior Notes due 2007 (the "New Notes")
with respect to the proposed Exchange Offer for the Old Notes. In this
connection, we have examined such corporate and other records, instruments,
certificates and documents as we have considered necessary to enable us to
render this opinion.
Based on the foregoing, it is our opinion that, upon completion of the
Exchange Offer, the New Notes will have been duly authorized for issuance and,
when duly executed, authenticated, issued and delivered, will constitute valid
and legally binding obligations of Elgin, entitled to the benefits of the
Indenture, subject to bankruptcy, insolvency, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditor's rights
and to general equitable principles (whether considered in a proceeding at law
or in equity).
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the reference to us under the caption "Legal Matters."
Very truly yours,
/s/ MAYER, BROWN & PLATT
------------------------
MAYER, BROWN & PLATT
<PAGE>
EXHIBIT 10.5
THE
ELGIN NATIONAL INDUSTRIES, INC.
SUPPLEMENTAL RETIREMENT PLAN
----------------------------
This Elgin National Industries, Inc. Supplemental Retirement Plan ("Plan")
is adopted by Elgin National Industries, Inc. a Delaware corporation
("Company"), this 21st day of November, 1995, and effective January 1, 1995.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company desires to establish a supplemental retirement plan
for the exclusive benefit of certain of its key executives and the key
executives of its subsidiaries that have adopted this Plan so as to reward them
for their loyal and faithful service and to aid them in increasing their
economic security by providing additional funds at retirement with respect to
those benefits that may have been reduced because of certain limitations imposed
by the Internal Revenue Code of 1986, as amended, the Employee Retirement Income
Security Act of 1974, and/or the Retirement Protection Act of the Uruguay Round
General Agreement on Tariffs & Trade; and
WHEREAS, the Company has been authorized by the Board of Directors of ENI
Holding Corp. and by its own Board of Directors to enter into this Agreement in
order to provide for the proper administration of the Plan;
NOW, THEREFORE, in consideration of the premises herein contained, it is
hereby agreed as follows:
ARTICLE I
---------
DEFINITIONS
-----------
The following words, when used herein, shall have the meanings indicated unless
the context indicates otherwise:
<PAGE>
1.01 "Agreement" or "Plan" -- The Plan set forth in this document, as it may be
amended from time to time. This Agreement shall be known as the Elgin
National Industries, Inc. Supplemental Retirement Plan.
1.02 "Beneficiary" -- The person or persons last designated by a Participant, by
written notice, filed with the Pension Plan, to receive a Pension Plan
benefit upon his death. In the event a Participant fails to designate a
person or persons as provided above, or if no Beneficiary so designated
survives the Participant, then for all purposes of this Plan, the
Beneficiary shall be the person or persons set forth in the order of
succession in the Pension Plan.
1.03 "Code" -- The Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder.
1.04 "Company" -- Elgin National Industries, Inc., or any corporation or
business organization which shall assume or succeed to the Company's
obligations under the Plan. The term "Company" shall also include a
subsidiary that has, with the consent of the Company, adopted this Plan.
1.05 "Effective Date" -- January 1, 1995.
1.06 "GATT Rate" -- The interest rate and mortality table utilized to determine
lump sum equivalencies in the Pension Plan in accordance with the
Retirement Protection Act of the Uruguay Round General Agreement on Tariffs
and Trade.
1.07 "Participant" -- An employee of the Company or an adopting subsidiary whose
participation in the Plan has been approved by the Board of Directors of
the Company and who is a Participant under the Pension and/or Profit
Sharing Plan.
1.08 "Pension Plan" -- The ENI Pension Plan for Employees of Elgin National
Industries, Inc. and Participating Affiliates, as it may be amended from
time to time.
1.09 "Profit Sharing Plan" -- The profit sharing portion of the Elgin National
Industries, Inc. Master Savings and Profit Sharing Plan, as it may be
amended from time to time.
ARTICLE II
----------
ELIGIBILITY
-----------
Any Participant who qualifies for a benefit under the Pension and/or Profit
Sharing Plan, who is approved by the Board of Directors of the Company to
participate herein, and whose benefits under such Plan are reduced or otherwise
limited by reason of the application of the limitations
-2-
<PAGE>
set forth in Sections 401(a)(17), and/or 415 of the Code, and/or the use of the
GATT Rate shall be entitled to participate and receive a benefit hereunder.
ARTICLE III
-----------
BENEFITS; FORM OF PAYMENT
-------------------------
3.01 Pension Benefits - The Pension benefits under this Plan to which an
eligible Participant or Beneficiary shall be entitled shall be an amount
equal to the difference, if any, between (a) and (b) below:
(a) The amount of benefits to which a Participant would be entitled to
receive under the Pension Plan if such benefits were computed in
accordance with the formula in Section 5.01 of the Pension Plan
utilizing all of a Participant's Years of Credited Service and
Compensation without giving any effect to the limitations imposed by
Sections 401(a)(17) and/or 415 of the Code, as now or hereafter in
effect and determining the actuarial equivalence of a lump sum benefit
utilizing the interest required under Code Section 417(e)(3) and
mortality table in effect prior to the implementation of the GATT Rate
(if, for any reason, the interest rate prior to the implementation of
GATT is not published or otherwise available, then for all purposes
hereof, such rate shall be the GATT rate less one hundred seventy five
(175) basis points); provided, however, if the GATT rate (mortality
table) would yield a larger lump sum equivalency, then such mortality
table shall be utilized;
less
(b) The amount of benefits to which he is entitled to receive under the
Pension Plan.
The amount of benefit so determined shall be subject to such adjustments as
the Company, from time to time, deems appropriate to reflect any changes in
the application of the limitations imposed by Code Sections 401(a)(17), 415
and/or 417(c)(3) with respect to the computation of benefits under the
Pension Plan.
3.02 Profit Sharing Benefits - The Profit Sharing benefits to which an eligible
Participant or Beneficiary shall be entitled to receive shall be determined
as follows:
As of the end of each calendar year, commencing with the year ended
December 31, 1994, the Company shall credit (bookkeeping account only)
each Participant with that percentage of his Compensation (as defined
in the Profit Sharing Plan) which cannot be allocated to his Account
under said Plan because of the limitations of Code Section 401(a)(17),
if any. To such bookkeeping account shall be credited annually, as of
each
-3-
<PAGE>
December 31, simple interest at the rate of eight percent (8%)
per annum or such other rate of interest as from time to time
determined by the Board of Directors of the Company. For the
year in which such contribution is deemed made, interest
shall be credited only from April 1 of the following year. If
an eligible Participant terminates employment for any reason
and is entitled to a distribution of his Profit Sharing
benefits hereunder, interest shall be credited through the last
day of the month preceding the date of distribution.
3.03 Payment of Benefits - Except as hereinafter specifically provided, the
benefits of any Participant or Beneficiary hereunder shall be paid in the
same manner as the benefits under the Pension Plan and Profit Sharing Plan,
as applicable. All optional forms of benefits shall be the actuarial
equivalent of the benefits otherwise payable under this Plan.
Any benefits payable under the Pension and Profit Sharing Plans shall be
paid solely in accordance with the terms and provisions thereof, and
nothing in this Agreement shall operate or be construed in any way to
modify, amend or affect the terms and provisions of the Pension and Profit
Sharing Plans.
3.04 Vesting - Notwithstanding anything herein to the contrary, except in the
event of a Participant's Disability (as defined in the Profit Sharing Plan)
or death, no benefits shall vest hereunder until January 1, 1996.
Thereafter, all benefits accrued shall be one hundred percent (100%) non-
forfeitably vested.
ARTICLE IV
ADMINISTRATION; AMENDMENTS AND
TERMINATION; RIGHTS AGAINST THE COMPANY
4.01 Administration - The Company shall administer this Plan. The Company shall
have, and shall exercise and perform, all the powers, rights, authorities
and duties set forth in the Pension Plan with the same effect as if set
forth in full herein with respect to this Plan. Any determination or
decision by the Company shall be conclusive and binding on all persons who
at any time have or claim to have any interest whatever under this Plan.
4.02 Amendment - The Company, solely, and without the approval of any
Participant or Beneficiary, shall have the right to amend this Plan at any
time and from time to time, by resolution duly adopted by it. Any such
Amendment shall become effective upon the date stated therein.
4.03 Termination - The Company has established this Plan with the bona fide
intention and expectation that from year to year it will deem it advisable
to continue it in effect.
-4-
<PAGE>
However, circumstances not now foreseen or circumstances beyond the
Company's control may make it impossible or inadvisable to continue the
Plan and therefor, the Company, in its sole discretion, reserves the right
to terminate the Plan in its entirety at any time; provided, however, that
any Participant who had previously accrued a Pension and/or Profit Sharing
benefit as of the termination date, shall be entitled to receive such
benefits.
4.04 Rights Against the Company - The establishment of this Plan shall not be
construed as giving to any Participant, Beneficiary, employee or any person
whomsoever, any legal, equitable or other rights against the Company, or
its stockholders, officers, directors, or agents, or as giving to any
Participant any equity or other interest in the assets or business of the
Company or giving any employee the right to be retained in the employment
of the Company. All employees and Participants shall be subject to
discharge to the same extent that they would have been if this Plan had
never been adopted. Subject to the rights of the Company to terminate this
Plan or any benefit hereunder, the rights of any Participant hereunder
shall be solely those of an unsecured creditor of the Company.
ARTICLE V
GENERAL AND MISCELLANEOUS
5.01 Spendthrift Clause - No right, title or interest of any kind in the Plan
shall be transferable or assignable by any Participant or Beneficiary or
any other person or be subject to alienation, anticipation, encumbrance,
garnishment, attachment, execution or levy of any kind, whether voluntary
or involuntary. Any attempt to alienate, sell, transfer, assign, pledge,
garnish, attach or otherwise encumber or dispose of any interest in the
Plan shall be void.
5.02 Severability - In the event that any provision of this Plan shall be
declared illegal or invalid for any reason, said illegality or invalidity
shall not affect the remaining provisions of this Plan but shall be fully
severable and this Plan shall be construed and enforced as if said illegal
or invalid provision had never been inserted herein.
5.03 Construction of Agreement - The article and section headings and numbers
are included only for convenience of reference and are not to be taken as
limiting or extending the meaning of any of the terms and provisions of
this Plan. Whenever appropriate, words used in the singular shall include
the plural or the plural may be read as the singular.
5.04 Gender - The personal pronoun of the masculine gender shall be understood
to apply to women as well as men except where specific reference is made to
one or the other.
-5-
<PAGE>
5.05 Governing Law -- Except to the extent pre-empted by Federal law, the
validity and effect of this Agreement and the rights and obligations of all
persons affected hereby shall be construed and determined in accordance
with the laws of the State of Illinois.
5.06 No Requirement to Fund -- This Plan is not funded, escrowed or trusteed in
any way or form and the establishment of any bookkeeping account or entry
or private investment by the Company to assist it in providing the benefits
contemplated hereunder shall not give any Participant, Beneficiary or other
party whomsoever any interest in or right to such account, entry or
investment. It is the Company's intention that this Plan be an unfunded
excess benefit plan as said term is defined in Section 3(36) of the
Employee Retirement Income Security Act of 1974, as amended.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed by its
duly authorized officers as of the day and year first above written.
ELGIN NATIONAL INDUSTRIES, INC.,
a Delaware corporation
By: /s/ Wayne J. Conner
----------------------
Its: Vice President
-----
ATTEST:
By: /s/ Lynn C. Batory
------------------------
Its: Secretary
-----------
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<PAGE>
EXHIBIT 25.1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
_____________________________
_____ CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
A U.S. National Banking Association 41-1592157
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national Identification No.)
bank)
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479
(Address of principal executive offices) (Zip code)
Stanley S. Stroup, General Counsel
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479
(612) 667-1234
(Agent for Service)
_____________________________
ELGIN NATIONAL INDUSTRIES, INC.
(Exact name of obligor as specified in its charter)
Delaware 36-3908410
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2001 Butterfield Road, Suite 1020
Downers Grove, Illinois 60515-1050
(Address of principal executive offices) (Zip code)
_____________________________
11% Series B Senior Notes Due 2007
(Title of the indenture securities)
================================================================================
<PAGE>
Item 1. General Information. Furnish the following information as to the
trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
Comptroller of the Currency
Treasury Department
Washington, D.C.
Federal Deposit Insurance Corporation
Washington, D.C.
The Board of Governors of the Federal Reserve System
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
Item 2. Affiliations with Obligor. If the obligor is an affiliate of the
trustee, describe each such affiliation.
None with respect to the trustee.
No responses are included for Items 3-14 of this Form T-1 because the obligor is
not in default as provided under Item 13.
Item 15. Foreign Trustee. Not applicable.
Item 16. List of Exhibits. List below all exhibits filed as a part of this
Statement of Eligibility. Norwest Bank
incorporates by reference into this Form T-1 the
exhibits attached hereto.
Exhibit 1. a. A copy of the Articles of Association of the
trustee now in effect.*
Exhibit 2. a. A copy of the certificate of authority of the
trustee to commence business issued June 28,
1872, by the Comptroller of the Currency to The
Northwestern National Bank of Minneapolis.*
b. A copy of the certificate of the Comptroller of
the Currency dated January 2, 1934, approving the
consolidation of The Northwestern National Bank
of Minneapolis and The Minnesota Loan and Trust
Company of Minneapolis, with the surviving entity
being titled Northwestern National Bank and Trust
Company of Minneapolis.*
c. A copy of the certificate of the Acting
Comptroller of the Currency dated January 12,
1943, as to change of corporate title of
Northwestern National Bank and Trust Company of
Minneapolis to Northwestern National Bank of
Minneapolis.*
<PAGE>
d. A copy of the letter dated May 12, 1983 from the
Regional Counsel, Comptroller of the Currency,
acknowledging receipt of notice of name change
effective May 1, 1983 from Northwestern National
Bank of Minneapolis to Norwest Bank Minneapolis,
National Association.*
e. A copy of the letter dated January 4, 1988 from
the Administrator of National Banks for the
Comptroller of the Currency certifying approval
of consolidation and merger effective January 1,
1988 of Norwest Bank Minneapolis, National
Association with various other banks under the
title of "Norwest Bank Minnesota, National
Association."*
Exhibit 3. A copy of the authorization of the trustee to exercise
corporate trust powers issued January 2, 1934, by the
Federal Reserve Board.*
Exhibit 4. Copy of By-laws of the trustee as now in effect.*
Exhibit 5. Not applicable.
Exhibit 6. The consent of the trustee required by Section 321(b)
of the Act.
Exhibit 7. A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority.**
Exhibit 8. Not applicable.
Exhibit 9. Not applicable.
* Incorporated by reference to exhibit number 25 filed with registration
statement number 33-66026.
** Incorporated by reference to exhibit number 25 filed with registration
statement number 333-43005.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the
trustee, Norwest Bank Minnesota, National Association, a national banking
association organized and existing under the laws of the United States of
America, has duly caused this statement of eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of
Minneapolis and State of Minnesota on the 7th day of January, 1998.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
/s/ Curtis D. Schwegman
----------------------------
Curtis D. Schwegman
Assistant Vice President
<PAGE>
EXHIBIT 6
January 7, 1998
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In accordance with Section 321(b) of the Trust Indenture Act of 1939, as
amended, the undersigned hereby consents that reports of examination of the
undersigned made by Federal, State, Territorial, or District authorities
authorized to make such examination may be furnished by such authorities to the
Securities and Exchange Commission upon its request therefor.
Very truly yours,
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
/s/ Curtis D. Schwegman
----------------------------
Curtis D. Schwegman
Assistant Vice President
<PAGE>
EXHIBIT 99
LETTER OF TRANSMITTAL
FOR TENDERS OF
$85,000,000 AGGREGATE PRINCIPAL AMOUNT OF
11% SERIES A SENIOR NOTES DUE 2007
ELGIN NATIONAL INDUSTRIES, INC.
PURSUANT TO THE PROSPECTUS
DATED , 1998 OF ELGIN NATIONAL INDUSTRIES, INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1998 (UNLESS EXTENDED, PROVIDED THAT NO EXTENSION WILL BE PERMITTED
BEYOND 45 DAYS FROM THE DATE OF THE PROSPECTUS) (THE "EXPIRATION DATE").
TENDERED OLD NOTES MAY BE WITHDRAWN AT ANY TIME ON OR PRIOR TO THE
EXPIRATION DATE OF THE EXCHANGE OFFER
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 THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL
NOT CONSTITUTE A VALID DELIVERY.
<PAGE>
The undersigned acknowledges that it has received the Prospectus, dated
, 1998 (the "Prospectus"), of Elgin National Industries, Inc., a
Delaware corporation (the "Issuer"), and this Letter of Transmittal, which may
be amended from time to time (this "Letter"), which together constitute the
offer of the Issuer (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 Issuer for a like principal amount of the Issuer's issued and
outstanding 11% Series A Senior Notes due 2007 (the "Old Notes" and together
with the New Notes, the "Notes").
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. The New Notes will bear interest at a rate of 11% per annum from the
most recent date to which interest has been paid on the Notes or, if no
interest has been paid, 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 interest or dividends on such Old
Notes otherwise payable on any interest payment date the record date for which
occurs on or after consummation of the Exchange Offer.
This Letter is to be used: (i) by all Holders who are not members of the
Automated Tender Offering Program ("ATOP") at the Depository Trust Company
("DTC"); (ii) by Holders who are ATOP members but choose not to use ATOP; or
(iii) if the Old Notes are to be tendered in accordance with the guaranteed
delivery procedures set forth in "The Exchange Offer--Guaranteed Delivery
Procedures" section of the Prospectus. See Instruction 2. Delivery of this
Letter to DTC does not constitute delivery to the Exchange Agent.
Notwithstanding anything to the contrary in the registration rights
agreement, dated November 5, 1997 between the Issuer and the initial
purchasers of the Old Notes (the "Registration Rights Agreement"), the Issuers
will accept for exchange any and all Old Notes validly tendered on or prior to
5:00 p.m., New York City time, on , 1998 (unless the Exchange Offer
is extended by the Issuer) (the "Expiration Date"). Tenders of the Old Notes
may be withdrawn at any time prior to 5:00 p.m., New York City time, on the
Expiration Date.
IMPORTANT: HOLDERS WHO WISH TO TENDER OLD NOTES IN THE EXCHANGE OFFER MUST
COMPLETE THIS LETTER OF TRANSMITTAL AND TENDER THE OLD NOTES TO THE EXCHANGE
AGENT AND NOT TO THE ISSUER.
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 conditions. Please see the Prospectus under the section titled "The
Exchange Offer--Conditions to the Exchange Offer."
The Exchange Offer is not being made to, nor will tenders be accepted from
or on behalf of, Holders of Old Notes in any jurisdiction in which the making
or acceptance of the Exchange Offer would not be in compliance with the laws
of such jurisdiction.
The instructions included with this Letter of Transmittal must be followed
in their entirety. Questions and request for assistance or for additional
copies of the Prospectus or this Letter of Transmittal may be directed to the
Exchange Agent at the address listed above.
2
<PAGE>
APPROPRIATE SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
LADIES AND GENTLEMEN:
The undersigned hereby tenders to the Issuer the principal amount of Old
Notes indicated below under "Description of Old Notes," in accordance with and
upon the terms and subject to the conditions set forth in the Prospectus,
receipt of which is hereby acknowledged, and in this Letter of Transmittal,
for the purpose of exchanging the principal amount of Old Notes designated
herein held by the undersigned and tendered hereby for an equal principal
amount of the New Notes. New Notes will be issued only in integral multiples
of $1,000 to each tendering Holder of Old Notes whose Old Notes are accepted
in the Exchange Offer. Holders may tender all or a portion of their Old Notes
pursuant to the Exchange Offer.
Subject to, and effective upon, the acceptance for exchange of the Old Notes
tendered herewith in accordance with the terms of the Exchange Offer, the
undersigned hereby sells, assigns and transfers to, or upon the order of, the
Issuer all right, title and interest in and to all such Old Notes that are
being tendered hereby and that are being accepted for exchange pursuant to the
Exchange Offer. The undersigned hereby irrevocably constitutes and appoints
the Exchange Agent as the true and lawful agent and attorney-in-fact of the
undersigned (with full knowledge that the Exchange Agent also acts as the
agent of the Issuer), with respect to the Old Notes tendered hereby and
accepted for exchange pursuant to the Exchange Offer with full power of
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest) to deliver the Old Notes tendered hereby to the
Issuer (together with all accompanying evidences of transfer and authenticity)
for transfer or cancellation by the Issuer.
All authority conferred or agreed to be conferred in this Letter of
Transmittal shall not be affected by, and shall survive, the death or
incapacity of the undersigned and any obligation of the undersigned hereunder
shall be binding upon the heirs, executors, administrators, legal
representatives, successors and assigns of the undersigned. Any tender of Old
Notes hereunder may be withdrawn only in accordance with the procedures set
forth in the instructions contained in this Letter of Transmittal. See
Instruction 4 hereto.
The undersigned hereby represents and warrants that it has full power and
authority to tender, exchange, assign and transfer the Old Notes tendered
hereby and that the Issuer will acquire good and unencumbered title thereto,
free and clear of all liens, restrictions, charges and encumbrances and not
subject to any adverse claim. The undersigned will, upon request, execute and
deliver any additional documents deemed by the Issuers to be necessary or
desirable to complete the assignment and transfer of the Old Notes tendered.
The undersigned has read and agrees to all of the terms of the Exchange Offer.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Issuer to be necessary or desirable to complete the
sale, assignment and transfer of the Old Notes tendered hereby. All authority
conferred or agreed to be conferred in this Letter and every obligation of the
undersigned hereunder shall be binding upon the successors, assigns, heirs,
executors, administrators, trustees in bankruptcy and legal representatives of
the undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned. This tender may be withdrawn only in accordance
with the procedures set forth in "The Exchange Offer--Withdrawal Rights"
section of the Prospectus.
The name(s) and address(es) of the registered Holder(s) should be printed
herein under "Description of Old Notes" (unless a label setting forth such
information appears thereunder), exactly as they appear on the Old Notes
tendered hereby. The certificate number(s) and the principal amount of Old
Notes to which this Letter of Transmittal relates, together with the principal
amount of such Old Notes that the undersigned wishes to tender, should be
indicated in the appropriate boxes herein under "Description of Old Notes."
The undersigned agrees that acceptance of any tendered Old Notes by the
Issuer and the issuance of New Notes in exchange therefor shall constitute
performance in full by the Issuer of their obligations under the Registration
Rights Agreement and that, upon the issuance of the New Notes, the Issuer will
have no further obligations or liabilities thereunder.
3
<PAGE>
The undersigned understands that the tender of Old Notes pursuant to one of
the procedures described in the Prospectus under "The Exchange Offer--
Procedures for Tendering Old Notes" and the Instructions hereto will
constitute the tendering Holder's acceptance of the terms and the conditions
of the Exchange Offer. The undersigned Holder hereby represents and warrants
to the Issuer that such Holder is not an affiliate of the Issuer, that the New
Notes to be acquired by such Holder pursuant to the Exchange Offer are being
acquired in the ordinary course of such Holder's business and that such Holder
has no arrangement or understanding with any person to participate in the
distribution of the New Notes. The Issuer's acceptance for exchange of Old
Notes tendered pursuant to the Exchange Offer will constitute a binding
agreement between the tendering Holder and the Issuer upon the terms and
subject to the conditions of the Exchange Offer.
THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT IT IS NOT ENGAGED IN,
AND DOES NOT INTEND TO ENGAGE IN, A DISTRIBUTION OF THE NEW NOTES.
The undersigned also acknowledges that this Exchange Offer is being made
based on interpretations by the staff of the Securities and Exchange
Commission (the "Commission") set forth in no action letters issued to third
parties in other transactions substantially similar to the Exchange Offer,
which lead the Issuer to believe that the New Notes issued in exchange for the
Old Notes 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 Issuer within the meaning of Rule 405 under the
Securities Act, (ii) the Initial Purchaser or any holder who acquired the Old
Notes directly from the Issuer 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 provisions of the Securities Act,
provided that such New Notes are acquired in the ordinary course of such
holders' business and such holders are not participating and have no
arrangement or understanding with any person to participate in the
distribution (within the meaning of the Securities Act) of such New Notes. If
the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of New Notes
and has no arrangement or understanding to participate in a distribution of
New Notes. If any holder is an affiliate of the Issuer or is engaged in or has
any arrangement or understanding with respect to the distribution of the New
Notes to be acquired pursuant to the Exchange Offer, such holder (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. If the undersigned is a broker-dealer that will receive New
Notes for its own account in exchange of Old Notes, it represents that the Old
Notes to be exchanged for the New Notes were acquired by it as a result of
market-making activities or other trading activities and acknowledges that it
will deliver a prospectus in connection with any resale of such New Notes;
however, by so acknowledging and by delivering a prospectus, the undersigned
will not be deemed to admit that it is an "underwriter" within the meaning of
Section 2(11) of the Securities Act.
The undersigned understands that the New Notes issued in consideration of
Old Notes accepted for exchange, and/or any principal amount of Old Notes not
tendered or not accepted for exchange, will only be issued in the name of the
Holder(s) appearing herein under "Description of Old Notes." Unless otherwise
indicated under "Special Delivery Instructions," please mail the New Notes
issued in consideration of Old Notes accepted for exchange, and/or any
principal amount of Old Notes not tendered or not accepted for exchange (and
accompanying documents, as appropriate), to the Holder(s) at the address(es)
appearing herein under "Description of Old Notes." In the event that the
Special Delivery Instructions are completed, please mail the New Notes issued
in consideration of Old Notes accepted for exchange, and/or any Old Notes for
any principal amount or liquidation preference not tendered or not accepted
for exchange, in the name of the Holder(s) appearing herein under "Description
of Old Notes," and send such New Notes and/or Old Notes to the address(es) so
indicated. Any transfer of Old Notes to a different holder must be completed
according to the provisions on transfer of Old Notes contained in the
Indentures.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD NOTES"
BELOW AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OLD NOTES
AS SET FORTH IN SUCH BOX BELOW.
4
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. Guarantee of Signatures. Signatures on this Letter of Transmittal or
notice of withdrawal, as the case maybe, must be guaranteed by an institution
which falls within the definition of "eligible guarantor institution"
contained in Rule 17Ad 15 as promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended (hereinafter,
an "Eligible Institution") unless (i) the Old Notes tendered hereby are
tendered by the Holder(s) of the Old Notes who has (have) not completed the
box entitled "Special Delivery Instructions" on this Letter of Transmittal or
(ii) the Old Notes are tendered for the account of an Eligible Institution.
2. Delivery of this Letter of Transmittal and Old Notes; Guaranteed Delivery
Procedures. This Letter of Transmittal is to be used: (i) by all Holders who
are not ATOP members, (ii) by Holders who are ATOP members but choose not to
use ATOP or (iii) if the Old Notes are to be tendered in accordance with the
guaranteed delivery procedures set forth in the Prospectus under "The Exchange
Offer--Guaranteed Delivery Procedures." To validly tender Old Notes, a Holder
must physically deliver a properly completed and duly executed Letter of
Transmittal (or facsimile thereof) with any required signature guarantees and
all other required documents to the Exchange Agent at its address set forth on
the cover of this Letter of Transmittal prior to the Expiration Date (as
defined below) or the Holder must properly complete and duly execute an ATOP
ticket in accordance with DTC procedures. Otherwise, the Holder must comply
with the guaranteed delivery procedures set forth in the next paragraph.
Notwithstanding anything to the contrary in the Registration Rights Agreement,
the term "Expiration Date" means 5:00 p.m., New York City time, on
, 1998 (or such later date to which the Issuer may, in its sole discretion,
extend the Exchange Offer). If this Exchange Offer is extended, the term
"Expiration Date" shall mean the latest time and date to which the Exchange
Offer is extended. The Issuer expressly reserves the right, at anytime or from
time to time, to extend the period of time during which the Exchange Offer is
open by giving oral (confirmed in writing) or written notice of such extension
to the Exchange Agent and by making a public announcement of such extension
prior to 12:00 p.m., New York City time, on the next business day after the
previously scheduled Expiration Date.
LETTERS OF TRANSMITTAL SHOULD NOT BE SENT TO THE ISSUER OR TO DTC.
If a Holder of the Old Notes desires to tender such Old Notes and time will
not permit such Holder's required documents to reach the Exchange Agent before
the Expiration Date, a tender may be effected if (a) the tender is made
through an Eligible Institution (as defined in the Prospectus); (b) on or
prior to the Expiration Date, the Exchange Agent receives from such Eligible
Institution a properly completed and duly executed Letter of Transmittal (or a
facsimile thereof) and Notice of Guaranteed Delivery (by telegram, facsimile
transmission, mail or hand delivery) setting forth the name and address of the
Holder of the Old Notes and the principal amount Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that within three New
York Stock Exchange trading days after the Expiration Date, any documents
required by the Letter of Transmittal will be deposited by the Eligible
Institution with the Exchange Agent; and (c) all other documents required by
the Letter of Transmittal are received by the Exchange Agent within three New
York Stock Exchange trading days after the Expiration Date. See "The Exchange
Offer--Guaranteed Delivery Procedures" as set forth in the prospectus.
Only a Holder of Old Notes may tender Old Notes in the Exchange Offer. The
term "Holder" as used herein with respect to the Old Notes means any person in
whose name Old Notes are registered on the books of the Trustee. If the Letter
of Transmittal or any Old Notes are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or
others acting in a fiduciary or representative capacity, such persons should
so indicate when signing, and, unless waived by the Issuer, proper evidence
satisfactory to the Issuer of their authority to so act must be so submitted.
5
<PAGE>
Any beneficial Holder whose Old Notes are registered in the name of his
broker, dealer, commercial bank, trust company or other nominee and who wishes
to validly surrender those Old Notes in the Exchange Offer should contact such
registered Holder promptly and instruct such registered holder to tender on
his behalf. If such beneficial Holder wishes to tender on his own behalf, such
beneficial Holder must, prior to completing and executing the Letter of
Transmittal, make appropriate arrangements to register ownership of the Old
Notes in such beneficial holder's name. It is the responsibility of the
beneficial holder to register ownership in his own name if he chooses to do
so. The transfer of record ownership may take considerable time.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF)
AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE EXCHANGING
HOLDER, but, except as otherwise provided below, the delivery will be deemed
made only when actually received or confirmed by the Exchange Agent. If sent
by mail, registered mail with return receipt requested, properly insured, is
recommended. In all cases, sufficient time should be allowed to assure timely
delivery to the Exchange Agent before the Expiration Date. No Letters of
Transmittal or Old Notes should be sent to the Issuer.
No alternative, conditional or contingent tenders will be accepted. All
tendering Holders, by execution of this Letter of Transmittal (or facsimile
hereof), waive any right to receive notice of acceptance of their Old Notes
for exchange.
3. Inadequate Space. If the space provided herein is inadequate, the
certificate numbers and principal amount of the Old Notes to which this Letter
of Transmittal relates should be listed on a separate signed scheduled
attached hereto.
4. Withdrawal of Tender. Tenders of Old Notes may be withdrawn at any time
prior to 5:00 p.m., New York City time, on the Expiration Date.
To be effective, a written or facsimile transmission notice of withdrawal
must (i) be received by the Exchange Agent at the address set forth herein
prior to 5:00 p.m., New York City time, on the Expiration Date; (ii) specify
the name of the person having tendered the Old Notes to be withdrawn; (iii)
identify the Old Notes to be withdrawn; and (iv) be (a) signed by the Holder
in the same manner as the original signature on the Letter of Transmittal by
which such Old Notes were tendered (including any required signature
guarantees) or (b) accompanied by evidence satisfactory to the Issuer that the
Holder withdrawing such tender has succeeded to beneficial ownership of such
Old Notes. If Old Notes have been tendered pursuant to the ATOP procedure with
DTC, any notice of withdrawal must otherwise comply with the procedures of
DTC. Old Notes properly withdrawn will thereafter be deemed not validly
tendered for purposes of the Exchange Offer; provided, however, that withdrawn
Old Notes may be retendered by again following one of the procedures described
herein at any time prior to 5:00 p.m., New York City time, on the Expiration
Date. All questions as to the validity, form and eligibility (including time
of receipt) of notice of withdrawal will be determined by the Issuer, whose
determinations will be final and binding on all parties. Neither the Issuers,
the Exchange Agent, nor any other person will be under any duty to give
notification of any defects or irregularities in any notice of withdrawal or
incur any liability for failure to give any such notification. The Exchange
Agent intends to use reasonable efforts to give notification of such defects
and irregularities.
5. Partial Tenders; Pro Rata Effect. Tenders of the Old Notes will be
accepted only in integral multiples of $1,000. If less than the entire
principal amount evidenced by any Old Notes is to be tendered, fill in the
principal amount that is to be tendered in the box entitled "Principal Amount
Tendered" below. The entire principal amount of all Old Notes delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise
indicated.
6. Signatures on this Letter of Transmittal; Bond Powers and
Endorsements. If this Letter of Transmittal is signed by the registered
Holder(s) of the Old Notes tendered hereby, the signature must correspond with
the name as written on the face of the certificate representing such Old Notes
without alteration, enlargement or any change whatsoever.
If any of the Old Notes tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
6
<PAGE>
If any of the Old Notes tendered hereby are registered in different names,
it will be necessary to complete, sign and submit as many separate copies of
this Letter of Transmittal and any necessary accompanying documents as there
are different registrations.
When this Letter of Transmittal is signed by the Holder(s) of Old Notes
listed and tendered hereby, no endorsements or separate bond powers are
required.
If this Letter of Transmittal is signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or
others acting in a fiduciary or representative capacity, such persons should
so indicate when signing, and, unless waived by the Issuer, proper evidence
satisfactory to the Issuer of their authority to so act must be submitted.
7. Special Delivery Instructions. Tendering Holders should indicate in the
applicable box the name and address to which New Notes issued in consideration
of Old Notes accepted for exchange, or Old Notes for principal amounts not
exchanged or not tendered, are to be sent, if different from the name and
address of the person signing this Letter of Transmittal.
8. Waiver of Conditions. The Issuer reserves the absolute right to waive any
of the specified conditions in the Exchange Offer, in whole at any time or in
part from time to time, in the case of any Old Notes tendered hereby. See "The
Exchange Offer--Conditions to the Exchange Offer" in the Prospectus.
9. Transfer Taxes. The Issuer will pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, New Notes and/or substitute Old Notes for principal amounts not
exchanged are to be delivered to any person other than the Holder of the Old
Notes or if a transfer tax is imposed for any reason other than the exchange
of Old Notes pursuant to the Exchange Offer, the amount of any such transfer
taxes (whether imposed in the registered Holder or any other persons) will be
payable by the tendering Holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted, the amount of such transfer
taxes will be billed directly to such tendering Holder.
10. Irregularities. All questions as to validity, form, eligibility
(including time of receipt), acceptance and withdrawal of tendered Old Notes
will be resolved by the Issuer whose determination shall be final and binding.
The Issuer reserves the absolute right to reject any or all tenders of any
particular Old Notes that are not in proper form, or the acceptance of which
would, in the opinion of the Issuer or its counsel, be unlawful. The Issuer
also reserves the absolute right to waive any defect, irregularity or
condition of tender with regard to any particular Old Notes. The Issuer's
interpretation of the terms of, and conditions to, the Exchange Offer
(including the instructions herein) will be final and binding. Unless waived,
any defects or irregularities in connection with tenders must be cured within
such time as the Issuer shall determine. Neither the Issuer nor the Exchange
Agent shall be under any duty to give notification of defects in such tenders
or shall incur any liability for failure to give such notification. The
Exchange Agent intends to use reasonable efforts to give notification of such
defects and irregularities. Tenders of Old Notes will be deemed to have been
made until all defects and irregularities have been cured or waived. Any Old
Notes received by the Exchange Agent that are not properly tendered and as to
which the irregularities have not been cured or waived will be returned by the
Exchange Agent to the tendering Holder, unless otherwise provided by this
Letter of Transmittal, as soon as practicable following the Expiration Date.
11. Interest on Exchanged Old Securities. Holders whose Old Notes are
accepted for exchange will not receive accrued interest thereon on the date of
exchange. Instead, interest accruing from the most recent date to which
interest has been paid on the Notes or, if no interest has been paid, November
5, 1997, through the Expiration Date will be payable in accordance with the
terms of the New Notes. See "The Exchange Offer--Acceptance of Old Notes for
Exchange; Delivery of New Notes" and "Description of the New Notes" as set
forth in the Prospectus.
12. Mutilated, Lost, Stolen or Destroyed Certificates. Holders whose
certificates for Old Notes have been mutilated, lost, stolen or destroyed
should contact the Exchange Agent at the address indicated above for further
instructions.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF), TOGETHER WITH
ALL REQUIRED DOCUMENTS, OR A NOTICE OF GUARANTEED DELIVERY, MUST BE RECEIVED
BY THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
7
<PAGE>
PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1 AND 7)
To be completed ONLY if the New Notes
issued in consideration of Old Notes
exchanged are to be mailed to someone
other than the undersigned or to the
undersigned at an address other than
that below.
Mail to:
Name: __________________________________
(Please Print)
Address: _______________________________
----------------------------------------
(Zip Code)
DESCRIPTION OF OLD NOTES
(SEE INSTRUCTIONS 2 AND 7)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES)
OF REGISTERED HOLDER(S) CERTIFICATE(S)
(PLEASE FILL IN, IN BLANK) (ATTACH ADDITIONAL SIGNED LIST, IF NECESSARY)
- ----------------------------------------------------------------------------------------------
AGGREGATE PRINCIPAL PRINCIPAL AMOUNT OF
AMOUNT OF OLD NOTES OLD NOTES TENDERED
EVIDENCED BY (MUST BE INTEGRAL
CERTIFICATE NUMBER(S) CERTIFICATE(S) MULTIPLES OF $1,000)
<S> <C> <C> <C>
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
TOTAL
</TABLE>
8
<PAGE>
(Boxes below to be checked by Eligible Institutions only)
[_] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution ______________________________________________
DTC Account Number__________________________________________________________
Transaction Code Number_____________________________________________________
[_] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF
TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE WITH FOLLOWING:
Names(s) of Registered Holder(s)____________________________________________
Window Ticket Number (if any)_______________________________________________
Date of Execution of Notice of Guaranteed Delivery__________________________
Name of Institution which Guaranteed Delivery_______________________________
If Guaranteed Delivery is to be made by Book-Entry Transfer:
Name of Tendering Institution_______________________________________________
DTC Account Number__________________________________________________________
Transaction Code Number_____________________________________________________
[_] CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED OLD NOTES
ARE TO BE RETURNED BY CREDITING THE DTC ACCOUNT NUMBER SET FORTH ABOVE.
[_] CHECK HERE IF YOUR ARE A BROKER-DEALER WHO ACQUIRED THE OLD NOTES FOR ITS
OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES (A
"PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF
THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name____________________________________________________________________________
Address_________________________________________________________________________
- --------------------------------------------------------------------------------
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
9
<PAGE>
PLEASE SIGN HERE
WHETHER OR NOT OLD NOTES ARE BEING
PHYSICALLY TENDERED HEREBY
X _______________________________ ------------
X _______________________________ ------------
SIGNATURE(S) OF OWNER(S) DATED
OF AUTHORIZED SIGNATORY
Area Code and Telephone Number: ___________________________________________
This box must be signed by registered holder(s) of Old Notes as their
name(s) appear(s) on certificate(s) for Old Notes hereby tendered or on a
security position listing, or by any person(s) authorized to become
registered holder(s) by endorsement and documents transmitted with this
Letter (including such opinions of counsel, certifications and other
information as may be required by the Issuer or the Trustee (as defined in
the Prospectus) for the Old Notes to comply with the restrictions on
transfer applicable to the Old Notes). If signature is by an attorney-in-
fact, trustee, executor, administrator, guardian, officer or other person
acting in a fiduciary or representative capacity, such person must set
forth his or her full title below.
Name(s) ___________________________________________________________________
---------------------------------------------------------------------------
(Please Print)
Capacity (full title) _____________________________________________________
Address ___________________________________________________________________
---------------------------------------------------------------------------
(Include Zip Code)
Tax Identification or Social Security Number(s) ___________________________
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 6 TO DETERMINE IF REQUIRED)
---------------------------------------------------------------------------
Authorized Signature
---------------------------------------------------------------------------
Name
---------------------------------------------------------------------------
Name of Firm
---------------------------------------------------------------------------
Title
---------------------------------------------------------------------------
Address
10
<PAGE>
NOTICE OF GUARANTEED DELIVERY
FOR
ELGIN NATIONAL INDUSTRIES, INC.
This Notice of Guaranteed Delivery, or one substantially equivalent to this
form, must be used to accept the Exchange Offer (as defined below) of Elgin
National Industries, Inc. (the "Issuer") made pursuant to the Prospectus,
dated , 1998 (as the same may be amended or supplemented from time
to time, the "Prospectus"), and the related Letter of Transmittal (the "Letter
of Transmittal") if the Letter of Transmittal and all other required documents
cannot be delivered or transmitted by facsimile transmission, mail or hand
delivery to Norwest Bank Minnesota, National Association (the "Exchange
Agent") on or prior to 5:00 p.m., New York City time, on the Expiration Date
(as defined in the Prospectus) or the procedures for delivery by book-entry
transfer cannot be completed on a timely basis. See "The Exchange Offer--
Guaranteed Delivery Procedures" section in the Prospectus. The term "Old
Notes" means the Company's outstanding 11% Series A Senior Notes due 2007 with
contingent interest.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON , 1998 (UNLESS EXTENDED) (THE
"EXPIRATION DATE"), TENDERED OLD NOTES MAY BE WITHDRAWN AT ANY
TIME ON OR PRIOR TO THE EXPIRATION DATE OF THE EXCHANGE OFFER.
Deliver to: Norwest Bank Minnesota, National Association, Exchange Agent:
By Registered or Certified Mail: By Hand Delivery:
Norwest Bank Minnesota, National
Association
Norwest Bank Minnesota, National
Association Northstar East 12th Floor
P.O. Box 1517 608 2nd Avenue
Minneapolis, Minnesota 55480-1517 Minneapolis, Minnesota 55479-0113
Attention: Corporate Trust Attention: Corporate Trust
Operations 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 THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF THIS NOTICE OF GUARANTEED DELIVERY VIA
FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A
VALID DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an "Eligible Institution" under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the
signature box on the Letter of Transmittal.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to the Issuers, upon the terms and conditions
set forth in the Prospectus and the Letter of Transmittal (which together
constitute the "Exchange Offer"), receipt of which are hereby acknowledged,
the aggregate principal amount of Old Notes set forth below pursuant to the
guaranteed delivery procedure described in "The Exchange Offer--Guaranteed
Delivery Procedures" section in the Prospectus and the Letter of Transmittal.
Principal Amount of Old Notes Signature(s) ________________________
Tendered $__________________________
-------------------------------------
Certificate Nos. Please Print the Following
Information
(if available) _____________________
Name(s) of Registered Holders _______
Total Principal Amount -------------------------------------
Represented by Old Notes Address _____________________________
Certificate(s) _____________________
-------------------------------------
If Old Notes will be tendered by Area Code and Telephone Number(s) ___
book-entry transfer, provide the
following information:
-------------------------------------
DTC Account Number __________________
Dated: ____________, 1997
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm or entity identified in Rule 17Ad-15 under the
Securities Exchange Act of 1934, as amended, as an "eligible guarantor
institution," hereby guarantees to deliver to the Exchange Agent, at its
address set forth above, either the Old Notes tendered hereby in proper form
for transfer, or confirmation of the book-entry transfer of such Old Notes
pursuant to the procedures for book-entry transfer set forth in the
Prospectus, in either case together with a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, and any other documents required by the Letter of
Transmittal within three New York Stock Exchange trading days after the date
of execution of this Notice of Guaranteed Delivery.
Name of Firm ________________________
-------------------------------------
Address _____________________________ (Authorized Signature)
Name ________________________________
- -------------------------------------
Zip Code Date ________________________________
Area Code andTelephone Number _______
2
