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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 17, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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ICO, INC.
(Exact name of Registrant as specified in its charter)
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TEXAS 1389 75-1619554
(STATE OF OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
JON C. BIRO
SENIOR VICE PRESIDENT AND TREASURER
11490 WESTHEIMER, SUITE 1000 11490 WESTHEIMER, SUITE 1000
HOUSTON, TEXAS 77077 HOUSTON, TEXAS 77077
(281) 721-4200 (281) 721-4200
(Address, including zip code, and telephone (Name, Address, including zip code, and
number, including area code, of telephone number, including area code,
registrant's principal executive offices) of agent for service)
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Copy to:
T. MARK KELLY
VINSON & ELKINS L.L.P.
2300 FIRST CITY TOWER
1001 FANNIN STREET
HOUSTON, TEXAS 77002-6760
(713) 758-4592
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable following the effectiveness 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. [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE MAXIMUM OFFERING PRICE MAXIMUM AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED PER NOTE(1) OFFERING PRICE(1) REGISTRATION FEE
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10 3/8% Senior Notes due 2007 $120,000,000 100% $120,000,000 $36,364
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(1) Estimated solely for the purpose of calculating the registration fee.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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PROSPECTUS
ICO, INC.
OFFER TO EXCHANGE
10 3/8% SENIOR NOTES DUE 2007, SERIES B
FOR ALL OUTSTANDING 10 3/8% SENIOR NOTES DUE 2007, SERIES A
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME,
ON , 1997, UNLESS EXTENDED
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ICO, Inc., a Texas corporation (the "Company"), hereby offers, upon the
terms and subject to the conditions set forth in this Prospectus and the
accompanying letter of transmittal (the "Letter of Transmittal," and together
with this Prospectus, the "Exchange Offer"), to exchange $1,000 principal amount
of its 10 3/8% Senior Notes due 2007, Series B (the "Exchange Notes"), which
have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to a Registration Statement (as defined herein) of
which this Prospectus constitutes a part, for each $1,000 principal amount of
its outstanding 10 3/8% Senior Notes due 2007, Series A (the "Old Notes"), of
which $120,000,000 principal amount is outstanding. The form and terms of the
Exchange Notes are identical in all material respects to the form and terms of
the Old Notes except for certain transfer restrictions and registration rights
relating to the Old Notes. The Exchange Notes will evidence the same debt as the
Old Notes and will be issued under and be entitled to the benefits of the
Indenture (as defined herein). The Exchange Notes and the Old Notes are
collectively referred to herein as the "Notes."
The Notes are senior unsecured obligations of the Company ranking pari
passu in right of payment with all existing and future Senior Indebtedness of
the Company, and senior in right of payment to all existing and future
Subordinated Indebtedness of the Company. Under certain circumstances, any
existing or future Restricted Subsidiaries of the Company will be obligated to
guarantee the Notes. See "Description of Notes -- Guarantees of Certain
Indebtedness". The obligation of the Restricted Subsidiaries under such
guarantees will be senior unsecured obligations of such Restricted Subsidiaries
which will rank pari passu with all existing and future unsecured Senior
Indebtedness of such Guarantor and senior in right of payment to all future
Subordinated Indebtedness of such Guarantor.
The Company will accept for exchange any and all Old Notes that are validly
tendered on or prior to 5:00 p.m., New York City time, on the date the Exchange
Offer expires, which will be , 1997, unless the Exchange Offer is
extended. See "The Exchange Offer -- Expiration Date; Extensions; Amendment."
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New York
City time, on the business day prior to the Expiration Date (as defined herein),
unless previously accepted for exchange. 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 which may be waived
by the Company and to the terms and provisions of the Registration Rights
Agreement (as defined herein). Old Notes may be tendered only in denominations
of $1,000 principal amount and integral multiples thereof. The Company has
agreed to pay the expenses of the Exchange Offer. See "The Exchange Offer."
(cover continued on next page)
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See "Risk Factors" beginning on Page 13 of this Prospectus for a discussion
of certain factors that should be considered in connection with the Exchange
Offer.
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.
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The date of this Prospectus is June 17, 1997.
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The Exchange Notes will bear interest at the rate of 10 3/8% per annum,
payable semi-annually on June 1 and December 1 of each year, commencing December
1, 1997. Holders of Exchange Notes of record on November 15, 1997 will receive
interest on December 1, 1997 from the date of issuance of the Exchange Notes,
plus an amount equal to the accrued interest on the Old Notes from the date of
issuance of the Old Notes, June 9, 1997, to the date of exchange thereof.
Interest on the Old Notes accepted for exchange will cease to accrue upon
issuance of the Exchange Notes.
The Old Notes were sold by the Company on June 9, 1997 to the Initial
Purchaser (as defined herein) in a transaction not registered under the
Securities Act in reliance upon Section 4(2) of the Securities Act. The Old
Notes were thereupon offered and sold by the Initial Purchaser only to
"qualified institutional buyers" (as defined in Rule 144A under the Securities
Act) and to a limited number of institutional "accredited investors" (as defined
in Rule 501(a)(1), (2), (3) or (7) under the Securities Act), each of whom
agreed to comply with certain transfer restrictions and other conditions.
Accordingly, the Old Notes may not be offered, resold or otherwise transferred
unless registered under the Securities Act or unless an applicable exemption
from the registration requirements of the Securities Act is available. The
Exchange Notes are being offered hereunder in order to satisfy the obligations
of the Company under the Registration Rights Agreement entered into with the
Initial Purchaser in connection with the offering of the Old Notes. See "The
Exchange Offer" and "Description of Notes -- Registration Rights; Liquidated
Damages."
Based on no-action letters issued by the staff of the Securities and
Exchange Commission (the "Commission" or "SEC") to third parties, including
Exxon Capital Holdings Corporation, SEC No-Action Letter (available April 13,
1989), Morgan Stanley & Co. Inc., SEC No-Action Letter (available June 5, 1991)
(the "Morgan Stanley Letter") and Mary Kay Cosmetics, Inc., SEC No-Action Letter
(available June 5, 1991), the Company believes that the Exchange Notes issued
pursuant to the Exchange Offer may be offered for resale, resold and otherwise
transferred by the respective holders thereof (other than a "Restricted Holder,"
being (i) a broker-dealer who purchased Old Notes exchanged for such Exchange
Notes directly from the Company to resell pursuant to Rule 144A or any other
available exemption under the Securities Act or (ii) a person that is an
affiliate of the Company within the meaning of Rule 405 under the Securities
Act), without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such Exchange Notes are acquired
in the ordinary course of such holder's business and such holder is not
participating in, and has no arrangement with any person to participate in, the
distribution (within the meaning of the Securities Act) of such Exchange Notes.
Eligible holders wishing to accept the Exchange Offer must represent to the
Company that such conditions have been met. Holders who tender Old Notes in the
Exchange Offer with the intention to participate in a distribution of the
Exchange Notes may not rely upon the Morgan Stanley Letter or similar no-action
letters. See "The Exchange Offer -- General." Each broker-dealer that receives
Exchange Notes for its own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. A broker-dealer that delivers such a prospectus to
purchasers in connection with such resales will be subject to certain of the
civil liability provisions under the Securities Act and will be bound by the
provisions of the Registration Rights Agreement (including certain
indemnification rights and obligations). This Prospectus, as it may be amended
or supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for 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 it will make
this Prospectus and any amendment or supplement to this Prospectus available to
any broker-dealer for use in connection with any such resale for a period of up
to 180 days after consummation of the Exchange Offer. See "Plan of
Distribution."
The Company will not receive any proceeds from the Exchange Offer.
The Exchange Notes will constitute a new issue of securities with no
established trading market, and there can be no assurance as to the liquidity of
any markets that may develop for the Exchange Notes or as to the ability of or
price at which the holders of Exchange Notes would be able to sell their
Exchange Notes. Future trading prices of the Exchange Notes will depend on many
factors, including, among others, prevailing interest rates, the Company's
operating results and the market for similar securities. The Company does not
intend to apply for listing of the Exchange Notes on any securities exchange.
Bear, Stearns & Co. Inc. (the
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"Initial Purchaser") has informed the Company that it currently intends to make
a market for the Exchange Notes as permitted by applicable law and regulation.
However, it is not so obligated, and any such market making may be discontinued
at any time without notice. Accordingly, no assurance can be given that an
active public or other market will develop for the Exchange Notes or as to the
liquidity of or the trading market for the Exchange Notes.
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THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH
THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
TABLE OF CONTENTS
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PAGE NO.
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Available Information....................................... 4
Disclosure Regarding Forward Looking Statements............. 5
Incorporation of Certain Documents by Reference............. 5
Prospectus Summary.......................................... 7
Risk Factors................................................ 13
The Company................................................. 20
Private Placement........................................... 22
Use of Proceeds............................................. 22
Capitalization.............................................. 23
Selected Historical Financial Data.......................... 24
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 26
Business.................................................... 34
Unaudited Pro Forma Condensed Consolidated Financial Data... 46
The Exchange Offer.......................................... 53
Description of Certain Credit Facilities.................... 60
Description of Notes........................................ 61
Description of Capital Stock................................ 91
Certain Federal Income Tax Consequences..................... 93
Plan of Distribution........................................ 96
Transfer Restrictions on Old Notes.......................... 98
Legal Matters............................................... 100
Experts..................................................... 101
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy and information statements and other information
with the Commission. Such reports, proxy and information statements and other
information can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the following regional offices of the
Commission: Seven World Trade Center, Suite 1300, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such materials can be obtained by mail from the Public
Reference Section of the Commission, at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. In addition, the Commission
maintains a site on the World Wide Web that contains reports, proxy and
information statements and other information filed electronically by the Company
with the Commission which can be accessed over the Internet at
http://www.sec.gov. The Company's Common Stock is traded on The Nasdaq Stock
Market National Market System under the trading symbol "ICOC" and such reports,
proxy statements and other information concerning the Company may also be
inspected at the offices of the Nasdaq National Market, 1735 K Street, N.W.,
Washington, D.C. 20006. While any Old Notes remain outstanding, the Company will
make available, upon request, to any holder and any prospective purchaser of Old
Notes, the information required pursuant to Rule 144A(d)(4) under the Securities
Act during any period in which the Company is not subject to Section 13 or 15(d)
of the Exchange Act. Any such request should be directed to Jon C. Biro, Senior
Vice President and Treasurer of the Company, 11490 Westheimer, Suite 1000,
Houston, Texas 77077.
This Prospectus constitutes part of a registration statement on Form S-4
(herein, together with all amendments and exhibits, referred to as the
"Registration Statement") filed by the Company with the
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Commission under the Securities Act. This Prospectus does not contain certain of
the information set forth in the Registration Statement. Reference is hereby
made to the Registration Statement and to the exhibits relating thereto for
further information with respect to the Company and the securities offered
hereby. Statements contained herein concerning the provisions of contracts or
other documents are not necessarily complete, and each such statement is
qualified in its entirety by reference to the copy of the applicable contract or
other document filed with the Commission. Copies of the Registration Statement
and the exhibits thereto are on file at the offices of the Commission and may be
obtained upon payment of the fee prescribed by the Commission, or may be
examined without charge at the public reference facilities of the Commission
described above.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus includes (or incorporates by reference) "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities Act") and Section 21E of the Exchange Act. Certain
statements contained in this Prospectus, including without limitation,
statements containing the words "believes," "anticipates," "intends," "expects"
and words of similar import, constitute "forward-looking statements." Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that 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:
general economic and business conditions, both domestic and foreign; industry
capacity; management of growth; development of products; proprietary rights;
demographic changes; existing government regulations and changes in, or the
failure to comply with, government regulations; liability and other claims
asserted against the Company; competition; the loss of any significant
customers; changes in operating strategy or development plans; the ability to
attract and retain qualified personnel; the significant indebtedness of the
Company as a result of the sale of the Old Notes; the availability and terms of
capital to fund the expansion of the Company's business; 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 "Prospectus Summary," "Risk Factors," "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 result of any
revisions to any of the forward-looking statements contained herein to reflect
future events or developments.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates by reference in this Prospectus the
following documents, which have been filed with the Commission pursuant to the
Exchange Act: (i) the Company's Current Report on Form 8-K dated April 30, 1996
and the amendment thereto dated July 15, 1996 (Commission file no. 0-10068),
(ii) the Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1996; (iii) the Company's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1996; (iv) the Company's Proxy Statement dated
January 24, 1997 for the Annual Meeting of Shareholders held March 3, 1997; (v)
the Company's Quarterly Report on Form 10-Q for the six months ended March 31,
1997; (vi) the Company's Current Report on Form 8-K filed May 12, 1997; and
(vii) the Company's Current Report on Form 8-K filed June 4, 1997.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering made by the Prospectus shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from the
date of such documents.
Any statement contained in a document incorporated by reference shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any subsequently filed
incorporated document or in any accompanying prospectus supplement modifies or
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supersedes such statement (but not to the extent that any statement and any such
other filed document is only summarized herein or in any other subsequently
filed document). Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon the written or oral request of such person, a copy
of any or all of the documents referred to above which have been or may be
incorporated by reference, not including exhibits to the information that has
been incorporated by reference unless such exhibits are specifically
incorporated by reference into the information that this Prospectus
incorporates. Requests for such copies should be directed to Jon C. Biro, Senior
Vice President and Treasurer, ICO, Inc., 11490 Westheimer, Suite 1000, Houston,
Texas 77077; telephone number (281) 721-4200.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS AND THE ACCOMPANYING LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE EXCHANGE AGENT. NEITHER THE DELIVERY OF THIS
PROSPECTUS OR THE ACCOMPANYING LETTER OF TRANSMITTAL, OR BOTH TOGETHER, NOR ANY
EXCHANGE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT SURRENDERS
FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH THE
EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
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PROSPECTUS SUMMARY
The following summary information is qualified in its entirety by, and
should be read in conjunction with, the more detailed information and financial
data, including the "Selected Historical Financial Data", "Unaudited Pro Forma
Condensed Consolidated Financial Data" and Consolidated Financial Statements and
notes thereto, each included elsewhere in this Prospectus or incorporated by
reference herein. Unless the context otherwise requires or as otherwise stated,
for purposes of this Prospectus the "Company" or "ICO" refers to ICO, Inc. and
its wholly-owned subsidiaries. References to a "fiscal year" refer to the
Company's fiscal year which ends on September 30 (e.g., "fiscal 1996" means the
Company's fiscal year ended September 30, 1996), and all numbers presented in
the text have been rounded to the nearest increment.
THE COMPANY
The Company provides specialized oilfield services and petrochemical
processing services. The Company operates in the United States, Canada and
Europe, and has grown through a combination of internal growth and fourteen
acquisitions since the beginning of fiscal 1994. On a consolidated basis, pro
forma for the fiscal 1996 and fiscal 1997 acquisitions of Wedco Technology, Inc.
("Wedco"), Bayshore Industrial, Inc. ("Bayshore") and Rotec Chemicals Ltd.
("Rotec") as if they had occurred at the start of the period, ICO would have
reported net revenues of $172.2 million and Adjusted EBITDA (as defined) of
$20.3 million for the year ended September 30, 1996 and would have reported net
revenues of $95.3 million and EBITDA of $12.3 million for the six months ended
March 31, 1997. See "Unaudited Pro Forma Condensed Consolidated Financial Data."
The Company is a leading provider of oilfield services designed to reduce
the customers' cost of drilling and production by preventing faulty tubular
goods from being placed downhole (exploration services), reclaiming and
reconditioning used tubular goods and sucker rods (production services), and
preventing premature failure of tubular goods and sucker rods from occurring due
to the corrosive downhole drilling environment (corrosion control services).
Although comprehensive industry statistics are not readily available, ICO
believes it is one of the two largest providers of inspection, reconditioning
and coating services for tubular goods in the United States. The Company's
customers in the oilfield services segment include several of the leading
integrated oil companies and major independent oil and gas exploration and
production companies.
In the petrochemical processing segment, the Company provides specialty
size reduction services and manufactures and distributes concentrates for use in
petrochemical products. The Company's size reduction services and concentrates
manufacturing operations are an intermediate step between the primary production
of petrochemical resins and the final manufacture of a wide variety of end
products, such as paint, garbage bags or objects made of plastic. The Company's
size reduction services involve the grinding of pellets into smaller sizes or
the blending of petrochemical pellets with other additives or fillers, while the
Company's concentrates manufacturing operations produce additives, which, when
blended into resin, give end products desired properties such as flame
retardance, color, ultraviolet stabilization or adhesion.
From the beginning of fiscal 1994 through the middle of fiscal 1996, ICO
completed and integrated eight acquisitions in the oilfield services segment
which increased its market share and expanded its service capabilities. In April
1996, the Company entered the petrochemical processing industry through the
acquisition of Wedco to take advantage of opportunities in that market. ICO
believes that the petrochemical processing segment presents consolidation
opportunities similar to those which existed in the oilfield services segment on
which ICO capitalized in the early 1990's. Since the Wedco acquisition, the
Company has completed five additional acquisitions in the petrochemical
processing industry and is in the process of consolidating three manufacturing
facilities to reduce operating costs and capital expenditure requirements.
The Company seeks growth through internal expansion, capital investments
and acquisitions. The primary focus of the Company's growth strategy is to (i)
increase its penetration of the oilfield services segment by continuing to
introduce new products that meet customers needs and utilizing technology to
develop innovative solutions for customers, (ii) continue to consolidate certain
segments of the petrochemical
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processing market through acquisitions, (iii) expand its business of
international distribution of certain petrochemical products, and (iv)
selectively pursue complementary acquisitions in the oilfield services business.
RECENT DEVELOPMENTS
In March 1997, ICO entered into a supply agreement with Borealis A.S., a
joint venture of two large petrochemical companies in Europe ("Borealis"), and
effective April 1, 1997, the Company acquired the micropowders distribution
business (the "Micropowders Business") of Exxon Chemical Belgium ("Exxon
Chemical Belgium"). The Company also purchased inventory from Exxon Chemical
Belgium and entered into a supply agreement with Exxon Chemical Holland ("Exxon
Chemical Holland")to acquire inventories in the future at contracted prices. The
Company believes that these agreements complement its existing European
operations by allowing for the distribution of rotational molding powders
throughout Europe under the ICO Polymers name.
On April 30, 1997 the Company completed the acquisition of Rotec, an
English manufacturer of specialized color concentrates and compounds, primarily
for the rotational molding industry. Rotec distributes the products it
manufactures to customers in Europe under its own brand name, and it has a sales
force of three persons and a facility located in Rushden, England. The Company
believes that the Rotec acquisition will enhance its distribution capabilities
in Europe and will offer it opportunities to provide its United States
rotational molding customers with products currently sold by Rotec.
In addition, on May 5, 1997 the Company acquired the remaining 50% interest
in Micronyl-Wedco S.A. ("Micronyl"), a joint venture previously established by
Wedco to perform size reduction operations in France, from its local management
joint venture partner. Micronyl operates two size reduction facilities in France
which perform services similar to those performed by other Wedco units.
THE PRIVATE PLACEMENT AND USE OF PROCEEDS
The Old Notes were sold by the Company on June 9, 1997 to the Initial
Purchaser and were thereupon offered and sold by the Initial Purchaser only to
certain qualified buyers. The Company intends to use the $115.5 million net
proceeds received by the Company in connection with the sale of the Old Notes to
(i) repay the balance of certain of the Company's outstanding indebtedness,
estimated at $17.2 million, and (ii) finance capital expenditures in its
petrochemical processing business segment, estimated at $8.2 million. The
balance of the net proceeds of the sale of the Old Notes is intended to be used
for general corporate purposes, including capital expenditures and acquisitions.
See "Private Placement" and "Capitalization."
THE EXCHANGE OFFER
The Exchange Offer relates to the exchange of up to $120,000,000 principal
amount of Exchange Notes for up to $120,000,000 principal amount of Old Notes.
The form and terms of the Exchange Notes are identical in all material respects
to the form and terms of the Old Notes except that the Exchange Notes have been
registered under the Securities Act and will not contain certain transfer
restrictions and hence are not entitled to the benefits of the Registration
Rights Agreement relating to the contingent increases in the interest rate
provided for pursuant thereto. The Exchange Notes will evidence the same debt as
the Old Notes and will be issued under and be entitled to the benefits of the
Indenture governing the Old Notes. See "Description of the Notes."
The Exchange Offer......... Each $1,000 principal amount of Exchange Notes will
be issued in exchange for each $1,000 principal
amount of outstanding Old Notes. As of the date
hereof, $120,000,000 principal amount of Old Notes
are issued and outstanding. The Company will issue
the Exchange Notes to tendering holders of Old
Notes on or promptly after the Expiration Date.
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Resale..................... The Company believes that the Exchange Notes issued
pursuant to the Exchange Offer generally will be
freely transferable by the holders thereof without
registration or any prospectus delivery requirement
under the Securities Act, except for certain
Restricted Holders who may be required to deliver
copies of this Prospectus in connection with any
resale of the Exchange Notes issued in exchange for
such Old Notes. See "The Exchange Offer -- General"
and "Plan of Distribution."
Expiration Date............ 5:00 p.m., New York City time, on ,
1997, unless the Exchange Offer is extended, in
which case the term "Expiration Date" means the
latest date to which the Exchange Offer is
extended. See "The Exchange Offer -- Expiration
Date; Extensions; Amendments."
Interest on the Notes...... The Exchange Notes will bear interest payable
semi-annually on June 1 and December 1 of each
year, commencing December 1, 1997. Holders of
Exchange Notes of record on November 15, 1997 will
receive interest on December 1, 1997 from the date
of issuance of the Exchange Notes, plus an amount
equal to the accrued interest on the Old Notes from
the date of issuance of the Old Notes, June 9,
1997, to the date of exchange thereof.
Consequently, holders who exchange their Old Notes
for Exchange Notes will receive the same interest
payment on December 1, 1997 that they would have
received had they not accepted the Exchange Offer.
Interest on the Old Notes accepted for exchange
will cease to accrue upon issuance of the Exchange
Notes. See "The Exchange Offer -- Interest on the
Exchange Notes."
Procedures for Tendering
Old Notes.................. Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile, or an
Agent's Message (as defined herein) together with
the Old Notes to be exchanged and any other
required documentation to the Exchange Agent at the
address set forth herein and therein or effect a
tender of Old Notes pursuant to the procedures for
book-entry transfer as provided for herein. See
"The Exchange Offer -- Procedures for Tendering."
Special Procedures for
Beneficial Holders......... Any beneficial holder whose Old Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and
who wishes to tender in the Exchange Offer should
contact such registered holder promptly and
instruct such registered holder to tender on the
beneficial holder's behalf. If such beneficial
holder wishes to tender directly, such beneficial
holder must, prior to completing and executing the
Letter of Transmittal and delivering the Old Notes,
either make appropriate arrangements to register
ownership of the Old Notes in such holder's name or
obtain a properly completed bond power from the
registered holder. The transfer of record ownership
may take considerable time. See "The Exchange
Offer -- Procedures for Tendering."
Guaranteed Delivery
Procedures................. Holders of Old Notes who wish to tender their Old
Notes and whose Old Notes are not immediately
available or who cannot deliver their Old Notes and
a properly completed Letter of Transmittal or any
other documents required by the Letter of
Transmittal to the Exchange Agent
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prior to the Expiration Date, or who cannot
complete the procedure for book-entry transfer on a
timely basis and deliver an Agent's Message, may
tender their Old Notes according to the guaranteed
delivery procedures set forth in "The Exchange
Offer -- Guaranteed Delivery Procedures."
Withdrawal Rights.......... Tenders of Old Notes may be withdrawn at any time
prior to 5:00 p.m., New York City time, on the
business day prior to the Expiration Date, unless
previously accepted for exchange. See "The Exchange
Offer -- Withdrawal of Tenders."
Termination of the Exchange
Offer.................... The Company may terminate the Exchange Offer if it
determines that the Exchange Offer violates any
applicable law or interpretation of the staff of
the SEC. Holders of Old Notes will have certain
rights against the Company under the Registration
Rights Agreement should the Company fail to
consummate the Exchange Offer. See "The Exchange
Offer -- Termination" and "Description of the
Notes -- Registration Rights; Liquidated Damages."
Acceptance of Old Notes and
Delivery of Exchange
Notes.................... Subject to certain conditions (as summarized above
in "Termination of the Exchange Offer" and
described more fully in "The Exchange
Offer -- Termination"), the Company will accept for
exchange any and all Old Notes which are properly
tendered in the Exchange Offer prior to 5:00 p.m.,
New York City time, on the Expiration Date. The
Exchange Notes issued pursuant to the Exchange
Offer will be delivered promptly following the
Expiration Date. See "The Exchange Offer --
General."
Exchange Agent............. Fleet National Bank is serving as exchange agent
(the "Exchange Agent") in connection with the
Exchange Offer. The mailing address of the Exchange
Agent is: Fleet National Bank, Corporate Trust
Operations, 777 Main Street, Lower Level, CTMO
0224, Hartford, Connecticut 06115, Attn: Patricia
Williams. Hand deliveries and deliveries by
overnight courier should be addressed to Fleet
National Bank, Corporate Trust Operations, 777 Main
Street, Lower Level, Hartford, Connecticut 06115,
Attn: Patricia Williams. For information with
respect to the Exchange Offer, the telephone number
for the Exchange Agent is (860) 986-1271 and the
facsimile number for the Exchange Agent is (860)
986-7908. See "The Exchange Offer -- Exchange
Agent."
Use of Proceeds............ There will be no cash proceeds payable to the
Company from the issuance of the Exchange Notes
pursuant to the Exchange Offer. See "Use of
Proceeds." For a discussion of the use of the net
proceeds received by the Company from the sale of
the Old Notes, see "Private Placement."
TERMS OF THE NOTES
Notes Outstanding.......... $120 million principal amount of 10 3/8% Senior
Notes due 2007.
Maturity Date.............. June 1, 2007.
Interest Payment Dates..... June 1 and December 1 of each year, commencing
December 1, 1997.
Optional Redemption........ The Notes are redeemable at the option of the
Company, in whole or in part, at any time on or
after June 1, 2002 at the redemption prices set
forth herein, plus accrued and unpaid interest and
Liquidated Damages,
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if any, thereon to the date of redemption, or at
the Make-Whole Price plus accrued and unpaid
interest to the date of redemption if redeemed
prior to June 1, 2002. In addition, the Company
may, at its option, redeem prior to June 1, 2000 up
to 35% of the aggregate principal amount of the
Notes at 110.375% of the principal amount thereof,
plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the date of redemption,
from the net proceeds of one or more Equity
Offerings, provided that at least $78 million the
aggregate principal amount of the Notes remains
outstanding following each such redemption. See
"Description of Notes -- Optional Redemption."
Mandatory Redemption....... None, except as set forth below under "Change of
Control Offer" and in the case of an asset sale
offer. See "Description of Notes -- Limitation on
Sale of Assets."
Change of Control Offer.... Upon the occurrence of a Change of Control, the
Company will be required, subject to certain
conditions, to offer to repurchase all or any part
of the outstanding Notes at 101% of the principal
amount thereof, plus accrued and unpaid interest
and Liquidated Damages, if any, thereon to the date
of repurchase. See "Description of Notes -- Change
of Control."
Ranking.................... The Notes are senior unsecured obligations of the
Company ranking pari passu in right of payment with
all existing and future Senior Indebtedness of the
Company, and senior in right of payment to all
existing and future Subordinated Indebtedness of
the Company. At March 31, 1997, after giving pro
forma effect to the acquisition of Rotec, the sale
of the Old Notes and the application of the
proceeds therefrom, the Company would have had $1.4
million of indebtedness that would rank pari passu
with the Notes, $900,000 of which is secured and
would effectively rank senior to the Notes in right
of payment. In addition, at March 31, 1997 the
Company would have had $14.6 million available for
borrowing under the Bank Credit Facility on the
same pro forma basis. The Notes will be effectively
subordinated to the liabilities of the Company's
subsidiaries, including trade payables. At March
31, 1997, on the same pro forma basis, the
Company's subsidiaries would have had $11.3 million
of indebtedness that would be effectively senior to
the Notes. See "Description of Notes -- Ranking."
Certain Covenants.......... The Indenture governing the Notes (the "Indenture")
contains certain covenants, including, but not
limited to, covenants limiting the Company and its
Subsidiaries with respect to the following: (i)
asset sales; (ii) the incurrence of additional
indebtedness; (iii) liens; (iv) issuance of certain
preferred stock; (v) mergers and consolidations;
(vi) payment restrictions affecting subsidiaries;
(vii) dividends, investments and other restricted
payments; (viii) transactions with affiliates; and
(ix) issuance or sale of equity interests in
subsidiaries. See "Description of Notes -- Certain
Covenants."
Use of Proceeds of Old
Notes...................... The Company intends to use the net proceeds of the
sale of the Old Notes (approximately $115.5
million) to (i) repay the balance of certain of the
Company's outstanding indebtedness, estimated at
$17.2 million, and (ii) finance capital
expenditures in its petrochemical processing
business segment, estimated at $8.2 million. The
balance of the net proceeds of the sale of the Old
Notes is intended to be used for general
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<PAGE> 13
corporate purposes, including capital expenditures
and acquisitions. See "Capitalization".
Transfer Restrictions...... The Old Notes were not registered under the
Securities Act and unless so registered may not be
offered or sold except pursuant to an exemption
from, or in a transaction not subject to, the
registration requirements of the Securities Act.
See "Transfer Restrictions on Old Notes".
Exchange Offer............. Pursuant to a registration rights agreement (the
"Registration Rights Agreement") by and between the
Company and the Initial Purchaser, the Company has
agreed to (i) file a registration statement with
the Commission (the "Exchange Offer Registration
Statement") with respect to an offer to exchange
the Old Notes (the "Exchange Offer") for senior
debt securities of the Company with terms
substantially identical to the Old Notes (the "New
Notes") (except that the New Notes generally will
not contain terms with respect to transfer
restrictions) within 60 days after the date of
original issuance of the Old Notes, June 9, 1997,
and (ii) use its best efforts to cause such
registration statement to become effective under
the Securities Act within 120 days after such issue
date. The Registration Statement of which this
Prospectus is a part constitutes such Exchange
Offer Registration Statement. In the event that
applicable law or interpretations of the staff of
the Commission do not permit the Company to effect
the Exchange Offer, or if certain holders of the
Notes notify the Company that they are not
permitted to participate in, or would not receive
freely tradeable Notes pursuant to, the Exchange
Offer, the Company will use its best efforts to
cause to become effective a registration statement
(the "Shelf Registration Statement") with respect
to the resale of the Old Notes and to keep the
Shelf Registration Statement effective until two
years after the date of original issuance of the
Old Notes. The interest rate on the Old Notes is
subject to increase under certain circumstances if
the Company is not in compliance with its
obligations under the Registration Rights
Agreement. See "Description of
Notes -- Registration Rights; Liquidated Damages."
RISK FACTORS
The Notes involve certain risks that a potential investor should carefully
evaluate prior to making an investment. See "Risk Factors."
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<PAGE> 14
RISK FACTORS
In addition to the other information set forth elsewhere in this
Prospectus, the following factors should be considered by prospective investors
when evaluating an investment in the Notes.
LEVERAGE AND RESTRICTIONS IMPOSED BY INDEBTEDNESS
At March 31, 1997, on a pro forma basis, after giving effect to the
acquisition of Rotec as described under "Unaudited Pro Forma Condensed
Consolidated Financial Data," the sale by the Company of the Old Notes and the
application of the proceeds therefrom, the Company would have had $132.7 million
of indebtedness and stockholders' equity of $128.4 million. In addition, the
terms of the Notes permit the Company to incur (i) $25 million of indebtedness
under the Bank Credit Facility, which amount the Company may increase if certain
inventory and receivables levels are achieved by the Company and (ii) certain
other indebtedness. The Company's stockholders' equity includes 322,500 shares,
with a $100 liquidation preference, of $6.75 Convertible Exchangeable Preferred
Stock (the "Convertible Preferred Stock") outstanding on which holders are
entitled to receive, out of funds of the Company legally available therefor, an
annual cash dividend of $6.75 per share, payable quarterly. See "Private
Placement", "Capitalization", "Unaudited Pro Forma Condensed Consolidated
Financial Data", "Description of Certain Credit Facilities" and "Description of
Notes."
The significant indebtedness incurred as a result of the sale of the Old
Notes will have several important consequences to the holders of the Notes,
including, but not limited to, the following: (i) a substantial portion of the
Company's cash flow from operations must be dedicated to service the Company's
indebtedness (including any increase in the Company's indebtedness to the extent
permitted by the terms of the Notes) and to pay dividends on the Convertible
Preferred Stock outstanding, to the extent funds are legally available, and the
failure of the Company to generate sufficient cash flow to service such
indebtedness could result in a default under such indebtedness, including under
the Notes; (ii) the Company's ability to obtain additional financing in the
future for working capital, capital expenditures, acquisitions or for other
purposes may be impaired; (iii) the Company's flexibility to expand, make
capital expenditures and respond to changes in the industry and economic
conditions generally may be limited; (iv) the Indenture contains, and future
agreements relating to the Company's indebtedness (including any expanded bank
lines of credit, to the extent permitted by the terms of the Notes) may contain,
numerous financial and other restrictive covenants, including, among other
things, limitations on the ability of the Company to incur additional
indebtedness, to create liens and other encumbrances, to make certain payments
and investments, to sell or otherwise dispose of assets or to merge or
consolidate with another entity, the failure to comply with which may result in
an event of default, which, if not cured or waived, could have a material
adverse effect on the Company; and (v) the ability of the Company to satisfy its
obligations pursuant to such indebtedness, including pursuant to the Notes and
the Indenture, will be dependent upon the Company's future performance which, in
turn, will be subject to management, financial, business, regulatory and other
factors affecting the business and operations of the Company, some of which are
not in the Company's control. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
If the Company is unable to generate sufficient cash flow to meet its debt
obligations, the Company may be required to renegotiate the payment terms or to
refinance all or a portion of the indebtedness under the Notes, its bank lines
of credit or otherwise, to sell assets or to obtain additional financing. If the
Company cannot satisfy its obligations related to such indebtedness,
substantially all of the Company's long-term debt could be in default and could
be declared immediately due and payable which would have a material adverse
effect on the Company. See "Description of Notes" and "Description of Capital
Stock."
RANKING OF THE NOTES: EFFECTIVE SUBORDINATION
The Old Notes are, and the Exchange Notes will be, senior unsecured
obligations of ICO, Inc. ranking pari passu in right of payment with all
existing and future senior indebtedness of ICO, Inc. Holders of secured
indebtedness of the Company and its subsidiaries, however, will have claims with
respect to the assets constituting collateral for such indebtedness that are
prior to the claims of holders of Notes. In addition, the Old Notes are, and the
Exchange Notes will be, effectively subordinated to liabilities of the Company's
subsidiaries, including trade payables.
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<PAGE> 15
In the event of a default on the Notes, or a bankruptcy, liquidation or
reorganization of the Company, assets securing indebtedness of the Company and
its subsidiaries will be available to satisfy obligations with respect to the
indebtedness secured thereby before any payment therefrom could be made on the
Notes. Accordingly, the Notes will be effectively subordinated to claims of
secured creditors of the Company to the extent of such pledged collateral. At
March 31, 1997, after giving pro forma effect to the acquisition of Rotec, the
sale of the Old Notes by the Company and the application of proceeds therefrom,
the Company would have had $1.4 million of indebtedness that would rank pari
passu with the Notes, of which $900,000 is secured and would effectively rank
senior to the Notes in right of payment. The Company's subsidiaries would have
had $11.3 million of indebtedness that would be effectively senior to the Notes,
as described in the following paragraph. The terms of the Notes permit the
Company to incur (i) $25 million of indebtedness under the Bank Credit Facility,
which amount the Company may increase if certain inventory and receivables
levels are achieved by the Company and (ii) certain other indebtedness. All of
such additional borrowings could rank senior to or pari passu in right of
payment with the Notes in the event of any default by the Company under its
indebtedness. See "Selected Historical Financial Data", "Unaudited Pro Forma
Condensed Consolidated Financial Data", "Description of Certain Credit
Facilities", "Description of the Notes", and the Company's Consolidated
Financial Statements and notes thereto incorporated by reference in this
Prospectus.
Although the Company itself has substantial assets, material amounts of
assets are held by the Company's subsidiaries. The Company's subsidiaries will
not guarantee the Company's obligations under the Notes and will not be required
to do so except in certain circumstances in which a subsidiary in the future
provides a Guarantee to third persons. Therefore, any indebtedness, or other
claims of creditors, of the Company's subsidiaries will be effectively senior to
the claims of the holders of the Notes with respect to the assets of such
subsidiary, and the rights of the Company and its creditors, including holders
of the Notes, with respect to a subsidiary's assets, upon such subsidiary's
liquidation or reorganization (and the consequent right of holders of the Notes
to participate in those assets) will be subject to the prior claims of such
subsidiary's creditors and the holders of minority interests, except to the
extent that the Company may itself be a creditor with recognized claims against
a subsidiary. In such case the Company's claims would still be subordinate to
any security interest in the assets of such subsidiary and any indebtedness of
such subsidiary senior to the claims of the Company. In addition, the Company is
dependent to a material extent upon the dividends or other distributions paid by
its subsidiaries to pay its operating expenses, service its debt obligations,
including the Notes, and satisfy any repurchase obligations relating to the
Notes, as a result of a Change of Control or a sale or disposition of certain
assets. Such funds may not be available depending on the financial condition and
results of operations of such subsidiaries on a stand alone basis. See
"-- Fraudulent Transfer Statutes" and "Description of Notes."
CHANGE OF CONTROL PROVISIONS
Upon the occurrence of a Change of Control at any time, the Company will be
required to offer to repurchase all or any part of each Holder's Notes at a
price equal to 101% of the aggregate principal amount thereof plus accrued and
unpaid interest and Liquidated Damages, if any, thereon to the date of
repurchase. There can be no assurance that the Company will have the financial
resources necessary to repurchase the Notes upon a Change of Control. In
addition, the requirement to repurchase the Notes upon a Change of Control may
discourage persons from making a tender offer for or a bid to acquire the
Company. See "Description of Notes -- Change of Control".
DEPENDENCE ON KEY PERSONNEL
The Company is dependent on the retention of, and continued performance by,
its senior management, including Dr. Asher O. Pacholder, Chairman of the Board
and Chief Financial Officer, Ms. Sylvia A. Pacholder, President and Chief
Executive Officer, Mr. Theo J. M. L. Verhoeff, Executive Vice President -- Wedco
and Mr. Isaac H. Joseph, Executive Vice President -- Oilfield Services. The
Company believes that the loss of the services of any of its senior management
could have a material adverse effect on the Company. ICO has not obtained
key-man disability or life insurance policies covering such executive officers.
The Company's success also depends in part on its ability to attract, retain and
motivate qualified professionals.
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<PAGE> 16
While the Company believes it has been able to obtain the services of such
personnel to date, there can be no assurance that it will continue to be able to
do so. See "Business -- Oilfield Services" and "-- Petrochemical Processing."
OILFIELD SERVICES: DEPENDENCE ON VOLATILE OIL AND GAS INDUSTRY
Demand for the Company's oilfield services principally depends upon the
level of domestic oil and gas drilling activity, which in turn depends upon
factors such as the level of oil and gas prices, expectations about future oil
and gas prices, the cost of exploring for and producing oil and gas, worldwide
weather conditions, international political, military, regulatory and economic
conditions and the ability of oil and gas companies to raise capital. No
assurance can be given that current levels of domestic oil and gas exploration
activities will continue or that the demand for the Company's services will
continue to reflect the level of activity in the industry generally. Industry
conditions will continue to be influenced by numerous factors over which the
Company will have no control. Over the last several years, drilling activity has
increased due to technological advances, royalty relief in deep offshore waters
and relatively stable oil and gas prices. A material decline in oil or gas
prices or domestic industry activity could have a material adverse effect on the
Company's oilfield service business, results of operations and prospects.
Furthermore, the oilfield services business is substantially seasonal,
reflecting the pattern of oilfield drilling and workovers, with the first and
fourth quarters of the fiscal years having generally higher levels of activity.
See "Business -- Oilfield Services" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
TECHNOLOGICAL OBSOLESCENCE
The operations of the Company's oilfield services and specialty
petrochemical processing businesses are dependent to a certain degree upon
proprietary technology, know-how and trade secrets either developed by the
Company or licensed to it by third parties. In many cases, these or equivalent
processes or technologies are available to the Company's competitors, customers
and others. In addition, there can be no assurance that such persons will not
develop substantially equivalent or superior proprietary processes and
technologies. The development by others of equivalent or superior information,
processes or technologies could have a material adverse effect on the Company.
See "Business -- Oilfield Services," "-- Petrochemical Processing" and
"-- Patents and Licenses."
LIMITED OPERATING HISTORY IN THE PETROCHEMICAL PROCESSING BUSINESS; ABILITY TO
MANAGE GROWTH
The Company recently entered the specialty petrochemical processing
industry with its acquisition of Wedco in April 1996, and had no experience in
the industry prior to the acquisition. Since the acquisition of Wedco, the
Company has expanded its specialty petrochemical processing business with the
acquisitions of PSI and Bayshore in July 1996 and December 1996, respectively,
the Rotec and Micropowders Business acquisitions in April 1997, and the Micronyl
acquisition in May 1997, and the success of the Company will depend, in part, on
the Company's ability to integrate the operations of these specialty
petrochemical processing companies, including centralizing certain functions to
achieve cost savings, successfully implementing the Company's announced plan to
discontinue petrochemical size reduction services at plants in Houston, Texas
and Long Beach, California (which have been closed) and Maywood, Illinois (which
is to be closed during fiscal 1997) and developing programs and processes that
will promote cooperation among the businesses and the sharing of resources. In
addition, the recent growth of the Company will place significant demands on the
Company's management, internal systems and networks. There can be no assurance
that the Company will be able to effectively manage or implement its plans for
these operations or that if implemented such plans will be successful. In
addition, in fiscal 1997, the Company began to expand the distribution aspects
of its specialty petrochemical production services business through the
acquisition of the Micropowders Business, the execution of supply agreements
with Borealis and Exxon Chemical Holland and the acquisition of Rotec. Each of
these operations, as well as the Bayshore operation, will require the Company to
buy and manage inventories of supplies and products in the specialty
petrochemical processing business. The Company's entry into the distribution
portion of this business may require the Company to maintain greater levels of
working capital than it has historically and to manage the risk of ownership of
commodity inventories
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<PAGE> 17
having fluctuating market values. The maintenance of excessive inventories in
these businesses could expose the Company to losses upon drops in market prices
for its products while maintenance of insufficient inventories may result in
lost sales to the Company. See "Business -- Petrochemical Processing" and
"Management's Discussion and Analysis of Financial condition and Results of
Operations."
CYCLICAL NATURE OF PETROCHEMICAL PROCESSING SERVICES
The business cycles of the Company's petrochemical processing services
segment are subject to changes in the cost of the petrochemicals produced by the
major chemical companies; as a result, the cycles are relatively unpredictable.
In addition, these business cycles may reflect cycles and prices in the
petroleum industry which also affect the Company's oilfield services business
segment and may make the Company as a whole vulnerable to the effects of changes
in the petroleum industry.
RISKS OF INTERNATIONAL OPERATIONS
A portion of the Company's current operations are conducted in
international markets, particularly the Company's Western European specialty
petrochemical processing services business. International specialty
petrochemical processing operations accounted for 19% of the Company's operating
revenues on a pro forma basis for the fiscal year ended September 30, 1996. The
Company expects to continue to seek to expand its international operations,
particularly in Europe, through internal growth and acquisitions, although the
Company has not entered into any agreement or arrangement for any such
acquisition. The Company's international operations are subject to certain
political, economic and other uncertainties, including, among others, risks of
government policies regarding private property, taxation policies, foreign
exchange restrictions and currency fluctuations and other restrictions arising
out of foreign governmental sovereignty over areas in which the Company conducts
business, and, possibly, civil disturbance or other forms of conflict. The
Company has not historically hedged against the risks inherent in currency
fluctuations, and there is no assurance the Company will be able to effectively
hedge against such risks. Losses from these factors could be material in those
countries where the Company now has or may in the future have a concentration of
assets. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and note 17 to the Consolidated Financial Statements of
the Company and notes thereto included elsewhere in this Prospectus or
incorporated by reference herein.
ACQUISITION STRATEGY
Since the beginning of fiscal 1994, the Company has made 14 acquisitions.
Reported revenues have increased from $34.6 million in fiscal 1992 to $108.7
million in fiscal 1996. Currently, the Company is actively seeking strategic
acquisitions that will provide additional and complementary products and
services. The Company expects to fund such acquisitions through a combination of
one or more of the following: cash from operations, the issuance of additional
equity securities, the net proceeds received from the sale of the Old Notes and
indebtedness, including borrowings under bank lines of credit (to the extent
permitted under the terms of the Notes). While the Company considers acquisition
opportunities from time to time, the Company has not entered into any agreement
or arrangement for any such acquisition. There can be no assurance that the
Company will be able to identify or reach mutually agreeable terms with
acquisition candidates and their owners, or that the Company will be able to
profitably manage additional businesses or successfully integrate such
additional businesses into the Company at all, or without substantial costs,
delays or other problems. There can be no assurance that businesses acquired
will achieve sales and profitability that justify the investment made by the
Company. Any inability on the part of the Company to effectively control these
risks and integrate and manage acquired businesses could have a material adverse
effect on the Company. See "The Company -- Acquisitions," "Unaudited Pro Forma
Condensed Consolidated Financial Data" and "Use of Proceeds."
RECENT LOSS
The Company reported a net loss in fiscal 1996 as a result of certain
nonrecurring costs and expenses. There can be no assurance that the Company will
be profitable in the future. See "Management's Discussion
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<PAGE> 18
and Analysis of Financial Condition and Results of Operations" and the
Consolidated Financial Statements and notes thereto included elsewhere in this
Prospectus or incorporated by reference herein.
CONTROL BY PRINCIPAL STOCKHOLDERS AND MANAGEMENT
Six of the Company's ten directors are presently or were formerly
associated with Pacholder Associates, Inc., an investment advisory firm located
in Cincinnati, Ohio ("PAI"), or USF&G Pacholder Fund, Inc., an affiliate of PAI,
and a seventh director is the founder and former chief executive officer of
Wedco. As a majority of the Company's Board of Directors, these persons
collectively are in a position to direct the business and policies of the
Company. Five of these persons (Dr. Asher O. Pacholder, Sylvia A. Pacholder,
Robin E. Pacholder, William J. Morgan and William E. Willoughby), PAI and
certain former shareholders of Wedco are parties to a stockholders agreement
("ICO Stockholders Agreement") covering approximately 33% of the Company's
outstanding Common Stock, without par value (the "Company Common Stock") and
which currently requires the shares subject thereto to be voted for the slate of
directors nominated by the Company's management for election at annual elections
of directors. The number of shares subject to the shareholders agreement may be
sufficient to control the election of the Company's Board of Directors. In
addition, the Company's organizational documents provide for the classification
of the Board of Directors of ICO into three classes, with directors serving
staggered three-year terms. As a result only one-third of the Company's Board of
Directors will be elected each year. The concentration of share ownership and
terms of the shareholders agreement and the classified board provision may
discourage persons from making a tender offer or a bid to acquire the Company.
See "Description of Capital Stock," included elsewhere in this Prospectus and
the Company's Proxy Statement dated January 24, 1997, incorporated by reference
herein.
ENVIRONMENTAL REGULATIONS
The Company is subject to numerous and changing local, state, federal and
foreign laws and regulations concerning the use, storage, treatment, disposal
and general handling of hazardous materials, some of which may be considered to
be hazardous wastes, and restricting releases of pollutants and contaminants
into the environment. These laws and regulations may require the Company to
obtain and maintain its operations in compliance with certain permits and other
authorizations mandating procedures under which the Company shall operate and
restricting emissions. Many of these laws and regulations provide for strict
joint and several liability for the costs of cleaning up contamination resulting
from releases of regulated materials into the environment. Violations of
mandatory procedures under operating permits may result in fines, remedial
actions or, in more serious instances, shutdowns or revocation of permits or
authorizations. There can be no assurance that a review of the Company's past,
present or future operations by courts or federal, state, local or foreign
regulatory authorities will not result in determinations that could have a
material adverse effect on the Company's financial condition or results of
operations. In addition, the revocation of any of the Company's material
operating permits, the denial of any material permit application or the failure
to renew any interim permit, could have a material adverse effect on the
Company. The Company cannot predict what environmental laws and regulations will
be enacted or adopted in the future or how such future law or regulation will be
administered or interpreted. Compliance with more stringent environmental laws
and regulations, more vigorous enforcement policies, or stricter interpretations
of current laws and regulations, or the occurrence of an industrial accident,
could have a material adverse effect on the Company. See "Business --
Environmental Regulation" and "-- Legal Proceedings."
INSURANCE RISKS
The Company has insurance coverage it believes to be adequate for the risks
of the businesses in which the Company is engaged. However, the occurrence of a
significant loss not fully covered by insurance could have a material adverse
effect on the Company. In addition, there can be no assurance that the Company
will be able to maintain adequate insurance coverage at rates it believes
reasonable. See "Business -- Insurance and Risk."
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COMPETITION
Each of the industries in which the Company participates is highly
competitive. Some competitors or potential competitors of the Company have
substantially greater financial or other resources than the Company. The
inability of the Company to effectively compete in its markets would have a
material adverse effect on the Company. See "Business -- Oilfield
Services -- Competition" and "-- Petrochemical Processing -- Competition."
LEGAL PROCEEDINGS
The Company is a named defendant in 12 cases involving 12 plaintiffs, filed
since June 1990, for personal injury claims alleging exposure to silica
resulting in silicosis-related disease. The Company is generally protected under
worker's compensation law from claims under these suits except to the extent a
judgment is awarded against the Company for intentional tort. If an adverse
judgment is obtained against the Company in any of the referenced suits which is
ultimately determined not to be covered by insurance, the amount of such
judgment could have a material adverse effect on the Company. The Company is
also a party to certain other litigation. See "Business -- Legal Proceedings."
ABSENCE OF PUBLIC MARKET
Prior to the Exchange Offer, there has been no public market for the Notes,
and there can be no assurance that such a market will develop. In addition, the
Notes will not be listed on any national securities exchange. The Company has
been advised by the Initial Purchaser that it currently intends to make a market
in the Notes following the Offering as permitted by applicable law and
regulation; however the Initial Purchaser is not obligated to do so and any such
market-making activities may be discontinued at any time without notice. In
addition, such market-making activities may be limited during the Exchange
Offer. Therefore, there can be no assurance that an active market for any of the
Notes will develop, either prior to or after the Company's performance of its
obligations under the Registration Rights Agreement. Furthermore, prior to the
Company's performance of its obligations under the Registration Rights
Agreement, the Notes may only be offered and sold pursuant to an exemption from
the registration requirements of the Securities Act and applicable state
securities laws or pursuant to an effective registration statement under the
Securities Act and such state securities laws. See "Description of
Notes -- Registration Rights" and "Transfer Restrictions on Old Notes."
FRAUDULENT TRANSFER STATUTES
Under Federal or state fraudulent transfer laws, the indebtedness
represented by the Notes may be subordinated to existing or future indebtedness
of the Company or found not to be enforceable in accordance with its terms.
Under such statutes, if a court were to find that, at the time the Notes were
issued, the Company (i) was insolvent, or was rendered insolvent by the issuance
of the Notes, and the substantially concurrent use of the proceeds therefrom,
(ii)was engaged in a business or transaction for which the assets remaining with
the Company constituted unreasonably small capital, (iii) intended to incur, or
believed that it would incur, debts beyond its ability to pay such debts as they
matured, or (iv) intended to hinder, delay or defraud its creditors, such court
could void the Company's obligations under the Notes, or subordinate the Notes
to all other indebtedness of the Company. In such event, there can be no
assurance that any repayment of the Notes could ever be recovered by Holders of
the Notes.
If Guarantees (as defined) by any of the Company's subsidiaries are issued
in accordance with the terms of the Notes, a similar risk would exist that the
indebtedness of any subsidiary represented by any Guarantee may be subordinated
to existing or future indebtedness of the Guarantor (as defined), found not to
be enforceable in accordance with its terms, or that the Guarantor's obligations
under the Guarantee could be avoided and any proceeds paid under the Guarantee
be ordered returned to the Guarantor, if a court were to find (a) any of the
factors listed in (i) through (iv) of the foregoing paragraph true with regard
to the Guarantor at the time the Guarantee was given, or (b) that the Guarantor
received less than fair consideration or reasonably equivalent value for giving
the Guarantee. It is likely that a Guarantor will be deemed not to
18
<PAGE> 20
have received fair consideration or reasonably equivalent value for its
Guarantee to the extent that its liability thereunder exceeds the amount by
which it directly benefits from the proceeds of the Old Notes.
For purposes of the foregoing, the measure of insolvency varies depending
upon the law of the jurisdiction which is being applied. Generally, however, the
Company or the Guarantor would be considered to have been insolvent at the time
the Old Notes were issued or the Guarantee given if the sum of its debts was, at
that time, greater than the sum of the value of all of its property at a fair
valuation, or if the then fair saleable value of its assets was less than the
amount that was then required to pay its probable liability on its existing
debts as they became absolute and matured. There can be no assurance as to what
standard a court would apply in order to determine whether the Company or any
Guarantor was insolvent as of the date the Old Notes were issued or any
Guarantee given, or that, regardless of the method of valuation, a court would
not determine that the Company or Guarantor was insolvent on that date, or that,
regardless of whether the Company or Guarantor was insolvent on the date the Old
Notes were issued or the Guarantee given, as the case may be, that the issuances
constituted fraudulent transfers on another of the grounds summarized above.
19
<PAGE> 21
THE COMPANY
The Company provides specialized oilfield and petrochemical processing
services. In the oilfield services segment, ICO is a leading provider of
inspection, reconditioning and coating services for new and used tubular goods
and sucker rods utilized in the oil and gas industry. The Company's oilfield
services are designed to reduce the customers' cost of drilling and production
by preventing faulty tubular goods from being placed downhole (exploration
services), reclaiming and reconditioning used tubular goods and sucker rods
(production services), and preventing premature failure of tubular goods and
sucker rods from occurring due to the corrosive downhole drilling environment
(corrosion control services). Although comprehensive industry statistics are not
readily available, ICO believes it is one of the two largest providers of
inspection, reconditioning and coating services for tubular goods in the United
States. In the petrochemical processing segment, the Company provides grinding
and ancillary services for petrochemical resins produced in pellet form (size
reduction services) and formulates and manufactures concentrated products for
blending with petrochemical resins to give finished products desired
characteristics such as color or ultraviolet protectants (concentrates
manufacturing).
ACQUISITIONS
From the beginning of fiscal 1994 through the middle of fiscal 1996, the
Company completed and integrated eight acquisitions in the oilfield services
segment which increased its market share and expanded its service capabilities.
In April 1996, the Company entered the petrochemical processing industry through
the acquisition of Wedco to take advantage of opportunities in that market.
Since the Wedco acquisition, the Company has completed five additional
acquisitions in the petrochemical processing industry. In total, in the 14
acquisitions since the beginning of fiscal 1994, the Company has invested
approximately $23.8 million cash, issued 13,371,242 shares of Company Common
Stock (recorded at approximately $65.8 million) and effectively assumed certain
liabilities in these acquisitions, as described below. The Company is actively
seeking strategic acquisitions, although the Company has not entered into any
agreement or arrangement for any such acquisition. For additional information,
see the unaudited pro forma information regarding these acquisitions contained
in notes 2 and 19 of the Company's Consolidated Financial Statements and notes
thereto incorporated by reference in this Prospectus. Also see "Unaudited Pro
Forma Condensed Consolidated Financial Data" and "Use of Proceeds" included in
this Prospectus.
In November 1993, ICO acquired the assets of Tubular Ultrasound Corporation
("TUC"), a tubular inspection company with low cost ultrasonic inspection
technology, located in Houston, Texas, for a total consideration of $1.1 million
in Company Common Stock and repayment of debt. The TUC acquisition provided ICO
with additional engineering and product development expertise in the ultrasonic
inspection area.
In February 1994, ICO acquired Shearer Supply Ltd. ("Shearer") located in
Edmonton, Alberta, for $1.9 million in cash and Company Common Stock, which
provided ICO with a presence in the Canadian market. Shearer is the largest
provider of sucker rod inspection and reclamation services in Canada and sells
pump engines used in the oilfield.
In April 1994, the Company acquired Permian Enterprises, Inc. ("Permian")
for approximately $2.5 million in Company Common Stock and the effective
assumption of $2.1 million in liabilities. Permian provides cement and
fiberglass lining for tubing and casing and also applies an external fusion
bonded wrap to tubular goods.
In April 1994, ICO acquired Frontier Inspection Services, Inc. ("Frontier")
of Farmington, New Mexico for approximately $1.5 million in Company Common
Stock. Frontier is a provider of tubular inspection services in New Mexico and
the lower Rocky Mountain area.
In October 1994, the Company purchased B&W Equipment Sales and Mfg., Inc.
("B&W") for approximately $745,000 in cash and Company Common Stock. B&W designs
and manufactures parts and components for nondestructive testing and inspection
of equipment for use in the tubular market. The acquisition enabled the Company
to lower repair and maintenance expenses for the Company's inspection units.
20
<PAGE> 22
In March 1995, the Company acquired the operating assets of Kebco Pipe
Services, Inc. ("Kebco"), which provides testing, inspecting and reconditioning
services for oil country tubular goods in the West Texas area. Kebco was
acquired for a total consideration of $671,000.
In June 1995, the Company purchased R. J Dixon, Inc. d/b/a Spinco
("Spinco") for approximately $490,000 in cash and 94,884 shares of Company
Common Stock. Spinco provides inspection and reclamation services for drill pipe
and other oil country tubular goods in the Gulf Coast area.
In March 1996, the Company acquired the operating assets of Rainbow
Inspection Company of Mississippi, Inc. ("Rainbow") for $328,000 in cash and
assumed liabilities. Rainbow provides inspection and reclamation services for
oil country tubular goods in the southern United States.
In April 1996, the Company acquired, via merger, Wedco. Wedco serves the
petrochemical industry by providing plastics size reduction services and related
machinery. The consideration paid consisted of 10,232,609 shares of Company
Common Stock, $4.6 million in cash (including transaction fees and expenses) and
the effective assumption of $29.9 million in total liabilities.
In July 1996, the Company acquired PSI for 431,826 shares of Company Common
Stock, approximately $2.0 million in cash and $2.1 million of effectively
assumed liabilities. PSI provides size reduction and related processing services
for the petrochemical industry.
During December 1996, the Company acquired Bayshore for approximately $6.9
million in cash and 1,285,012 shares of Company Common Stock, and effectively
assumed $2.6 million in debt. Bayshore is a provider of concentrates and
compounds to resin producers in the United States.
Effective April 1, 1997, the Company acquired the Micropowders Business.
The consideration consisted of an initial payment of $500,000 and five
additional payments of Dutch Guilders ("NLG") 674,000 ($350,000 at April 1, 1997
exchange rates) payable for each of five years beginning one year after the
acquisition date. The Company also purchased inventory from Exxon Chemical
Belgium and entered into a supply agreement with Exxon Chemical Holland to
acquire inventories in the future at contracted prices. The Company believes
that the acquisition of this business complements the Company's existing
European operations by allowing for the distribution of rotational molding
powders throughout Europe under the ICO Polymers name.
On April 30, 1997, the Company acquired Rotec for $2.5 million in cash and
427,353 shares of Company Common Stock. In addition, Rotec shareholders may be
entitled to additional consideration in cash and Company Common Stock based on
future earnings of Rotec. Rotec serves the United Kingdom, Ireland and
Continental Europe markets and is a producer of high quality concentrates for a
variety of plastics processes.
On May 5, 1997, the Company acquired the remaining 50% ownership of
Micronyl not already owned by the Company for French Francs ("FF") 15 million
($2.6 million) in cash and the assumption of Micronyl's total outstanding debt
as of the acquisition date equal to $1.5 million. Micronyl operates two size
reduction facilities in France which perform services similar to those performed
by other Wedco units.
In connection with each of the foregoing acquisitions in which ICO issued
Company Common Stock (other than Shearer and Rotec), the Company granted demand
and/or piggyback registration rights to the former owners of the business
acquired to register the resale of the Company Common Stock issued in such
acquisitions.
The Company is a Texas corporation whose corporate headquarters are located
at 11490 Westheimer, Suite 1000, Houston, Texas 77077 and its telephone number
is (281) 721-4200.
21
<PAGE> 23
PRIVATE PLACEMENT
On June 9, 1997, the Company completed the private sale to the Initial
Purchaser of $120,000,000 principal amount of the Old Notes at a price of 96.75%
of the principal amount thereof in a transaction not registered under the
Securities Act in reliance upon Section 4(2) of the Securities Act. The Initial
Purchaser thereupon offered and resold the Old Notes only to qualified
institutional buyers and a limited number of institutional accredited investors
at an initial price to such purchasers of 100% of the principal amount thereof.
The $115.5 million net proceeds received by the Company in connection with the
sale of the Old Notes will be used to (i) repay the balance of certain of the
Company's outstanding indebtedness, estimated at $17.2 million, and (ii) finance
capital expenditures in its petrochemical processing business segment, estimated
at $8.2 million. The balance of the net proceeds from the sales of the Old Notes
is intended to be used for general corporate purposes, including capital
expenditures and acquisitions.
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the
Exchange Notes offered hereby. In consideration for issuing the Exchange Notes
as contemplated in this Prospectus, the Company will receive in exchange a like
principal amount of Old Notes, the terms of which are identical in all material
respects to the Exchange Notes. The Old Notes surrendered in exchange for the
Exchange Notes will be retired and canceled and cannot be reissued. Accordingly,
issuance of the Exchange Notes will not result in any change in capitalization
of the Company.
22
<PAGE> 24
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
March 31, 1997 on an actual basis and as adjusted for the acquisition of Rotec
and to give effect to the sale of the Old Notes and the use of net proceeds
therefrom. This table should be read in conjunction with "Selected Historical
Financial Data" and "Unaudited Pro Forma Condensed Consolidated Financial Data"
appearing elsewhere in this Prospectus and the Consolidated Financial Statements
and notes thereto incorporated by reference in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1997
------------------------------------------
ACTUAL PRO FORMA(1) AS ADJUSTED(2)
-------- ------------ --------------
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Cash and equivalents................................... $ 6,133 $ 6,272 $107,326
======== ======== ========
Short-term borrowings and current maturities of long
term debt............................................ 2,767 3,388 2,301
Credit facilities...................................... 1,436 3,936 1,436
-------- -------- --------
4,203 7,324 3,737
======== ======== ========
Long-term debt:
10 3/8% Senior Notes due 2007........................ -- -- 120,000
Foreign term debt(3)................................. 5,943 6,247 6,247
Domestic term debt(4)................................ 13,592 13,592 2,733
-------- -------- --------
19,535 19,839 128,980
-------- -------- --------
Stockholders' Equity:
Preferred stock, without par value -- 500,000 shares
authorized;
Convertible Preferred Stock, 322,500 shares issued
and outstanding with a liquidation preference of
$32,250,000....................................... 13 13 13
Common Stock, without par value -- 50,000,000 shares
authorized; 21,016,124 shares issued and
outstanding, actual and 21,443,475 shares issued
and outstanding, pro forma and as adjusted........ 36,079 36,083 36,083
Additional paid-in capital........................... 108,310 110,431 110,431
Cumulative translation adjustment.................... (761) (761) (761)
Accumulated deficit.................................. (17,406) (17,406) (17,406)
-------- -------- --------
126,235 128,360 128,360
-------- -------- --------
Total Capitalization......................... $145,770 $148,199 $257,340
======== ======== ========
</TABLE>
- ------------------------------
(1) Represents actual amounts adjusted to give effect to the acquisition of
Rotec as if it had occurred on March 31, 1997.
(2) Represents pro forma amounts adjusted to give effect to the sale of the Old
Notes and the use of the net proceeds therefrom as if it had occurred on
March 31, 1997. See "Private Placement."
(3) Consists of term loans, for the Company's Holland ($3,604,000, including
$457,000 of current maturities), U.K. ($1,521,000, including $164,000 of
current maturities) and ICO Polymers B.V. ($1,798,000, including $359,000 of
current maturities) subsidiaries and, for the Pro Forma column, debt assumed
in connection with the Rotec acquisition. In addition, on April 30, 1997 the
Company acquired the remaining 50% ownership of Micronyl in connection with
which it assumed Micronyl's total outstanding debt as of the acquisition
date equal to $1.5 million. See "The Company -- Acquisitions."
(4) Consists principally of (i) an $8,480,000 (including $321,000 of current
maturities) 8.0% term loan due 2003 (to be repaid with a portion of the
proceeds from the sale of the Old Notes) secured by various property, plant
and equipment of the Company's petrochemical size reduction operations, (ii)
a $3,000,000 (including $300,000 of current maturities) 8.0% term loan due
2004 and secured by the receivables, inventory and equipment of one of the
Company's petrochemical services subsidiaries and (iii) various other term
loans secured by land and/or equipment.
23
<PAGE> 25
SELECTED HISTORICAL FINANCIAL DATA(1)
The following selected historical financial data have been derived from the
consolidated financial statements of the Company audited by Price Waterhouse
LLP, independent accountants, whose report with respect to the fiscal years
ended September 30, 1994, 1995 and 1996 is incorporated by reference herein. The
data as of March 31, 1997 and for the six months ended March 31, 1996 and March
31, 1997 are derived from the Company's unaudited financial statements
incorporated by reference in this Prospectus. In the opinion of management, the
unaudited financial statements include all adjustments (consisting of only
normal recurring adjustments) necessary for a fair presentation of the
information set forth therein. The results of operations for the six months
ended March 31, 1997 are not necessarily indicative of the results that may be
expected for any other interim period or the entire year. The following data
should be read in conjunction with the Company's Consolidated Financial
Statements and notes thereto incorporated by reference into this Prospectus and
"Management's Discussion and Analysis of Operations" included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
SIX MONTHS
FISCAL YEAR ENDED SEPTEMBER 30, ENDED MARCH 31,
------------------------------------------------ ------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- -------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues................................... $34,635 $60,217 $75,970 $87,883 $108,663 $43,828 $81,791
Cost of sales and services..................... 24,153 42,862 54,191 59,885 74,704 30,668 56,810
------- ------- ------- ------- -------- ------- -------
Gross profit................................... 10,482 17,355 21,779 27,998 33,959 13,160 24,981
Selling, general and administrative expenses... 8,055 12,730 15,202 17,736 19,996 7,775 13,591
Depreciation and amortization.................. 2,616 3,669 4,357 5,112 7,230 2,676 5,109
Impairment of long-term assets................. -- -- -- -- 5,025 -- --
Non-recurring compensation arrangements........ -- -- -- -- 1,812 -- --
Non-recurring litigation charges............... (467) 605 -- -- 1,112 -- --
Writedown of inventories....................... -- -- -- 104 868 -- --
------- ------- ------- ------- -------- ------- -------
Operating income (loss)........................ 278 351 2,220 5,046 (2,084) 2,709 6,281
Interest (income) expense, net................. 740 2,352 (431) (1,307) (608) (705) 531
Other (income) expense......................... -- -- -- (4) 216 (44) (56)
------- ------- ------- ------- -------- ------- -------
Income (loss) before income taxes and
extraordinary item........................... (462) (2,001) 2,651 6,357 (1,692) 3,458 5,806
Income taxes (benefit)......................... -- -- 55 567 (632) 184 2,227
Extraordinary items -- gain (loss) on
repurchase (repayment) of debt............... 79 -- (1,371) -- -- -- --
------- ------- ------- ------- -------- ------- -------
Net income (loss).............................. (383) (2,001) 1,225 5,790 (1,060) 3,274 3,579
Preferred stock dividends...................... -- -- 1,826 2,176 2,178 1,088 1,088
------- ------- ------- ------- -------- ------- -------
Net income (loss) available for
common shareholders.......................... $ (383) $(2,001) $ (601) $ 3,614 $ (3,238) $ 2,186 $ 2,491
======= ======= ======= ======= ======== ======= =======
Earnings (loss) applicable to common and common
share equivalents............................ $ (.12) $ (.49) $ (.07) $ .41 $ (.24) $ .25 $ .12
======= ======= ======= ======= ======== ======= =======
OTHER FINANCIAL DATA:
EBITDA(2)...................................... $ 2,894 $ 4,020 $ 6,577 $10,158 $ 5,146 $ 5,385 $11,390
Adjusted EBITDA(3)............................. 2,427 4,625 6,577 10,262 13,963 5,385 11,390
Capital expenditures(4)........................ 642 2,252 4,782 5,838 8,712 4,196 5,172
Common stock dividends......................... -- -- -- -- 2,830 894 2,196
Common stock dividends per share............... -- -- -- -- .21 .10 .11
Ratio of earnings to fixed charges(5).......... -- -- 3.7x 10.7x -- 12.1x 6.1x
Ratio of EBITDA to interest expense, net(6).... 3.9x 1.7x -- -- -- -- 21.5x
Ratio of Adjusted EBITDA to interest expense,
net(6)....................................... 3.3x 2.0x -- -- -- -- 21.5x
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, AS OF MARCH 31,
------------------------------------------------ ------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- -------- ------- --------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and equivalents........................... $ 209 $ 9,450 $24,763 $24,991 $ 13,414 $22,415 $ 6,133
Working capital................................ 3,321 17,787 37,656 37,284 29,882 36,560 28,045
Property, plant and equipment, net............. 25,435 24,431 27,513 29,824 72,585 31,537 76,999
Total assets................................... 40,713 51,353 78,969 88,183 163,391 87,604 175,285
Total debt(7).................................. 21,946 11,094 893 1,682 19,302 1,720 23,738
Total stockholders' equity..................... 10,304 32,293 69,402 74,471 120,594 75,887 126,235
</TABLE>
24
<PAGE> 26
- ---------------
(1) The Statement of Operations and Other Financial Data include the results of
operations of the Company and each of the companies acquired since their
respective dates of acquisition. See note 2 to the Consolidated Financial
Statements and notes thereto incorporated by reference in this Prospectus.
(2) EBITDA represents income from operations before interest expense, other
income and expense, provision for income taxes, extraordinary items and
depreciation and amortization. EBITDA is a widely accepted indicator of a
company's ability to service debt. EBITDA should not be considered in
isolation or as a substitute for net income, cash flows from operations, or
other income or cash flow data prepared in accordance with generally
accepted accounting principles or as a measure of a company's profitability
or liquidity.
(3) Adjusted EBITDA is comprised of EBITDA (see (2) above) excluding the
following fiscal 1996 operating expenses: impairment of long-term assets,
non-recurring compensation arrangements, non-recurring litigation and
writedown of inventories. Adjusted EBITDA is provided as additional
information regarding ICO's ability to service debt, but, as with EBITDA,
should not be considered in isolation or as a substitute for net income,
cash flows from operations, or other income or cash flow data prepared in
accordance with generally accepted accounting principles or as a measure of
a company's profitability or liquidity.
(4) Consists of cash used for capital expenditures, excluding property, plant
and equipment obtained in acquisitions.
(5) For purposes of calculating the ratio of earnings to fixed charges, earnings
consist of income before provision for income taxes plus fixed charges.
Fixed charges consist of interest expense (including the amortization of
debt issuance costs) plus that portion of rental payments on operating
leases deemed representative of the interest factor. As a result of
incurring a net loss for the fiscal years ended September 30, 1992, 1993 and
1996, earnings did not cover fixed charges by $462,000, $2,001,000 and
$1,772,000, respectively.
(6) The ratio has not been presented for periods in which the Company incurred
net interest income.
(7) Total debt includes short-term and long-term borrowing and current
maturities of long-term debt.
25
<PAGE> 27
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
The Company's net revenues in recent years have increased due to a variety
of factors, including acquisitions and increased sales volumes in both existing
and acquired business lines.
Prior to April 1996, the Company's operations were exclusively in the
oilfield services business. From fiscal 1994 to the middle of fiscal 1996 the
Company completed eight acquisitions in the oilfield services business and
integrated these acquisitions by consolidating plants, reducing headcount and
centralizing administrative functions. During fiscal 1996, the Company entered
the specialty petrochemical processing business through the merger with Wedco.
Since the Wedco acquisition, the Company has completed five additional
acquisitions in the specialty petrochemical processing business. Since the
acquisitions were consummated at various times, the financial information
contained herein with respect to each fiscal period does not fully reflect the
results of operations of the businesses acquired; thus, this financial
information is not necessarily indicative of the results of operations that
would have been achieved had the acquisitions been consummated by the Company at
the beginning of the periods presented herein or which may be achieved in the
future. See "The Company -- Acquisitions."
The April 1996 Wedco acquisition occurred during a cyclical downturn in the
plastics industry and followed a period during which the domestic management of
Wedco was focused upon the sale of Wedco and related matters. The Company
believes as a result of these factors Wedco experienced declines in the
utilization of machinery and equipment which resulted in the underabsorption of
certain overhead costs in several of Wedco's domestic facilities. As a result,
during its fiscal year ended March 31, 1996, Wedco experienced a decline of both
revenues and gross margins in comparison to its historical performance. As part
of the strategy initiated with the Wedco acquisition, the Company acquired PSI
(which solidified the Company's domestic petrochemical size reduction market
share and added management expertise), continued to emphasize its European
petrochemical processing business and established a domestic sales force. The
Company has also implemented a plan of consolidation involving the closure of
three petrochemical processing plants. Two plants have already been closed and
the third will close during fiscal 1997. The Company believes the closures will
reduce operating costs and capital expenditures requirements. See
"Business -- Petrochemical Processing."
In general, the petrochemical processing segment generates higher gross
margins than the oilfield services segment. The acquisition of Bayshore in
December of 1996 is expected to have the effect of reducing overall
petrochemical processing margins. The gross margin percentage for Bayshore's
business is generally lower than those generated by the Company's size reduction
services because Bayshore typically buys raw materials, improves the material
and then sells the finished product. In contrast, the Company's size reduction
services typically involve processing customer owned material.
The Company's revenue is classified within two categories: oilfield
services and petrochemical processing. Oilfield services revenues include
revenues derived from (i) exploration sales and services (new tubular goods
inspection), (ii) production sales and services (reclamation and reconditioning
of used tubular goods and sucker rods and inspection of new sucker rods), (iii)
corrosion control services (coating of tubular goods and sucker rods), and (iv)
other sales and services (oilfield engine equipment sales and services in
Canada). Petrochemical processing revenues include revenues derived from
grinding petrochemicals into powders (size reduction), the manufacture of
concentrates, compounding, distributing plastic powders to customers and other
ancillary services. Revenues are recorded as the services are performed or the
equipment is shipped to third-parties.
Cost of sales and services is primarily comprised of compensation and
benefits to non-administrative employees, occupancy costs, repair and
maintenance, electricity and equipment costs and supplies. Selling, general and
administrative expenses consist primarily of compensation and related benefits
to the sales and marketing, executive management, accounting, human resources
and other administrative employees of the
26
<PAGE> 28
Company, other sales and marketing expenses, communications costs, systems
costs, insurance costs and legal and accounting professional fees.
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED SEPTEMBER 30, MARCH 31,
---------------------------------------------------- ---------------------------------
% OF % OF % OF % OF % OF
1994 TOTAL 1995 TOTAL 1996 TOTAL 1996 TOTAL 1997 TOTAL
------- ----- ------- ----- -------- ----- ------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET REVENUES (000'S)
Exploration sales and services........ $30,096 40 $34,953 40 $ 34,545 32 $16,686 38 $17,735 22
Production sales and services......... 28,919 38 28,745 33 31,087 28 14,879 34 15,870 20
Corrosion control services............ 14,549 19 20,562 23 21,591 20 10,942 25 10,798 13
Other sales and services.............. 2,406 3 3,623 4 2,167 2 1,321 3 1,939 2
------- --- ------- --- -------- --- ------- --- ------- ---
Total oilfield sales and services
revenues............................ 75,970 100 87,883 100 89,390 82 43,828 100 46,342 57
Petrochemical processing sales and
services............................ -- -- -- -- 19,273 18 -- -- 35,449 43
------- --- ------- --- -------- --- ------- --- ------- ---
Total............................. $75,970 100 $87,883 100 $108,663 100 $43,828 100 $81,791 100
======= ======= ======== ======= =======
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED SEPTEMBER 30, MARCH 31,
---------------------------------------------------- ---------------------------------
% OF % OF % OF % OF % OF
1994 TOTAL 1995 TOTAL 1996(1) TOTAL 1996 TOTAL 1997 TOTAL
------- ----- ------- ----- -------- ----- ------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING INCOME (LOSS) (000'S)
Oilfield sales and services........... $ 8,934 100 $12,085 100 $ 11,541 154 $ 5,413 100 $ 7,146 69
Petrochemical processing sales and
services............................ -- -- -- -- (4,070) (54) -- -- 3,261 31
------- --- ------- --- -------- --- ------- --- ------- ---
Total operations...................... 8,934 100 12,085 100 7,471 100 5,413 100 10,407 100
General corporate expenses............ (6,714) (7,039) (9,555) (2,704) (4,126)
------- ------- -------- ------- -------
Total............................. $ 2,220 $ 5,046 $ (2,084) $ 2,709 $ 6,281
======= ======= ======== ======= =======
</TABLE>
- ---------------
(1) Fiscal 1996 operating income includes various fourth quarter charges, see
"Costs and Expenses" and "Unusual Items" below.
Six Months Ended March 31, 1997 Compared to Six Months Ended March 31, 1996
Revenues. Consolidated revenues increased 86.6% in the six months ended
March 31, 1997, as compared to the same period in the prior year. This
improvement is primarily due to the fiscal 1996 acquisitions.
Oilfield service revenues increased $2,514,000 or 5.7% during the six
months ended March 31, 1997, compared to the same period in fiscal 1996.
Revenues from exploration services increased $1,049,000 or 6.3% from the six
months ended March 31, 1996, compared to the same period of fiscal 1997. The
improvement was driven primarily by increased sales volumes of the Company's
Houston, Texas tubular service facility. Demand for the Company's exploration
services is driven, in part, by the average domestic rig count which increased
16% during the six months ended March 31, 1997, versus the comparable period in
fiscal 1996. Revenues from production services increased $991,000 or 6.7% for
the six months ended March 31, 1997, compared to the same period in fiscal 1996.
The demand for these services has been favorably impacted by generally higher
oil prices in fiscal 1997 versus fiscal 1996. The increases in production
services revenues were due in large part to increased Canadian sucker rod
inspection revenues resulting from higher levels of production activity in
Western Canada. Corrosion control revenues decreased $144,000 or 1.3% during the
six months ended March 31, 1997, compared to the same period of fiscal 1996.
This change was primarily due to lower West Texas sales volumes. Other sales and
services consist of revenues generated by the Company's Canadian subsidiary
relating to the reconditioning and selling of engines used in connection with
oil well pumping units. These revenues increased due to greater production
activity in Western Canada during fiscal 1997 versus the comparable period in
fiscal 1996.
Petrochemical processing sales and services relate entirely to revenues of
the Company's Wedco, PSI and Bayshore subsidiaries which were acquired in April,
July and December, 1996, respectively. During the six months ended March 31,
1997, petrochemical processing revenues included grinding and other,
concentrate, and distribution revenues of $21,500,000, $12,684,000 and
$1,265,000, respectively.
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Costs and Expenses. Gross profit as a percentage of revenues was 30.5%
during the six months ended March 31, 1997 versus 30.0% for the six months ended
March 31, 1996. Within the oilfield services business, gross margins as a
percentage of revenues increased less than 1% during the six months ended March
31, 1997 compared to the year earlier period. This improvement is due to an
overall increase in sales volumes and modest price improvements within some of
the Company's oilfield services markets without a proportionate increase in
costs and expenses. The gross margins of the Company's size reduction operations
are generally higher than the margins of the oilfield service operations.
Conversely, the gross margins of the Company's concentrate manufacturing and
distribution businesses are generally lower due to the higher raw material cost
component included in these revenues as compared to the Company's other
petrochemical services. The Company anticipates that as the concentrate and
distribution businesses expand, overall gross margins, as a percentage of sales,
will decline.
The Company closed two petrochemical processing facilities during the six
months ended March 31, 1997 and plans to close a third facility in fiscal 1997
(See "Introduction"). Due to the timing of the closures, however, the full cost
benefits of the closures were not reflected in the results of the first quarter
and a portion of the second quarter.
Selling, general and administrative costs increased $5,816,000 during the
six months ended March 31, 1997 versus the same period of fiscal 1996. Selling,
general and administrative costs, as a percentage of sales, decreased to 16.6%
during the six months ended March 31, 1997, from 17.7% for the six months ended
March 31, 1996. The overall increase in these costs is primarily the result of
acquisitions in the latter part of fiscal 1996 and in fiscal 1997 and, to a
lesser extent, higher legal and employee compensation expenses during the six
months ended March 31, 1997 versus the same period of fiscal 1996, partially
offset by lower costs relating the Company's workers' compensation insurance
program.
Depreciation and amortization expense increased from $2,676,000 for the six
months ended March 31, 1996 to $5,109,000 for the six months ended March 31,
1997. The increases resulted from additions of property, plant and equipment and
goodwill primarily due to the acquisitions made during fiscal 1996 and fiscal
1997.
Operating Income. Operating income increased from $2,709,000 for the six
months ended March 31, 1996, to $6,281,000 for the same period of fiscal 1997.
The increase is due to the changes in revenues and costs and expenses discussed
above. Particularly significant were lower insurance costs relating to workers'
compensation, within the oilfield service operations.
Interest Income/Expense. Net interest expense was $531,000 during the six
months ended March 31, 1997. For the six months ended March 31, 1996, the
Company had net interest income of $705,000. The change is due to the fiscal
1996 and fiscal 1997 acquisitions which increased the Company's debt and reduced
investable cash balances.
Income Taxes. The Company's effective tax rate increased to 38.4% during
the six months of fiscal 1997, compared to 5.3% during the same period of fiscal
1996. This change is due to the Company decreasing its valuation allowance
through the provision for income taxes to reflect its ability to benefit from
temporary differences during fiscal 1996. In connection with the April 1996
acquisition of Wedco, the Company reversed the remaining valuation allowance
against net tax assets expected to be realized, resulting in a decrease of
acquired goodwill. As a result of the reversal of the valuation allowance in
April 1996 and increased goodwill amortization, which is not tax deductible,
provisions for income taxes for periods subsequent to the Wedco acquisition will
be higher as a percentage of pre-tax income than reported in fiscal 1995 and
fiscal 1996.
Net Income. For the six months ended March 31, 1997, the Company had net
income of $3,579,000, as compared to net income of $3,274,000 for the same
period in fiscal 1996, due to the factors described above.
Foreign Currency Translation. The fluctuation of the dollar against the
Dutch Guilder, the British Pound and the Swedish Krona has impacted the
translation of revenues and income of Wedco's European operations into U.S.
dollars for the six months ended March 31, 1997. Gains and losses from the
translation of certain balance sheet accounts are not included in determining
net income, but are accumulated as a separate component of stockholders' equity.
These unrealized gains and losses are subject to deferred income taxes. As
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a result of the dollar's fluctuation against these currencies and changes in the
net assets of foreign subsidiaries, stockholders' equity decreased net of
deferred income taxes by $793,000 during the six months ended March 31, 1997.
This change was due primarily to a change of Dutch Guilder to U.S. Dollar
exchange rates.
Year Ended September 30, 1996 Compared to Year Ended September 30, 1995
Revenues. Revenues increased $20,780,000, or 23.6%, in the fiscal year
ended September 30, 1996 from the same period in fiscal 1995. The increase was
primarily the result of the Company's entry into the specialty petrochemical
processing business via the acquisitions of Wedco (April 1996) and PSI (July
1996).
Exploration revenues decreased $408,000, or 1.2% in fiscal 1996 versus
fiscal 1995. The decrease was primarily due to a shift in the classification of
the services provided to customers within the Company's Lone Star, Texas
facility. Historically, the Lone Star facility provided mostly new pipe
inspection. During late fiscal 1995, the Company began providing mostly used
tubular goods inspection at this facility. Accordingly, in fiscal 1996, Lone
Star revenues were classified as production services revenues versus fiscal
1995, when these revenues were included in exploration services revenues. After
eliminating the effect of this reclassification, fiscal 1996 revenues increased
$1,280,000 or 3.7% versus fiscal 1995. Demand for exploration services is
affected by domestic drilling activity. The domestic rig count averaged 762 for
the fiscal year ended September 30, 1996 versus 738 during fiscal 1995, an
increase of 3.3%. In addition, the Company's exploration revenues increase in
fiscal 1996 was due in part to the full-year effect of the acquisition of Spinco
in June 1995.
Production revenues increased $2,342,000, or 8.1% in fiscal 1996 from
fiscal 1995, primarily due to the reclassification of Lone Star, Texas revenues
discussed above. After eliminating the effect of the reclassification of Lone
Star revenues, production services revenues would have increased $654,000 or
2.3%. The increase resulted from generally high oil prices in fiscal 1996 which
increased the demand for production services. Oil prices ranged from a high of
$25 per barrel to a low of $17 per barrel during fiscal 1996 compared to a high
of $21 and a low of $17 per barrel during fiscal 1995.
Revenues from corrosion control services increased $1,029,000, or 5.0%, in
fiscal 1996 versus fiscal 1995. The increase resulted primarily from greater
demand for the Company's services in the Louisiana and West Texas corrosion
control markets.
Revenues from other services decreased $1,456,000, or 40.2% from fiscal
1995 versus fiscal 1996. Half the decrease resulted from a decline in oilfield
engine sales and reconditioning revenues in Canada, due to a slowdown in
oilfield activity in Western Canada. The remaining decrease was the result of
recognizing an equipment sale in fiscal 1995, with no comparable sale in fiscal
1996.
Costs and Expenses. Cost of sales and services as a percentage of net
revenues increased to 68.7% during fiscal 1996 versus 68.1% for the same period
in fiscal 1995. Within the oilfield service business, costs of sales and
services increased to 70.3% in fiscal 1996 versus 68.1% in fiscal 1995. The
gross margin decline within the oilfield services segment is due to (in order of
magnitude): a softening of prices in the Houston inspection and West Texas
coating markets, the recognition of $2.1 million in product sales during fiscal
1995 which carried gross margins greater than the Company's traditional oilfield
sales and services and the reclassification of certain employee expenses to cost
of sales during fiscal 1996 which were recognized as selling, general and
administrative expenses during fiscal 1995. The reclassification of the employee
expenses was based upon the applicable employees' job functions. The effects of
lower margins in the Company's oilfield service business were partially offset
by the higher margins generated by the specialty petrochemical processing
business. This business generally generates higher gross margins than the
Company's oilfield services business.
Selling, general and administrative expenses increased from $17,736,000
during fiscal 1995 to $19,996,000 during fiscal 1996. Selling, general and
administrative expenses as a percentage of revenues decreased to 18.4% in fiscal
1996 versus 20.2% in fiscal 1995. These changes are primarily due to the Wedco
and PSI acquisitions which increased revenues and selling, general and
administrative expenses, but had the effect of lowering these costs as a
percentage of revenues. The Company also incurred the following lower expenses
for fiscal 1996 versus fiscal 1995 (in order of magnitude): lower insurance
costs, lower moving
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expenses (primarily related to several employee relocations in 1995) and lower
payroll costs due to the reclassification of certain employee costs explained
above. These lower costs were offset by $490,000 in expenses relating to
litigation costs incurred in fiscal 1996. The $490,000 in costs relate to
litigation reserves established because, during the fourth quarter and
subsequent to year-end, the Company determined that it was probable that certain
legal matters of the Company would result in a charge to income and that these
charges could be reasonably estimated.
Depreciation and amortization increased from $5,112,000 for the year ended
September 30, 1995 to $7,230,000 for the year ended September 30, 1996. The
increase was primarily due to increases in property, plant and equipment and
goodwill due to the Wedco acquisition as well as capital expenditures made
during the year.
In March 1995, the Financial Accounting Standards Board (FASB) issued
Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of (SFAS No. 121), which the Company adopted in
the first quarter of fiscal 1996. SFAS No. 121 established "accounting standards
for the impairment of long-lived assets, certain identifiable intangibles, and
goodwill related to those assets to be held and used and for long-lived assets
and certain identifiable intangibles to be disposed of." The new statement
requires the value of long-lived assets, certain identifiable intangibles, and
goodwill to be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. If this change in circumstances or other initial indication has
occurred, the next step in determining whether an asset has been impaired is
performed using the expected future undiscounted cash flows of assets, grouped
at the lowest level for which there are identifiable cash flows, compared to the
carrying value of those assets. If the undiscounted cash flow value is less than
the net carrying value, the amount of impairment is then measured by comparing
the discounted cash flows with the corresponding carrying values of the assets
evaluated. The Company's previous policy was to evaluate the realizability of
long-term assets on an aggregate basis based on undiscounted cash flows. The
Company accumulated cash flow information at the lowest asset grouping levels
for which there were identifiable cash flows. These levels were represented by
separate operating locations. In the fourth quarter of fiscal 1996, based on the
consolidation plans, the Company was required to consider impairment which
resulted in a write-down of long-lived assets of $5,025,000. The SFAS No. 121
write-down related entirely to the Wedco facilities which, during the fourth
quarter of fiscal 1996, the Company decided to close in fiscal 1997. More than
two-thirds of the write-down reduced the carrying value of goodwill created by
the April 1996 acquisition of Wedco. The remaining charge related to machinery
and equipment within the facilities to be closed. See "Business -- Petrochemical
Processing -- Size Reduction Services" and note 15 to the Consolidated Financial
Statements of the Company and notes thereto included elsewhere herein.
Non-recurring compensation charges of $1,812,000 in fiscal 1996 related to
previous acquisitions made by the Company. Most of the expense consists of
severance and consulting fee obligations resulting from the Wedco acquisition.
During the fourth quarter of fiscal 1996, the Company determined these expenses
would not benefit the Company in the future. Inventory writedowns of $868,000 in
fiscal 1996 consisted of a reduction in the carrying value of inventory, within
the oilfield service operations, which partially related to the acquisition of
Baker Hughes Tubular Services, Inc. ("BHTS") in September 1992.
In fiscal 1996, the Company incurred $1,112,000 in non-recurring litigation
charges. During the fourth quarter and subsequent to year-end, the Company
determined that it was probable that certain legal matters of the Company would
result in a charge to income and that these charges could be reasonably
estimated. Eight-five percent (85%) of the charge relates to the settlement of
the litigation of a dispute concerning the assumption of certain liabilities in
connection with the acquisition of BHTS in September 1992. See
"Business -- Legal Proceedings."
Operating Income. Operating Income decreased from operating income of
$5,046,000 for the year ended September 30, 1995 to an operating loss of
$2,084,000 for the year ended September 30, 1996. The decrease is due to the
changes in revenues, selling, general and administrative, depreciation and
amortization and unusual items during fiscal 1996 versus fiscal 1995 as
explained above.
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Net interest income decreased from $1,307,000 in fiscal 1995 to $608,000
during fiscal 1996. This change resulted from the debt assumed in connection
with the Wedco acquisition, a lower average cash balance and lower yields on the
Company's high-quality commercial paper portfolio.
Provision (Benefit) for Income Taxes. The Company decreased its valuation
allowance through the fiscal 1996 provision to reflect its ability to benefit
from temporary differences. In connection with the purchase price accounting for
the Wedco acquisition, the Company reversed the remaining valuation allowance
against net tax assets expected to be realized, resulting in a decrease of
acquired goodwill. As a result of the reversal of the valuation allowance,
provisions for income taxes in future years will increase as a percentage of net
income and will be greater than the Company's effective tax rate. See note 10 to
the Consolidated Financial Statements and notes thereto included elsewhere in
this Offering Memorandum for the detail of temporary differences between income
for financial reporting purposes and income for federal income tax purposes.
The Company has for tax return purposes $6,306,000 and $1,078,000 in net
operating and capital loss carryforwards, respectively, which expire between
2000 and 2008, and $1,532,000 in investment, alternative minimum and other tax
credit carryforwards. All of the tax credits are expected to expire unused
except $104,000 in alternative minimum tax credits, which have no expiration.
Net Income. For the year ended September 30, 1996, the Company had a net
loss of $1,060,000 as compared to net income of $5,790,000 for the year ended
September 30, 1995 due to the factors described above.
Year Ended September 30, 1995 Compared to Year Ended September 30, 1994
Revenues. Revenues increased $11,917,000 or 16% from the year ended
September 30, 1994 to the same period in fiscal 1995. Exploration revenues
increased $4,857,000 or 16% from the year ended September 30, 1994 to the same
period in fiscal 1995. Demand for exploration services was affected by domestic
drilling activity. The domestic rig count averaged 770 for the year ended
September 30, 1994 compared to an average of 738 for the year ended September
30, 1995. The adverse impact of the lower domestic rig count, however, was more
than offset by the Company's increased success in providing in-plant, new pipe
inspection services to steel mill and processing customers.
Production sales and services revenues decreased $174,000 or less than 1%
from the year ended September 30, 1994 to the same period in fiscal 1995. Demand
for these services was affected by changes in oil prices which remained
relatively stable in fiscal 1995 versus fiscal 1994. Oil prices ranged from a
high of $21 per barrel to a low of $17 per barrel for the year ended September
30, 1995 compared to a high of $21 per barrel to a low of $14 per barrel for the
year ended September 30, 1994. The full year impact of fiscal 1994 acquisitions
of Frontier and Shearer and the partial year impact of Kebco acquired in March
1995 had a positive impact on production revenues. The Company believes the
effect of the acquisitions, however, was offset by a temporary decline in
services in the Oklahoma and Wyoming markets. The decrease in California was the
result of production delays following the relocation of the Company's operating
facility to Bakersfield, California, from The City of Industry, California.
Revenues from corrosion control services increased $6,013,000 or 41% from
the year ended September 30, 1994 to the same period in fiscal 1995. The
increase was due to the full year effect of the April 1994 acquisition of
Permian and an increased demand for the Company's corrosion control services at
all of its facilities.
Costs and Expenses. Cost of sales and services as a percentage of net
revenues decreased from 71% for the year ended September 30, 1994 to 68% for the
year ended September 30, 1995. This was due to the cost reduction program
implemented at the beginning of the fiscal 1994 third quarter and the increased
sales volume of the Company's exploration sales and services in fiscal 1995
versus fiscal 1994.
Selling, general and administrative expenses increased from $15,202,000 for
the year ended September 30, 1994 to $17,736,000 for the year ended September
30, 1995. The change is due to increased sales activity, the fiscal 1994
acquisitions of TUC, Shearer, Permian and Frontier and the fiscal 1995
acquisitions of B&W and Spinco. Selling, general and administrative costs as a
percentage of revenues remained relatively consistent for the fiscal year ended
September 30, 1994 as compared to the same period in fiscal 1995.
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<PAGE> 33
Depreciation and amortization expense increased from $4,357,000 for the
year ended September 30, 1994 to $5,112,000 for the year ended September 30,
1995. The increase resulted from the additions of property, plant and equipment
during the year including the property, plant and equipment included in the
fiscal 1995 and fiscal 1994 acquisitions.
Operating Income. Operating income increased to $5,046,000 during fiscal
1995 versus $2,220,000 for fiscal 1994. The increase is due to the changes in
revenues and costs and expenses, explained above.
Net interest income increased from $431,000 for the year ended September
30, 1994 to $1,307,000 for the year ended September 30, 1995. This change
resulted from the retirement of indebtedness in early fiscal 1994 and increasing
yields on the Company's high-quality commercial paper portfolio in fiscal 1995
versus fiscal 1994.
Provision (Benefit) For Income Taxes. The Company reduced its valuation
allowance during fiscal 1995 to reflect its ability to benefit from temporary
differences to the extent that regular federal taxes have been paid. See note 10
to the Consolidated Financial Statements and notes thereto included elsewhere
herein for the detail of temporary differences between income for financial
reporting purposes and federal income tax purposes.
Net Income. For the year ended September 30, 1995 the Company had net
income of $5,790,000 as compared to net income of $1,225,000 for the year ended
September 30, 1994 due to the factors described above. Included in the net
income for the year ended September 30, 1994 is an extraordinary loss of
$1,371,000 resulting from the retirement of indebtedness previously recorded on
the consolidated balance sheet at a discounted value.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1995 the balance of cash and cash equivalents was
$24,991,000 compared to $13,414,000 and $6,133,000 at September 30, 1996 and
March 31, 1997, respectively. The changes are a result of cash generated by
operating activities offset by cash used for investing and financing activities,
discussed below.
For the six months ended March 31, 1997 cash provided by operating
activities increased to $7,732,000 compared to $4,076,000 for the six months
ended March 31, 1996. The increase is primarily due to higher net income and
depreciation and amortization expense offset by various changes in working
capital accounts. Cash provided by operating activities increased from $9.0
million in fiscal 1995 to $11.1 million in fiscal 1996 also reflecting increased
net income and depreciation and amortization offset by various changes in
working capital accounts. The Company had working capital of $37,284,000,
$29,882,000 and $28,045,000 at September 30, 1995 and 1996 and March 31, 1997,
respectively.
Cash flows used for financing activities increased to $3,041,000 during the
first six months of fiscal 1997 compared to $2,216,000 during the first six
months of fiscal 1996. The increase is due to the increase in common stock
dividends, resulting from the increase in the number of common shares
outstanding, offset by lower net debt repayments, net of debt incurred. Cash
flows used for financing activities increased from $2.2 million in fiscal 1995
to $8.2 million in fiscal 1996 primarily reflecting increased common stock
dividends and repayments of debt in fiscal 1996 compared to fiscal 1995.
During the periods commencing on October 1, 1995 and ended on March 31,
1997, the Company acquired four companies, three within the specialty
petrochemical processing business. Since March 31, 1997, the Company has
acquired three additional petrochemical processing businesses. These
acquisitions required significant investment by the Company in cash, common
stock issued to the former shareholders of the acquired businesses and
indebtedness effectively assumed by the Company. Cash requirements for these
acquisitions were financed by cash generated from operations, existing cash and
borrowings under the Company's Bank Credit Facility.
During fiscal 1996, capital expenditures totaled $8,712,000, excluding
property, plant and equipment of $42,797,000 acquired in connection with
acquisitions. These capital expenditures related primarily to the oilfield
service business and approximately 70% of the expenditures were incurred for new
property, plant and
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equipment and the remaining expenditures were incurred for major repairs and
enhancements for existing facilities. During the first six months of fiscal 1997
the Company spent $5,172,000 for capital expenditures excluding property, plant
and equipment of $5,074,000 acquired with the acquisition of Bayshore. Of the
capital expenditures, $1,952,000 related to the oilfield services segment and
the remainder related to the speciality petrochemical processing business. The
expenditures during the first six months of fiscal 1997 were primarily incurred
to enhance existing facilities. For the balance of fiscal 1997, capital
expenditures are expected to be approximately $7,800,000. This figure includes
approximately $3,000,000 to build an additional compounding line and a portion
of the $5,200,000 in expenditures necessary to expand the capacities of the
Company's European petrochemical processing facilities. These expenditures are
expected to be financed through cash generated from operations, existing cash
and net proceeds from the Offering. See "Use of Proceeds."
In order to decrease fixed costs and increase economies of scale, during
the fourth quarter of fiscal 1996, the Company determined that three
petrochemical size reduction plants should be closed. The decision to
consolidate was driven by the redundancy of other Company facilities performing
identical services in the same area, in part due to the acquisition of PSI in
July 1996. The Company anticipates that future expenses relating to the plant
closures will not be material. The Company believes the closures will reduce
operating costs and capital expenditure requirements. The Long Beach, California
facility was closed during the first quarter of fiscal 1997, and the Houston,
Texas plant was closed during February 1997. The Company plans to close the
Maywood, Illinois facility during fiscal 1997. Due to this timing, the benefits
of these closures are not reflected in the results of the first six months.
As of March 31, 1997 the Company had approximately $18.5 million in
additional borrowing capacity available under domestic and foreign credit
arrangements. Of this available credit, $14.6 million relates to the domestic
credit facility while the remainder is comprised primarily of various foreign
credit facilities.
The Company has a bank credit facility (the "Bank Credit Facility") with
Bank of America Texas, N.A. (the "Bank") providing for a revolving line of
credit equal to the sum of (i) 80% of the balance due on Acceptable Receivables
(as defined therein) and (ii) the lesser of 40% of the value of Acceptable
Inventory (as defined) consisting of domestic finished goods and raw materials
and 50% of (i) above. Borrowings under this facility bear interest at Libor plus
1.25% or the Bank's reference rate as announced from time to time and must be
repaid on or before April 17, 1998. Certain subsidiaries of the Company have
guaranteed the Company's obligations under this facility, which is also secured
by certain inventory and receivables of ICO, Inc. and its domestic subsidiaries.
The facility provides for certain representations and covenants by the Company,
including financial ratio covenants. At April 30, 1997, the Company had $5.3
million outstanding under the Bank Credit Facility incurred primarily to finance
the Rotec and Micronyl acquisitions. See "The Company -- Acquisitions." The
Company is currently negotiating with the Bank to amend the Bank Credit Facility
to alter certain financial ratios which could not be met upon completion of the
offering of the Notes and to obtain the release of certain subsidiary guarantees
of the facility. For a description of the contemplated terms of the facility as
amended, see "Description of Certain Credit Facilities." While the Company
believes, based on its discussions to date with the Bank, that the Bank will
agree to an amendment and restatement of the Bank Credit Facility as described
elsewhere in this Offering Memorandum, there can be no assurance that the
Company will be able to obtain an amendment of the Bank Credit Facility at all
or on the terms described. See "Description of Certain Credit Facilities."
The Company believes the net proceeds of the Offering, cash from operations
and credit available under the Bank Credit Facility and other credit lines are
an adequate source of liquidity for its operations for the forseeable future.
SEASONALITY
Much of the Company's oilfield services business is seasonal in nature and
reflects the general pattern of oilfield drilling and workovers, with the first
and fourth quarters of the fiscal year generally having higher levels of
activity and the second and third quarters generally having lower levels of
activity. The Company does not believe its specialty petrochemical processing
business generally follows a seasonal pattern.
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BUSINESS
GENERAL
The Company provides specialized oilfield and petrochemical processing
services. In the oilfield services segment, ICO is a leading provider of
inspection, reconditioning and coating services for new and used tubular goods
and sucker rods utilized in the oil and gas industry. The Company's oilfield
services are designed to reduce the customers' cost of drilling and production
by preventing faulty tubular goods from being placed downhole (exploration
services), reclaiming and reconditioning used tubular goods and sucker rods
(production services), and preventing premature failure of tubular goods and
sucker rods from occurring due to the corrosive downhole drilling environment
(corrosion control services). Although comprehensive industry statistics are not
readily available, ICO believes it is one of the two largest providers of
inspection, reconditioning and coating services for tubular goods in the United
States. The Company's customers in the oilfield services segment include many of
the leading integrated oil companies and major independent oil and gas
exploration and production companies. In the petrochemical processing segment,
the Company provides grinding and ancillary services for petrochemical resins
produced in pellet form (size reduction services) and formulates and
manufactures concentrated products for blending with petrochemical resins to
give finished products desired characteristics such as color or ultraviolet
protectants (concentrates manufacturing). The Company's specialty petrochemical
processing customers include major chemical companies and petrochemical
production affiliates of major oil production companies.
ICO STRATEGY
The Company's goal is to be a leading provider of specialized services to
the oil and gas, plastics and steel industries. The Company seeks to achieve
steady growth in its oilfield services business by (i) providing high-quality
services at competitive prices, (ii) developing new products that meet its
customers needs, and (iii) selectively pursuing complementary acquisitions in
the oilfield services business. The Company intends to seek growth in its
petrochemical processing niche by (i) opportunistically pursuing additional
strategic acquisitions to increase market share and enable it to provide
additional and complementary products and services, (ii) streamlining acquired
operations to improve margins and (iii) increasing the sales and marketing
effort of acquired operations.
From the beginning of fiscal 1994 to the middle of fiscal 1996, the Company
completed and integrated eight acquisitions in the oilfield services segment to
increase market share and expand its service capabilities. These acquisitions
allowed the Company to streamline manufacturing facilities, reduce headcount,
and centralize administration functions to improve operating margins. In April
1996, ICO entered the petrochemical processing industry through the Wedco merger
to take advantage of opportunities in that market. Since the Wedco merger, the
Company has completed five additional acquisitions in the petrochemical
processing industry and has recently implemented a consolidation program which
has resulted in the closure of two manufacturing facilities with a third
facility to close during fiscal 1997.
The Company seeks growth through internal expansion, capital investments
and acquisitions. The primary focus of the Company's growth strategy is to:
Increase Penetration of Oilfield Services Markets -- The Company seeks to
increase its market share in oilfield services based upon the breadth of its
service line and the strength of its reputation in the industry. ICO believes
that it has a reputation for providing a wide range of services utilizing
advanced technologies at competitive prices while maintaining high levels of
quality and customer service. The Company intends to continue to introduce new
products, develop innovative solutions for customers, and pursue customized
marketing approaches to build market share.
Continue to Consolidate the Petrochemical Processing Market -- The Company
believes that the petrochemical processing segment presents opportunities
similar to those which existed in the oilfield services business in the early
1990's. The Company entered the industry in April 1996 with the Wedco merger and
has subsequently acquired five businesses that have allowed the Company to
increase its market share and expand its product line, both domestically and
internationally. The Company is actively seeking strategic acquisitions
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<PAGE> 36
of companies, technologies or service lines which will complement its existing
operations. Acquisition opportunities will be evaluated based on the Company's
perception of strategic fit, the expected return on capital invested and the
ability of management to improve the profitability of acquired operations
through cost reductions, plant consolidations and other synergies with existing
operations. While the Company considers such acquisition opportunities from time
to time, the Company has not entered into any agreement or arrangement for any
such acquisition.
Expand International Distribution of Specialty Petrochemical
Products -- The Company believes that the trend toward outsourcing of non-core
operations is creating an opportunity for ICO to expand into the distribution of
specialized petrochemical products in international markets. Historically, the
Company has provided petrochemical processing services for its customers, and
during fiscal 1997 the Company acquired the Micropowder Business and entered
into supply agreements with Exxon Chemical Belgium and Borealis to distribute
specified rotational molding powders in Europe. Additionally, Rotec, which was
acquired on April 30, 1997, is currently providing distribution services in the
United Kingdom. The Company believes that it is well positioned to develop its
international specialty petrochemicals distribution business.
Selectively Pursue Complementary Acquisitions in the Oilfield Services
Business -- Although ICO anticipates that its acquisition efforts will primarily
focus on the petrochemical processing business, the Company plans to continue to
evaluate strategic acquisitions in the oilfield services segment that complement
its existing business. Acquisition opportunities will be evaluated based on
criteria similar to those discussed above, with particular emphasis on
acquisitions which would expand the Company's geographic coverage, technological
base or provide complementary products or services. The Company has not entered
into any agreement or arrangement for any such acquisition.
OILFIELD SERVICES
The Company's inspection, reconditioning and coating services for new and
used tubular goods and sucker rods include exploration services, production
services and corrosion control services. These services include a variety of
processes designed to reduce the customer's cost of drilling and production. The
Company also sells equipment and supplies used in the inspection, reconditioning
and coating of tubular goods and sucker rods.
Tubular goods include various forms of casing, tubing, drill pipe and line
pipe. Casing is used to seal off fluids and prevent collapse of the bore holes
of oil and natural gas wells. After production casing is set, a string of tubing
is suspended from the surface inside the casing to serve as a conduit for the
extraction of oil and natural gas. Drill pipe is heavy seamless pipe used to
rotate the drill bit and circulate drilling fluids. Line pipe is used for waste
disposal lines, flow lines, gathering systems and pipelines through which oil,
natural gas and liquid hydrocarbons are transported. Removal of casing or tubing
for repair or replacement is expensive and results in an interruption of
production and loss of revenues to the well owner. Sucker rods are steel rods
which are joined together in a "string" by couplings to form a mechanical link
from a downhole pump at the bottom of an oil well to the pumping unit on the
surface. Removal of a sucker rod string for repair or replacement of rods,
couplings or the downhole pump requires a well to be shut down and the entire
string of sucker rods to be removed, resulting in additional expenses and loss
of revenues to the well owner due to interruption of production.
Exploration Services. The Company provides inspection services designed to
identify new tubular goods which are defective or which do not meet American
Petroleum Institute ("API") standards or other specifications set by the
customer. The API standards require pipes to be inspected to meet specified
standards and are generally employed as a benchmark in the petroleum industry.
Customers, however, generally require pipe to meet more rigorous standards.
These inspection services are used by the mills which manufacture pipe, pipe
suppliers and end users, such as oil and gas exploration and production
companies, as a quality assurance and control measure to reduce the risk of
costs associated with defective tubular goods and to reduce the risk of downhole
failure, especially when drilling deep oil and natural gas wells with high
downhole temperatures and pressures and when drilling in environmentally
sensitive areas such as offshore waters. The Company operates its own inspection
facilities for new tubular goods which provide (in contrast to field inspection)
a
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<PAGE> 37
controlled environment which permits more efficient and consistent inspection
procedures, facilitates supervision of personnel and electronic equipment and
avoids problems associated with inclement weather. The Company also performs
inspection services on site at the manufacturing plants of 12 major producers
and processors of tubular goods, reducing transportation and handling costs to
the customer, and provides mobile inspection services in the field. ICO also
manufactures inspection and quality control equipment which is sold or leased
from time to time to steel producers and processors.
The Company offers a wide range of tubular services including
electro-magnetic inspection ("EMI"), ultrasonic inspection, tubular maintenance
and storage, inventory management and associated services such as threading and
hydrostatic testing, providing "one-stop shopping" for customers. EMI is a
process which identifies flaws through magnetic flux leakage and is generally
used on pipe of less than 500 mil. in thickness. The Company designed and uses
an EMI system, the AGS system, which the Company believes is capable of
identifying and visually displaying natural and man-made flaws that are not
identifiable using conventional EMI methods. Ultrasonic inspection identifies
flaws which are virtually undetectable by other means, employing high frequency
sound waves, and is used to inspect pipe that is thicker than pipe which EMI can
effectively inspect or which contains alloys of metals other than steel, such as
titanium. The Company expanded its ultrasonic technology and engineering
expertise with the acquisitions of BHTS in September 1992 and TUC in November
1993. See "The Company -- Acquisitions."
Production Services. The Company reconditions and inspects used tubular
goods and new and used sucker rods through the provision of a complete package
of inspection and maintenance services. These services include the testing,
cleaning, reconditioning and electronic inspection of tubular goods. Such
services are performed in a controlled environment at the Company's facilities
(providing many of the advantages previously described for in-plant inspection
of new tubular goods) as well as at the well site, using mobile equipment. These
services reduce the customer's well operating costs because reconditioning used
tubular goods is less expensive than purchasing new tubular goods. Reconditioned
tubular goods generally must meet the same API or customer standards as new
tubular goods. The Company performs these services at nine Company facilities
located in California, Mississippi, New Mexico, North Dakota, Oklahoma, Texas
and Wyoming.
The Company is a provider of the reconditioning and inspection of new and
used sucker rods. Using a patented process, reconditioning involves a number of
steps designed to clean, straighten, inspect and apply protective coating to
sucker rods to guard against corrosion. This process reduces the customer's well
operating costs because reconditioning used sucker rods is less expensive than
purchasing new sucker rods. The Company also inspects new sucker rods before
they are placed in service to reduce the risk of downhole failure, which
requires expensive pulling services and results in loss of production. The
Company's sucker rod reconditioning and inspection services are provided at
seven Company facilities located in California, Oklahoma, Texas, Wyoming and
Canada. The Canadian operations were acquired in the February 1994 acquisition
of Shearer. See "The Company -- Acquisitions."
The Company has a program in which it purchases used tubular goods and
sucker rods from certain customers, reconditions and grades the pipe and sucker
rods for varying degrees of usage and resells the pipe and sucker rods to other
customers in the marketplace.
The Company also operates mobile inspection units utilizing a system known
as Wellhead Scanalog. The Company acquired the rights to Wellhead Scanalog for
use in the United States pursuant to a non-exclusive, royalty free license
assigned to it in connection with the acquisition of BHTS. Wellhead Scanalog is
designed to perform tubular inspection while the tubing is being removed from
the well without interfering with the normal operation of the rig. The Company
believes Wellhead Scanalog inspection is unique because it is not affected by
scale, mud, paraffin or water, which can inhibit the operation of other systems.
Corrosion Control Services. Corrosive conditions exist inside most wells.
Such conditions are particularly extreme in high temperature gas wells and in
oil producing regions where secondary and tertiary recovery techniques are
utilized. Secondary and tertiary recovery techniques are methods by which
natural forces in an oil reservoir are supplemented by means such as water
flooding to increase ultimate oil recovery. Under highly corrosive conditions,
even a microscopic area of uncoated steel can result in a tubular or rod failure
or damage.
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To combat these conditions, the Company offers a variety of corrosion control
services to its customers, using several of the Company's patented processes.
The Company's corrosion control services are designed to reduce well operating
costs by extending the useful life of downhole tubular goods and sucker rods and
by improving the well's hydraulic efficiency and pipe integrity.
The Company internally coats new and used tubular goods with a variety of
powder and liquid coatings. In the coating process, tubular goods are placed in
large burnout ovens to remove foreign substances. The tubular goods are then
grit blasted, primed with phenolic, preheated, coated internally and subjected
to a final baking process. The tubular goods are then inspected visually and
electronically to make certain the coating uniformly covers the entire interior
of the pipe and that no bare spots or thin coverings exist. A similar process is
utilized for cleaning, priming and coating tubular couplings. The selection of
the proper coating for downhole tubular goods requires knowledge and
considerable effort by the Company's experienced coating managers and
technicians. The key to the process is gathering facts concerning the well, its
environment, test procedures and related conditions planned for the life of the
well. The Company has four coating facilities located in Louisiana and Texas.
The Company's patented sucker rod coating process involves applying a
special formula stainless steel to the sucker rods and then coating them with a
phenolic primer and fusion bonded modified epoxy. Sucker rods used in less
corrosive conditions are usually coated only with the phenolic primer and fusion
bonded modified epoxy. The Company's sucker rod coating services are provided at
its facility in Odessa, Texas.
ICO expanded its corrosion control services with the acquisition of Permian
in April 1994. Permian provides internal cement lining for small diameter tubing
through 24-foot line pipe. Cement provides an increased barrier between
corrosive fluids and the tubular product which allows the customer to use a
larger portion of its used pipe with a welded connection, when weight and
torsion strength are not a primary issue. Permian also applies an external
fusion bonded tape which forms a tough protective corrosion barrier for critical
line pipe. The addition of Permian has afforded the Company expanded flexibility
and product offerings for small diameter pipe used in production applications.
See "The Company -- Acquisitions."
In fiscal 1995, the Company introduced five new corrosion control products,
including powder coatings for drill pipe and high temperature production tubing.
These powder coatings have better mechanical and protective capabilities as
compared to liquid coatings without the environmental control expenses normally
associated with their liquid counterparts. The five products the Company
introduced in fiscal 1995 are as follows: IPC 100 -- a powdered, internal
protective coating for drill pipe, IPC 800 -- a high temperature powder coating
for production tubing, Nose-Gard(TM) -- a metalizing process for the end area of
tubing, Weld-Gard(TM) -- a metalizing process for the end area of line pipe, and
Fiber-Line(TM) -- an internal fiberglass lining for tubing. During fiscal 1996,
the Company added a deep water drilling choke and kill line unit to the
Louisiana coating facility. ICO believes it is the only company with the ability
to apply baked on coatings to 75-foot choke and kill lines used to control well
pressures.
Oilfield Services Customers and Pricing. The Company's customers include
several of the leading integrated oil companies, as well as major independent
oil and gas exploration and production companies, drilling contractors and steel
producers and processors and supply companies. No single customer of the
oilfield services business segment accounted for over 10% of the Company's
revenues in fiscal 1994, 1995 or 1996 or for the six months ended March 31,
1997. Sales are generally on an order-by-order basis or under short-term
contracts (i.e., one year or less). Contracts involving the placement of Company
owned equipment in tubular goods manufacturing facilities. These contracts are
generally for three or more years and in some instances provide for fixed
prices, volume discounts and indemnification of customers for certain
liabilities.
Oilfield Services Sales and Marketing. The Company's oilfield services are
marketed by 26 individuals who are responsible for in-depth customer contact and
service knowledge. Oilfield service sales representatives are required to be
technically knowledgeable in inspection and corrosion control services, and to
stay abreast of regional and industry-wide trends in oil and gas exploration,
completion and production.
Competition. The principal competitive factors in the Company's oilfield
services business are price, availability and quality of service. The
consolidation in the tubular inspection, reconditioning and coating
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industry has resulted in the elimination of many of the Company's competitors.
Notwithstanding the industry's consolidation, the tubular inspecting,
reconditioning and coating industry continues to be highly competitive. The
Company's ability to compete effectively is dependent upon timely, reliable
performance and quality of its services at competitive rates. The Company
believes that it has been able to compete effectively because of its efficient
and cost-effective processes and the strong relationships which it maintains
with its customers.
The Company believes few competitors provide as wide a variety of tubular
services as those offered by ICO, or in-plant inspection of new tubular goods
outside Houston, Texas. The Company and Tuboscope Vetco International
Corporation compete with each other and a number of smaller companies in most
domestic markets. Capital and other requirements for entry into the tubular
inspection business are relatively low and new competition may enter the market
from time to time. Potential entrants may have substantially greater financial
or other resources than the Company. While there can be no assurance, the
Company believes it will be able to compete effectively in the industry, based
on the factors described above.
PETROCHEMICAL PROCESSING
The Company's petrochemical processing business segment provides size
reduction services and manufactures concentrates for use in petrochemical
products. The Company conducts its size reduction operations through its Wedco
business unit (including the operations of PSI and Micronyl), which operates in
the United States and Europe. The Company's concentrates manufacturing
operations are conducted primarily through Bayshore, which operates in the
United States. Through the recently completed acquisition of Rotec, the Company
expanded its concentrates manufacturing operations in Europe. See "The
Company -- Acquisitions."
Petrochemical resins are produced by chemical manufacturers, generally in
the form of pellets. A variety of the manufacturing processes necessary to
produce finished plastic or other petrochemical products require the pellets to
be ground into smaller sizes, or to be mixed with additives and recombined,
before end products having the desired characteristics are produced. The
Company's size reduction services and concentrates manufacturing operations are
an intermediate step between the primary production of petrochemical resins and
the final manufacture of a wide variety of end products, such as paint, garbage
bags or objects made of plastic. The Company's size reduction services involve
the grinding of pellets into smaller sizes or the blending of petrochemical
pellets with other additives or fillers, while the Company's concentrates
manufacturing operations produce additives which, when blended into resin, give
end products desired properties such as flame retardency, color, ultraviolet
stabilization or adhesion.
Size Reduction Services. The Company's size reduction services include
ambient grinding, cryogenic grinding and air jet milling of petrochemical
pellets. Materials processed by the Company's size reduction services include
polyethylene, polyester, polypropylene, nylon, fluorocarbons, cellulose acetate,
vinyls, phenolic, polyurethane, acrylics, epoxies and others.
The majority of size reduction services performed by the Company involve
ambient grinding, a process which passes the petrochemical pellets between two
separated metal grinding disks, one rotating and one fixed, thus breaking down
the pellets. The Company generally performs ambient grinding utilizing Wedco-
manufactured equipment. Ambient grinding is suitable for products which do not
require very fine particle size and are not highly heat sensitive. The powders
resulting from the Company's ambient grinding services are used in the
manufacture of household and automotive items (such as household furniture,
trash receptacles and plastic automobile parts), agricultural products (such as
fertilizer and water tanks), paint and metal coatings, fabric coatings and as
raw material for additional processing involving the addition of additives or
colors. Many of these products are produced by rotational molding, and a
substantial portion of the Company's size reduction services are produced for
customers manufacturing in the rotational molding industry or supplying that
industry.
Rotational molding manufactures plastic products by melting pre-measured
plastic resin in molds which are heated in an oven while being slowly rotated on
both the vertical and horizontal axis. The melting resin sticks to the hot mold
and coats each surface evenly. This process offers design advantages over other
molding processes, such as injection molding, because assembly of multiple parts
is unnecessary, consistent thickness
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can be maintained, tooling is less expensive and molds do not need to be
designed to withstand the high pressures inherent in injection molding.
The Company provides air jet milling of resins for products requiring very
fine particle size, such as additives for printing ink, adhesives, waxes and
cosmetics. Air jet milling utilizes high velocity compressed air to reduce
materials to sizes between 0.5 and 50 microns. Materials with special thermal
characteristics (such as heat sensitive plastics) are processed utilizing
cryogenic grinding, which grinds pellets chilled to extremely low temperatures
employing equipment developed by Wedco over the past 20 years.
The Company also offers its customers other related services, such as melt
blending and mixing of plastics and other additives to form pellets
(compounding) and other processing, packaging, warehousing and distribution
services, which are integrated with the size reduction services described above.
From time to time, the Company also sells the ambient grinding equipment
manufactured by Wedco in the United States and Europe. Sales of such equipment
were less than $1.0 million in fiscal 1996.
The Company's size reduction services are conducted at seven locations in
the United States and six in Europe. The Company's acquisition program,
particularly the acquisition of PSI, resulted in ownership by ICO of multiple
size reduction facilities in the same geographic area. Accordingly, in order to
reduce operating costs and capital expenditure requirements, the Company decided
to discontinue petrochemical size reduction services at three plants, in
Houston, Texas, Long Beach, California and Maywood, Illinois. The Houston and
Long Beach facilities have been closed and the Maywood facility is expected to
be closed during fiscal 1997. See "The Company -- Acquisitions" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
The Company (through Wedco) also owns 50% of WedTech, Inc. ("WedTech"), a
Canadian company which provides size reduction services and manufactures
concentrates. See "-- Legal Proceedings."
Concentrates Manufacturing. The Company's concentrates manufacturing
operations are conducted primarily at Bayshore's facility in La Porte, Texas,
and were recently augmented by the Company's acquisition of Rotec, described
below, whose Rushden, England facility also manufactures concentrates. ICO's
concentrates manufacturing operations involve the formulation and production of
highly concentrated compounds of additives which are then blended (by the
Company or others) with petrochemical resins to produce products having
specifically desired characteristics, such as flame retardance, color,
ultraviolet stabilization or adhesion. The Company's concentrates are produced
to the detailed specifications of customers and require the combination of up to
25 different additives or fillers in precise proportions. The Company is often
approved as the manufacturer of such concentrates following rigorous
qualification procedures imposed by customers on a product by product basis. The
Company works closely with its concentrates customers to research, develop and
test the formulations necessary to create the desired characteristics of the
concentrates to be produced. Such concentrates are produced in batches which may
range from as little as five pounds (i.e., a lab sample) to as large as 4
million pounds. Bayshore operates a facility in LaPorte, Texas with a present
capacity of up to 100 million pounds per annum, depending upon the density of
the material produced, and is constructing an additional production line at this
location with a capacity of up to 55 million pounds per annum.
In the second quarter of fiscal 1997 the Company began to expand the
distribution component of its specialty petrochemical production services
business through the acquisition, effective April 1, 1997, of the Micropowders
Business, the execution of the supply agreements with Borealis and Exxon
Chemical Holland and the acquisition of Rotec, described below. Under the supply
agreements the Company has received the distribution rights to specific
rotational molding products of Borealis and Exxon Chemical Holland in the
European Union under agreements providing for purchase of the products from the
manufacturers at scheduled prices. These actions will allow ICO to sell a
variety of petrochemical products in Europe under its own name and under the
name of Rotec. ICO has established trading companies (under the name ICO
Polymers) in The Netherlands, the United Kingdom and Sweden to engage in these
activities. The Company believes this enhanced distribution capacity will
provide access to new customers and enable it to expand its relationships with
existing petrochemical producer customers by the creation of a vending
relationship with the customer in addition to existing service relationships. In
this activity, the Company will acquire the petrochemical products for its own
account from the petrochemical producer for resale to third parties, and
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will expand the portion of the Company's specialty petrochemical processing
business which is performed through product-based pricing rather than on a
tolling basis.
Recent Petrochemical Processing Acquisitions. On April 30, 1997 the Company
completed the acquisition of Rotec, an English manufacturer of specialized color
concentrates, primarily for the rotational molding industry. Rotec distributes
the products it manufactures to customers in Europe under its own brand name and
has a sales force of three persons and a facility located in Rushden, England.
The Company believes that the Rotec acquisition will enhance its distribution
capabilities in Europe and will offer it opportunities to provide its United
States rotational molding customers with products currently sold by Rotec. See
"Unaudited Pro Forma Condensed Financial Data" and "The
Company -- Acquisitions."
In addition, on May 5, 1997 the Company acquired the remaining 50% interest
in Micronyl, a joint venture previously established by Wedco to perform size
reduction operations in France, from its local management joint venture partner,
for approximately FF15 million ($2.6 million) in cash. Micronyl operates two
size reduction facilities in France which perform services similar to those
performed by other Wedco units.
Petrochemical Processing Customers and Pricing. The primary customers of
the Company's petrochemical processing business segment are large producers of
petrochemicals, which include major chemical companies and petrochemical
production affiliates of major oil production companies. In size reduction
services, the number of customers is large and no customer or particular type of
customer is dominant. While the Company has a large number of concentrates
manufacturing customers, sales are focused on a limited number of large chemical
companies and affiliates of oil producers. Dow Chemical Company and its
affiliates accounted for approximately 10% of the revenues of the Company for
the six months ended March 31, 1997 on a pro forma basis.
The Company's size reduction services are generally performed on a tolling
basis, whereby the customer delivers raw materials to the Company, which
processes them for a processing fee and returns the processed materials to the
customer for further processing or sale. The Company has long term contract
arrangements with several customers whereby it has agreed to process
petrochemical products for a multi-year term for a fixed processing fee.
While the Company emphasizes value-added services to customers in both its
size reduction services and its concentrates manufacturing, the Company
generally purchases and takes into inventory the raw materials necessary to
manufacture the concentrates and sells the resulting manufactured products at a
product price, which contrasts with its pricing in its size reduction services
performed on a tolling basis. The Company seeks to minimize the risk of price
fluctuation in raw materials and other supplies by maintaining relatively short
order cycles. The Company's recent expansion into the micropowders distribution
business in Europe will also require the Company to purchase and take raw
materials into inventory, exposing the Company to increased risk of price
fluctuations. See "-- Raw Materials and Backlog."
Petrochemical Processing Sales and Marketing. Prior to its acquisition by
the Company in April 1996, Wedco operated in the United States without a formal
sales and marketing group. As part of its integration of Wedco, the Company has
established a sales force of five full-time individuals dedicated to selling its
size reduction services in the United States. In addition, Wedco has an
established sales force in Europe consisting of four full-time individuals, who
are located in The Netherlands and the United Kingdom. Bayshore's concentrates
sales force consists of two individuals who sell the Company's concentrates and
related services throughout the United States. Finally, Rotec has a sales force
of three individuals located at its facility in Rushden, England who sell
Rotec's products and services primarily in the United Kingdom.
Competition. The specialty petrochemical processing business is highly
competitive. Competition is based principally on price, quality of service,
manufacturing technology, proximity to markets and customer service and support.
The Company's competitors in providing size reduction services are generally
smaller and mid-sized companies providing ambient grinding services from
regional locations, as well as larger providers of specialized services such as
cryogenic grinding and air jet milling. Several companies also maintain
significant size reduction facilities for their own use in connection with
products produced by rotational molding. The
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Company believes that it has been able to compete effectively in its market
based on competitive pricing, its network of plants in the U.S. and Europe, its
technical expertise and equipment manufacturing capabilities and its range of
services, such as flexible storage and packaging facilities. The Company also
believes that its knowledge of the rotational molding industry, through
activities such as participation in the Association of Rotational Molders,
enhances its competitive position with this key customer group. The Company's
competitors in the concentrates industry include a number of large enterprises,
as well as smaller and mid-sized regional companies. The Company believes its
technical expertise, high quality product, customer support and pricing have
enabled it to compete successfully in this market.
The size reduction business lacks substantial barriers to entry. However,
the concentrates manufacturing business requires substantial investment in
equipment, as well as technical expertise. In general, many of the Company's
customers could perform the special petrochemical processing services provided
by the Company for themselves if they choose, and new competitors may enter the
market from time to time. A number of the Company's competitors and potential
competitors in this segment have substantially greater financial and other
resources than the Company. While there can be no assurance, the Company
believes that it will be able to continue to compete effectively in the
industry, based on the factors described above.
ENVIRONMENTAL REGULATION
The Company is subject to numerous and changing local, state, federal and
foreign laws and regulations concerning the use, storage, treatment, disposal
and general handling of hazardous materials, some of which may be considered to
be hazardous wastes, and restricting releases of pollutants and contaminants
into the environment. These laws and regulations may require certain permits and
other authorizations mandating procedures under which the Company shall operate
and restricting emissions. Many of these laws and regulations provide for strict
joint and several liability for the costs of cleaning up contamination resulting
from releases of regulated materials into the environment. Violation of
mandatory procedures under operating permits may result in fines, remedial
actions or, in more serious situations, shutdowns or revocation of permits or
authorizations.
The Company regularly monitors and reviews its operations, procedures and
policies for compliance with environmental laws and regulations and the
Company's operating permits. The Company believes that its current procedures
and practices in its operations, including those for handling hazardous
materials, are substantially in compliance with all material environmental laws
and regulations and its material operating permits. There can be no assurance,
however, that a review of the Company's past, present or future operations by
courts or federal, state, local or foreign regulatory authorities will not
result in determinations that could have a material adverse effect on the
Company. In addition, the revocation of any of the Company's material operating
permits, the denial of any material permit application or the failure to renew
any interim permit, could have a material adverse effect on the Company. While
the Company cannot predict what environmental laws and regulations will be
enacted or adopted in the future or how such future law or regulations will be
administered or interpreted, it believes the impact of any such laws or
regulations is not likely to be more burdensome to the Company than to other
similarly situated companies involved in oilfield services or petrochemical
processing. Compliance with more stringent environmental laws and regulations,
more vigorous enforcement policies, or stricter interpretations of current laws
and regulations, or the occurrence of an industrial accident, could have a
material adverse effect on the Company.
For a description of certain legal proceedings involving the Company and
relating to environmental laws and regulations, see "-- Legal Proceedings."
INSURANCE AND RISK
Except for warranties implied by law, the Company does not generally
warrant the tubular goods or sucker rods it inspects or the specialty
petrochemical processing services it provides. Nonetheless, if the Company were
found to have been negligent, or to have breached its obligations to its
customers, the Company could be exposed to significant liabilities, and its
reputation could be adversely affected. Likewise, the Company's activities as a
vendor of inspection equipment, a reseller of tubular goods and a manufacturer
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of specialty petrochemical products, may result in liability on account of
defective products. ICO believes the risks of its business are adequately
covered by its insurance program. However, such coverage is subject to
applicable deductibles, exclusions, limitations on coverage and policy limits.
In addition, the occurrence of a significant adverse event, the risks of which
are not fully covered by insurance, could have a material adverse effect on the
Company's financial condition and results of operations. Moreover, no assurance
can be given that the Company will be able to maintain adequate insurance in the
future at rates it considers reasonable. ICO believes it operates in substantial
compliance with applicable laws and government regulations and in accordance
with safety standards which meet or exceed industry standards.
RAW MATERIALS AND BACKLOG
The Company's specialty petrochemical business uses resins which are
generally supplied to it by its customers in size reduction operations. The
Company purchases and takes into inventory the resins, additives and other
materials used in its concentrates manufacturing and distribution business,
which are subject to fluctuating availability and prices. The Company believes
that other materials used in its operations are available from numerous sources
and are available to meet its needs. The Company believes that backlogs are not
meaningful to the Company operations.
PATENTS AND LICENSES
The Company holds six United States patents and has six patent applications
pending covering the proprietary technology utilized in its reconditioning,
inspecting, spraymetal and epoxy coating of sucker rods and its services for
used tubular goods. The expiration dates on these patents range from March 2007
to February 2014. The Company's petrochemical processing operations are not
materially dependent upon any patents or trademarks. The Company believes that
its patents and licenses are valid and that the duration of its existing patents
is satisfactory. However, no assurance can be given that one or more of the
Company's competitors may not be able to develop or produce a process or system
of comparable or greater quality to those covered by the Company's patents or
licenses or, because patent applications are confidential, that competitors may
not have previously filed patent application for the same inventions covered by
the Company's pending applications. In addition, issued patents may be modified
or revoked by the United States Patent and Trademark Office or in legal
proceedings. The Company does not believe any single patent is essential to the
overall successful operation of the Company's business.
In connection with the acquisition of BHTS, the Company acquired
royalty-free exclusive licenses to use Wellhead Scanalog, PipeImage(TM) and
other proprietary technology in the United States. Pursuant to the terms of such
licenses, the Company generally is prohibited from using such proprietary
technology in foreign markets.
EMPLOYEES
As of April 21, 1997, the Company had approximately 1,147 full-time
employees, and approximately 260 full-time contract employees. The acquisitions
of Rotec and Micronyl after March 31, 1997 added an additional 40 and 83
employees, respectively. The Company's employees working at the facility located
in 's-Gravendeel, are parties to a collective bargaining agreement. None of the
other employees are represented by a union. The Company has experienced no
strikes or work stoppages and considers its relations with its employees to be
satisfactory. The Company provides many of its employees with stock options and
year-end bonuses.
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PROPERTIES
The location and approximate acreage of the Company's operating facilities
at March 31, 1997, together with an indication of the services performed at such
facilities are set forth below.
<TABLE>
<CAPTION>
OWNERSHIP
OR LEASE
LOCATION SERVICES ACRES EXPIRATION
-------- -------- ----- ----------
<S> <C> <C> <C>
OILFIELD SERVICES
Bakersfield, California.............. Sucker rod reconditioning and inspecting 30 Owned
Amelia, Louisiana.................... Internal coating and inspection of new and used 31 1998
tubular goods
Broussard, Louisiana................. Drill pipe inspection 22 Owned
Brookhaven, Mississippi.............. Inspection of tubular goods 12 2001
Brookhaven, Mississippi.............. Inspection of tubular goods 3 2008
Farmington, New Mexico............... Inspection of new and used tubular goods 14 1997
Williston, North Dakota.............. Used tubular goods services 2 1997
Oklahoma City, Oklahoma.............. Sucker rod reconditioning and inspecting 8 Owned
Oklahoma City, Oklahoma.............. Inspection of new and used tubular goods 22 Owned
Corpus Christi, Texas................ Inspection of new and used tubular goods 10 Owned
Denver City, Texas................... Sucker rod reconditioning and inspecting 10 Owned
Houston, Texas....................... Corporate headquarters N/A 2001
Houston, Texas....................... Inspection of new tubular goods 199 Owned
Houston, Texas....................... Internal coating of tubular goods 49 Owned
Houston, Texas....................... Internal research and development N/A 2003
Lone Star, Texas..................... Inspection of new tubular goods 80 Owned
Odessa, Texas........................ Sucker rod reconditioning and inspecting 13 (1)
Odessa, Texas........................ Sucker rod storage 7 Owned
Odessa, Texas........................ Spraymetal and epoxy coating of sucker rods 3 Owned
Odessa, Texas........................ Used tubular goods services 13 Owned
Odessa, Texas........................ Internal coating of tubular goods 15 Owned
Odessa, Texas........................ Trucking yard 14 Owned
Odessa, Texas........................ Used tubular goods services 22 Owned
Odessa, Texas........................ Facility sub-leased to third party 22 Owned
Odessa, Texas........................ Cement lining/external coating 20 (2)
Odessa, Texas........................ Equipment manufacturing and repair 5 Owned
Casper, Wyoming...................... Sucker rod reconditioning and inspecting; inspection 29 (3)
of new and used tubular goods
Edmonton, Alberta, Canada............ Inspection of new and used sucker rods
Sales and service of new and used oilwell engines 10 2005
PETROCHEMICAL PROCESSING SERVICES
Fontana, California.................. Size reduction 7 Owned
Long Beach, California............... Idle facility 2 Owned
Maywood, Illinois.................... Size reduction 3 Owned
East Chicago, Indiana................ Size reduction 4 1999
Bloomsbury, New Jersey............... Size reduction 15 Owned
Grand Junction, Tennessee............ Size reduction 5 Owned
Memphis, Tennessee................... Engineering N/A 1997
Beaumont, Texas...................... Sales office 2 1997
China, Texas......................... Size reduction 12 Owned
Houston, Texas....................... Idle facility 22 Owned
LaPorte, Texas....................... Concentrate and compounding processing facility 37 Owned
Lovelady, Texas...................... Size reduction 12 Owned
Gainsborough, England................ Size reduction 5 Owned
Rotterdam, The Netherlands........... European headquarters N/A 2001
's-Gravendeel, The Netherlands....... Size reduction 5 Owned
Stenungsund, Sweden.................. Size reduction N/A 2000
</TABLE>
- ---------------
(1) Three acres are leased on a month-to-month basis; the remaining ten acres
are owned by the Company.
(2) Eighteen acres are owned; the remaining two acres are leased on a
month-to-month basis.
(3) Seventeen acres are owned; ten acres are leased through 1997; remaining two
acres are leased on a month-to-month basis.
43
<PAGE> 45
The acquisition of Rotec added a facility in Rushden, England which is a
concentrates manufacturing and compounding facility covering approximately one
acre. The acquisition of Micronyl on May 5, 1997 added two facilities in
Beaucaire and Montereau, France. Micronyl conducts size reduction operations on
approximately three acres. See "The Company -- Acquisitions."
The Company's facilities and equipment, owned and leased, are considered by
ICO to be well maintained and adequate for the Company's operations. The Company
also leases various sales and administrative offices with various lease
expiration dates through 2002. Utilization of the Company's oilfield service
facilities is subject to fluctuations based in part on oil and gas exploration
and production levels. The Company is currently operating most of its facilities
below full capacity. Most facilities are operating no more than one shift per
day. The Company does not presently intend to close any of its significant
operating facilities other than the Maywood, Illinois petrochemical grinding
facilities. The Company considers its properties to be suitable for its present
needs.
LEGAL PROCEEDINGS
The Company is a named defendant in 12 cases involving 12 plaintiffs, filed
since June 1990, for personal injury claims alleging exposure to silica
resulting in silicosis-related disease. The Company is generally protected under
worker's compensation law from claims under these suits except to the extent a
judgment is awarded against the Company for intentional tort. In 1994, the
Company was dismissed without liability from two suits alleging intentional tort
against the Company for silicosis-related disease. In fiscal 1993, the Company
settled two other suits, both of which alleged wrongful death caused by
silicosis-related diseases, which resulted in a total charge of $605,000. In
1996, the Company obtained a non-suit in two other intentional tort cases and in
early 1997 was non-suited in an additional tort case. Three of the pending
personal injury cases involve three alleged silicosis-related deaths, which are
premised upon allegations of gross negligence. The standard of liability
applicable to the remainder of the pending cases is intentional tort, a stricter
standard than the gross negligence standard applicable to the wrongful death
cases. The Company and its counsel cannot at this time predict with any
reasonable certainty the outcome of any of the remaining suits or whether or in
what circumstances additional suits may be filed. Except as described below, the
Company does not believe, however, that such suits will have a material adverse
effect on its financial condition or results of operations. The Company has in
effect in some instances general liability and employer's liability insurance
policies applicable to the referenced suits; however, the extent and amount of
coverage is limited and the Company has been advised by certain insurance
carriers of a reservation of rights with regard to policy obligations pertaining
to the suits because of various exclusions in the policies. If an adverse
judgment is obtained against the Company which is ultimately determined not to
be covered by insurance, the amount of such judgment could have a material
adverse effect on the financial condition or results of operations of the
Company.
The Company's agreement with Baker Hughes, Incorporated ("Baker Hughes"),
pursuant to which Baker Hughes Tubular Services ("BHTS") was acquired by the
Company, provides that Baker Hughes will reimburse the Company for 50% of the
BHTS environmental remediation costs in excess of $318,000, with Baker Hughes'
total reimbursement obligation being limited to $1,000,000. BHTS is a
responsible party at two hazardous waste disposal sites that are currently
undergoing remediation pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act ("CERCLA"). Under CERCLA, persons who were
responsible for generating the hazardous waste disposed of at a site where
hazardous substances are being released into the environment are jointly and
severally liable for the costs of cleaning up environmental contamination, and
it is not uncommon for neighboring landowners and other third parties to file
claims for personal injuries and property damage allegedly caused by hazardous
substances released into the environment. The two sites where BHTS is a
responsible party are the French Limited site northeast of Houston, Texas, and
the Sheridan site near Hempstead, Texas. Remediation of the French Limited site
has been completed, with only natural attenuation of contaminants in groundwater
occurring at this time. Remediation has not yet commenced at the Sheridan site;
current plans set forth in the federal Record of Decision for cleanup of the
site call for bioremediation of the soils and natural attenuation of
contaminants in the groundwater. Based on the completed status of the
remediation at the French Limited site and BHTS's
44
<PAGE> 46
minimal contribution of wastes at both of the sites, the Company believes that
its future liability under the agreement with Baker Hughes with respect to these
two sites will not be material.
During December of 1996, an agreement was signed by the Company and Baker
Hughes to settle the litigation of a dispute concerning the assumption of
certain liabilities in connection with the acquisition of BHTS in 1992. The
agreement stipulates that with regard to future occupational health claims, the
parties shall share costs equally with the Company's obligations being limited
to $500,000 for each claim and a maximum contingent liability of $4,500,000 (net
of current accruals) in the aggregate, for all claims.
Wedco is a plaintiff and a counterclaim defendant and the Company is a
third party defendant in a lawsuit filed by Wedco against Polyvector Corporation
("Polyvector") and John Lefas ("Lefas"), the current president of WedTech and
principal shareholder of Polyvector, which is pending in the federal district
court for the District of New Jersey. Wedco alleges, among other things, that
the various defendants have breached the terms of the shareholders' agreement
among Wedco and the defendants and seeks performance of the terms of such
agreement. WedTech, Polyvector and Lefas have asserted various counterclaims and
third party claims against the Company allegedly arising out of the Company's
merger with Wedco and the conduct of WedTech's affairs under the shareholders'
agreement. The defendants are seeking, among other things, injunctive relief,
recission of the transfer of WedTech shares in the merger between Wedco and the
Company and reimbursement for alleged damages. The case is in the preliminary
discovery stage. The outcome of this litigation cannot be predicted, but the
Company believes it has meritorious defenses to the counterclaims and third
party claims.
Permian is a defendant in a case filed by Tidelands Oil Production Company
("Tidelands") pending in the Superior Court of Los Angeles County, California
(Long Beach division) alleging Permian is liable for damages exceeding $1.1
million suffered by Tidelands and third parties resulting from the failure of a
pipe owned by Tidelands and which was allegedly lined by Permian. Discovery in
this case is ongoing, and a jury trial in the case is currently scheduled for
1998. The outcome of this litigation cannot be predicted, but the Company
believes Permian has meritorious defenses in this matter.
The Company is also named as a defendant in certain lawsuits arising in the
ordinary course of business. While the outcome of these lawsuits cannot be
predicted with certainty, ICO does not expect these matters to have a material
adverse effect on its financial condition or results of operations.
45
<PAGE> 47
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
Set forth below are the unaudited pro forma condensed consolidated
statements of operations of the Company for the year ended September 30, 1996
and the six months ended March 31, 1997 and the unaudited pro forma condensed
consolidated balance sheet of the Company at March 31, 1997. The unaudited pro
forma condensed consolidated statements of operations include the historical
results of the Company and give effect to the fiscal 1996 and 1997 acquisitions
of Wedco, Bayshore and Rotec and to the sale of the Old Notes and the use of
proceeds therefrom as if they had occurred as of the beginning of the periods
presented. The unaudited pro forma condensed consolidated balance sheet gives
effect to the fiscal 1997 acquisition of Rotec and the sale of the Old Notes and
the use of the proceeds therefrom as if they had occurred as of March 31, 1997.
The pro forma financial data do not purport to be indicative of the Company's
financial position or results of operations that would actually have been
obtained had the acquisitions and the sale of the Old Notes and the use of
proceeds therefrom been completed as of the date or for the periods presented,
or to project the Company's financial position or results of operations at any
future date or for any future period. The unaudited pro forma adjustments are
based upon available information and upon certain assumptions that the Company
believes are reasonable. The Unaudited Pro Forma Condensed Consolidated
Financial Data should be read in conjunction with "Capitalization", "Private
Placement", "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this Prospectus and the historical
Consolidated Financial Statements of the Company and notes thereto incorporated
by reference herein.
46
<PAGE> 48
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1996
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL (NOTE 1)
---------------------------------------------------------------------
ACQUISITIONS
--------------------------------------------
ICO WEDCO(1) WEDCO(2) ROTEC(3) BAYSHORE(4) SUBTOTAL
----------- -------- -------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Net revenues....................... $ 108,663 $20,797 $ 3,060 $9,933 $29,703 $172,156
COST AND EXPENSES:
Cost of sales and services......... 74,704 13,464 2,141 8,190 26,081 124,580
Selling, general and administrative
expenses......................... 19,996 4,889 1,897 1,016 1,886 29,684
Depreciation and amortization...... 7,230 2,058 329 233 392 10,242
Impairment of long-term assets..... 5,025 5,025
Non-recurring compensation
arrangements..................... 1,812 1,812
Non-recurring litigation charges... 1,112 1,112
Write-down of inventories.......... 868 868
----------- ------- ------- ------ ------- --------
Operating income (loss)............ (2,084) 386 (1,307) 494 1,344 (1,167)
----------- ------- ------- ------ ------- --------
Interest expense (income), net..... (608) 724 120 45 182 463
Other (income) expense, net........ 216 554 86 35 (14) 877
----------- ------- ------- ------ ------- --------
Income (loss) before taxes......... (1,692) (892) (1,513) 414 1,176 (2,507)
Income taxes (benefit)............. (632) (60) (292) 110 400 (474)
----------- ------- ------- ------ ------- --------
Net income (loss).................. (1,060) (832) (1,221) 304 776 (2,033)
----------- ------- ------- ------ ------- --------
Preferred stock dividends.......... 2,178 2,178
----------- ------- ------- ------ ------- --------
Net income (loss) available for
common shareholders.............. $ (3,238) $ (832) $(1,221) $ 304 $ 776 $ (4,211)
=========== ======= ======= ====== ======= ========
Earnings (loss) applicable to
common and common share
equivalents...................... $ (0.24)
===========
Weighted average shares
outstanding...................... 13,327,855
===========
<CAPTION>
PRO FORMA ADJUSTMENTS (NOTE 2)
---------------------------------------
FOR THE FOR SALE OF
ACQUISITIONS SUBTOTAL OLD NOTES PRO FORMA
------------ ---------- ----------- -----------
<S> <C> <C> <C> <C>
Net revenues....................... $ 172,156 $ 172,156
COST AND EXPENSES:
Cost of sales and services......... 124,580 124,580
Selling, general and administrative
expenses......................... $ (1,174)a 27,264 27,264
(1,118)b
(128)c
Depreciation and amortization...... 209d 10,802 10,802
351e
Impairment of long-term assets..... 5,025 5,025
Non-recurring compensation
arrangements..................... 1,812 1,812
Non-recurring litigation charges... 1,112 1,112
Write-down of inventories.......... 868 868
---------- ---------- ------- -----------
Operating income (loss)............ 1,860 693 693
---------- ---------- ------- -----------
Interest expense (income), net..... 633f 1,096 $11,928i 13,024
Other (income) expense, net........ 877 877
---------- ---------- ------- -----------
Income (loss) before taxes......... 1,227 (1,280) (11,928) (13,208)
Income taxes (benefit)............. 1,985g 1,511 (2,021)j (510)
---------- ---------- ------- -----------
Net income (loss).................. (758) (2,791) (9,907) (12,698)
---------- ---------- ------- -----------
Preferred stock dividends.......... 2,178 2,178
---------- ---------- ------- -----------
Net income (loss) available for
common shareholders.............. $ (758) $ (4,969) $(9,907) $ (14,876)
========== ========== ======= ===========
Earnings (loss) applicable to
common and common share
equivalents...................... $ (0.24) $ (0.71)
========== ===========
Weighted average shares
outstanding...................... 7,567,941h 20,895,796 20,895,796
========== ========== ===========
</TABLE>
(1) Historical information for the six-month period ended March 31, 1996.
(2) Historical information for the one-month period ended April 30, 1996.
(3) Historical information for the twelve-month period ended December 31, 1996,
translated from British Pounds at an exchange rate of $1.59.
(4) Historical information for the eleven-month, ten-day period ended December
10, 1996.
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
47
<PAGE> 49
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED MARCH 31, 1997
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL (NOTE 1) PRO FORMA ADJUSTMENTS (NOTE 2)
----------------------------------------------- ----------------------------------------
ACQUISITIONS
---------------------- FOR THE FOR SALE OF
ICO ROTEC(1) BAYSHORE(2) SUBTOTAL ACQUISITIONS SUBTOTAL OLD NOTES
----------- -------- ----------- -------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenues................... $ 81,791 $5,360 $8,107 $95,258 $ 95,258
COST AND EXPENSES:
Cost of sales and services..... 56,810 4,386 7,098 68,294 68,294
Selling, general and
administrative expenses...... 13,591 750 446 14,787 $ (128)c 14,659
Depreciation and
amortization................. 5,109 138 21 5,268 159e 5,427
----------- ------ ------ ------- ---------- -----------
Operating income (loss)........ 6,281 86 542 6,909 (31) 6,878
----------- ------ ------ ------- ---------- -----------
Interest expense (income),
net.......................... 531 27 56 614 152f 766 $ 6,011i
Other (income) expense, net.... (56) (56) (56)
----------- ------ ------ ------- ---------- ----------- -------
Income (loss) before taxes..... 5,806 59 486 6,351 (183) 6,168 (6,011)
Income taxes (benefit)......... 2,227 16 168 2,411 (18)g 2,393 (1,553)j
----------- ------ ------ ------- ---------- ----------- -------
Net income (loss).............. 3,579 43 318 3,940 (165) 3,775 (4,458)
Preferred stock dividends...... 1,088 1,088 1,088
----------- ------- -----------
Net income (loss) available for
common shareholders.......... $ 2,491 $ 43 $ 318 $ 2,852 $ (165) $ 2,687 $(4,458)
=========== ====== ====== ======= ========== =========== =======
Earnings (loss) applicable to
common and common share
equivalents.................. $ 0.12 $ 0.12
=========== ===========
Weighted average shares
outstanding.................. 20,630,478 1,331,494h 21,961,972
=========== ========== ===========
<CAPTION>
PRO FORMA
-----------
<S> <C>
Net revenues................... $ 95,258
COST AND EXPENSES:
Cost of sales and services..... 68,294
Selling, general and
administrative expenses...... 14,659
Depreciation and
amortization................. 5,427
-----------
Operating income (loss)........ 6,878
-----------
Interest expense (income),
net.......................... 6,777
Other (income) expense, net.... (56)
-----------
Income (loss) before taxes..... 157
Income taxes (benefit)......... 840
-----------
Net income (loss).............. (683)
Preferred stock dividends...... 1,088
-----------
Net income (loss) available for
common shareholders.......... $ (1,771)
===========
Earnings (loss) applicable to
common and common share
equivalents.................. $ (0.08)
===========
Weighted average shares
outstanding.................. 21,961,972
===========
</TABLE>
- ---------------
(1) Historical information for the six-month period ended March 31, 1997,
translated from British Pounds at an exchange rate of $1.68.
(2) Historical information for the two-month, ten-day period ended December 10,
1996.
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
48
<PAGE> 50
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS (NOTE 2)
HISTORICAL (NOTE 1) --------------------------------
------------------------------------ FOR FOR SALE OF
ICO ROTEC SUBTOTAL ROTEC SUBTOTAL OLD NOTES PRO FORMA
-------- ACQUISITION(1) -------- ------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and equivalents................. $ 6,133 $ 139 $ 6,272 $ 6,272 $101,054 o $107,326
Trade receivables, net............... 29,682 2,219 31,901 31,901 31,901
Inventories.......................... 12,088 755 12,843 12,843 12,843
Deferred tax asset................... 3,213 3,213 3,213 3,213
Prepaid expenses and other........... 2,638 135 2,773 2,773 2,773
-------- ------ -------- ------- -------- -------- --------
Total current assets......... 53,754 3,248 57,002 57,002 101,054 158,056
-------- ------ -------- ------- -------- -------- --------
Property, plant and equipment, net... 76,999 1,272 78,271 $ 200 l 78,471 78,471
Goodwill............................. 34,779 34,779 2,988 m 37,767 37,767
Investment in joint ventures......... 4,468 4,468 4,468 4,468
Other................................ 5,285 5,285 5,285 4,500 o 9,785
-------- ------ -------- ------- -------- -------- --------
TOTAL ASSETS................. $175,285 $4,520 $179,805 $ 3,188 $182,993 $105,554 $288,547
======== ====== ======== ======= ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Short term borrowings and current
portion of long-term debt.......... $ 4,203 $ 621 $ 4,824 $ 2,500 k $ 7,324 $ (3,587)o $ 3,737
Accounts payable..................... 12,270 1,631 13,901 13,901 13,901
Accrued expenses..................... 8,746 441 9,187 9,187 9,187
Income taxes payable................. 490 490 490 490
-------- ------ -------- ------- -------- -------- --------
Total current liabilities.... 25,709 2,693 28,402 2,500 30,902 (3,587) 27,315
-------- ------ -------- ------- -------- -------- --------
Long-term debt net of current
portion............................ 19,535 304 19,839 19,839 (10,859)o 128,980
120,000 o
Deferred income taxes................ 1,524 86 1,610 1,610 1,610
Other long-term liabilities.......... 2,282 2,282 2,282 2,282
-------- ------ -------- ------- -------- -------- --------
TOTAL LIABILITIES............ 49,050 3,083 52,133 2,500 54,633 105,554 160,187
-------- ------ -------- ------- -------- -------- --------
STOCKHOLDERS' EQUITY................. 126,235 1,437 127,672 2,125 n 128,360 128,360
(1,437)n
-------- ------ -------- ------- -------- -------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY......... $175,285 $4,520 $179,805 $ 3,188 $182,993 $105,554 $288,547
======== ====== ======== ======= ======== ======== ========
</TABLE>
- ---------------
(1) Translated from British Pounds at an exchange rate of $1.64.
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
49
<PAGE> 51
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- ACQUISITIONS INCLUDED IN PRO FORMA FINANCIAL STATEMENTS
Effective April 30, 1996, the Company acquired Wedco. Wedco serves the
petrochemical industry by providing plastics size reduction services and related
machinery. The consideration paid consisted of 10,232,609 shares of Company
Common Stock, $4,637,000 in cash (including transaction fees and expenses) and
the effective assumption in the merger of $29,947,000 in total liabilities.
In December 1996, the Company acquired Bayshore located in LaPorte, Texas
for approximately $6,900,000 in cash, 1,285,012 shares of Company Common Stock
and the effective assumption in the acquisition of $2,616,000 in debt.
In April 1997, the Company acquired Rotec of Rushden, England. Rotec serves
the United Kingdom, Ireland and Continental Europe markets and is a producer of
high quality concentrates for a variety of plastics processes. The Company paid
$2,500,000 in cash and issued 427,353 shares of Company Common Stock. The
purchase price is also subject to an earnout provision based upon future net
income. The purchase price is also subject to an earnout provision which is not
expected to have a material impact on the results of operations of the Company.
Rotec's audited financial statements for the year ending December 31, 1996
were used to prepare the Pro Forma Statement of Operations for the year ending
September 30, 1996. Accordingly, Rotec's results for the three months ended
December 31, 1996 have been included in the Pro Forma Statements of Operations
for the year ended September 30, 1996. Revenues and net loss for the three
months ended December 31, 1996 were $2,529,000 and $87,000, respectively.
Revenues and net loss for the three months ending December 31, 1995 were
$1,870,000 and $65,000, respectively. Rotec's financial statements were prepared
using U.K. generally accepting accounting principles ("GAAP") which in the case
of these financial statements, is equivalent to U.S. GAAP, in all material
respects.
All acquisitions were accounted for under the purchase method of
accounting.
NOTE 2 -- PRO FORMA ADJUSTMENTS
Statement of Operations:
(a) To remove compensation expense for director and employee stock options
redeemed in connection with the Wedco merger.
(b) To remove merger costs expensed by Wedco ($423,000), and to reflect
incremental cost savings resulting from Wedco no longer being a separate public
company ($145,000) and cost savings resulting from the retirement of certain
Wedco executives as a result of the merger, who will not be replaced ($550,000).
(c) To remove shareholder salaries and bonuses which will no longer be paid
relating to Rotec management.
(d) To increase amortization for intangibles (including goodwill) and
reduce depreciation for machinery and equipment after the purchase price
accounting adjustments for the Wedco acquisition. The machinery and equipment
depreciation adjustment was calculated as the difference between the historical
depreciation prior to the Wedco acquisition date and the depreciation included
in the Company's consolidated financial statements subsequent to such date.
Historically, Wedco depreciated machinery and equipment over 10 years. Select
assets which have useful lives in excess of this time period are now being
depreciated over their estimated useful life. Goodwill is amortized over a
useful life of 40 years and value allocated to a non-compete agreement is
amortized over the 10-year term of the agreement.
ICO has analyzed the past and expected future operating performance of
Wedco, the competitive and regulatory environment in which Wedco operates and
has assessed the expected future life of Wedco's basic technology concluding
that, as of the acquisition date, the future life of goodwill is forty years or
greater. Accordingly, goodwill is amortized over an estimated useful life of 40
years, the maximum allowable life under APB 17. ICO's policy is to periodically
review goodwill and other intangibles to assess recoverability and review the
impact of events and circumstances which may warrant a revision to the estimated
useful life. Impairments would be recognized in operating results if a permanent
diminution in value were to occur.
50
<PAGE> 52
(e) To increase amortization related to goodwill and non-compete agreements
and increase depreciation for machinery and equipment resulting from purchase
price accounting adjustments for all the acquisitions, excluding Wedco. The
machinery and equipment depreciation adjustment was calculated as the difference
between the historical depreciation prior to the applicable acquisition dates
and the depreciation included in the Company's consolidated financial statements
subsequent to such dates. Goodwill is amortized over a useful life of 40 years
and value allocated to non-compete agreements is amortized over the life of the
agreements.
(f) To reflect interest expense for $2,500,000 of debt incurred to
consummate the acquisition of Rotec with an interest rate of 6.94% and reduce
interest income earned on cash which would have been used to consummate the
acquisitions.
(g) To reflect the tax effect of the pro forma income statement adjustments
($1,492,000 and ($183,000) for the pro forma periods ended September 30, 1996
and March 31, 1997, respectively) and to remove the fiscal 1996 income statement
effect of the reversal of a portion of the Company's valuation allowance on
deferred tax assets. In fiscal 1996, the Company recognized a $1,365,000 ($.10
per share) tax benefit as a reversal of the valuation allowance to the extent
taxes had been paid.
Upon the acquisition of Wedco, the Company changed its assessment of the
valuation allowance to only reserve against tax assets which are not expected to
be utilized. Upon this revaluation, the Company recognized $1,328,000 ($.10 per
share) as a change in net deferred tax assets realized as a reduction of
goodwill attributable to the Wedco acquisition. Had the acquisition occurred on
the first day of fiscal year 1996, the entire reversal of the valuation
allowance would have reduced goodwill attributable to Wedco.
ICO continues to realize a cash savings from $5,629,000 (i.e., a tax
benefit of $1,914,000) in net operating loss carryforwards (at March 31, 1997)
for tax purposes. The benefits resulting from the utilization of the net
operating loss carryforwards, however, are no longer recognized in the income
statements prepared in accordance with generally accepted accounting principles.
(h) To give effect to shares issued in connection with the acquisitions.
(i) The pro forma adjustments to Interest expense, net consist of the
following (excludes interest income which would be earned from the proceeds of
the sale of the Old Notes):
<TABLE>
<CAPTION>
INCREASE/(DECREASE)
---------------------------------------
YEAR ENDED SIX MONTHS ENDED
SEPTEMBER 30, 1996 MARCH 31, 1997
------------------ ------------------
(IN THOUSANDS)
<S> <C> <C>
Pro forma interest expense, net, before pro forma
adjustments for the sale of the Old Notes................. $ 1,096 $ 766
------- -------
Elimination of interest relating to debt to be repaid with
proceeds:(1)
Domestic term loans(2).................................... (776) (388)
Domestic credit facility(3)............................... (196) (51)
Interest expense on:
10 3/8% Senior Notes due 2007............................. 12,450 6,225
Amortization of debt issuance costs....................... 450 225
------- -------
Pro forma interest expense, net............................. 13,024 6,777
------- -------
Pro forma adjustment........................................ $11,928 $6,011
======= =======
</TABLE>
- ---------------
(1) Includes interest expense for the entire pro forma period presented.
(2) Primarily relates to two term loans each with an interest rate of 8.0%.
(3) Relates to a credit and term facility of a subsidiary of the Company
bearing an interest rate of approximately 8.5%.
(j) To reduce income tax expense to reflect pro forma offering adjustments
to the extent of income tax expense related to U.S. operations. Under this
assumption, the Company would have generated a net operating loss carryforward
(NOL) for the pro forma periods ending September 30, 1996 and March 31, 1997 of
$6.9 million and $2.1 million, respectively. The pro forma income statements for
the periods presented assume these NOLs are fully offset by a valuation
allowance.
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<PAGE> 53
Balance Sheet:
(k) To reflect $2,500,000 of debt incurred under the Company's credit
facility with an interest rate of 6.94% to consummate the Rotec acquisition.
(l) To increase Rotec's property, plant and equipment to estimated fair
market value.
(m) To reflect the excess purchase price over fair value of net tangible
assets acquired allocated to goodwill. Goodwill is calculated as cash paid of
$2,500,000 plus $2,125,000 relating to the value of the 427,353 common shares
issued less $4,720,000 of assets acquired (including the adjustment discussed in
Note 2(l) to the Unaudited Pro Forma Condensed Consolidated Financial
Statements) and plus $3,083,000 of liabilities assumed.
(n) To eliminate Rotec stockholders' equity accounts and reflect the value
of shares issued in connection with the acquisition.
(o) To reflect the issuance of the Old Notes, the repayment of certain
indebtedness (see "Private Placement") and capitalized debt issuance costs.
52
<PAGE> 54
THE EXCHANGE OFFER
GENERAL
In connection with the sale of the Old Notes, the purchasers thereof became
entitled to the benefits of certain registration rights under the Registration
Rights Agreement. The Exchange Notes are being offered hereunder in order to
satisfy the obligations of the Company under the Registration Rights Agreement.
See "Description of Notes -- Registration Rights; Liquidated Damages."
For each $1,000 principal amount of Old Notes surrendered to the Company
pursuant to the Exchange Offer, the holder of such Old Notes will receive $1,000
principal amount of Exchange Notes. Upon the terms and subject to the conditions
set forth in this Prospectus and in the accompanying Letter of Transmittal, the
Company will accept all Old Notes properly tendered prior to 5:00 p.m., New York
City time, on the Expiration Date. Holders may tender some or all of their Old
Notes pursuant to the Exchange Offer in integral multiples of $1,000 principal
amount.
Under existing interpretations of the staff of the SEC, including Exxon
Capital Holdings Corporation, SEC No-Action Letter (available April 13, 1989),
the Morgan Stanley Letter and Mary Kay Cosmetics, Inc., SEC No-Action Letter
(available June 5, 1991), the Company believes that the Exchange Notes would in
general be freely transferable after the Exchange Offer without further
registration under the Securities Act by the respective holders thereof (other
than a "Restricted Holder," being (i) a broker-dealer who purchased Old Notes
exchanged for such Exchange Notes directly from the Company to resell pursuant
to Rule 144A or any other available exemption under the Securities Act or (ii) a
person that is an affiliate of the Company within the meaning of Rule 405 under
the Securities Act), without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such Exchange Notes are
acquired in the ordinary course of such holder's business and such holder is not
participating in, and has no arrangement with any person to participate in, the
distribution (within the meaning of the Securities Act) of such Exchange Notes.
Eligible holders wishing to accept the Exchange Offer must represent to the
Company that such conditions have been met. Any holder of Old Notes who tenders
in the Exchange Offer for the purpose of participating in a distribution of the
Exchange Notes could not rely on the interpretation by the staff of the SEC
enunciated in the Morgan Stanley Letter and similar no-action letters, and must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction.
Each holder of Old Notes who wishes to exchange Old Notes for Exchange
Notes in the Exchange Offer will be required to make certain representations,
including that (i) it is neither an affiliate of the Company nor a broker-dealer
tendering Old Notes acquired directly from the Company for its own account, (ii)
any Exchange Notes to be received by it are being acquired in the ordinary
course of its business and (iii) it is not participating in, and it has no
arrangement with any person to participate in, the distribution (within the
meaning of the Securities Act) of the Exchange Notes. In addition, in connection
with any resales of Exchange Notes, any broker-dealer (a "Participating
Broker-Dealer") who acquired Old Notes for its own account as a result of
market-making activities or other trading activities must acknowledge that it
will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes. The staff of the SEC has
taken the position in no-action letters issued to third parties including
Shearman & Sterling, SEC No-Action Letter (available July 2, 1993), that
Participating Broker-Dealers may fulfill their prospectus delivery requirements
with respect to the Exchange Notes (other than a resale of an unsold allotment
from the original sale of Old Notes) with this Prospectus, as it may be amended
or supplemented from time to time. Under the Registration Rights Agreement, the
Company is required to allow Participating Broker-Dealers to use this
Prospectus, as it may be amended or supplemented from time to time, in
connection with the resale of such Exchange Notes. See "Plan of Distribution."
The Exchange Offer shall be deemed to have been consummated upon the
earlier to occur of (i) the Company having exchanged Exchange Notes for all
outstanding Old Notes (other than Old Notes held by a Restricted Holder)
pursuant to the Exchange Offer and (ii) the Company having exchanged, pursuant
to the Exchange Offer, Exchange Notes for all Old Notes that have been tendered
and not withdrawn on the date
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<PAGE> 55
that is 30 days following the commencement of the Exchange Offer. In such event,
holders of Old Notes seeking liquidity in their investment would have to rely on
exemptions to registration requirements under the securities laws, including the
Securities Act.
As of the date of this Prospectus, $120,000,000 aggregate principal amount
of Old Notes are issued and outstanding. In connection with the issuance of the
Old Notes, the Company arranged for the Old Notes to be eligible for trading in
the Private Offering, Resale and Trading through Automated Linkages (PORTAL)
Market, the National Association of Securities Dealers' screen based, automated
market trading of securities eligible for resale under Rule 144A.
The Company shall be deemed to have accepted for exchange validly tendered
Old Notes when, as and if the Company has given oral or written notice thereof
to the Exchange Agent. See "-- Exchange Agent." The Exchange Agent will act as
agent for the tendering holders of Old Notes for the purpose of receiving
Exchange Notes from the Company and delivering Exchange Notes to such holders.
If any tendered Old Notes are not accepted for exchange because of an invalid
tender or the occurrence of certain other events set forth herein, certificates
for any such unaccepted Old Notes will be returned, without expense, to the
tendering holder thereof as promptly as practicable after the Expiration Date.
Holders of Old Notes who tender in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than certain applicable taxes, in connection with the Exchange Offer. See
"-- Fees and Expenses."
This Prospectus, together with the accompanying Letter of Transmittal, is
being sent to all registered holders as of the date of this Prospectus.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean , 1997 unless the
Company, in its sole discretion, extends the Exchange Offer, in which case the
term "Expiration Date" shall mean the latest date to which the Exchange Offer is
extended. In order to extend the Expiration Date, the Company will notify the
Exchange Agent of any extension by oral or written notice and will mail to the
record holders of Old Notes an announcement thereof, each prior to 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date. Such announcement may state that the Company is extending the
Exchange Offer for a specified period of time. The Company reserves the right
(i) to delay acceptance of any Old Notes, to extend the Exchange Offer or to
terminate the Exchange Offer and to refuse to accept Old Notes not previously
accepted, if any of the conditions set forth herein under "-- Termination" shall
have occurred and shall not have been waived by the Company (if permitted to be
waived by the Company), by giving oral or written notice of such delay,
extension or termination to the Exchange Agent, and (ii) to amend the terms of
the Exchange Offer in any manner deemed by it to be advantageous to the holders
of the Old Notes. Any such delay in acceptance, extension, termination or
amendment will be followed as promptly as practicable by oral or written notice
thereof. If the Exchange Offer is amended in a manner determined by the Company
to constitute a material change, the Company will promptly disclose such
amendment in a manner reasonably calculated to inform the holders of the Old
Notes of such amendment. Without limiting the manner in which the Company may
choose to make public announcements of any delay in acceptance, extension,
termination or amendment of the Exchange Offer, the Company shall have no
obligation to publish, advertise, or otherwise communicate any such public
announcement, other than by making a timely release to the Dow Jones News
Service.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest payable semi-annually on June 1 and
December 1 of each year, commencing December 1, 1997. Holders of Exchange Notes
of record on November 15, 1997 will receive interest on December 1, 1997 from
the date of issuance of the Exchange Notes, plus an amount equal to the accrued
interest on the Old Notes from the date of issuance of the Old Notes, June 9,
1997, to the date of exchange thereof. Consequently, assuming the Exchange Offer
is consummated prior to the record date in
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<PAGE> 56
respect of the December 1, 1997 interest payment for the Old Notes, holders who
exchange their Old Notes for Exchange Notes will receive the same interest
payment on December 1, 1997 that they would have received had they not accepted
the Exchange Offer. Interest on the Old Notes accepted for exchange will cease
to accrue upon issuance of the Exchange Notes.
PROCEDURES FOR TENDERING
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile, or an Agent's Message,
together with the Old Notes and any other required documents, to the Exchange
Agent prior to 5:00 p.m., New York City time, on the Expiration Date. In
addition, either (i) the 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 tender by a holder of
Old Notes will constitute an agreement between such holder and the Company in
accordance with the terms and subject to the conditions set forth herein and in
the Letter of Transmittal. Delivery of all documents must be made to the
Exchange Agent at its address set forth herein. Holders may also request that
their respective brokers, dealers, commercial banks, trust companies or nominees
effect such tender for such holders.
The term "Agent's Message" means a message, transmitted by the Book-Entry
Transfer Facility to, and received by, the Exchange Agent and forming a part of
a Book-Entry Confirmation, which states that such Book-Entry Transfer Facility
has received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering Old Notes which are the subject of such Book-Entry
Confirmation that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal, and that the Company may enforce such
agreement against such participant.
The method of delivery of Old Notes and the Letter of Transmittal and all
other required documents to the Exchange Agent is at the election and risk of
the holders. Instead of delivery by mail, it is recommended that holders use an
overnight or hand delivery service. In all cases, sufficient time should be
allowed to assure timely delivery. No Letter of Transmittal or Old Notes should
be sent to the Company. Only a holder of Old Notes may tender such Old Notes in
the Exchange Offer. The term "holder" with respect to the Exchange Offer means
any person in whose name Old Notes are registered on the books of the Company or
any other person who has obtained a properly completed stock power from the
registered holder.
Any beneficial holder whose Old Notes are registered in the name of such
holder's broker, dealer, commercial bank, trust company or other nominee and who
wishes to tender should contact such registered holder promptly and instruct
such registered holder to tender on behalf of the registered holder. If such
beneficial holder wishes to tender directly, such beneficial holder must, prior
to completing and executing the Letter of Transmittal and delivering his Old
Notes, either make appropriate arrangements to register ownership of the Old
Notes in such holder's name or obtain a properly completed bond power from the
registered holder. The transfer of record ownership may take considerable time.
If the Letter of Transmittal is signed by the record holder(s) of the Old Notes
tendered thereby, the signature must correspond with the name(s) written on the
face of the Old Notes without alteration, enlargement or any change whatsoever.
If the Letter of Transmittal is signed by a participant in Depositary Trust
Company ("DTC"), the signature must correspond with the name as it appears on
the security position listing as the holder of the Old Notes. Signatures on a
Letter of Transmittal or a notice of withdrawal, as the case may be, must be
guaranteed by a member firm of a registered national securities exchange or of
the National Association of Securities Dealers, Inc., a commercial bank or trust
company having an office or correspondent in the United States or an "eligible
guarantor institution" within the meaning of Rule 17Ad-15 under the Exchange Act
(an "Eligible Institution") unless the Old Notes tendered pursuant thereto are
tendered (i) by a registered holder (or by a participant in DTC whose name
appears on a security position listing as the owner) who has not completed
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<PAGE> 57
the box entitled "Special Issuance Instructions" or "Special Delivery
Instructions" on the Letter of Transmittal and the Exchange Notes are being
issued directly to such registered holder (or deposited into the participant's
account at DTC) or (ii) for the account of an Eligible Institution. If the
Letter of Transmittal is signed by a person other than the registered holder of
any Old Notes listed therein, such Old Notes must be endorsed or accompanied by
appropriate bond powers which authorize such person to tender the Old Notes on
behalf of the registered holder, in either case signed as the name of the
registered holder or holders appears on the Old Notes. If the Letter of
Transmittal or any Old Notes or bond powers are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and unless waived by the Company, evidence satisfactory
to the Company of their authority to so act must be submitted with the Letter of
Transmittal.
A tender will be deemed to have been received as of the date when the
tendering holder's duly signed Letter of Transmittal accompanied by Old Notes
(or a timely confirmation received of a book-entry transfer of Old Notes into
the Exchange Agent's account at DTC with an Agent's Message) or a Notice of
Guaranteed Delivery from an Eligible Institution is received by the Exchange
Agent. Issuances of Exchange Notes in exchange for Old Notes tendered pursuant
to a Notice of Guaranteed Delivery by an Eligible Institution will be made only
against delivery of the Letter of Transmittal (and any other required documents)
and the tendered Old Notes (or a timely confirmation received of a bookentry
transfer of Old Notes into the Exchange Agent's account at DTC) with the
Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered Old Notes will be determined
by the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Old Notes
not properly tendered or any Old Notes the Company's acceptance of which would,
in the opinion of the Company or its counsel, be unlawful. The Company also
reserves the absolute right to waive any conditions of the Exchange Offer or
defects or irregularities in tender as to particular Old Notes. The Company's
interpretation of the terms and conditions of the Exchange Offer (including the
instructions in the Letter of Transmittal) shall be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of Old Notes must be cured within such time as the Company shall determine.
Neither the Company, the Exchange Agent nor any other person shall be under any
duty to give notification of defects or irregularities with respect to tenders
of Old Notes nor shall any of them incur any liability for failure to give such
notification. Tenders of Old Notes will not be deemed to have been made until
such irregularities have been cured or waived. Any Old Notes received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned without cost by
the Exchange Agent to the tendering holder of such Old Notes unless otherwise
provided in the Letter of Transmittal, as soon as practicable following the
Expiration Date. In addition, the Company reserves the right in its sole
discretion to (i) purchase or make offers for any Old Notes that remain
outstanding subsequent to the Expiration Date, or, as set forth under
"-- Termination," to terminate the Exchange Offer and (ii) to the extent
permitted by applicable law, purchase Old Notes in the open market, in privately
negotiated transactions or otherwise. The terms of any such purchases or offers
may differ from the terms of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will establish an account with respect to the Old Notes
at DTC within two business days after the date of this Prospectus, and any
financial institution which is a participant in DTC may make book-entry delivery
of the Old Notes by causing DTC to transfer such Old Notes into the Exchange
Agent's account in accordance with DTC's procedure for such transfer. Although
delivery of Old Notes may be effected through book-entry transfer into the
Exchange Agent's account at DTC, an Agent's Message must be transmitted to and
received by the Exchange Agent on or prior to the Expiration Date at one of its
addresses set forth below under "-- Exchange Agent", or the guaranteed delivery
procedure described below must be complied with. DELIVERY OF DOCUMENTS TO DTC
DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. All references in this
Prospectus to deposit or delivery of Old Notes shall be deemed to include DTC's
book-entry delivery method.
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<PAGE> 58
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and whose Old Notes are not
immediately available or who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent prior to the
Expiration Date, or who cannot complete the procedure for book-entry transfer on
a timely basis and deliver an Agent's Message, may effect a tender if: (i) the
tender is made by or through an Eligible Institution; (ii) prior to the
Expiration Date, the Exchange Agent receives from such Eligible Institution a
properly completed and duly executed Notice of Guaranteed Delivery (by facsimile
transmission, mail or hand delivery) setting forth the name and address of the
holder of the Old Notes, the registration number or numbers of such Old Notes
(if applicable), and the total principal amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that, within five
business days after the Expiration Date, the Letter of Transmittal, together
with the Old Notes in proper form for transfer (or a confirmation of a
book-entry transfer into the Exchange Agent's account at DTC) and any other
documents required by the Letter of Transmittal, will be deposited by the
Eligible Institution with the Exchange Agent; and (iii) such properly completed
and executed Letter of Transmittal, together with the certificate(s)
representing all tendered Old Notes in proper form for transfer (or a
confirmation of such a book-entry transfer) and all other documents required by
the Letter of Transmittal are received by the Exchange Agent within five
business days after the Expiration Date.
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, certain terms and
conditions which are summarized below and are part of the Exchange Offer.
Each holder who participates in the Exchange Offer will be required to
represent that any Exchange Notes received by it will be acquired in the
ordinary course of its business, that such holder is not participating in, and
has no arrangement with any person to participate in, the distribution (within
the meaning of the Securities Act) of the Exchange Notes, and that such holder
is not a Restricted Holder.
Old Notes tendered in exchange for Exchange Notes (or a timely confirmation
of a book-entry transfer of such Old Notes into the Exchange Agent's account at
DTC) must be received by the Exchange Agent, with the Letter of Transmittal or
an Agent's Message and any other required documents, by the Expiration Date or
within the time periods set forth above pursuant to a Notice of Guaranteed
Delivery from an Eligible Institution. Each holder tendering the Old Notes for
exchange sells, assigns and transfers the Old Notes to the Exchange Agent, as
agent of the Company, and irrevocably constitutes and appoints the Exchange
Agent as the holder's agent and attorney-in-fact to cause the Old Notes to be
transferred and exchanged. The holder warrants that it has full power and
authority to tender, exchange, sell, assign and transfer the Old Notes and to
acquire the Exchange Notes issuable upon the exchange of such tendered Old
Notes, that the Exchange Agent, as agent of the Company, will acquire good and
unencumbered title to the tendered Old Notes, free and clear of all liens,
restrictions, charges and encumbrances, and that the Old Notes tendered for
exchange are not subject to any adverse claims when accepted by the Exchange
Agent, as agent of the Company. The holder also warrants and agrees that it
will, upon request, execute and deliver any additional documents deemed by the
Company or the Exchange Agent to be necessary or desirable to complete the
exchange, sale, assignment and transfer of the Old Notes. All authority
conferred or agreed to be conferred in the Letter of Transmittal by the holder
will survive the death, incapacity or dissolution of the holder and any
obligation of the holder shall be binding upon the heirs, personal
representatives, successors and assigns of such holder.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the business day prior to
the Expiration Date, unless previously accepted for exchange. To withdraw a
tender of Old Notes in the Exchange Offer, a written or facsimile transmission
notice of withdrawal must be received by the Exchange Agent at its address set
forth herein prior to 5:00 p.m., New York City time, on the business day prior
to the Expiration Date and prior to acceptance for exchange thereof by the
Company. Any such notice of withdrawal must (i) specify the name of the person
having
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<PAGE> 59
deposited the Old Notes to be withdrawn (the "Depositor"), (ii) identify the Old
Notes to be withdrawn (including, if applicable, the registration number or
numbers and total principal amount of such Old Notes), (iii) be signed by the
Depositor 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 be accompanied by documents of transfer sufficient to
permit the Trustee with respect to the Old Notes to register the transfer of
such Old Notes into the name of the Depositor withdrawing the tender, (iv)
specify the name in which any such Old Notes are to be registered, if different
from that of the Depositor and (v) if applicable because the Old Notes have been
tendered pursuant to the book-entry procedures, specify the name and number of
the participant's account at DTC to be credited, if different than that of the
Depositor. All questions as to the validity, form and eligibility (including
time of receipt) of such withdrawal notices will be determined by the Company,
whose determination shall be final and binding on all parties. Any Old Notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
Exchange Offer and no Exchange Notes will be issued with respect thereto unless
the Old Notes so withdrawn are validly retendered. Any Old Notes which have been
tendered but which are not accepted for exchange will be returned to the holder
thereof without cost to such 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" at any time prior to the Expiration Date.
TERMINATION
Notwithstanding any other term of the Exchange Offer, the Company will not
be required to accept for exchange any Old Notes not theretofore accepted for
exchange, and may terminate the Exchange Offer if it determines that the
Exchange Offer violates any applicable law or interpretation of the staff of the
SEC.
If the Company determines that it may terminate the Exchange Offer, as set
forth above, the Company may (i) refuse to accept any Old Notes and return any
Old Notes that have been tendered to the holders thereof, (ii) extend the
Exchange Offer and retain all Old Notes tendered prior to the Expiration of the
Exchange Offer, subject to the rights of such holders of tendered Old Notes to
withdraw their tendered Old Notes or (iii) waive such termination event with
respect to the Exchange Offer and accept all properly tendered Old Notes that
have not been withdrawn. If such waiver constitutes a material change in the
Exchange Offer, the Company will disclose such change by means of a supplement
to this Prospectus that will be distributed to each registered holder of Old
Notes, and the Company will extend the Exchange Offer for a period of five to
ten business days, depending upon the significance of the waiver and the manner
of disclosure to the registered holders of the Old Notes, if the Exchange Offer
would otherwise expire during such period. Holders of Old Notes will have
certain rights against the Company under the Registration Rights Agreement
should the Company fail to consummate the Exchange Offer.
EXCHANGE AGENT
Fleet National Bank, the trustee under the Indenture, has been appointed as
Exchange Agent for the Exchange Offer. Questions and requests for assistance and
requests for additional copies of this Prospectus or of the Letter of
Transmittal should be directed to the Exchange Agent addressed as follows:
By Mail: By Hand or Overnight Courier:
Fleet National Bank Fleet National Bank
Corporate Trust Operations Corporate Trust Operations
777 Main Street, Lower Level 777 Main Street, Lower Level
Hartford, Connecticut 06115 CTMO 0224
Attn: Patricia Williams Hartford, Connecticut 06115
Attn: Patricia Williams
Facsimile Transmission: (860) 986-7908
Confirm by Telephone: (860) 986-1271
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FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Company. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail. Additional solicitations may be made by
officers and regular employees of the Company and its affiliates in person, by
telegraph or telephone. The Company will not make any payments to brokers,
dealers or other persons soliciting acceptances of the Exchange Offer. The
Company, however, will pay the Exchange Agent reasonable and customary fees for
its services and will reimburse the Exchange Agent for its reasonable out-
of-pocket expenses in connection therewith. The Company may also pay brokerage
houses and other custodians, nominees and fiduciaries the reasonable
out-of-pocket expenses incurred by them in forwarding copies of this Prospectus,
Letters of Transmittal and related documents to the beneficial owners of the Old
Notes and in handling or forwarding tenders for exchange.
The other expenses incurred in connection with the Exchange Offer,
including fees and expenses of the Exchange Agent and Trustee and accounting and
legal fees, will be paid by the Company. The Company will pay all transfer
taxes, if any, applicable to the exchange of Old Notes pursuant to the Exchange
Offer. If, however, Exchange Notes or Old Notes not tendered or accepted for
exchange are to be delivered to, or are to be registered or issued in the name
of, any person other than the registered holder of the Old Notes tendered, or if
tendered Old Notes are registered in the name of any person other than the
person signing the Letter of Transmittal, or if a transfer tax is imposed for
any reason other than the exchange of Old Notes pursuant to the Exchange Offer,
then the amount of any such transfer taxes (whether imposed on the registered
holder or any other persons) will be payable by the tendering holder. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes will
be billed directly to such tendering holder.
ACCOUNTING TREATMENT
No gain or loss for accounting purposes will be recognized by the Company
upon the consummation of the Exchange Offer. The expenses of the Exchange Offer
will be amortized by the Company over the term of the Exchange Notes under
generally accepted accounting principles.
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DESCRIPTION OF CERTAIN CREDIT FACILITIES
The Company currently has a $15 million revolving credit facility which was
amended on June 9, 1997 (the "Bank Credit Facility"). The amount that can be
borrowed under the Bank Credit Facility is subject to a borrowing base
limitation, equal to the sum of (x) 80% of the balance due on Acceptable
Receivables (as defined therein) and (y) the lesser of 40% of the value of
Acceptable Inventory (as defined) consisting of domestic finished goods and raw
materials and 50% of (x) above. The borrowing base is determined monthly and
calculated using the receivables and inventory of the Company and its
subsidiaries excluding Wedco and its subsidiaries. Borrowings under the Bank
Credit Facility are intended to be used for working capital and general
purposes. The principal will be due at maturity, April 17, 1999.
Interest is payable monthly at either: (i) LIBOR + 1.25% or (ii) the bank's
base rate, at the option of the Company. The Company is required to pay an
unused commitment fee on the unused portion of the Borrowing Base equal to 1/4
of 1% per annum.
The Bank has a current lien on the receivables and inventory of the Company
and certain subsidiaries.
The Bank Credit Facility as amended requires the Company to maintain
certain financial ratios including minimum tangible net worth and profitability
and a maximum total debt to capitalization. The Bank Credit Facility limits the
amount of other debts and liens which may be incurred by the Company. In
addition, the Bank's consent will be required prior to an optional redemption of
the Notes by the Company.
Borrowings under the amended Bank Credit Facility will effectively rank
senior to the Notes in right of payment. At April 30, 1997, after giving pro
forma effect to the acquisition of Rotec and the sale of the Old Notes by the
Company and the application of the proceeds therefrom, the Company would have
had $15.0 million available for borrowing under the amended Bank Credit
Facilities, as described. See "Unaudited Pro Forma Condensed Consolidated
Financial Data" and "Description of Notes -- Ranking."
Some of the Company's foreign subsidiaries also maintain various credit
facilities which in some cases are guaranteed by the Company. At April 30, 1997,
$2.4 million was outstanding under these facilities and the Company would have
been permitted to incur up to an additional $3.3 million in indebtedness.
Outstanding indebtedness under these facilities will be effectively senior to
the Notes. See "Description of Notes -- Ranking" and "Capitalization."
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DESCRIPTION OF NOTES
GENERAL
The Notes are issued pursuant to an Indenture (the "Indenture") between the
Company, as issuer, and Fleet National Bank, 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, as amended (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 certain provisions of the Notes, the Indenture
and the Registration Rights Agreement does not purport to be complete and is
qualified in its entirety by reference to the Notes, the Indenture and the
Registration Rights Agreement, including the definitions therein of certain
terms used below. Copies of the Indenture and Registration Rights Agreement are
filed as exhibits to the Registration Statement of which this Prospectus is a
part. For purposes of this "Description of Notes" section of this Prospectus,
references to the "Company" are to ICO, Inc., excluding its subsidiaries. The
definitions of certain terms used in the following summary are set forth below
under "-- Certain Definitions." Capitalized terms used herein and not otherwise
defined shall have the respective meanings assigned to them in the Indenture.
The Notes and the Exchange Notes constitute a single series of debt
securities under the Indenture. If the Exchange Offer is consummated, Holders of
Old Notes who do not exchange their Old Notes for Exchange Notes will vote
together with Holders of Exchange Notes for all relevant purposes under the
Indenture. In that regard, the Indenture requires that certain actions by the
Holders thereunder (including acceleration following an Event of Default) must
be taken, and certain rights must be exercised, by specified minimum percentages
of the aggregate principal amount of the outstanding securities issued under the
Indenture. In determining whether Holders of the requisite percentage in
principal amount have given any notice, consent or waiver or taken any other
action permitted under the Indenture, any Old Notes that remain outstanding
after the Exchange Offer will be aggregated with the Exchange Notes, and the
Holders of such Old Notes and the Exchange Notes will vote together as a single
series for all such purposes. Accordingly, all references herein to specified
percentages in aggregate principal amount of the outstanding Notes shall be
deemed to mean, at any time after the Exchange Offer is consummated, such
percentages in aggregate principal amount of the Old Notes and the Exchange
Notes then outstanding.
The Notes are general senior unsecured obligations of the Company and rank
pari passu in right of payment to all existing and future Senior Indebtedness of
the Company, and senior in right of payment to all future Subordinated
Indebtedness of the Company. See "-- Ranking."
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $120.0 million and
mature on June 1, 2007. Interest on the Notes accrues from the Issue Date at the
rate of 10 3/8% per annum and is payable semiannually in arrears on June 1 and
December 1 of each year, commencing on December 1, 1997, to Holders of record on
the immediately preceding May 15 and November 15. Interest on the Notes accrues
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 is computed on the basis
of a 360-day year comprised of twelve 30-day months.
The Notes are payable as to principal, premium, if any, interest and
Liquidated Damages, if any, at the office or agency of the Company maintained
for such purpose within the City and State of New York, which initially is the
corporate trust office or agency of the Trustee maintained at New York, 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 Notes at
their respective addresses set forth in the register of Holders of Notes;
provided that all payments with respect to Global Notes are required to be made
by wire transfer of immediately available funds to the accounts specified by the
Holders thereof. The Notes will be issued in registered form, without coupons,
and in denominations of $1,000 and integral multiples thereof.
The Trustee will act initially as Paying Agent and Registrar under the
Indenture. The Company may act as Paying Agent or Registrar under the Indenture,
and the Company may change the Paying Agent or Registrar without notice to the
Holders of the Notes.
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RANKING
The Indebtedness evidenced by the Notes are general senior unsecured
obligations of the Company. The Notes rank pari passu in right of payment with
all existing and future Senior Indebtedness of the Company and senior in right
of payment to all future Subordinated Indebtedness of the Company. Holders of
secured Indebtedness of the Company and its Subsidiaries, including under the
Bank Credit Facility, will have claims with respect to assets constituting
collateral for such Indebtedness that are prior to the claims of the Holders of
the Notes. To the extent of pledged collateral, such Indebtedness will have
priority over the Notes. At March 31, 1997, after giving pro forma effect to the
acquisition of Rotec and the sale of the Old Notes and the application of the
proceeds therefrom, the Company would have had approximately $1.4 million of
Indebtedness that would rank pari passu with the Notes, of which $900,000 is
secured and would effectively rank senior to the Notes in right of payment. In
addition, at March 31, 1997, the Company would have had $14.6 million available
for borrowing under the Bank Credit Facility on the same pro forma basis.
Subject to certain limitations set forth in the Indenture, the Company and its
Subsidiaries may incur additional Indebtedness. See "Risk Factors -- Ranking of
the Notes; Effective Subordination" and "-- Certain Covenants -- Limitations on
the Incurrence of Indebtedness and Issuance of Disqualified Stock."
The Notes are effectively subordinated to claims of creditors of the
Subsidiaries of the Company (other than the Company) and the claims of secured
creditors of the Guarantors. Claims of creditors of such Subsidiaries (other
than the Company), including, but not limited to, trade creditors, tort
claimants, secured creditors, taxing authorities and creditors holding
guarantees, will generally have priority as to assets of such Subsidiaries over
the claims and equity interest of the Company and, thereby indirectly, the
holders of the Indebtedness of the Company, including the Notes. At March 31,
1997, after giving pro forma effect to the acquisition of Rotec and the sale of
the Old Notes and the application of the proceeds therefrom, the Subsidiaries of
the Company would have approximately $11.3 million of Indebtedness that would be
effectively senior to the Notes. See "Unaudited Pro Forma Condensed Consolidated
Financial Data" and "Description of Certain Credit Facilities."
OPTIONAL REDEMPTION
The Notes are not redeemable at the Company's option prior to June 1, 2002.
Thereafter, the Notes are subject to redemption at the option of the Company, in
whole or in part, at the redemption prices (expressed as percentages of
principal amount) set forth below plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the applicable redemption date, if
redeemed during the twelve-month period beginning on June 1 of the years
indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002........................................................ 105.188%
2003........................................................ 103.458%
2004........................................................ 101.729%
2005 and thereafter......................................... 100.000%
</TABLE>
Notwithstanding the foregoing, at any time prior to June 1, 2002, the
Company may, at its option, redeem all or any portion of the Notes at the
Make-Whole Price plus accrued and unpaid interest to the date of redemption. In
addition, on or prior to June 1, 2000, the Company may redeem at any time or
from time to time up to 35% of the aggregate principal amount of the Notes
originally issued at a redemption price of 110.375% of the principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the redemption date, with the net proceeds of one or more Public
Equity Offerings; provided that at least $78.0 million of the aggregate
principal amount of the Notes remain outstanding following each such redemption;
provided, further, that such redemption shall occur not earlier than 30 days or
later than 60 days, after the date of the closing of any such Public Equity
Offering.
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SELECTION AND NOTICE
If less than all of the Notes are to be redeemed at any time, the Trustee
shall, unless otherwise set forth in the Indenture, select the Notes to be
redeemed among the Holders of the Notes pro rata, by lot or in accordance with a
method which the Trustee shall deem fair and appropriate (and in such manner as
complies with applicable legal and principal national securities exchanges
requirements, if any). Notes and portions of them selected shall be in face
amounts of $1,000 or whole multiples of $1,000. Notices of redemption shall be
given by first class mail at least 30 but not more than 60 days before the
redemption date to each Holder of Notes to be redeemed at its registered
address. 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 and that, after the redemption date, a new Note in
principal amount equal to the unredeemed portion thereof will be issued in the
name of the Holder thereof upon cancellation of the original Note. On and after
the redemption date (unless the Company shall default in the payment of the
redemption price, together with accrued and unpaid interest and Liquidated
Damages, if any, to the redemption date), interest ceases to accrue on Notes or
portions thereof called for redemption.
MANDATORY REDEMPTION
The Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes. However, as described below, the Company may
be obligated, under certain circumstances, to make an offer to repurchase (i)
all outstanding Notes at a redemption price of 101% of the principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the date of repurchase, upon a Change of Control; and (ii)
outstanding Notes with a portion of the Net Cash Proceeds of Asset Sales at a
redemption price of 100% of the principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages, if any, thereon to the date of
repurchase. See "-- Change of Control" and the covenant captioned "Limitation on
Sale of Assets."
CHANGE OF CONTROL
The Indenture provides that, upon the occurrence of a Change of Control,
the Company will be obligated to make an offer (the "Change of Control Offer")
to repurchase all or any part (equal to $1,000 or an integral multiple thereof)
of the Notes as the Holders may elect at a purchase price in cash (the "Change
of Control Price") equal to 101% of the principal amount thereof, plus accrued
and unpaid interest, and Liquidated Damages, if any, thereon to the date of
repurchase (the "Change of Control Payment Date"). Notice of a Change of Control
Offer shall be prepared by the Company and shall be mailed by the Company with a
copy to the Trustee or at the option of the Company and at the expense of the
Company, by the Trustee within 30 days following a Change of Control to each
Holder of the Notes and such Change of Control Offer must remain open for at
least 30 and not more than 40 days (unless otherwise required by applicable
law). In addition, the Company will comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws, rules and regulations
thereunder to the extent such laws, rules and regulations are applicable in
connection with the repurchase of the Notes pursuant to a Change of Control
Offer.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (i) accept for payment Notes or portions thereof tendered pursuant to
the Change of Control Offer, (ii) deposit with the Paying Agent an amount equal
to the Change of Control Price in respect of all Notes or portions thereof so
tendered and (iii) deliver or cause to be delivered to the Trustee the Notes so
accepted together with an Officers' Certificate stating the amount of the Notes
or portions thereof tendered to the Company. The Paying Agent will promptly mail
or deliver to each Holder of Notes so accepted the Change of Control Price for
such Notes, and the Trustee will promptly authenticate and mail (or cause to be
transferred by book-entry) to each Holder a new Note equal in principal amount
to any unpurchased portion of the Notes surrendered, if any; provided that each
such new Note will be in a principal amount of $1,000 or an integral multiple
thereof. The Company will publicly announce the results of the Change of Control
Offer on or as soon as practicable after the Change of Control Payment Date.
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With respect to the sale of assets referred to in the definition of "Change
of Control," the phrase "all or substantially all" as used in the Indenture
varies according to the facts and circumstances of the subject transaction, has
no clearly established meaning under New York law (which governs the Indenture)
and is subject to judicial interpretation. Accordingly, in certain circumstances
there may be a degree of uncertainty in ascertaining whether a particular
transaction would involve a disposition of "all or substantially all" of the
assets of a Person and therefore it may be unclear whether a Change of Control
has occurred and whether the Notes are subject to a Change of Control Offer.
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 same 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.
GUARANTEES
Under the circumstances described below, the Company's payment obligations
under the Notes may in the future be jointly and severally Guaranteed by
existing or future Restricted Subsidiaries of the Company as Guarantors.
Currently none of the Company's Restricted Subsidiaries have guaranteed the
Notes. Each Guarantor will guarantee to each Holder and the Trustee, the full
and prompt performance of the Obligations of the Company under the Notes,
including the payment of principal of (premium, if any, on) and interest on the
Notes pursuant to its Guarantee. The Obligations of each Guarantor under its
Guarantee will be general senior obligations of such Guarantor, unsecured except
to the extent provided pursuant to the covenant captioned "Limitation on Liens,"
which will rank pari passu with all existing and future unsecured Senior
Indebtedness of such Guarantor and senior in right of payment to all future
Subordinated Indebtedness of such Guarantor.
The Obligations of each Guarantor under its Guarantee will be limited to
such maximum amount as will, after giving effect to all other contingent and
fixed liabilities of such Guarantor and after giving effect to any collections
from or payments made by or on behalf of any other Guarantor in respect of the
Obligations of such other Guarantor under its Guarantee or pursuant to its
contribution Obligations under the Indenture, result in the Obligations of such
Guarantor under its Guarantee not constituting a fraudulent conveyance or
fraudulent transfer under federal, state or foreign law. Each Guarantor that
makes a payment or distribution under a Guarantee shall be entitled to a
contribution from each other Guarantor in a pro rata amount based on the
Adjusted Net Assets of each Guarantor.
The Indenture provides that, subject to the following paragraph, each
Guarantor (including any existing or future Restricted Subsidiary that becomes
an additional Guarantor) may not consolidate or merge with or into (whether or
not such Guarantor is the surviving Person) another Person unless (i) the Person
formed by or surviving any such consolidation or merger (if other than such
Guarantor) (A) in the case of a Guarantor that is a Domestic Subsidiary, is a
corporation organized and existing under the laws of the United States of
America, any state thereof, or the District of Columbia and (B) expressly
assumes all the obligations of such Guarantor pursuant to a supplemental
indenture, in a form reasonably satisfactory to the Trustee, under the Notes and
the Indenture, (ii) immediately before and after giving effect to such
transaction, no Default or Event of Default exists and (iii) such Guarantor or
the Person formed by or surviving any such consolidation or merger on a pro
forma basis will have Consolidated Net Worth (immediately after the transaction)
equal to or greater than the Consolidated Net Worth of such Guarantor
immediately preceding the transaction. The foregoing will not apply to a merger
between Guarantors or a merger between the Company and any Guarantor.
The Indenture provides that in the event of a sale or other disposition of
all of the Capital Stock of a Guarantor (by way of merger, consolidation or
otherwise) which is otherwise in compliance with the terms of the Indenture,
then such Guarantor will be unconditionally released from any Obligations under
its Guarantee of the Notes upon the consummation of such transaction provided
that upon such release the Obligations of such Guarantor in respect of any and
all other Guarantees of Indebtedness of the Company or a Guarantor are similarly
released. The Indenture provides that in the event of the unconditional release
of a Guarantor from
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all Obligations under any and all Guarantees of Indebtedness of the Company or a
Guarantor (other than the Notes), such Guarantor will be released from any
Obligations under its Guarantee of the Notes; provided that immediately before
and after giving effect to such release, no Default or Event of Default shall
have occurred and be continuing.
Although the Indenture does not contain any requirement that any Subsidiary
execute and deliver a Guarantee, certain covenants described below require a
Restricted Subsidiary in the future to execute and deliver a Guarantee prior to
the Guarantee of other Indebtedness of the Company or a Guarantor. See
"-- Certain Covenants -- Guarantees of Certain Indebtedness."
CERTAIN COVENANTS
Limitation on Restricted Payments
The Indenture provides 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 distribution on account of Equity Interests, other than
dividends or distributions payable in Equity Interests (other than Disqualified
Stock) of the Company, or dividends or distributions payable to the Company or a
Wholly-Owned Restricted Subsidiary of the Company; (ii) purchase, redeem or
otherwise acquire or retire for value any Equity Interests of the Company or any
Subsidiary or other Affiliate of the Company (other than any such Equity
Interests owned by the Company or a Wholly-Owned Restricted Subsidiary of the
Company); (iii) purchase, redeem, repay, defease or otherwise acquire or retire
for consideration prior to a scheduled mandatory sinking fund payment or
maturity date, any Subordinated Indebtedness of the Company or Subordinated
Indebtedness of a Guarantor; or (iv) make any Restricted Investment (all such
payments and other actions set forth in clauses (i) through (iv) 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
immediately after giving pro forma effect thereto as if such Restricted
Payment had been made at the beginning of the applicable Reference Period,
have been permitted to incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) pursuant to the covenant captioned
"Limitation on the Incurrence of Indebtedness and Issuance of Disqualified
Stock;" and
(c) such Restricted Payment (the amount of any such payment, if other
than cash, to be determined in good faith by the Board of Directors, whose
determination shall be conclusive and evidenced by a resolution in an
Officers' Certificate delivered to the Trustee), together with the
aggregate of all other Restricted Payments made by the Company and its
Restricted Subsidiaries after the date of the Indenture (including
Restricted Payments permitted by the next succeeding paragraph), shall not
exceed the sum of (without duplication) (t) $5.0 million plus 50% of the
Consolidated Net Income of the Company for the period (taken as one
accounting period) commencing with the first full fiscal quarter after the
Issue Date and ending on the last day 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, minus 100% of such deficit), plus (u) 100% of the
aggregate Net Cash Proceeds received by the Company for such period from
any Person other than a Restricted Subsidiary of the Company as a result of
the issuance or sale of Equity Interests of the Company (other than
Disqualified Stock), other than in connection with the conversion of
Indebtedness or Disqualified Stock, plus (v) 100% of the aggregate Net Cash
Proceeds received by the Company for such period from any Person other than
a Restricted Subsidiary of the Company as a result of the issuance or sale
of any Indebtedness or Disqualified Stock to the extent that at the time
the determination is made such Indebtedness or Disqualified Stock, as the
case may be, has been converted into or exchanged for Equity Interests of
the Company (other than Disqualified Stock), plus (w) the aggregate cash
received by the Company as capital contributions to the Company after the
Issue Date (other than from a Subsidiary), plus (x) in case any
Unrestricted Subsidiary has been redesignated a Restricted
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<PAGE> 67
Subsidiary, an amount (not less than zero) equal to the lesser of (A) the
book value determined in accordance with GAAP) at the date of such
redesignation of the aggregate Investments made by the Company and its
Restricted Subsidiaries in such Unrestricted Subsidiary and (B) the Fair
Market Value of such Investments in such Unrestricted Subsidiary at the
time of such redesignation (less, in the case of each of clauses (A) and
(B), the amount of the original Investment (based upon book value
determined in accordance with GAAP at the time of such Investment) made by
the Company or any Restricted Subsidiary pursuant to clause (ix) of the
definition of "Permitted Investment" minus the aggregate cash dividends
paid by such Unrestricted Subsidiary to the Company or any other Restricted
Subsidiary since the date of such original Investment), minus (y) in case
any Restricted Subsidiary has been redesignated an Unrestricted Subsidiary,
the greater of (1) the book value (determined in accordance with GAAP) at
the date or redesignation of the aggregate Investments made by the Company
and its Restricted Subsidiaries and (2) the Fair Market Value of such
Investments in such Restricted Subsidiary at the time of such
redesignation, plus, to the extent not included in the definition of
"Consolidated Net Income," and plus (z) the amount of any payments of
interest on Indebtedness, dividends, repayments of Indebtedness and other
cash distributions, in each case after taxes and to the extent received by
the Company or a Restricted Subsidiary after the date of the Indenture from
any Unrestricted Subsidiary.
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 payment of any dividend on any shares of Preferred Stock of
the Company issued and outstanding as of the Issue Date in accordance with the
terms of such Preferred Stock in effect at the Issue Date; (iii) any dividend on
shares of Capital Stock of the Company or any Wholly-Owned Restricted Subsidiary
payable solely in shares of Capital Stock (other than Disqualified Stock); (iv)
the payment of annual dividends on shares of common stock of the Company in an
aggregate amount not to exceed $0.22 per share per annum (as equitably adjusted
by resolution of the Board of Directors of the Company evidenced by an Officers'
Certificate delivered to the Trustee for stock splits, stock dividends and
similar events after the Issue Date); (v) the redemption, repurchase, retirement
or other acquisition of any 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 or other acquisition shall be excluded from clause (u) of the
preceding paragraph (c); (vi) the defeasance, redemption or repurchase of any
Subordinated Indebtedness of the Company in exchange for, or out of the Net Cash
Proceeds from an incurrence of Permitted Company Refinancing Indebtedness or the
substantially concurrent sale (other than to a Restricted Subsidiary of the
Company) of 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 defeasance, redemption or repurchase shall be excluded from clause (u) or
(v) of the preceding paragraph (c), as applicable; (vii) the repurchase,
redemption or retirement by the Company of shares of its Capital Stock (other
than Disqualified Stock) held by an employee or former employee of the Company
or any of its Restricted Subsidiaries issued under the Company's stock option
plans pursuant to the terms of such plans; provided that (A) the repurchase,
redemption or retirement results from the retirement, termination of employment,
death or disability (as defined in the relevant plan) of the employee or former
employee and (B) the aggregate price paid for all such repurchased, redeemed or
retired Capital Stock shall not exceed $2.0 million after the date of the
Indenture; (viii) a Qualified Redemption Transaction; (ix) any Investment in an
Affiliate of the Company engaged in the Business made with the Net Cash Proceeds
of a substantially concurrent sale (other than to a Restricted Subsidiary of the
Company) of Equity Interests of the Company (other than Disqualified Stock)
provided, that the amount of any such Net Cash Proceeds that are utilized for
any such Investment shall be excluded from clause (u) of the preceding paragraph
(c); and provided, further, that at the time of, and after giving effect to, any
Restricted Payment permitted under clauses (ii), (iii), (iv), (v), (vi), (vii)
and (ix), no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof.
Not later than the date of making any Restricted Payment, the Company shall
deliver to the Trustee an Officers' Certificate stating that such Restricted
Payment is permitted and setting forth the basis upon which the calculations
required by this covenant were computed.
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Limitation on the Incurrence of Indebtedness and Issuance of Disqualified
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 with respect
to (collectively, "incur" and, correlatively, "incurred" and "incurrence") any
Indebtedness (other than Permitted Indebtedness), and the Company will not, and
will not permit any of its Restricted Subsidiaries to, 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 and any Guarantor may
incur Indebtedness if the Consolidated Interest Coverage Ratio for the Company's
most recently ended Reference Period immediately preceding the date on which
such additional Indebtedness is incurred, determined on a pro forma basis
(including a pro forma application of the net proceeds therefrom), as if the
additional Indebtedness had been incurred at the beginning of such Reference
Period, would have been at least 2.0 to 1.0.
Limitation on Liens
The Indenture provides 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 any Liens (other than Permitted Liens) upon any of their
respective properties or assets, including, without limitation, any Capital
Stock owned by the Company or any Restricted Subsidiary, securing (i) any
Indebtedness of the Company, unless the Notes are equally and ratably secured,
or (ii) any Indebtedness of any Guarantor, unless the Guarantees are equally and
ratably secured, provided, that if such Indebtedness is expressly subordinated
to the Notes or the Guarantees, the Lien securing such Indebtedness will be
subordinated and junior to any Lien securing the Notes or the Guarantees, with
the same relative priority as such Subordinated Indebtedness of the Company or
Subordinated Indebtedness of a Guarantor will have with respect to the Notes or
the Guarantees, as the case may be.
Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries
The Indenture provides 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 consensual encumbrance or
restriction on the ability of any Restricted Subsidiary to (i) pay dividends or
make any other distributions to the Company or any of its Restricted
Subsidiaries (A) on its Capital Stock or (B) with respect to any other interest
or participation in, or measured by, its profits, (ii) pay any Indebtedness owed
to the Company or any of its Restricted Subsidiaries, (iii) make loans or
advances to the Company or any of its Restricted Subsidiaries, (iv) transfer any
of its properties or assets to the Company or any of its Restricted
Subsidiaries, (v) grant Liens or other security interests on any of the
properties or assets of the Company in favor of any Holder of any Note or (vi)
Guarantee the Notes, except for such encumbrances or restrictions existing under
or by reason of (a) Existing Indebtedness as in effect on the date of the
Indenture, (b) the Bank Credit Facility as in effect as of the date of the
Indenture and any amendments, modifications, restatements, renewals,
supplements, refundings, replacements or refinancing thereof, provided that such
amendments, modifications, restatements, renewals, supplements, refundings,
replacements or refinancings are no more materially restrictive with respect to
such dividend and other payment restrictions than those contained in the Bank
Credit Facility as in effect at the date of the Indenture, (c) the Indenture 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 on or after the Issue Date 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, (f)
customary nonassignment provisions in contracts or leases entered into in the
ordinary course of business and consistent with past practices, (g) pursuant to
capital leases and purchase money obligations, in each case, for property
acquired in the ordinary course of business after the date of the Indenture that
impose restrictions of the nature described in clause (iv) above on the property
so acquired, which obligations do not cover any assets other than the asset
acquired, (h) Permitted Liens which are customary limitations on the transfer of
collateral subject to such Permitted Liens, (i) any merger agreements, stock
purchase agreements, asset sale
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agreements and similar agreements limiting the transfer of properties and assets
to be transferred or otherwise disposed pending consummation of the subject
transaction in accordance with the terms thereof, or (j) Permitted Company
Refinancing Indebtedness or Permitted Subsidiary Refinancing Indebtedness,
provided that, in each case, the restrictions contained in the agreements
governing such Permitted Company Refinancing Indebtedness or Permitted
Subsidiary Refinancing Indebtedness, as the case may be, are no more restrictive
with respect to the provisions set forth in clauses (i), (ii), (iii), (iv), (v)
and (vi) above than those contained in the agreements governing the Indebtedness
being refinanced.
Limitation on Merger, Consolidation or Sale of Assets
The Indenture provides that the Company shall not consolidate or merge with
or into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its properties or assets in one or more related transactions, to another
Person unless (i) the Company is the surviving corporation 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
Person formed by or surviving any such consolidation or merger (if other than
the Company), or the Person to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made, expressly 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 immediately after giving effect to such transaction
(including any Indebtedness incurred or anticipated to be incurred in connection
with the transaction), no Default or Event of Default shall have occurred and be
continuing; (iv) except in the case of a consolidation or merger of the Company
with or into a Wholly-Owned Restricted Subsidiary of the Company, immediately
after giving effect to such transaction on a pro forma basis, the Consolidated
Net Worth of the Company or any Person formed by or surviving any such
consolidation or merger, or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made, is equal to or greater
than the Consolidated Net Worth of the Company immediately preceding such
transaction; and (v) except in the case of a consolidation or merger of the
Company with or into a Wholly-Owned Restricted Subsidiary of the Company,
immediately after giving pro forma effect to such transaction as if such
transaction had been made at the beginning of the applicable Reference Period,
the Company or any Person formed by or surviving any such consolidation or
merger, or to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made, would have been permitted to incur at least
$1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to
the covenant captioned "Limitation on the Incurrence of Indebtedness and
Issuance of Disqualified Stock."
Limitation on Sale of Assets
The Indenture provides that the Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, make any Asset Sale unless:
(i) the Company (or its Restricted Subsidiary, as the case may be)
receives consideration at the time of such sale or other disposition at
least equal to the Fair Market Value thereof;
(ii) at least 75% of the consideration received by the Company (or its
Restricted Subsidiary, as the case may be) from such Asset Sale consists of
cash or Cash Equivalents provided, however, that the amount of (a) any
liabilities (as shown on the Company's or such Restricted Subsidiary's most
recent balance sheet or in the notes thereto) of the Company or such
Restricted Subsidiary (other than contingent liabilities and liabilities
that are by their terms subordinated in right of payment to the Notes or
any Guarantee thereof) from which the Company and its Restricted
Subsidiaries are expressly released in connection with such sale, and (b)
any notes or other non-cash consideration received by the Company or such
Restricted Subsidiary from such transferee that are converted by the
Company or such Restricted Subsidiary into cash or Cash Equivalents within
30 days of receipt thereof (to the extent of the cash or Cash Equivalents
so received (net of costs relating thereto)), shall be deemed to be cash
for purposes of this provision; and
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(iii) the Net Cash Proceeds received by the Company (or its Restricted
Subsidiary, as the case may be) from such Asset Sale are applied in
accordance with the following two paragraphs.
The Company may apply such Net Cash Proceeds, within 365 days after any
Asset Sale, to: (a) the repayment of Indebtedness of the Company under the Bank
Credit Facility or other Senior Indebtedness of the Company or any Senior
Indebtedness of a Guarantor, that results in a permanent reduction in any
revolving credit or other commitment relating thereto or the maximum principal
amount that may be borrowed thereunder in an amount equal to the principal
amount so repaid or (b) make an Investment in assets or properties used in the
Business. Pending the final application of any such Net Cash Proceeds, the
Company or any such Restricted Subsidiary may invest such Net Cash Proceeds in
any manner that is not prohibited by the Indenture.
If, upon completion of the 365-day period, the Net Cash Proceeds of any
Asset Sale less the aggregate amount applied by the Company during such period
as described in clauses (a) or (b) in the immediately preceding paragraph,
together with any Net Cash Proceeds in excess of amounts similarly applied by
the Company from any prior Asset Sale after the date of receipt of such Net Cash
Proceeds (such aggregate constituting "Excess Proceeds"), exceeds $7.5 million,
then the Company will be obligated to make an offer to all Holders of Notes (the
"Asset Sale Offer") to repurchase the Notes having an aggregate principal amount
equal to the Excess Proceeds (and not solely the amount in excess of $7.5
million) (such repurchase to be made on a pro rata basis if the amount available
for such repurchase is less than the principal amount of the Notes tendered in
such Asset Sale Offer) at a repurchase price in cash in an amount equal to 100%
of the principal amount thereof plus accrued and unpaid interest, if any, and
Liquidated Damages, if any, to the date of such repurchase, in accordance with
the procedures set forth in the Indenture; provided, however, that, if the
Company is required to apply such Excess Proceeds to repurchase, or to offer to
repurchase, any Pari Passu Indebtedness, the Company shall only be required to
offer to repurchase the maximum principal amount of Notes that may be purchased
out of the amount of such Excess Proceeds multiplied by a fraction, the
numerator of which is the aggregate principal amount of Notes outstanding and
the denominator of which is the aggregate principal amount of Notes outstanding
plus the aggregate principal amount of such Pari Passu Indebtedness outstanding.
To the extent that the aggregate amount of Notes tendered pursuant to an offer
is less than the Excess Proceeds, the Company may use the amount of such
deficiency, or a portion thereof, in any manner permitted by the Indenture. Upon
the completion of the Asset Sale Offer, the amount of Excess Proceeds will be
reset to zero, subject to further increase resulting from subsequent Asset
Sales. The Asset Sale Offer must be commenced within 30 days following the Asset
Sale that triggers the Company's obligation to make the Asset Sale Offer and
remain open for at least 30 and not more than 40 days (unless otherwise required
by applicable law).
Any Asset Sale Offer will be conducted in substantially the same manner as
a Change of Control Offer. The Company will comply with Rule 14e-1 of the
Exchange Act and any other securities laws, rules and regulations thereunder to
the extent such laws, rules and regulations are applicable in connection with
the repurchase of the Notes pursuant to an Asset Sale Offer.
Notwithstanding the foregoing, the Company will not, and will not permit
any Restricted Subsidiary to, directly or indirectly, make any Asset Sale of any
of the Capital Stock of a Restricted Subsidiary except pursuant to an Asset Sale
of all of the Capital Stock of such Restricted Subsidiary.
Limitation on Transactions with Affiliates
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, enter into any
transaction or series of transactions (including, without limitation, the sale,
purchase, license, transfer, exchange, lease or otherwise dispose of any assets
or properties or the rendering of any services, or entering into any contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of) with any Affiliate (other than transactions among the Company and its
Wholly-Owned Restricted Subsidiaries) (each of the foregoing, an "Affiliate
Transaction"), on terms that are less favorable to the Company or the relevant
Restricted Subsidiary, as the case may be, than those that would have been
obtained in a comparable arms' length transaction by the Company or such
Restricted Subsidiary
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with an unrelated Person. In addition, the Company will not, and will not permit
any Restricted Subsidiary of the Company to, enter into an Affiliate
Transaction, or any series of related Affiliate Transactions involving aggregate
payments (a) in excess of $1.0 million, unless a majority of the Board of
Directors of the Company (including a majority of the Company's Disinterested
Directors) determines in good faith, as evidenced by a resolution of such Board,
that such Affiliate Transaction or series of related Affiliate Transactions is
fair to the Company and in compliance with the first sentence of this paragraph;
or (b) equal to or greater than $5.0 million, unless the Company complies with
the preceding clause (a) and receives a written opinion from a nationally
recognized investment banking firm with total assets in excess of $1.0 billion
that such transaction or series of transactions is fair to the Company or such
Restricted Subsidiary from a financial point of view, provided, however, that
this covenant will not restrict the Company from (1) paying reasonable and
customary regular compensation and fees to directors of the Company who are not
employees or consultants of the Company or any Restricted Subsidiary or
Affiliate of the Company, (2) paying dividends on, or making distributions with
respect to, shares of Capital Stock of the Company on a pro rata basis to the
extent permitted by the covenant captioned "Limitation on Restricted Payments,"
(3) other Restricted Payments that are permitted by the provisions of the
Indenture described above under the covenant captioned "Limitation on Restricted
Payments," (4) loans or advances to employees of the Company or any Restricted
Subsidiary to the extent permitted by clause (vi) of the definition of
"Permitted Investments," (5) any indemnification payment made to any director or
officer of the Company or any Restricted Subsidiary (A) in accordance with the
corporate charter or by-laws of the Company or such Restricted Subsidiary, (B)
under any customary agreement providing for such indemnification payment, or (C)
under applicable law, and (6) obligations of the Company or any Restricted
Subsidiary under employee compensation and other benefit arrangements entered
into or provided for in the ordinary course of business.
Limitation on Sale/Leaseback Transactions
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, enter into any Sale/Leaseback Transaction
unless (i) the Company or such Restricted Subsidiary, as the case may be, would
be able to incur Indebtedness in an amount equal to the Attributable
Indebtedness with respect to such Sale/Leaseback Transaction or (ii) the Company
or such Restricted Subsidiary receives cash proceeds from such Sale/Leaseback
Transaction at least equal to the Fair Market Value of the assets subject
thereto and such proceeds are applied in the same manner and to the same extent
as Net Cash Proceeds and Excess Proceeds from an Asset Sale.
Guarantees of Certain Indebtedness
The Company will not permit any of its Restricted Subsidiaries, directly or
indirectly, to Guarantee any Indebtedness of the Company or a Guarantor, unless
each such Restricted Subsidiary simultaneously executes and delivers to the
Trustee a supplemental indenture, in form reasonably satisfactory to the
Trustee, providing for the Guarantee by such Restricted Subsidiary of the
payment of the Obligations of the Company under the Notes in the manner set
forth under "-- Guarantees." Neither the Company nor any such Guarantor shall be
required to make a notation on the Notes to reflect any such Guarantee. Nothing
in this covenant shall be construed to permit any Restricted Subsidiary of the
Company to incur Indebtedness otherwise prohibited by the covenant captioned
"Limitation on the Incurrence of Indebtedness and Issuance of Disqualified
Stock."
Conduct of Business
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, engage in any business or activity other than
the Business.
Rule 144A Information Requirement
The Company has agreed to furnish to the Holders or beneficial Holders of
Old Notes and prospective purchasers of Notes designated by the Holders of
Notes, upon their request, the information required to be delivered pursuant to
Rule 144A (d) (4) under the Securities Act until such time as the Company either
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exchanges all of the Old Notes for the Exchange Notes or has registered all of
the Old Notes for resale under the Securities Act.
Reports
The Indenture provides that whether or not required by the rules and
regulations of the Commission, including the reporting requirements of Section
13 or 15(d) of the Exchange Act, 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, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" that describes the financial condition and results of
operations of the Company and its Subsidiaries and, with respect to the annual
information only, a report thereon by the Company's independent certified public
accountants and (ii) all reports that would be required to be filed with the
Commission on Form 8-K if the Company were required to file such reports. In
addition, whether or not required by the rules and regulations of the
Commission, the Company will file a copy of all such information with the
Commission for public availability (unless the Commission will not accept such a
filing) and make such information available to investors or prospective
investors who request it in writing.
Payments for Consent
The Indenture prohibits the Company and any of its Subsidiaries from,
directly or indirectly, paying or causing 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 terms or provisions of the
Notes unless such consideration is offered to be paid or agreed to be paid to
all Holders of the Notes which so consent, waive or agree to amend in the time
frame set forth in solicitation documents relating to such consent, waiver or
agreement.
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, any of the Notes; (ii) default in
payment when due (whether at maturity, upon redemption or repurchase, or
otherwise) of the principal of or premium, if any, on any of the Notes
(including the failure to make a payment to repurchase Notes tendered pursuant
to a Change of Control Offer or an Asset Sale Offer); (iii) failure by the
Company to comply with the provisions described under the covenant captioned
"Limitation on Merger, Consolidation or Sale of Assets" or a Guarantor to comply
with the provisions described in the third paragraph under the caption
"-- Guarantees"; (iv) failure by the Company or, with respect to any Guarantee,
any Guarantor, for 30 days after notice by the Trustee or by the Holders of at
least 25% in aggregate principal amount of the Notes then outstanding to comply
with any of the covenants or agreements in, in the case of the Company, the
Indenture or the Notes or, in the case of a Guarantor, the Guarantee of such
Guarantor (other than those referred to in clauses (i), (ii) and (iii) above);
(v) default under any mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any Indebtedness for money
borrowed by the Company or any of its Restricted Subsidiaries or any Guarantor
(or the payment of which is guaranteed by the Company or any of its Restricted
Subsidiaries or any Guarantor) 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 (a "Payment Default") or (b) results in the acceleration of such
Indebtedness prior to its express maturity and, in each case described in
clauses (a) and (b) of this subsection (v), 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 $3.0 million or more; provided that if any such
Payment Default is cured or waived or any such acceleration rescinded, or such
Indebtedness is repaid, within a period of 10 days from the continuation of such
default beyond the applicable grace period or the occurrence of such
acceleration, as the case may be, such Event of Default under the Indenture and
any consequential acceleration of the Notes shall
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be automatically rescinded, so long as such rescission does not conflict with
any judgment or decree; (vi) the failure of a Guarantee by a Guarantor to be in
full force and effect (other than a release of a Guarantee in accordance with
the Indenture), or the denial or disaffirmance by such Guarantor thereof; (vii)
failure by the Company or any of its Restricted Subsidiaries or any Guarantor to
pay final judgments or orders rendered against the Company or any Restricted
Subsidiary or any Guarantor aggregating in excess of $3.0 million, and (x) such
judgments or orders are not paid, discharged or stayed for a period of 60 days
after their entry or (y) an enforcement proceeding shall have been commenced
(and not discharged or settled) by any creditor upon any such judgments or
orders; and (viii) certain events of bankruptcy, insolvency or reorganization
with respect to the Company or any of its Restricted Subsidiaries or any
Guarantor.
If any Event of Default occurs and is continuing, the Trustee by notice to
the Company, or the Holders of at least 25% in principal amount of the then
outstanding Notes may declare by notice to the Company and the Trustee all of
the principal amount of the Notes, accrued and unpaid interest, premium and
Liquidated Damages, if any, thereon and all other Obligations thereunder to be
due and payable immediately. Notwithstanding the foregoing, in the case of an
Event of Default arising from certain events of bankruptcy, insolvency or
reorganization with respect to the Company or any Restricted Subsidiary or any
Guarantor occurs, then 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, premium, interest or Liquidated Damages, if any) if it determines
that withholding notice is in their interest.
Subject to certain limitations, 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 principal, premium, interest or Liquidated
Damages, if any on the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No past, present or future director, officer, employee, agent or
stockholder of the Company, as such, shall have any liability for any
obligations of the Company under the Notes, the Indenture or for any claim based
on, in respect of, or by reason of, such obligations or their creation. Each
Holder of Notes, by accepting a Note, waives and releases all such liability.
The waiver and release are part of the consideration for issuance of the Notes.
Such waiver shall not be effective to waive or release liabilities to the extent
required by applicable law. It is the view of the Commission that such a waiver
or release 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, interest and
Liquidated Damages, if any, on such Notes when such payments are due, (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
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Defeasance occurs, certain events (not including nonpayment, 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 U.S. dollars, non-callable U.S. Government
Securities, or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent certified public
accountants or a nationally recognized investment bank, to pay the principal of,
premium, if any, interest and Liquidated Damages, if any, on the outstanding
Notes on the Stated Maturity or on the applicable redemption date, as the case
may be; (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 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 shall 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 Restricted Subsidiaries is a party or by which the
Company or any of its Restricted Subsidiaries is bound; (vi) the Company shall
have delivered to the Trustee an opinion of counsel to the effect that after the
91st day following the deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally; (vii) the Company shall have delivered to
the Trustee an Officers' Certificate stating that the deposit was not made by
the Company with the intent of preferring the Holders of Notes over the other
creditors of the Company with the intent of defeating, hindering, delaying or
defrauding creditors of the Company; and (viii) the Company shall have delivered
to the Trustee an Officers' Certificate and an opinion of counsel, each stating
that all conditions precedent provided for or relating to the Legal Defeasance
or the Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture,
subject to the restrictions described under "Notice to Investors." 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 its owner for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next succeeding paragraphs and in the Indenture,
the Indenture or the Notes may be amended or supplemented by the Company and the
Trustee with the consent of the Holders of at least a majority in principal
amount of the Notes then outstanding (including consents obtained in connection
with a 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
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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 of Notes): (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 covenant captioned "Limitation on Sale of
Assets") or reduce the prices at which the Company shall repurchase such Notes
pursuant to the provisions of "Change of Control" and the covenant captioned
"Limitation on Sale of Assets," (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, if any, interest or Liquidated Damages, if
any, 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, interest or Liquidated Damages, if any, on the Notes, (vii)
impair the right to institute suit for the enforcement of any payment of
principal of, or premium, if any, or interest or Liquidated Damages, if any, on,
any Note, (viii) waive a redemption payment with respect to any Note or (ix)
make any change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Company and the Trustee may amend or supplement the Indenture or the Notes
to cure any ambiguity, defect or inconsistency; provided that such amendment or
supplement does not adversely affect the rights of any Holder, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Company's obligations to Holders of the Notes
in the case of a merger, consolidation or sale of assets, to secure the Notes as
contemplated by the covenant captioned "Limitation on Liens," to make any change
that would provide any additional rights or benefits to the Holders of the Notes
or that does not adversely affect the legal rights under the Indenture of any
such Holder, to reflect the release of any Guarantor from its Guarantee, or the
addition of any Subsidiary of the Company as a Guarantor, in the manner provided
in the Indenture, or to comply with requirements of the Commission in order to
effect or maintain the qualification of the Indenture under the Trust Indenture
Act.
THE TRUSTEE
Fleet National Bank is the Trustee under the Indenture and has been
appointed by the Company as initial Registrar and Paying Agent with respect to
the Notes.
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.
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 a Default or 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 and skill of a prudent man
in the conduct of his own affairs. Subject to such provisions, the Trustee will
be under no obligation to exercise any of its rights or powers under the
Indenture at the request of any Holder of Notes, unless such Holder shall have
offered to the Trustee security and indemnity satisfactory to it against any
loss, liability or expense.
GOVERNING LAW
The Indenture provides that it will be governed by, and construed in
accordance with, the laws of the State of New York, but without regard to
principles of conflicts of law.
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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 Indebtedness" means, with respect to any specified Person: (i)
Indebtedness of any other Person existing at the time such other Person 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. Acquired
Indebtedness shall be deemed incurred at the time such other Person is merged
with or into or becomes a Restricted Subsidiary of such specified Person.
"Adjusted Net Assets" of a Guarantor at any date shall mean the lesser of
the amount by which (i) the fair value of the property of such Guarantor exceeds
the total amount of liabilities, including, without limitation, contingent
liabilities (after giving effect to all other fixed and contingent liabilities
incurred or assumed on such date), but excluding liabilities under its
Guarantee, of such Guarantor at such date and (ii) the present fair saleable
value of the assets of such Guarantor at such date exceeds the amount that will
be required to pay the probable liability of such Guarantor on its debts (after
giving effect to all other fixed and contingent liabilities incurred or assumed
on such date and after giving effect to any collection from any Subsidiary of
such Guarantor in respect of the obligations of such Subsidiary under the
Guarantee of such Guarantor), excluding debt in respect of its Guarantee, as
they become absolute and matured.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise.
"Asset Sale" means (i) the sale, lease, conveyance, transfer, exchange or
other disposition (collectively, "dispositions") of any assets (including by way
of a Sale/Leaseback Transaction) other than dispositions of inventory in the
ordinary course of business, (ii) the issuance by any Restricted Subsidiary of
the Company of Equity Interests of such Restricted Subsidiary (other than
directors' qualifying shares) and (iii) the disposition by the Company or any of
its Restricted Subsidiaries of Equity Interests of any Restricted Subsidiary of
the Company, in the case of either clause (i), (ii) or (iii), whether in a
single transaction or a series of related transactions (a) that have a Fair
Market Value in excess of $2.0 million or (b) for net proceeds in excess of $2.0
million. Notwithstanding the foregoing, the following will not be deemed to be
Asset Sales: (i) a disposition of assets by a Restricted Subsidiary of the
Company to the Company or a Wholly-Owned Restricted Subsidiary of the Company or
by the Company to a Wholly-Owned Restricted Subsidiary of the Company, (ii) an
issuance of Equity Interests by a Restricted Subsidiary of the Company to the
Company or to a Wholly-Owned Restricted Subsidiary of the Company, (iii) a
disposition consisting of a Restricted Payment permitted by the covenant
captioned "Limitation on Restricted Payments," (iv) the disposition of all or
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole governed by the provisions of the provisions captioned "Change
of Control" and/or "Limitation on Merger, Consolidation or Sale of Assets," (v)
any trade or exchange by the Company or any Restricted Subsidiary of (A)
properties and assets used in the Business for properties and assets used in the
Business owned or held by another Person or (B) shares of Capital Stock in any
Person engaged in the Business for shares of Capital Stock in any Person engaged
in the Business owned or held by another Person, provided that (1) the Fair
Market Value of the properties, assets or shares traded or exchanged by the
Company or such Restricted Subsidiary (including any cash or Cash Equivalents,
not to exceed 15% of such Fair Market Value, to be delivered by the Company or
such Restricted Subsidiary) is reasonably equivalent to the Fair Market Value of
the properties, assets and shares (together with any cash or Cash Equivalents,
not to exceed 15% of such Fair Market Value) to be received by the Company or
such Restricted Subsidiary, provided that if such
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Fair Market Value is equal to or in excess of $5.0 million, the resolution of
the Board of Directors of the Company evidenced by an Officers' Certificate
delivered to the Trustee shall be accompanied by a written appraisal by a
nationally recognized investment banking firm or appraisal firm, in each case
specializing or having a specialty in the Business and (2) such exchange is
approved by a majority of the Disinterested Directors, (vi) any sale, transfer
and other disposition of defaulted receivables for collection in the ordinary
course of business, (vii) the grant in the ordinary course of business of any
non-exclusive license of patents, trademarks, registrations therefor and other
similar intellectual property, (viii) any Lien (or foreclosure thereon) securing
Indebtedness to the extent that such Lien is granted in compliance with the
covenant captioned "Limitation on Liens" above, (ix) any disposition of
equipment or materials in the ordinary course of business consistent with past
practices which, in the reasonable judgment of the Company, are obsolete, worn
out or no longer useful in the Company's or any Restricted Subsidiaries'
business and (x) the factoring or securitization of equipment receivables by the
Company or a Restricted Subsidiary with a financial institution in connection
with the sale by the Company or such Restricted Subsidiary of such equipment in
the ordinary course of business, provided that, such equipment was sold by the
Company or such Restricted Subsidiary subsequent to the date of the Indenture
and within eighteen months of such factoring or securitization.
"Attributable Indebtedness" means, with respect to any particular lease
under which any Person is at the time liable and at any date as of which the
amount thereof is to be determined, the present value of the total net amount of
rent required to be paid by such Person under the lease during the primary term
thereof, without giving effect to any renewals at the option of the lessee,
discounted from the respective due dates thereof to such date at the rate of
interest per annum implicit in the terms of the lease. As used in the preceding
sentence, the net amount of rent under any lease for any such period shall mean
the sum of rental and other payments required to be paid with respect to such
period by the lessee thereunder excluding any amounts required to be paid by
such lessee on account of maintenance and repairs, insurance, taxes,
assessments, water rates or similar charges. In the case of any lease which is
terminable by the lessee upon payment of a penalty, such net amount of rent
shall also include the amount of such penalty, but no rent shall be considered
as required to be paid under such lease subsequent to the first date upon which
it may be so terminated.
"Average Life" means, as of the date of determination, with respect to any
Indebtedness, the quotient obtained by dividing (i) the product of (x) the
number of years (calculated to the nearest one-twelfth) from such date to the
date of each successive scheduled principal payment, including payment at final
maturity, of such Indebtedness multiplied by (y) the amount of such principal
payment by (ii) the sum of all such principal payments.
"Bank Credit Facility" means the Amended and Restated Business Loan
Agreement (Receivables and Inventory), dated as of February 21, 1997, as amended
by the First Amendment thereto, dated as of the Issue Date, by and among the
Company and Bank of America, Texas, N.A., including any related notes,
collateral documents, instruments and agreements executed in connection
therewith, and in each case as amended, supplemented, modified, renewed, or
refunded, replaced or refinanced by a revolving credit, term and/or letter of
credit facility, from time to time.
"Board of Directors" means, with respect to any Person, the Board of
Directors of such Person or any committee of the Board of Directors of such
Person duly authorized to act on behalf of the Board of Directors of such
Person.
"Business" means the business of providing services and products to the oil
and gas industry and the petrochemicals industry.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be so required to be capitalized on the balance sheet in accordance
with GAAP.
"Capital Stock" means (i) with respect to any Person that is a corporation,
any and all shares, interests, participations, rights or other equivalents
(however designated) of corporate stock, including each class of common stock
and preferred stock of such Person, (ii) with respect to any Person that is not
a corporation,
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any and all, partnership interests (whether general or limited) or limited
liability company interests, and (iii) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than 180
days from the date of acquisition (provided that the full faith and credit of
the United States is pledged in support thereof), (iii) certificates of deposit
with maturities of 180 days or less from the date of acquisition, bankers'
acceptances with maturities not exceeding 180 days and overnight bank deposits,
in each case with any domestic commercial bank having capital and surplus in
excess of $500.0 million or any commercial bank organized under the laws of any
other country that is a member of the Organization for Economic Cooperation and
Development and that has total assets in excess of $500.0 million, (iv)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clause (ii) above entered into with any
financial institution meeting the qualifications specified in clause (iii)
above, (v) commercial paper issued by a corporation that is not an Affiliate of
the Company and is organized under the laws of any state of the United States or
the District of Columbia and rated at least P-1 (or higher) by Moody's Investors
Service, Inc. or A-1 (or higher) by Standard & Poor's Ratings Services and in
each case maturing within six months after the date of acquisition, and (vi)
shares of any money market mutual fund, or similar fund, in each case having
assets in excess of $500.0 million, which invests solely in investments of the
types described in clauses (i) through (v) above.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition, in one or a series of
related transactions, directly or indirectly, of all or substantially all of the
assets of the Company and its Restricted Subsidiaries to any Person or group (as
such term is used in Sections 13(d) and 14(d) of the Exchange Act), (ii) the
adoption of a plan relating to the liquidation or dissolution of the Company,
(iii) any Person or group (as defined above), is or becomes the "beneficial
owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that
a Person shall be deemed to have "beneficial ownership" of all shares that any
such Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of more
than 50% of the total voting power of the Voting Stock of the Company, including
by way of merger, consolidation or otherwise, or (iv) the first day on which a
majority of the members of the Board of Directors of the Company are not
Continuing Directors.
"Commodity Agreement" means any commodity futures contract, commodity
option or other similar agreement or arrangement entered into by the Company or
any of its Restricted Subsidiaries designed to protect the Company or any of its
Restricted Subsidiaries against fluctuations in the price of commodities
actually used in the ordinary course of business of the Company and its
Restricted Subsidiaries.
"Consolidated Interest Coverage Ratio" means, for any Reference Period, the
ratio on a pro forma basis of (a) the sum of (without duplication) (i)
Consolidated Net Income of such Person for such period, plus an amount equal to
any extraordinary, nonrecurring or unusual loss plus any net loss realized in
connection with an asset sale, to the extent such losses were deducted or
otherwise excluded in computing Consolidated Net Income, (ii) Consolidated
Interest Expense, (iii) Consolidated Tax Expense, (iv) depreciation and
amortization (including amortization of goodwill, amortization of deferred debt
expense and other intangibles and amortization of deferred compensation in
respect of non-cash compensation but excluding amortization of prepaid cash
expenses that were paid in a prior period) and other extraordinary, unusual or
non-recurring non-cash charges (excluding any such non-cash charge to the extent
it represents an accrual of a reserve for cash charges in any future period or
amortization of a prepaid cash expense that was paid in a prior period) of such
Person and its Restricted Subsidiaries for such period, to the extent such
depreciation and amortization were deducted or otherwise excluded in computing
Consolidated Net Income, as determined in accordance with GAAP on a consolidated
basis in each case as determined for the Reference Period to (b) Consolidated
Interest Expense for such Reference Period; provided, that, in calculating each
of the items set forth in the foregoing (i) acquisitions which occurred during
the Reference Period or subsequent to the Reference Period and on or prior to
the date of the transaction giving rise to the need to calculate the
Consolidated Interest Coverage Ratio (the "Transaction Date") shall be assumed
to have occurred on the first day of the Reference
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Period, (ii) the incurrence of any Indebtedness (including the issuance of the
Notes) or issuance of any Disqualified Stock during the Reference Period or
subsequent to the Reference Period and on or prior to the Transaction Date shall
be assumed to have occurred on the first day of such Reference Period, (iii) any
Indebtedness that had been outstanding during the Reference Period that has been
repaid on or prior to the Transaction Date shall be assumed to have been repaid
as of the first day of such Reference Period, (iv) the Consolidated Interest
Expense attributable to interest on any Indebtedness or dividends on any
Disqualified Stock bearing a floating interest (or dividend) rate shall be
computed on a pro forma basis as if the rate in effect on the Transaction Date
was the average rate in effect during the entire Reference Period and (v) in
determining the amount of Indebtedness pursuant to the covenant captioned
"Limitation on the Incurrence of Indebtedness and Issuance of Disqualified
Stock," the incurrence of Indebtedness giving rise to the need to calculate the
Consolidated Interest Coverage Ratio and, to the extent the net proceeds from
the incurrence thereof are used to retire Indebtedness, the application of the
proceeds therefrom shall be assumed to have occurred on the first day of the
Reference Period.
"Consolidated Interest Expense" means, with respect to any Person for any
Reference Period, the aggregate amount (without duplication) of (a) consolidated
interest, whether expensed or capitalized, paid, accrued or scheduled to be paid
or accrued, of such Person and its Restricted Subsidiaries for such period
(including (i) amortization of original issue discount and non-cash interest
payments and accruals, (ii) the interest portion of all deferred payment
obligations, calculated in accordance with the effective interest method and
(iii) the interest component of any payments associated with Capital Lease
Obligations and net payments (if any) pursuant to Hedging Obligations, in each
case, to the extent attributable to such period, but excluding (x) commissions,
discounts and other fees and charges incurred with respect to letters of credit
and bankers' acceptances financing and (y) any interest expense on Indebtedness
of another Person that is Guaranteed by such Person or secured by a Lien on
assets of such Person) determined in accordance with GAAP, and (b) with respect
to any Disqualified Stock, cash dividends paid (other than to the Company or any
of its Restricted Subsidiaries), declared, accrued or accumulated during such
period, divided by one minus the applicable actual combined federal, state,
local and foreign income tax rate of the Company and its Restricted Subsidiaries
(expressed as a decimal), on a consolidated basis, for the Reference Period
preceding the date of the transaction giving rise to the need to calculate
Consolidated Interest Expense, in each case to the extent attributable to such
period and excluding items eliminated in consolidation. Consolidated Interest
Expense of the Company shall not include any prepayment premiums or amortization
of original issue discount or deferred financing costs, to the extent such
amounts are incurred as a result of the prepayment on the date of the Indenture
of any Indebtedness of the Company with the proceeds of the Notes.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP,
adjusted to exclude (only to the extent included and without duplication) (i)
all net gains which are extraordinary, unusual or are non-recurring (including
any gain from the sale or other disposition of assets outside the ordinary
course of business or from the issuance or sale of capital stock), (ii) all
gains resulting from currency or hedging transactions not in the ordinary course
of business consistent with past practice, (iii) the Net Income (if positive) of
any Person acquired after the Issue Date in a pooling of interests transaction
for any period prior to the date of such acquisition, (iv) the cumulative effect
of a change in accounting principles and (v) the Net Income of any Restricted
Subsidiary of any Person to the extent that such Restricted Subsidiary has any
restrictions or encumbrances on making distributions to such Person; provided,
that the Net Income 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 cash dividends or cash distributions actually paid during such
period to the referent Person or a Restricted Subsidiary thereof.
"Consolidated Net Worth" means, with respect to the Company and its
Restricted Subsidiaries, and at any date of determination, the sum of Capital
Stock (other than Disqualified Stock) and additional paid-in capital plus
retained earnings (or minus accumulated deficit) minus all intangible assets,
including, without limitation, organization costs, patents, trademarks,
copyrights, franchises, research and development costs, and any amount reflected
in treasury stock, of the Company and its Restricted Subsidiaries determined on
a consolidated basis in accordance with GAAP.
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"Consolidated Tax Expense" means, with respect to any Person for any
period, the provisions for federal, state, local and foreign income taxes
(including state franchise taxes accounted for as income taxes in accordance
with GAAP) of such Person and its Restricted Subsidiaries for such period as
determined on a consolidated basis in accordance with GAAP.
"Continuing Director" 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 affirmative vote of a majority of
the Continuing Directors who were members of such Board at the time of such
nomination or election.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any of its Restricted Subsidiaries in the ordinary course of business
against fluctuation in the values of the currencies of the countries (other than
the United States) in which the Company or its Restricted Subsidiaries conduct
business.
"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.
"Disinterested Director" means, with respect to an Affiliate Transaction or
series of related Affiliate Transactions or an Asset Sale, a member of the Board
of Directors of the Company who has no financial interest, and whose employer
has no financial interest, in such Affiliate Transaction or series of related
Affiliate Transactions or in such Asset Sale.
"Disqualified Stock" means any Capital Stock which, 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 or with the passing of time,
matures or is mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise, or is redeemable or is convertible or exchangeable for Indebtedness
at the option of the Holder thereof, in whole or in part, on or prior to June 1,
2007.
"Domestic Subsidiary" shall mean each Subsidiary of the Company
incorporated or organized under the laws of the United States or any state or
territory thereof.
"Eligible Foreign Inventory" means the consolidated finished goods, raw
materials and work-in-process of the Wholly-Owned Foreign Subsidiaries of the
Company (excluding finished goods, raw materials and work-in-process of
Unrestricted Subsidiaries of the Company) less any applicable reserves, each of
the foregoing determined in accordance with GAAP.
"Eligible Foreign Receivables" means the consolidated trade receivables of
the Wholly-Owned Foreign Subsidiaries of the Company (excluding trade
receivables of Unrestricted Subsidiaries of the Company) less the allowance for
doubtful accounts, each of the foregoing determined in accordance with GAAP.
"Eligible Inventory" means the consolidated finished goods, raw materials
and work-in-process of the Company and its consolidated Subsidiaries (excluding
finished goods, raw materials and work-in-process of Foreign Subsidiaries and
their Subsidiaries and Unrestricted Subsidiaries of the Company) less applicable
reserves located in the United States and Canada, each of the foregoing
determined in accordance with GAAP.
"Eligible Receivables" means the consolidated trade receivables of the
Company and its consolidated Subsidiaries (other than the trade receivables of
Foreign Subsidiaries and their Subsidiaries and Unrestricted Subsidiaries of the
Company) less the allowance for doubtful accounts and less sales to account
debtors outside the United States and Canada, each of the foregoing determined
in accordance with GAAP.
"Equity Interests" means Capital Stock and all warrants, options or other
rights exercisable for, exchangeable for or convertible into Capital Stock (but
excluding any debt security that is convertible into, or exchangeable for,
Capital Stock).
"Exchange Act" means the Securities and Exchange Act of 1934, as amended,
and the rules and regulations of the Commission thereunder.
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"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the Bank Credit Facility) in
existence on the date of the Indenture, until such amounts are repaid.
"Fair Market Value" means, with respect to any asset, the price (after
taking into account any liabilities relating to such assets) which could be
negotiated in an arm's-length free market transaction, for cash, between a
willing seller and a willing buyer, neither of which is under pressure or
compulsion to complete the transaction; provided that the Fair Market Value of
any such asset or assets shall be determined by the Board of Directors of the
Company, including a majority of the Company's Disinterested Directors, acting
in good faith, and which determination shall be evidenced by an Officers'
Certificate delivered to the Trustee.
"Foreign Subsidiary" shall mean each Subsidiary of the Company that is
incorporated or organized under the laws of any jurisdiction other than the
United States of America or any state or territory thereof.
"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 in the United States on the date of the
Indenture.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Guarantors" means any Restricted Subsidiary of the Company which becomes a
guarantor of the Notes pursuant to the covenant captioned "Guarantees of Certain
Indebtedness," until such time, if any, as such Restricted Subsidiary is
released from the Guarantee pursuant to the provisions of the Indenture.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) Interest Rate Agreements, (ii) Currency Agreements and
(iii) Commodity Agreements.
"Holder" means a Person in whose name a Note is registered.
"Indebtedness" means, with respect to any Person, (a) all obligations of
such Person, whether or not contingent, (i) in respect of borrowed money
(whether or not the recourse of the lender is to be the whole of the assets of
such Person or only to a portion thereof), (ii) evidenced by bonds, notes,
debentures or similar instruments (including, but not limited to, purchase money
obligations), (iii) representing the balance deferred and unpaid of the purchase
price of any property or services (other than trade accounts payable or other
obligations arising in the ordinary course of business), (iv) representing any
Hedging Obligations, (v) evidenced by bankers' acceptances or similar
instruments issued or accepted by banks, (vi) for the payment of money relating
to a Capital Lease Obligation, or (vii) evidenced by a letter of credit or a
reimbursement obligation of such Person with respect to any letter of credit, if
and to the extent any of the foregoing obligations referred to in this clause
(a) (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;
(b) all liabilities of others of the kind described in the preceding clause (a)
that such Person has Guaranteed or that are otherwise its legal liability; (c)
Indebtedness (as otherwise defined in this definition) of another Person secured
by a Lien on any asset of such Person, whether or not such Indebtedness is
assumed by such Person, the amount of such obligations being deemed to be the
lesser of (1) the full amount of such obligations so secured and (2) the Fair
Market Value of such asset; (d) with respect to such Person, the liquidation
preference or any mandatory redemption payment obligations in respect of
Disqualified Stock; and (e) the aggregate preference in respect of amounts
payable on the issued and outstanding shares of Preferred Stock of any of the
Company's Restricted Subsidiaries in the event of any voluntary or involuntary
liquidation, dissolution or winding up (excluding any such preference
attributable to such shares of Preferred Stock that are owned by such Person or
any of its Restricted Subsidiaries; provided, that if such Person is the
Company, such exclusion shall be for such preference attributable to such shares
of Preferred Stock that are owned by the Company or any of its Restricted
Subsidiaries).
"Interest Rate Agreement" means any interest rate swap agreement, interest
rate cap agreement, interest rate collar agreement or other similar agreement or
arrangement entered into by the Company or any of its
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Restricted Subsidiaries designed to protect the Company or any of its Restricted
Subsidiaries in the ordinary course of business against fluctuations in interest
rates.
"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, without limitation, any guarantee), advances or other
extensions of credit or capital contributions to (by means of any transfer of
cash or other property to others or any payment for property or services for the
account or use of others) (excluding commission, travel and similar advances to
officers and employees made in the ordinary course of business), all
acquisitions (whether by purchase, merger, consolidation or otherwise) for
consideration by such Person of any Indebtedness, capital stock, bonds, notes,
debentures or other securities (including, without limitation, any interests in
any partnership or joint venture) issued or owned by any other Person and all
other items that are or would be classified as investments on a balance sheet
prepared in accordance with GAAP.
"Issue Date" means the date on which the Notes are originally issued under
the Indenture.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, easement, restriction, covenant, right-of-way, adverse claim, 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 grant a security interest in and any
filing of or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction),
"Liquidated Damages" means all liquidated damages then owing pursuant to
the Registration Rights Agreement.
"Make-Whole Amount" with respect to a Note means an amount equal to the
excess, if any, of (i) the present value of the remaining interest, premium and
principal payments due on such Note as if such Note were redeemed on June 1,
2002, computed using a discount rate equal to the Treasury Rate plus 75 basis
points, over (ii) the outstanding principal amount of such Note. "Treasury Rate"
is defined as the yield to maturity at the time of the computation of United
States Treasury securities with a constant maturity (as compiled by and
published in the most recent Federal Reserve Statistical Release H.15(519),
which has become publicly available at least two Business Days prior to the date
of the redemption notice or, if such Statistical Release is no longer published,
any publicly available source of similar market data) most nearly equal to the
then remaining maturity of the Notes assuming redemption of the Notes on June 1,
2002; provided, however, that if the Make-Whole Average Life of such Note is not
equal to the constant maturity of the United States Treasury securities for
which a weekly average yield is given, the Treasury Rate shall be obtained by
linear interpolation (calculated to the nearest one-twelfth of a year) from the
weekly average yields of United States Treasury securities for which such yields
are given, except that if the Make-Whole Average Life of such Notes is less than
one year, the weekly average yield on actually traded United States Treasury
securities adjusted to a constant maturity of one year shall be used.
"Make-Whole Average Life" means the number of years (calculated to the
nearest one-twelfth) between the date of redemption and June 1, 2002.
"Make-Whole Price" with respect to a Note means the greater of (i) the sum
of the outstanding principal amount and the Make-Whole Amount of such Note, and
(ii) the redemption price of such Note on June 1, 2002, determined pursuant to
the Indenture (105.188% of the principal amount).
"Net Cash Proceeds" means (a) with respect to any Asset Sale or
Sale/Leaseback Transaction of any Person, an amount equal to aggregate cash
proceeds received (including any cash proceeds received by way of deferred
payment in principal pursuant to a note or installment receivable or otherwise,
but only as and when received, and excluding any other consideration until such
time as such consideration is converted into cash) therefrom, in each case net
of all legal, title and recording tax expenses, commissions, accounting and
investment banking and other fees and expenses incurred, and all federal, state
or local taxes required to be accrued as a liability as a consequence of such
Asset Sale or Sale/Leaseback Transaction, and in each case net of all
Indebtedness which is secured by such asset or assets (including Equity
Interests) which are the subject of such Asset Sale, in accordance with the
terms of any Lien upon or with respect to such asset or assets, or
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which must, by its terms or in order to obtain a necessary consent to such Asset
Sale or Sale/Leaseback Transaction or by applicable law, be repaid out of the
proceeds from such Asset Sale or Sale/Leaseback Transaction and which is
actually so repaid and (b) in the case of any sale by the Company of securities
relevant to the covenant captioned "Limitation on Restricted Payments," the
amount of aggregate net cash proceeds received by the Company, after payment of
expenses, commissions, discounts and any other transaction costs incurred in
connection therewith.
"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 (only to the extent
included and without duplication), (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 sale of assets (including, without limitation,
dispositions pursuant to Sale/Leaseback Transactions), or (b) the disposition of
any securities or the extinguishment of any Indebtedness of such Person or any
of its Restricted Subsidiaries, and (ii) any extraordinary, non-recurring or
unusual gain (but not loss), together with any related provision for taxes on
such extraordinary, non-recurring or unusual gain (but not loss).
"Non-Recourse Indebtedness" means Indebtedness (i) as to which neither the
Company or any of its Restricted Subsidiaries (a) provides credit support of any
kind (including any undertaking, agreement or instrument that would constitute
Indebtedness) or (b) is directly or indirectly liable (as a guarantor or
otherwise), (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 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, premium, interest (including
post-petition interest), penalties, fees, indemnifications, reimbursements,
damages and other liabilities payable under the documentation governing any
Indebtedness.
"Officers' Certificate" means, with respect to any Person, a certificate
signed by the Chief Executive Officer, President or Vice President and the Chief
Financial Officer, chief accounting officer, Treasurer or Assistant Treasurer of
such Person.
"Pari Passu Indebtedness" means, with respect to any Net Cash Proceeds from
Asset Sales, Senior Indebtedness of the Company or a Guarantor the terms of
which require the Company or such Guarantor to apply such Net Cash Proceeds to
offer to repurchase such Indebtedness.
"Permitted Company Refinancing Indebtedness" means Indebtedness of the
Company, the net proceeds of which are used to renew, extend, refinance, refund
or repurchase outstanding Indebtedness of the Company, provided that (i) if the
Indebtedness (including the Notes) being renewed, extended, refinanced, refunded
or repurchased is pari passu with or subordinated in right of payment to the
Notes, then such Indebtedness is pari passu or subordinated in right of payment
to, as the case may be, the Notes at least to the same extent as the
Indebtedness being renewed, extended, refinanced, refunded or repurchased, (ii)
such Indebtedness is scheduled to mature no earlier than the Indebtedness being
renewed, extended, refinanced, refunded or repurchased, and (iii) such
Indebtedness has an Average Life at the time such Indebtedness is incurred that
is equal to or greater than the Average Life of the Indebtedness being renewed,
extended, refinanced, refunded or repurchased; provided, further, that such
Indebtedness (to the extent that such Indebtedness constitutes Permitted Company
Refinancing Indebtedness) is in an aggregate principal amount (or, if such
Indebtedness is issued at a price less than the principal amount thereof, the
aggregate amount of gross proceeds therefrom is) not in excess of the aggregate
principal amount then outstanding of the Indebtedness being renewed, extended,
refinanced, refunded or repurchased (or if the Indebtedness being renewed,
extended, refinanced, refunded or repurchased was issued at a price less than
the principal amount thereof, then not in excess of the amount of liability in
respect thereof determined in accordance with GAAP) (plus the amount of
reasonable fees and expenses incurred in connection therewith).
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"Permitted Indebtedness" means (i) Indebtedness incurred by the Company
under the Bank Credit Facility in an aggregate principal amount not to exceed
(a) the greater of (x) $25.0 million at any time outstanding or (y) the sum of
85% of the amount of Eligible Receivables and 50% of the amount of Eligible
Inventory, at any time outstanding minus (b) the amount of Net Cash Proceeds
from any Asset Sale applied pursuant to the covenant captioned "Limitation on
Sale of Assets" to repay or prepay such Indebtedness that results in a permanent
reduction in any revolving credit or other commitment relating thereto or the
maximum amount that may be borrowed thereunder provided that the aggregate
amount of applied Net Cash Proceeds shall not permanently reduce the principal
amount of Permitted Indebtedness under this clause (i) below $10.0 million; (ii)
Existing Indebtedness outstanding on the date of the Indenture; (iii)
Indebtedness represented by the Notes and the Indenture; (iv) Hedging
Obligations; provided, that the notional principal amount of any Interest Rate
Agreement does not significantly exceed the principal amount of the Indebtedness
to which such agreement relates; provided, further, that any Currency Agreement
does not increase the outstanding loss potential or liabilities other than as a
result of fluctuations in foreign currency exchange rates; (v) Purchase Money
Indebtedness of the Company and its Restricted Subsidiaries incurred on or after
the date of the Indenture, provided, that (A) the aggregate amount of such
Purchase Money Indebtedness (including any Permitted Company Refinancing
Indebtedness and Permitted Subsidiary Refinancing Indebtedness issued to
refinance, replace or refund such Indebtedness) incurred on or after the date of
the Indenture and outstanding at any time pursuant to this clause (v) shall not
exceed $5.0 million, and (B) in each case, such Purchase Money Indebtedness
shall not constitute more than 100% of the cost (determined in accordance with
GAAP) to the Company or such Restricted Subsidiary, as applicable, of the
property so acquired or leased; (vi) Indebtedness of the Company to any of its
Wholly-Owned Restricted Subsidiaries, and Indebtedness of any Restricted
Subsidiary of the Company to the Company or any of its Wholly-Owned Restricted
Subsidiaries (the Indebtedness incurred pursuant to this clause (vi) being
hereinafter referred to as "Intercompany Indebtedness"); provided, that, in the
case of Intercompany Indebtedness of the Company such Indebtedness shall be
unsecured and (except to a Guarantor) subordinated in all respects to the Notes;
provided, further, that an incurrence of Indebtedness shall be deemed to have
occurred upon (A) any sale or other disposition of Intercompany Indebtedness to
a Person other than the Company or any of its Wholly-Owned Restricted
Subsidiaries, (B) any sale or other disposition of Equity Interests of any
Wholly-Owned Restricted Subsidiary of the Company which holds Intercompany
Indebtedness such that such Restricted Subsidiary ceases to be a Wholly-Owned
Restricted Subsidiary after such sale or other disposition, or (C) designation
of a Restricted Subsidiary which holds Intercompany Indebtedness as an
Unrestricted Subsidiary; (vii) Permitted Company Refinancing Indebtedness;
(viii) Permitted Subsidiary Refinancing Indebtedness; (ix) Indebtedness of a
Restricted Subsidiary pursuant to a Guarantee of the Notes; (x) to the extent
that such incurrence does not result in the incurrence by the Company or any
Restricted Subsidiary of any obligation for the payment of borrowed money of
others, Indebtedness incurred solely as a result of the execution by the Company
or its Restricted Subsidiaries of letters of credit relating to workers'
compensation or self insurance, performance bonds or similar instruments;
provided, however, that the foregoing exception shall not be applicable to
Indebtedness incurred in connection with the performance by the Company or its
Restricted Subsidiaries of such bonds or instruments or payments of such letters
of credit; (xi) Acquired Indebtedness incurred by the Restricted Subsidiaries on
or after the date of the Indenture, provided, that (A) the aggregate amount of
such Acquired Indebtedness (including any Permitted Subsidiary Refinancing
Indebtedness issued to refinance, replace or refund such Indebtedness)
outstanding at any time pursuant to this clause (xi) shall not exceed $10.0
million, (B) immediately before and after giving effect to the incurrence of
such Acquired Indebtedness, no Default or Event of Default shall have occurred
and be continuing and after giving effect to the incurrence of such Acquired
Indebtedness the Company could incur at least $1.00 of additional Indebtedness
under the first paragraph of the covenant captioned "Limitation on the
Incurrence of Indebtedness and Issuance of Disqualified Stock" and (C) such
Acquired Indebtedness was not incurred in connection with or in contemplation of
the subject transaction; (xii) Indebtedness incurred by the Wholly-Owned Foreign
Subsidiaries of the Company in an aggregate principal amount not to exceed the
sum of (1) 85% of the amount of Eligible Foreign Receivables and 50% of the
amount of Eligible Foreign Inventory, at any time outstanding minus (2) the
amount of any such Indebtedness retired with Net Cash Proceeds from any Asset
Sale (any Indebtedness incurred pursuant to this clause (xii) is referred to as
the "Permitted Foreign Subsidiary Indebtedness"); and (xiii) in addition to
Indebtedness specified in clauses
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(i) through (xii) above, additional Indebtedness in an aggregate principal
amount not to exceed $5.0 million at any time outstanding.
"Permitted Investments" means (i) Investments in any assets or property to
be used in the Business of the Company or any of its Restricted Subsidiaries;
(ii) any Investments in the Company or in a Wholly-Owned Restricted Subsidiary
of the Company; (iii) any Investments in Cash Equivalents; (iv) any Investment
acquired solely in exchange for Equity Interests (other than Disqualified Stock)
of the Company; (v) without duplication of clause (iv) hereof, Investments by
the Company or any Restricted Subsidiary of the Company in a Person engaged
principally in the Business of the Company or any of its Restricted
Subsidiaries, if as a result of such Investment (a) such Person becomes a
Wholly-Owned Restricted Subsidiary of the Company or (b) 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; (vi) loans and advances by the Company or
any Restricted Subsidiary to their respective employees made in the ordinary
course of business and consistent with customary practices, which loans and
advances do not exceed in the aggregate $1.0 million at any one time
outstanding; (vii) Investments acquired by the Company or any of its Restricted
Subsidiaries (A) in exchange of any other Investment or accounts receivable held
by the Company or such Restricted Subsidiary in connection with or as a result
of a bankruptcy workout, reorganization or recapitalization of the issuer of
such Investment or accounts receivable or (B) as a result of a foreclosure by
the Company or such Restricted Subsidiary or other transfer of title with
respect to any secured Investment in default; (viii) Investments permitted under
the covenants captioned "Limitation on Sale of Assets" and "Limitation on
Sale/Leaseback Transactions"; and (ix) any Investment in an Unrestricted
Subsidiary of the Company or in an entity (except a Wholly-Owned Restricted
Subsidiary of the Company) in which the Company or any Wholly-Owned Restricted
Subsidiary of the Company has an Equity Interest together with one or more other
Persons, and which is formed after the date of the Indenture for the purpose of
engaging in the Business, provided, that, at the date any such Investment is
made and after giving effect thereto, such Investment, together with all other
such Investments by the Company and its Restricted Subsidiaries since the date
of the Indenture, does not in the aggregate exceed $15 million.
"Permitted Liens" means (i) Liens in favor of the Company; (ii)(A) Liens
securing Indebtedness of the Company in an amount not in excess of that
permitted to be incurred in accordance with clause (i) of the definition of
"Permitted Indebtedness" and (B) Liens securing Indebtedness of the Wholly-Owned
Foreign Subsidiaries of the Company which are Restricted Subsidiaries incurred
pursuant to clause (xii) of the definition of "Permitted Indebtedness;" (iii)
Liens existing on the date of the Indenture; (iv) Liens securing Indebtedness,
the proceeds of which are used to refinance secured Indebtedness of the Company
or any of its Restricted Subsidiaries, provided that (a) such Liens are on terms
at least as favorable to the Holders of the Notes as those governing the
Indebtedness being refinanced, (b) such Liens shall not extend to property other
than that encumbered to secure the Indebtedness being refinanced and (c) the
principal amount of the Indebtedness secured by such Liens is not increased; (v)
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 not created in connection with or in contemplation
of such merger or consolidation and do not extend to any property or assets
other than those of the Person merged into or consolidated with the Company or
such Restricted Subsidiary; (vi) 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 not created in connection with or in contemplation
of such acquisition and do not extend to any property or assets other than those
being acquired; (vii) Liens to secure the performance of statutory obligations,
surety or appeal bonds, performance bonds, leases or other obligations of a like
nature incurred in the ordinary course of business (other than obligations for
borrowed money); (viii) 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, if any, as shall be required in
conformity with GAAP shall have been made therefor; (ix) Liens imposed by law,
such as mechanics', carriers', warehousemen's, materialmen's, and vendors'
Liens, incurred in good faith in the ordinary course of business with respect to
amounts not yet delinquent or being contested in good faith by appropriate
proceedings if a reserve or other appropriate provisions, if any, as shall be
required by
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GAAP shall have been made therefor; (x) zoning restrictions, easements,
licenses, covenants, reservations, restrictions on the use of real property or
minor irregularities of title incident thereto that do not, in the aggregate,
materially detract from the value of the property or the assets of the Company
or impair the use of such property in the operation of the Company's business;
(xi) judgment Liens to the extent that such judgments do not cause or constitute
a Default or an Event of Default; (xii) Liens arising from Purchase Money
Indebtedness provided that each such Lien shall encumber only the assets or
property (or portions thereof) which is subject to such Purchase Money
Indebtedness and shall attach to such property within 120 days of the
acquisition or lease thereof; and (xiii) precautionary filings of any financial
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction made in connection with Capital Lease Obligations permitted to be
incurred under the covenant captioned "Limitation on the Incurrence of
Indebtedness and Issuance of Disqualified Stock," provided that such Lien does
not violate clause (xii) hereof and provided that clauses (ii), (iii) and (iv)
shall not permit Liens on Capital Stock of a Restricted Subsidiary.
"Permitted Subsidiary Refinancing Indebtedness" means Indebtedness of any
Restricted Subsidiary, the net proceeds of which are used to renew, extend,
refinance, refund or repurchase outstanding Indebtedness of such Restricted
Subsidiary, provided that (i) if the Indebtedness (including any Guarantee)
being renewed, extended, refinanced, refunded or repurchased is pari passu with
or subordinated in right of payment to such Guarantee, then such Indebtedness is
pari passu with or subordinated in right of payment to, as the case may be, such
Guarantee at least to the same extent as the Indebtedness being renewed,
extended, refinanced, refunded or repurchased, (ii) such Indebtedness is
scheduled to mature no earlier than the Indebtedness being renewed, extended,
refinanced, refunded or repurchased, and (iii) such Indebtedness has an Average
Life at the time such Indebtedness is incurred that is equal to or greater than
the Average Life of the Indebtedness being renewed, extended, refinanced,
refunded or repurchased, provided, further, that such Indebtedness (to the
extent that such Indebtedness constitutes Permitted Subsidiary Refinancing
Indebtedness) is in an aggregate principal amount (or, if such Indebtedness is
issued at a price less than the principal amount thereof, the aggregate amount
of gross proceeds therefrom is) not in excess of the aggregate principal amount
then outstanding of the Indebtedness being renewed, extended, refinanced,
refunded or repurchased (or if the Indebtedness being renewed, extended,
refinanced, refunded or repurchased was issued at a price less than the
principal amount thereof, then not in excess of the amount of liability in
respect thereof determined in accordance with GAAP) (plus the amount of
reasonable fees and expenses incurred in connection therewith); provided,
however, that a Restricted Subsidiary shall not incur refinancing Indebtedness
to renew, extend, refinance, refund or repurchase outstanding Indebtedness of
another Subsidiary.
"Person" means any individual, corporation, limited liability company,
general or limited partnership, joint venture, association, joint-stock company,
trust, estate, charitable foundation, unincorporated organization or government
or any agency or political subdivision thereof or any other entity.
"Preferred Stock" as applied to the Capital Stock of any corporation, means
Capital Stock of any class or classes (however designated), which is preferred
as to the payment of dividends, or upon any voluntary or involuntary liquidation
or dissolution of such corporation, over shares of Capital Stock of any other
class of such corporation.
"Public Equity Offering" means a bona fide underwritten sale to the public
of Common Stock of the Company pursuant to a registration statement (other than
on Form S-8 or any other form relating to securities issuable under any benefit
plan of the Company) that is declared effective by the Commission.
"Public Market" exists at any time with respect to the Capital Stock of the
Company if such Capital Stock of the Company is then (a) registered with the
Commission pursuant to Section 12(b) or 12(g) of the Exchange Act and (b) traded
either on a national securities exchange or on the NASDAQ Stock Market.
"Purchase Money Indebtedness" means any Indebtedness of a Person to any
seller or other Person incurred to finance the acquisition (including in the
case of a Capital Lease Obligation, the lease) of any real or personal tangible
property which, in the good faith judgment of the Board of Directors of the
Company, is directly related to the Business and which is incurred substantially
concurrently with such acquisition and is secured only by the assets so
financed.
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"Qualified Redemption Transaction" means a redemption of any Capital Stock
or Subordinated Indebtedness of the Company (including any Subordinated
Indebtedness of the Company accounted for as a minority interest of the Company
that is held by a Subsidiary that is a business trust or similar entity formed
for the primary purpose of issuing preferred securities the proceeds of which
are loaned to the Company or a Restricted Subsidiary) that by its terms is
convertible into Capital Stock of the Company if on the date of notice of the
call for such redemption (A) a Public Market exists in the shares of such
Capital Stock of the Company and (B) the average closing price on the Public
Market for shares of such Capital Stock of the Company for the twenty trading
days immediately preceding the date of such notice exceeds 120% of the
conversion price per share (determined by reference to the redemption price) of
such Capital Stock of the Company issuable upon conversion of such Capital Stock
or Subordinated Indebtedness of the Company called for redemption.
"Reference Period" means, with respect to any Person, the four full
consecutive fiscal quarters ended with the last full fiscal quarter for which
financial information is available immediately preceding any date upon which any
determination is to be made pursuant to the terms of the Notes or the Indenture.
"Registration Rights Agreement" means that certain Registration Rights
Agreement, dated as of the date of the Indenture, among the Company and the
Initial Purchaser, as amended or supplemented from time to time.
"Restricted Investment" means an Investment other than a Permitted
Investment. With respect to Unrestricted Subsidiaries or Restricted
Subsidiaries, the amount of Restricted Investments shall be calculated as the
greater of (i) the book value of assets contributed by the Company or a
Restricted Subsidiary or (ii) the Fair Market Value of the assets contributed by
the Company or a Restricted Subsidiary.
"Restricted Subsidiary" means (i) any Subsidiary of the Company in
existence on the date of the Indenture, (ii) any Subsidiary of the Company
(other than a Subsidiary that is also a Subsidiary of an Unrestricted
Subsidiary) organized or acquired after the date of the Indenture, unless such
Subsidiary shall have been designated as an Unrestricted Subsidiary by
resolution of the Board of Directors of the Company as provided in and in
compliance with the definition of "Unrestricted Subsidiary" and (iii) any
Unrestricted Subsidiary which is designated as a Restricted Subsidiary by the
Board of Directors of the Company as provided in and in compliance with the
definition of "Unrestricted Subsidiary." Any Indebtedness of a Person existing
at the time such Person becomes a Restricted Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be incurred by such
Restricted Subsidiary at the time it becomes a Restricted Subsidiary.
"Sale/Leaseback Transaction" means with respect to the Company or any of
its Restricted Subsidiaries, any arrangement with any Person providing for the
leasing by the Company or any of its Restricted Subsidiaries of any property
acquired or placed into service more than 180 days prior to such arrangement,
whereby such property has been or is to be sold or transferred by the Company or
any of its Restricted Subsidiaries to such Person.
"Senior Indebtedness" means any Indebtedness of the Company (whether
outstanding on the date of the Indenture or thereafter incurred), unless such
Indebtedness is contractually subordinate or junior in right of payment of
principal, premium and interest to the Notes.
"Senior Indebtedness of a Guarantor" means any Indebtedness of such
Guarantor (whether outstanding on the date of the Indenture or thereafter
incurred), unless such Indebtedness is contractually subordinate or junior in
right of payment of principal, premium and interest to the Guarantees.
"Stated Maturity" means, when used with respect to any Note or any
installment of interest thereon, the date specified in such Note as the fixed
date on which the principal of such Note or such installment of interest is due
and payable, and when used with respect to any other Indebtedness, means the
date specified in the instrument governing such Indebtedness as the fixed date
on which the principal of such Indebtedness, or any installment of interest
thereon, is due and payable, 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.
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"Subordinated Indebtedness of a Guarantor" means any Indebtedness of such
Guarantor (whether outstanding on the date of the Indenture or thereafter
incurred) which is contractually subordinate or junior in right of payment of
principal, premium and interest to the Guarantees.
"Subordinated Indebtedness of the Company" means any Indebtedness of the
Company (whether outstanding on the date of the Indenture or thereafter
incurred) which is contractually subordinate or junior in right of payment of
principal, premium and interest to the Notes.
"Subsidiary" means, with respect to any Person (i) any corporation,
association or other business entity of which more than 50% of the total general
voting power of shares of Capital Stock entitled under ordinary circumstances
(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
Persons or one or more Subsidiaries of such Person or any combination thereof.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be or continue to be designated an Unrestricted
Subsidiary by the Board of the Company in the manner provided below and (ii) any
Subsidiary of any Unrestricted Subsidiary. The Board of Directors of the Company
may designate any Subsidiary of the Company (including any newly acquired or
newly formed Subsidiary) to be an Unrestricted Subsidiary of the Company by
resolution of the Board of Directors, provided that, (a) immediately after
giving effect to such designation, no Default or Event of Default shall have
occurred and be continuing, (b) any such designation shall be deemed, at the
election of the Company at the time of such designation, to be either (but not
both) (x) the making of a Restricted Payment at the time of such designation in
an amount equal to the Investment in such Subsidiary subject to the restrictions
contained in the covenant captioned "Limitation on Restricted Payments" or (y)
the making of an Asset Sale at the time of such designation in an amount equal
to the Investment in such Subsidiary subject to the restrictions contained in
the covenant captioned "Limitation on Asset Sales", and (c) such Subsidiary or
any of its Subsidiaries does not own any Capital Stock or Indebtedness of, or
own or hold any Lien on any property of, the Company or any other Subsidiary of
the Company that is not a Subsidiary of the Subsidiary to be so designated. The
Company shall be deemed to make an Investment in an amount equal to the greater
of the book value (as determined in accordance with GAAP) and the Fair Market
Value of the net assets of any Restricted Subsidiary (or, if the Company has not
theretofore made an Investment in such Restricted Subsidiary, in an amount equal
to the Investments being made), at the time that such Restricted Subsidiary is
designated an Unrestricted Subsidiary, and any property transferred to an
Unrestricted Subsidiary from the Company shall be deemed an Investment valued at
an amount equal to the greater of its book value (as determined in accordance
with GAAP) and its Fair Market Value at the time of such transfer. A Person may
be designated as an Unrestricted Subsidiary only if and for so long as such
Person (i) has no Indebtedness other than Non-Recourse Indebtedness; (ii) is a
Person with respect to which neither the Company nor any of its Restricted
Subsidiaries has any direct or indirect obligation (a) to subscribe for
additional Equity Interests or (b) to make any payment to maintain or preserve
such Person's financial condition or to cause such Person to achieve any
specified levels of operating results; and (iii) has not guaranteed or otherwise
directly or indirectly provided credit support for any Indebtedness of the
Company or any of its Restricted Subsidiaries. Any Unrestricted Subsidiary of
the Company may be designated as a Restricted Subsidiary of the Company by
resolution of the Board of Directors of the Company; provided that, immediately
after giving effect to such designation, no Default or Event of Default shall
have occurred and be continuing and the Company could incur at least $1.00 of
additional Indebtedness under the first paragraph of the covenant captioned
"Limitation on the Incurrence of Indebtedness and Issuance of Disqualified
Stock." The Company shall evidence any such designation to the Trustee by filing
with the Trustee within 45 days of such designation a copy of the resolution
giving effect to such designation and an Officers' Certificate certifying that
such designation has been made and stating that such designation complies with
the foregoing provisions.
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances (without regard to the occurrence of any contingency)
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to elect at least a majority of the board of directors, managers, or trustees of
any Person or, with respect to a partnership (whether general or limited), any
general partner interest in such partnership.
"Wholly-Owned Foreign Subsidiary" shall mean, as to any Person, any
Wholly-Owned Restricted Subsidiary of such Person which is a Foreign Subsidiary.
"Wholly-Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person 100% of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall be
at the time beneficially owned by such Person either directly or indirectly
through Wholly-Owned Subsidiaries.
"Wholly-Owned Subsidiary" of any Person means a Subsidiary of such Person
100% of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall be at the time beneficially
owned by such Person either directly or indirectly through Wholly-Owned
Subsidiaries.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth in the next paragraph, the Notes will initially be
issued in the form of one or more Global Notes (the "Global Notes"). The Global
Notes will be deposited with, or on behalf of, the Depositary and registered in
the name of Cede & Co., as nominee of the Depositary (such nominee being
referred to herein as the "Global Note Holder").
Notes that are issued as described below under "-- Certificated
Securities," will be issued in registered form (the "Certificated Securities").
Upon the transfer of Certificated Securities, such Certificated Securities may,
unless the Global Notes have previously been exchanged for Certificated
Securities, be exchanged for an interest in a Global Note representing the
principal amount of Notes being transferred.
The Depositary is a limited-purpose trust company which was created to hold
securities for its participating organizations (collectively, the "Participants"
or the "Depositary's Participants") and to facilitate the clearance and
settlement of transactions in such securities between Participants through
electronic book-entry changes in accounts of its Participants. The Depositary's
Participants include securities brokers and dealers (including the Initial
Purchaser), banks and trust companies, clearing corporations and certain other
organizations. Access to the Depositary's system is also available to other
entities such as banks, brokers, dealers and trust companies (collectively, the
"Indirect Participants" or the "Depositary's Indirect Participants") that clear
through or maintain a custodial relationship with a Participant, either directly
or indirectly. Persons who are not Participants may beneficially own securities
held by or on behalf of the Depositary only through the Depositary's
Participants or the Depositary's Indirect Participants.
The Company expects that pursuant to procedures established by the
Depositary (i) upon deposit of the Global Notes, the Depositary will credit the
accounts of Participants designated by the Initial Purchaser with portions of
the principal amount of the Global Notes and (ii) ownership of the Notes
evidenced by the Global Notes will be shown on, and the transfer of ownership
thereof will be effected only through, records maintained by the Depositary
(with respect to the interests of the Depositary's Participants), the
Depositary's Participants and the Depositary's Indirect Participants.
Prospective purchasers are advised that 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 Notes evidenced by the Global
Notes will be limited to such extent. For certain other restrictions on the
transferability of the Notes, see "Notice to Investors."
So long as the Global Note Holder is the registered owner of any Notes, the
Global Note Holder will be considered the sole owner or holder of such Notes
outstanding under the Indenture. Beneficial owners of Notes evidenced by the
Global Note will not be considered the owners or Holders thereof under the
Indenture for any purpose, including with respect to the giving of any
directions, instructions or approvals to the Trustee thereunder. The ability of
a Person having a beneficial interest in Notes represented by a Global Note to
pledge such interest to Persons or entities that do not participate in the
Depositary's system or to otherwise take actions in respect of such interest,
may be affected by the lack of a physical certificate evidencing such interest.
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Neither the Company nor the Trustee will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of Notes by the Depositary, or for maintaining, supervising or reviewing any
records of the Depositary relating to such Notes.
Payments in respect of the principal of, premium, if any, interest and
Liquidated Damages, if any, on any Notes registered in the name of a Global Note
Holder on the applicable record date will be payable to or at the direction of
such Global Note Holder in its capacity as the registered holder under the
Indenture. Under the terms of the Indenture, the Company and the Trustee may
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 nor
the Trustee has or will have any responsibility or liability for the payment of
such amounts to beneficial owners of Notes (including principal, premium, if
any, interest and Liquidated Damages, if any).
The Company believes, however, that it is currently the policy of the
Depositary to immediately credit the accounts of the relevant Participants with
such payment, in amounts proportionate to their respective holdings in principal
amount of beneficial interests in the relevant security as shown on the records
of the Depositary. Payments by the Depositary's Participants and the
Depositary's Indirect Participants to the beneficial owners of Notes will be
governed by standing instructions and customary practice and will be the
responsibility of the Depositary's Participants or the Depositary's Indirect
Participants.
Neither the Company nor the Trustee shall be liable for any delay by the
Depositary in identifying the beneficial owners of the related Notes and each
such Person may conclusively rely on, and shall be protected in relying on,
instructions from the Depositary for all purposes (including with respect to the
registration and delivery, and the respective principal amounts, of the Notes to
be issued).
CERTIFICATED SECURITIES
Notes originally purchased by or transferred to Accredited Investors who
are not QIBs will be issued in the form of Certificated Securities. In addition,
subject to certain conditions, any Person having a beneficial interest in a
Global Note may, upon request to the Company or the Trustee, exchange such
beneficial interest for Notes in the form of Certificated Securities. Upon any
such issuance, the Trustee is required to register such Notes in the name of,
and cause the same to be delivered to, such Person or Persons. All such
Certificated Securities would be subject to the legend requirements described
herein under "Notice to Investors." In addition, if (i) the Company notifies the
Trustee in writing that the Depositary is no longer willing or able to act as a
depositary and the Company is unable to appoint a qualified successor within 90
days or (ii) the Company, at its option, notifies the Trustee in writing that it
elects to cause the issuance of Notes in the form of Certificated Securities
under the Indenture, then, upon surrender by the relevant Global Note Holder of
its Global Note, Notes in such form will be issued to each Person that the
Depositary identifies as the beneficial owner of the related Notes.
SAME-DAY SETTLEMENT AND PAYMENT
The Indenture requires that payments in respect of the 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. The Old Notes are 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 the Notes will therefore be required by the
Depositary to be settled in immediately available funds. The Company expects
that secondary trading in the Certificated Notes also will be settled in
immediately available funds.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
The Company has agreed pursuant to the Registration Rights Agreement to use
its best efforts to cause to be filed with the Commission the Exchange Offer
Registration Statement on the appropriate form under the Securities Act with
respect to an offer to exchange the Old Notes for Exchange Notes. The Exchange
Notes will be substantially identical to the Old Notes, except that the Exchange
Notes will not contain terms with
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respect to transfer restrictions (other than those that might be imposed by
state securities laws) or provide for the payment of Liquidated Damages. In the
event that (i) the Exchange Offer registration is not available to any Holder or
may not be consummated because, in either case, it would violate applicable
securities laws or because the applicable interpretations of the staff of the
Commission would not permit the Company to effect the Exchange Offer or (ii) the
Exchange Offer is not for any other reason consummated within 180 days of the
Closing Date, the Company will use its best efforts to cause to be filed with
the Commission a Shelf Registration Statement.
Based on no-action letters issued by the staff of the Commission, the
Exchange Notes would, in general, be freely transferable after the Exchange
Offer without further registration under the Securities Act; provided, that
broker-dealers receiving Exchange Notes in the Exchange Offer will have a
prospectus delivery requirement with respect to resales of Exchange Notes. The
staff of the Commission has taken the position that such broker-dealers may
fulfill their prospectus delivery requirements with respect to the Exchange
Notes (other than a resale of an unsold allotment from the original sale of
Notes) with the prospectus contained in the Exchange Offer Registration
Statement. The Company has agreed, for a period of 180 days after consummation
of the Exchange Offer, to make available a prospectus meeting the requirements
of the Securities Act to any broker-dealer for use in connection with any resale
of any Exchange Notes acquired.
Each Holder (other than certain specified holders) who wishes to exchange
such Old Notes for Exchange Notes in the Exchange Offer will be required to make
certain representations, including representations that (i) any Exchange Notes
to be received by it will be acquired in the ordinary course of its business,
(ii) at the time of the commencement of the Exchange Offer, it had no
arrangement with any Person to participate in the distribution (within the
meaning of the Securities Act) of the Exchange Notes and (iii) it is not an
"affiliate," as defined in Rule 405 of the Securities Act, of the Company.
The Registration Rights Agreement provides that, to the extent not
prohibited by any applicable law or applicable interpretation of the staff of
the Commission, (i) the Company will use its best efforts to cause to be filed
with the Commission an Exchange Offer Registration Statement on or prior to 60
days after the Closing Date, (ii) the Company will use its best efforts to have
such Exchange Offer Registration Statement declared effective under the
Securities Act by the Commission on or prior to 120 days after the Closing Date
and (iii) the Company shall have commenced the Exchange Offer and shall use its
best efforts to cause the Exchange Offer to be consummated on or prior to 45
days after the date on which the Exchange Offer Registration Statement was
declared effective under the Securities Act by the Commission (the
"Effectiveness Target Date") and (iv) if obligated to cause to be filed with the
Commission the Shelf Registration Statement, the Company will (a) cause to be
filed with the Commission a Shelf Registration Statement on or prior to 60 days
after such filing obligation arises, (b) use its best efforts to cause the Shelf
Registration to be declared effective by the Commission on or prior to 120 days
after such obligation arises and (c) use its best efforts to cause the Shelf
Registration Statement to remain effective until the earlier of (x) two years
after the Issue Date and (y) the consummation of the Exchange Offer; provided,
that if the Company has not consummated the Exchange Offer within 180 days of
the Closing Date, then the Company will cause to be filed with the Commission a
Shelf Registration Statement on or prior to 60 days thereafter. The Company
shall use its reasonable best efforts to keep such Shelf Registration Statement
continuously effective, supplemented and amended until the second anniversary of
the Closing Date or such shorter period that will terminate when all the
securities covered by the Shelf Registration Statement have been sold pursuant
to the Shelf Registration Statement. If (1) the Company fails to file any of the
Registration Statements required by the Registration Rights Agreement on or
prior to the date specified for such filing, (2) any of such Registration
Statements are not declared effective by the Commission on or prior to
Effectiveness Target Date, (3) the Company fails to consummate the Exchange
Offer on or prior to 45 days after the Effectiveness Target Date with respect to
the Exchange Offer Registration Statement, or (4) the Shelf Registration
Statement or the Exchange Offer Registration Statement is declared effective but
thereafter ceases to be effective or usable during the periods specified in the
Registration Rights Agreement (each such event referred to in clauses (1)
through (4) above a "Registration Default"), then the Company will be required
to pay Liquidated Damages to each Holder affected by such Registration Default
on each interest payment date. Liquidated Damages shall accrue from and after
the date of each Registration Default, and shall continue to
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accrue thereafter until such Registration Default has been cured or waived as
set forth in the Registration Rights Agreement, at a rate equal to 0.25% per
annum of the principal amount of Notes during (x) in the case of a Registration
Default under clause (1) above, the first 30-day period, and (y) in the case of
any other Registration Default other than under clause (1) above, the first
90-day period, in each case immediately following the occurrence of such
Registration Default, which rate shall increase by an additional 0.25% per annum
during each subsequent 30-day period or 90-day period, as the case may be, up to
a maximum rate equal to 1% per annum. The Exchange Offer Registration Statement
was filed with the Commission on June 17, 1997 and it was declared effective on
, 1997.
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company is authorized to issue up to 50,000,000 shares of Common Stock,
no par value, 21,443,477 shares of which were issued and outstanding at June 13,
1997. In addition, the Company is authorized to issue up to 500,000 shares of
preferred stock, no par value. 345,000 shares of preferred stock have been
divided into a series, 322,500 of which underlie the Company's Depositary Shares
(the "Depositary Shares"). Each of the Company's Depositary Shares represents
ownership of 1/4 of a share of the Company's $6.75 Convertible Exchangeable
Preferred Stock (the "Convertible Preferred Stock").
COMPANY COMMON STOCK
Holders of Common Stock are entitled to one vote per share on all other
matters submitted to a vote of shareholders. Such holders do not have the right
to cumulate their votes in the election of directors. Holders of Common Stock
have no redemption or conversion rights and no preemptive or other rights to
subscribe for securities of the Company. In the event of a liquidation,
dissolution or winding up of the Company, holders of Common Stock are entitled
to share equally and ratably in all of the assets remaining, if any, after
satisfaction of all debts and liabilities of the Company, and of the
preferential rights of any series of preferred stock then outstanding. The
outstanding shares of Common Stock are validly issued, fully paid and
nonassessable. Holders of Common Stock are entitled to receive dividends when,
as and if declared by the Company's Board of Directors out of funds legally
available therefor. Society National Bank is transfer agent and registrar for
the Common Stock.
COMPANY PREFERRED STOCK
The Company is authorized to issue, without any action on the part of its
shareholders, 500,000 shares of preferred stock, no par value per share. The
Board of Directors has the authority to divide the preferred stock into one or
more series and to fix and determine the relative rights and preference of the
shares of each such series, including dividend rates, terms of redemption,
sinking funds, the amount payable in the event of voluntary liquidation,
dissolution or winding up of the affairs of the Company, conversion rights and
voting powers.
The Company has authorized the issuance of a series, consisting of 345,000
shares of Convertible Preferred Stock in connection with the issuance and sale
by public offering of the Depositary Shares in November 1993, prior to which no
shares of preferred stock were outstanding. Only 322,500 shares of Convertible
Preferred Stock are issued and outstanding. The shares of Convertible Preferred
Stock underlying the Depositary Shares have been deposited with Society National
Bank as depositary. Depositary receipts issued by the depositary evidence the
Depositary Shares. There is no public trading market for the Convertible
Preferred Stock except as represented by the Depositary Shares. The following is
a summary description of the Convertible Preferred Stock.
Dividend Rights
Holders of the Convertible Preferred Stock are entitled to receive when and
if declared by the Company's Board of Directors, out of the funds of the Company
legally available therefor, an annual cash dividend of
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$6.75 per share, payable quarterly in each year. Dividends on the Convertible
Preferred Stock are cumulative. Unless full cumulative dividends on all
outstanding shares of the Convertible Preferred Stock have been paid, no
dividends may be paid, declared or set aside for payment, or any other
distributions made on the Common Stock or on any other stock of the Company
ranking junior to the Convertible Preferred Stock as to dividends.
Conversion Rights; Redemption
Each share of Convertible Preferred Stock is convertible, at any time, at
the option of the holder thereof, into Common Stock, at a conversion rate of
10.96 shares of Common Stock for each share of Convertible Preferred Stock
(equivalent to 2.74 shares of Common Stock for each Depositary Share) and at an
initial conversion price of $9.125 per share. The conversion price is subject to
adjustment upon certain events. In addition, the Convertible Preferred Stock has
special conversion rights that become effective upon the occurrence of certain
types of significant transactions affecting ownership or control of the Company
or the market for the Common Stock. In such situations, the special conversion
right would, for a limited period, reduce the then prevailing conversion price
to the market value of the Common Stock, subject to a minimum conversion price
of $5.17 per share of Common Stock (subject to certain adjustments). Such
provisions may in certain circumstances discourage persons from making a tender
offer or a bid to acquire the Company. The Depositary Shares, as such, are not
convertible into Common Stock. Nevertheless, the depositary receipts may be
surrendered by holders to the depositary to cause conversion of the Convertible
Preferred Stock represented by the Depositary Shares into whole shares of Common
Stock.
The Convertible Preferred Stock may be redeemed for cash, in whole or in
part, at the option of the Company at any time or from time to time, at
redemption prices beginning at $105.00 per share on or after December 31, 1996
and reducing to $100.00 on or after December 31, 2001, in each case, with an
amount equal to all dividends (whether or not declared) accrued and unpaid to
the date fixed for redemption.
Voting Rights
Except as required by law or in certain instances with respect to (i) the
election of directors, where dividends on the Preferred Convertible Stock are in
arrears; (ii) the creation, issuance or increase in the number of authorized
shares of any class or classes or series of stock ranking senior to the
Convertible Preferred Stock; or (iii) the alteration, change or repeal any of
the powers, rights or preferences of the holders of the Convertible Preferred
Stock so as to affect adversely such powers, preferences or rights, holders of
Convertible Preferred Stock have no voting rights. The limited voting rights of
the holders of Convertible Preferred Stock could, under certain circumstances,
operate to restrict the flexibility the Company would otherwise have in
connection with any future issuances of equity securities or changes to its
capital structure.
COMPANY OPTIONS AND WARRANTS
At June 13, 1997, warrants for the purchase of 833,375 shares of Common
Stock and options covering an aggregate of 1,529,118 shares of Company Common
Stock were outstanding. The warrants have exercise prices of $5.00 per share and
expiration dates ranging from June 1997 to July 2002. The options have exercise
prices ranging from $3.75 per share to $9.75 per share and expiration dates
ranging from October 1997 to May 2007.
REGISTRATION RIGHTS
Certain warrant holders of the Company presently possess registration
rights with respect to 801,750 shares of Common Stock issuable upon exercise of
warrants. In addition, certain stockholders of the Company have registration
rights granted in connection with the Company's acquisitions. See "The
Company -- Acquisitions."
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion of the material United Stated Federal income tax
consequences of the Exchange Offer is for general information only. It is based
on the Internal Revenue Code of 1986, as amended to the date hereof (the
"Code"), existing and proposed Treasury regulations, and judicial and
administrative determinations, all of which are subject to change at any time,
possibly on a retroactive basis. The following relates only to the Old Notes,
and the Exchange Notes received therefor, that are held as "capital assets"
within the meaning of Section 1221 of the Code. It does not discuss state, local
or foreign tax consequences, nor, except as otherwise noted, does it discuss tax
consequences to categories of holders that are subject to special rules, such as
foreign persons, tax-exempt organizations, insurance companies, banks and
dealers in stocks and securities. Tax consequences may vary depending on the
particular status of an investor. No rulings will be sought from the Internal
Revenue Service ("IRS") with respect to the Federal income tax consequences of
the Exchange Offer.
THIS SECTION DOES NOT PURPORT TO DEAL WITH ALL ASPECTS OF FEDERAL INCOME
TAXATION THAT MAY BE RELEVANT TO AN INVESTOR'S DECISION TO EXCHANGE THE NOTES.
EACH INVESTOR SHOULD CONSULT WITH ITS OWN TAX ADVISOR CONCERNING THE APPLICATION
OF THE FEDERAL INCOME TAX LAWS AND OTHER TAX LAWS TO ITS PARTICULAR SITUATION
BEFORE DETERMINING WHETHER TO EXCHANGE THE NOTES.
PAYMENTS OF INTEREST AND SPECIAL INTEREST
In general, interest on a Note will be taxable to a beneficial owner who or
which is (i) a citizen or resident of the United States, (ii) a corporation
created or organized under the laws of the United States or any State thereof
(including the District of Columbia), (iii) a person otherwise subject to United
States Federal income taxation on its worldwide income (a "U.S. Holder") as
ordinary income at the time it is received or accrued, depending on the U.S.
Holder's method of accounting for tax purposes.
The Company is obligated to pay Special Interest to the U.S. Holders of Old
Notes under certain circumstances described under "Description of
Notes -- Registration Rights Liquidated Damages." It is believed that any such
payments should be taxable to U.S. Holders at the time it is received or
accrued, depending on the U.S. Holder's method of accounting for tax purposes.
OPTIONAL REDEMPTION OR REPURCHASE
The Notes are subject to redemption at the option of the Company, on or
after June 1, 2002, at the applicable redemption price plus any accrued, unpaid
interest and Liquidated Damages, if any, and to purchase at the option of each
holder thereof upon a Change of Control for 101% of the principal amount plus
any accrued, unpaid interest and Liquidated Damages, if any. Furthermore, under
certain circumstances, the Company may become obligated to purchase all or a
portion of the Notes at 101% of the principal amount plus any accrued, unpaid
interest and Liquidated Damages, if any, with the proceeds of certain Asset
Sales. See "Description of Notes." Upon the optional redemption or purchase of a
Note, it is expected that the difference between the amount received by such
holder and the holder's adjusted tax basis in the Note will be taxable as
capital gain or loss, if the Note is held as a capital asset (subject to the
market discount rules discussed below).
PAYMENTS OF PRINCIPAL; DISPOSITIONS
Subject to the discussion of the Exchange Offer below, upon the sale,
exchange, redemption, retirement at maturity or other disposition of a Note, a
U.S. Holder will generally recognize taxable gain or loss equal to the
difference between the sum of cash plus the fair market value of all other
property received on such disposition (except to the extent such cash or
property is attributable to accrued but unpaid interest or market discount,
which will be taxable as ordinary income) and such U.S. Holder's adjusted tax
basis in the Note. A U.S. Holder's adjusted tax basis in a Note generally will
equal the cost of the Note to such U.S. Holder (increased for accrued original
issue discount, if any), less any principal payment received by such U.S.
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Holder. Gain or loss realized by a U.S. Holder on the sale, redemption or other
disposition of a Note or an Exchange Note generally will be long-term capital
gain or loss if, at the time of the disposition, the Note has been held for more
than one year.
AMORTIZABLE BOND PREMIUM
If a U.S. Holder pays an amount (exclusive of accrued and unpaid interest
through the acquisition date) in excess of the Note's stated redemption price at
maturity at the time of its acquisition ("Bond Premium"), the U.S. Holder will
not be required to include original issue discount, if any, in his income and
may elect to amortize Bond Premium. If Bond Premium is amortized, the amount of
interest that must be included in the U.S. Holder's income from each period
ending on an interest payment date or stated maturity, as the case may be, will
be reduced by the portion of the Bond Premium allocable to such period based on
the Note's yield to maturity and the U.S. Holder's adjusted basis in the Notes
will be reduced accordingly. This election applies to all Notes acquired by the
U.S. Holder during the year of election and thereafter.
ACQUISITION PREMIUM
If a U.S. Holder pays an amount (exclusive of accrued and unpaid interest
through the acquisition date) in excess of the Note's adjusted issue price at
the time of its acquisition ("Acquisition Premium"), but less than its stated
redemption price at maturity, the U.S. Holder may be entitled to a reduction, in
the daily portion of any original issue discount includable in such U.S.
Holder's income, for such Acquisition Premium. The reduction will be an amount
equal to the daily portion of original issue discount for that day multiplied by
a fraction, the numerator of which is equal to the Acquisition Premium, and the
denominator of which is the excess of the stated redemption price at maturity
over the adjusted issue price of the Note on the date of purchase.
MARKET DISCOUNT
A U.S. Holder, other than an initial Holder, will be treated as holding a
Note at a market discount (a "Market Discount Note") if the amount for which
such U.S. Holder purchased the Note is less than the Note's stated redemption
price at maturity, or, in the case of a Note issued with original issue
discount, the "revised issue price," as defined in Section 1278 of the Code,
subject to a de minimis rule.
In general, any partial payment of principal on, or gain recognized on the
maturity, optional redemption or repurchase, or disposition of, a Market
Discount Note will be treated as ordinary interest income to the extent that
such gain does not exceed the accrued market discount on such Note.
Alternatively, a U.S. Holder of a Market Discount Note may elect to include
market discount in income currently over the life of the Market Discount Note.
Such an election applies to all debt instruments with market discount acquired
by the electing U.S. Holder on or after the first day of the first taxable year
to which the election applies and may not be revoked without the consent of the
IRS.
Market discount accrues on a straight-line basis, unless the U.S. Holder
elects to accrue such discount on a constant yield to maturity basis. Such an
election is applicable only to the Note with respect to which it is made and is
irrevocable. A U.S. Holder of a Market Discount Note that does not elect to
include market discount in income currently generally will be required to defer
deductions for interest on borrowings allocable to such Note, in an amount not
exceeding the accrued market discount on such Note, until the maturity or
disposition of such Note. If such Note is disposed of in a non-taxable
transaction (other than a nonrecognition transaction described in Section
1276(c) of the Code) accrued market discount will be includable as ordinary
income to the U.S. Holder as if such U.S. Holder had sold the Note at its then
fair market value.
THE EXCHANGE OFFER
Pursuant to recently-issued Treasury regulations, the exchange of Old Notes
for Exchange Notes pursuant to the Exchange Offer should not constitute a
significant modification of the terms of the Old Notes and, accordingly, such
exchange should be treated as a "non-event" for Federal income tax purposes.
Therefore, such exchange should have no Federal income tax consequences to
Holders of Old Notes, and each
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Holder of Old Notes would continue to be required to include interest on the Old
Notes in its gross income in accordance with its method of accounting for
Federal income tax purposes.
NON-U.S. HOLDERS
A non-U.S. Holder will not be subject to withholding of United States
Federal income taxes on payments of principal, premium (if any) or interest
(including original issue discount, if any) on a Note, provided in the case of
interest that (i) the beneficial owner does not actually or constructively own
10% or more of the total combined voting power of all classes of stock of the
Company entitled to vote, (ii) the beneficial owner is not a controlled foreign
corporation that is related to the Company through stock ownership, (iii) the
beneficial owner is not a bank which receives interest on an extension of credit
made pursuant to a loan agreement entered into in the ordinary course of its
trade or business, (iv) the beneficial owner provides the ownership statement
described below, and (v) such interest is not contingent interest under Section
871(h)(4)(A) of the Code and the regulations thereunder. To qualify for the
exemption from taxation, the last United States payor in the chain of payment
prior to payment to a non-U.S. Holder (the "Withholding Agent") must have
received in the year in which a payment of interest or principal occurs, or in
either of the two preceding calendar years, a statement that (i) is signed by
the beneficial owner of the Note under penalties of perjury, (ii) certifies that
such owner is not a U.S. Holder and (iii) provides the name and address of the
beneficial owner. The statement may be made on an IRS Form W-8 or a
substantially similar form, and the beneficial owner must inform the Withholding
Agent of any change in the information on the statement within 30-days of such
change. If a Note is held through a securities clearing organization or certain
other financial institutions, the organization or institution may provide a
signed statement under penalties of perjury to the Withholding Agent. In such
case, however, the signed statement must be accompanied by a copy of the IRS
Form W-8 or the substitute form provided by the beneficial owner to the
organization or institution. The Treasury Department is considering
implementation of further certification requirements aimed at determining
whether the issuer of a debt obligation is related to holders thereof.
A non-U.S. Holder will not be subject to withholding of United States
Federal income taxes on any amount which constitutes capital gain upon
retirement or disposition of a Note.
If a non-U.S. Holder cannot satisfy the requirements of the "portfolio
interest" exception described above, payments of premium and interest (including
original issue discount) made to such non-U.S. Holder will be subject to a 30%
withholding tax unless the beneficial owner of the Note provides the Company or
its paying agent, as the case may be, with a properly executed (1) IRS Form 1001
(or successor form) claiming an exemption from withholding under the benefit of
a tax treaty or (2) IRS Form 4224 (or successor form) stating that interest paid
on the Note is not subject to withholding tax because it is effectively
connected with the beneficial owner's conduct of a trade or business in the
United States.
If a non-U.S. Holder is engaged in a trade or business in the United States
and interest (including original issue discount) on the Note is effectively
connected with the conduct of such trade or business, the non-U.S. Holder,
although exempt from the withholding tax discussed above, will be subject to
United States federal income tax on such interest and original issue discount on
a net income basis in the same manner as if it were a U.S. Holder. In addition,
if such nonU.S. Holder is a foreign corporation, it may be subject to a branch
profits tax equal to 30% (or lower treaty rate) of its effectively connected
earnings and profits for the taxable year, including such premium, if any, and
interest (including original issue discount) on a note or Exchange Note.
Any gain realized upon the sale, exchange, retirement or other disposition
of a Note generally will not be subject to United States federal income tax
unless (i) such gain is effectively connected with a trade or business in the
United States of the non-U.S. Holder, or (ii) in the case of a non-U.S. Holder
who is an individual, such individual is present in the United States for 183
days or more in the taxable year of such sale, exchange, retirement or other
disposition, and certain other conditions are met.
The Notes will not be includible in the estate of a non-U.S. Holder
provided that such individual does not actually or constructively own 10% or
more of the total combined voting power of all classes of stock of the company
entitled to vote and provided that at the time of such individual's death,
payments in respect of the
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Notes would not have been effectively connected with the conduct of such
individual of a trade or business in the United States.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Backup withholding of United States Federal income tax at a rate of 31% may
apply to payments of principal, interest, original issue discount or premium
made in respect of the Notes to registered owners who are not "exempt
recipients" and who fail to provide certain identifying information (such as the
registered owner's taxpayer identification number) in the required manner.
Generally, individuals are not exempt recipients, whereas corporations and
certain other entities generally are exempt recipients. Payments made in respect
of the Notes to a U.S. Holder must be reported to the IRS, unless the U.S.
Holder is an exempt recipient or establishes and exemption. Compliance with the
identification procedures described in the preceding section would establish an
exemption from backup withholding and information reporting for those non-U.S.
Holders who are not exempt recipients and the payor does not have actual
knowledge that the beneficial owner is a United States person.
In addition, backup withholding and information reporting will not apply if
payments of the principal, interest, original issue discount or premium on a
Note are paid or collected by a foreign office of a custodian, nominee or other
foreign agent on behalf of the beneficial owner of such Note, or if a foreign
office of a broker pays the proceeds of the sale of a Note to the owner thereof.
If, however, such nominee, custodian, agent or broker is a United States person,
a controlled foreign corporation or a foreign person that derives 50% or more of
its gross income from the conduct of a trade or business in the United States,
such payments will not be subject to backup withholding but will be subject to
information reporting, unless (1) such custodian, nominee, agent or broker has
documentary evidence in its records that the beneficial owner is not a United
States person and certain other conditions are met or (2) the beneficial owner
establishes an exemption. Temporary Treasury regulations provide that the
Treasury is considering whether backup withholding will apply with respect to
such payments of principal, interest or the proceeds of a sale that are not
subject to backup withholding under the current regulations.
Payments of principal, interest, original issue discount and premium on a
Note paid to the beneficial owner of a Note by a United States office of a
custodian, nominee or agent, or the payment by the United States office of a
broker of the proceeds of sale of a Note will be subject to both backup
withholding and information reporting unless the beneficial owner provides the
statement referred to above and the payer does not have actual knowledge that
the beneficial owner is a United States person, or the beneficial owner
otherwise establishes as exemption.
Any amounts withheld under the backup withholding rules from a payment to a
beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States Federal income tax provided the required
information is furnished to the IRS.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Old Notes where such Old Notes were acquired as a result of
market-making activities or other trading activities. The Company has agreed
that it will make this Prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with any such resale for a period of 180
days after consummation of the Exchange Offer, or such shorter period as will
terminate when all Old Notes acquired by broker-dealers for their own accounts
as a result of market-making activities or other trading activities have been
exchanged for Exchange Notes and resold by such broker-dealers. A broker-dealer
that delivers such a prospectus to purchasers in connection with such resales
will be subject to certain of the civil liability provisions under the
Securities Act and will be bound by the provisions of the Registration Rights
Agreement (including certain indemnification rights and obligations).
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<PAGE> 98
The Company will not receive any proceeds from any sale of Exchange Notes
by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to purchasers or to or through brokers or dealers who may
receive compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such Exchange Notes. Any
broker-dealer that resells Exchange Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. For a period of 180 days after consummation of the Exchange Offer, or such
shorter period as will terminate when all Old Notes acquired by broker-dealers
for their own accounts as a result of market-making activities or other trading
activities have been exchanged for Exchange Notes and resold by such
broker-dealers, the Company will promptly send additional copies of this
Prospectus and any amendment or supplement to this Prospectus to any
broker-dealer that requests such documents in the Letter of Transmittal. The
Company has agreed in the Registration Rights Agreement to indemnify such
broker-dealers against certain liabilities, including liabilities under the
Securities Act.
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<PAGE> 99
TRANSFER RESTRICTIONS ON OLD NOTES
OFFERS AND SALES BY THE INITIAL PURCHASERS
The Old Notes were not registered under the Securities Act and may not be
offered or sold in the United States or to, or for the account or benefit of,
U.S. persons except in accordance with an applicable exemption from the
registration requirements thereof. Accordingly, the Old Notes were offered and
sold only (i) in the United States to QIBs under Rule 144A under the Securities
Act and other Institutional Accredited Investors who, prior to their purchase of
Old Notes, delivered to the Initial Purchasers a letter containing certain
representations and agreements, in a private sale exempt from the registration
requirements of the Securities Act, and (ii) outside the United States to
non-U.S. persons ("foreign purchasers") in reliance upon Regulation S under the
Securities Act.
INVESTOR REPRESENTATIONS AND RESTRICTIONS ON RESALE
Each purchaser of the Old Notes was deemed to have represented and agreed
as follows (terms used in this paragraph that are defined in Rule 144A are used
herein as defined therein):
(1) The purchaser (A) is a Qualified Institutional Buyer and is aware
that the sale to it is being made in reliance on Rule 144A and (B) is
acquiring such Notes for its own account or for the account of another
Qualified Institutional Buyer.
(2) The purchaser understands that the Notes are being offered in a
transaction not involving any public offering in the United States within
the meaning of the Securities Act, that the Notes have not been registered
under the Securities Act and that (A) the Notes may be offered, resold,
pledged or otherwise transferred only (i) to a person who the seller
reasonably believes is a Qualified Institutional Buyer in a transaction
meeting the requirements of Rule 144A, in a transaction meeting the
requirements of Rule 144 under the Securities Act, outside the United
States to a foreign person in a transaction meeting the requirements of
Rule 904 under the Securities Act or in accordance with another exemption
from the registration requirements of the Securities Act (and based upon an
opinion of counsel if the Company so requests), (ii) to the Company or
(iii) pursuant to an effective registration statement and, in each case, in
accordance with any applicable securities laws of any State of the United
States or any other applicable jurisdiction and (B) the purchaser will, and
each subsequent holder is required to, notify any subsequent purchaser from
it of the resale restrictions set forth in (A) above.
(3) The purchaser confirms that (A) such purchaser has such knowledge
and experience in financial and business matters that it is capable of
evaluating the merits and risks of purchasing Notes, and such purchaser and
any accounts for which it is acting are each able to bear the economic
risks of its or their investment, (B) such purchaser is not acquiring Old
Notes with a view to any distribution thereof in a transaction that would
violate the Securities Act or the securities laws of any State of the
United States or any other applicable jurisdiction; provided that the
disposition of its property and the property of any accounts for which such
purchaser is acting as fiduciary shall remain at all times within its
control, and (C) such purchaser has received a copy of the Offering
Memorandum and acknowledges that such purchaser has had access to such
financial and other information, and has been afforded the opportunity to
ask such questions of representatives of the Company and receive answers
thereto, as it deemed necessary in connection with its decision to purchase
Old Notes.
(4) The purchaser understands that the certificates evidencing the
Notes will, unless otherwise agreed by the Company and the holder thereof,
bear a legend substantially to the following effect:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE
UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THE
SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.
EACH PURCHASER OF THE SECURITY EVIDENCED
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<PAGE> 100
HEREBY (1) BY ITS ACQUISITION HEREOF REPRESENTS THAT (A) IT IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR
(B) IT IS AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3)
OR (7) UNDER THE SECURITIES ACT) WHO IS AN INSTITUTION (AN "INSTITUTIONAL
ACCREDITED INVESTOR") AND (2) IS HEREBY NOTIFIED THAT THE SELLER MAY BE
RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES
ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED
HEREBY AGREES FOR THE BENEFIT OF THE ISSUER THAT PRIOR TO THE DATE WHICH IS
TWO YEARS AFTER THE LATER OF THE DATE OF ORIGINAL ISSUANCE OF THIS NOTE AND
THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE
OWNER OF THIS NOTE (THE "RESALE RESTRICTION TERMINATION DATE") (X) SUCH
SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (i)(a) TO A
PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED
STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 904 UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND
BASED UPON AN OPINION OF COUNSEL IF THE ISSUER SO REQUESTS), (ii) TO THE
ISSUER OR (iii) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN
EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE
OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (Y) THE
HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (X) ABOVE. THE FOREGOING RESTRICTIONS ON RESALE
WILL NOT APPLY SUBSEQUENT TO THE RESALE RESTRICTION TERMINATION DATE."
Each purchaser of Old Notes that is an Institutional Accredited Investor
but not a Qualified Institutional Buyer must execute and deliver a purchaser's
letter for the benefit of the Initial Purchasers and the Company, whereby such
institutional Accredited Investor (a) agrees to the restrictions on transfer set
forth in clause (2) above, (b) confirms that it (i) is an Institutional
Accredited Investor or an entity in which all of the equity owners are
Institutional Accredited Investors, (ii) is acquiring such Old Notes, for its
own account or for the account of one or more other Institutional Accredited
Investors as to which it exercises sole investment discretion, (iii) is not
acquiring the Old Notes with a view to distribution thereof in a transaction
that would violate the Securities Act or the securities laws of any State of the
United States or any other applicable jurisdiction; provided that the
disposition of its property and the property of any accounts for which it is
acting as fiduciary shall remain at all times within its control, (iv) has such
knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risks of purchasing Notes, and it and any accounts for
which it is acting are able to bear the economic risks of its or their
investment, and (v) has received a copy of the Offering Memorandum and
acknowledges that it has had access to such financial and other information, and
has been afforded the opportunity to ask such questions of representatives of
the Company and receive answers thereto, as it deems necessary in connection
with its decision to purchase Old Notes, and (c) acknowledges that the registrar
and transfer agent for the Old Notes will not be required to accept for
registration of transfer any Old Notes, except upon presentation of evidence
satisfactory to the Company that the restrictions on transfer set forth in
clause (2) above have been complied with, and that any such Old Notes will be in
the form of definitive physical certificates bearing the legend set forth in
clause (4) above.
------------------------------
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<PAGE> 101
The Old Notes may not be sold or transferred to, and each purchaser, by its
purchase of the Old Notes shall be deemed to have represented and covenanted
that it is not acquiring the Notes for or on behalf of, and will not transfer
the Notes to, any pension or welfare plan (as defined in Section 3 of the
Employee Retirement Income Security Act of 1974 ("ERISA")), except that such a
purchase for or on behalf of a pension or welfare plan shall be permitted:
(1) to the extent such purchase is made by or on behalf of a bank
collective investment fund maintained by the purchaser in which no plan
(together with any other plans maintained by the same employer or employee
organization) at any time while the Notes are held by such collective
investment fund has an interest in excess of 10% of the total assets in
such collective investment fund and the conditions of Prohibited
Transaction Class Exemption 91-38 issued by the Department of Labor are
satisfied;
(2) to the extent such purchase is made by or on behalf of an
insurance company pooled separate account maintained by the purchaser in
which, at any time while the Notes are held by such account, no plan
(together with any other plans maintained by the same employer or employee
organization) has an interest in excess of 10% of the total of all assets
in such pooled separate account and the conditions of Prohibited
Transaction Class Exemption 90-1 issued by the Department of Labor are
satisfied;
(3) to the extent such purchase is made on behalf of a plan, such
purchase and the continued holding of the Notes is directed by (i) an
investment advisor registered under the Investment Advisers Act of 1940
that had as of the last day of its most recent fiscal year total client
assets under its management and control in excess of $50,000,000 and had
stockholders' or partners' equity in excess of $750,000, as shown in its
most recent balance sheet prepared in accordance with generally accepted
accounting principles, or (ii) a bank as defined in Section 202(a)(2) of
the Investment Advisers Act of 1940 with equity capital in excess of
$1,000,000 as of the last day of its most recent fiscal year, or (iii) an
insurance company which is qualified under the laws of more than one state
to manage, acquire or dispose of any assets of a plan, which insurance
company has as of the last day of its most recent fiscal year net worth in
excess of $1,000,000 and which is subject to supervision and examination by
state authority having supervision over insurance companies and, in any
case, such investment adviser, bank or insurance company is otherwise a
qualified professional asset manager, as such term is used in Prohibited
Transaction Class Exemption 84-14 issued by the Department of Labor, and
the assets of such plan when combined with the assets of other plans
established or maintained by the same employer (or affiliated thereof) or
employee organization and managed by such investment adviser, bank or
insurance company do not represent more than 20% of the total client assets
managed by such investment adviser, bank or insurance company, and the
conditions of Section I of such exemption are satisfied;
(4) to the extent such plan is a governmental plan (as defined in
Section 3 of ERISA) which is not subject to the provisions of Title I of
ERISA or Section 4975 of the Internal Revenue Code;
(5) to the extent such purchase is made by or on behalf of an
insurance company with assets in its insurance company general account, and
the conditions of Prohibited Transaction Class Exemption 95-60 issued by
the Department of Labor are satisfied at the time of purchase and
thereafter while the Notes are held by such account; or
(6) to the extent such purchase is made on behalf of a plan, such
purchase and the continued holding of the Notes is directed by an in-house
asset manager and the conditions of Part I of Prohibited Transactions Class
Exemption 96-23 issued by the Department of Labor are satisfied.
LEGAL MATTERS
The validity of the issuance of the Exchange Notes offered hereby is being
passed upon for the Company by Vinson & Elkins L.L.P., Houston, Texas.
100
<PAGE> 102
EXPERTS
The consolidated financial statements of the Company incorporated in this
Prospectus by reference to the Annual Report on Form 10-K for the year ended
September 30, 1996, have been so incorporated in reliance on the report of Price
Waterhouse LLP, independent accountants, given on the authority of said firm as
experts in auditing and accounting.
The consolidated financial statements of Wedco Technology, Inc. for the
year ended March 31, 1996 incorporated in this Prospectus by reference to the
current report on Form 8-K/A dated July 15, 1996 have been so incorporated in
reliance on the report of Coopers and Lybrand L.L.P., independent accountants,
given on the authority of said firm as experts in auditing and accounting.
The financial statements of Rotec Chemicals Limited for the year ended
December 31, 1996, incorporated in this Prospectus by reference to the current
report on Form 8-K (File No. 001-08327, effective May 12, 1997) have been so
incorporated in reliance on the report by Grant Thornton, independent chartered
accountants, given on the authority of said firm as experts in auditing and
accounting.
101
<PAGE> 103
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article 2.02-1 of the Texas Business Corporation Act provides:
(1) A corporation may indemnify any officer or director from and
against any judgments, penalties, fines, settlements, and reasonable
expenses actually incurred by him in an action, suit, investigation or
other proceeding to which he is, was, or is threatened to be a party;
provided that it is determined by the board of Directors, a committee
thereof, special legal counsel, or a majority of the stockholders that such
officer or director: (a) acted in good faith; (b) reasonably believed that
his conduct was in the best interest of the corporation or was, in some
circumstances, not opposed to the corporations' interest, and (c) in a
criminal case, had no reasonable cause to believe his conduct was unlawful.
Such indemnity is limited to the reasonable expenses actually incurred in
matters as to which the officer or director is found liable to the
corporation or is found liable on the basis that a personal benefit was
improperly received by him. No indemnification is permitted with respect to
any proceeding in which the officer or director is found liable for willful
or intentional misconduct in the performance of his duty to the
corporation.
(2) A corporation shall indemnify a director against reasonable
expenses incurred by him in connection with an action, suit, investigation,
or other proceeding to which he is, was, or was threatened to be a party if
he has been wholly successful in its defense.
(3) A corporation may advance an officer or director the reasonable
costs of defending an action, suit, investigation or other proceeding in
certain cases.
(4) A corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise against
any liability asserted against him and incurred by him in any such capacity
or arising out of his status as such, whether or not the corporation would
have the power to indemnify him against such liability under the provisions
of this Article.
Article 7, Section 7.01 of the Registrant's Bylaws provides for
indemnification of directors and officers, and such Article 7, Section 7.01 is
hereby incorporated herein be reference.
The Registrant has purchased a directors and officers liability and
corporation reimbursement policy in the amount of $10,000,000 which, subject to
certain exceptions, protects the officers and directors of the Registrant
against liabilities arising from any claim for breach of duty, neglect, error,
misstatement, misleading statement, omission or other act attempted, committed
or allegedly committed by reason of the director or officer acting in such
capacity.
Article 302-7.06 of the Texas Miscellaneous Corporation Laws Act permits a
corporation to provide in its articles of incorporation that a director of the
corporation shall not be personally liable to the corporation or its
stockholders for monetary damages for an act or omission in the director's
capacity as a director, except for liability (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) for any transaction from which the director
derived an improper personal benefit, or (iv) an act or omission for which
liability of a director is expressly provided by applicable statute.
Article Twelve of the Articles of Incorporation of the Registrant provides
that to the full extent that the Texas Miscellaneous Corporation Laws Act, as it
now exists or may hereafter be amended, permits the limitation or elimination of
the liability of directors, a director of the Registrant shall not be liable to
the Registrant or its stockholders for monetary damages for breach of fiduciary
duty as a director. Any amendment to or repeal of such Article Twelfth shall not
adversely affect any right or protection of a director of the Registrant for or
with respect to any acts or omissions of such director occurring prior to such
amendment or repeal.
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<PAGE> 104
ITEM 21. EXHIBITS
The following instruments and documents are included as Exhibits to this
Registration Statement. Exhibits incorporated by reference are so indicated by
parenthetical information.
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
----------- -------
<C> <S>
3(i) -- Amended and Restated Articles of Incorporation of the
Company (filed as Exhibit 4 to Form S-3 dated September
13, 1993)
3(ii) -- By-Laws of the Company (filed as Exhibit 3(ii) to Form
10-Q for the quarter ended June 30, 1996)
4.1* -- Indenture dated as of June 9, 1997 between the Company,
as issuer, and Fleet National Bank, as trustee
4.2* -- Registration Rights Agreement dated June 9, 1997 by and
between the Company and Bear, Stearns & Co. Inc.
4.3 -- Warrant Agreement -- Series A, dated as of September 1,
1992, between the Registrant and Society National Bank
(incorporated by reference to Exhibit 4 of the
Registrant's Annual Report on Form 10-K for 1992).
4.4 -- Warrant Agreement Series B, dated as of September 1,
1992, between the Registrant and Society National Bank
(incorporated by reference to Exhibit 4 of the
Registrant's Annual Report on Form 10-K for 1992).
4.5 -- Stock Registration Rights Agreement dated April 30, 1996
by and between the Company, a subsidiary of the Company
and the Wedco Shareholders Group, as defined
(incorporated by reference to Exhibit 4.4 to Form S-4
dated May 15, 1996)
5.1* -- Opinion of Vinson & Elkins L.L.P.
10.1 -- Amended and Restated Business Loan Agreement dated
February 21, 1997 between the Registrant and Bank of
America, Texas, N.A. (filed as Exhibit 10 to Form 10-Q
dated May 14, 1997)
10.2* -- Substituted First Amendment to Amended and Restated
Business Loan Agreement by and between the Company and
Bank of America Texas, N.A.
10.3 -- ICO, Inc. Tax Credit Employee Stock Ownership Plan, as
amended (incorporated by reference to Exhibit 10(a) of
the Registrant's Annual Report on Form 10-K for 1993).
10.4 -- ICO, Inc. 1985 Stock Option Plan, as amended
(incorporated by reference to Exhibit B to the
Registrant's Definitive Proxy Statement dated April 27,
1987 for the Annual Meeting of Shareholders).
10.5 -- 1993 Stock Option Plan for Non-Employee Directors of ICO,
Inc. (incorporated by reference to Exhibit 99 to the
Registrant's Form S-8 dated September 13, 1993).
10.6 -- ICO, Inc. 1994 Stock Option Plan (incorporated by
reference to Exhibit A to Registrant's Definitive Proxy
Statement dated June 24, 1994 for the Annual Meeting of
Shareholders).
10.7 -- ICO, Inc. 1995 Stock Option Plan (incorporated by
reference to Exhibit A to Registrant's Definitive Proxy
Statement dated August 10, 1995 for the Annual Meeting of
Shareholders).
10.8 -- ICO, Inc. 1996 Stock Option Plan (Exhibit A to
Registrant's definitive proxy statement dated August 29,
1996 for the Annual Meeting of Shareholders)
10.9 -- Willoughby International Stockholders Agreement dated
April 30, 1996 (incorporated by reference to Exhibit 10.9
to Form S-4 dated May 15, 1996).
10.10 -- Consulting Agreement -- William E. Willoughby
(incorporated by reference to Exhibit 10.13 to Form S-4
dated May 15, 1996).
10.11 -- Salary Continuation Agreement -- William E. Willoughby
(incorporated by reference to Exhibit 10.14 to Form S-4
dated May 15, 1996).
10.12 -- Addendum to Salary Continuation Agreement -- William E.
Willoughby (incorporated by reference to Exhibit 10.15 to
Form S-4 dated May 15, 1996).
</TABLE>
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<PAGE> 105
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
----------- -------
<S> <C>
10.13 -- Non-Competition Covenant William E. Willoughby (incorporated by reference to Exhibit
10.11 to Form S-4 dated May 15, 1996).
10.14 -- Stockholders Agreement (respecting voting of shares of certain former Wedco common
shareholders -- incorporated by reference to Exhibit 10.21 to Form S-4 dated May 15,
1996).
10.15 -- Stockholders Agreement (respecting voting of shares of certain ICO common
shareholders -- incorporated by reference to Exhibit 10.22 to Form S-4 dated May 15,
1996).
12.0* -- Ratio of Earnings to Fixed Charges
21.1* -- Subsidiaries of the Company
23.1* -- Consent of Price Waterhouse LLP
23.2* -- Consent of Coopers and Lybrand L.L.P.
23.3* -- Consent of Grant Thornton
23.4* -- Consent of Vinson & Elkins L.L.P. (included in Exhibit 5.1)
24.1* -- Power of Attorney (included on the signature pages of this Registration Statement)
25.1* -- Statement of Eligibility of Fleet National Bank
99.1* -- Form of Letter of Transmittal
</TABLE>
- ---------------
* Filed herewith.
ITEM 22. UNDERTAKINGS
The Company hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Company's annual report
pursuant to section 13(a) or section 15(d) of the Exchange Act (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
section 15(d) of the Exchange Act) that is incorporated by reference in the
Registration Statement 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.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the provisions described under Item 20 above, or otherwise, the
Company has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities 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 Company 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 Company 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
Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, the State of
Texas on June 17, 1997.
ICO, INC.
By:
----------------------------------------
Sylvia A. Pacholder
Chief Executive Officer and President
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Asher O. Pacholder and Sylvia A. Pacholder, and
each of them (with full power to each of them to act alone), his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign on
his behalf individually and in each capacity stated below any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents and either of them, or their substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
Chief Executive Officer, June 17, 1997
- ----------------------------------------------------- President, Secretary & Director
Sylvia A. Pacholder (Principal Executive Officer)
Chairman of the Board, Chief June 17, 1997
- ----------------------------------------------------- Financial Officer & Director
Asher O. Pacholder (Principal Financial Office)
Director June 17, 1997
- -----------------------------------------------------
William E. Cornelius
Director June 17, 1997
- -----------------------------------------------------
James E. Gibson
Director June 17, 1997
- -----------------------------------------------------
Walter L. Leib
Director June 17, 1997
- -----------------------------------------------------
William J. Morgan
Director June 17, 1997
- -----------------------------------------------------
George S. Sirusas
Director June 17, 1997
- -----------------------------------------------------
John F. Williamson
Director June 17, 1997
- -----------------------------------------------------
William E. Willoughby
</TABLE>
II-4
<PAGE> 107
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
Senior Vice President and General June 17, 1997
- ----------------------------------------------------- Counsel; Director
Robin E. Pacholder
Senior Vice President and June 17, 1997
- ----------------------------------------------------- Treasurer
Jon C. Biro (Principal Accounting Officer)
</TABLE>
II-5
<PAGE> 108
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
----------- -------
<C> <S>
3(i) -- Amended and Restated Articles of Incorporation of the
Company (filed as Exhibit 4 to Form S-3 dated September
13, 1993)
3(ii) -- By-Laws of the Company (filed as Exhibit 3(ii) to Form
10-Q for the quarter ended June 30, 1996)
4.1* -- Indenture dated as of June 9, 1997 between the Company,
as issuer, and Fleet National Bank, as trustee
4.2* -- Registration Rights Agreement dated June 9, 1997 by and
between the Company and Bear, Stearns & Co. Inc.
4.3 -- Warrant Agreement -- Series A, dated as of September 1,
1992, between the Registrant and Society National Bank
(incorporated by reference to Exhibit 4 of the
Registrant's Annual Report on Form 10-K for 1992).
4.4 -- Warrant Agreement Series B, dated as of September 1,
1992, between the Registrant and Society National Bank
(incorporated by reference to Exhibit 4 of the
Registrant's Annual Report on Form 10-K for 1992).
4.5 -- Stock Registration Rights Agreement dated April 30, 1996
by and between the Company, a subsidiary of the Company
and the Wedco Shareholders Group, as defined
(incorporated by reference to Exhibit 4.4 to Form S-4
dated May 15, 1996)
5.1* -- Opinion of Vinson & Elkins L.L.P.
10.1 -- Amended and Restated Business Loan Agreement dated
February 21, 1997 between the Registrant and Bank of
America, Texas, N.A. (filed as Exhibit 10 to Form 10-Q
dated May 14, 1997)
10.2* -- Substituted First Amendment to Amended and Restated
Business Loan Agreement by and between the Company and
Bank of America Texas, N.A.
10.3 -- ICO, Inc. Tax Credit Employee Stock Ownership Plan, as
amended (incorporated by reference to Exhibit 10(a) of
the Registrant's Annual Report on Form 10-K for 1993).
10.4 -- ICO, Inc. 1985 Stock Option Plan, as amended
(incorporated by reference to Exhibit B to the
Registrant's Definitive Proxy Statement dated April 27,
1987 for the Annual Meeting of Shareholders).
10.5 -- 1993 Stock Option Plan for Non-Employee Directors of ICO,
Inc. (incorporated by reference to Exhibit 99 to the
Registrant's Form S-8 dated September 13, 1993).
10.6 -- ICO, Inc. 1994 Stock Option Plan (incorporated by
reference to Exhibit A to Registrant's Definitive Proxy
Statement dated June 24, 1994 for the Annual Meeting of
Shareholders).
10.7 -- ICO, Inc. 1995 Stock Option Plan (incorporated by
reference to Exhibit A to Registrant's Definitive Proxy
Statement dated August 10, 1995 for the Annual Meeting of
Shareholders).
10.8 -- ICO, Inc. 1996 Stock Option Plan (Exhibit A to
Registrant's definitive proxy statement dated August 29,
1996 for the Annual Meeting of Shareholders)
10.9 -- Willoughby International Stockholders Agreement dated
April 30, 1996 (incorporated by reference to Exhibit 10.9
to Form S-4 dated May 15, 1996).
10.10 -- Consulting Agreement -- William E. Willoughby
(incorporated by reference to Exhibit 10.13 to Form S-4
dated May 15, 1996).
10.11 -- Salary Continuation Agreement -- William E. Willoughby
(incorporated by reference to Exhibit 10.14 to Form S-4
dated May 15, 1996).
</TABLE>
<PAGE> 109
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
----------- -------
<S> <C>
10.12 -- Addendum to Salary Continuation Agreement -- William E. Willoughby (incorporated by
reference to Exhibit 10.15 to Form S-4 dated May 15, 1996).
10.13 -- Non-Competition Covenant William E. Willoughby (incorporated by reference to Exhibit
10.11 to Form S-4 dated May 15, 1996).
10.14 -- Stockholders Agreement (respecting voting of shares of certain former Wedco common
shareholders -- incorporated by reference to Exhibit 10.21 to Form S-4 dated May 15,
1996).
10.15 -- Stockholders Agreement (respecting voting of shares of certain ICO common
shareholders -- incorporated by reference to Exhibit 10.22 to Form S-4 dated May 15,
1996).
12.0* -- Ratio of Earnings to Fixed Charges
21.1* -- Subsidiaries of the Company
23.1* -- Consent of Price Waterhouse LLP
23.2* -- Consent of Coopers and Lybrand L.L.P.
23.3* -- Consent of Grant Thornton
23.4* -- Consent of Vinson & Elkins L.L.P. (included in Exhibit 5.1)
24.1* -- Power of Attorney (included on the signature pages of this Registration Statement)
25.1* -- Statement of Eligibility of Fleet National Bank
99.1* -- Form of Letter of Transmittal
</TABLE>
- ---------------
* Filed herewith.
<PAGE> 1
EXHIBIT 4.1
- --------------------------------------------------------------------------------
ICO, INC.
---------------
$120,000,000
SERIES A AND SERIES B
10 3/8% SENIOR NOTES DUE 2007
---------------
INDENTURE
Dated as of June 9, 1997
---------------
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE . . . . . . . . . 1
SECTION 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2 Other Definitions . . . . . . . . . . . . . . . . . . 23
SECTION 1.3 Incorporation by Reference of Trust Indenture Act . . 23
SECTION 1.4 Rules of Construction . . . . . . . . . . . . . . . . 24
ARTICLE 2 THE NOTES . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 2.1 Form and Dating . . . . . . . . . . . . . . . . . . . 24
SECTION 2.2 Execution and Authentication . . . . . . . . . . . . . 25
SECTION 2.3 Registrar and Paying Agent . . . . . . . . . . . . . . 26
SECTION 2.4 Paying Agent to Hold Assets in Trust . . . . . . . . . 27
SECTION 2.5 Holder Lists . . . . . . . . . . . . . . . . . . . . . 28
SECTION 2.6 Transfer and Exchange . . . . . . . . . . . . . . . . 28
SECTION 2.7 Replacement Notes . . . . . . . . . . . . . . . . . . 37
SECTION 2.8 Outstanding Notes . . . . . . . . . . . . . . . . . . 37
SECTION 2.9 Treasury Notes . . . . . . . . . . . . . . . . . . . . 38
SECTION 2.10 Temporary Notes . . . . . . . . . . . . . . . . . . . 38
SECTION 2.11 Cancellation . . . . . . . . . . . . . . . . . . . . 38
SECTION 2.12 Defaulted Interest . . . . . . . . . . . . . . . . . 39
SECTION 2.13 CUSIP Number . . . . . . . . . . . . . . . . . . . . 39
SECTION 2.14 Deposit of Moneys . . . . . . . . . . . . . . . . . . 39
SECTION 2.15 Liquidated Damages Under Registration Rights
Agreement . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE 3 REDEMPTION AND OFFERS TO PURCHASE . . . . . . . . . . . . . 40
SECTION 3.1 Notice to Trustee . . . . . . . . . . . . . . . . . . 40
SECTION 3.2 Selection of Notes to Be Redeemed . . . . . . . . . . 40
SECTION 3.3 Notice of Redemption . . . . . . . . . . . . . . . . . 41
SECTION 3.4 Effect of Notice of Redemption . . . . . . . . . . . . 42
SECTION 3.5 Deposit of Redemption Price . . . . . . . . . . . . . 42
SECTION 3.6 Notes Redeemed in Part . . . . . . . . . . . . . . . . 42
SECTION 3.7 Optional Redemption . . . . . . . . . . . . . . . . . 42
SECTION 3.8 Mandatory Redemption . . . . . . . . . . . . . . . . . 43
SECTION 3.9 Offer to Repurchase by Application of Excess Proceeds 43
ARTICLE 4 COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 4.1 Payment of Notes . . . . . . . . . . . . . . . . . . . 46
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
SECTION 4.2 Maintenance of Office or Agency . . . . . . . . . . . 46
SECTION 4.3 Reports . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 4.4 Compliance Certificate . . . . . . . . . . . . . . . . 47
SECTION 4.5 Taxes . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 4.6 Stay, Extension and Usury Laws . . . . . . . . . . . . 48
SECTION 4.7 Company and Corporate Existence and Maintenance
of Properties and Insurance . . . . . . . . . . . . . . 48
SECTION 4.8 Limitation on the Incurrence of Indebtedness and
Issuance of Disqualified Stock . . . . . . . . . . . . 49
SECTION 4.9 Limitation on Restricted Payments . . . . . . . . . . 49
SECTION 4.10 Limitation on Liens . . . . . . . . . . . . . . . . . 52
SECTION 4.11 Limitation on Transactions with Affiliates . . . . . 52
SECTION 4.12 Limitation on Dividend and Other Payment Restrictions
Affecting Subsidiaries . . . . . . . . . . . . . . . . 53
SECTION 4.13 Limitation on Sale of Assets . . . . . . . . . . . . 54
SECTION 4.14 Change of Control . . . . . . . . . . . . . . . . . . 56
SECTION 4.15 Limitation on Sale/Leaseback Transactions . . . . . . 57
SECTION 4.16 Guarantees of Certain Indebtedness . . . . . . . . . 57
SECTION 4.17 Conduct of Business . . . . . . . . . . . . . . . . . 58
SECTION 4.18 Payments for Consent . . . . . . . . . . . . . . . . 58
ARTICLE 5 SUCCESSORS . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 5.1 Limitation on Merger, Consolidation or Sale of
Assets . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 5.2 Successor Person Substituted . . . . . . . . . . . . . 59
ARTICLE 6 DEFAULTS AND REMEDIES . . . . . . . . . . . . . . . . . . . 59
SECTION 6.1 Events of Default . . . . . . . . . . . . . . . . . . 59
SECTION 6.2 Acceleration . . . . . . . . . . . . . . . . . . . . . 62
SECTION 6.3 Other Remedies . . . . . . . . . . . . . . . . . . . . 62
SECTION 6.4 Waiver of Past Defaults . . . . . . . . . . . . . . . 62
SECTION 6.5 Control by Majority . . . . . . . . . . . . . . . . . 63
SECTION 6.6 Limitation on Suits . . . . . . . . . . . . . . . . . 63
SECTION 6.7 Rights of Holders to Receive Payment . . . . . . . . . 64
SECTION 6.8 Collection Suit by Trustee . . . . . . . . . . . . . . 64
SECTION 6.9 Trustee May File Proofs of Claim . . . . . . . . . . . 64
SECTION 6.10 Priorities . . . . . . . . . . . . . . . . . . . . . 65
SECTION 6.11 Undertaking for Costs . . . . . . . . . . . . . . . . 65
ARTICLE 7 TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 7.1 Duties of Trustee . . . . . . . . . . . . . . . . . . 65
SECTION 7.2 Rights of Trustee . . . . . . . . . . . . . . . . . . 67
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C>
SECTION 7.3 Definitive Rights of Trustee . . . . . . . . . . . . . 67
SECTION 7.4 Trustee's Disclaimer . . . . . . . . . . . . . . . . . 67
SECTION 7.5 Notice of Defaults . . . . . . . . . . . . . . . . . . 68
SECTION 7.6 Reports by Trustee to Holders . . . . . . . . . . . . 68
SECTION 7.7 Compensation and Indemnity . . . . . . . . . . . . . . 68
SECTION 7.8 Replacement of Trustee . . . . . . . . . . . . . . . . 69
SECTION 7.9 Successor Trustee by Merger, etc. . . . . . . . . . . 70
SECTION 7.10 Eligibility; Disqualification . . . . . . . . . . . . 71
SECTION 7.11 Preferential Collection of Claims Against Company . . 71
ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE . . . . . . . . . . 71
SECTION 8.1 Option to Effect Legal Defeasance or Covenant
Defeasance . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 8.2 Legal Defeasance and Discharge . . . . . . . . . . . . 71
SECTION 8.3 Covenant Defeasance . . . . . . . . . . . . . . . . . 72
SECTION 8.4 Conditions to Legal Defeasance or Covenant Defeasance 72
SECTION 8.5 Deposited Money and Government Securities to be Held in
Trust; Other Miscellaneous Provisions . . . . . . . . 74
SECTION 8.6 Repayment to Company . . . . . . . . . . . . . . . . . 74
SECTION 8.7 Reinstatement . . . . . . . . . . . . . . . . . . . . 75
ARTICLE 9 AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 9.1 Without Consent of Holders . . . . . . . . . . . . . . 75
SECTION 9.2 With Consent of Holders . . . . . . . . . . . . . . . 76
SECTION 9.3 Compliance with Trust Indenture Act . . . . . . . . . 77
SECTION 9.4 Revocation and Effect of Consents . . . . . . . . . . 78
SECTION 9.5 Notation on or Exchange of Notes . . . . . . . . . . . 78
SECTION 9.6 Trustee to Sign Amendments, etc. . . . . . . . . . . . 78
ARTICLE 10 GUARANTEE . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 10.1 Guarantee . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 10.2 Guarantors May Consolidate, etc., on Certain Terms . 80
SECTION 10.3 Application of Certain Terms and Provisions to the
Guarantors . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 10.4 Release of Guarantee . . . . . . . . . . . . . . . . 81
SECTION 10.5 Limitation of Guarantor's Liability . . . . . . . . . 82
SECTION 10.6 Contribution . . . . . . . . . . . . . . . . . . . . 82
ARTICLE 11 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 83
SECTION 11.1 Trust Indenture Act Controls . . . . . . . . . . . . 83
SECTION 11.2 Notices . . . . . . . . . . . . . . . . . . . . . . . 83
SECTION 11.3 Communication by Holders with Other Holders . . . . . 84
SECTION 11.4 Certificate and Opinion as to Conditions Precedent . 84
</TABLE>
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<PAGE> 5
<TABLE>
<S> <C>
SECTION 11.5 Statements Required in Certificate or Opinion . . . . 84
SECTION 11.6 Rules by Trustee and Agents . . . . . . . . . . . . . 85
SECTION 11.7 Legal Holidays . . . . . . . . . . . . . . . . . . . 85
SECTION 11.8 No Recourse Against Others . . . . . . . . . . . . . 85
SECTION 11.9 Governing Law . . . . . . . . . . . . . . . . . . . . 85
SECTION 11.10 No Adverse Interpretation of Other Agreements . . . 86
SECTION 11.11 Successors . . . . . . . . . . . . . . . . . . . . . 86
SECTION 11.12 Severability . . . . . . . . . . . . . . . . . . . . 86
SECTION 11.13 Counterpart Originals . . . . . . . . . . . . . . . 86
SECTION 11.14 Table of Contents, Headings, etc. . . . . . . . . . . 86
</TABLE>
EXHIBIT A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
EXHIBIT B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
EXHIBIT C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-1
EXHIBIT D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D-1
-iv-
<PAGE> 6
INDENTURE, dated as of June 9, 1997, between ICO, Inc., a Texas
corporation (the "Company"), and Fleet National Bank, as trustee (the
"Trustee").
The Company and the Trustee agree as follows for the benefit of
each other and for the equal and ratable benefit of the Holders of the 10 3/8%
Series A Senior Notes due 2007 of the Company (the "Series A Notes") and the 10
3/8% Series B Senior Notes due 2007 of the Company (the "Series B Notes").
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1 Definitions
"Acquired Indebtedness" means, with respect to any specified
Person: (i) Indebtedness of any other Person existing at the time such other
Person 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.
Acquired Indebtedness shall be deemed incurred at the time such other Person is
merged with or into or becomes a Restricted Subsidiary of such Specified
Person.
"Adjusted Net Assets" of a Guarantor at any date shall mean the
lesser of the amount by which (i) the fair value of the property of such
Guarantor exceeds the total amount of liabilities, including, without
limitation, contingent liabilities (after giving effect to all other fixed and
contingent liabilities incurred or assumed on such date), but excluding
liabilities under its Guarantee, of such Guarantor at such date and (ii) the
present fair saleable value of the assets of such Guarantor at such date
exceeds the amount that will be required to pay the probable liability of such
Guarantor on its debts (after giving effect to all other fixed and contingent
liabilities incurred or assumed on such date and after giving effect to any
collection from any Subsidiary of such Guarantor in respect of the obligations
of such Subsidiary under the Guarantee of such Guarantor), excluding debt in
respect of its Guarantee, as they become absolute and matured.
"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.
<PAGE> 7
"Agent" means any Registrar, Paying Agent or co-registrar.
"Asset Sale" means (i) the sale, lease, conveyance, transfer,
exchange or other disposition (collectively, "dispositions") of any assets
(including by way of a Sale/Leaseback Transaction) other than dispositions of
inventory in the ordinary course of business, (ii) the issuance by any
Restricted Subsidiary of the Company of Equity Interests of such Restricted
Subsidiary (other than directors' qualifying shares) and (iii) the disposition
by the Company or any of its Restricted Subsidiaries of Equity Interests of any
Restricted Subsidiary of the Company, in the case of either clause (i), (ii) or
(iii), whether in a single transaction or a series of related transactions (a)
that have a Fair Market Value in excess of $2.0 million or (b) for net proceeds
in excess of $2.0 million. Notwithstanding the foregoing, the following will
not be deemed to be Asset Sales: (i) a disposition of assets by a Restricted
Subsidiary of the Company to the Company or a Wholly-Owned Restricted
Subsidiary of the Company or by the Company to a Wholly-Owned Restricted
Subsidiary of the Company, (ii) an issuance of Equity Interests by a Restricted
Subsidiary of the Company to the Company or to a Wholly-Owned Restricted
Subsidiary of the Company, (iii) a disposition consisting of a Restricted
Payment permitted by Section 4.9 hereof, (iv) the disposition of all or
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole governed by the provisions of Section 4.14 and/or Article V
hereof, (v) any trade or exchange by the Company or any Restricted Subsidiary
of (A) properties and assets used in the Business for properties and assets
used in the Business owned or held by another Person or (B) shares of Capital
Stock in any Person engaged in the Business for shares of Capital Stock in any
Person engaged in the Business owned or held by another Person, provided that
(1) the Fair Market Value of the properties, assets or shares traded or
exchanged by the Company or such Restricted Subsidiary (including any cash or
Cash Equivalents, not to exceed 15% of such Fair Market Value, to be delivered
by the Company or such Restricted Subsidiary) is reasonably equivalent to the
Fair Market Value of the properties, assets or shares (together with any cash
or Cash Equivalents, not to exceed 15% of such Fair Market Value) to be
received by the Company or such Restricted Subsidiary, provided that if such
Fair Market Value is equal to or in excess of $5.0 million, the resolution of
the Board of Directors of the Company evidenced by an Officers' Certificate
delivered to the Trustee shall be accompanied by a written appraisal by a
nationally recognized investment banking firm or appraisal firm, in each case
specializing or having a specialty in the Business and (2) such exchange is
approved by a majority of the Disinterested Directors, (vi) any sale, transfer
and other disposition of defaulted receivables for collection in the ordinary
course of business, (vii) the grant in the ordinary course of business of any
non-exclusive license of patents, trademarks, registrations therefor and other
similar intellectual property, (viii) any Lien (or foreclosure thereon)
securing Indebtedness to the extent that such Lien is granted in compliance
with the Section 4.10 hereof, (ix) any disposition of equipment or materials in
the ordinary course of business consistent with past practices which, in the
reasonable judgment of the Company, are obsolete, worn out or no longer useful
in the Company's or any Restricted Subsidiaries' business and (x) the factoring
or securitization of equipment receivables by the Company or a Restricted
Subsidiary with a financial institution in connection with the sale by the
Company or such Restricted Subsidiary of such equipment in the ordinary course
of business, provided that, such
-2-
<PAGE> 8
equipment was sold by the Company or such Restricted Subsidiary subsequent to
the date of this Indenture and within eighteen months of such factoring or
securitization.
"Attributable Indebtedness" means, with respect to any particular
lease under which any Person is at the time liable and at any date as of which
the amount thereof is to be determined, the present value of the total net
amount of rent required to be paid by such Person under the lease during the
primary term thereof, without giving effect to any renewals at the option of
the lessee, discounted from the respective due dates thereof to such date at
the rate of interest per annum implicit in the terms of the lease. As used in
the preceding sentence, the net amount of rent under any lease for any such
period shall mean the sum of rental and other payments required to be paid with
respect to such period by the lessee thereunder excluding any amounts required
to be paid by such lessee on account of maintenance and repairs, insurance,
taxes, assessments, water rates or similar charges. In the case of any lease
which is terminable by the lessee upon payment of a penalty, such net amount of
rent shall also include the amount of such penalty, but no rent shall be
considered as required to be paid under such lease subsequent to the first date
upon which it may be so terminated.
"Average Life" means, as of the date of determination, with
respect to any Indebtedness, the quotient obtained by dividing (i) the product
of (x) the number of years (calculated to the nearest one-twelfth) from such
date to the date of each successive scheduled principal payment, including
payment at final maturity, of such Indebtedness multiplied by (y) the amount of
such principal payment by (ii) the sum of all such principal payments.
"Bank Credit Facility" means the Amended and Restated Business
Loan Agreement (Receivables and Inventory), dated as of February 21, 1997, by
and among the Company and Bank of America Texas, N.A., as amended by the First
Amendment thereto dated as of June 6, 1997, including any related notes,
collateral documents, instruments and agreements executed in connection
therewith, and in each case as amended, supplemented, modified, renewed, or
refunded, replaced or refinanced by a revolving credit, term and/or letter of
credit facility, from time to time.
"Board of Directors" means, with respect to any Person, the Board
of Directors of such Person or any committee of the Board of Directors of such
Person duly authorized to act on behalf of the Board of Directors of such
Person.
"Business" means the business of providing services and products
to the oil and gas industry and the petrochemicals industry.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital
lease that would at such time be so required to be capitalized on the balance
sheet in accordance with GAAP.
-3-
<PAGE> 9
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations, rights or other
equivalents (however designated) of corporate stock, including each class of
common stock and Preferred Stock of such Person, (ii) with respect to any
Person that is not a corporation, any and all partnership interests (whether
general or limited) or limited liability company interests, and (iii) any other
interest or participation that confers on a Person the right to receive a share
of the profits and losses of, or distributions of assets of, the issuing
Person.
"Cash Equivalents" means (i) United States dollars, (ii)
securities issued or directly and fully guaranteed or insured by the United
States government or any agency or instrumentality thereof having maturities of
not more than 180 days from the date of acquisition (provided that the full
faith and credit of the United States is pledged in support thereof), (iii)
certificates of deposit with maturities of 180 days or less from the date of
acquisition, bankers' acceptances with maturities not exceeding 180 days and
overnight bank deposits, in each case with any domestic commercial bank having
capital and surplus in excess of $500.0 million or any commercial bank
organized under the laws of any other country that is a member of the
Organization for Economic Cooperation and Development and that has total assets
in excess of $500.0 million, (iv) repurchase obligations with a term of not
more than seven days for underlying securities of the types described in clause
(ii) above entered into with any financial institution meeting the
qualifications specified in clause (iii) above, (v) commercial paper issued by
a corporation that is not an Affiliate of the Company and is organized under
the laws of any state of the United States or the District of Columbia and
rated at least P-1 (or higher) by Moody's or A-1 (or higher) by S&P and in each
case maturing within six months after the date of acquisition, and (vi) shares
of any money market mutual fund, or similar fund, in each case having assets in
excess of $500.0 million, which invests solely in investments of the types
described in clauses (i) through (v) above.
"Change of Control" means the occurrence of any of the following:
(i) the sale, lease, transfer, conveyance or other disposition, in one or a
series of related transactions, directly or indirectly, of all or substantially
all of the assets of the Company and its Restricted Subsidiaries to any Person
or group (as such term is used in Sections 13(d) and 14(d) of the Exchange
Act), (ii) the adoption of a plan relating to the liquidation or dissolution of
the Company, (iii) any Person or group (as defined above) is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
except that a Person shall be deemed to have "beneficial ownership" of all
shares that any such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than 50% of the total voting power of the Voting Stock of
the Company, including by way of merger, consolidation or otherwise, or (iv)
the first day on which a majority of the members of the Board of Directors of
the Company are not Continuing Directors.
"Commodity Agreement" means any commodity futures contract,
commodity option or other similar agreement or arrangement entered into by the
Company or any of its Restricted Subsidiaries designed to protect the Company
or any of its Restricted Subsidiaries
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against fluctuations in the price of commodities actually used in the ordinary
course of business of the Company and its Restricted Subsidiaries.
"Company" means the party named as such above, until a successor
replaces such Person in accordance with the terms of this Indenture and
thereafter means such successor.
"Consolidated Interest Coverage Ratio" means, for any Reference
Period, the ratio on a pro forma basis of (a) the sum of (without duplication)
(i) Consolidated Net Income of such Person for such period, plus an amount
equal to any extraordinary, nonrecurring or unusual loss plus any net loss
realized in connection with an asset sale, to the extent such losses were
deducted or otherwise excluded in computing Consolidated Net Income, (ii)
Consolidated Interest Expense, (iii) Consolidated Tax Expense, (iv)
depreciation and amortization (including amortization of goodwill, amortization
of deferred debt expense and other intangibles and amortization of deferred
compensation in respect of non-cash compensation but excluding amortization of
prepaid cash expenses that were paid in a prior period) and other
extraordinary, unusual or non-recurring non-cash charges (excluding any such
non-cash charge to the extent it represents an accrual of a reserve for cash
charges in any future period or amortization of a prepaid cash expense that was
paid in a prior period) of such Person and its Restricted Subsidiaries for such
period, to the extent such depreciation and amortization were deducted or
otherwise excluded in computing Consolidated Net Income, as determined in
accordance with GAAP on a consolidated basis in each case as determined for the
Reference Period to (b) Consolidated Interest Expense for such Reference
Period; provided, that, in calculating each of the items set forth in the
foregoing (i) acquisitions which occurred during the Reference Period or
subsequent to the Reference Period and on or prior to the date of the
transaction giving rise to the need to calculate the Consolidated Interest
Coverage Ratio (the "Transaction Date") shall be assumed to have occurred on
the first day of the Reference Period, (ii) the incurrence of any Indebtedness
(including the issuance of the Notes) or issuance of any Disqualified Stock
during the Reference Period or subsequent to the Reference Period and on or
prior to the Transaction Date shall be assumed to have occurred on the first
day of such Reference Period, (iii) any Indebtedness that had been outstanding
during the Reference Period that has been repaid on or prior to the Transaction
Date shall be assumed to have been repaid as of the first day of such Reference
Period, (iv) the Consolidated Interest Expense attributable to interest on any
Indebtedness or dividends on any Disqualified Stock bearing a floating interest
(or dividend) rate shall be computed on a pro forma basis as if the rate in
effect on the Transaction Date was the average rate in effect during the entire
Reference Period and (v) in determining the amount of Indebtedness pursuant to
Section 4.8 hereof, the incurrence of Indebtedness giving rise to the need to
calculate the Consolidated Interest Coverage Ratio and, to the extent the net
proceeds from the incurrence thereof are used to retire Indebtedness, the
application of the proceeds therefrom shall be assumed to have occurred on the
first day of the Reference Period.
"Consolidated Interest Expense" means, with respect to any Person
for any Reference Period, the aggregate amount (without duplication) of (a)
consolidated interest, whether expensed or capitalized, paid, accrued or
scheduled to be paid or accrued, of such Person and its Restricted Subsidiaries
for such period (including (i) amortization of original
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<PAGE> 11
issue discount and non-cash interest payments and accruals, (ii) the interest
portion of all deferred payment obligations, calculated in accordance with the
effective interest method and (iii) the interest component of any payments
associated with Capital Lease Obligations and net payments (if any) pursuant to
Hedging Obligations, in each case, to the extent attributable to such period,
but excluding (x) commissions, discounts and other fees and charges incurred
with respect to letters of credit and bankers' acceptances financing and (y)
any interest expense on Indebtedness of another Person that is Guaranteed by
such Person or secured by a Lien on assets of such Person) determined in
accordance with GAAP and (b) with respect to any Disqualified Stock, cash
dividends paid (other than to the Company or any of its Restricted
Subsidiaries), declared, accrued or accumulated during such period, divided by
one minus the applicable actual combined federal, state, local and foreign
income tax rate of the Company and its Restricted Subsidiaries (expressed as a
decimal), on a consolidated basis, for the Reference Period preceding the date
of the transaction giving rise to the need to calculate Consolidated Interest
Expense, in each case to the extent attributable to such period and excluding
items eliminated in consolidation. Consolidated Interest Expense of the
Company shall not include any prepayment premiums or amortization of original
issue discount or deferred financing costs, to the extent such amounts are
incurred as a result of the prepayment on the date of this Indenture of any
Indebtedness of the Company with the proceeds of the Notes.
"Consolidated Net Income" means, with respect to any Person for
any period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP, adjusted to exclude (only to the extent included and without
duplication) (i) all net gains which are extraordinary, unusual or are non-
recurring (including any gain from the sale or other disposition of assets
outside the ordinary course of business or from the issuance or sale of capital
stock), (ii) all gains resulting from currency or hedging transactions not in
the ordinary course of business consistent with past practice, (iii) the Net
Income (if positive) of any Person acquired after the Issue Date in a pooling
of interests transaction for any period prior to the date of such acquisition,
(iv) the cumulative effect of a change in accounting principles and (v) the Net
Income of any Restricted Subsidiary of any Person to the extent that such
Restricted Subsidiary has any restrictions or encumbrances on making
distributions to such Person; provided, that the Net Income 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 cash dividends or cash
distributions actually paid during such period to the referent Person or a
Restricted Subsidiary thereof.
"Consolidated Net Worth" means, with respect to the Company and
its Restricted Subsidiaries, and at any date of determination, the sum of
Capital Stock (other than Disqualified Stock) and additional paid-in capital
plus retained earnings (or minus accumulated deficit) minus all intangible
assets, including, without limitation, organization costs, patents, trademarks,
copyrights, franchises, research and development costs, and any amount
reflected in treasury stock, of the Company and its Restricted Subsidiaries
determined on a consolidated basis in accordance with GAAP.
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"Consolidated Tax Expense" means, with respect to any Person for
any period, the provisions for federal, state, local and foreign income taxes
(including state franchise taxes accounted for as income taxes in accordance
with GAAP) of such Person and its Restricted Subsidiaries for such period as
determined on a consolidated basis in accordance with GAAP.
"Continuing Director" 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 this Indenture or (ii) was nominated for
election or elected to such Board of Directors with the affirmative vote of a
majority of the Continuing Directors who were members of such Board at the time
of such nomination or election.
"Corporate Trust Office of the Trustee" shall be at the address
of the Trustee specified in Section 11.2 hereof or such other address as to
which the Trustee may give notice to the Company.
"Currency Agreement" means any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement designed to
protect the Company or any of its Restricted Subsidiaries in the ordinary
course of business against fluctuation in the values of the currencies of the
countries (other than the United States) in which the Company or its Restricted
Subsidiaries conduct business.
"Default" means any event that is, or with the passage of time or
the giving of notice, or both, would be, an Event of Default.
"Definitive Notes" means Notes that are in the form of Exhibit A
attached hereto (but without including the text referred to in footnote 1
thereto and the additional schedule referred to therein).
"Depository" means, with respect to the Notes issuable or issued
in whole or in part in global form, the Person specified in Section 2.3 hereof
as the Depository with respect to the Notes, until a successor shall have been
appointed and become such pursuant to the applicable provision of this
Indenture, and, thereafter, "Depository" shall mean or include such successor.
"Disinterested Director" means, with respect to an Affiliate
Transaction or series of related Affiliate Transactions or an Asset Sale, a
member of the Board of Directors of the Company who has no financial interest,
and whose employer has no financial interest, in such Affiliate Transaction or
series of related Affiliate Transactions or in such Asset Sale.
"Disqualified Stock" means any Capital Stock which, 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 or with the passing of
time, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable or is convertible or
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<PAGE> 13
exchangeable for Indebtedness at the option of the holder thereof, in whole or
in part, on or prior to June 1, 2007.
"Domestic Subsidiary" shall mean each Subsidiary of the Company
incorporated or organized under the laws of the United States or any state or
territory thereof.
"Eligible Foreign Inventory" means the consolidated finished
goods, raw materials and work-in-process of the Wholly-Owned Foreign
Subsidiaries of the Company (excluding finished goods, raw materials and work-
in-process of Unrestricted Subsidiaries of the Company) less any applicable
reserves, each of the foregoing determined in accordance with GAAP.
"Eligible Foreign Receivables" means the consolidated trade
receivables of the Wholly-Owned Foreign Subsidiaries of the Company (excluding
trade receivables of the Unrestricted Subsidiaries of the Company) less the
allowance for doubtful accounts, each of the foregoing determined in accordance
with GAAP.
"Eligible Inventory" means the consolidated finished goods, raw
materials and work-in-process of the Company and its consolidated Subsidiaries
(excluding finished goods, raw materials and work-in-process of Foreign
Subsidiaries and their Subsidiaries and Unrestricted Subsidiaries of the
Company) less applicable reserves located in the United States and Canada, each
of the foregoing determined in accordance with GAAP.
"Eligible Receivables" means the consolidated trade receivables
of the Company and its consolidated Subsidiaries (excluding trade receivables
of Foreign Subsidiaries and their Subsidiaries and Unrestricted Subsidiaries of
the Company) less the allowance for doubtful accounts and less sales to account
debtors outside the United States and Canada, each of the foregoing determined
in accordance with GAAP.
"Equity Interests" means Capital Stock and all warrants, options
or other rights exercisable for, exchangeable for or convertible into Capital
Stock (but excluding any debt security that is convertible into, or
exchangeable for, Capital Stock).
"Event of Default" has the meaning set forth in Section 6.1
hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC thereunder.
"Exchange Note" means any Series B Note issued in exchange for an
Original Note pursuant to the Exchange Offer or the Private Exchange Offer.
"Exchange Offer" means the offer by the Company registered
pursuant to the Securities Act to the Holders of all outstanding Transfer
Restricted Securities to exchange all such outstanding Transfer Restricted
Securities held by such Holders for Series B Notes, in an
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<PAGE> 14
aggregate principal amount equal to the aggregate principal amount of the
Transfer Restricted Securities tendered in such exchange offer by such Holders.
"Exchange Offer Registration Statement" means the registration
statement under the Securities Act relating to the Exchange Offer, including
the related prospectus.
"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the Bank Credit Facility) in
existence on the date of this Indenture, until such amounts are repaid.
"Fair Market Value" means with respect to any asset, the price
(after taking into account any liabilities relating to such assets) which could
be negotiated in an arm's-length free market transaction, for cash, between a
willing seller and a willing buyer, neither of which is under pressure or
compulsion to complete the transaction; provided that the Fair Market Value of
any such asset or assets shall be determined by the Board of Directors of the
Company, including a majority of the Company's Disinterested Directors, acting
in good faith, and which determination shall be evidenced by an Officers'
Certificate delivered to the Trustee.
"Foreign Subsidiary" shall mean each Subsidiary of the Company
that is incorporated or organized under the laws of any jurisdiction other than
the United States of America or any state or territory thereof.
"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 in the United States on the
date of this Indenture.
"Global Note" means a Note that contains the paragraph referred
to in footnote 1 and the additional schedule referred to in the form of Note
attached hereto as Exhibit A.
"Government Securities" means direct obligations of, or
obligations guaranteed by, the United States of America for the payment of
which guarantee or obligations the full faith and credit of the United States
of America is pledged.
"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 any Restricted Subsidiary of the Company which
becomes a guarantor of the Notes in compliance with the provisions of Section
4.16 and Article 10 hereof
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<PAGE> 15
until such time, if any, as such Restricted Subsidiary is released from the
Guarantee pursuant to Section 10.4 hereof.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) Interest Rate Agreements, (ii) Currency
Agreements and (iii) Commodity Agreements.
"Holder" means a Person in whose name a Note is registered on the
Registrar's books.
"Indebtedness" means, with respect to any Person, (a) all
obligations of such Person, whether or not contingent, (i) in respect of
borrowed money (whether or not the recourse of the lender is to be the whole of
the assets of such Person or only to a portion thereof), (ii) evidenced by
bonds, notes, debentures or similar instruments (including, but not limited to,
purchase money obligations), (iii) representing the balance deferred and unpaid
of the purchase price of any property or services (other than trade accounts
payable or other obligations arising in the ordinary course of business), (iv)
representing any Hedging Obligations, (v) evidenced by bankers' acceptances or
similar instruments issued or accepted by banks, (vi) for the payment of money
relating to a Capital Lease Obligation or (vii) evidenced by a letter of credit
or a reimbursement obligation of such Person with respect to any letter of
credit, if and to the extent any of the foregoing obligations referred to in
this clause (a) (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; (b) all liabilities of others of the kind described in
the preceding clause (a) that such Person has Guaranteed or that are otherwise
its legal liability; (c) Indebtedness (as otherwise defined in this definition)
of another Person secured by a Lien on any asset of such Person, whether or not
such Indebtedness is assumed by such Person, the amount of such obligations
being deemed to be the lesser of (1) the full amount of such obligations so
secured and (2) the Fair Market Value of such asset; (d) with respect to such
Person, the liquidation preference or any mandatory redemption payment
obligations in respect of Disqualified Stock: (e) the aggregate preference in
respect of amounts payable on the issued and outstanding shares of Preferred
Stock of any of the Company's Restricted Subsidiaries in the event of any
voluntary or involuntary liquidation, dissolution or winding up (excluding any
such preference attributable to such shares of Preferred Stock that are owned
by such Person or any of its Restricted Subsidiaries; provided that if such
Person is the Company, such exclusion shall be for such preference attributable
to such shares of Preferred Stock that are owned by the Company or any of its
Restricted Subsidiaries).
"Indenture" means this Indenture, as amended or supplemented from
time to time in accordance with the terms hereof.
"Initial Purchaser" means Bear, Stearns & Co. Inc., as initial
purchaser in the Offering.
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<PAGE> 16
"Interest Payment Date" means, with respect to any installment of
interest on the Notes, the date specified in such Note as the fixed date on
which such installment of interest is due and payable.
"Interest Record Date" shall have the meaning set forth in the
form of the Note attached hereto as Exhibit A.
"Interest Rate Agreement" means any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or other similar
agreement or arrangement entered into by the Company or any of its Restricted
Subsidiaries designed to protect the Company or any of its Restricted
Subsidiaries in the ordinary course of business against fluctuations in
interest rates.
"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, without limitation, any Guarantee), advances or
other extensions of credit or capital contributions to (by means of any
transfer of cash or other property to others or any payment for property or
services for the account or use of others) (excluding commission, travel and
similar advances to officers and employees made in the ordinary course of
business), all acquisitions (whether by purchase, merger, consolidation or
otherwise) for consideration by such Person of any Indebtedness, Capital Stock,
bonds, notes, debentures or other securities (including, without limitation,
any interests in any partnership or joint venture) issued or owned by any other
Person and all other items that are or would be classified as investments on a
balance sheet prepared in accordance with GAAP.
"Issue Date" means the date on which the Notes are originally
issued under this Indenture.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, easement, restriction, covenant, right-of-way, adverse claim,
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 grant a security interest in
and any filing of or agreement to give any financing statement under the
Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Liquidated Damages" means all liquidated damages then owing
pursuant to the Registration Rights Agreement.
"Make-Whole Amount" with respect to a Note means an amount equal
to the excess, if any, of (i) the present value of the remaining interest,
premium and principal payments due on such Note as if such Note were redeemed
on June 1, 2002, computed using a discount rate equal to the Treasury Rate plus
75 basis points, over (ii) the outstanding principal amount of such Note.
"Treasury Rate" is defined as the yield to maturity at the time of the
computation
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<PAGE> 17
of United States Treasury securities with a constant maturity (as compiled by
and published in the most recent Federal Reserve Statistical Release H.15(519),
which has become publicly available at least two Business Days prior to the
date of the redemption notice or, if such Statistical Release is no longer
published, any publicly available source of similar market data) most nearly
equal to the then remaining maturity of the Notes assuming redemption of the
Notes on June 1, 2002; provided, however, that if the Make-Whole Average Life
of such Note is not equal to the constant maturity of the United States
Treasury securities for which a weekly average yield is given, the Treasury
Rate shall be obtained by linear interpolation (calculated to the nearest one-
twelfth of a year) from the weekly average yields of United States Treasury
securities for which such yields are given, except that if the Make-Whole
Average Life of such Notes is less than one year, the weekly average yield on
actually traded United States Treasury securities adjusted to a constant
maturity of one year shall be used.
"Make-Whole Average Life" means the number of years (calculated
to the nearest one-twelfth) between the date of redemption and June 1, 2002.
"Make-Whole Price" with respect to a Note means the greater of
(i) the sum of the outstanding principal amount and the Make-Whole Amount of
such Note, and (ii) the redemption price of such Note on June 1, 2002,
determined pursuant to Article 3 hereof (105.188% of the principal amount).
"Moody's" means Moody's Investors Service, Inc. and its
successors.
"Net Cash Proceeds" means (a) with respect to any Asset Sale or
Sale/Leaseback Transaction of any Person, an amount equal to aggregate cash
proceeds received (including any cash proceeds received by way of deferred
payment in principal pursuant to a note or installment receivable or otherwise,
but only as and when received, and excluding any other consideration until such
time as such consideration is converted into cash) therefrom, in each case net
of all legal, title and recording tax expenses, commissions, accounting and
investment banking and other fees and expenses incurred, and all federal, state
or local taxes required to be accrued as a liability as a consequence of such
Asset Sale or Sale/Leaseback Transaction, and in each case net of all
Indebtedness which is secured by such asset or assets (including Equity
Interests) which are the subject of such Asset Sale, in accordance with the
terms of any Lien upon or with respect to such asset or assets, or which must,
by its terms or in order to obtain a necessary consent to such Asset Sale or
Sale/Leaseback Transaction or by applicable law, be repaid out of the proceeds
from such Asset Sale or Sale/Leaseback Transaction and which is actually so
repaid and (b) in the case of any sale by the Company of securities relevant to
Section 4.9 hereof, the amount of aggregate net cash proceeds received by the
Company, after payment of expenses, commissions, discounts and any other
transaction costs incurred in connection therewith.
"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 (only to
the extent included and without duplication),
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<PAGE> 18
(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 sale of assets
(including, without limitation, dispositions pursuant to Sale/Leaseback
Transactions), or (b) the disposition of any securities or the extinguishment
of any Indebtedness of such Person or any of its Restricted Subsidiaries, and
(ii) any extraordinary, non-recurring or unusual gain (but not loss), together
with any related provision for taxes on such extraordinary, non-recurring or
unusual gain (but not loss).
"Non-Recourse Indebtedness" 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) or (b) is directly or indirectly liable (as a
guarantor or otherwise); (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 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.
"Note Custodian" means the Trustee, as custodian with respect to
the Notes in global form, or any successor entity thereto.
"Notes" means the Exchange Notes and the Original Notes.
"Obligations" means any principal, premium, interest (including
post-petition interest), penalties, fees, indemnifications, reimbursements,
damages and other liabilities payable under the documentation governing any
Indebtedness.
"Offering" means the offering of the Series A Notes pursuant to
the Offering Memorandum.
"Offering Memorandum" means the Offering Memorandum of the
Company, dated June 4, 1997, relating to the Offering.
"Officer" means, with respect to any Person, the Chairman of the
Board, the Chief Executive Officer, the President, the Chief Operating Officer,
the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the
Controller, the Secretary or any Vice-President of such Person or any
individual holding a similar or greater position of authority within the
organization of such Person, or, if such Person is a limited partnership,
within the organization of the general partner of such limited partnership,
including, without limitation, the manager or managing member of a limited
liability company or a director or managing director of a Foreign Subsidiary.
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<PAGE> 19
"Officers' Certificate" means, with respect to any Person, a
certificate signed by the Chief Executive Officer, the President or any Vice
President and the Chief Financial Officer, chief accounting officer, the
Treasurer or any Assistant Treasurer of such Person.
"Opinion of Counsel" means a written opinion from legal counsel
who is reasonably acceptable to the Trustee, that meets the requirements of
Section 11.5 hereof and, to the extent required by the TIA, complies with TIA
Section 314. The counsel may be an employee of or counsel to the Company, any
of its Subsidiaries or the Trustee.
"Original Notes" means the Series A Notes initially issued
pursuant to this Indenture prior to the issuance of Exchange Notes.
"Pari Passu Indebtedness" means, with respect to any Net Cash
Proceeds from Asset Sales, Senior Indebtedness of the Company or a Guarantor
the terms of which require the Company or such Guarantor to apply such Net Cash
Proceeds to offer to repurchase such Indebtedness.
"Permitted Company Refinancing Indebtedness" means Indebtedness
of the Company, the net proceeds of which are used to renew, extend, refinance,
refund or repurchase outstanding Indebtedness of the Company, provided that (i)
if the Indebtedness (including the Notes) being renewed, extended, refinanced,
refunded or repurchased is pari passu with or subordinated in right of payment
to the Notes, then such Indebtedness is pari passu or subordinated in right of
payment to, as the case may be, the Notes at least to the same extent as the
Indebtedness being renewed, extended, refinanced, refunded or repurchased, (ii)
such Indebtedness is scheduled to mature no earlier than the Indebtedness being
renewed, extended, refinanced, refunded or repurchased, and (iii) such
Indebtedness has an Average Life at the time such Indebtedness is incurred that
is equal to or greater than the Average Life of the Indebtedness being renewed,
extended, refinanced, refunded or repurchased; provided, further, that such
Indebtedness (to the extent that such Indebtedness constitutes Permitted
Company Refinancing Indebtedness) is in an aggregate principal amount (or, if
such Indebtedness is issued at a price less than the principal amount thereof,
the aggregate amount of gross proceeds therefrom is) not in excess of the
aggregate principal amount then outstanding of the Indebtedness being renewed,
extended, refinanced, refunded or repurchased (or if the Indebtedness being
renewed, extended, refinanced, refunded or repurchased was issued at a price
less than the principal amount thereof, then not in excess of the amount of
liability in respect thereof determined in accordance with GAAP) (plus the
amount of reasonable fees and expenses incurred in connection therewith).
"Permitted Indebtedness" means (i) Indebtedness incurred by the
Company under the Bank Credit Facility in an aggregate principal amount not to
exceed (a) the greater of (x) $25.0 million at any time outstanding or (y) the
sum of 85% of the amount of Eligible Receivables and 50% of the amount of
Eligible Inventory, at any time outstanding minus (b) the amount of Net Cash
Proceeds from any Asset Sale applied pursuant to Section 4.13 hereof to repay
or prepay such Indebtedness that results in a permanent reduction in any
revolving credit
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<PAGE> 20
or other commitment relating thereto or the maximum amount that may be borrowed
thereunder, provided that the aggregate amount of applied Net Cash Proceeds
shall not permanently reduce the principal amount of Permitted Indebtedness
under this clause (i) below $10.0 million; (ii) Existing Indebtedness
outstanding on the date of this Indenture; (iii) Indebtedness represented by
the Notes and this Indenture; (iv) Hedging Obligations; provided that the
notional principal amount of any Interest Rate Agreement does not significantly
exceed the principal amount of the Indebtedness to which such agreement
relates; provided, further, that any Currency Agreement does not increase the
outstanding loss potential or liabilities other than as a result of
fluctuations in foreign currency exchange rates; (v) Purchase Money
Indebtedness of the Company and its Restricted Subsidiaries incurred on or
after the date hereof, provided that (A) the aggregate amount of such Purchase
Money Indebtedness (including any Permitted Company Refinancing Indebtedness
and Permitted Subsidiary Refinancing Indebtedness issued to refinance, replace
or refund such Indebtedness) incurred on or after the date of this Indenture
and outstanding at any time pursuant to this clause (v) shall not exceed $5.0
million, and (B) in each case, such Purchase Money Indebtedness shall not
constitute more than 100% of the cost (determined in accordance with GAAP) to
the Company or such Restricted Subsidiary, as applicable, of the property so
acquired or leased; (vi) Indebtedness of the Company to any of its Wholly-Owned
Restricted Subsidiaries, and Indebtedness of any Restricted Subsidiary of the
Company to the Company or any of its Wholly-Owned Restricted Subsidiaries (the
Indebtedness incurred pursuant to this clause (vi) being hereinafter referred
to as "Intercompany Indebtedness"); provided that, in the case of Intercompany
Indebtedness of the Company such Indebtedness shall be unsecured and (except to
a Guarantor) subordinated in all respects to the Notes; provided, further, that
an incurrence of Indebtedness shall be deemed to have occurred upon (A) any
sale or other disposition of Intercompany Indebtedness to a Person other than
the Company or any of its Wholly-Owned Restricted Subsidiaries, (B) any sale or
other disposition of Equity Interests of any Wholly-Owned Restricted Subsidiary
of the Company which holds Intercompany Indebtedness such that such Restricted
Subsidiary ceases to be a Wholly-Owned Restricted Subsidiary after such sale or
other disposition, or (C) designation of a Restricted Subsidiary which holds
Intercompany Indebtedness as an Unrestricted Subsidiary; (vii) Permitted
Company Refinancing Indebtedness; (viii) Permitted Subsidiary Refinancing
Indebtedness; (ix) Indebtedness of a Restricted Subsidiary pursuant to a
Guarantee of the Notes; (x) to the extent that such incurrence does not result
in the incurrence by the Company or any Restricted Subsidiary of any obligation
for the payment of borrowed money of others, Indebtedness incurred solely as a
result of the execution by the Company or its Restricted Subsidiaries of
letters of credit relating to workers' compensation or self insurance,
performance bonds or similar instruments; provided, however, that the foregoing
exception shall not be applicable to Indebtedness incurred in connection with
the performance by the Company or its Restricted Subsidiaries of such bonds or
instruments or payments of such letters of credit; (xi) Acquired Indebtedness
incurred by the Restricted Subsidiaries of the Company on or after the date
hereof the Indenture, provided that (A) the aggregate amount of such Acquired
Indebtedness (including any Permitted Subsidiary Refinancing Indebtedness
issued to refinance, replace or refund such Indebtedness) outstanding at any
time pursuant to this clause (xi) shall not exceed $10.0 million, (B)
immediately before and after giving effect to the incurrence of such Acquired
Indebtedness, no Default or Event of Default shall have occurred and be
continuing and after giving effect to
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<PAGE> 21
the incurrence of such Acquired Indebtedness the Company could incur at least
$1.00 of additional Indebtedness under the first paragraph of Section 4.8
hereof and (C) such Acquired Indebtedness was not incurred in connection with
or in contemplation of the subject transaction; (xii) Indebtedness incurred by
the Wholly-Owned Foreign Subsidiaries of the Company in an aggregate principal
amount not to exceed the sum of (1) 85% of the amount of Eligible Foreign
Receivables and 50% of the amount of Eligible Foreign Inventory, at any time
outstanding minus (2) the amount of any such Indebtedness retired with Net Cash
Proceeds from any Asset Sale; and (xiii) in addition to Indebtedness specified
in clauses (i) through (xii) above, additional Indebtedness in an aggregate
principal amount not to exceed $5.0 million at any time outstanding.
"Permitted Investments" means (i) Investments in any assets or
property to be used in the Business of the Company or any of its Restricted
Subsidiaries; (ii) any Investments in the Company or in a Wholly-Owned
Restricted Subsidiary of the Company; (iii) any Investments in Cash
Equivalents; (iv) any Investment acquired solely in exchange for Equity
Interests (other than Disqualified Stock) of the Company; (v) without
duplication of clause (iv) hereof, Investments by the Company or any Restricted
Subsidiary of the Company in a Person engaged principally in the Business of
the Company or any of its Restricted Subsidiaries, if as a result of such
Investment (a) such Person becomes a Wholly-Owned Restricted Subsidiary of the
Company or (b) 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; (vi)
loans and advances by the Company or any Restricted Subsidiary to their
respective employees made in the ordinary course of business and consistent
with customary practices, which loans and advances do not exceed in the
aggregate $1.0 million at any one time outstanding; (vii) Investments acquired
by the Company or any of its Restricted Subsidiaries (A) in exchange of any
other Investment or accounts receivable held by the Company or such Restricted
Subsidiary in connection with or as a result of a bankruptcy workout,
reorganization or recapitalization of the issuer of such Investment or accounts
receivable or (B) as a result of a foreclosure by the Company or such
Restricted Subsidiary or other transfer of title with respect to any secured
Investment in default; (viii) Investments permitted under Sections 4.13 and
4.15 hereof; and (ix) any Investment in an Unrestricted Subsidiary of the
Company or in an entity (except a Wholly-Owned Restricted Subsidiary of the
Company) in which the Company or any Wholly-Owned Restricted Subsidiary of the
Company has an Equity Interest together with one or more other Persons, and
which is formed after the date hereof for the purpose of engaging in the
Business, provided that, at the date any such Investment is made and after
giving effect thereto, such Investment, together with all other such
Investments by the Company and its Restricted Subsidiaries since the date of
this Indenture, does not in the aggregate exceed $15.0 million.
"Permitted Liens" means (i) Liens in favor of the Company; (ii)
(A) Liens securing Indebtedness of the Company in an amount not in excess of
that permitted to be incurred in accordance with clause (i) of the definition
of "Permitted Indebtedness" and (B) Liens securing Indebtedness of the Wholly-
Owned Foreign Subsidiaries of the Company which are Restricted Subsidiaries
incurred pursuant to clause (xii) of the definition of "Permitted
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<PAGE> 22
Indebtedness;" (iii) Liens existing on the date of this Indenture; (iv) Liens
securing Indebtedness, the proceeds of which are used to refinance secured
Indebtedness of the Company or any of its Restricted Subsidiaries, provided
that (a) such Liens are on terms at least as favorable to the Holders of the
Notes as those governing the Indebtedness being refinanced, (b) such Liens
shall not extend to property other than that encumbered to secure the
Indebtedness being refinanced and (c) the principal amount of the Indebtedness
secured by such Liens is not increased; (v) 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 not created in connection with or in contemplation of such merger or
consolidation and do not extend to any property or assets other than those of
the Person merged into or consolidated with the Company or such Restricted
Subsidiary; (vi) 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 not created in connection with or in contemplation of such
acquisition and do not extend to any property or assets other than those being
acquired; (vii) Liens to secure the performance of statutory obligations,
surety or appeal bonds, performance bonds, leases or other obligations of a
like nature incurred in the ordinary course of business (other than obligations
for borrowed money); (viii) 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, if any, as
shall be required in conformity with GAAP shall have been made therefor; (ix)
Liens imposed by law, such as mechanics', carriers', warehousemen's,
materialmen's, and vendors' Liens, incurred in good faith in the ordinary
course of business with respect to amounts not yet delinquent or being
contested in good faith by appropriate proceedings if a reserve or other
appropriate provisions, if any, as shall be required by GAAP shall have been
made therefor; (x) zoning restrictions, easements, licenses, covenants,
reservations, restrictions on the use of real property or minor irregularities
of title incident thereto that do not, in the aggregate, materially detract
from the value of the property or the assets of the Company or impair the use
of such property in the operation of the Company's business; (xi) judgment
Liens to the extent that such judgments do not cause or constitute a Default or
an Event of Default; (xii) Liens arising from Purchase Money Indebtedness,
provided that each such Lien shall encumber only the assets or property (or
portions thereof) which is subject to such Purchase Money Indebtedness and
shall attach to such property within 120 days of the acquisition or lease
thereof; and (xiii) precautionary filings of any financial statement under the
Uniform Commercial Code (or equivalent statutes) of any jurisdiction made in
connection with Capital Lease Obligations permitted to be incurred under
Section 4.8 hereof, provided that such Lien does not violate clause (xii)
hereof and provided that clauses (ii), (iii) and (iv) shall not permit Liens on
Capital Stock of a Restricted Subsidiary.
"Permitted Subsidiary Refinancing Indebtedness" means
Indebtedness of any Restricted Subsidiary, the net proceeds of which are used
to renew, extend, refinance, refund or repurchase outstanding Indebtedness of
such Restricted Subsidiary, provided that (i) if the Indebtedness (including
any Guarantee) being renewed, extended, refinanced, refunded or repurchased is
pari passu with or subordinated in right of payment to such Guarantee, then
such Indebtedness is pari passu with or subordinated in right of payment to, as
the case may be, such
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<PAGE> 23
Guarantee at least to the same extent as the Indebtedness being renewed,
extended, refinanced, refunded or repurchased, (ii) such Indebtedness is
scheduled to mature no earlier than the Indebtedness being renewed, extended,
refinanced, refunded or repurchased, and (iii) such Indebtedness has an Average
Life at the time such Indebtedness is incurred that is equal to or greater than
the Average Life of the Indebtedness being renewed, extended, refinanced,
refunded or repurchased, provided, further, that such Indebtedness (to the
extent that such Indebtedness constitutes Permitted Subsidiary Refinancing
Indebtedness) is in an aggregate principal amount (or, if such Indebtedness is
issued at a price less than the principal amount thereof, the aggregate amount
of gross proceeds therefrom is) not in excess of the aggregate principal amount
then outstanding of the Indebtedness being renewed, extended, refinanced,
refunded or repurchased (or if the Indebtedness being renewed, extended,
refinanced, refunded or repurchased was issued at a price less than the
principal amount thereof, then not in excess of the amount of liability in
respect thereof determined in accordance with GAAP) (plus the amount of
reasonable fees and expenses incurred in connection therewith); provided,
however, that a Restricted Subsidiary shall not incur refinancing Indebtedness
to renew, extend, refinance, refund or repurchase outstanding Indebtedness of
another Subsidiary.
"Person" means any individual, corporation, limited liability
company, general or limited partnership, joint venture, association, joint-
stock company, trust, estate, charitable foundation, unincorporated
organization or government or any agency or political subdivision thereof or
any other entity.
"Preferred Stock" as applied to the Capital Stock of any
corporation, means Capital Stock of any class or classes (however designated),
which is preferred as to the payment of dividends, or upon any voluntary or
involuntary liquidation or dissolution of such corporation, over shares of
Capital Stock of any other class of such corporation.
"Private Exchange Offer" means a private exchange offer pursuant
to Section 2(a) of the Registration Rights Agreement.
"Public Equity Offering" means a bona fide underwritten sale to
the public of common stock of the Company pursuant to a registration statement
(other than on Form S-8 or any other form relating to securities issuable under
any benefit plan of the Company) that is declared effective by the SEC.
"Public Market" exists at any time with respect to the Capital
Stock of the Company if such Capital Stock of the Company is then (a)
registered with the SEC pursuant to Section 12(b) or 12(g) of the Exchange Act
and (b) traded either on a national securities exchange or on the NASDAQ Stock
Market.
"Purchase Money Indebtedness" means any Indebtedness of a Person
to any seller or other Person incurred to finance the acquisition (including in
the case of a Capital Lease Obligation, the lease) of any real or personal
tangible property which, in the good faith judgment of the Board of Directors
of the Company, is directly related to the Business and which is
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<PAGE> 24
incurred substantially concurrently with such acquisition and is secured only
by the assets so financed.
"Qualified Redemption Transaction" means a redemption of any
Capital Stock or Subordinated Indebtedness of the Company (including any
Subordinated Indebtedness of the Company accounted for as a minority interest
of the Company that is held by a Subsidiary that is a business trust or similar
entity formed for the primary purpose of issuing preferred securities the
proceeds of which are loaned to the Company or a Restricted Subsidiary) that by
its terms is convertible into Capital Stock of the Company if on the date of
notice of the call for such redemption (A) a Public Market exists in the shares
of such Capital Stock of the Company and (B) the average closing price on the
Public Market for shares of such Capital Stock of the Company for the twenty
trading days immediately preceding the date of such notice exceeds 120% of the
conversion price per share (determined by reference to the redemption price) of
such Capital Stock of the Company issuable upon conversion of such Capital
Stock or Subordinated Indebtedness of the Company called for redemption.
"Reference Period" means, with respect to any Person, the four
full consecutive fiscal quarters ended with the last full fiscal quarter for
which financial information is available immediately preceding any date upon
which any determination is to be made pursuant to the terms of the Notes or
this Indenture.
"Registration Rights Agreement" means that certain Registration
Rights Agreement, dated as of the date of this Indenture, between the Company
and the Initial Purchaser, as amended, modified or supplemented from time to
time.
"Responsible Officer" when used with respect to the Trustee,
means any officer within the corporate trust department of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above officers
and also means, with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of his knowledge of and
familiarity with the particular subject.
"Restricted Investment" means an Investment other than a
Permitted Investment. With respect to Unrestricted Subsidiaries or Restricted
Subsidiaries, the amount of Restricted Investments shall be calculated as the
greater of (i) the book value of assets contributed by the Company or a
Restricted Subsidiary or (ii) the Fair Market Value of the assets contributed
by the Company or a Restricted Subsidiary.
"Restricted Subsidiary" means (i) any Subsidiary of the Company
in existence on the date of this Indenture, (ii) any Subsidiary of the Company
(other than a Subsidiary that is also a Subsidiary of an Unrestricted
Subsidiary) organized or acquired after the date of this Indenture, unless such
Subsidiary shall have been designated as an Unrestricted Subsidiary by
resolution of the Board of Directors as provided in and in compliance with the
definition of "Unrestricted Subsidiary" and (iii) any Unrestricted Subsidiary
which is designated as a
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<PAGE> 25
Restricted Subsidiary by the Board of Directors of the Company as provided in
and in compliance with the definition of "Unrestricted Subsidiary." Any
Indebtedness of a Person existing at the time such Person becomes a Restricted
Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall
be deemed to be incurred by such Restricted Subsidiary at the time it becomes a
Restricted Subsidiary.
"Sale/Leaseback Transaction" means with respect to the Company or
any of its Restricted Subsidiaries, any arrangement with any Person providing
for the leasing by the Company or any of its Restricted Subsidiaries of any
property acquired or placed into service more than 180 days prior to such
arrangement, whereby such property has been or is to be sold or transferred by
the Company or any of its Restricted Subsidiaries to such Person.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Indebtedness" means any Indebtedness of the Company
(whether outstanding on the date hereof or hereafter incurred), unless such
Indebtedness is contractually subordinate or junior in right of payment of
principal, premium and interest to the Notes.
"Senior Indebtedness of a Guarantor" means any Indebtedness of
such Guarantor (whether outstanding on the date hereof or hereafter incurred),
unless such Indebtedness is contractually subordinate or junior in right of
payment of principal, premium and interest to the Guarantees.
"Series A Notes" means the Company's 10 3/8% Series A Senior
Notes due 2007 to be issued pursuant to this Indenture.
"Series B Notes" means the Company's 10 3/8% Series B Senior
Notes due 2007 to be issued pursuant to this Indenture in the Exchange Offer
and the Private Exchange Offer.
"S&P" means Standard & Poor's Ratings Services, and its
successors.
"Stated Maturity" means, when used with respect to any Note or
any installment of interest thereon, the date specified in such Note as the
fixed date on which the principal of such Note or such installment of interest
is due and payable, and when used with respect to any other Indebtedness, means
the date specified in the instrument governing such Indebtedness as the fixed
date on which the principal of such Indebtedness, or any installment of
interest thereon, is due and payable, 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.
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<PAGE> 26
"Subordinated Indebtedness of a Guarantor" means any Indebtedness
of such Guarantor (whether outstanding on the date hereof or hereafter
incurred) which is contractually subordinate or junior in right of payment of
principal, premium and interest to the Guarantees.
"Subordinated Indebtedness of the Company" means any Indebtedness
of the Company (whether outstanding on the date hereof or hereafter incurred)
which is contractually subordinate or junior in right of payment of principal,
premium and interest to the Notes.
"Subsidiary" means, with respect to any Person (i) any
corporation, association or other business entity of which more than 50% of the
total general voting power of shares of Capital Stock entitled under ordinary
circumstances (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 Persons or one or more Subsidiaries of such Person or any combination
thereof.
"TIA" means the Trust Indenture Act of 1939, as in effect on the
date this Indenture is qualified under the TIA.
"Transfer Restricted Securities" has the meaning ascribed to the
term "Registrable Securities" in the Registration Rights Agreement.
"Trustee" means the party named as such above until a successor
replaces it in accordance with applicable provisions of this Indenture, and
thereafter means the successor serving hereunder.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company
that at the time of determination shall be or continue to be designated an
Unrestricted Subsidiary by the Board of the Company in the manner provided
below and (ii) any Subsidiary of any Unrestricted Subsidiary. The Board of
Directors of the Company may designate any Subsidiary of the Company (including
any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary
of the Company by resolution of the Board of Directors, provided that, (a)
immediately after giving effect to such designation, no Default or Event of
Default shall have occurred and be continuing, (b) any such designation shall
be deemed, at the election of the Company at the time of such designation, to
be either (but not both) (x) the making of a Restricted Payment at the time of
such designation in an amount equal to the Investment in such Subsidiary
subject to the restrictions contained in Section 4.9 hereof or (y) the making
of an Asset Sale at the time of such designation in an amount equal to the
Investment in such Subsidiary subject to the restrictions contained in Section
4.13 hereof, and (c) such Subsidiary or any of its Subsidiaries does not own
any Capital Stock or Indebtedness of, or own or hold any Lien on any property
of, the Company or any other Subsidiary of the Company that is not a Subsidiary
of the Subsidiary to be so designated. The Company shall be deemed to make an
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<PAGE> 27
Investment in an amount equal to the greater of the book value (as determined
in accordance with GAAP) and the Fair Market Value of the net assets of any
Restricted Subsidiary (or, if the Company has not theretofore made an
Investment in such Restricted Subsidiary, in an amount equal to the Investments
being made), at the time that such Restricted Subsidiary is designated an
Unrestricted Subsidiary, and any property transferred to an Unrestricted
Subsidiary from the Company shall be deemed an Investment valued at an amount
equal to the greater of its book value (as determined in accordance with GAAP)
and its Fair Market Value at the time of such transfer. A Person may be
designated as an Unrestricted Subsidiary only if and for so long as such Person
(i) has no Indebtedness other than Non-Recourse Indebtedness; (ii) is a Person
with respect to which neither the Company nor any of its Restricted
Subsidiaries has any direct or indirect obligation (a) to subscribe for
additional Equity Interests or (b) to make any payment to maintain or preserve
such Person's financial condition or to cause such Person to achieve any
specified levels of operating results; and (iii) has not Guaranteed or
otherwise directly or indirectly provided credit support for any Indebtedness
of the Company or any of its Restricted Subsidiaries. Any Unrestricted
Subsidiary of the Company may be designated as a Restricted Subsidiary of the
Company by resolution of the Board of Directors of the Company; provided that,
immediately after giving effect to such designation, no Default or Event of
Default shall have occurred and be continuing and the Company could incur at
least $1.00 of additional Indebtedness under the first paragraph of Section 4.8
hereof. The Company shall evidence any such designation to the Trustee by
filing with the Trustee within 45 days of such designation a copy of the
resolution giving effect to such designation and an Officers' Certificate
certifying that such designation has been made and stating that such
designation complies with the foregoing provisions.
"Voting Stock" means any class or classes of Capital Stock
pursuant to which the holders thereof have the general voting power under
ordinary circumstances (without regard to the occurrence of any contingency) to
elect at least a majority of the board of directors, managers or trustees of
any Person or, with respect to a partnership (whether general or limited), any
general partner interest in such partnership.
"Wholly-Owned Foreign Subsidiary" shall mean, as to any Person,
any Wholly-Owned Restricted Subsidiary of such Person which is a Foreign
Subsidiary.
"Wholly-Owned Restricted Subsidiary" of any Person means a
Restricted Subsidiary of such Person 100% of the outstanding Capital Stock or
other ownership interests of which (other than directors' qualifying shares)
shall be at the time beneficially owned by such Person either directly or
indirectly through Wholly-Owned Subsidiaries.
"Wholly-Owned Subsidiary" of any Person means a Subsidiary of
such Person 100% of the outstanding Capital Stock or other ownership interests
of which (other than directors' qualifying shares) shall be at the time
beneficially owned by such Person either directly or indirectly through Wholly-
Owned Subsidiaries.
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<PAGE> 28
SECTION 1.2 Other Definitions
<TABLE>
<CAPTION>
DEFINED
TERM IN SECTION
---- ----------
<S> <C>
"Affiliate Transaction" 4.11
"Asset Sale Offer" 4.13
"Bankruptcy Law" 6.1
"Change of Control Offer" 4.14
"Change of Control Price" 4.14
"Change of Control Payment Date" 4.14
"Covenant Defeasance" 8.3
"Custodian" 6.1
"DTC" 2.3
"Excess Proceeds" 4.13
"Funding Guarantor" 10.6
"incur" 4.8
"Legal Defeasance" 8.2
"Legal Holiday" 11.7
"Offer Amount" 3.9
"Offer Period" 3.9
"Paying Agent" 2.3
"Payment Default" 6.1
"Purchase Date" 3.9
"Registrar" 2.3
"Restricted Payments" 4.9
</TABLE>
SECTION 1.3 Incorporation by Reference of Trust Indenture Act
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes;
"indenture security holder" means a Holder of Notes;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
"obligor" on the Notes means the Company, as obligor, or any
successor obligor upon the Notes.
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All other terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule under
the TIA have the meanings so assigned to them.
SECTION 1.4 Rules of Construction
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the
plural include the singular;
(5) the words "herein," "hereof" and "hereunder" and other
words of similar import refer to the Indenture as a whole and not to any
particular Article, Section or other subdivision;
(6) any gender used in this Indenture shall be deemed to
include the neuter, masculine or feminine genders;
(7) provisions apply to successive events and transactions;
(8) the word "including" (and, with correlative meaning, the
word "include") means including, without limiting the generality of any
description preceding such word; and
(9) references to sections of or rules under the Securities
Act or the Exchange Act shall be deemed to include substitute, replacement or
successor sections or rules adopted by the SEC from time to time.
ARTICLE 2
THE NOTES
SECTION 2.1 Form and Dating
The Original Notes and the Trustee's certificate of
authentication relating thereto shall be substantially in the form of Exhibit A
hereto, with such appropriate insertions, substitutions and other variations as
are required or permitted by this Indenture. The Exchange
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Notes and the Trustee's certificate of authentication relating thereto shall be
substantially in the form of Exhibit A hereto, with such appropriate
insertions, substitutions and other variations as are required or permitted by
this Indenture; provided, that Exchange Notes issued in the Exchange Offer
shall not bear the legend set forth in Exhibit A hereto as indicated by
footnote 2; provided, further, that Exchange Notes issued in both the Exchange
Offer and the Private Exchange Offer shall not refer to Liquidated Damages and
shall not include paragraph 20 of Exhibit A hereto. The Notes may have
notations, legends or endorsements required by this Indenture, law, stock
exchange rule, depository rule or usage. Any such notation, legend or
endorsement shall be delivered in writing to the Trustee by the Company. Each
Note shall be dated the date of its issuance and show the date of its
authentication.
The terms and provisions contained in the Notes, annexed hereto
as Exhibit A hereto, shall constitute, and are hereby expressly made, a part of
this Indenture, and the Company and the Trustee, by their execution and
delivery of this Indenture, expressly agree to such terms and provisions and to
be bound thereby.
The Original Notes bought and sold in reliance on Rule 144A
initially will be issued in global form, substantially in the form of Exhibit A
attached hereto (including the text set forth in footnote 1 thereto and the
additional schedule referred to therein). The Original Notes initially will be
deposited with the Trustee, as Note Custodian. The Global Notes initially
shall be registered in the name of the Depository or the nominee of the
Depository. A Global Note shall represent such of the outstanding Notes as
shall be specified therein and shall provide that it shall represent the
aggregate amount of outstanding Notes from time to time endorsed thereon and
subject to the limitation set forth in Section 2.2 that the aggregate principal
amount of outstanding Notes represented thereby may from time to time be
reduced or increased, as appropriate, to reflect exchanges and redemptions.
Any endorsement of a Global Note to reflect the amount of any increase or
decrease in the amount of outstanding Notes represented thereby shall be made
by the Trustee, as Note Custodian, in accordance with instructions given by the
Holder thereof as required by Section 2.6 hereof.
Original Notes offered and sold other than as described in the
preceding paragraph shall be issued in the form of Definitive Notes in
registered form in substantially the form set forth in Exhibit A.
SECTION 2.2 Execution and Authentication
Two Officers of the Company shall sign the Notes for the Company
by manual or facsimile signature. The seal of the Company shall be reproduced
on the Notes and may be in facsimile form.
If an Officer of the Company whose signature is on a Note no
longer holds that office at the time the Note is authenticated, the Note shall
nevertheless be valid.
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Only such Notes as shall bear thereon a certificate of
authentication substantially in the form set forth in Exhibit A hereto,
manually executed by the Trustee, shall be entitled to the benefits of this
Indenture or be valid or obligatory for any purpose. Such certificate of
authentication executed by the Trustee upon any Note executed by the Company
shall be conclusive evidence that the Note so authenticated has been duly
authenticated and delivered hereunder.
At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Notes executed by the
Company to the Trustee for authentication, together with a request for the
authentication and delivery of such Notes signed by an Officer of the Company,
and the Trustee, in accordance with such request, shall authenticate and
deliver such Notes as provided in this Indenture.
The Trustee shall authenticate (i) Original Notes for original
issue in the aggregate principal amount not to exceed $120,000,000, and (ii)
Exchange Notes issued, either (x) in the Exchange Offer for the Original Notes
pursuant to the Exchange Offer Registration Statement filed with the SEC from
time to time, for issue only in exchange for a like principal amount of
Original Notes or (y) in the Private Exchange Offer, for issue only in exchange
for a like principal amount of Original Notes, in each case, upon written order
of the Company in the form of an Officers' Certificate. The Officers'
Certificate shall specify the amount of Notes to be authenticated and the date
on which the Notes are to be authenticated, whether the Notes are to be
Original Notes or Exchange Notes and whether the Notes are to be Definitive
Notes or Global Notes. Except as contemplated by Section 2.7 hereof, the
aggregate principal amount of Notes outstanding at any time may not exceed
$120,000,000. Notwithstanding the foregoing, all Notes issued under this
Indenture shall vote and consent together on all matters as one class and no
series of Notes will have the right to vote or consent as a separate class on
any matter.
The Notes shall be issuable in fully registered form only,
without coupons, in denominations of $1,000 and any integral multiple thereof.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. Unless limited by the terms of such
appointment, an authenticating agent may authenticate Notes whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same right as an Agent to deal with the Company or an Affiliate of the Company.
The Trustee shall not be liable for any act or failure to act of the
authenticating agent to perform any duty either required herein or authorized
herein to be performed by such person in accordance with this Indenture. Each
authenticating agent shall be acceptable to the Company and otherwise comply in
all respects with the eligibility requirements of the Trustee contained in this
Indenture.
SECTION 2.3 Registrar and Paying Agent
The Company shall maintain an office or agency where (a) Notes
may be presented for registration of transfer or for exchange ("Registrar"),
(b) Notes may be presented
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or surrendered for payment ("Paying Agent") and (c) notices and demands to or
upon the Company in respect of the Notes may be served. The Registrar shall
keep a register of the Notes and of their transfer and exchange. The Company
may appoint one or more co-registrars and one or more additional paying agents.
The term "Registrar" includes any co-registrar and the term "Paying Agent"
includes any additional paying agents. The Company may change any Paying Agent
or Registrar without notice to any Holder. The Company shall notify the
Trustee of the name and address of any Agent not a party to this Indenture. If
the Company fails to appoint or maintain another entity as Registrar or Paying
Agent, the Trustee shall act as such and shall be entitled to appropriate
compensation in accordance with Section 7.7 hereof. The Company or any of its
Subsidiaries may act as Paying Agent or Registrar, except that for purposes of
payments on the Notes pursuant to Sections 4.13 and 4.14 hereof, neither the
Company nor any of its Affiliates may act as Paying Agent.
The Company shall enter into an appropriate agency agreement with
any Agent not a party to this Indenture, which shall incorporate the provisions
of the TIA. The agency agreement shall implement the provisions of this
Indenture that relate to such Agent. The Company initially appoints The
Depository Trust Company ("DTC") to act as Depository with respect to the
Global Notes.
The Registrar or a co-registrar and a Paying Agent shall be
maintained by the Company in the Borough of Manhattan, the City of New York.
The Company initially appoints the Trustee to act as the Registrar and Paying
Agent and agent for service of notices and demands in connection with the
Notes.
SECTION 2.4 Paying Agent to Hold Assets in Trust
The Company shall require each Paying Agent other than the
Trustee to agree in writing that the Paying Agent will hold in trust for the
benefit of Holders or the Trustee all assets held by the Paying Agent for the
payment of principal of, premium, if any, or interest on, or Liquidated
Damages, if any, with respect to, the Notes (whether such assets have been
distributed to it by the Company or any other obligor on the Notes), and will
notify the Trustee of any Default by the Company or any other obligor on the
Notes in making any such payment. While any such Default continues, the
Trustee may require a Paying Agent to distribute all assets held by it to the
Trustee and account for any assets disbursed. Except as provided in the
immediately preceding sentence, the Company at any time may require a Paying
Agent to pay all assets held by it to the Trustee and account for any assets
disbursed. Upon payment over and accounting to the Trustee, the Paying Agent
(if other than the Company or any of its Subsidiaries) shall have no other
liability for the assets. If either the Company or any of its Subsidiaries
acts as Paying Agent, it shall segregate and hold in a separate trust fund for
the benefit of the Holders all money held by it as Paying Agent.
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SECTION 2.5 Holder Lists
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders and shall otherwise comply with TIA Section 312(a). If the Trustee is
not the Registrar, the Company shall furnish to the Trustee as of each Interest
Record Date and at such other times as the Trustee may request in writing a
list in such form and as of such date as the Trustee may reasonably require of
the names and addresses of Holders, including the aggregate principal amount of
Notes held by each Holder, and the Company shall otherwise comply with TIA
Section 312(a).
SECTION 2.6 Transfer and Exchange
(a) Transfer and Exchange of Definitive Notes. When
Definitive Notes are presented to the Registrar with the request to register
the transfer of the Definitive Notes, or to exchange such Definitive Notes for
an equal principal amount of Definitive Notes of other authorized
denominations, the Registrar shall register the transfer or make the exchange
as requested if its requirements for such transactions are met; provided,
however, that the Definitive Notes presented or surrendered for registration of
transfer or exchange:
(i) shall be duly endorsed or accompanied by a written
instrument of transfer in form satisfactory to the Trustee and
the Registrar duly executed by the Holder thereof or by an
attorney who is duly authorized in writing to act on behalf of
the Holder; and
(ii) shall, in the case of a Transfer Restricted
Security, be accompanied by the following additional information
and documents, as applicable:
(A) if such Transfer Restricted Securities are
being delivered to the Registrar by a Holder for
registration in the name of such Holder, without transfer,
a certification from such Holder to that effect (in
substantially the form of Exhibit B hereto); or
(B) if such Transfer Restricted Securities are
being transferred (1) to a "qualified institutional buyer"
(as defined in Rule 144A under the Securities Act) in a
transaction meeting the requirements of Rule 144A under
the Securities Act or (2) pursuant to an exemption from
registration in a transaction meeting the requirements of
Rule 144 under the Securities Act (based upon an Opinion
of Counsel if the Company so requests) or (3) pursuant to
an effective registration statement under the Securities
Act, a certification to that effect from such Holder (in
substantially the form of Exhibit B hereto); or
(C) if such Transfer Restricted Securities are
being transferred to an institutional "accredited
investor," within the meaning of Rule
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501(a)(1), (2), (3) or (7) under the Securities Act
pursuant to a private placement exemption from the
registration requirements of the Securities Act (based
upon an Opinion of Counsel if the Company so requests), a
certification to that effect from such Holder (in
substantially the form of Exhibit B hereto) and a
certification from the applicable transferee (in
substantially the form of Exhibit C hereto); or
(D) if such Transfer Restricted Securities are
being transferred outside the U.S. to a foreign person
pursuant to an exemption from registration in a
transaction meeting the requirements of Regulation S under
the Securities Act (based on an Opinion of Counsel if the
Company so requests), certification to that effect from
such Holder (in substantially the form of Exhibits B and D
hereto); or
(E) if such Transfer Restricted Securities are
being transferred in reliance on another exemption from
the registration requirements of the Securities Act (based
upon an Opinion of Counsel if the Company so requests), a
certification to that effect from such Holder (in
substantially the form of Exhibit B hereto).
(b) Transfer of a Definitive Note for a Beneficial Interest in
a Global Note. A Definitive Note may not be exchanged for a beneficial
interest in a Global Note except upon satisfaction of the requirements set
forth below. Upon receipt by the Trustee of a Definitive Note, duly endorsed
or accompanied by a written instrument of transfer in form satisfactory to the
Trustee duly executed by the Holder thereof or by an attorney who is duly
authorized in writing to act on behalf of the Holder, together with:
(i) if such Definitive Note is being delivered to the
Trustee by a Holder, without transfer, to enable such Holder to
obtain a beneficial interest in a Global Note, a certification
from such Holder to that effect (in substantially the form of
Exhibit B hereto); provided that such Holder provides a
certification that such Holder is otherwise permitted to hold a
beneficial interest in a Global Note;
(ii) if such Definitive Note is a Transfer Restricted
Security and is being transferred, certification, substantially
in the form of Exhibit B hereto, that either (A) such Definitive
Note is being transferred to a "qualified institutional buyer"
(as defined in Rule 144A under the Securities Act) in a
transaction meeting the requirements of Rule 144A under the
Securities Act, (B) to an institutional "accredited investor,"
within the meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act pursuant to a private placement exemption from the
registration requirements of the Securities Act (based upon an
Opinion of Counsel if the Company so requests), provided that the
Trustee receives a certification from such transferee (in
substantially the form of Exhibit C hereto), or (C) to a foreign
person outside the U.S. pursuant to an exemption from
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registration in a transaction meeting the requirements of
Regulation S under the Securities Act (based upon an Opinion of
Counsel if the Company so requests), provided that the Trustee
receives a certification from such transferor (in substantially
the form of Exhibit D hereto); and
(iii) whether or not such Definitive Note is a Transfer
Restricted Security, written instructions from the Holder thereof
directing the Trustee to make, or directing the Note Custodian to
make, an endorsement on the Global Note to reflect an increase in
the aggregate principal amount of the Notes represented by the
Global Note;
then the Trustee shall cancel such Definitive Note in accordance with Section
2.11 hereof and cause, or direct the Note Custodian to cause, in accordance
with the standing instructions and procedures existing between the Depository
and the Note Custodian, the aggregate principal amount of Notes represented by
the Global Note to be increased accordingly. If no Global Notes are then
outstanding, the Company shall issue and, upon receipt of an authentication
order in accordance with Section 2.2 hereof, the Trustee shall authenticate a
new Global Note in the appropriate principal amount.
(c) Transfer and Exchange of Global Notes. The transfer and
exchange of Global Notes or beneficial interests therein shall be effected
through the Depository, in accordance with this Indenture and the procedures of
the Depository therefor, which shall include restrictions on transfer
comparable to those set forth herein to the extent required by the Securities
Act.
(d) Transfer of a Beneficial Interest in a Global Note for a
Definitive Note.
(i) Any Person having a beneficial interest in a Global
Note may upon request exchange such beneficial interest for a
Definitive Note. Upon receipt by the Trustee of written
instructions or such other form of instructions as is customary
for the Depository from the Depository or its nominee on behalf
of any Person having a beneficial interest in a Global Note, and,
in the case of a Transfer Restricted Security, the following
additional information and documents (all of which may be
submitted by facsimile):
(A) if such beneficial interest is being
transferred to the Person designated by the Depository as
being the beneficial owner, a certification from such
Person to that effect (in substantially the form of
Exhibit B hereto); or
(B) if such beneficial interest is being
transferred (1) to a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act) in a
transaction meeting the requirements of Rule 144A under
the Securities Act or (2) pursuant to an exemption from
registration
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in a transaction meeting the requirements of Rule 144
under the Securities Act (based upon an Opinion of Counsel
if the Company so requests) or (3) pursuant to an
effective registration statement under the Securities Act,
a certification to that effect from the transferor (in
substantially the form of Exhibit B hereto); or
(C) if such beneficial interest is being
transferred to an institutional "accredited investor,"
within the meaning of Rule 501(a)(1), (2), (3) or (7)
under the Securities Act pursuant to a private placement
exemption from the registration requirements of the
Securities Act (based upon an Opinion of Counsel if the
Company so requests), a certification to that effect from
such transferor (in substantially the form of Exhibit B
hereto) and a certification from the applicable transferee
(in substantially the form of Exhibit C hereto); or
(D) if such beneficial interest is being
transferred outside the U.S. to a foreign person pursuant
to an exemption from registration in a transaction meeting
the requirements of Regulation S under the Securities Act
(based upon an Opinion of Counsel if the Company so
requests), certifications to that effect from such
transferor (in substantially the form of Exhibits B and D
hereto); or
(E) if such beneficial interest is being
transferred in reliance on another exemption from the
registration requirements of the Securities Act (based
upon an Opinion of Counsel if the Company so requests), a
certification to that effect from such transferor (in
substantially the form of Exhibit B hereto);
then the Trustee or the Note Custodian, at the direction of the Trustee, shall,
in accordance with the standing instructions and procedures existing between
the Depository and the Note Custodian, cause the aggregate principal amount of
Global Notes to be reduced accordingly and, following such reduction, the
Company shall execute and, upon receipt of an authentication order in
accordance with Section 2.2 hereof, the Trustee shall authenticate and deliver
to the transferee a Definitive Note in the appropriate principal amount.
(ii) Definitive Notes issued in exchange for a
beneficial interest in a Global Note pursuant to this Section
2.6(d) shall be registered in such names and in such authorized
denominations as the Depository, pursuant to instructions from
its direct or indirect participants or otherwise, shall instruct
the Trustee. The Trustee shall deliver such Definitive Notes to
the Persons in whose names such Notes are so registered.
(e) Restrictions on Transfer and Exchange of Global Notes.
Notwithstanding any other provisions of this Indenture (other than the
provisions set forth in subsection (d) of this
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Section 2.6), a Global Note may not be transferred except as a whole by the
Depository to a nominee of the Depository or by a nominee of the Depository to
the Depository or another nominee of the Depository or by the Depository or any
such nominee to a successor Depository or a nominee of such successor
Depository.
(f) Authentication of Definitive Notes. If at any time:
(i) the Company notifies the Trustee in writing that
the Depository for the Notes is no longer willing or able to act
as Depository for the Global Notes and a successor Depository for
the Global Notes is not appointed by the Company within 90 days
after delivery of such notice; or
(ii) the Company, at its option, notifies the Trustee in
writing that it elects to cause the issuance of Definitive Notes
under this Indenture;
then the Company will execute, and the Trustee, upon receipt of an Officers'
Certificate requesting the authentication and delivery of Definitive Notes,
will authenticate and deliver Definitive Notes, in an aggregate principal
amount equal to the principal amount of the Global Notes, in exchange for such
Global Notes and registered in such names as the Depository shall instruct the
Trustee or the Company in writing.
(g) Legends.
(i) Except as permitted by the following paragraphs
(iii) and (iv), each Note certificate evidencing the Global Notes
and the Definitive Notes (and all Notes issued in exchange
therefor or substitution thereof) shall bear a legend in
substantially the following form until after the second
anniversary of the later of the date of original issuance of the
Note and the last day on which the Company or any Affiliate of
the Company was the owner of such Note (or any predecessor
security):
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM
REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THE
SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF
THE SECURITY EVIDENCED HEREBY (1) BY ITS ACQUISITION
HEREOF REPRESENTS THAT (A) IT IS A QUALIFIED INSTITUTIONAL
BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT)
OR (B) IT IS AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) WHO
IS AN
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INSTITUTION (AN "INSTITUTIONAL ACCREDITED INVESTOR") AND
(2) IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON
THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE
HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE
BENEFIT OF THE ISSUER THAT PRIOR TO THE DATE WHICH IS TWO
YEARS AFTER THE LATER OF THE DATE OF ORIGINAL ISSUANCE OF
THIS NOTE AND THE LAST DATE ON WHICH THE COMPANY OR ANY
AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS NOTE (THE
"RESALE RESTRICTION TERMINATION DATE") (X) SUCH SECURITY
MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY
(i)(a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c)
OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE
SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
(AND BASED UPON AN OPINION OF COUNSEL IF THE ISSUER SO
REQUESTS), (ii) TO THE ISSUER OR (iii) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION AND (Y) THE HOLDER WILL, AND EACH SUBSEQUENT
HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE
SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET
FORTH IN (X) ABOVE. THE FOREGOING RESTRICTIONS ON RESALE
WILL NOT APPLY SUBSEQUENT TO THE RESALE RESTRICTION
TERMINATION DATE."
(ii) Each Global Note shall also bear the following
legend:
"UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES
IN DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO
THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY OR BY THE DEPOSITORY OR ANY
SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
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REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW
YORK) ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER
ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN. THIS SECURITY IS A GLOBAL NOTE WITHIN THE MEANING OF THE
INDENTURE REFERRED TO HEREINAFTER. THIS GLOBAL NOTE MAY NOT BE EXCHANGED, IN
WHOLE OR IN PART, FOR A SECURITY REGISTERED IN THE NAME OF ANY PERSON OTHER
THAN THE DEPOSITORY TRUST COMPANY OR A NOMINEE THEREOF EXCEPT IN THE
CIRCUMSTANCES SET FORTH IN SECTION 2.6 OF THE INDENTURE, AND MAY NOT BE
TRANSFERRED, IN WHOLE OR IN PART, EXCEPT IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN SECTION 2.6 OF THE INDENTURE. BENEFICIAL INTEREST IN THIS GLOBAL
NOTE MAY NOT BE TRANSFERRED EXCEPT IN ACCORDANCE WITH SECTION 2.6 OF THE
INDENTURE."
(iii) Upon any sale or transfer of a Transfer Restricted
Security (including any Transfer Restricted Security represented
by a Global Note) pursuant to Rule 144 under the Securities Act
or an effective registration statement under the Securities Act:
(A) in the case of any Transfer Restricted
Security that is a Definitive Note, the Registrar shall
permit the Holder thereof to exchange such Transfer
Restricted Security for a Definitive Note that does not
bear the legend set forth in clause (i) above and rescind
any restriction on the transfer of such Transfer
Restricted Security; and
(B) in the case of any Transfer Restricted
Security represented by a Global Note, such Transfer
Restricted Security shall not be required to bear the
legend set forth in clause (i) above if all other
interests in such Global Note have been or are
concurrently being sold or transferred pursuant to Rule
144 under the Securities Act or pursuant to an effective
registration statement under the Securities Act, but such
Transfer Restricted Security shall continue to be subject
to the other provisions hereof; provided, however, that
with respect to any request for an exchange of a Transfer
Restricted Security that is represented by a Global Note
for a Definitive Note that does not bear a legend set
forth in clause (i) above, which request is made in
reliance upon Rule 144 under the
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Securities Act, the Holder thereof shall certify in
writing to the Registrar that such request is being made
pursuant to Rule 144 under the Securities Act (such
certification to be substantially in the form of Exhibit B
hereto).
(iv) Notwithstanding the foregoing, upon consummation of
the Exchange Offer, the Company shall issue and, upon receipt of
an authentication order in accordance with Section 2.2 hereof,
the Trustee shall authenticate Series B Notes in exchange for
Series A Notes accepted for exchange in the Exchange Offer, which
Series B Notes shall not bear the legend set forth in clause (i)
above, and the Registrar shall rescind any restriction on the
transfer of such Notes, in each case unless the Holder of such
Series A Notes is either (A) a broker-dealer, (B) a Person
participating in the distribution (within the meaning of the
Securities Act) of the Series A Notes, (C) a Person who is an
affiliate (as defined in Rule 144A) of the Company or (D) a
Person who is not acquiring Series B Notes in the ordinary course
of business. The Company shall identify to the Trustee such
Holders of the Notes in a written certification signed by an
Officer of the Company and, absent certification from the Company
to such effect, the Trustee shall assume that there are no such
Holders.
(v) By its acceptance of any Note bearing the legend
set forth in Section 2.6(g)(i) hereof, each Holder of such a Note
acknowledges the restrictions on transfer of such Note set forth
in this Indenture and in such legend and agrees that it will
transfer such Note only as provided in this Indenture.
(h) Cancellation and/or Adjustment of Global Note. At such
time as all beneficial interests in a Global Note have either been exchanged
for Definitive Notes, or redeemed, repurchased or cancelled, such Global Note
shall be returned to or retained and cancelled by the Trustee. At any time
prior to such cancellation, if any beneficial interest in a Global Note is
exchanged for Definitive Notes, or redeemed, repurchased or cancelled, the
principal amount of Notes represented by such Global Note shall be reduced and
an endorsement shall be made on such Global Note, by the Trustee or the Note
Custodian, at the direction of the Trustee to reflect such reduction.
(i) General Provisions with respect to Transfer and Exchanges.
(i) To permit registrations of transfers and exchanges,
the Company shall execute and the Trustee shall authenticate in
accordance with Section 2.2, pursuant to the terms of this
Indenture, Definitive Notes and Global Notes at the Registrar's
request.
(ii) No service charge shall be made to a Holder for any
registration of transfer or exchange, but the Company may require
payment of a sum sufficient to cover any transfer tax or similar
governmental charge payable in connection therewith (other than
any such transfer taxes or similar governmental
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charges payable upon exchange or transfer pursuant to Sections
2.10, 3.7, 3.9, 4.13, 4.14 and 9.5 hereof).
(iii) Neither the Company nor the Registrar shall be
required to register the transfer or exchange of any Note
selected for redemption in whole or in part, except the
unredeemed portion of any Note being redeemed in part.
(iv) All Definitive Notes and Global Notes issued upon
any registration of transfer or exchange of Definitive Notes or
Global Notes shall be the valid obligations of the Company,
evidencing the same debt, and entitled to the same benefits under
this Indenture as the Definitive Notes or Global Notes
surrendered upon such registration of transfer or exchange.
(v) The Company shall not be required to issue,
register the transfer or exchange of Notes during a period
beginning at the opening of 15 days before the day of any
selection of Notes for redemption under Section 3.2 and ending at
the close of business on the day of selection.
(vi) Prior to due presentment for registration of
transfer of any Note, the Trustee, any Agent and the Company may
deem and treat the Person in whose name any Note is registered as
the absolute owner of such Note for the purpose of receiving
payment of principal of, and premium, interest and Liquidated
Damages, if any, on such Note, and neither the Trustee, any Agent
nor the Company shall be affected by notice to the contrary.
(vii) The Trustee shall authenticate Definitive Notes and
Global Notes in accordance with the provisions of Section 2.2
hereof.
(viii) Neither the Company nor the Trustee shall be liable
for any delay by the Depository in identifying the beneficial
owners of the Notes and each such Person may conclusively rely
on, and shall be protected in relying on, instructions from the
Depository for all purposes (including with respect to the
registration and delivery, and the respective principal amounts,
of any Notes to be issued).
(ix) Members of, or participants in, the Depository
shall have no rights under this Indenture with respect to any
Global Note held on their behalf by the Depository, or the
Trustee as the Note Custodian, or under the Global Note, and the
Depository may be treated by the Company, the Trustee and any
agent of the Company or the Trustee as the absolute owner of the
Global Note for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall (x) prevent the Company, the
Trustee or any agent of the Company or the Trustee from giving
effect to any written certification, proxy or other authorization
furnished by the Depository or (y) impair, as between the
Depository and members of, or
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participants in, the Depository, the operation of customary
practices governing the exercise of the rights of a Holder of any
Note.
SECTION 2.7 Replacement Notes
If any mutilated Note is surrendered to the Trustee, or the
Company and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Note, the Company shall issue and the
Trustee, upon the written order of the Company signed by an Officer of the
Company, shall authenticate a replacement Note if the Trustee's requirements
are met. If required by the Trustee or the Company, an indemnity bond must be
supplied by the Holder that is sufficient in the judgment of the Trustee and
the Company to protect the Company, the Trustee, any Agent or any
authenticating agent from any loss which any of them may suffer if a Note is
replaced. The Company and the Trustee may charge for their fees and expenses
in replacing a Note. If after the delivery of such new Note, a bona fide
purchaser of the original Note in lieu of which such new Note was issued
presents for payment such original Note, the Company and the Trustee shall be
entitled to recover such new Note from the person to whom it was delivered or
any transferee thereof, except a bona fide purchaser, and shall be entitled to
recover upon the security or indemnity provided therefor to the extent of any
loss, damage, cost or expense incurred by the Company or the Trustee in
connection therewith.
Upon the issuance of a new Note under this Section 2.7, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto.
Every replacement Note is an additional obligation of the Company
and shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.
SECTION 2.8 Outstanding Notes
The Notes outstanding at any time are all the Notes authenticated
by the Trustee except for those cancelled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Note effected by the
Trustee hereunder, and those described in this Section 2.8 as not outstanding.
Except as set forth in Section 2.9 hereof, a Note does not cease to be
outstanding because either of the Company, a Subsidiary of the Company or an
Affiliate of the Company holds a Note.
If a Note is replaced pursuant to Section 2.7 hereof, it ceases
to be outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under
Section 4.1 hereof, it ceases to be outstanding and interest on it ceases to
accrue.
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If the Paying Agent (other than the Company, a Subsidiary or an
Affiliate of any thereof) segregates and holds in trust, in accordance with
this Indenture, on a redemption date or maturity date, money sufficient to pay
all principal, interest, premium and Liquidated Damages, if any, payable on
that date with respect to the Notes (or the portion thereof to be redeemed or
maturing, as the case may be), then on and after that date such Notes (or
portions thereof) shall be deemed to be no longer outstanding and shall cease
to accrue interest.
SECTION 2.9 Treasury Notes
In determining whether the Holders of the required principal
amount of Notes have concurred in any direction, waiver, consent or notice,
Notes owned by the Company or any Affiliate of the Company shall be considered
as though not outstanding, except that for the purposes of determining whether
the Trustee shall be protected in relying on any such direction, waiver,
consent or notice, only Notes which a Responsible Officer of the Trustee
actually knows are so owned shall be so disregarded. The Company shall notify
the Trustee, in writing, when the Company or any of its Affiliates repurchases
or otherwise acquires Notes and the aggregate principal amount of such Notes so
repurchased or otherwise acquired.
SECTION 2.10 Temporary Notes
Until Definitive Notes are ready for delivery, the Company may
prepare and the Trustee, upon receipt of the written order of the Company
signed by an Officer of the Company, shall authenticate and deliver temporary
Notes. Temporary Notes shall be substantially in the form of Definitive Notes
but may have variations that the Company and the Trustee consider appropriate
for temporary Notes. Without unreasonable delay, the Company shall prepare and
the Trustee, upon receipt of the written order of the Company signed by an
Officer of the Company, shall authenticate and deliver, definitive Notes in
exchange for temporary Notes.
Until such exchange, Holders of temporary Notes shall be entitled
to all of the rights, benefits and privileges of this Indenture.
SECTION 2.11 Cancellation
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment.
The Trustee shall cancel all Notes surrendered for registration of transfer or
exchange, payment, replacement or cancellation, except as expressly permitted
by this Indenture. The Company may not issue new Notes to replace Notes that
have been redeemed or paid or that have been delivered to the Trustee for
cancellation. All cancelled Notes held by the Trustee shall be destroyed and
certification of their destruction delivered to the Company unless by a written
order delivered to the Trustee at the time such cancelled Notes are delivered
to the Trustee, signed by one Officer of the Company, the Company shall direct
that cancelled Notes be returned to it.
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SECTION 2.12 Defaulted Interest
If the Company defaults in a payment of interest on the Notes, it
shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, which date shall be at the
earliest practicable date but in all events at least five Business Days prior
to the payment date, in each case as provided in the Notes and in Section 4.1
hereof. The Company shall, with the consent of the Trustee, fix or cause to be
fixed each such special record date and payment date. At least 15 days before
the special record date, the Company (or the Trustee, in the name of and at the
expense of the Company) shall mail to Holders a notice that states the special
record date, the related payment date and the amount of such interest to be
paid.
SECTION 2.13 CUSIP Number
The Company in issuing the Notes shall use a CUSIP number, and
the Trustee shall use the CUSIP number in notices of redemption or exchange as
a convenience to Holders; provided, however, that no representation is hereby
deemed to be made by the Trustee as to the correctness or accuracy of the CUSIP
number printed in the notice or on the certificates representing the Notes, and
that reliance may be placed only on the other identification numbers printed on
the certificates representing the Notes. The Company will promptly notify the
Trustee of any change in a CUSIP number.
SECTION 2.14 Deposit of Moneys
On each Interest Payment Date and each date on which payments in
respect of the Notes are required to be made pursuant to the terms of this
Indenture, the Company shall, not later than 11:00 a.m., New York City time,
deposit with the Paying Agent in immediately available funds money sufficient
to make any cash payments due on such date in a timely manner which permits the
Paying Agent to remit payment to the Holders on such date.
SECTION 2.15 Liquidated Damages Under Registration Rights Agreement
Under certain circumstances, the Company shall be obligated to
pay certain Liquidated Damages to the Holders, all as set forth in Section 2 of
the Registration Rights Agreement.
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ARTICLE 3
REDEMPTION AND OFFERS TO PURCHASE
SECTION 3.1 Notice to Trustee
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.7 hereof, it shall furnish to the Trustee,
at least 45 days but not more than 60 days before a redemption date (unless a
shorter notice period shall be satisfactory to the Trustee), an Officers'
Certificate setting forth (i) the Section of this Indenture pursuant to which
the redemption shall occur, (ii) the redemption date, (iii) the principal
amount of Notes to be redeemed and (iv) the redemption price.
If the Company is required to make an offer to repurchase Notes
pursuant to the provisions of Sections 4.13 or 4.14 hereof, it shall furnish to
the Trustee, at least 30 days before the scheduled repurchase date, an
Officers' Certificate setting forth (i) the Section of this Indenture pursuant
to which the offer to repurchase shall occur, (ii) the terms of the offer,
(iii) the repurchase price, (iv) the principal amount of the Notes to be
repurchased, and (v) further setting forth a statement to the effect that (a)
the Company or one of its Restricted Subsidiaries has made an Asset Sale and
there are Excess Proceeds aggregating more than $7.5 million and the amount of
such Excess Proceeds or (b) a Change of Control has occurred, as applicable.
SECTION 3.2 Selection of Notes to Be Redeemed
If less than all of the Notes are to be redeemed at any time, the
Trustee shall, unless otherwise set forth herein, select the Notes to be
redeemed among the Holders of the Notes pro rata, by lot or in accordance with
a method which the Trustee shall deem fair and appropriate (and in such manner
as complies with applicable legal and principal national securities exchanges
requirements, if any). In the event of partial redemption by lot, the
particular Notes to be redeemed shall be selected, unless otherwise provided
herein, not less than 30 nor more than 60 days prior to the redemption date by
the Trustee from the outstanding Notes not previously called for redemption.
The Trustee shall promptly notify the Company and the Registrar
(if other than the Trustee) in writing of the Notes selected for redemption
and, in the case of any Note selected for partial redemption, the principal
amount thereof to be redeemed. Notes and portions of them selected shall be in
face amounts of $1,000 or whole multiples of $1,000. Provisions of this
Indenture that apply to Notes called for redemption also apply to portions of
Notes called for redemption.
In the event the Company is required to make an Asset Sale Offer
pursuant to Section 3.9 and Section 4.13, and the amount of the Excess Proceeds
is not evenly divisible by $1,000, the Trustee shall promptly refund to the
Company the portion of such Excess Proceeds
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that is not necessary to repurchase the immediately lesser principal amount of
Notes that is so divisible.
SECTION 3.3 Notice of Redemption
Subject to the provisions of Sections 3.9 and 4.14 hereof, at
least 30 days but not more than 60 days before a redemption date, the Company
shall mail by first class mail a notice of redemption to each Holder of Notes
to be redeemed at its registered address.
The notice shall identify the Notes to be redeemed (including
CUSIP number) and shall state:
(1) the redemption date;
(2) the redemption price, separately stating the amount of any
accrued and unpaid interest and Liquidated Damages, if any, to be paid
in connection with the redemption;
(3) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the
redemption date, upon cancellation of such Note, a new Note or Notes in
principal amount equal to the unredeemed portion will be issued;
(4) the name and address of the Paying Agent;
(5) that Notes called for redemption must be surrendered to
the Paying Agent to collect the redemption price;
(6) that, unless the Company defaults in making such
redemption payment together with accrued and unpaid interest and
Liquidated Damages, if any, to the redemption date, interest ceases to
accrue on and after the redemption date on Notes or portions of Notes
called for redemption;
(7) the paragraph of the Notes or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed;
(8) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or printed
on the Notes; and
(9) the aggregate principal amount of Notes being redeemed.
At the Company's request, the Trustee shall give the notice of
redemption in the name of the Company and at its expense: provided, however,
that the Company shall deliver to the Trustee, at least 45 days prior to the
redemption date, an Officers' Certificate requesting that
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the Trustee give such notice and setting forth the information to be stated in
such notice as provided in the preceding paragraph.
SECTION 3.4 Effect of Notice of Redemption
Once notice of redemption is mailed in accordance with Section
3.3 herein, Notes called for redemption become due and payable on the
redemption date at the redemption price stated in such notice. A notice of
redemption may not be conditional.
SECTION 3.5 Deposit of Redemption Price
Prior to 11:00 a.m., New York City time, on the redemption date,
the Company shall deposit with the Trustee (to the extent not already held by
the Trustee) or with the Paying Agent money in immediately available funds
sufficient to pay the redemption price, together with accrued and unpaid
interest and Liquidated Damages, if any, to the redemption date on all Notes to
be redeemed. The Trustee or the Paying Agent shall return to the Company any
money deposited with the Trustee or the Paying Agent by the Company in excess
of the amount necessary to pay the redemption price of, and accrued and unpaid
interest and Liquidated Damages, if any, on, all Notes to be redeemed.
If the Company complies with the provisions of the preceding
paragraph, on and after the redemption date, interest shall cease to accrue on
the Notes or the portions of Notes called for redemption. If a Note is
redeemed on or after an Interest Record Date but on or prior to the related
Interest Payment Date, then any accrued and unpaid interest and Liquidated
Damages, if any, shall be paid to the Person in whose name such Note was
registered at the close of business on such record date. Upon surrender of a
Note for redemption in accordance with the notice given pursuant to Section 3.3
hereof, such Note shall be purchased by the Company at the redemption price,
together with accrued and unpaid interest and Liquidated Damages, if any, to
the redemption date. If any Note called for redemption shall not be so paid
upon surrender for redemption because of the failure of the Company to comply
with the preceding paragraph, interest shall be paid on the unpaid principal,
premium and Liquidated Damages, if any, from the redemption date until such
principal, premium or Liquidated Damages, if any, is paid, and to the extent
lawful on any interest not paid on such unpaid principal, premium or Liquidated
Damages, if any, in each case at the rate provided in the Notes and in Section
4.1 hereof.
SECTION 3.6 Notes Redeemed in Part
Upon surrender and cancellation of a Note that is redeemed in
part only, the Company shall issue and the Trustee shall authenticate for the
Holder at the expense of the Company a new Note equal in principal amount to
the unredeemed portion of the surrendered and cancelled original Note.
SECTION 3.7 Optional Redemption
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The Notes are not redeemable at the Company's option prior to
June 1, 2002. Thereafter, the Notes will be subject to redemption at the
option of the Company, in whole or in part, at the redemption prices (expressed
as percentages of principal amount) set forth below plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the applicable redemption
date, if redeemed during the twelve-month period beginning on June 1 of the
years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002 . . . . . . . . . . . . . . . 105.188%
2003 . . . . . . . . . . . . . . . 103.458%
2004 . . . . . . . . . . . . . . . 101.729%
2005 and thereafter . . . . . . . . 100.000%
</TABLE>
Notwithstanding the foregoing, at any time prior to June 1, 2002,
the Company may, at its option, redeem all or any portion of the Notes at the
Make-Whole Price plus accrued and unpaid interest and Liquidated Damages, if
any, thereon to the date of redemption. In addition, on or prior to June 1,
2000, the Company may redeem at any time or from time to time up to 35% of the
aggregate principal amount of the Notes originally issued at a redemption price
of 110.375% of the principal amount thereof, plus accrued and unpaid interest
and Liquidated Damages, if any, thereon to the redemption date, with the net
proceeds of one or more Public Equity Offerings; provided that at least $78.0
million of the aggregate principal amount of the Notes remain outstanding
following each such redemption; provided, further, that such redemption shall
occur not earlier than 30 days or later than 60 days after the date of the
closing of any such Public Equity Offering.
SECTION 3.8 Mandatory Redemption
The Company shall not be required to make any mandatory
redemption or sinking fund payments with respect to the Notes. However, as
described in Sections 3.9, 4.13 and 4.14, the Company may be obligated, under
certain circumstances, to make an offer to repurchase (i) all outstanding Notes
at a redemption price of 101% of the principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages, if any, thereon to the date of
repurchase, upon a Change of Control; and (ii) outstanding Notes with a portion
of the Net Cash Proceeds of Asset Sales at a redemption price of 100% of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the date of repurchase.
SECTION 3.9 Offer to Repurchase by Application of Excess Proceeds
Any Asset Sale Offer pursuant to Section 4.13 shall remain open
for at least 30 and not more than 40 days, except to the extent that a longer
period is required by applicable law (the "Offer Period"). On a date within
five Business Days after the termination of the Offer
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Period (the "Purchase Date"), the Company shall repurchase the principal amount
of Notes required to be repurchased pursuant to Section 4.13 hereof (the "Offer
Amount") or, if less than the Offer Amount has been tendered, all Notes
tendered in response to the Asset Sale Offer. Payment for any Notes so
repurchased shall be made in the same manner as interest payments are made.
The Company shall comply with any tender offer rules under the
Exchange Act which may then be applicable, including Rule 14e-1, in connection
with any offer required to be made by the Company to repurchase the Notes as a
result of an Asset Sale Offer. To the extent that the provisions of any other
securities laws, rules or regulations conflict with provisions of this Section
3.9, the Company shall comply with the applicable securities laws, rules or
regulations and shall not be deemed to have breached its obligations hereunder
by virtue thereof.
If the Purchase Date is on or after an Interest Record Date and
on or before the related Interest Payment Date, any accrued and unpaid interest
and Liquidated Damages, if any, shall be paid to the Person in whose name a
Note is registered at the close of business on such record date, and no
additional interest shall be payable to Holders who tender Notes pursuant to
the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company shall
send, by first class mail, a notice to the Trustee and each of the Holders,
with a copy to the Trustee. The notice shall contain all instructions and
materials necessary to enable such Holders to tender Notes pursuant to the
Asset Sale Offer. The Asset Sale Offer shall be made to all Holders. The
notice, which shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this
Section 3.9 and Section 4.13 hereof and the length of time the Asset
Sale Offer shall remain open;
(b) the Offer Amount, the repurchase price, separately stating
the amount of any accrued and unpaid interest and Liquidated Damages, if
any, and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall
continue to accrue interest;
(d) that, unless the Company defaults in making such payments,
any Note accepted for payment pursuant to the Asset Sale Offer shall
cease to accrue interest after the Purchase Date;
(e) that Holders electing to have a Note repurchased pursuant
to any Asset Sale Offer shall be required to surrender the Note, with
the form entitled "Option of Holder to Elect Purchase" on the reverse of
the Note completed, or transfer by book-entry transfer, to the Company,
a Depository, if appointed by the Company, or a Paying Agent at the
address specified in the notice at least three days before the Purchase
Date;
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(f) that Holders shall be entitled to withdraw their election
if the Company, the Depository or the Paying Agent, as the case may be,
receives, not later than the expiration of the Offer Period, a telegram,
telex, facsimile transmission or letter setting forth the name of the
Holder, the principal amount of the Note the Holder delivered for
repurchase and a statement that such Holder is withdrawing his election
to have such Note repurchased;
(g) that, if the aggregate principal amount of Notes
surrendered by Holders exceeds the Offer Amount, the Trustee shall
select the Notes to be repurchased on a pro rata basis (with such
adjustments as may be deemed appropriate by the Trustee so that only
Notes in denominations of $1,000, or integral multiples thereof, shall
be repurchased); and
(h) that Holders whose Notes are repurchased only in part
shall be issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered (or transferred by book-entry
transfer).
On or before the Purchase Date, the Company shall, to the extent
lawful, accept for payment, on a pro rata basis to the extent necessary, the
Offer Amount of Notes or portions thereof tendered pursuant to the Asset Sale
Offer, or if less than the Offer Amount has been tendered, all Notes tendered,
and shall deliver to the Trustee an Officers' Certificate stating that such
Notes or portions thereof were accepted for payment by the Company in
accordance with the terms of this Section 3.9. The Company, the Depository or
the Paying Agent, as the case may be, shall promptly (but in any case not later
than five Business Days after the Purchase Date) mail or deliver to each
tendering Holder an amount equal to the repurchase price of the Notes tendered
by such Holder and accepted by the Company for repurchase plus accrued and
unpaid interest and Liquidated Damages, if any, and the Company shall promptly
issue a new Note, and the Trustee, upon written request from the Company shall
authenticate and mail or deliver such new Note to such Holder, in a principal
amount equal to any unpurchased portion of the Note surrendered. Any Note not
so accepted shall be promptly mailed or delivered by the Company to the Holder
thereof. The Company shall publicly announce the results of the Asset Sale
Offer on the Purchase Date.
Other than as specifically provided in this Section 3.9 and
Section 4.13, any repurchase of Notes pursuant to this Section 3.9 shall be
made pursuant to the provisions of Sections 3.1 through 3.6 hereof.
No repurchase of Notes under this Section 3.9 shall be deemed to
be a redemption of Notes.
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ARTICLE 4
COVENANTS
SECTION 4.1 Payment of Notes
The Company shall pay the principal of, premium, if any, and
interest, if any, on the Notes on the dates and in the manner provided in the
Notes and in this Indenture. Principal, premium, if any, and interest, if any,
shall be considered paid on the date due if the Paying Agent, other than the
Company or any of its Subsidiaries or Affiliates, holds on or before that date
money deposited by the Company in immediately available funds and designated
for and sufficient to pay all principal, premium and interest, if any, then
due. The Company shall pay all Liquidated Damages, if any, in the same manner
on the dates and in the amounts set forth in the Registration Rights Agreement.
If any Liquidated Damages become payable, the Company shall not later than
three Business Days prior to the date that any payment of Liquidated Damages is
due (i) deliver an Officers' Certificate to the Trustee setting forth the
amount of Liquidated Damages payable to Holders and (ii) instruct the Paying
Agent to pay such amount of Liquidated Damages to Holders entitled to receive
such Liquidated Damages.
The Company shall pay interest (including post-petition interest
under any Bankruptcy Law) on overdue principal and premium, if any, from time
to time on demand at the rate equal to 1% per annum in excess of the then
applicable interest rate on the Notes to the extent lawful; the Company shall
pay interest (including post-petition interest under any Bankruptcy Law) on
overdue installments of interest and Liquidated Damages (without regard to any
applicable grace period) from time to time on demand at the same rate to the
extent lawful. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.
SECTION 4.2 Maintenance of Office or Agency
The Company shall maintain in the Borough of Manhattan, The City
of New York, an office or agency (which may be an office of the Trustee,
Registrar or co-registrar) where Notes may be surrendered for registration of
transfer or exchange, where Notes may be presented or surrendered for payment
and where notices and demands to or upon the Company in respect of the Notes
and this Indenture may be served. The Company shall give prompt written notice
to the Trustee of the location, and any change in the location, of such office
or agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at
the Corporate Trust Office of the Trustee.
The Company may also from time to time designate one or more
other offices or agencies where the Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligations to maintain an office or
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agency in the Borough of Manhattan, The City of New York for such purposes.
The Company will give prompt written notice to the Trustee of any such
designation or rescission and of any change in the location of any such other
office or agency.
The Company hereby designates the office of the Trustee at 14
Wall Street, New York, New York as the initial office or agency of the Company
in accordance with Section 2.3.
SECTION 4.3 Reports
(a) Whether or not required by the rules and regulations of
the SEC, including the reporting requirements of Section 13 or 15(d) of the
Exchange Act, so long as any Notes are outstanding, the Company shall furnish
to the Holders of Notes (i) within 60 days following the end of each fiscal
quarter and 105 days following the end of each fiscal year, respectively, all
quarterly and annual financial information that would be required to be
contained in a filing with the SEC on Forms 10-Q and 10-K if the Company were
required to file such Forms, including a "Management's Discussion and Analysis
of Financial Condition and Results of Operations" that describes the financial
condition and results of operations of the Company and its Subsidiaries and,
with respect to the annual information only, a report thereon by the Company's
independent certified public accountants and (ii) all reports that would be
required to be filed with the SEC on Form 8-K if the Company were required to
file such reports. In addition, whether or not required by the rules and
regulations of the SEC, the Company shall file a copy of all such information
with the SEC for public availability (unless the SEC will not accept such
filing) and make such information available to investors or prospective
investors who request it in writing.
(b) Upon qualification of this Indenture under the TIA, the
Company shall also comply with the provisions of TIA Section 314(a).
(c) For so long as any Transfer Restricted Securities remain
outstanding, the Company shall furnish to all Holders or beneficial owners of
Notes and prospective purchasers of the Notes designated by the Holders of
Transfer Restricted Securities, upon their request, the information required to
be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
SECTION 4.4 Compliance Certificate
(a) The Company shall deliver to the Trustee, within 105 days
after the end of each fiscal year, but not less often than annually, an
Officers' Certificate stating that a review of the activities of the Company
and its Subsidiaries during the preceding fiscal year has been made under the
supervision of the signing Officers with a view to determining whether each of
the Company and its Subsidiaries has kept, observed, performed and fulfilled
its obligations under this Indenture, and further stating, as to each such
Officer signing such certificate, that to the best of his knowledge each of the
Company and its Subsidiaries has kept, observed, performed and fulfilled each
and every covenant contained in this Indenture, and is not in default in the
performance or observance of any of the terms, provisions and conditions hereof
or
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thereof (or, if a Default or Event of Default shall have occurred, describing
all such Defaults or Events of Default of which he may have knowledge and what
action each is taking or proposes to take with respect thereto).
(b) The Company will, so long as any of the Notes are
outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware
of (i) any Default or Event of Default or (ii) any event of default under any
other mortgage, indenture or instrument referred to in Section 6.1(5), an
Officers' Certificate specifying such Default, Event of Default or other event
of default and what action the Company is taking or proposes to take with
respect thereto.
SECTION 4.5 Taxes
The Company shall, and shall cause its Subsidiaries to, pay or
discharge prior to delinquency all taxes, assessments, and governmental charges
levied or imposed on the Company or any Subsidiary of the Company or upon the
income, profits or property of the Company or any Subsidiary of the Company
except as contested in good faith and by appropriate proceedings and for which
adequate reserves, to the extent required under GAAP, have been taken.
SECTION 4.6 Stay, Extension and Usury Laws
The Company covenants (to the extent that it may lawfully do so)
that it shall not at any time insist upon, plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay, extension or usury law
wherever enacted, now or at any time hereafter in force, which would prohibit
or forgive the Company from paying all or any portion of the principal of,
premium, interest and Liquidated Damages, if any, on the Notes as contemplated
herein, wherever enacted, now or at any time hereafter in force, or which may
affect the covenants or the performance of this Indenture; and the Company (to
the extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and covenants that it shall not, by resort to any
such law, hinder, delay or impede the execution of any power herein granted to
the Trustee, but shall suffer and permit the execution of every such power as
though no such law has been enacted.
SECTION 4.7 Company and Corporate Existence and Maintenance
of Properties and Insurance
Subject to Section 4.14, Article 5 and Section 10.2 hereof, the
Company shall do or cause to be done all things necessary to preserve and keep
in full force and effect its corporate existence, and the corporate,
partnership or other existence of each of its Restricted Subsidiaries, in
accordance with their respective organizational documents (as the same may be
amended from time to time) and its (and its Restricted Subsidiaries') rights
(charter and statutory), licenses and franchises; provided, however, that the
Company shall not be required to preserve any such right, license or franchise,
or the corporate, partnership or other existence of any Restricted Subsidiary,
if the Board of Directors of the Company shall determine in good faith that the
preservation thereof is no longer desirable in the conduct of the business of
the
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Company and its respective Subsidiaries taken as a whole and that the loss
thereof is not adverse in any material respect to the Holders.
The Company shall, and shall cause each of its Restricted
Subsidiaries to, maintain its properties in good working order, repair and
condition (subject to ordinary wear and tear) and make all reasonably necessary
repairs, renewals, replacements, additions and improvements required for it to
actively conduct and carry on its business; provided, however, that nothing in
this Section 4.7 shall prevent the Company or any of its Restricted
Subsidiaries from discontinuing the operation and maintenance of any of its
properties if such discontinuance is, in the good faith judgment of the Board
of Directors or other governing body of the Company or the Restricted
Subsidiary concerned, as the case may be, desirable in the conduct of its
businesses and is not adverse in any material respect to the Holders.
Notwithstanding the foregoing, nothing contained in this Section 4.7 shall
limit or impair in any way the right of the Company and its Restricted
Subsidiaries to sell, divest and otherwise engage in transactions that are
otherwise permitted by this Indenture.
The Company shall maintain insurance against loss or damage of
the kinds that, in the good faith judgment of the Company, are adequate and
appropriate for the conduct of the business of the Company and its Restricted
Subsidiaries in a prudent manner, with reputable insurers or with the
government of the United States of America or an agency or instrumentality
thereof, in such amounts, with such deductibles, and by such methods as shall
be customary, in the good faith judgment of the Company, for companies
similarly situated and owning like properties in the industry.
SECTION 4.8 Limitation on the Incurrence of Indebtedness and
Issuance of Disqualified Stock
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable with respect to
(collectively, "incur" and, correlatively, "incurred" and "incurrence") any
Indebtedness (other than Permitted Indebtedness), and the Company shall not,
and shall not permit any of its Restricted Subsidiaries to, 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 and
any Guarantor may incur Indebtedness if the Consolidated Interest Coverage
Ratio for the Company's most recently ended Reference Period immediately
preceding the date on which such additional Indebtedness is incurred,
determined on a pro forma basis (including a pro forma application of the net
proceeds therefrom), as if the additional Indebtedness had been incurred at the
beginning of such Reference Period, would have been at least 2.0 to 1.0.
SECTION 4.9 Limitation on Restricted Payments
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or
make any distribution on account of
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Equity Interests, other than dividends or distributions payable in Equity
Interests (other than Disqualified Stock) of the Company, or dividends or
distributions payable to the Company or a Wholly-Owned Restricted Subsidiary of
the Company; (ii) purchase, redeem or otherwise acquire or retire for value any
Equity Interests of the Company or any Subsidiary or other Affiliate of the
Company (other than any such Equity Interests owned by the Company or a Wholly-
Owned Restricted Subsidiary of the Company); (iii) purchase, redeem, repay,
defease or otherwise acquire or retire for consideration prior to a scheduled
mandatory sinking fund payment or maturity date, any Subordinated Indebtedness
of the Company or Subordinated Indebtedness of a Guarantor; or (iv) make any
Restricted Investment (all such payments and other actions set forth in clauses
(i) through (iv) 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 immediately after giving pro forma effect thereto as if such
Restricted Payment had been made at the beginning of the applicable
Reference Period, have been permitted to incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to
Section 4.8 hereof; and
(c) such Restricted Payment (the amount of any such payment,
if other than cash, to be determined in good faith by the Board of
Directors, whose determination shall be conclusive and evidenced by a
resolution in an Officers' Certificate delivered to the Trustee),
together with the aggregate of all other Restricted Payments made by the
Company and its Restricted Subsidiaries after the date of this Indenture
(including Restricted Payments permitted by the next succeeding
paragraph), shall not exceed the sum of (without duplication) (t) $5.0
million plus 50% of the Consolidated Net Income of the Company for the
period (taken as one accounting period) commencing with the first full
fiscal quarter after the Issue Date and ending on the last day 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, minus 100% of such deficit), plus (u) 100% of the aggregate Net
Cash Proceeds received by the Company for such period from any Person
other than a Restricted Subsidiary of the Company as a result of the
issuance or sale of Equity Interests of the Company (other than
Disqualified Stock), other than in connection with the conversion of
Indebtedness or Disqualified Stock, plus (v) 100% of the aggregate Net
Cash Proceeds received by the Company for such period from any Person
other than a Restricted Subsidiary of the Company as a result of the
issuance or sale of any Indebtedness or Disqualified Stock to the extent
that at the time the determination is made such Indebtedness or
Disqualified Stock, as the case may be, has been converted into or
exchanged for Equity Interests of the Company (other than Disqualified
Stock), plus (w) the aggregate cash received by the Company as capital
contributions to the Company after the Issue Date (other than from a
Subsidiary), plus (x) in case any Unrestricted
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Subsidiary has been redesignated a Restricted Subsidiary, an amount (not
less than zero) equal to the lesser of (A) the book value (determined in
accordance with GAAP) at the date of such redesignation of the aggregate
Investments made by the Company and its Restricted Subsidiaries in such
Unrestricted Subsidiary and (B) the Fair Market Value of such
Investments in such Unrestricted Subsidiary at the time of such
redesignation (less, in the case of each of clauses (A) and (B), the
amount of the original Investment (based upon book value determined in
accordance with GAAP at the time of such Investment) made by the Company
or any Restricted Subsidiary pursuant to clause (ix) of the definition
of "Permitted Investment" minus the aggregate cash dividends paid by
such Unrestricted Subsidiary to the Company or any other Restricted
Subsidiary since the date of such original Investment); minus (y) in
case any Restricted Subsidiary has been redesignated an Unrestricted
Subsidiary, the greater of (1) the book value (determined in accordance
with GAAP) at the date or redesignation of the aggregate Investments
made by the Company and its Restricted Subsidiaries and (2) the Fair
Market Value of such Investments in such Restricted Subsidiary at the
time of such redesignation, plus, to the extent not included in the
definition of "Consolidated Net Income," and plus (z) the amount of any
payments of interest on Indebtedness, dividends, repayments of
Indebtedness and other cash distributions, in each case after taxes and
to the extent received by the Company or a Restricted Subsidiary after
the date hereof from any Unrestricted Subsidiary.
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 this
Indenture; (ii) the payment of any dividend on any shares of Preferred Stock of
the Company issued and outstanding as of the Issue Date in accordance with the
terms of such Preferred Stock in effect at the Issue Date; (iii) any dividend
on shares of Capital Stock of the Company or any Wholly-Owned Restricted
Subsidiary payable solely in shares of Capital Stock (other than Disqualified
Stock); (iv) the payment of annual dividends on shares of common stock of the
Company in an aggregate amount not to exceed $0.22 per share per annum (as
equitably adjusted by resolution of the Board of Directors of the Company
evidenced by an Officers' Certificate delivered to the Trustee for stock
splits, stock dividends and similar events after the date of this Indenture);
(v) the redemption, repurchase, retirement or other acquisition of any 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 or other acquisition
shall be excluded from clause (u) of the preceding paragraph (c); (vi) the
defeasance, redemption or repurchase of any Subordinated Indebtedness of the
Company in exchange for, or out of the Net Cash Proceeds from an incurrence of
Permitted Company Refinancing Indebtedness or the substantially concurrent sale
(other than to a Restricted Subsidiary of the Company) of 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 defeasance,
redemption or repurchase shall be excluded from clause (u) or (v) of the
preceding paragraph (c), as applicable; (vii) the repurchase,
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redemption or retirement by the Company of shares of its Capital Stock (other
than Disqualified Stock) held by an employee or former employee of the Company
or any of its Restricted Subsidiaries issued under the Company's stock option
plans pursuant to the terms of such plans; provided that (A) the repurchase,
redemption or retirement results from the retirement, termination of
employment, death or disability (as defined in the relevant plan) of the
employee or former employee and (B) the aggregate price paid for all such
repurchased, redeemed or retired Capital Stock shall not exceed $2.0 million
after the date of this Indenture; (viii) a Qualified Redemption Transaction;
(ix) any Investment in an Affiliate of the Company engaged in the Business made
with the Net Cash Proceeds of a substantially concurrent sale (other than to a
Restricted Subsidiary of the Company) of Equity Interests of the Company (other
than Disqualified Stock); provided that the amount of any such Net Cash
Proceeds that are utilized for any such Investment shall be excluded from
clause (u) of the preceding paragraph (c); and provided, further, that at the
time of, and after giving effect to, any Restricted Payment permitted under
clauses (ii), (iii), (iv), (v), (vi), (vii) and (ix), no Default or Event of
Default shall have occurred and be continuing or would occur as a consequence
thereof.
Not later than the date of making any Restricted Payment, the
Company shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by this Section 4.9 were computed, which calculations may
be based upon the Company's latest available financial statements.
SECTION 4.10 Limitation on Liens
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Liens (other than Permitted Liens) upon any of their respective
properties or assets now owned or hereafter acquired, including, without
limitation, any Capital Stock owned by the Company or any Restricted
Subsidiary, securing (i) any Indebtedness of the Company, unless the Notes are
equally and ratably secured, or (ii) any Indebtedness of any Guarantor, unless
the Guarantees are equally and ratably secured, provided that if such
Indebtedness is expressly subordinated to the Notes or the Guarantees, the Lien
securing such Indebtedness will be subordinated and junior to any Lien securing
the Notes or the Guarantees, with the same relative priority as such
Subordinated Indebtedness of the Company or a Guarantor will have with respect
to the Notes or the Guarantees, as the case may be.
SECTION 4.11 Limitation on Transactions with Affiliates
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into any transaction or series
of transactions (including, without limitation, the sale, purchase, license,
transfer, exchange, lease or otherwise dispose of any assets or properties or
the rendering of any services, or entering into any contract, agreement,
understanding, loan, advance or Guarantee with, or for the benefit of) with any
Affiliate (other than transactions among the Company and its Wholly-Owned
Restricted Subsidiaries) (each of
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the foregoing, an "Affiliate Transaction"), on terms that are less favorable to
the Company or the relevant Restricted Subsidiary, as the case may be, than
those that would have been obtained in a comparable arms' length transaction by
the Company or such Restricted Subsidiary with an unrelated Person. In
addition, the Company will not, and will not permit any Restricted Subsidiary
of the Company to, enter into an Affiliate Transaction, or any series of
related Affiliate Transactions involving aggregate payments (a) in excess of
$1.0 million, unless a majority of the Board of Directors of the Company
(including a majority of the Company's Disinterested Directors) determines in
good faith, as evidenced by a resolution of such Board, that such Affiliate
Transaction or series of related Affiliate Transactions is fair to the Company
and in compliance with the first sentence of this paragraph; or (b) equal to or
greater than $5.0 million, unless the Company complies with the preceding
clause (a) and receives a written opinion from a nationally recognized
investment banking firm with total assets in excess of $1.0 billion that such
transaction or series of transactions is fair to the Company or such Restricted
Subsidiary from a financial point of view, provided, however, that this
covenant will not restrict the Company from (1) paying reasonable and customary
regular compensation and fees to directors of the Company who are not employees
or consultants of the Company or any Restricted Subsidiary or Affiliate of the
Company, (2) paying dividends on, or making distributions with respect to,
shares of Capital Stock of the Company on a pro rata basis to the extent
permitted by Section 4.9 hereof, (3) other Restricted Payments that are
permitted by the provisions of Section 4.9 hereof, (4) loans or advances to
employees of the Company or any Restricted Subsidiary to the extent permitted
by clause (vi) of the definition of "Permitted Investments," (5) any
indemnification payment made to any director or officer of the Company or any
Restricted Subsidiary (A) in accordance with the corporate charter or by-laws
of the Company or such Restricted Subsidiary, (B) under any customary agreement
providing for such indemnification payment, or (C) under applicable law, and
(6) obligations of the Company or any Restricted Subsidiary under employee
compensation and other benefit arrangements entered into or provided for in the
ordinary course of business.
SECTION 4.12 Limitation on Dividend and Other Payment Restrictions
Affecting Subsidiaries
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction on the
ability of any Restricted Subsidiary to (i) pay dividends or make any other
distributions to the Company or any of its Restricted Subsidiaries (A) on its
Capital Stock or (B) with respect to any other interest or participation in, or
measured by, its profits, (ii) pay any Indebtedness owed to the Company or any
of its Restricted Subsidiaries, (iii) make loans or advances to the Company or
any of its Restricted Subsidiaries, (iv) transfer any of its properties or
assets to the Company or any of its Restricted Subsidiaries, (v) grant Liens or
other security interests on any of the properties or assets of the Company in
favor of any Holder of any Note or (vi) Guarantee the Notes, except for such
encumbrances or restrictions existing under or by reason of (a) Existing
Indebtedness as in effect on the date of this Indenture, (b) the Bank Credit
Facility as in effect as of the date of this Indenture and any amendments,
modifications, restatements, renewals, supplements, refundings, replacements or
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refinancings thereof, provided that such amendments, modifications,
restatements, renewals, supplements, refundings, replacements or refinancings
are no more materially restrictive with respect to such dividend and other
payment restrictions than those contained in the Bank Credit Facility as in
effect at the date of this Indenture, (c) this Indenture 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 on or
after the date of this Indenture 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, (f) customary
nonassignment provisions in contracts or leases entered into in the ordinary
course of business and consistent with past practices, (g) pursuant to capital
leases and purchase money obligations, in each case, for property acquired in
the ordinary course of business after the date of this Indenture that impose
restrictions of the nature described in clause (iv) above on the property so
acquired, which obligations do not cover any assets other than the asset
acquired, (h) Permitted Liens which are customary limitations on the transfer
of collateral subject to such Permitted Liens, (i) any merger agreements, stock
purchase agreements, asset sale agreements and similar agreements limiting the
transfer of properties and assets to be transferred or otherwise disposed
pending consummation of the subject transaction in accordance with the terms
thereof, or (j) Permitted Company Refinancing Indebtedness or Permitted
Subsidiary Refinancing Indebtedness, provided that, in each case, the
restrictions contained in the agreements governing such Permitted Company
Refinancing Indebtedness or Permitted Subsidiary Refinancing Indebtedness, as
the case may be, are no more restrictive with respect to the provisions set
forth in clauses (i), (ii), (iii), (iv), (v) and (vi) above than those
contained in the agreements governing the Indebtedness being refinanced.
SECTION 4.13 Limitation on Sale of Assets
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, make any Asset Sale, unless (i) the
Company (or its Restricted Subsidiary, as the case may be) receives
consideration at the time of such sale or other disposition at least equal to
the Fair Market Value thereof; (ii) at least 75% of the consideration received
by the Company (or its Restricted Subsidiary, as the case may be) from such
Asset Sale consists of cash or Cash Equivalents, provided, however, that the
amount of (a) any liabilities (as shown on the Company's or such Restricted
Subsidiary's most recent balance sheet or in the notes thereto) of the Company
or such Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated in right of payment to the
Notes or any Guarantee thereof) from which the Company and its Restricted
Subsidiaries are expressly released in connection with such sale, and (b) any
notes or other non-cash consideration received by the Company or such
Restricted Subsidiary from such transferee that are converted by the Company or
such Restricted Subsidiary into cash or Cash Equivalents within 30 days of
receipt thereof (to the extent of the cash or Cash Equivalents so received (net
of costs relating thereto)), shall be deemed to be cash for purposes of this
provision; and (iii) the Net Cash Proceeds received by the Company (or its
Restricted Subsidiary, as the case may be) from such Asset Sale are applied in
accordance with the following two paragraphs.
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The Company may apply such Net Cash Proceeds, within 365 days
after any Asset Sale, to: (a) the repayment of Indebtedness of the Company
under the Bank Credit Facility or other Senior Indebtedness of the Company or
any Senior Indebtedness of a Guarantor, that results in a permanent reduction
in any revolving credit or other commitment relating thereto or the maximum
principal amount that may be borrowed thereunder in an amount equal to the
principal amount so repaid or (b) make an Investment in assets or properties
used in the Business. Pending the final application of any such Net Cash
Proceeds, the Company or any such Restricted Subsidiary may invest such Net
Cash Proceeds in any manner that is not prohibited by this Indenture.
If, upon completion of the 365-day period, the Net Cash Proceeds
of any Asset Sale less the aggregate amount applied by the Company during such
period as described in clauses (a) or (b) in the immediately preceding
paragraph, together with any Net Cash Proceeds in excess of amounts similarly
applied by the Company from any prior Asset Sale after the date of receipt of
such Net Cash Proceeds (such aggregate constituting "Excess Proceeds"), exceeds
$7.5 million, then the Company will be obligated to make an offer to all
Holders of Notes (the "Asset Sale Offer") to repurchase the Notes having an
aggregate principal amount equal to the Excess Proceeds (and not solely the
amount in excess of $7.5 million) (such repurchase to be made on a pro rata
basis if the amount available for such repurchase is less than the principal
amount of the Notes tendered in such Asset Sale Offer) at a repurchase price in
cash in an amount equal to 100% of the principal amount thereof plus accrued
and unpaid interest and Liquidated Damages, if any, to the date of such
repurchase, in accordance with the procedures set forth in this Indenture;
provided, however, that, if the Company is required to apply such Excess
Proceeds to repurchase, or to offer to repurchase, any Pari Passu Indebtedness,
the Company shall only be required to offer to repurchase the maximum principal
amount of Notes that may be repurchased out of the amount of such Excess
Proceeds multiplied by a fraction, the numerator of which is the aggregate
principal amount of Notes outstanding and the denominator of which is the
aggregate principal amount of Notes outstanding plus the aggregate principal
amount of such Pari Passu Indebtedness outstanding. To the extent that the
aggregate amount of Notes tendered pursuant to an offer is less than the Excess
Proceeds, the Company may use the amount of such deficiency, or a portion
thereof, in any manner that is not prohibited by this Indenture. Upon the
completion of the Asset Sale Offer, the amount of Excess Proceeds will be reset
to zero, subject to further increase resulting from subsequent Asset Sales.
The Asset Sale Offer must be commenced within 30 days following the Asset Sale
that triggers the Company's obligation to make the Asset Sale Offer and remain
open for at least 30 and not more than 40 days (unless required by applicable
law). The Company shall comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws, rules and regulations thereunder to
the extent such laws, rules and regulations are applicable in connection with
the repurchase of the Notes pursuant to an Asset Sale Offer.
Notwithstanding the foregoing, the Company will not, and will not
permit any Restricted Subsidiary to, directly or indirectly, make any Asset
Sale of any of the Capital Stock of a Restricted Subsidiary except pursuant to
an Asset Sale of all of the Capital Stock of such Restricted Subsidiary.
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SECTION 4.14 Change of Control
Upon the occurrence of a Change of Control, the Company will be
obligated to make an offer (the "Change of Control Offer") to repurchase all or
any part (equal to $1,000 or an integral multiple thereof) of the Notes as the
Holders may elect at a repurchase price in cash (the "Change of Control Price")
equal to 101% of the principal amount thereof, plus accrued and unpaid interest
and Liquidated Damages, if any, thereon to the date of repurchase (the "Change
of Control Payment Date"). Notice of a Change of Control Offer shall be
prepared by the Company and shall be mailed by the Company with a copy to the
Trustee or at the option of the Company and at the expense of the Company, by
the Trustee within 30 days following a Change of Control to each Holder of the
Notes and such Change of Control Offer must remain open for at least 30 and not
more than 40 days (unless required by applicable law). The notice to each
Holder of the Notes shall state: (1) that the Change of Control Offer is being
made pursuant to this Section 4.14 and that all Notes tendered and not
withdrawn will be accepted for payment; (2) the repurchase price, separately
stating the amount of any accrued and unpaid interest and Liquidated Damages,
if any, and the Change of Control Payment Date, which will be no earlier than
30 days nor later than 60 days from the date such notice is mailed; (3) that
any Note not tendered will continue to accrue interest; (4) that, unless the
Company defaults in the payment of the Change of Control Price, all Notes
accepted for payment pursuant to the Change of Control Offer will cease to
accrue interest after the Change of Control Payment Date; (5) that Holders
electing to have any Notes repurchased pursuant to a Change of Control Offer
will be required to surrender the Notes, with the form entitled "Option of
Holder to Elect Purchase" on the reverse of the Notes completed, to the Paying
Agent at the address specified in the notice prior to the close of business on
the third Business Day preceding the Change of Control Payment Date; (6) that
Holders will be entitled to withdraw their election if the Paying Agent
receives, not later than the close of business on the second Business Day
preceding the Change of Control Payment Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holders, the principal
amount of Notes delivered for repurchase, and a statement that such Holder is
withdrawing his election to have such Notes repurchased; (7) that Holders whose
Notes are being repurchased only in part will be issued new Notes equal in
principal amount to the unpurchased portion of the Notes surrendered, which
unpurchased portion must be equal to $1,000 in principal amount or an integral
multiple thereof; and (8) the circumstances and material facts regarding the
Change of Control (including but not limited to information with respect to the
historical consolidated financial information of the Company and pro forma
consolidated financial information of the Company after giving effect to the
Change of Control, information regarding the Person or Persons acquiring
control, to the extent reasonably available, and the business plans of such
Person or Persons with respect to the Company, to the extent reasonably
available). The Company shall comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws, rules and regulations
thereunder to the extent such laws, rules and regulations are applicable in
connection with the repurchase of the Notes pursuant to a Change of Control
Offer.
On the Change of Control Payment Date, the Company shall, to the
extent lawful, (i) accept for payment Notes or portions thereof tendered
pursuant to the Change of Control
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Offer, (ii) deposit with the Paying Agent an amount equal to the Change of
Control Price in respect of all Notes or portions thereof so tendered and (iii)
deliver or cause to be delivered to the Trustee the Notes so accepted together
with an Officers' Certificate stating the amount of the Notes or portions
thereof tendered to the Company. The Paying Agent shall promptly mail or
deliver to each Holder of Notes so accepted the Change of Control Price for
such Notes, and the Trustee shall promptly authenticate and mail (or cause to
be transferred by book-entry) to each Holder a new Note equal in principal
amount to any unpurchased portion of the Notes surrendered, if any; provided
that each such new Note will be in a principal amount of $1,000 or an integral
multiple thereof. The Company shall publicly announce the results of the
Change of Control Offer on or as soon as practicable after the Change of
Control Payment Date.
The Company 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 same times and otherwise in compliance with the
requirements set forth in this 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.
Other than as specifically provided in this Section 4.14, any
repurchase pursuant to this Section 4.14 shall be made pursuant to the
provisions of Section 3.1 through 3.6 hereof.
SECTION 4.15 Limitation on Sale/Leaseback Transactions
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, enter into any Sale/Leaseback Transaction unless (i) the
Company or such Restricted Subsidiary, as the case may be, would be able to
incur Indebtedness in an amount equal to the Attributable Indebtedness with
respect to such Sale/Leaseback Transaction or (ii) the Company or such
Restricted Subsidiary receives cash proceeds from such Sale/Leaseback
Transaction at least equal to the Fair Market Value of the assets subject
thereto and such proceeds are applied in the same manner and to the same extent
as Net Cash Proceeds and Excess Proceeds from an Asset Sale.
SECTION 4.16 Guarantees of Certain Indebtedness
The Company will not permit any of its Restricted Subsidiaries,
directly or indirectly, to Guarantee any Indebtedness of the Company or a
Guarantor, unless each such Restricted Subsidiary simultaneously executes and
delivers to the Trustee a supplemental indenture, in form reasonably
satisfactory to the Trustee, providing for the Guarantee by such Restricted
Subsidiary of the payment of the Obligations of the Company under the Notes in
the manner set forth under Article 10 hereof. Neither the Company nor any such
Guarantor shall be required to make a notation on the Notes to reflect any such
Guarantee. Nothing in this covenant shall be construed to permit any
Restricted Subsidiary of the Company to incur Indebtedness otherwise prohibited
by Section 4.8 hereof.
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SECTION 4.17 Conduct of Business
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, engage in any business or activity other than the Business.
SECTION 4.18 Payments for Consent
The Company and its Subsidiaries shall not, 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 terms or provisions of the Notes or
this Indenture unless such consideration is offered to be paid or agreed to be
paid to all Holders of the Notes which so consent, waive or agree to amend in
the time frame set forth in any solicitation documents relating to such
consent, waiver or agreement.
ARTICLE 5
SUCCESSORS
SECTION 5.1 Limitation on Merger, Consolidation or Sale of Assets
(a) The Company shall not consolidate or merge with or into
(whether or not the Company is the surviving corporation), or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions to, another Person or
entity unless (i) the Company is the surviving corporation, 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 Person formed by or surviving any such consolidation or
merger (if other than the Company), or the Person to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made, expressly assumes all the Obligations of the Company under the Notes and
this Indenture pursuant to a supplemental indenture in a form reasonably
satisfactory to the Trustee; (iii) immediately before and immediately after
giving effect to such transaction (including any Indebtedness incurred or
anticipated to be incurred in connection with such transaction), no Default or
Event of Default shall have occurred and be continuing; (iv) except in the case
of a consolidation or merger of the Company with or into a Wholly-Owned
Restricted Subsidiary of the Company, immediately after giving effect to such
transaction on a pro forma basis, the Consolidated Net Worth of the Company or
any Person formed by or surviving any such consolidation or merger, or to which
such sale, assignment, transfer, lease, conveyance or other disposition shall
have been made, is equal to or greater than the Consolidated Net Worth of the
Company immediately preceding such transaction; and (v) except in the case of a
consolidation or merger of the Company with or into a Wholly-Owned Restricted
Subsidiary of the Company, immediately after giving pro forma effect to such
transaction as if such transaction had been made at the beginning of the
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applicable Reference Period, the Company or any Person formed by or surviving
any such consolidation or merger, or to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made, would have been
permitted to incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) pursuant to the first paragraph of Section 4.8 hereof.
(b) The Company shall deliver to the Trustee prior to the
consummation of any proposed transaction subject to the foregoing paragraph (a)
an Officers' Certificate to the foregoing effect and an Opinion of Counsel
stating that the proposed transaction, all conditions precedent thereto and the
execution and delivery and form of such supplemental indenture comply with this
Indenture. The Trustee shall be entitled to conclusively rely upon such
Officers' Certificate and Opinion of Counsel.
SECTION 5.2 Successor Person Substituted
Upon any consolidation or merger, or any sale, assignment,
transfer, lease, conveyance or other disposition of all or substantially all of
the properties or assets of the Company in accordance with Section 5.1 hereof,
the successor Person formed by such consolidation or into or with which the
Company is merged or to which such sale, assignment, transfer, lease,
conveyance or other disposition is made shall succeed to, and be substituted
for (so that from and after the date of such consolidation, merger, sale,
assignment, transfer, lease, conveyance or other disposition, the provisions of
this Indenture referring to the "Company" shall refer to or include instead the
successor Person and not the Company), and may exercise every right and power
of the Company under this Indenture with the same effect as if such successor
Person had been named as the Company herein. The provisions of this Article V
shall not limit the obligations of the Company pursuant to Section 4.14.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.1 Events of Default
An "Event of Default" occurs if:
(1) the Company defaults in the payment of the principal of or
premium, if any, on any Note when the same becomes due and payable (upon
Stated Maturity, acceleration, optional redemption, required purchase
(whether pursuant to Section 4.13 or 4.14 or otherwise)); or
(2) the Company defaults in the payment of an installment of
interest on, or Liquidated Damages, if any, with respect to, any of the
Notes, when the same becomes due and payable, which default continues
for a period of 30 days; or
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(3) the Company fails to comply with the provisions described
under Article 5 hereof or any Guarantor fails to comply with the
provisions described under Section 10.2; or
(4) the Company or, with respect to any Guarantee, any
Guarantor fails to comply with any of its covenants or agreements
contained in, in the case of the Company, the Notes or this Indenture
or, in the case of a Guarantor, the Guarantee of such Guarantor (other
than a default specified in clause (1), (2) or (3) above) and such
default continues for a period of 30 days after notice of such default
requiring the Company, or such Guarantor to remedy the same shall have
been given (x) to the Company by the Trustee or (y) to the Company and
the Trustee by Holders of at least 25% in aggregate principal amount of
the Notes then outstanding; or
(5) a default under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company or any of
its Restricted Subsidiaries or any Guarantor (or the payment of which is
guaranteed by the Company or any of its Restricted Subsidiaries or any
Guarantor) whether such Indebtedness or guarantee now exists, or is
created after the date of this Indenture, which default (a) is caused by
a failure to pay principal of or premium, if any, or interest on such
Indebtedness prior to the expiration of the grace period provided in
such Indebtedness (a "Payment Default") or (b) results in the
acceleration of such Indebtedness prior to its express maturity and, in
each case described in clauses (a) and (b) of this subsection (5), 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 $3.0 million or more; provided that if any such Payment
Default is cured or waived or any such acceleration rescinded, or such
Indebtedness is repaid, within a period of 10 days from the continuation
of such default beyond the applicable grace period or the occurrence of
such acceleration, as the case may be, such Event of Default under this
Indenture and any consequential acceleration of the Notes shall be
automatically rescinded, so long as such rescission does not conflict
with any judgment or decree; or
(6) the failure of a Guarantee by a Guarantor to be in full
force and effect (other than a release of a Guarantee in accordance with
Section 10.4), or the denial or disaffirmance by such Guarantor thereof;
or
(7) the Company or any of its Restricted Subsidiaries or any
Guarantor fails to pay one or more final judgments or orders rendered
against the Company or any Restricted Subsidiary or any Guarantor in an
aggregate amount in excess of $3.0 million, and (a) such judgments or
orders are not paid, discharged or stayed for a period of 60 days from
the entry thereof or (b) an enforcement proceeding shall have been
commenced (and not discharged or settled) by any creditor upon any such
judgments or orders; or
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(8) the Company or any of its Restricted Subsidiaries or any
Guarantor, pursuant to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case or proceeding,
(B) consents to the entry of an order for relief
against it in an involuntary case or proceeding,
(C) consents to the appointment of a Custodian of it or
for all or substantially all of its property,
(D) makes a general assignment for the benefit of its
creditors, or
(E) admits in writing its inability to pay debts as the
same become due; or
(9) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(A) is for relief against the Company, or any of its
Restricted Subsidiaries, or any Guarantor, in an involuntary case
or proceeding,
(B) appoints a Custodian of the Company or any of its
Restricted Subsidiaries, or any Guarantor, or for all or
substantially all of its respective property, or
(C) orders the liquidation of the Company, or any of
its Restricted Subsidiaries, or any Guarantor,
and, in each case, the order or decree remains unstayed and in effect
for 60 days.
The term "Bankruptcy Law" means Title 11, U.S. Code or any
similar federal, state or foreign law for the relief of debtors. The term
"Custodian" means any receiver, trustee, assignee, liquidator or similar
official under any Bankruptcy Law.
In the case of any Event of Default pursuant to the provisions of
this Section 6.1 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 Section 3.7 hereof, 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 June 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
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to such date, then the premium specified in this Indenture shall also become
immediately due and payable to the extent permitted by law upon the
acceleration of the Notes.
SECTION 6.2 Acceleration
If an Event of Default (other than an Event of Default specified
in clauses (8) and (9) of Section 6.1) occurs and is continuing, the Trustee by
notice to the Company, or the Holders of at least 25% in principal amount of
the then outstanding Notes by written notice to the Company and the Trustee may
declare the unpaid principal of, any accrued and unpaid interest, premium and
Liquidated Damages, if any, on and all other Obligations under all the Notes to
be due and payable immediately. Upon such declaration the principal, interest,
premium, Liquidated Damages, if any, and all other Obligations shall be due and
payable immediately. If an Event of Default specified in clause (8) or (9) of
Section 6.1 occurs, such an amount shall ipso facto become and be immediately
due and payable without any notice, declaration or other act on the part of the
Trustee or any Holder. Subject to Section 2.9, the Holders of a majority in
principal amount of the then outstanding Notes by written notice to the Company
and the Trustee may rescind a declaration of acceleration and its consequences
if the rescission would not conflict with any judgment or decree and if all
existing Events of Default (except nonpayment of principal, premium, interest
or Liquidated Damages, if any, or any other Obligation that has become due
solely because of the acceleration) have been cured or waived. No such
recession will affect any subsequent Event of Default or impair any right
consequent thereon.
SECTION 6.3 Other Remedies
If an Event of Default occurs and is continuing, the Trustee may
and shall at the direction of the Holders of 25% in principal amount of the
then outstanding Notes pursue any available remedy (under this Indenture or
otherwise) to collect the payment of principal of, premium, interest or
Liquidated Damages, if any, on the Notes or to enforce the performance of any
provision of the Notes, this Indenture or the Registration Rights Agreement.
The Trustee may maintain a proceeding even if it does not possess
any of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of Notes in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. All
remedies are cumulative to the extent permitted by law.
SECTION 6.4 Waiver of Past Defaults
Subject to Sections 2.9, 6.7 and 9.2, Holders of a majority in
principal amount of the then outstanding Notes by notice to the Trustee may on
behalf of the Holders of all the Notes waive an existing Default or Event of
Default and its consequences, except a continuing Default or Event of Default
in the payment of the principal, premium, interest or Liquidated Damages, if
any, with respect to any Note held by a non-consenting Holder. Upon any such
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waiver, such Default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or other Default
or impair any right consequent thereon.
SECTION 6.5 Control by Majority
Subject to Section 2.9, the Holders of a majority in principal
amount of the then outstanding Notes may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on it. Subject to Section 7.1, however, the
Trustee may refuse to follow any direction that conflicts with law or this
Indenture that the Trustee determines may be unduly prejudicial to the rights
of other Holders of Notes, or that may involve the Trustee in personal
liability. Subject to the provisions of TIA Section 315, the Trustee may take
any other action deemed proper by the Trustee which is not inconsistent with
such direction.
SECTION 6.6 Limitation on Suits
A Holder of Notes may pursue a remedy with respect to this
Indenture or the Notes only if:
(1) such Holder gives to the Trustee written notice of a
continuing Event of Default;
(2) the Holders of at least 25% in principal amount of the
then outstanding Notes make a written request to the Trustee to pursue
the remedy;
(3) such Holder or Holders offer and, if requested, provide to
the Trustee indemnity reasonably satisfactory to the Trustee against any
loss, liability or expense that may be incurred by the Trustee in
compliance with such request;
(4) the Trustee does not comply with the request within 60
days after receipt of the request and the offer and, if requested, the
provision of indemnity; and
(5) during such 60-day period the Holders of a majority in
principal amount of the then outstanding Notes (subject to Section 2.9)
do not give the Trustee a direction inconsistent with the request.
A Holder of Notes may not use this Indenture to prejudice
the rights of another Holder of Notes or to obtain a preference or
priority over another Holder of Notes.
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SECTION 6.7 Rights of Holders to Receive Payment
Notwithstanding any other provision of this Indenture, the right
of any Holder of a Note, which right is absolute and unconditional, to receive
payment of principal, premium, interest or Liquidated Damages, if any, with
respect to the Notes, on or after the respective due dates expressed in the
Note, or to bring suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the consent of such
Holder.
SECTION 6.8 Collection Suit by Trustee
If an Event of Default specified in Section 6.1(1) or (2) occurs
and is continuing, the Trustee is authorized to recover judgment in its own
name and as trustee of an express trust against the Company or any Guarantor
for the whole amount of principal, premium, interest and Liquidated Damages, if
any, remaining unpaid on the Notes and interest on overdue principal and, to
the extent lawful, interest and such further amount as shall be sufficient to
cover the costs and expenses of collection, including the reasonable
compensation and expenses of the Trustee, its agents and counsel.
SECTION 6.9 Trustee May File Proofs of Claim
The Trustee is authorized to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the
claims of the Trustee (including any claim for the reasonable compensation and
expenses of the Trustee, its agents and counsel) and the Holders of Notes
allowed in any judicial proceedings relative to the Company, a Guarantor (or
any other obligor upon the Notes), their creditors or their property and shall
be entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any
such judicial proceeding is hereby authorized by each Holder of Notes to make
such payments to the Trustee, and in the event that the Trustee shall consent
to the making of such payments directly to the Holders of Notes, to pay to the
Trustee any amount due to it for the reasonable compensation and expenses of
the Trustee, its agents and counsel, and any other amounts due the Trustee
under Section 7.7 hereof. To the extent that the payment of any such
compensation and expenses of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 7.7 hereof out of the estate in any such
proceeding, shall be denied for any reason, payment of the same shall be
secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties which the Holders of the
Notes may be entitled to receive in such proceeding whether in liquidation or
under any plan of reorganization or arrangement or otherwise. Nothing herein
contained shall be deemed to authorize the Trustee to authorize or consent to
or accept or adopt on behalf of any Holder of Notes any plan of reorganization,
arrangement, adjustment or composition affecting the Notes or the rights of any
Holder thereof, or to authorize the Trustee to vote in respect of the claim of
any Holder of Notes in any such proceeding.
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SECTION 6.10 Priorities
If the Trustee collects any money pursuant to this Article 6, it
shall pay out the money in the following order:
First: to the Trustee, its agents and counsel for amounts due
under Section 7.7, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the
costs and expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the
Notes for principal, premium, interest and Liquidated Damages, if any,
ratably, without preference or priority of any kind, according to the
amounts due and payable on the Notes for principal, premium, interest
and Liquidated Damages, if any, respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any
payment to Holders of Notes.
SECTION 6.11 Undertaking for Costs
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder
to enforce the provisions of Section 6.7 hereof, or a suit by a Holder or
Holders of more than 10% in principal amount of the then outstanding Notes.
ARTICLE 7
TRUSTEE
SECTION 7.1 Duties of Trustee
(1) If a Default or an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Indenture, and use the same degree of care and skill in their
exercise, as a prudent person would exercise or use under the circumstances in
the conduct of its own affairs.
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(2) Except during the continuance of a Default or an Event of
Default:
(A) The duties of the Trustee shall be determined
solely by the TIA or express provisions of this Indenture and the
Trustee need perform, and be liable for (as set forth herein), only
those duties that are specifically set forth in the TIA or this
Indenture and no others.
(B) In the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture. However, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the requirements of
this Indenture, but need not verify the information contained therein.
(3) The Trustee may not be relieved from liabilities for its
own negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(A) This paragraph (3) does not limit the effect of
paragraph (2) of this Section 7.1.
(B) The Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer, unless it is
proved that the Trustee was negligent in ascertaining the pertinent
facts.
(C) The Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.5.
(4) Whether or not therein expressly so provided, every
provision of this Indenture that in any way relates to the Trustee is subject
to paragraphs (1), (2), (3) and (5) of this Section 7.1.
(5) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder, if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity
against such risk or liability is not reasonably assured to it.
(6) The Trustee shall not be liable for interest on any money
or assets received by it except as the Trustee may agree in writing with the
Company. Assets held in trust by the Trustee need not be segregated from other
funds except to the extent required by law.
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SECTION 7.2 Rights of Trustee
(1) The Trustee may conclusively rely and shall be protected
in relying upon any resolution, document, Officers' Certificate or any other
certificate, statement, instrument, opinion, report, notice, request, consent,
order, bond or other document believed by it to be genuine and to have been
signed or presented by the proper Person. The Trustee need not investigate any
fact or matter stated in any such document.
(2) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel. The Trustee shall
not be liable for any action it takes or omits to take in good faith in
reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may
consult with counsel and the written advice of such counsel or any Opinion of
Counsel shall be full and complete authorization and protection from liability,
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon.
(3) The Trustee may act through its agent and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(4) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers conferred upon it by this Indenture.
(5) Unless otherwise specifically provided in this Indenture,
any demand, request, direction or notice from the Company shall be sufficient
if signed by an Officer of the Company.
SECTION 7.3 Definitive Rights of Trustee
The Trustee in its individual or any other capacity may become
the owner or pledgee of Notes and may otherwise deal with the Company or its
Subsidiaries or an Affiliate of the Company with the same rights it would have
if it were not Trustee. Any Agent may do the same with like rights. However,
the Trustee is subject to Sections 7.10 and 7.11.
SECTION 7.4 Trustee's Disclaimer
The Trustee makes no representation as to the validity or
adequacy of this Indenture or the Notes, it shall not be accountable for the
Company's use of the proceeds from the Notes or any money paid to the Company
or upon the Company's direction under any provision hereof, it shall not be
responsible for the use or application of any money received by any Paying
Agent other than the Trustee and it shall not be responsible for any statement
or recital herein or any statement in the Notes or any other document in
connection with the sale of the Notes or pursuant to this Indenture other than
its certificate of authentication.
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SECTION 7.5 Notice of Defaults
If a Default or Event of Default occurs and is continuing and if
it is actually known to a Responsible Officer of the Trustee, the Trustee shall
mail to Holders of Notes a notice of the Default or Event of Default within 30
days after it occurs. Except in the case of a Default or Event of Default in
payment on any Note pursuant to Section 6.1(1) or (2), the Trustee may withhold
the notice if it in good faith determines that withholding the notice is in the
interests of Holders of Notes.
SECTION 7.6 Reports by Trustee to Holders
Within 60 days after each May 15 beginning with the May 15
following the date of this Indenture, the Trustee shall mail to Holders of
Notes a brief report dated as of such reporting date that complies with TIA
Section 313(a) (but if no event described in TIA Section 313(a) has occurred
within the twelve months preceding the reporting date, no report need be
transmitted). The Trustee also shall comply with TIA Section 313(b)(2). The
Trustee shall also transmit by mail all reports as required by TIA Section
313(c).
Commencing at the time this Indenture is qualified under the TIA,
a copy of each report at the time of its mailing to Holders of Notes shall be
filed with the SEC and each stock exchange on which the Notes are listed. The
Company shall promptly notify the Trustee when the Notes are listed on any
stock exchange and the Trustee shall comply with TIA Section 313(d).
SECTION 7.7 Compensation and Indemnity
The Company shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and its services hereunder.
The Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. Except as otherwise expressly provided herein,
the Company shall reimburse the Trustee promptly upon request for all
reasonable disbursements, advances and expenses incurred or made by it in
addition to the compensation for its services in accordance with any provision
of this Indenture (including, without limitation, the reasonable compensation,
expenses and disbursements of its counsel and of all agents and other persons
not regularly in its employ (A) in connection with the preparation, execution
and delivery of this Indenture, any waiver or consent hereunder, any
modification or termination hereof, or any Event of Default or alleged Event of
Default; (B) if an Event of Default occurs, in connection with such Event of
Default and collection, bankruptcy, insolvency and other enforcement
proceedings relating thereto; (C) in connection with the administration of the
Trustee's rights pursuant hereto; or (D) in connection with any removal of the
Trustee pursuant to Section 7.8 hereof), except such disbursements, advances
and expenses as may be attributable to its negligence or bad faith.
The Company shall indemnify the Trustee against any and all
losses, liabilities, obligations, damages, penalties, judgments, actions,
suits, proceedings, reasonable costs and expenses (including reasonable fees
and disbursements of counsel) of any kind whatsoever which
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may be incurred by the Trustee in connection with any investigative,
administrative or judicial proceeding (whether or not such indemnified party is
designated a party to such proceeding) arising out of or in connection with the
acceptance or administration of its duties under this Indenture; provided,
however, that the Company need not reimburse any expense or indemnify against
any loss, obligation, damage, penalty, judgment, action, suit, proceeding,
reasonable cost or expense (including reasonable fees and disbursements of
counsel) of any kind whatsoever which may be incurred by the Trustee in
connection with any investigative, administrative or judicial proceeding
(whether or not such indemnified party is designated a party to such
proceeding) in which it is determined that the Trustee acted with negligence,
bad faith or willful misconduct. The Trustee shall notify the Company promptly
of any claim for which it may seek indemnity. Failure by the Trustee to so
notify the Company shall not relieve the Company of its obligations hereunder.
The Company shall defend the claim and the Trustee shall cooperate in the
defense. Unless otherwise set forth herein, the Trustee may have separate
counsel and the Company shall pay the reasonable fees and expenses of such
counsel. The Company need not pay for any settlement made without its consent.
The obligations of the Company under this Section 7.7 shall
survive the satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section 7.7,
the Trustee shall have a Lien prior to the Holder of Notes on all money or
property held or collected by the Trustee, except that held in trust to pay
principal of and premium, interest and Liquidated Damages, if any, on
particular Notes. Such Lien shall survive the satisfaction and discharge of
this Indenture.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.1(8) or (9) occurs, the expenses and
the compensation for such services are intended to constitute expenses of
administration under any Bankruptcy Law.
SECTION 7.8 Replacement of Trustee
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign at any time and be discharged from the
trust hereby created by so notifying the Company by at least 30 days' advance
written notice. Subject to Section 2.9, the Holders of a majority in principal
amount of the then outstanding Notes may remove the Trustee by so notifying the
Trustee and the Company in writing. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
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(2) the Trustee is adjudged a bankrupt or an insolvent or an
order for relief is entered with respect to the Trustee under any
Bankruptcy Law;
(3) a Custodian or public officer takes charge of the Trustee
or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office,
the Holders of a majority in principal amount of the then outstanding Notes
(subject to Section 2.9) may appoint a successor Trustee to replace the
successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after
the retiring Trustee resigns or is removed, the retiring Trustee, the Company
or the Holders of at least 10% in principal amount of the then outstanding
Notes may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee after written request by any Holder of Notes who
has been a Holder of Notes for at least six months fails to comply with Section
7.10, such Holder of Notes may, on behalf of himself and all others similarly
situated, petition any court of competent jurisdiction for the removal of the
Trustee and the appointment of a successor Trustee.
The Company shall give or cause to be given notice of each
resignation and each removal of the Trustee to all Holders in the manner
provided herein. Each notice shall include the name of the successor Trustee
and the address of its Corporate Trust Office.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to each Holder of Notes. The retiring Trustee shall promptly
transfer all property held by it as Trustee to the successor Trustee provided
that all sums owing to the Trustee hereunder have been paid and subject to the
Lien provided for in Section 7.7. Notwithstanding replacement of the Trustee
pursuant to this Section 7.8, the Company's obligations under Section 7.7
hereof shall continue for the benefit of the retiring Trustee. No successor
Trustee shall accept its appointment unless at the time of such acceptance such
successor Trustee shall be qualified and eligible under this Article 7.
SECTION 7.9 Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the successor corporation
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without any further act shall be the successor Trustee; provided that such
successor is otherwise eligible hereunder.
SECTION 7.10 Eligibility; Disqualification
There shall at all times be a Trustee hereunder which shall be a
corporation organized and doing business under the laws of the United States of
America or of any state thereof or territory or of the District of Columbia
authorized under such laws to exercise corporate trustee power, shall be
subject to supervision or examination by federal, state, territorial or
District of Columbia authority and shall have a combined capital and surplus of
at least $50 million as set forth in its most recent published annual report of
condition.
If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 7.10 it shall resign immediately
in the manner and with the effect specified in this Article 7. If the Trustee
has or shall acquire a conflicting interest within the meaning of the TIA, the
Trustee shall either eliminate such interest or resign, to the extent and in
the manner provided by, and subject to the provision of, the TIA and this
Indenture.
This Indenture shall always have a Trustee who satisfies the
requirements of the TIA, including TIA Sections 310(a)(1) and 310(a)(5). The
Trustee is subject to TIA Section 310(b).
SECTION 7.11 Preferential Collection of Claims Against Company
The Trustee is subject to TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has
resigned or been removed shall be subject to TIA Section 311(a) to the extent
indicated therein.
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.1 Option to Effect Legal Defeasance or Covenant Defeasance
The Company may, at the option of the Board of Directors of the
Company, evidenced by a resolution set forth in an Officers' Certificate, at
any time, elect to have either Section 8.2 or 8.3 hereof be applied to all
outstanding Notes upon compliance with the conditions set forth below in this
Article 8.
SECTION 8.2 Legal Defeasance and Discharge
Upon the Company's exercise under Section 8.1 hereof of the
option applicable to this Section 8.2, the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.4 hereof, be deemed to
have been discharged from its obligations with respect to all outstanding Notes
on the date the conditions set forth below are satisfied (hereinafter, "Legal
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Defeasance"). For this purpose, Legal Defeasance means that the Company shall
be deemed to have paid and discharged the entire Indebtedness represented by
the outstanding Notes, which shall thereafter be deemed to be "outstanding"
only for the purposes of Section 8.5 hereof and the other Sections of this
Indenture referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, promptly on
demand of and at the expense of the Company, shall execute proper instruments
prepared by the Company acknowledging the same), except for the following
provisions which shall survive until otherwise terminated or discharged
hereunder: (a) the rights of Holders of outstanding Notes to receive solely
from the trust fund described in Section 8.4 hereof, and as more fully set
forth in such Section, payments in respect of the principal of, premium,
interest and Liquidated Damages, if any, on such Notes when such payments are
due, (b) the Company's obligations with respect to outstanding Notes under
Article 2 and Section 4.2 hereof, (c) the rights, powers, trusts, duties and
immunities of the Trustee hereunder and the Company's obligations in connection
therewith and (d) this Article 8. Subject to compliance with this Article 8,
the Company may exercise its option under this Section 8.2 notwithstanding the
prior exercise of its option under Section 8.3 hereof.
SECTION 8.3 Covenant Defeasance
Upon the Company's exercise under Section 8.1 hereof of the
option applicable to this Section 8.3, the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.4 hereof, be released
from its obligations under the covenants contained in Sections 4.3(a), 4.5,
4.7, 4.8, 4.9, 4.10, 4.11, 4.12, 4.13, 4.14 , 4.15, 4.16, 4.17 and 4.18 and
Article 5 hereof with respect to the outstanding Notes on and after the date
the conditions set forth below are satisfied (hereinafter, "Covenant
Defeasance"), and the Notes shall thereafter be deemed not "outstanding" for
the purposes of any direction, waiver, consent or declaration or act of Holders
(and the consequences of any thereof) in connection with such covenants, but
shall continue to be deemed "outstanding" for all other purposes hereunder (it
being understood that such Notes shall not be deemed outstanding for accounting
purposes). For this purpose, Covenant Defeasance means that, with respect to
the outstanding Notes, the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein or in any other document, and such omission to comply shall not
constitute a Default or Event of Default under Section 6.1 hereof, but, except
as specified above, the remainder of this Indenture and such Notes shall be
unaffected thereby. In addition, upon the Company's exercise under Section 8.1
hereof of the option applicable to this Section 8.3 hereof, subject to the
satisfaction of the conditions set forth in Section 8.4 hereof, Sections 6.1(5)
and 6.1(7) hereof shall not constitute Events of Default.
SECTION 8.4 Conditions to Legal Defeasance or Covenant Defeasance
The following shall be the conditions to the application of
either Section 8.2 or 8.3 hereof to the outstanding Notes:
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In order to exercise either Legal Defeasance or Covenant
Defeasance, as applicable:
(a) the Company must irrevocably deposit or cause to be
deposited with the Trustee, in trust, for the benefit of the Holders of
the Notes, cash in United States dollars, non-callable Government
Securities which through the scheduled payment of principal and interest
in respect thereof in accordance with their terms will provide, not
later than one day before the due date of any payment, cash, or a
combination thereof, in such amounts as will be sufficient, in the
opinion of a nationally recognized firm of independent certified public
accountants or nationally recognized investment bank expressed in a
written certification thereof delivered to the Trustee, to pay and
discharge, and which shall be applied by the Trustee to pay and
discharge, the principal of, premium, interest and Liquidated Damages,
if any, on the outstanding Notes on the Stated Maturity or on the
applicable redemption date, as the case may be, in accordance with the
terms of this Indenture;
(b) in the case of an election under Section 8.2 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel
confirming that (A) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling or (B) since the
date of this Indenture, there has been a change in the applicable
federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Holders of the
outstanding Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal Defeasance and will be
subject to federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such Legal
Defeasance had not occurred;
(c) in the case of an election under Section 8.3 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel
confirming that the Holders of the outstanding Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
Covenant Defeasance and will be subject to federal income tax on the
same amounts, in the same manner and at the same times as would have
been the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or insofar as Section 6.1(8) or
6.1(9) hereof are concerned, at any time in the period ending on the
91st day after the date of deposit (it being understood that this
condition shall not be deemed satisfied until the expiration of such
period);
(e) such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute a default under, any
material agreement or instrument (other than this Indenture) to which
the Company or any of its Restricted Subsidiaries is a party or by which
the Company or any of its Restricted Subsidiaries is bound;
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(f) the Company shall have delivered to the Trustee an Opinion
of Counsel to the effect that after the 91st day following the deposit,
the trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally;
(g) the Company shall have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made by the
Company with the intent of preferring the Holders of Notes over any
other creditors of the Company with the intent of defeating, hindering,
delaying or defrauding creditors of the Company; and
(h) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for or relating to the Legal Defeasance
under Section 8.2 or the Covenant Defeasance under Section 8.3 have been
complied with.
SECTION 8.5 Deposited Money and Government Securities to be Held in Trust;
Other Miscellaneous Provisions
Subject to Section 8.6 hereof, all money and non-callable
Government Securities (including the proceeds thereof) deposited with the
Trustee (or other qualifying trustee, collectively for purposes of this Section
8.5, the "Trustee") pursuant to Section 8.4 hereof in respect of the
outstanding Notes shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Notes and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as Paying Agent) as the Trustee may determine, to the Holders of such
Notes of all sums due and to become due thereon in respect of principal,
premium, interest and Liquidated Damages, if any, but such money and Government
Securities need not be segregated from other funds except to the extent
required by law.
The Company shall pay and indemnify the Trustee against any tax,
fee or other charge imposed on or assessed against the cash or non-callable
Government Securities deposited pursuant to Section 8.4 hereof or the principal
and interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
SECTION 8.6 Repayment to Company
(a) Anything in this Article 8 to the contrary
notwithstanding, the Trustee shall deliver or pay to the Company from time to
time upon the request of the Company any money or non-callable Government
Securities held by it as provided in Section 8.4 hereof which, in the opinion
of a nationally recognized firm of independent certified public accountants or
nationally recognized investment bank expressed in a written certification
thereof delivered to the Trustee (which may be the opinion delivered under
Section 8.4(a) hereof), are in excess of the amount thereof that would then be
required to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.
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(b) Subject to any applicable abandoned property law, the
Trustee and the Paying Agent shall pay to the Company upon request in the form
of an Officers' Certificate any money held by them for the payment of
principal, premium, interest or Liquidated Damages, if any, that remains
unclaimed for two years after such principal, interest, premium, if any, or
Liquidated Damages, if any, became due and payable, and, thereafter, Holders
entitled to the money must look to the Company for payment of such money as
creditors and all liability of the Trustee and the Paying Agent with respect to
such money shall cease.
SECTION 8.7 Reinstatement
If the Trustee or Paying Agent is unable to apply any United
States dollars or noncallable Government Securities in accordance with Section
8.2 or 8.3 hereof, as the case may be, by reason of any order or judgment of
any court or governmental authority enjoining, restraining or otherwise
prohibiting such application, then the Company's Obligations under this
Indenture and the Notes shall be revived and reinstated as though no deposit
had occurred pursuant to Section 8.2 or 8.3 hereof until such time as the
Trustee or Paying Agent is permitted to apply all such money in accordance with
Section 8.2 or 8.3 hereof, as the case may; provided that, if the Company makes
any payment of principal of, premium, interest or Liquidated Damages, if any,
on any Note following the reinstatement of its obligations, the Company shall
be subrogated to the rights of the Holders of such Notes to receive such
payment from the money held by the Trustee or Paying Agent.
ARTICLE 9
AMENDMENTS
SECTION 9.1 Without Consent of Holders
The Company and the Trustee may amend or supplement this
Indenture or the Notes without the consent of any Holder of Notes:
(1) to cure any ambiguity, defect or inconsistency; provided
that such amendment or supplement does not adversely affect the rights
of any Holder;
(2) to comply with Article 5;
(3) to provide for uncertificated Notes in addition to or in
place of certificated Notes;
(4) to provide security for the Notes as contemplated by the
provisions of Section 4.10 hereof;
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(5) to reflect the release of any Guarantor from its
Guarantee, or the addition of any Restricted Subsidiary of the Company
as a Guarantor, in the manner provided in Article 10 hereof;
(6) to make any change that would provide any additional
rights or benefits to the Holders of the Notes or that does not
adversely affect the rights hereunder of any Holder of the Notes; or
(7) to comply with requirements of the SEC in order to effect
or maintain the qualification of this Indenture under the TIA.
Upon the request of the Company, accompanied by a resolution of
the Board of Directors of the Company and of each Guarantor, if any,
authorizing the execution of any such supplemental indenture or amendment, and
upon receipt by the Trustee of the documents described in Section 9.6 hereof
required or requested by the Trustee, the Trustee shall join with the Company
and such Guarantor, if any, in the execution of any supplemental indenture or
amendment authorized or permitted by the terms of this Indenture and to make
any further appropriate agreements and stipulations which may be therein
contained, but the Trustee shall not be obligated to enter into such
supplemental indenture or amendment which affects its own rights, duties or
immunities under this Indenture or otherwise. After an amendment or supplement
under this Section 9.1 becomes effective, the Company shall mail to the Holders
of each Note affected thereby a notice briefly describing such amendment or
supplement.
SECTION 9.2 With Consent of Holders
Except as otherwise provided herein, the Company and the Trustee
may amend or supplement this Indenture or the Notes with the written consent of
the Holders of at least a majority in principal amount (subject to Section 2.9)
of the then outstanding Notes (including consents obtained in connection with a
tender offer or exchange offer for the Notes).
Upon the request of the Company, accompanied by a resolution of
the Board of Directors of the Company and of each Guarantor, if any,
authorizing the execution of any such supplemental indenture or amendment, and
upon the filing with the Trustee of evidence satisfactory to the Trustee of the
consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee
of the documents described in Section 9.6 hereof, the Trustee shall join with
the Company and such Guarantor, if any, in the execution of such supplemental
indenture or amendment unless such supplemental indenture or amendment affects
the Trustee's own rights, duties or immunities under this Indenture or
otherwise, in which case the Trustee may in its discretion, but shall not be
obligated to, enter into such supplemental indenture.
It shall not be necessary for the consent of the Holders under
this Section 9.2 to approve the particular form of any proposed supplemental
indenture or amendment, but it shall be sufficient if such consent approves the
substance thereof.
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After a supplemental indenture or amendment under this Section
9.2 becomes effective, the Company shall mail to the Holders of each Note
affected thereby a notice briefly describing the amendment or waiver. Subject
to Sections 2.9, 6.4 and 6.7 hereof, the Holders of a majority in principal
amount of the Notes then outstanding may waive compliance in a particular
instance by the Company or any Guarantor with any provision of this Indenture
or the Notes. However, without the consent of each Holder of Notes affected,
an amendment or waiver under this Section 9.2 may not (with respect to any
Notes held by a non-consenting Holder of Notes):
(1) reduce the principal amount of Notes whose Holders must
consent to an amendment, supplement or waiver;
(2) reduce the rate of or change the time for payment of
interest or Liquidated Damages, if any, including default interest, on
any Note;
(3) reduce the principal of or change the fixed maturity of
any Note or alter the optional or mandatory redemption provisions (other
than provisions relating to the covenants described in Sections 3.9 and
4.13) or reduce the prices at which the Company shall repurchase such
Notes pursuant to Sections 3.9, 4.13 or 4.14 hereof;
(4) make any Note payable in money other than that stated in
the Note;
(5) make any change in Section 6.4 or 6.7 hereof or in this
Section 9.2;
(6) waive a Default or Event of Default in the payment of
principal of, premium or interest or Liquidated Damages, if any, on, any
Note (other than a Default in the payment of an amount due as a result
of an acceleration if the Holders of Notes rescind such acceleration
pursuant to Section 6.2);
(7) waive a redemption payment with respect to any Note; or
(8) impair the right to institute suit for the enforcement of
any payment of principal of, or premium, if any, or interest or
Liquidated Damages, if any, on, any Note.
SECTION 9.3 Compliance with Trust Indenture Act
If at the time of an amendment to this Indenture or the Notes,
this Indenture shall be qualified under the TIA, every amendment to this
Indenture or the Notes shall be set forth in a supplemental indenture that
complies with the TIA as then in effect.
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SECTION 9.4 Revocation and Effect of Consents
Until a supplemental indenture, an amendment or waiver becomes
effective, a consent to it by a Holder of a Note is a continuing consent by the
Holder and every subsequent Holder of a Note or portion of a Note that
evidences the same debt as the consenting Holder's Note, even if notation of
the consent is not made on any Note. Subject to the following paragraph, any
such Holder or subsequent Holder may revoke the consent as to such Holder's
Note or portion of such Note by notice to the Trustee or the Company received
before the date specified in any solicitation or waiver. Subject to Section
9.2 hereof, a supplemental indenture, amendment or waiver becomes effective in
accordance with its terms and thereafter binds every Holder of Notes.
The Company may fix a record date for determining which Holders
must consent to such supplemental indenture, amendment or waiver. If the
Company fixes a record date, the record date shall be fixed at the later of (i)
30 days prior to the first solicitation of such consent or the date of the most
recent list of Holders furnished to the Trustee prior to such solicitation
pursuant to Section 2.5 hereof, or (ii) such other date as the Company shall
designate.
SECTION 9.5 Notation on or Exchange of Notes
The Trustee may place an appropriate notation about a
supplemental indenture, amendment or waiver on any Note thereafter
authenticated. The Company in exchange for all Notes may issue and the Trustee
shall authenticate new Notes that reflect such amendment or waiver.
Failure to make the appropriate notation or issue a new Note
shall not affect the validity and effect of such amendment or waiver.
SECTION 9.6 Trustee to Sign Amendments, etc.
The Trustee shall sign any amendment, waiver or supplemental
indenture authorized pursuant to this Article 9 if the amendment, waiver or
supplemental indenture does not adversely affect the rights, duties,
liabilities or immunities of the Trustee. If it does, the Trustee may, but
need not, sign such amendment, waiver or supplemental indenture, as the case
may be. In signing or refusing to sign such amendment, waiver or supplemental
indenture, the Trustee shall be entitled to receive, if requested, an indemnity
reasonably satisfactory to it and to receive and, subject to Section 7.1, shall
be fully protected in relying upon, an Officers' Certificate and an Opinion of
Counsel as conclusive evidence that such amendment, waiver or supplemental
indenture is authorized or permitted by this Indenture, that it is not
inconsistent herewith or therewith, and that it will be valid and binding upon
the Company and any Guarantor in accordance with its terms. The Company or any
Guarantor may not sign an amendment, waiver or supplemental indenture until the
Board of Directors of the Company and such Guarantor approves it.
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ARTICLE 10
GUARANTEE
SECTION 10.1 Guarantee
Subject to the provisions of this Article 10, each Guarantor
hereby, jointly and severally, unconditionally Guarantees to each Holder of
Notes authenticated and delivered by the Trustee and to the Trustee (i) the due
and punctual payment of the principal of, premium, interest and Liquidated
Damages, if any, on such Note, and the Change of Control Price and Offer
Amount, when and as the same shall become due and payable, whether at maturity,
by acceleration or otherwise, the due and punctual payment of interest on the
overdue principal of, premium, interest and Liquidated Damages, if any, on the
Notes, and the Change of Control Price and Offer Amount to the extent lawful,
and the due and punctual performance of all other obligations of the Company to
the Holders thereof or the Trustee all in accordance with the terms of such
Note and of this Indenture and (ii) in the case of any extension of time of
payment or renewal of any Notes or any of such other obligations, that the same
will be promptly paid in full when due or performed in accordance with the
terms of the extension or renewal, at stated maturity, by acceleration or
otherwise. Each Guarantee is a general senior obligation of such Guarantor,
unsecured except to the extent provided in Section 4.10 and ranking pari passu
in right of payment to all existing and future Senior Indebtedness of such
Guarantor and senior in right of payment to all existing and future
Subordinated Indebtedness of such Guarantor.
Failing payment when due of any amount so Guaranteed for whatever
reason, the Guarantors will be jointly and severally obligated to pay the same
immediately. Each Guarantor hereby agrees that its obligations hereunder shall
be absolute and unconditional, irrespective of, and shall be unaffected by, any
invalidity, irregularity or unenforceability of any such Note or this
Indenture, any failure to enforce the provisions of any such Note or this
Indenture, any waiver, modification or indulgence granted to the Company with
respect thereto, by the Holder thereof or the Trustee, or any other
circumstances which may otherwise constitute a legal or equitable discharge of
a surety or guarantor. To the fullest extent permitted by law, each Guarantor
hereby waives diligence, presentment, demand of payment, filing of claims with
a court in the event of merger, insolvency or bankruptcy of the Company, any
right to require a proceeding first against the Company, the benefit of
discussion, protest or notice with respect to any such Note or the indebtedness
evidenced thereby and all demands whatsoever, and covenants that this Guarantee
will not be discharged as to any such Note except by the indefeasible and
irrevocable payment in full in cash of the principal thereof, premium, interest
and Liquidated Damages, if any, thereon and Change of Control Price, Offer
Amount or as provided in Sections 10.2 and 10.4 hereof. Each Guarantor further
agrees that, as between such Guarantor, on the one hand, and the Holders and
the Trustee, on the other hand, (i) the maturity of the obligations Guaranteed
hereby may be accelerated as provided in Article 6 for the purposes of this
Guarantee, notwithstanding any stay, injunction or other prohibition preventing
such acceleration in respect of the obligations Guaranteed hereby, and (ii) in
the event of any declaration of acceleration of such obligations as provided in
Article 6, such obligations (whether
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or not due and payable) shall, subject to the other provisions of this Article
10, forthwith become due and payable by such Guarantor for the purpose of this
Guarantee. In addition, without limiting the foregoing provisions, upon the
effectiveness of an acceleration under Article 6, the Trustee shall promptly
make a demand for payment on the Notes under the Guarantee provided for in this
Article 10. Each Guarantor agrees it shall not be entitled to any right of
subrogation in relation to the Holders of Notes in respect of any obligations
Guaranteed hereby until the indefeasible and irrevocable payment in full in
cash of all obligations Guaranteed hereby.
SECTION 10.2 Guarantors May Consolidate, etc., on Certain Terms
(a) Subject to paragraph (b) of this Section 10.2, each
Guarantor (including any existing or future Restricted Subsidiary that becomes
an additional Guarantor) may not consolidate or merge with or into (whether or
not such Guarantor is the surviving Person) another Person unless (i) the
Person formed by or surviving any such consolidation or merger (if other than
such Guarantor) (A) in the case of a Guarantor that is a Domestic Subsidiary,
is a corporation organized and existing under the laws of the United States of
America, any state thereof, or the District of Columbia and (B) expressly
assumes all the obligations of such Guarantor pursuant to a supplemental
indenture, in a form reasonably satisfactory to the Trustee, under the Notes
and this Indenture, (ii) immediately before and after giving effect to such
transaction, no Default or Event of Default exists and (iii) such Guarantor or
the Person formed by or surviving any such consolidation or merger on a pro
forma basis will have Consolidated Net Worth (immediately after the
transaction) equal to or greater than the Consolidated Net Worth of such
Guarantor immediately preceding the transaction. In connection with any
consolidation or merger contemplated by this Section 10.2, the Company shall
deliver to the Trustee prior to the consummation of the proposed transaction an
Officers' Certificate and an Opinion of Counsel, each stating that such merger
or consolidation and such supplemental indenture comply with this Section 10.2
and that all conditions precedent herein provided relating to such transaction
have been complied with. This Section 10.2(a) will not apply to a merger
between Guarantors or a merger between the Company and any Guarantor.
(b) In the event of a sale or disposition of all of the
Capital Stock of a Guarantor (by way of merger, consolidation or otherwise) and
which sale or disposition is otherwise in compliance with the terms of this
Indenture, then such Guarantor shall be unconditionally released from any
obligations under its Guarantee of the Notes upon the consummation of such
transaction without any further action required on the part of the Trustee,
such Guarantor, the Company or any Holder of Notes, provided that upon such
release the obligations of such Guarantor in respect of any other Guarantee of
Indebtedness of the Company or a Guarantor has been or is simultaneously
released. The provisions of this Section 10.2 shall not limit the obligations
of the Company set forth in Sections 3.9 and 4.13.
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SECTION 10.3 Application of Certain Terms and Provisions to the Guarantors
(a) For purposes of any provision of this Indenture which
provides for the delivery by any Guarantor of an Officer's Certificate and/or
an Opinion of Counsel, the definitions of such terms in Section 1.1 shall apply
to such Guarantor as if references therein to the Company were references to
such Guarantor.
(b) The Guarantors shall comply with all reporting
requirements of Section 4.3 as if references therein to the Company were
references to the Guarantors.
(c) Any request, direction, order or demand which by any
provision of this Indenture is to be made by any Guarantor, shall be sufficient
if evidenced as described in Section 7.2 as if references therein to the
Company were references to such Guarantor.
(d) Any notice or demand which by any provision of this
Indenture is required or permitted to be given or served by the Trustee or by
the Holders of Notes to or on any Guarantor may be given or served as described
in Section 11.2 as if references therein to the Company were references to such
Guarantor.
(e) Upon any demand, request or application by any Guarantor
to the Trustee to take any action under this Indenture, such Guarantor shall
furnish to the Trustee such certificates and opinions as are required in
Section 11.4 as if all references therein to the Company were references to
such Guarantor.
SECTION 10.4 Release of Guarantee
(a) Upon the sale or disposition of all of the Capital Stock
of a Guarantor as provided in Section 10.2 (b) hereof, which sale or
disposition is effected in compliance with the terms of this Indenture, such
Guarantor shall be deemed released from its obligations under its Guarantee of
the Notes and related obligations in this Indenture in accordance with the
provisions of Section 10.2(b) hereof upon the consummation of such transaction;
provided that upon such release the Obligations of such Guarantor in respect of
any and all other Guarantees of Indebtedness of the Company or a Guarantor is
similarly released.
(b) In the event of the unconditional release of a Guarantor
from all obligations under any and all Guarantees of Indebtedness of the
Company or a Guarantor (other than the Notes), such Guarantor shall be released
from any obligations under its Guarantee of the Notes without any further
action required on the part of the Trustee, such Guarantor, the Company or any
Holder of the Notes; provided that immediately before and after giving effect
to such release, no Default or Event of Default shall have occurred and be
continuing.
(c) Upon any Guarantor ceasing to be a Guarantor pursuant to
any provision of this Indenture, at the request of the Company which request
shall be accompanied by an Officers' Certificate and an Opinion of Counsel,
each certifying that no Event of Default (or
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event or condition which with the giving of notice or the passage of time would
become an Event of Default) exists and is continuing and that all conditions
precedent herein provided relating to this Section 10.4 have been complied
with, the Trustee shall execute and deliver an appropriate instrument
evidencing any such release.
(d) Upon the release of any Guarantor from its Guarantee
pursuant to any provision of this Indenture, each other Guarantor not so
released shall remain liable for the full amount of principal of, premium,
interest and Liquidated Damages, if any, on, the Notes as and to the extent
provided in this Indenture.
SECTION 10.5 Limitation of Guarantor's Liability
Each Guarantor and by its acceptance of Notes under this
Indenture each Holder hereby confirms that it is the intention of all such
parties that the Guarantee by such Guarantor pursuant to its Guarantee of the
Notes not constitute a fraudulent transfer or conveyance for purposes of any
federal or state law. To effectuate the foregoing intention, the Holders and
each Guarantor hereby irrevocably agree that the obligations of each Guarantor
under its Guarantee of its Notes shall be limited to the maximum amount as
will, after giving effect to all other contingent and fixed liabilities of such
Guarantor and after giving effect to any collections from or payments made by
or on behalf of any other Guarantor in respect of the Obligations of such other
Guarantor under its Guarantee or pursuant to Section 10.6, result in the
Obligations of such Guarantor under its Guarantee not constituting a fraudulent
conveyance or fraudulent transfer under federal, state or foreign law. This
Section 10.5 is for the benefit of the creditors of each Guarantor.
SECTION 10.6 Contribution
In order to provide for just and equitable contribution among the
Guarantors, the Guarantors agree, inter se, that in the event any payment or
distribution is made by any Guarantor (a "Funding Guarantor") under its
Guarantee of the Notes, such Funding Guarantor shall be entitled to a
contribution from each other Guarantor in a pro rata amount based on the
Adjusted Net Assets of each Guarantor (including the Funding Guarantor) for all
payments, damages and expenses incurred by the Funding Guarantor in discharging
the Company's obligations with respect to the Notes or any other Guarantor's
obligations with respect to its Guarantee of the Notes.
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ARTICLE 11
MISCELLANEOUS
SECTION 11.1 Trust Indenture Act Controls
If any provision of this Indenture limits, qualifies or conflicts
with a provision of the TIA that is required under the TIA to be a part of and
govern this Indenture, such required provision shall control. If any provision
of this Indenture modifies or excludes any provision of the TIA that may be so
modified or excluded, the provision of the TIA shall be deemed to apply to this
Indenture as so modified or excluded, as the case may be.
SECTION 11.2 Notices
Any notice or communication by the Company, any Guarantor or the
Trustee to the others is duly given if in writing and delivered by hand
delivery, by first-class mail (registered or certified, return receipt
requested), by facsimile or by overnight air courier guaranteeing next day
delivery, to the others' addresses as follows:
If to the Company or any Guarantor:
ICO, Inc.
11490 Westheimer, Suite 1000
Houston, Texas 77077
Attention: Treasurer
Telecopier No.: (281) 721-4251
If to the Trustee:
Fleet National Bank
777 Main Street
Hartford, Conn 06115
Attention: Corporate Trust Department
Telecopier No.: (860) 986-7920
The Company, any Guarantor or the Trustee by notice to the others
may designate additional or different addresses of subsequent notices or
communications.
All notices and communications (other than those sent to Holders
of Notes) shall be deemed to have been duly received: at the time delivered by
hand, if personally delivered; five Business Days after being deposited in the
mail, postage prepaid, if mailed; when receipt is confirmed, if sent by
facsimile; and the next Business Day after timely delivery to the courier, if
sent by overnight air courier guaranteeing next day delivery.
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<PAGE> 89
Any notice or communication to a Holder of Notes shall be mailed
by first-class mail, certified or registered, return receipt requested, to his
address shown on the register kept by the Registrar. Failure to mail a notice
or communication to a Holder of Notes or any defect in it shall not affect its
sufficiency with respect to other Holders of Notes.
If a notice or communication is mailed in the manner provided
above within the time prescribed, it is duly given, whether or not the
addressee receives it.
If the Company or any Guarantor mails a notice or communication
to Holders of Notes, it shall mail a copy to the Trustee and each Agent at the
same time.
SECTION 11.3 Communication by Holders with Other Holders
Holders of Notes may communicate pursuant to TIA Section 312(b)
with other Holders of Notes with respect to their rights under this Indenture
or the Notes. The Company, the Guarantors, the Trustee, the Registrar and
anyone else shall have the protection of TIA Section 312(c). Upon
qualification of this Indenture under the TIA, the Trustee shall otherwise
comply with TIA Section 312(b).
SECTION 11.4 Certificate and Opinion as to Conditions Precedent
Upon any request or application by the Company to the Trustee to
take any action under this Indenture, the Company shall furnish to the Trustee
(if required by the TIA or this Indenture):
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set
forth in Section 11.5 hereof) stating that, in the opinion of the
signers, all conditions precedent and covenants, if any provided for in
this Indenture relating to the proposed action have been complied with;
and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set
forth in Section 11.5 hereof) stating that, in the opinion of such
counsel, all such conditions precedent and covenants have been complied
with.
SECTION 11.5 Statements Required in Certificate or Opinion
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA Section 314(a)(4)) shall include:
(1) statement that the Person making such certificate or
opinion has read and understands such covenant or condition and the
definitions herein relating thereto;
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(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such
Person, such condition or covenant has been complied with, provided,
however, that with respect to matters of fact, an Opinion of Counsel may
rely upon an Officers' Certificate or a certificate of a public
official.
SECTION 11.6 Rules by Trustee and Agents
The Trustee may make reasonable rules for action by or at a
meeting of Holders of Notes. The Registrar or Paying Agent may make reasonable
rules and set reasonable requirements for its functions.
SECTION 11.7 Legal Holidays
A "Legal Holiday" is a Saturday, a Sunday or a day on which
banking institutions in The City of New York, in the city in which the
Corporate Trust Office of the Trustee is located or at a place of payment are
authorized or obligated by law, regulation or executive order to remain closed.
If a payment date is a Legal Holiday at a place of payment, payment may be made
at that place on the next succeeding day that is not a Legal Holiday, and no
interest shall accrue for the intervening period.
SECTION 11.8 No Recourse Against Others
(a) No past, present or future director, officer, employee,
agent, or stockholder of the Company, as such, shall have any liability for any
obligations of the Company under the Notes or this Indenture or for any claim
based on, in respect of or by reason of such obligations or their creation.
Each Holder of Notes, by accepting a Note, waives and releases all such
liability. The waiver and release shall be part of the consideration for the
issuance of the Notes.
(b) Notwithstanding the foregoing, this provision shall not be
construed as a waiver or release of any claims to the extent required by
applicable law.
SECTION 11.9 Governing Law
THIS INDENTURE AND THE NOTES AND THE GUARANTEES SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
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<PAGE> 91
STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED ENTIRELY WITHIN
THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. EACH
OF THE PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE
STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS INDENTURE, THE NOTES OR THE GUARANTEES.
SECTION 11.10 No Adverse Interpretation of Other Agreements
This Indenture may not be used to interpret another indenture,
loan or debt agreement of the Company or its Subsidiaries or any Guarantor.
Any such indenture, loan or debt agreement may not be used to interpret this
Indenture.
SECTION 11.11 Successors
All agreements of the Company, any of its Subsidiaries or any
Guarantor in this Indenture and the Notes shall bind their respective
successors. All agreements of the Trustee in this Indenture shall bind its
successor.
SECTION 11.12 Severability
In case any one or more of the provisions in this Indenture or in
the Notes shall be held invalid, illegal or unenforceable in any jurisdiction,
in any respect for any reason, the validity, legality and enforceability of any
such provision in every other jurisdiction and in every other respect, and of
the remaining provisions, shall not in any way be affected or impaired thereby,
it being intended that all of the provisions hereof shall be enforceable to the
full extent permitted by law.
SECTION 11.13. Counterpart Originals
This Indenture may be executed in any number of counterparts,
each of which shall be deemed to be an original, but all of them together shall
represent the same agreement.
SECTION 11.14 Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof and shall in no way
modify or restrict any of the terms or provisions hereof.
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SIGNATURES
IN WITNESS WHEREOF, the undersigned have caused this Indenture to
be executed as of the date first above written.
ICO, INC.
By:
----------------------------------
Name:
Title:
FLEET NATIONAL BANK
By:
----------------------------------
Name:
Title:
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<PAGE> 93
EXHIBIT A
FORM OF NOTE
[Face of Note]
ICO, INC.
10 3/8% SERIES [A/B] SENIOR NOTE DUE 2007
No. CUSIP NO.
---------- -------------
ICO, Inc., a Texas corporation, promises to pay to _______
________________________ or registered assigns, the principal sum of
_______________ Dollars on June 1, 2007.
Interest Payment Dates: June 1 and December 1
Interest Record Dates: May 15 and November 15
Reference is hereby made to the further provisions of this Note
set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers and a facsimile of its
corporate seal to be affixed hereto or imprinted hereon.
Dated:
[Seal]
ICO, INC.
By:
--------------------------------
By:
--------------------------------
Certificate of Authentication:
Fleet National Bank, as Trustee,
certifies that this is one of the [Global] Notes
referred to in the within-mentioned Indenture.
By:
----------------------------------------
Authorized Signature
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<PAGE> 94
[UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES
IN DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO
THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY OR BY THE DEPOSITORY OR ANY
SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW
YORK) ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER
ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN. THIS SECURITY IS A GLOBAL NOTE WITHIN THE MEANING OF THE
INDENTURE REFERRED TO HEREINAFTER. THIS GLOBAL NOTE MAY NOT BE EXCHANGED, IN
WHOLE OR IN PART, FOR A SECURITY REGISTERED IN THE NAME OF ANY PERSON OTHER
THAN THE DEPOSITORY TRUST COMPANY OR A NOMINEE THEREOF EXCEPT IN THE
CIRCUMSTANCES SET FORTH IN SECTION 2.6 OF THE INDENTURE, AND MAY NOT BE
TRANSFERRED, IN WHOLE OR IN PART, EXCEPT IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN SECTION 2.6 OF THE INDENTURE. BENEFICIAL INTEREST IN THIS GLOBAL
NOTE MAY NOT BE TRANSFERRED EXCEPT IN ACCORDANCE WITH SECTION 2.6 OF THE
INDENTURE.](1)
[THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER
SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933 (THE
"SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE SECURITY EVIDENCED HEREBY (1) BY ITS ACQUISITION
HEREOF REPRESENTS THAT (A) IT IS A QUALIFIED INSTITUTIONAL BUYER
(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS
AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3)
OR (7) UNDER THE SECURITIES ACT) WHO IS AN INSTITUTION (AN
"INSTITUTIONAL ACCREDITED INVESTOR") AND (2) IS HEREBY NOTIFIED
THAT THE SELLER MAY BE
- --------------------
(1) This paragraph should be included only if the Note is issued in global
form.
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<PAGE> 95
RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF
THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE
ISSUER THAT PRIOR TO THE DATE WHICH IS TWO YEARS AFTER THE LATER
OF THE DATE OF ORIGINAL ISSUANCE OF THIS NOTE AND THE LAST DATE
ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE
OWNER OF THIS NOTE (THE "RESALE RESTRICTION TERMINATION DATE")
(X) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED
ONLY (i)(a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144
UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A
FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
904 UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE ISSUER SO
REQUESTS), (ii) TO THE ISSUER OR (iii) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR
ANY OTHER APPLICABLE JURISDICTION AND (Y) THE HOLDER WILL, AND
EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM
IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS
SET FORTH IN (X) ABOVE. THE FOREGOING RESTRICTIONS ON RESALE
WILL NOT APPLY SUBSEQUENT TO THE RESALE RESTRICTION TERMINATION
DATE.](2)
- ------------------------------
(2) This paragraph should not be included on Exchange Notes received in an
Exchange Offer.
A-3
<PAGE> 96
[Reverse of Note]
ICO, INC.
10 3/8% SERIES [A/B] SENIOR NOTE DUE 2007
1. Interest. ICO, Inc., a Texas corporation (the "Company"),
promises to pay interest on the principal amount of this Note at 10 3/8% per
annum from the Issue Date until maturity and to pay Liquidated Damages, if any,
payable pursuant to Section 2 of the Registration Rights Agreement referred to
below. The Company will pay interest and Liquidated Damages, if any,
semiannually in arrears on June 1 and December 1 of each year (each an
"Interest Payment Date"), or if any such day is not a Business Day, on the next
succeeding Business Day. Interest on the Notes will accrue from the most
recent Interest Payment Date to which interest has been paid or, if no interest
has been paid, from June 9, 1997; provided that if there is no existing Default
in the payment of interest, and if this Note is authenticated between a record
date referred to on the face hereof and the next succeeding Interest Payment
Date, interest shall accrue from such next succeeding Interest Payment Date;
provided, further, that the first Interest Payment Date shall be December 1,
1997. The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal and premium, if any,
from time to time on demand at a rate equal to 1% per annum in excess of the
interest rate then in effect to the extent lawful; it shall pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law)
on overdue installments of interest and Liquidated Damages (without regard to
any applicable grace periods) from time to time on demand at the same rate to
the extent lawful. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.
2. Method of Payment. The Company will pay interest on the
Notes (except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Notes at the close of business on the record date
immediately preceding the Interest Payment Date, except as provided in Section
2.12 of the Indenture with respect to defaulted interest. The Notes will be
payable as to principal, premium, if any, interest and Liquidated Damages, if
any, at the office or agency of the Company maintained for such purpose within
the City and State of New York, which initially will be the corporate trust
office or agency of the Trustee maintained at New York, 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 Notes at their respective
addresses set forth in the register of Holders of Notes; provided that all
payments with respect to Global Notes will be required to be made by wire
transfer of immediately available funds to the accounts specified by the
Holders thereof. Such payment shall be in such coin or currency of the United
States of America as at the time of payment is legal tender for payment of
public and private debts.
3. Paying Agent and Registrar. Initially, the Trustee will
act as Paying Agent and Registrar. The Company may change any Paying Agent,
Registrar or co-registrar without
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<PAGE> 97
notice to any Holder of Notes. The Company or any of its Subsidiaries may act
as Paying Agent or Registrar, except that for purposes of payments on the Notes
pursuant to Sections 7 and 8 hereof, neither the Company nor any of its
Affiliates may act as Paying Agent.
4. Indenture. The Company issued the Notes under an
Indenture, dated as of June 9, 1997 (the "Indenture"), between the Company and
the Trustee. Capitalized terms herein are used as defined in the Indenture
unless otherwise defined herein. 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 (15 U.S. Code Sections 77aaa-77bbb) as in effect on the
date of the Indenture. Notwithstanding anything to the contrary herein, the
Notes are subject to all such terms, and Holders are referred to the Indenture
and such Act for a statement of such terms. The Notes are limited to
$120,000,000 aggregate principal amount.
5. Ranking and Guarantees. The Notes are general senior
unsecured obligations of the Company and will rank pari passu in right of
payment to all existing and future Senior Indebtedness of the Company, and
senior in right of payment to all future Subordinated Indebtedness of the
Company. The Company's obligation to pay principal, premium, interest and
Liquidated Damages, if any, with respect to the Notes may in future be
unconditionally Guaranteed on a senior basis, jointly and severally, by the
Guarantors pursuant to Article 10 of the Indenture and may in future be secured
as provided in Section 4.10 of the Indenture. Certain limitations to the
obligations of the Guarantors are set forth in further detail in the Indenture.
6. Optional Redemption. The Notes are not redeemable at the
Company's option prior to June 1, 2002. Thereafter, the Notes will be subject
to redemption at the option of the Company, in whole or in part, at the
redemption prices (expressed as percentages of principal amount) set forth
below plus accrued and unpaid interest and Liquidated Damages, if any, thereon
to the applicable redemption date, if redeemed during the twelve-month period
beginning on June 1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002 . . . . . . . . . . . . . . . 105.188%
2003 . . . . . . . . . . . . . . . 103.458%
2004 . . . . . . . . . . . . . . . 101.729%
2005 and thereafter . . . . . . . . 100.000%
</TABLE>
Notwithstanding the foregoing, at any time prior to June 1, 2002,
the Company may, at its option, redeem all of any portion of the Notes at the
Make-Whole Price plus accrued and unpaid interest to the date of redemption.
In addition, on or prior to June 1, 2000, the Company may redeem at any time or
from time to time up to 35% of the aggregate principal amount of the Notes
originally issued at a redemption price of 110.375% of the principal amount
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<PAGE> 98
thereof, plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the redemption date, with the net proceeds of one or more Public
Equity Offerings; provided that at least $78.0 million of the aggregate
principal amount of the Notes remain outstanding following each such
redemption; provided, further, that such redemption shall occur not earlier
than 30 days or later than 60 days after the date of the closing of any such
Public Equity Offering.
7. Notice of Redemption. Subject to the provisions of the
Indenture, notice of redemption will be mailed by first class mail to the
Holder's registered address at least 30 days but not more than 60 days before
the redemption date to each Holder of Notes to be redeemed. If less than all
Notes are to be redeemed at any time, the Trustee shall, unless otherwise set
forth in the Indenture, select the Notes to be redeemed in multiples of $ 1,000
pro rata, by lot or in accordance with a method which the Trustee considers to
be fair and appropriate (and in such manner as complies with applicable legal
and principal national securities exchanges requirements, if any). On and
after the redemption date (unless the Company shall default in the payment of
the redemption price, together with accrued and unpaid interest and Liquidated
Damages, if any, to the redemption date), interest ceases to accrue on Notes or
portions thereof called for redemption.
8. Change of Control. In the event of a Change of Control of
the Company, and subject to certain conditions and limitations provided in the
Indenture, the Company will be obligated to make an offer to repurchase all or
any part (equal to $1,000 or an integral multiple thereof) of the Notes as the
Holders may elect, at a repurchase price in cash equal to 101% of the principal
amount thereof, plus accrued and unpaid interest and Liquidated Damages, if
any, thereon to the Change of Control Payment Date.
9. Asset Sales. In the event of Asset Sales, under certain
circumstances, the Company may be obligated to make an Asset Sale Offer to
repurchase the maximum principal amount of Notes that may be purchased out of
Excess Proceeds, at a repurchase price in cash equal to 100% of the principal
amount of the Notes, plus accrued and unpaid interest and Liquidated Damages,
if any, thereon to the date of repurchase.
10. Restrictive Covenants. The Indenture imposes certain
limitations on, among other things, the ability of the Company to consolidate
or merge with or into any other Person, or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets, the ability of the Company or its Restricted Subsidiaries to dispose of
certain assets, to declare or pay dividends or make certain other distributions
and payments, to make certain investments or purchase, redeem, or otherwise
acquire or retire for value Equity Interests, to incur additional Indebtedness
or incur Liens and to enter into certain transactions with Affiliates, all
subject to certain limitations described in the Indenture.
11. Denominations, Transfer, Exchange. The Notes are in
registered form, without coupons, in denominations of $1,000 and integral
multiples thereof. A Holder may transfer or exchange Notes in accordance with
the Indenture. The Registrar and the Trustee may
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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. Neither the Company nor
the Registrar shall be required to transfer or exchange any Notes selected for
redemption. Also, the Company need not transfer or exchange any Notes for a
period of 15 days before a selection of Notes to be redeemed.
12. Persons Deemed Owners. The registered Holder of a Note
may be treated as the owner of it for all purposes and neither the Company, the
Trustee nor any Agent shall be affected by notice to the contrary.
13. Unclaimed Money. If money for the payment of principal,
premium, interest or Liquidated Damages, if any, remains unclaimed for two
years, the Trustee or Paying Agent will pay the money back to the Company at
its request. After that, all liability of the Trustee and such Paying Agent
with respect to such money shall cease.
14. Amendment, Supplement, Waiver. Subject to certain
exceptions, the Indenture or the Notes may be amended, waived or supplemented
with the written consent of the Holders of at least a majority in principal
amount of the Notes then outstanding (including consents obtained in connection
with a tender offer of exchange offer for the Notes). Holders of a majority in
principal amount of the then outstanding Notes by notice to the Trustee may on
behalf of the Holders of all the Notes waive an existing Default or Event of
Default and its consequences, except a continuing Default or Event of Default
in the payment of principal, premium, interest or Liquidated Damages, if any,
with respect to any Note held by a non-consenting Holder. Without the consent
of any Holder, the Company may amend, waive or supplement the Indenture or the
Notes to, among other things, cure any ambiguity, defect or inconsistency that
does not adversely affect the rights of any Holder or to provide for
uncertificated Notes in addition to or in place of certificated Notes or to
make any change that does not adversely affect the legal rights of any Holder.
15. Events of Default and Remedies. An Event of Default
generally is: (i) default for 30 days in the payment when due of interest on,
or Liquidated Damages, if any, with respect to, any of the Notes; (ii) default
in payment when due (whether at maturity, upon redemption or repurchase, or
otherwise) of the principal of or premium, if any, on any of the Notes
(including the failure to make a payment to repurchase Notes tendered pursuant
to a Change of Control Offer or an Asset Sale Offer); (iii) failure by the
Company to comply with the provisions described under Article V of the
Indenture or any Guarantor to comply with the provisions described in Section
10.2 of the Indenture; (iv) failure by the Company or, with respect to any
Guarantee, any Guarantor for 30 days after notice by the Trustee or by the
Holders of at least 25% in aggregate principal amount of the Notes then
outstanding to comply with any of the covenants or agreements in, in the case
of the Company, the Indenture or the Notes or, in the case of a Guarantor, the
Guarantee of such Guarantor other than those referred to in clauses (i), (ii)
and (iii) above; (v) default under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries or any
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<PAGE> 100
Guarantor (or the payment of which is guaranteed by the Company or any of its
Restricted Subsidiaries or any Guarantor) 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 (a "Payment Default") or (b) results in the
acceleration of such Indebtedness prior to its express maturity and, in each
case described in clauses (a) and (b) of this subsection (v), 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 $3.0 million or more;
provided that if any such Payment Default is cured or waived or any such
acceleration rescinded, or such Indebtedness is repaid, within a period of 10
days from the continuation of such default beyond the applicable grace period
or the occurrence of such acceleration, as the case may be, such Event of
Default under the Indenture and any consequential acceleration of the Notes
shall be automatically rescinded, so long as such rescission does not conflict
with any judgment or decree; (vi) the failure of a Guarantee by a Guarantor to
be in full force and effect (other than a release of a Guarantee in accordance
with the Indenture), or the denial or disaffirmance by such Guarantor thereof;
(vii) failure by the Company or any of its Restricted Subsidiaries or any
Guarantor to pay final judgments or orders rendered against the Company or any
Restricted Subsidiary or any Guarantor aggregating in excess of $3.0 million,
and (x) such judgments or orders are not paid, discharged or stayed for a
period of 60 days after their entry or (y) an enforcement proceeding shall have
been commenced (and not discharged or settled) by any creditor upon any such
judgments or orders; and (viii) certain events of bankruptcy, insolvency or
reorganization with respect to the Company or any of its Restricted
Subsidiaries or any Guarantor. Subject to certain limitations in the
Indenture, if an 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 of the principal amount of the Notes, accrued and unpaid interest
thereon and all other Obligations thereunder, to be due and payable
immediately, except that in the case of an Event of Default arising from
certain events of bankruptcy or insolvency with respect to the Company, any
Restricted Subsidiary or any Guarantor, all outstanding Notes shall become due
and payable immediately without further action or notice. Holders may not
enforce the Indenture or the Notes except as provided in the Indenture.
Subject to certain limitations, Holders of a majority in principal amount of
the Notes may direct the Trustee in its exercise of any trust or power. The
Company must furnish an annual compliance certificate to the Trustee.
16. Trustee Dealings with Company. Fleet National Bank, the
Trustee under the Indenture, in its individual or any other capacity, may
become the owner or pledgee of Notes and may otherwise deal with the Company or
its respective Subsidiaries or Affiliates with the same rights it would have if
it were not Trustee.
17. No Recourse Against Others. No past, present or future
director, officer, employee, agent or stockholder of the Company, as such,
shall have any liability for any obligations of the Company under the Notes or
the Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of Notes, by
A-8
<PAGE> 101
accepting a Note, waives and releases all such liability. The waiver and
release are part of the consideration for the issue of the Notes.
Notwithstanding the foregoing, nothing in this provision shall be construed as
a waiver or release of any claims under the federal securities laws.
18. Authentication. This Note shall not be valid until the
Trustee or an authenticating agent signs the certificate of authentication on
the other side of this Note.
19. Abbreviations. Customary abbreviations may be used in the
name of a Holder or an assignee, such as: TEN COM (=tenants in common), TEN ENT
(=tenants by the entireties), JT TEN (=joint tenants with right of survivorship
and not as tenants in common), CUST (=Custodian), and U/G/M/A (=Uniform Gifts
to Minors Act).
20. Additional Rights of Holders of Transfer Restricted Notes.
In addition to the rights provided to Holders of Notes under the Indenture,
Holders of Transfer Restricted Notes shall have all the rights set forth in the
Registration Rights Agreement, dated as of the date of the Indenture (the
"Registration Rights Agreement"), between the Company and the Initial
Purchaser.
21. Obligation Absolute and Unconditional. No reference
herein to the Indenture and no provision of this Note or of the Indenture shall
alter or impair the obligation of the Company, which is absolute and
unconditional, to pay the principal of, premium, interest and Liquidated
Damages, if any, on this Note at the times, place and rate, and in the coin or
currency, herein prescribed.
22. CUSIP Numbers. Pursuant to a recommendation promulgated
by the Committee on Uniform Note Identification Procedures, the Company will
cause CUSIP numbers to be printed on the Notes as a convenience to Holder of
the Notes. No representation is made as to the accuracy of such numbers as
printed on the Notes and reliance may be placed only on the other
identification numbers printed hereon.
23. Governing Law. This Note and the Indenture shall be
governed by and construed in accordance with the laws of the State of New York,
as applied to contracts made and performed entirely within the State of New
York, without regard to principles of conflicts of laws.
24. Indenture. Each Holder, by accepting a Note, agrees to be
bound by all of the terms and provisions of the Indenture, as the same may be
amended from time to time.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture or Registration Rights Agreement.
Requests may be made to: ICO, Inc., 11490 Westheimer, Suite 1000, Houston,
Texas 77077, Attention: Treasurer.
A-9
<PAGE> 102
ASSIGNMENT FORM
To assign this Note, fill in the form below and have your signature guaranteed:
I or we assign and transfer this Note to:
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint as agent to transfer this
--------------------------
Note on the books of the Company. The agent may substitute another to act for
him.
- --------------------------------------------------------------------------------
Your Signature:
------------------------------------------------------------------
(Sign exactly as your name appears on the other side of this Note)
Date:
------------------------------
Signature Guarantee:
-----------------------------------------------------------
NOTICE: Your Signature must be guaranteed by an Institution which is a member
of one of the following recognized signature Guarantee Programs: (i) The
Securities Transfer Agent Medallion Program; (ii) The New York Stock Exchange
Medallion Program; (iii) The Stock Exchange Medallion Program; or (iv) any
other guarantee program acceptable to the Trustee.
In connection with any transfer of this Note the Holder hereof may be required
by the Indenture to deliver to the Trustee and the Registrar a certification
substantially in the form of Exhibit B to the Indenture.
A-10
<PAGE> 103
FORM OF OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note repurchased by the Company
pursuant to Section 4.13 or Section 4.14 of the Indenture, check the
appropriate box:
Section 4.13 [ ] Section 4.14 [ ]
If you want to have only part of this Note repurchased by the
Company pursuant to Section 4.13 or Section 4.14 of the Indenture, state the
amount (in integral multiples of $1,000):
$
---------------------------
Date:
-----------------------
Signature:
----------------------------------------------------------------------
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:
-----------------------------
NOTICE: Your Signature must be guaranteed by an Institution which is a member
of one of the following recognized signature Guarantee Programs: (i) The
Securities Transfer Agent Medallion Program; (ii) The New York Stock Exchange
Medallion Program; (iii) The Stock Exchange Medallion Program; or (iv) any
other guarantee program acceptable to the Trustee.
A-11
<PAGE> 104
SCHEDULE OF EXCHANGES FOR DEFINITIVE NOTES(3)
The following exchanges of a part of this Global Note for Definitive Notes have
been made:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF SIGNATURE OF
AMOUNT OF DECREASE AMOUNT OF INCREASE THIS GLOBAL NOTE AUTHORIZED OFFICER
DATE OF IN PRINCIPAL AMOUNT IN PRINCIPAL AMOUNT FOLLOWING SUCH OF TRUSTEE OR NOTE
EXCHANGE OF THIS GLOBAL NOTE OF THIS GLOBAL NOTE DECREASE (OR INCREASE) CUSTODIAN
-------- ------------------- ------------------- ---------------------- ---------
<S> <C> <C> <C> <C>
</TABLE>
- --------------------
(3) This schedule should be included only if the Note is issued in global
form.
A-12
<PAGE> 105
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF NOTES
Re: 10 3/8% Series [A/B] Senior Notes due 2007 of ICO, Inc.
This Certificate relates to $ __________ principal amount of Notes
held in* ____________ book-entry or* __________ definitive form by _____________
(the "Transferor").
[ ] has requested the Registrar by written order to exchange or register the
transfer of a Note or Notes; or
[ ] has requested the Trustee by written order to exchange its Note or Notes
in definitive, registered form for a beneficial interest in a Global
Note held by the Depository equal to the principal amount of Notes it
holds (or the portion thereof indicated above); or
[ ] has requested the Trustee by written order to deliver in exchange for
its beneficial interest in a Global Note held by the Depository a Note
or Notes in definitive, registered form equal to its beneficial interest
in such Global Note (or the portion thereof indicated above).
In connection with such request and in respect of each such Note, the
Transferor does hereby certify that the Transferor is familiar with the
Indenture relative to the above captioned Notes and that the transfer of
this Note does not require registration under the Securities Act (as
defined below) because:*
[ ] Such Note is being acquired for the Transferor's own account without
transfer (in satisfaction of Section 2.6(a)(ii)(A), Section 2.6(b)(i) or
Section 2.6(d)(i)(A) of the Indenture).
[ ] Such Note is being transferred to a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act of 1933, as amended (the
"Securities Act")), in a transaction meeting the requirements of Rule
144A under the Securities Act.
[ ] Such Note is being transferred outside the U.S. to a foreign person
pursuant to an exemption from registration in a transaction meeting the
requirements of Regulation S under the Securities Act (based on an
opinion of counsel if the Company so requests and together with a
certification in substantially the form of Exhibit D to the Indenture).
- --------------------
* Check applicable box.
B-1
<PAGE> 106
[ ] Such Note is being transferred in a transaction meeting the requirements
of Rule 144 under the Securities Act (based on an opinion of counsel if
the Company so requests).
[ ] Such Note is being transferred pursuant to an effective registration
statement under the Securities Act.
[ ] Such Note is being transferred to an institutional "accredited investor"
within the meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act pursuant to a private placement exemption from the
registration requirements of the Securities Act (based on an opinion of
counsel if the Company so requests together with a certification in
substantially the form of Exhibit C to the Indenture).
[ ] Such Note is being transferred in reliance on and in compliance with
another exemption from the registration requirements of the Securities
Act (based on an opinion of counsel if the Company so requests).
----------------------------
[INSERT NAME OF TRANSFEROR]
By:
-------------------------
Name:
Title:
Address:
Date:
-----------------------
TO BE COMPLETED BY TRANSFEREE IF SECOND BOX ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing
this Note for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to
request such information and that it is aware that the transferor is relying
upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated: Signed:
---------------------- ------------------------------------
NOTICE: To be executed by an
executive officer.
B-2
<PAGE> 107
EXHIBIT C
FORM OF CERTIFICATE TO BE DELIVERED BY ACCREDITED INSTITUTIONS
,
--------------------- -- ----
Fleet National Bank
c/o First Chicago Trust Company of New York
14 Wall Street, 8th Floor
New York, New York 10005,
as Registrar
Attn: Corporate Trust Department
Dear Sirs:
In connection with our proposed purchase of $______ aggregate
principal amount of ___% Series [A/B] Senior Notes due 2007 (the "Notes") of
ICO, Inc. (the "Issuer"), a Texas corporation, we hereby confirm that:
(i) we are an "accredited investor" within the meaning of Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended
(the "Securities Act"), or an entity in which all of the equity owners
are accredited investors within the meaning of Rule 501(a)(1), (2), (3)
or (7) under the Securities Act (an "Institutional Accredited
Investor");
(ii) any purchase of Notes by us will be for our own account or
for the account of one or more other Institutional Accredited Investors;
(iii) we have such knowledge and experience in financial and
business matters that we are capable of evaluating the merits and risks
of purchasing the Notes and we, and any accounts for which we are
acting, are able to bear the economic risks of its or their investment;
(iv) we are not acquiring Notes with a view to any distribution
thereof in a transaction that would violate the Securities Act or the
securities laws of any State of the United States or any other
applicable jurisdiction; provided that the disposition of our property
and the property of any accounts for which we are acting as fiduciary
shall remain at all times within our control; and
(v) we have received a copy of the Offering Memorandum and
acknowledge that we have had access to such financial and other
information, and have been afforded
C-1
<PAGE> 108
the opportunity to ask such questions of representatives of the Company
and receive answers thereto, as we deem necessary in connection with our
decision to purchase Notes.
We understand that the Notes are being offered in a transaction not
involving any public offering within the meaning of the Securities Act and that
the Notes have not been registered under the Securities Act, and we agree, on
our own behalf and on behalf of each account for which we acquire any Notes,
that such Notes may be offered, resold, pledged or otherwise transferred only
(a) to a person whom we reasonable believe to be a qualified institutional
buyer (as defined in Rule 144A under the Securities Act) in a transaction
meeting the requirements of Rule 144A, in a transaction meeting the
requirements of Rule 144 under the Securities Act, outside the United States in
a transaction meeting the requirements of Rule 904 under the Securities Act, or
in accordance with another exemption from the registration requirements of the
Securities Act (and based upon an opinion of counsel if the Company so
requests), (b) to the Company or (c) pursuant to an effective registration
statement, and, in each case, in accordance with any applicable securities laws
of any State of the United States or any other applicable jurisdiction. We
understand that the registrar will not be required to accept for registration
of transfer any securities, except upon presentation of evidence satisfactory
to the Company that the foregoing restrictions on transfer have been complied
with. We further understand that the Notes purchased by us will be in the form
of definitive physical certificates and that such certificates will bear a
legend reflecting the substance of this paragraph. We further agree to provide
to any person acquiring any of the Securities from us a notice advising such
person that resales of the Securities are restricted as stated herein.
We acknowledge that you, the Company and others will rely upon our
confirmations, acknowledgments and agreements set forth herein and we agree to
notify you promptly in writing if any of our representations or warranties
herein ceases to be accurate and complete.
C-2
<PAGE> 109
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK.
------------------------------
(Name of Purchaser)
By:
---------------------------
Name:
-------------------------
Title:
------------------------
Address:
----------------------
C-3
<PAGE> 110
EXHIBIT D
FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION
WITH TRANSFERS PURSUANT TO REGULATION S
________________, ____
Fleet National Bank
c/o First Chicago Trust Company of New York
14 Wall Street, 8th Floor
New York, New York 10005,
as Registrar
Attention: Corporate Trust Department
Ladies and Gentlemen:
In connection with our proposed sale of $____________ aggregate
principal amount of 10 3/8% Series [A/B] Senior Notes due 2007 (the "Notes") of
ICO, Inc., a Texas corporation (the "Company"), we represent that:
(i) the offer of the Notes was not made to a person in the
United States;
(ii) at the time the buy order was originated, the transferee
was outside the United States or we and any person acting on our behalf
reasonably believed that the transferee was outside the United States;
(iii) no directed selling efforts have been made by us, any of
our affiliates or any person acting on our or their behalf in the United
States in contravention of the requirements of Rule 903(b) or Rule
904(b) of Regulation S, as applicable; and
(iv) the transaction is not part of a plan or scheme to evade
the registration requirements of the U.S. Securities Act of 1933.
D-1
<PAGE> 111
You and the Company are entitled to rely upon this letter and you
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate
have the meanings set forth in Regulation S.
Very truly yours,
-------------------------------------
[Name of Transferor]
By:
----------------------------------
Name:
-------------------------------
Title:
------------------------------
Address:
-----------------------------
D-2
<PAGE> 112
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
TRUST INDENTURE INDENTURE
ACT SECTION SECTION
- ----------------- -----------
<S> <C>
310(a)(1) 7.10
(a)(2) 7.10
(a)(3) N.A.
(a)(4) N.A.
(a)(5) 7.10
(b) 7.8; 7.10
(c) N.A.
311(a) 7.11
(b) 7.11
(c) N.A.
312(a) 2.5
(b) 11.3
(c) 11.3
313(a) 7.6
(b)(1) N.A.
(b)(2) 7.6
(c) 7.6
(d) 7.6
314(a)(1) 4.3; 4.4
(a)(2) 4.3; 4.4
(a)(3) 4.3; 4.4
(b) N.A.
(c)(1) 11.4
(c)(2) 11.4
(c)(3) N.A.
(d) N.A.
(e) 11.5
(f) N.A.
315(a) 7.1(2)
(b) 7.5
(c) 7.1(1)
(d) 7.1(3)
(e) 6.11
316(a)(last sentence) 2.9
(a)(1)(A) 6.5
(a)(1)(B) 6.4
(a)(2) N.A.
(b) 6.7
(c) 9.4
317(a)(1) 6.8
(a)(2) 6.9
</TABLE>
<PAGE> 113
<TABLE>
<CAPTION>
TRUST INDENTURE INDENTURE
ACT SECTION SECTION
- ----------------- -----------
<S> <C>
(b) 2.4
318(a) 11.1
(b) N.A.
(c) 11.1
</TABLE>
- --------------------
N.A. means not applicable
*This Cross-Reference Table is not part of this Indenture.
2
<PAGE> 1
EXHIBIT 4.2
EXHIBIT B
(to Indenture)
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made
and entered into as of June 9, 1997 between ICO, INC., a Texas corporation (the
"Company"), and Bear, Stearns & Co. Inc. (the "Initial Purchaser").
This Agreement is made pursuant to the Purchase Agreement
dated as of June 4, 1997 between the Company and the Initial Purchaser (the
"Purchase Agreement"), which provides for the sale by the Company to the
Initial Purchaser of an aggregate of $120,000,000 aggregate principal amount of
the Company's 10 3/8% Senior Notes due 2007 (the "Notes"). In order to induce
the Initial Purchaser to enter into the Purchase Agreement and to purchase the
Notes, the Company has agreed to provide to the Initial Purchaser and its
direct and indirect transferees the registration rights for the Notes set forth
in this Agreement. The execution and delivery of this Agreement is a condition
precedent to the obligations of the Initial Purchaser under the Purchase
Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
1. Definitions. As used in this Agreement, the
following capitalized defined terms shall have the following meanings (and,
unless otherwise indicated, capitalized terms used herein without definition
shall have the meanings ascribed to them in the Purchase Agreement):
"Act" shall mean the Securities Act of 1933, as amended.
"Agreement" shall have the meaning set forth in the preamble
to this Agreement.
"Applicable Period" shall have the meaning set forth in
Section 3(t) hereof.
"Closing Date" shall mean the Closing Date as defined in the
Purchase Agreement.
"Commission" shall mean the Securities and Exchange
Commission, or such other federal agency administering the Act or the
Exchange Act.
"Company" shall have the meaning set forth in the preamble to
this Agreement, and shall also include the Company's successors.
<PAGE> 2
"Depository" shall mean The Depository Trust Company, or any
successor depositary appointed by the Company; provided, however, that
such depositary must have an address in the Borough of Manhattan, The
City of New York.
"Effectiveness Period" shall have the meaning set forth in
Section 2(b) hereof.
"Event Date" shall have the meaning set forth in Section 2(e)
hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Exchange Offer" shall mean the exchange offer by the Company
of Exchange Notes for Notes pursuant to Section 2(a) hereof.
"Exchange Notes" shall mean the 10 3/8% Series B Senior Notes
due 2007, to be issued by the Company under the Indenture and
containing terms identical to the Notes (except that (i) interest
thereon shall accrue from the last date on which interest was paid on
the Notes or, if no such interest has been paid, from the Issue Date
(as defined in the Indenture), and (ii) the transfer restrictions
thereon shall be eliminated) to be offered to Holders of Notes in
exchange for Notes pursuant to the Exchange Offer.
"Exchange Offer Registration" shall mean a registration under
the Act effected pursuant to Section 2(a) hereof.
"Exchange Offer Registration Statement" shall mean the
registration statement (on Form S-4 or, if applicable, on any other
appropriate form) relating to the Exchange Offer, and all amendments
and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto and all material incorporated
by reference therein.
"Exchange Period" shall have the meaning set forth in Section
2(a) hereof.
"Holder" shall mean the Initial Purchaser, for so long as it
owns any Registrable Securities, and each of its respective
successors, assigns and direct and indirect transferees who become
registered owners of Registrable Securities under the Indenture.
"Indenture" shall mean the Indenture dated as of June 9, 1997
by and between the Company and Fleet National Bank, as trustee, as the
same may be amended or supplemented from time to time in accordance
with the terms thereof.
"Initial Purchaser" shall have the meaning set forth in the
preamble to this Agreement.
-2-
<PAGE> 3
"Inspectors" shall have the meaning set forth in Section 3(n)
hereof.
"Liquidated Damages" shall have the meaning set forth in
Section 2(e) hereof.
"Majority Holders" shall mean the Holders of a majority of the
aggregate principal amount of outstanding (as determined under the
Indenture) Registrable Securities to be sold pursuant to a Shelf
Registration Statement.
"NASD" shall mean the National Association of Securities
Dealers, Inc.
"Notes" shall have the meaning set forth in the preamble to
this Agreement.
"Participating Broker-Dealer" shall have the meaning set forth
in Section 3(t) hereof.
"Person" shall mean any individual, corporation, limited
liability company, general or limited partnership, limited liability
partnership, joint venture, association, joint-stock company, trust,
charitable foundation, unincorporated organization, government or
agency or political subdivision thereof or any other entity.
"Private Exchange" shall have the meaning set forth in Section
2(a) hereof.
"Private Exchange Notes" shall have the meaning set forth in
Section 2(a) hereof.
"Prospectus" shall mean the prospectus included in a
Registration Statement, including any preliminary prospectus, and any
such prospectus as amended or supplemented by any prospectus
supplement, including any prospectus contained in an Exchange Offer
Registration Statement and any prospectus or prospectus supplement
with respect to the terms of the offering of any portion of the
Registrable Securities covered by a Shelf Registration Statement,
including post-effective amendments, and in each case including all
material incorporated by reference therein.
"Purchase Agreement" shall have the meaning set forth in the
preamble to this Agreement.
"Records" shall have the meaning set forth in Section 3(n)
hereof.
"Registrable Securities" shall mean the Notes and, if issued,
the Private Exchange Notes; provided, however, that Notes or Private
Exchange Notes, as the case may be, shall cease to be Registrable
Securities when (i) a Registration Statement with respect to such
Notes or Private Exchange Notes or the resale thereof shall have been
declared effective under the Act and such Notes or Private Exchange
Notes, as
-3-
<PAGE> 4
the case may be, shall have been disposed of pursuant to such
Registration Statement, (ii) such Notes or Private Exchange Notes, as
the case may be, shall have become eligible to be sold to the public
pursuant to Rule 144(k) (or any similar provision then in force, but
not Rule 144A) under the Act, (iii) such Notes or Private Exchange
Notes, as the case may be, shall have ceased to be outstanding or (iv)
with respect to the Notes, such Notes have been exchanged for Exchange
Notes upon consummation of the Exchange Offer.
"Registration Expenses" shall mean any and all expenses incident
to performance of or compliance by the Company with this Agreement,
including, without limitation: (i) Commission, stock exchange or NASD
registration and filing fees, including, if applicable, the fees and
expenses of any "qualified independent underwriter" and its counsel
that is required to be retained by any Holder of Registrable
Securities in accordance with the rules and regulations of the NASD,
(ii) fees and expenses incurred in connection with compliance with
state securities or blue sky laws (including reasonable fees and
disbursements of counsel for any underwriters or Holders in connection
with the blue sky qualification of any of the Exchange Notes or
Registrable Securities) and compliance with the rules of the NASD,
(iii) expenses of any Persons in preparing or assisting in preparing,
printing and distributing any Registration Statement, any Prospectus
and any amendments or supplements thereto, and in preparing or
assisting in preparing, printing and distributing any underwriting
agreements, securities sales agreements and other documents relating
to the performance of and compliance with the obligations under this
Agreement, (iv) rating agency fees, if applicable, (v) fees and
disbursements of counsel for and independent certified public
accountants of the Company, including the expenses of any "cold
comfort" letters required by or incident to such performance and
compliance, (vi) fees and expenses of the Trustee, and any exchange
agent or custodian, (vii) fees and expenses incurred in connection
with the listing, if any, of any of the Registrable Securities on any
securities exchange or exchanges, and (viii) the fees and expenses of
any special experts retained by the Company in connection with any
Registration Statement, if applicable. The term "Registration
Expenses" shall not include fees of counsel to any underwriters or the
Holders (other than the fees described in clauses (i) and (ii) above),
underwriting discounts and commissions and transfer taxes, if any,
relating to the sale or disposition of Registrable Securities by a
Holder pursuant to a Shelf Registration Statement.
"Registration Statement" shall mean any registration statement
of the Company relating to the Exchange Notes or Registrable
Securities pursuant to the provisions of this Agreement, and all
amendments and supplements to any such registration statement,
including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all material
incorporated by reference therein.
-4-
<PAGE> 5
"Shelf Registration" shall mean a registration effected pursuant
to Section 2(b) hereof.
"Shelf Registration Statement" shall mean a "shelf" registration
statement of the Company pursuant to the provisions of Section 2(b) of
this Agreement which covers all of the Registrable Securities, on an
appropriate form under Rule 415 under the Act, or any similar rule
that may be adopted by the Commission, and all amendments and
supplements to such registration statement, including post-effective
amendments, in each case including the Prospectus contained therein,
all exhibits thereto and all material incorporated by reference
therein.
"TIA" shall mean the Trust Indenture Act of 1939, as amended.
"Trustee" shall mean the trustee under the Indenture.
2. Registration under the Act.
(a) Exchange Offer. To the extent not prohibited by any
applicable law or applicable interpretation of the staff of the Commission, the
Company shall, for the benefit of the Holders, at the Company's cost, use its
best efforts to cause to be filed with the Commission an Exchange Offer
Registration Statement on or prior to 60 days after the Closing Date on an
appropriate form under the Act covering the offer by the Company to the Holders
to exchange all of the Registrable Securities (other than Private Exchange
Notes) for a like aggregate principal amount of Exchange Notes, to cause such
Exchange Offer Registration Statement to be declared effective under the Act by
the Commission on or prior to 120 days after the Closing Date, to cause such
Registration Statement to remain effective until the closing of the Exchange
Offer and to cause the Exchange Offer to be consummated on or prior to 45 days
after the date on which the Exchange Offer Registration Statement was declared
effective under the Act by the Commission. The Exchange Notes will be issued
under the Indenture. Upon the effectiveness of the Exchange Offer Registration
Statement, the Company shall promptly commence the Exchange Offer, it being the
objective of such Exchange Offer to enable each Holder (other than
Participating Broker-Dealers) eligible and electing to exchange Registrable
Securities for Exchange Notes (assuming that such Holder is not an affiliate of
the Company within the meaning of Rule 405 under the Act, acquires the Exchange
Notes in the ordinary course of such Holder's business and has no arrangements
or understandings with any Person to participate in the Exchange Offer for the
purpose of distributing the Exchange Notes) to transfer such Exchange Notes
from and after their receipt without any limitations or restrictions under the
Act or under state securities or blue sky laws.
In connection with the Exchange Offer, the Company shall:
-5-
<PAGE> 6
(i) mail to each Holder a copy of the Prospectus forming
part of the Exchange Offer Registration Statement, together with an
appropriate letter of transmittal and related documents;
(ii) keep the Exchange Offer open for acceptance for
a period of not less than 30 days after the date notice thereof is
mailed to the Holders, or longer if required by applicable law (such
period being referred to herein as the "Exchange Period");
(iii) utilize the services of the Depository for the
Exchange Offer;
(iv) permit Holders to withdraw tendered Notes at any time
prior to the close of business, New York City time, on the last
business day of the Exchange Period, by sending to the institution
specified in the notice a telegram, telex, facsimile transmission or
letter setting forth the name of such Holder, the principal amount of
Notes delivered for exchange, and a statement that such Holder is
withdrawing its election to have such Notes exchanged;
(v) notify each Holder that upon consummation of the
Exchange Offer any Note not tendered will remain outstanding and
continue to accrue interest, but will not retain any rights under this
Agreement (except in the case of the Initial Purchaser and
Participating Broker-Dealers as provided herein); and
(vi) otherwise comply in all respects with all applicable
laws relating to the Exchange Offer.
If, prior to consummation of the Exchange Offer, the Initial
Purchaser holds any Notes acquired by it and having the status of an unsold
allotment in the initial distribution, the Company upon the request of the
Initial Purchaser shall, simultaneously with the delivery of the Exchange Notes
in the Exchange Offer, issue and deliver to the Initial Purchaser in exchange
(the "Private Exchange") for Notes held by the Initial Purchaser a like
principal amount of debt securities of the Company that are identical (except
that such securities shall bear appropriate transfer restrictions) to the
Exchange Notes (the "Private Exchange Notes") and which are issued pursuant to
the Indenture (which will provide that the Exchange Notes will not be subject
to the transfer restrictions set forth in the Indenture and that the Exchange
Notes, the Private Exchange Notes and the Notes will vote and consent together
on all matters as one class and that none of the Exchange Notes, the Private
Exchange Notes or the Notes will have the right to vote or consent as a
separate class on any matter). The Private Exchange Notes shall be of the same
series as and shall bear the same CUSIP number as the Exchange Notes.
As soon as practicable after the close of the Exchange Offer
or the Private Exchange, as the case may be, the Company shall:
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<PAGE> 7
(i) accept for exchange all Notes or portions thereof
duly tendered and not validly withdrawn pursuant to the Exchange
Offer;
(ii) accept for exchange all Notes or portions thereof
duly tendered pursuant to the Private Exchange; and
(iii) deliver, or cause to be delivered, to the Trustee for
cancellation all Notes or portions thereof so accepted for exchange by
the Company, and issue, and cause the Trustee to promptly authenticate
and deliver to each Holder, a new Exchange Note or Private Exchange
Note, as the case may be, equal in principal amount to the principal
amount of the Notes surrendered by such Holder.
To the extent not prohibited by applicable law or any
applicable interpretation of the staff of the Commission, the Company shall use
its best efforts to complete the Exchange Offer as provided above, and shall
comply with all applicable requirements of the Act, the Exchange Act and other
applicable laws in connection with the Exchange Offer. The Exchange Offer
shall not be subject to any condition, other than that (i) the Exchange Offer
does not violate any applicable law or interpretation of the staff of the
Commission, (ii) no action or proceeding has been instituted or threatened in
any court or by or before any governmental agency with respect to the Exchange
Offer which, in the reasonable judgment of the Company, might impair the
ability of the Company to proceed with the Exchange Offer, (iii) there has not
been any material change, or development involving a prospective material
change, in the business or financial affairs of the Company or any of its
subsidiaries which, in the reasonable judgment of the Company, would materially
impair the Company's ability to consummate the Exchange Offer or have a
material adverse effect on the Company if the Exchange Offer is consummated,
(iv) there has not been proposed, adopted, or enacted any law, statute, rule or
regulation which, in the reasonable judgment of the Company, might materially
impair the ability of the Company to proceed with the Exchange Offer or have a
material adverse effect on the Company if the Exchange Offer is consummated and
(v) all governmental approvals which the Company shall reasonably deem
necessary for the consummation of the Exchange Offer as contemplated shall have
been obtained. Each Holder of Registrable Securities who wishes to exchange
such Registrable Securities for Exchange Notes in the Exchange Offer will be
required to make certain customary representations in connection therewith,
including representations that such Holder is not an affiliate of the Company
within the meaning of Rule 405 under the Act, that any Exchange Notes to be
received by it will be acquired in the ordinary course of business and that at
the time of the commencement of the Exchange Offer it had no arrangement with
any Person to participate in the distribution (within the meaning of the Act)
of the Exchange Notes and will be required to make such other representations
as may be necessary under applicable Commission rules, regulations or
interpretations to render available the use of Form S-4 or any other
appropriate form under the Act.
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<PAGE> 8
In the event that the Company is unable to consummate the
Exchange Offer due to any event listed in clauses (i) through (v) in the
paragraph immediately above, the Company shall not be deemed to have breached
any covenant under this Section 2(a).
Upon consummation of the Exchange Offer in accordance with
this Section 2(a), the provisions of this Agreement shall continue to apply,
mutatis mutandis, solely with respect to Registrable Securities that are
Private Exchange Notes and Exchange Notes held by Participating Broker-Dealers,
and the Company shall have no further obligation to register Registrable
Securities (other than Private Exchange Notes) pursuant to Section 2(b) of this
Agreement.
(b) Shelf Registration. In the event that (i) the
Exchange Offer Registration provided in Section 2(a) above is not available to
any Holder or may not be consummated as soon as practicable after the last day
of the Exchange Period because, in either case, it would violate applicable
securities laws or because the applicable interpretations of the staff of the
Commission would not permit the Company to effect the Exchange Offer, or (ii)
the Exchange Offer is not for any other reason consummated within 180 days of
the Closing Date, the Company shall, at its cost, cause to be filed with the
Commission as promptly as practicable after such determination or date, as the
case may be, and, in any event, on or prior to 60 days thereafter, a Shelf
Registration Statement providing for the sale by the Holders of all of the
Registrable Securities, and shall use its best efforts to cause such Shelf
Registration Statement declared effective by the Commission on or prior to 120
days after such determination or date. No Holder of Registrable Securities may
include any of its Registrable Securities in any Shelf Registration pursuant to
this Agreement unless and until such Holder furnishes to the Company in
writing, within 15 days after receipt of a request therefor, such information
as the Company may, after conferring with counsel with regard to information
relating to Holders that would be required by the Commission to be included in
such Shelf Registration Statement or Prospectus included therein, reasonably
request for inclusion in any Shelf Registration Statement or Prospectus
included therein. Each Holder as to which any Shelf Registration is being
effected agrees to furnish promptly to the Company all information required to
be disclosed in the applicable Shelf Registration Statement or Prospectus
included therein by the rules and regulations of the Commission applicable to
the Shelf Registration Statement in order to make the information previously
furnished to the Company by such Holder not materially misleading.
The Company agrees, subject to applicable law or applicable
interpretation of the staff of the Commission, to use its reasonable best
efforts to keep the Shelf Registration Statement continuously effective,
supplemented and amended under the Act for a period ending on the earlier of
the date two years from the Closing Date (subject to extension pursuant to the
last paragraph of Section 3) or when all of the Registrable Securities covered
by the Shelf Registration Statement have been sold pursuant to the Shelf
Registration Statement or cease to be outstanding (the "Effectiveness Period").
The Company shall not permit any securities other than Registrable Securities
to be included in the Shelf
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<PAGE> 9
Registration. The Company will, in the event a Shelf Registration Statement is
declared effective, provide to each Holder copies of the Prospectus which is a
part of the Shelf Registration Statement, notify each such Holder when the
Shelf Registration Statement has become effective and take certain other
actions as are customary to permit unrestricted resales of the Registrable
Securities covered by the Shelf Registration Statement. The Company further
agrees, if necessary, to use its reasonable best efforts to supplement or amend
the Shelf Registration Statement, if required by the Act or the rules,
regulations or instructions applicable to the registration form used by the
Company for such Shelf Registration Statement or by any other rules and
regulations thereunder for shelf registrations, or if reasonably requested by
the Majority Holders, and the Company agrees to furnish to the Holders copies
of any such supplement or amendment promptly after its being used or filed with
the Commission.
(c) Expenses. The Company shall pay all Registration
Expenses in connection with registrations pursuant to Section 2(a) or 2(b).
Each Holder shall pay all expenses of its counsel (other than the fees
described in clauses (i) and (ii) of the definition of "Registration
Expenses"), underwriting discounts and commissions and transfer taxes, if any,
relating to the sale or disposition of such Holder's Registrable Securities
pursuant to the Shelf Registration Statement.
(d) Effective Registration Statement. An Exchange Offer
Registration Statement pursuant to Section 2(a) hereof or a Shelf Registration
Statement pursuant to Section 2(b) hereof will not be deemed to have become
effective unless it has been declared effective by the Commission; provided,
however, that if, after it has been declared effective, the offering of
Registrable Securities pursuant to a Shelf Registration Statement is interfered
with by any stop order, injunction or other order or requirement of the
Commission or any other governmental agency or court, such Registration
Statement will be deemed not to have been effective during the period of such
interference, until the offering of Registrable Securities pursuant to such
Registration Statement may legally resume.
(e) Liquidated Damages. In the event that an Exchange
Offer Registration Statement has not been filed with the Commission on or prior
to 60 days after the Closing Date, additional interest payable by the Company
as liquidated damages ("Liquidated Damages") will accrue on the Notes from and
including the 31st day after the Closing Date until but excluding the date such
Exchange Offer Registration Statement is filed. In addition, if on or prior to
120 days after the Closing Date, such Exchange Offer Registration Statement is
not declared effective under the Act by the Commission, Liquidated Damages will
accrue on the Notes from and including the 121st day after the Closing Date
until but excluding the date such Exchange Offer Registration Statement is
declared effective. Further, if on or prior to 45 days after the date on which
the Exchange Offer Registration Statement was declared effective under the Act
by the Commission, the Exchange Offer is not consummated, Liquidated Damages
will accrue on the Notes from and including the 46th day after the date the
Exchange Offer Registration Statement was declared effective under the
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<PAGE> 10
Act by the Commission, until but excluding the date of consummation of the
Exchange Offer. If applicable law or interpretations of the staff of the
Commission prohibit a Holder from participating in the Exchange Offer or if for
any reason the Exchange Offer is not consummated within 180 days of the Closing
Date and if a Shelf Registration Statement is not filed or declared effective
within the time periods provided by Section 2(b) hereof for such filing or
declaration, Liquidated Damages will accrue on the Notes (other than those
exchanged in the Exchange Offer) or the Private Exchange Notes, as the case may
be, from and including the day immediately following such default until but
excluding the effective date of the Shelf Registration Statement. Further, if
the Shelf Registration Statement or the Exchange Offer Registration Statement
is declared effective but thereafter ceases to be effective or usable during
the time periods specified in this Agreement, Liquidated Damages will accrue on
the Notes (other than those exchanged in the Exchange Offer) or the Private
Exchange Notes, as the case may be, from and including the day immediately
following such default until but excluding the date such Registration Statement
is declared effective. In each case, such Liquidated Damages will be payable
in cash semiannually in arrears, with the first semiannual payment due on the
first interest payment date in respect of the Notes (or the Private Exchange
Notes) following the date from which Liquidated Damages begin to accrue, and
will accrue, under each circumstance set forth above at a rate per annum equal
to an additional one quarter of one percent (0.25%) of the principal amount of
the Notes (or the Private Exchange Notes) upon the occurrence of each such
circumstance, which rate will increase by one quarter of one percent (0.25%)
for each 30-day period (as to a failure to file an Exchange Offer Registration
Statement or a Shelf Registration Statement with the Commission) or for each
90-day period (as to all other circumstances) that such Liquidated Damages
continue to accrue, with an aggregate maximum increase in the interest rate per
annum equal to one percent (1.00%).
Upon the filing of the Exchange Offer Registration Statement,
the effectiveness of the Exchange Offer Registration Statement, or the
consummation of the Exchange Offer, as the case may be, the interest rate borne
by the Notes will be reduced by the full amount of any such increase to the
extent that such increase related to the failure of any such event to have
occurred unless and until increased as described above. Upon the filing or the
effectiveness of a Shelf Registration Statement, as the case may be, the
interest rate borne by the Notes (and the Private Exchange Notes) will be
reduced by the full amount of any such increase to the extent that such
increase related to the failure of any such event to have occurred unless and
until increased as described above. Notwithstanding the foregoing, the Company
(i) shall not be required to amend or supplement the Shelf Registration
Statement, any related prospectus or any document incorporated therein by
reference and (ii) may suspend the effectiveness of any such Shelf Registration
Statement in the event that, and for a period not to exceed, for so long as
this Agreement is in effect, an aggregate of 90 days in any one calendar year
if (A) an event occurs and is continuing as a result of which the Shelf
Registration Statement, any related prospectus or any document incorporated
therein by reference as then amended or supplemented would, in the Company's
good faith judgment, contain an untrue statement of a material fact or omit to
state a material fact necessary in
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<PAGE> 11
order to make the statements therein not misleading, and (B) the Company
determines in its good faith judgment that the disclosure of such event at such
time would have a material adverse effect on the business, operations or
prospects of the Company; provided that any such suspension shall not relieve
the Company from its obligation to pay Liquidated Damages.
The Company shall notify the Trustee within three business
days after each and every date on which an event occurs in respect of which
Liquidated Damages is required to be paid (an "Event Date"). Liquidated
Damages shall be paid by depositing with the Trustee, in trust, for the benefit
of the Holders of Notes, Exchange Notes or Private Exchange Notes, as the case
may be, on or before the applicable semiannual interest payment date,
immediately available funds in sums sufficient to pay the Liquidated Damages
then due. The Liquidated Damages due shall be payable on each interest payment
date to the record Holder of Notes entitled to receive the interest payment to
be paid on such date as set forth in the Indenture. Each obligation to pay
Liquidated Damages shall be deemed to accrue from and including the day
following the applicable Event Date.
(f) Specific Enforcement. Without limiting the remedies
available to the Initial Purchaser and the Holders, the Company acknowledges
that any failure by the Company to comply with its obligations under Section
2(a) and Section 2(b) hereof would result in material irreparable injury to the
Initial Purchaser and the Holders for which there is no adequate remedy at law,
that it would not be possible to measure damages for such injuries precisely
and that, in the event of any such failure, the Initial Purchaser or any Holder
may obtain such relief as may be required to specifically enforce the Company's
obligations under Section 2(a) and Section 2(b) hereof.
3. Registration Procedures. In connection with the
obligations of the Company with respect to the Registration Statements pursuant
to Sections 2(a) and 2(b) hereof, the Company shall:
(a) prepare and file with the Commission a Registration
Statement or Registration Statements as prescribed by Sections 2(a)
and 2(b) within the relevant time periods specified in Section 2
hereof on the appropriate form under the Act, which form (i) shall be
selected by the Company, (ii) shall, in the case of a Shelf
Registration, be available for the sale of the Registrable Securities
by the selling Holders and (iii) shall comply as to form in all
material respects with the requirements of the applicable form and
include or incorporate by reference all financial statements required
by the Commission to be filed therewith, and the Company shall use its
best efforts to cause such Registration Statement to become effective
and remain effective in accordance with Section 2; provided, however,
that if (1) such filing is pursuant to Section 2(b), or (2) a
Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2(a) is required to be delivered under the Act by
any Participating Broker-Dealer who seeks to sell
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<PAGE> 12
Exchange Notes, before filing any Registration Statement or Prospectus
or any amendments or supplements thereto, the Company, if requested,
shall furnish to and afford the Holders and each such Participating
Broker-Dealer, as the case may be, covered by such Registration
Statement, their counsel and the managing underwriters, if any, a
reasonable opportunity to review copies of all such documents
(including copies of any documents to be incorporated by reference
therein and all exhibits thereto) proposed to be filed at least five
business days prior to such filing. The Company shall not file any
Registration Statement or Prospectus or any amendments or supplements
thereto in respect of which the Holders, pursuant to this Agreement,
must be afforded an opportunity to review prior to the filing of such
document, if the Majority Holders or such Participating Broker-Dealer,
as the case may be, their counsel or the managing underwriters, if
any, shall reasonably object;
(b) subject to Section 3(a) hereof, prepare and file with
the Commission such amendments and post-effective amendments to each
Registration Statement as may be necessary to keep such Registration
Statement effective for the Effectiveness Period or the Applicable
Period, as the case may be, and cause each Prospectus to be
supplemented by any required prospectus supplement and as so
supplemented to be filed pursuant to Rule 424 (or any similar
provision then in force) under the Act, and comply with the provisions
of the Act, the Exchange Act and the rules and regulations promulgated
thereunder applicable to it with respect to the disposition of all
securities covered by each Registration Statement during the
Effectiveness Period or the Applicable Period, as the case may be, in
accordance with the intended method or methods of distribution by the
selling Holders thereof described in this Agreement (including sales
by any Participating Broker-Dealer);
(c) in the case of a Shelf Registration, (i) notify each
Holder, at least five business days prior to filing, that a Shelf
Registration Statement with respect to the Registrable Securities is
being filed and advising such Holder that the distribution of
Registrable Securities will be made in accordance with the method
selected by the Majority Holders, (ii) furnish to each Holder and to
each underwriter of an underwritten offering of Registrable
Securities, if any, without charge, as many copies of each Prospectus,
including each preliminary Prospectus, and any amendment or supplement
thereto and such other documents as such Holder or underwriter may
reasonably request, in order to facilitate the public sale or other
disposition of the Registrable Securities, and (iii) subject to the
last paragraph of this Section 3, consent to the use of the Prospectus
or any amendment or supplement thereto by each of the selling Holders
in connection with the offering and sale of the Registrable Securities
covered by the Prospectus or any amendment or supplement thereto,
provided that such use complies with all applicable laws and
regulations;
(d) use its best efforts to register or qualify the
Registrable Securities under all applicable state securities or "blue
sky" laws of such jurisdictions as any Holder of
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<PAGE> 13
Registrable Securities covered by a Registration Statement and each
underwriter of an underwritten offering of Registrable Securities
shall reasonably request by the time the applicable Registration
Statement is declared effective by the Commission, and do any and all
other acts and things which may be reasonably necessary or advisable
to enable such Holder and underwriter to consummate the disposition in
each such jurisdiction of such Registrable Securities owned by such
Holder; provided, however, that the Company shall not be required to
(i) qualify as a foreign partnership or foreign corporation or as a
dealer in securities in any jurisdiction where it would not otherwise
be required to qualify but for this Section 3(d), (ii) file any
general consent to service of process in any jurisdiction where it
would not otherwise be subject to such service of process or (iii)
subject itself to taxation in any such jurisdiction if it is not then
so subject;
(e) in the case of (A) a Shelf Registration or (B)
Participating Broker-Dealers who have notified the Company that they
will be utilizing the Prospectus contained in the Exchange Offer
Registration Statement as provided in Section 3(t) hereof, are seeking
to sell Exchange Notes and are required to deliver Prospectuses,
notify each Holder, or such Participating Broker-Dealers, as the case
may be, their counsel and the managing underwriters, if any, promptly
and, if requested by such Holder or Participating Broker-Dealer,
confirm such notice in writing (i) when a Registration Statement has
become effective and when any post-effective amendments and
supplements thereto become effective, (ii) of any request by the
Commission or any state securities authority for amendments and
supplements to a Registration Statement or Prospectus or for
additional information after the Registration Statement has become
effective, (iii) of the issuance by the Commission or any state
securities authority of any stop order suspending the effectiveness of
a Registration Statement or the initiation of any proceedings for that
purpose, (iv) in the case of a Shelf Registration, if, between the
effective date of a Registration Statement and the closing of any sale
of Registrable Securities covered thereby, the representations and
warranties of the Company contained in any underwriting agreement,
securities sales agreement or other similar agreement, if any,
relating to such offering cease to be true and correct in all material
respects, (v) if the Company receives any notification with respect to
the suspension of the qualification of the Registrable Securities or
the Exchange Notes to be sold by any Participating Broker-Dealer for
offer or sale in any jurisdiction or the initiation of any proceeding
for such purpose, (vi) of the happening of any event or the failure of
any event to occur or the discovery of any facts or otherwise, during
the period a Shelf Registration Statement is effective or the
Applicable Period, as the case may be, which makes any statement made
in the Shelf Registration Statement, the Exchange Offer Registration
Statement or any related Prospectus untrue in any material respect or
which causes such Registration Statement or Prospectus, as the case
may be, to omit to state a material fact necessary to make the
statements therein, in the case of a Prospectus in light of the
circumstances under which they were made, not misleading and (vii) the
Company's reasonable
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<PAGE> 14
determination that a post-effective amendment to the Registration
Statement would be appropriate;
(f) make every effort to obtain the withdrawal of any
order suspending the effectiveness of a Registration Statement at the
earliest possible moment;
(g) in the case of a Shelf Registration, furnish to each
Holder, upon request and without charge, at least one conformed copy
of each Registration Statement and any post-effective amendment
thereto (without documents incorporated therein by reference or
exhibits thereto, unless requested);
(h) in the case of a Shelf Registration, cooperate with
the selling Holders to facilitate the timely preparation and delivery
of certificates, if any, representing Registrable Securities to be
sold, which certificates shall not bear any restrictive legends and
shall be in a form eligible for deposit with the Depository; and cause
such Registrable Securities to be in such denominations (consistent
with the provisions of the Indenture) and registered in such names as
the selling Holders or the managing underwriters may reasonably
request at least two business days prior to the closing of any sale of
Registrable Securities;
(i) subject to Section 3(a) hereof and the second
paragraph of Section 2(e) hereof, in the case of a Shelf Registration
or an Exchange Offer Registration, upon the occurrence of any
circumstance contemplated by Section 3(e)(ii), 3(e)(iii), 3(e)(iv),
3(e)(v), 3(e)(vi) or 3(e)(vii) hereof, use its best efforts to prepare
a supplement or post-effective amendment to the Registration Statement
and the related Prospectus or any document incorporated therein by
reference or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Securities, such
Prospectus will not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading. The Company agrees to notify each Holder to suspend
use of the Prospectus as promptly as practicable after the occurrence
of any such circumstance, and each Holder hereby agrees to suspend use
of the Prospectus until the Company has amended or supplemented the
Prospectus to correct such misstatement or omission;
(j) in the case of a Shelf Registration, furnish to each
Holder of Registrable Securities, upon request and without charge, a
reasonable number of copies of any document which is incorporated by
reference into or is an exhibit to a Registration Statement or a
Prospectus after the initial filing of a Registration Statement;
(k) obtain a CUSIP number for all Exchange Notes or
Registrable Securities, as the case may be, not later than the
effective date of a Registration
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<PAGE> 15
Statement, and provide the Trustee with printed certificates for the
Exchange Notes or the Registrable Securities, as the case may be, in a
form eligible for deposit with the Depository;
(l) cause the Indenture to be qualified under the TIA in
connection with the registration of the Exchange Notes or Registrable
Securities, as the case may be, cooperate with the Trustee and the
Holders to effect such changes to the Indenture as may be required for
the Indenture to be so qualified in accordance with the terms of the
TIA and execute, and use its best efforts to cause the Trustee to
execute, all documents as may be required to effect such changes, and
all other forms and documents required to be filed with the Commission
to enable the Indenture to be so qualified in a timely manner;
(m) in the case of a Shelf Registration, enter into such
agreements (including underwriting agreements) as are customary in
underwritten public offerings and take all such other appropriate
actions as are reasonably requested in order to expedite or facilitate
the registration or the disposition of such Registrable Securities,
and in such connection, whether or not an underwriting agreement is
entered into and whether or not the registration is an underwritten
registration: (i) make such representations and warranties to Holders
of such Registrable Securities and the underwriters (if any), with
respect to the business of the Company and its subsidiaries and the
Registration Statement, the Prospectus and all documents, if any,
incorporated or deemed to be incorporated by reference therein, in
each case, as are customarily made by issuers to underwriters in
underwritten public offerings, and confirm the same if and when
reasonably requested; (ii) obtain customary opinions of counsel to the
Company and updates thereof in form and substance reasonably
satisfactory to the managing underwriters (if any) and the Majority
Holders, addressed to each selling Holder and the underwriters (if
any) covering the matters customarily covered in opinions requested in
underwritten public offerings and such other matters as may be
reasonably requested by such Holders and underwriters; (iii) obtain
"cold comfort" letters and updates thereof in form and substance
reasonably satisfactory to the managing underwriters from the
independent certified public accountants of the Company (and, if
necessary, any other independent certified public accountants of any
subsidiary of the Company or of any business acquired or to be
acquired by the Company for which financial statements and financial
data are, or are required to be, included in the Registration
Statement), addressed to the selling Holders of Registrable Securities
and to each of the underwriters, such letters to be in customary form
and covering matters of the type customarily covered in "cold comfort"
letters in connection with underwritten public offerings; and (iv) if
an underwriting agreement is entered into, cause the same to contain
indemnification provisions and procedures no less favorable than those
set forth in Section 4 hereof (or such other provisions and procedures
acceptable to the Majority Holders and the managing underwriters or
agents) with respect to all parties to be indemnified pursuant to said
Section. The
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<PAGE> 16
above shall be done at each closing under such underwriting agreement,
or as and to the extent required thereunder;
(n) if (A) a Shelf Registration is filed pursuant to
Section 2(b) or (B) a Prospectus contained in an Exchange Offer
Registration Statement filed pursuant to Section 2(a) is required to
be delivered under the Act by any Participating Broker-Dealer who
seeks to sell Exchange Notes during the Applicable Period, make
available for inspection by any selling Holder of such Registrable
Securities being sold, or each such Participating Broker-Dealer, as
the case may be, any underwriter participating in any such disposition
of Registrable Securities, if any, and any attorney, accountant or
other agent retained by any such selling Holder or each such
Participating Broker-Dealer, as the case may be, or underwriter
(collectively, the "Inspectors"), at the offices where normally kept,
during reasonable business hours, all financial and other records,
pertinent corporate documents and properties of the Company and its
subsidiaries (collectively, the "Records") as shall be reasonably
necessary to enable them to exercise any applicable due diligence
responsibilities, and cause the officers, directors and employees of
the Company and its subsidiaries to supply all information in each
case reasonably requested by any such Inspector in connection with
such Registration Statement. Records which the Company determines, in
good faith, to be confidential and as to which they notify the
Inspectors are confidential shall not be disclosed by the Inspectors
unless, after prior consultation with the Company, (i) the disclosure
of such Records is necessary to avoid or correct a material
misstatement or omission in such Registration Statement, (ii) the
release of such Records is ordered pursuant to an effective subpoena
or other order from a court of competent jurisdiction or (iii) the
information in such Records has been made generally available to the
public, other than as a result of a breach of confidentiality or
secrecy to the Company. Each selling Holder of such Registrable
Securities and each such Participating Broker-Dealer will be required
to agree that information obtained by it as a result of such
inspections shall be deemed confidential and shall not be used by it
as the basis for any market transactions in the securities of the
Company unless and until such is made generally available to the
public, other than as a result of a breach of confidentiality or
secrecy to the Company. Each selling Holder of such Registrable
Securities and each such Participating Broker- Dealer will be required
to further agree that it will, upon learning that disclosure of such
Records is sought in a court of competent jurisdiction or is otherwise
required in the opinion of such Participating Broker- Dealer, give
notice to the Company and allow the Company at its expense to
undertake appropriate action to prevent disclosure of the Records
deemed confidential;
(o) comply with all applicable rules and regulations of
the Commission and, as soon as reasonably practicable, make generally
available to the Holders earnings statements of the Company covering
at least 12 months satisfying the
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<PAGE> 17
provisions of Section 11(a) of the Act and Rule 158 thereunder (or any
similar rule promulgated under the Act);
(p) upon consummation of an Exchange Offer or a Private
Exchange, obtain an opinion of counsel to the Company addressed to the
Trustee for the benefit of all Holders of Registrable Securities
participating in the Exchange Offer or the Private Exchange, as the
case may be, and which includes an opinion that (i) the Company has
duly authorized, executed and delivered the Exchange Notes and Private
Exchange Notes and the Indenture, as the case may be, and (ii) each of
the Exchange Notes or the Private Exchange Notes and the Indenture, as
the case may be, constitute a legal, valid and binding obligation of
the Company, enforceable against the Company in accordance with its
respective terms (in each case, with customary exceptions);
(q) if an Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Registrable Securities by Holders to
the Company (or to such other Person as directed by the Company) in
exchange for the Exchange Notes or the Private Exchange Notes, as the
case may be, the Company shall mark, or cause to be marked, on such
Registrable Securities delivered by such Holders that such Registrable
Securities are being cancelled in exchange for the Exchange Notes or
the Private Exchange Notes, as the case may be; in no event shall such
Registrable Securities be marked as paid or otherwise satisfied;
(r) cooperate with each seller of Registrable Securities
covered by any Registration Statement and each underwriter, if any,
participating in the disposition of such Registrable Securities and
their respective counsel in connection with any filings required to be
made with the NASD;
(s) use its best efforts to take all other steps
necessary to effect the registration of the Registrable Securities
covered by a Registration Statement contemplated hereby;
(t) (A) in the case of the Exchange Offer
Registration Statement (i) include in the Exchange Offer Registration
Statement a section entitled "Plan of Distribution," which shall
contain a summary statement of the positions taken or policies made by
the staff of the Commission with respect to the potential "underwriter"
status of any broker-dealer (a "Participating Broker-Dealer") that
holds Registrable Securities acquired for its own account as a result
of market-making activities or other trading activities and that will
be the beneficial owner (as defined in Rule 13d-3 under the Exchange
Act) of Exchange Notes to be received by such broker-dealer in the
Exchange Offer, whether such positions or policies have been publicly
disseminated by the staff of the Commission or such positions or
policies represent the prevailing views of the staff of the Commission,
including a statement
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<PAGE> 18
that any such broker-dealer who receives Exchange Notes for Registrable
Securities pursuant to the Exchange Offer may be deemed a statutory
underwriter and must deliver a prospectus meeting the requirements of
the Act in connection with any resale of such Exchange Notes, (ii)
furnish to each Participating Broker-Dealer who has delivered to the
Company the notice referred to in Section 3(e), without charge, as many
copies of each Prospectus included in the Exchange Offer Registration
Statement, including any preliminary prospectus, and any amendment or
supplement thereto, as such Participating Broker-Dealer may reasonably
request, (iii) subject to the last paragraph of this Section 3, hereby
consent to the use of the Prospectus forming part of the Exchange Offer
Registration Statement or any amendment or supplement thereto, by any
Person subject to the prospectus delivery requirements of the
Commission, including all Participating Broker-Dealers, in connection
with the sale or transfer of the Exchange Notes covered by the
Prospectus or any amendment or supplement thereto, (iv) use its best
efforts to keep the Exchange Offer Registration Statement effective and
to amend and supplement the Prospectus contained therein, in order to
permit such Prospectus to be lawfully delivered by all Persons subject
to the prospectus delivery requirements of the Act for such period of
time as such Persons must comply with such requirements in order to
resell the Exchange Notes (provided, however, that such period shall
not be required to exceed 180 days, or such longer period if extended
pursuant to the last sentence of this Section 3 (the "Applicable
Period")), and (v) include in the transmittal letter or similar
documentation to be executed by an exchange offeree all necessary
information for such offeree to participate in the Exchange Offer;
(B) in the case of any Exchange Offer Registration
Statement, the Company agrees to deliver to each Participating
Broker-Dealer upon consummation of the Exchange Offer (i) an opinion
of counsel substantially in the form attached hereto as Exhibit A,
(ii) an Officers' Certificate containing certifications substantially
similar to those set forth in Section 8(d) of the Purchase Agreement
and such additional certifications as are customarily delivered in a
public offering of debt securities, and (iii) a comfort letter in
customary form permitted by Statement of Auditing Standards No. 72 of
the American Institute of Certified Public Accountants.
The Company may require each seller of Registrable Securities
as to which any registration is being effected to furnish to the Company such
information regarding such seller and the proposed distribution of such
Registrable Securities as the Company may from time to time reasonably request
in writing. The Company may exclude from such registration the Registrable
Securities of any seller who unreasonably fails to furnish such information
within a reasonable time after receiving such request.
In the case of (i) a Shelf Registration Statement or (ii)
Participating Broker-Dealers who have notified the Company that they will be
utilizing the Prospectus contained in the Exchange Offer Registration Statement
as provided in Section 3(t) hereof, are seeking
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<PAGE> 19
to sell Exchange Notes and are required to deliver copies of such Prospectus,
each Holder agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 3(e)(ii), 3(e)(iii),
3(e)(iv), 3(e)(v), 3(e)(vi) or 3(e)(vii) hereof, such Holder will forthwith
discontinue disposition of Registrable Securities pursuant to a Registration
Statement until such Holder's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 3(i) hereof or until it is advised
in writing by the Company that the use of the applicable Prospectus may be
resumed, and, if so directed by the Company, such Holder will deliver to the
Company (at the Company's expense) all copies in such Holder's possession,
other than permanent file copies then in such Holder's possession, of the
Prospectus covering such Registrable Securities or Exchange Notes, as the case
may be, current at the time of receipt of such notice. If the Company shall
give any such notice to suspend the disposition of Registrable Securities or
Exchange Notes, as the case may be, pursuant to a Registration Statement as a
result of the happening of any event of the kind described in Section 3(e)(ii),
3(e)(iii), 3(e)(iv), 3(e)(v), 3(e)(vi) or 3(e)(vii) hereof, the Company shall
use its best efforts to file and have declared effective (if an amendment) as
soon as practicable an amendment or supplement to the Registration Statement
and shall extend the period during which such Registration Statement shall be
maintained effective pursuant to this Agreement by the number of days in the
period from and including the date of the giving of such notice to and
including the date when the Company shall have made available to the Holders
copies of the supplemented or amended Prospectus necessary to resume such
dispositions or shall have advised the Holders in writing that the use of the
applicable Prospectus may be resumed.
4. Indemnification and Contribution. (a) The Company
shall indemnify and hold harmless each Holder, each Participating
Broker-Dealer, each underwriter who participates in an offering of Registrable
Securities, the Initial Purchaser, each of their respective affiliates, each
Person, if any, who controls any of such parties within the meaning of Section
15 of the Act or Section 20 of the Exchange Act, and each of their respective
directors, officers, partners, employees, representatives and agents, to the
fullest extent lawful as follows:
(i) from and against any and all loss, liability, claim,
damage and expense whatsoever, joint or several, as incurred, arising
out of any untrue statement or alleged untrue statement of a material
fact contained in any Registration Statement or any amendment thereto
pursuant to which the offer and sale of the Registrable Securities or
Exchange Notes were registered under the Act including all documents
incorporated therein by reference, or the omission or alleged omission
therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading, or arising
out of any untrue statement or alleged untrue statement of a material
fact contained in any Prospectus or any amendment or supplement
thereto, or the omission or alleged omission therefrom of a material
fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading;
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<PAGE> 20
(ii) from and against any and all loss, liability, claim,
damage and expense whatsoever, joint or several, as incurred, to the
extent of the aggregate amount paid in settlement of any litigation,
or any investigation or proceeding by any court or governmental agency
or body, whether commenced or threatened, or of any claim whatsoever
based upon any such untrue statement or omission, or any such alleged
untrue statement or omission, if and only if such settlement is
effected with the prior written consent of the Company; and
(iii) from and against any and all expenses whatsoever
(including reasonable fees and disbursements of counsel chosen by such
Initial Purchaser, Holder, Participating Broker-Dealer or underwriter
(except to the extent otherwise expressly provided in Section 4(c)
hereof)), as incurred, reasonably incurred in investigating, preparing
for or defending against any litigation, or any investigation or
proceeding by any court or governmental agency or body, whether
commenced or threatened, and any amount paid in settlement thereof, or
any other claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, to the
extent that any such expense is not paid under subparagraph (i) or
(ii) of this Section 4(a);
provided, however, that as to any Holder, Participating Broker-Dealer or
underwriter, this indemnity does not apply to any loss, liability, claim,
damage or expense to the extent arising out of an untrue statement or omission
or alleged untrue statement or omission (i) made solely in reliance upon and in
conformity with written information furnished to the Company by such Holder,
such Participating Broker-Dealer or such underwriter in writing expressly for
use in the Registration Statement (or any amendment thereto) or any Prospectus
(or any amendment or supplement thereto) or (ii) contained in any preliminary
prospectus or any Prospectus if such Holder, such Participating Broker-Dealer
or such underwriter failed to send or deliver a copy of the Prospectus (as then
amended or supplemented if the Company shall have timely furnished any
amendments or supplements thereto) to the Person asserting such losses,
liabilities, claims or damages on or prior to the delivery of written
confirmation of any sale of securities covered thereby to such Person in any
case where such delivery is required by the Act and it shall have been finally
judicially determined by a court of competent jurisdiction that such Prospectus
(as so amended or supplemented) would have corrected such untrue statement or
omission and the delivery thereof would have eliminated such losses,
liabilities, claims, damages or expenses. Any amounts advanced by the Company
to an indemnified party pursuant to this Section 4 as a result of such losses
shall be returned to the Company if it shall be finally judicially determined
by such a court in a judgment not subject to appeal or final review that such
indemnified party was not entitled to indemnification by the Company.
(b) Each Holder agrees, severally and not jointly, to
indemnify and hold harmless the Company, each underwriter who participates in
an offering of Registrable Securities, the other selling Holders and the
Initial Purchaser and each of their respective
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<PAGE> 21
directors, officers (including each officer of the Company who signed the
Registration Statement), employees, representatives and agents, and each
Person, if any, who controls the Company, the Initial Purchaser, any
underwriter or any other selling Holder within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act, from and against any and all loss,
liability, claim, damage and expense whatsoever described in the indemnity
contained in Section 4(a) hereof, as reasonably incurred, but only with respect
to untrue statements or omissions, or alleged untrue statements or omissions,
made in a Shelf Registration Statement (or any amendment thereto) or any
Prospectus (or any amendment or supplement thereto) contained in a Shelf
Registration Statement solely in reliance upon and in conformity with written
information furnished to the Company by such selling Holder expressly for use
in the Registration Statement (or any amendment thereto) or any such Prospectus
(or any amendment or supplement thereto); provided, however, that no such
Holder shall be liable for any claims hereunder in excess of the amount of net
proceeds received by such Holder from the sale of Registrable Securities
pursuant to such Shelf Registration Statement.
(c) Each indemnified party shall give prompt notice to
each indemnifying party of any action commenced against it in respect of which
indemnity may be sought hereunder, enclosing a copy of all papers properly
served on such indemnified party (but failure to notify an indemnifying party
shall not relieve such indemnifying party from any liability hereunder to the
extent it is not materially prejudiced as a result thereof and in any event
shall not relieve it from any liability which it may have other than on account
of this indemnity agreement). An indemnifying party may participate, at its
own expense, in the defense of any such action. If an indemnifying party so
elects within a reasonable time after receipt of such notice, such indemnifying
party, jointly with any other indemnifying party, may assume the defense of
such action with counsel chosen by it and reasonably satisfactory to the
indemnified parties defendant in such action; provided, however, that if any
such indemnified party reasonably determines, upon written advice of counsel,
that there may be legal defenses available to such indemnified party which are
different from or in addition to those available to such indemnifying party or
that representation of such indemnifying party and any indemnified party by the
same counsel would present a conflict of interest, then such indemnifying party
or parties shall not so be entitled to assume such defense. If an indemnifying
party is not so entitled to assume the defense of such action, counsel for such
indemnifying party shall be entitled to conduct the defense of such
indemnifying party and counsel for each indemnified party or parties shall be
entitled to conduct the defense of such indemnified party or parties. If an
indemnifying party assumes the defense of an action in accordance with and as
permitted by the provisions of this Section 4(c), such indemnifying party shall
not be liable for any fees and expenses of counsel for the indemnified parties
incurred thereafter in connection with such action. In no event shall the
indemnifying party or parties be liable for the fees and expenses of more than
one counsel (in addition to any local counsel) for all indemnified parties in
connection with any one action, or separate but similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances. No indemnifying party shall, without the prior written consent
of the
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<PAGE> 22
indemnified parties, which consent shall not be unreasonably withheld, settle
or compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 4, unless
such settlement, compromise or consent includes an unconditional release of
each indemnified party from all liability arising out of such litigation,
investigation, proceeding or claim and does not include a statement as to or an
admission of fault, culpability or a failure to act by or on behalf of any
indemnified party.
(d) Notwithstanding any payment or payments made by the
Company hereunder, the Company hereby expressly waives subrogation to, and
agrees that it shall not be entitled to be subrogated to, any of the rights of
any indemnified party against the Company or any other right of offset held by
any indemnified party for the payment of any amounts owed to any indemnified
party pursuant to this Section 4; provided, however, that if any of the
foregoing provisions of this paragraph are held to be contrary to applicable
law or unenforceable by a court of competent jurisdiction, the Company hereby
expressly agrees that any right of subrogation or contribution that the Company
may have as a result of such applicable law or unenforceability, as the case
may be, shall be subordinate in right of payment to the payment in full in cash
of all amounts owed to any indemnified party pursuant to this Section 4.
(e) If the indemnification provided for in this Section 4
is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative fault of the indemnifying party or parties
on the one hand and the indemnified party or parties on the other hand in
connection with the statements or omissions which resulted in such losses,
liabilities, claims, damages or expenses, or (ii) if the allocation provided by
clause (i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative fault referred to in clause (i)
above but also other relevant equitable considerations. The relative fault of
the Company on the one hand and the Holders and any other indemnity parties on
the other hand shall be determined by reference to, among other things, whether
any such untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by
the Company or by another indemnifying party, and the respective parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Company, the Holders and any other indemnifying parties
agree that it would not be just and equitable if contribution pursuant to this
Section 4 were determined by pro rata allocation (even if the Holders were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations
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<PAGE> 23
referred to above in this Section 4(e). The aggregate amount of losses,
liabilities, claims, damages and expenses incurred by an indemnified party and
referred to above in this Section 4(e) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in investigating,
preparing for or defending against any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened, or any
claim whatsoever based upon any such untrue or alleged untrue statement or
omission or alleged omission.
Notwithstanding the provisions of this Section 4(e), the
Initial Purchaser shall not be required to contribute any amount in excess of
the amount by which the total discount received by the Initial Purchaser in
respect of the purchase price of the Notes purchased by it from the Company
exceeds the amount of any damages which the Initial Purchaser has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission.
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.
For purposes of this Section 4(e), each person, if any, who
controls the Initial Purchaser within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act shall have the same rights to contribution as
the Initial Purchaser, and each director of the Company and each officer of the
Company who signed the Registration Statement and each person, if any, who
controls the Company within the meaning of Section 15 of the Act or Section 20
of the Exchange Act shall have the same rights to contribution as the Company.
5. Participation in Underwritten Registrations. No
Holder may participate in any underwritten registration hereunder unless such
Holder (a) agrees to sell such Holder's Registrable Securities on the basis
provided in any customary underwriting arrangements approved by the Persons
entitled hereunder to approve such arrangements and (b) completes and executes
all reasonable questionnaires, powers of attorney, indemnities, underwriting
agreements, lock-up letters and other documents reasonably required in
connection with such underwriting arrangements.
6. Selection of Underwriters. In any underwritten
offering, the underwriter or underwriters and manager or managers that will
administer the offering will be selected by the Majority Holders; provided,
however, that such underwriters and managers must be reasonably satisfactory to
the Company.
7. Miscellaneous.
(a) No Inconsistent Agreements. The Company hereby
represents that it is not party to nor will the Company on or after the date of
this Agreement enter into any
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<PAGE> 24
agreement that is inconsistent with the rights granted in this Agreement or
otherwise conflicts with the provisions hereof.
(b) Amendments and Waivers. The provisions of this
Agreement, including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the Company has obtained the written
consent of Holders of at least a majority of the then outstanding (as
determined under the Indenture) aggregate principal amount of the Registrable
Securities; provided, however, that no amendment, modification or supplement or
waiver or consent to the departure with respect to the provisions of Section 4
hereof shall be effective as against any Holder of Registrable Securities
unless consented to in writing by such Holder of Registrable Securities.
(c) Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
sent by registered or certified mail, postage prepaid, sent by any national
courier service guaranteeing overnight delivery or transmitted by any standard
form of telecommunication, as follows: (i) if to a Holder, at the most current
address given by such Holder to the Company in accordance with the provisions
of this Section 7(c), which address, with respect to the Initial Purchaser,
shall initially be the address provided for the Initial Purchaser in the
Purchase Agreement; and (ii) if to the Company, at its address as set forth in
the Purchase Agreement, or at such other address provided in accordance with
the provisions of this Section 7(c).
All such notices and communications shall be deemed to have
been duly given at the earlier of: (i) the time of actual receipt by the
addressee; or (ii) the time delivered, if personally delivered, or five
business days after being sent by registered or certified mail, postage
prepaid, if mailed, or when answered back, if telexed, or when transmission is
confirmed, if telecopied, or on the next business day, if timely delivered to a
national courier service guaranteeing overnight delivery.
Copies of all notices, demands, or other communications shall
be concurrently delivered by the Person giving the same to the Trustee at its
address specified in the Indenture.
(d) Successors and Assigns. This Agreement shall inure
to the benefit of and be binding upon the successors, assigns and transferees
of the Initial Purchaser, including, without limitation and without the need
for an express assignment, subsequent Holders; provided, however, that nothing
herein shall be deemed to permit any assignment, transfer or other disposition
of Registrable Securities in violation of the terms of the Purchase Agreement
or the Indenture. If any transferee of any Holder shall acquire Registrable
Securities, in any manner, whether by operation of law or otherwise, such
Registrable Securities shall be held subject to all of the terms of this
Agreement, and by taking and holding such Registrable Securities, such Person
shall be conclusively deemed to have agreed
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<PAGE> 25
to be bound by and to perform all of the terms and provisions of this Agreement
and such Person shall be entitled to receive the benefits hereof.
(e) Third Party Beneficiary. The Holders shall be third
party beneficiaries of the agreements made hereunder between the Company, on
the one hand, and the Initial Purchaser, on the other hand, and the Holders
shall have the right to enforce such agreements directly to the extent they
deem such enforcement necessary or advisable to protect their rights or the
rights of any of the other Holders.
(f) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(g) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK,
WITHOUT GIVING EFFECT TO ANY PROVISIONS RELATING TO CONFLICTS OF LAWS.
(h) Severability. In the event that any one or more of
the provisions contained herein, or the application thereof in any
circumstance, is held invalid, illegal or unenforceable, the validity, legality
and enforceability of any such provision in every other respect and of the
remaining provisions contained herein shall not be affected or impaired
thereby.
(i) Notes Held by the Company or its Affiliates.
Whenever the consent or approval of Holders of a specified percentage of
Registrable Securities is required hereunder, Registrable Securities held by
the Company or any affiliate of the Company (as such term is defined in Rule
405 under the Act) shall not be counted in determining whether such consent or
approval was given by the Holders of such required percentage.
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<PAGE> 26
(j) Counterparts. This Agreement may be executed in one
or more counterparts and, when so executed, all such counterparts taken
together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Registration Rights Agreement as of the date first written above.
ICO, INC.
By:_____________________________________
Name:
Title:
Accepted as of the
date first above written:
BEAR, STEARNS & CO. INC.
By:_________________________________
Name:
Title:
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<PAGE> 27
Exhibit A
Form of Opinion of Counsel
1. Each of the Exchange Offer Registration Statement and
the Prospectus (other than the financial statements, notes or schedules thereto
and other financial and statistical data and supplemental schedules included or
referred to therein or omitted therefrom and the Form T-1, as to which such
counsel need express no opinion), complies as to form in all material respects
with the applicable requirements of the Act and the applicable rules and
regulations promulgated under the Act.
Such counsel may also state that because the primary
purpose of such counsel's engagement was not to establish or confirm factual
matters or financial or accounting data and because of the wholly or partially
non- legal character of many of the statements contained or incorporated by
reference in the Exchange Offer Registration Statement, such counsel is not
passing upon and does not assume any responsibility for the accuracy,
completeness or fairness of the statements contained or incorporated by
reference in the Exchange Offer Registration Statement, and such counsel has
not independently verified the accuracy, completeness or fairness of such
statements. Without limiting the generality of the foregoing, such counsel may
state that such counsel assumes no responsibility for and has not independently
verified the accuracy, completeness or fairness of the financial statements and
other financial and accounting data included or incorporated by reference in
the Exchange Offer Registration Statement, and that such counsel has not
examined the financial or accounting records from which such financial
statements, and other financial or accounting data are derived. However, such
counsel shall state that such counsel has participated in the preparation of
the Exchange Offer Registration Statement and conferences with officers and
other representatives of the Company and representatives of the independent
public accountants of the Company, at which the contents of the Exchange Offer
Registration Statement and related matters were discussed. Such counsel shall
also state that such counsel has reviewed certain corporate documents furnished
to such counsel by the Company. Such counsel shall state that based on such
participation and review (relying as to materiality to a large extent upon the
officers and other representatives of the Company), no facts have come to the
attention of such counsel that cause such counsel to believe that the Exchange
Offer Registration Statement, as of its date or as of the date of such
statement, contained or contains an untrue statement of a material fact or
omitted or omits to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
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<PAGE> 1
EXHIBIT 5.1
[VINSON & ELKINS LETTERHEAD]
June 16, 1997
ICO, Inc.
11490 Westheimer
Suite 1000
Houston, Texas 77077
Ladies and Gentlemen:
We have acted as counsel to ICO, Inc., a Texas corporation ("ICO"), in
connection with the preparation of the Registration Statement on Form S-4 (the
"Registration Statement") filed on even date herewith with the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to ICO's offer to exchange (the
"Exchange Offer") up to $120,000,000 aggregate principal amount of ICO's 10 3/8%
Senior Notes due 2007, Series B (the "Notes"), for a like principal amount of
ICO's 10 3/8% Senior Notes, Series A (the "Series A Notes") presently
outstanding pursuant to the Exchange Offer contemplated by the Registration
Statement.
We have examined originals or copies, certified or otherwise identified to
our satisfaction, of (i) the Articles of Incorporation and Bylaws of ICO, each
as amended to the date hereof, (ii) the Indenture (the "Indenture") dated as of
June 9, 1997 between ICO and Fleet National Bank, as Trustee, filed as an
exhibit to the Registration Statement, and (iii) such other certificates,
statutes and other instruments and documents as we considered appropriate for
purposes of the opinions hereafter expressed.
In connection with this opinion, we have assumed that (i) the Registration
Statement, and any amendments thereto (including post-effective amendments),
will have become effective; and (ii) all Notes will be issued in exchange for
Series A Notes pursuant to the Exchange Offer in compliance with applicable
federal and state securities laws and in the manner stated in the Registration
Statement.
Based on the foregoing, we are of the opinion that:
1. ICO has been duly incorporated and is validly existing and in good
standing under the laws of the State of Texas.
2. When (i) the Indenture has been duly qualified under the Trust
Indenture Act of 1939, as amended; and (ii) such Notes have been duly
executed, authenticated, issued and delivered in accordance with the
provisions of the Indenture and in accordance with the applicable terms of
the Exchange Offer, such Notes will be legally issued and will constitute
valid and binding obligations of ICO, enforceable against ICO in accordance
with their terms, except as such enforcement is subject to any applicable
bankruptcy, insolvency, reorganization or other law relating to or
affecting creditors' rights generally and general principles of equity and
will be entitled to the benefits of the Indenture.
The foregoing opinions are limited in all respects to the laws of the State
of Texas, the laws of the State of New York and federal laws.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. By giving such consent, we do not admit that we are
within the category of persons whose consent is required under Section 7 of the
Securities Act or the rules and regulations of the Commission issued thereunder.
Very truly yours,
/s/ VINSON & ELKINS L.L.P.
--------------------------------------
VINSON & ELKINS L.L.P.
<PAGE> 1
EXHIBIT 10.2
[BANK OF AMERICA LOGO]
AMENDMENT TO DOCUMENTS
SUBSTITUTED FIRST AMENDMENT TO AMENDED AND RESTATED
BUSINESS LOAN AGREEMENT
(RECEIVABLES AND INVENTORY)
This Substituted First Amendment to Amended and Restated Business Loan
Agreement (Receivables and Inventory) ("First Amendment") is entered into as of
June 6, 1997, between Bank of America Texas, N.A. ("Bank") and ICO, INC.
("Borrower") and is intended to replace in all respects, the First Amendment to
Amended and Restated Business Loan Agreement executed as of June 2, 1997.
RECITALS
A. WHEREAS, Bank and Borrower have entered into that certain Amended and
Restated Business Loan Agreement (Receivables and Inventory) ("the "Agreement"),
dated February 21, 1997.
B. WHEREAS, Borrower has requested that Bank amend the Agreement to (1)
allow Borrower to issue up to $120,000,000 of unsecured, senior notes; (2)
release existing guarantors; (3) modify the leverage covenant contained in the
Agreement to allow for the issuance of the senior notes; and (4) to extend the
Availability Period to April 17, 1999; and
C. WHEREAS, Bank has agreed to the amendments requested on the terms and
conditions stated below.
CONDITIONS
THIS FIRST AMENDMENT WILL BECOME EFFECTIVE, IF AND ONLY IF, THE OFFERING OF
$120,000,000 OF SENIOR, UNSECURED NOTES CONTEMPLATED BY THE PRELIMINARY OFFERING
MEMORANDUM DESCRIBED BELOW CLOSES ON OR BEFORE JUNE 30, 1997. IF FOR ANY REASON,
THE OFFERING IS NOT CLOSED BY JUNE 30, 1997, THE LOAN AGREEMENT DATED AS OF
FEBRUARY 21, 1997 AND ALL ASSOCIATED LOAN DOCUMENTS, INCLUDING BUT NOT LIMITED
TO THE BUSINESS LOAN CONTINUING GUARANTIES DATED AS OF FEBRUARY 21, 1997, WILL
REMAIN IN FULL FORCE AND EFFECT, AS IF THIS FIRST AMENDMENT HAD NEVER BEEN
EXECUTED.
AGREED
NOW, THEREFORE, in consideration of the foregoing recitals and other
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Bank and Borrower mutually agree to amend said Agreement as
follows:
1. Paragraph 1.2(a) of the Agreement is amended and restated to read as
follows:
1.2(a) The account has resulted from the sale of goods or the
performance of services by the Borrower, or any subsidiary or affiliate of
Borrower which has executed security documents acceptable to Bank
("Pledging Subsidiary"), in the ordinary course of business.
2. The term Pledging Subsidiary, defined above, will be substituted for the
term Pledging Guarantor and the term subsidiary will be substituted for
the term guarantor throughout the Agreement.
3. In Paragraph 2.2 (Availability Period) of the Agreement, the date "April
17, 1999" is substituted for the date "April 17, 1998".
4. In Paragraph 2.4 (Repayment Terms), subparagraph (b) of the Agreement,
the date "April 17, 1999" is substituted for the date "April 17, 1998".
<PAGE> 2
5. The Business Loan Continuing Guaranties executed by each of Bayshore
Industrial, Inc., B&W Equipment Sales & Mfg., Inc., ICO Tubular
Services, Inc., ICO International, Inc., Permian Enterprises, Inc., FIS
Acquisition Corp., Polymer Service, Inc., Polymer Service of Indiana,
Inc. and RJD Acquisition Corp. are hereby released. The Bank has not
granted or conveyed to any other person any rights or benefits under any
of such Business Loan Continuing Guaranties and such Business Loan
Continuing Guaranties constitute the only guaranties executed by
subsidiaries of the Borrower in connection with the Agreement still in
effect on the date of execution of this First Amendment. The text of
Paragraph 7.1(e) (Guaranties) of the Agreement is deleted in its
entirety and the sentence "This paragraph has been intentionally
deleted." is substituted for the deleted text.
6. New Paragraph 9.2(f) (Financial Information) is added to the Agreement
to read as follows:
(f) Within 45 days of each quarter end, to provide a listing of all
credit available or outstanding to the Borrower or any of Borrower's
subsidiaries guaranteed by the Borrower.
7. In Paragraph 9.4 (Total Liabilities to Tangible Net Worth Ratio) of the
Agreement is deleted and new paragraph 9.4 is added to the Agreement to
read as follows:
9.4 TOTAL DEBT TO CAPITALIZATION RATIO. To maintain, on a
consolidated basis, a ratio of all obligations and liabilities of Borrower
and its subsidiaries, including: (i) liabilities for money borrowed
evidenced by bills, notes, acceptances, letters of credit, bonds or similar
evidence of debt which are actually funded (or issued in the case of
acceptances or letters of credit), (ii) all obligations in respect of any
guaranty or contingent liability which is due or has matured, and (iii) all
obligations in respect of any capital lease ("Total Debt"), to Total Debt
plus net worth (as determined in accordance with GAAP) of less than or
equal to 55%.
8. A new Paragraph 9.6(f) is added to the Agreement to read as follows:
(f) The issuance by Borrower of up to $120,000,000 of senior,
unsecured notes bearing interest at no more than 11% per annum, provided
that any terms of issuance and repayment of the senior notes which differ
in any material respect from those outlined in the Preliminary Offering
Memorandum provided by Borrower to Bank, date stamped May 16, 1997, are
approved by Bank and provided that no discretionary payments nor optional
redemption payments to the holders of the senior notes may be made, nor
liens fixed on Borrower's or any Pledging Subsidiary's assets including
subordinate liens fixed on collateral owned by Borrower or any Pledging
Subsidiary securing Borrower's obligations to Bank, without the written
consent of the Bank.
9. Paragraph 9.7 of the Agreement is amended and restated to read as
follows:
9.7 OTHER LIENS. That neither the Borrower nor any subsidiary shall
create, assume, or allow any security interest or lien (including judicial
liens) on property the Borrower or any subsidiary now or later owns,
except:
(a) Deeds of trust and security agreements in favor of the Bank.
(b) Liens for taxes not yet due on Borrower's property other than the
Personal Property Collateral.
(c) Additional liens which secure obligations in a total principal
amount not exceeding One Million and No/100 Dollars ($1,000,000.00) on
Borrower's property other than the Personal Property Collateral.
(d) Liens in existence prior to the date of this Agreement on
Borrower's property other than the Personal Property Collateral.
(e) Statutory liens of mechanics, materialmen, landlords, employees,
carriers, shippers and warehousemen for services or materials for which
payment is not yet due on Borrower's property other than the Personal
Property Collateral.
(f) Liens incurred or deposits made in the ordinary course of business
in connection with worker's compensation, unemployment insurance and other
types of social security on Borrower's property other than the Personal
Property Collateral.
<PAGE> 3
10. Paragraph 9.17(e) of the Agreement is amended and restated to read as
follows:
(e) acquire or purchase a business or its assets whether by
acquisition or merger, unless (a) the entity being acquired is in a similar
business; (b) the acquisition is not considered hostile; (c) no event of
default exists prior to or as a result of the acquisition; and (d)
Borrower's acquisitions in combination with those of any of Borrower's
subsidiaries for any single calendar year do not entail cash consideration
exceeding 25% of the Borrower's net worth and any single acquisition does
not entail cash consideration exceeding 10% of Borrower's net worth.
11. A new paragraph 11.13 (Change of Control) is added to read as follows:
11.13 CHANGE OF CONTROL. The occurrence of any of the following: (a) the
sale, lease, transfer, conveyance or other disposition, in one or a series of
related transactions, directly or indirectly, of all or substantially all of the
assets of Borrower of the Pledging Subsidiaries to any Person (as defined in the
Preliminary Offering Memorandum) or group (as such term is defined in Section
13(d) and 14(d) of the Securities and Exchange Act of 1934, as amended, or as
supplemented by rules promulgated pursuant thereto ["Exchange Act"]), (b) the
adoption of a plan relating to the liquidation or dissolution of Borrower or any
of the Pledging Subsidiaries, (c) any Person or group is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 of the Exchange Act,
except that a Person will be deemed to have beneficial ownership of all shares
that any such Person has the right to acquire, whether the right is exercisable
immediately or after the passage of time), directly or indirectly, of more than
50% of the total voting power of any class of the stock of the Borrower entitled
to vote, including by way of merger, consolidation or otherwise, or (d) the
first day on which a majority of the members of the Board of Directors, as that
term is defined in the Preliminary Offering Memorandum, of the Borrower are not
Continuing Directors, as that term is defined in the Preliminary Offering
Memorandum.
The First Amendment will become effective as of the date first written
above, provided that each of the following conditions precedent have been
satisfied in a manner satisfactory to Bank:
The Bank has received from the Borrower a duly executed original of
this First Amendment.
Except as provided in the First Amendment, all of the terms and provisions of
the Agreement and the documents executed in connection therewith shall remain in
full force and effect. All references in such other documents to the Agreement
shall hereafter be deemed to be references to the Agreement as amended hereby.
THIS WRITTEN FIRST AMENDMENT AND THE DOCUMENTS EXECUTED IN CONNECTION HEREWITH
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES.
IN WITNESS WHEREOF, this First Amendment has been executed by the parties hereto
as of the date first written above.
BANK OF AMERICA TEXAS, N.A.
By: /s/ KIRK SWEET
----------------------------------
Kirk Sweet, Senior Vice President
ICO, INC.
By: /s/ JON C. BIRO
----------------------------------
Jon C. Biro, Senior Vice President
and Treasurer
<PAGE> 1
EXHIBIT 12.0
ICO, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
SIX MONTHS
FISCAL YEAR ENDED SEPTEMBER 30, ENDED MARCH 31,
---------------------------------------------------- -------------------
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings
Income (loss) before income
taxes and extraordinary
items..................... $ (462) $(2,001) $2,651 $6,357 $(1,692) $3,458 $5,806
Undistributed income in joint
ventures.................. -- -- -- -- 80 -- 15
------ ------- ------ ------ ------- ------ ------
Total Earnings
(Loss)............. (462) (2,001) 2,651 6,357 (1,772) 3,458 5,791
------ ------- ------ ------ ------- ------ ------
Fixed Charges
Interest expense............. 741 2,414 471 117 669 43 767
Portion of rental expense
which relates to
interest.................. 279 523 502 536 590 268 373
------ ------- ------ ------ ------- ------ ------
Total fixed
charges............ 1,020 2,937 973 653 1,259 311 1,140
------ ------- ------ ------ ------- ------ ------
Earnings (Loss) before income
taxes, extraordinary items,
undistributed income in joint
ventures and fixed charges... $ 558 $ 936 $3,624 $7,010 $ (513) $3,769 $6,931
====== ======= ====== ====== ======= ====== ======
Ratio of earnings to fixed
charges(1)................... -- -- 3.7x 10.7x -- 12.1x 6.1x
====== ======= ====== ====== ======= ====== ======
</TABLE>
- ---------------
(1) As a result of incurring a net loss for the fiscal years ended September 30,
1992, 1993 and 1996, earnings did not cover fixed charges by $462,000,
$2,001,000 and $1,772,000, respectively.
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
ICO Tubular Services, Inc.
(Formerly Baker Hughes Tubular Services, Inc.)
Permian Enterprises, Inc.
Frontier Inspection Services, Inc.
Shearer Supply Ltd.
The Innovation Company, S.A. de C.V.
B&W Equipment Sales and Mfg., Inc.
RJD Corporation
Wedco Technology, Inc.
Wedco, Inc.
Wedco Manufacturing Systems, Inc.
Tri-Delta Technology, Inc.
Wedco A.G. (Switzerland)
Wedco Sales, Inc.
Wedco Design & Development, Inc.
Polymer Services, Inc.
Polymer Services of Indiana, Inc.
Bayshore Industrial, Inc.
ICO Europe B.V.
Wedco Holland B.V.
Wedco Technology U.K. Ltd.
Willoughby Engineering and Development Corporation A.B.
Rotec Chemicals Ltd.
Micronyl -- Wedco S.A.
Wedco Italy Srl
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-4 of ICO, Inc. of our
report dated December 20, 1996 appearing on page F-2 of ICO, Inc.'s Annual
Report on Form 10-K for the year ended September 30, 1996. We also consent to
the references to us under the headings "Experts" and "Selected Historical
Financial Data" in such Prospectus. However, it should be noted that Price
Waterhouse LLP has not prepared or certified such "Selected Historical Financial
Data."
/s/ PRICE WATERHOUSE LLP
Houston, Texas
June 17, 1997
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 of
our report, dated June 25, 1996, on our audits of the consolidated financial
statements of Wedco Technology, Inc. as of March 31, 1996 and 1995, and for the
years ended March 31, 1996, 1995 and 1994. We also consent to the reference to
our Firm under the caption "Experts" in such registration statement.
/s/ COOPERS AND LYBRAND L.L.P.
Princeton, New Jersey
June 16, 1997
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We have issued our report dated March 20, 1997 (except for Note
28 -- Subsequent Event as to which the date is April 29, 1997) accompanying the
financial statements of Rotec Chemicals Limited for the year ended December 31,
1996 included in form 8-K (File No. 001-08327, effective May 12, 1997) of ICO
Inc. which is incorporated by reference in this registration statement. We
consent to the incorporation by reference in the Registration Statement of the
aforementioned report and to the use of our name as it appears under the caption
"Experts."
/s/ GRANT THORNTON
Kettering, United Kingdom
June 16, 1997
<PAGE> 1
EXHIBIT 25.1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
FORM T-1
--------------------------
STATEMENT OF ELIGIBILITY AND QUALIFICATION 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)
FLEET NATIONAL BANK
----------------------------------------------------------
(Exact name of trustee as specified in its charter)
Not applicable 06-0850628
---------------------------- ------------------
(State of incorporation if (I.R.S. Employer
not a national bank) Identification No.)
777 Main Street, Hartford, Connecticut 06115
---------------------------------------------------
(Address of principal executive offices) (Zip Code)
Patricia Beaudry, 777 Main Street, Hartford, CT (860) 728-2065
------------------------------------------------------------------
(Name, address and telephone number of agent for service)
ICO, Inc.
------------------------------------------------------------------
(Exact name of obligor as specified in its charter)
Texas 75-1619554
- ------------------------------- ------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11490 Westheimer, Suite 1000
------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
10 3/8% Senior Notes Due 2007
------------------------------------------------------------------
(Title of the indenture securities)
<PAGE> 2
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject:
The Comptroller of the Currency,
Washington, D.C.
Federal Reserve Bank of Boston
Boston, Massachusetts
Federal Deposit Insurance Corporation
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers:
The trustee is so authorized.
Item 2. Affiliations with obligor. If the obligor is an affiliate of
the trustee, describe each such affiliation.
None with respect to the trustee; none with respect to Fleet
Financial Group, Inc. and its affiliates (the "affiliates").
Item 16. List of exhibits. List below all exhibits filed as a part of
this statement of eligibility and qualification.
1. A copy of the Articles of Association of the trustee as
now in effect.
2. A copy of the Certificate of Authority of the trustee
to do Business and the Certification of Fiduciary Powers.
3. A copy of the By-laws of the trustee as now in effect.
4. Consent of the trustee required by Section 321(b) of
the Act.
5. A copy of the latest Consolidated Report of Condition
and Income of the trustee, published pursuant to law or the requirements
of its supervising or examining authority.
<PAGE> 3
NOTES
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
trustee of all facts on which to base its answer to Item 2, the answer to said
Item is based upon incomplete information. Said Item may, however, be
considered correct unless amended by an amendment to this Form T-1.
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, Fleet National Bank, a national banking association organized and
existing under the laws of the United States, has duly caused this statement of
eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of Hartford, and State of
Connecticut, on the 16th day of June, 1997.
FLEET NATIONAL BANK,
Trustee
By /s/ DENNIS FISHER
-------------------------------------
Name: Dennis Fisher
Title: Assistant Vice President
<PAGE> 5
EXHIBIT 1
ARTICLES OF ASSOCIATION
OF
FLEET NATIONAL BANK
FIRST. The title of this Association, which shall carry on the business of
banking under the laws of the United States, shall be "Fleet National Bank."
SECOND. The main office of the Association shall be in Springfield, Hampden
County Commonwealth of Massachusetts. The general business of the Association
shall be conducted at its main office and its branches.
THIRD. The board of directors of this Association shall consist of not less
than five (5) nor more than twenty-five (25) shareholders, the exact number of
directors within such minimum and maximum limits to be fixed and determined
from time to time by resolution of a majority of the full board of directors or
by resolution of the shareholders at any annual or special meeting thereof.
Unless otherwise provided by the laws of the United States, any vacancy in the
board of directors for any reason, including an increase in the number thereof,
may be filled by action of the board of directors.
FOURTH. The annual meeting of the shareholders for the election of directors
and the transaction of whatever other business may be brought before said
meeting shall be held at the main office or such other place as the board of
directors may designate, on the day of each year specified therefore in the
bylaws, but if no election is held on that day, it may be held on any
subsequent day according to the provisions of law; and all elections shall be
held according to such lawful regulations as may be prescribed by the board of
directors.
FIFTH. The authorized amount of capital stock of this Association shall be
eight million five hundred thousand (8,500,000) shares of which three million
five hundred thousand (3,500,000) shares shall be common stock with a
par value of six and 25/100 dollars ($6.25) each, and of which five million
(5,000,000) shares without par value shall be preferred stock. The capital
stock may be increased or decreased from time to time, in accordance with
the provisions of the laws of the United States.
No holder of shares of the capital stock of any class of the Association shall
have any pre-emptive or preferential right of subscription to any shares of any
class of stock of the Association, whether now or hereafter authorized, or to
any obligations convertible into stock of the Association, issued or sold, nor
any right of subscription to any thereof other than such, if any, as the board
of directors, in its discretion, may from time to time determine and at such
price as the board of directors may from time to time fix.
<PAGE> 6
The board of directors of the Association is authorized, subject to limitations
prescribed by law and the provisions of this Article, to provide for the
issuance from time to time in one or more series of any number of the preferred
shares, and to establish the number of shares be included in each series, and
to fix the designation, relative rights, preferences, qualifications and
limitations of the shares of each such series. The authority of the board of
directors with respect to each series shall include, but not be limited to,
determination of the following:
a. The number of shares constituting that series and the distinctive
designation of that series;
b. The dividend rate on the shares of that series, whether dividends shall be
cumulative, and, if so, from which date or dates, and whether they shall be
payable in preference to, or in another relation to, the dividends payable
to any other class or classes or series of stock;
c. Whether that series shall have voting rights, in addition to the voting
rights provided by law, and, if so, the terms of such voting rights;
d. Whether that series shall have conversion or exchange privileges, and,
if so, the terms and conditions of such conversion or exchange, including
provision for the adjustment of the conversion or exchange rate in such
events as the board of directors shall determine;
e. Whether or not the shares of that series shall be redeemable, and, if so,
the terms and conditions of such redemption, including the manner of
selecting shares for redemption if less than all shares are to be redeemed,
the date or dates upon or after which they shall be redeemable, and the
amount per share payable in case of redemption, which amount may vary under
different conditions and at different redemption dates;
f. Whether that series shall be entitled to the benefit of a sinking fund to
be applied to the purchase or redemption of shares of that series, and, if
so, the terms and amounts of such sinking fund;
g. The right of the shares of that series to the benefit of conditions and
restrictions upon the creation of indebtedness of the Association or any
subsidiary, upon the issue of any additional stock (including additional
shares of such series or of any other series) and upon the payment of
dividends or the making of other distributions on, and the purchase,
redemption or other acquisition by the Association or any subsidiary of
any outstanding stock of the Association;
h. The right of the shares of that series in the event of voluntary or
involuntary liquidation, dissolution or winding up of the Association and
whether such rights shall be in preference to, or in another relation to,
the comparable rights of any other class or classes or series of stock; and
i. Any other relative, participating, optional or other special rights,
qualifications, limitations or restrictions of that series.
Shares of any series of preferred stock which have been redeemed (whether
through the operation of a sinking fund or otherwise) or which, if convertible
or exchangeable, have been converted into or exchanged for shares of stock of
any other class or classes shall have the status of authorized and unissued
shares of preferred stock of the same series and may be reissued as a part of
the series of which they were originally a part or may be reclassified and
reissued as part of a new series of preferred stock to be created by resolution
or resolutions of the board of directors or as part of any other series or
preferred stock, all subject to the conditions and the restrictions adopted by
the board of directors providing for the issue of any series of preferred
stock and by the provisions of any applicable law.
Subject to the provisions of any applicable law, or except as otherwise
provided by the resolution or resolutions providing for the issue of any series
of preferred stock, the holders of outstanding shares of common stock shall
exclusively possess voting power for the election of directors and for all
purposes, each holder of record of shares of common stock being entitled to one
vote for each share of common stock standing in his name on the books of the
Association.
Except as otherwise provided by the resolution or resolutions providing for the
issue of any series of preferred stock, after payment shall have been made to
the holders of preferred stock of the full amount of dividends to which they
shall be entitled pursuant to the resolution or resolutions providing for the
issue of any other series of preferred stock, the holders of common stock shall
be entitled, to the exclusion of the holders of preferred stock of any and all
series, to receive such dividends as from time to time may be declared by the
board of directors.
Except as otherwise provided by the resolution or resolutions for the issue
of any series of preferred stock, in the event of any liquidation, dissolution
or winding up of the Association, whether voluntary or involuntary, after
payment shall have been made to the holders of preferred stock of the full
amount to which they shall be entitled pursuant to the resolution or
resolutions providing for the issue of any series of preferred stock the
holders of common stock shall be entitled, to the exclusion of the holders of
preferred stock of any and all series, to share, ratable according to the
number of shares of common stock held by them, in all remaining assets of the
Association available for distribution to its shareholders.
The number of authorized shares of any class may be increased or decreased by
the affirmative vote of the holders of a majority of the stock of the
Association entitled to vote.
<PAGE> 7
SIXTH. The board of directors shall appoint one of its members president of
this Association, who shall be chairman of the board, unless the board appoints
another director to be the chairman. The board of directors shall have the
power to appoint one or more vice presidents; and to appoint a secretary and
such other officers and employees as may be required to transact the business
of this Association.
The board of directors shall have the power to define the duties of the
officers and employees of the Association; to fix the salaries to be paid to
them; to dismiss them; to require bonds from them and to fix the penalty
thereof; to regulate the manner in which any increase of the capital of the
Association shall be made; to manage and administer the business and affairs of
the Association; to make all bylaws that it may be lawful for them to make; and
generally to do and perform all acts that it may be legal for a board of
directors to do and perform.
SEVENTH. The board of directors shall have the power to change the location of
the main office to any other place within the limits of the City of Hartford,
Connecticut, without the approval of the shareholders but subject to the
approval of the Comptroller of the Currency; and shall have the power to
establish or change the location of any branch or branches of the Association
to any other location, without the approval of the shareholders but subject to
the approval of the Comptroller of the Currency.
EIGHTH. The corporate existence of this Association shall continue until
terminated in accordance with the laws of the United States.
NINTH. The board of directors of this Association, or any three or more
shareholders owning, in the aggregate, not less than ten percent (10%) of the
stock of this Association, may call a special meeting of shareholders at any
time. Unless otherwise provided by the laws of the United States, a notice of
the time, place and purpose of every annual and special meeting of the
shareholders shall be given by first class mail, postage prepaid, mailed at
least ten (10) days prior to the date of such meeting to each shareholder of
record at his address as shown upon the books of this Association.
TENTH. (a) Right to Indemnification. Each person who was or is made 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 (hereinafter a "proceeding"), by reason of the fact that he or
she is or was a director, officer or employee of the Association or is or was
serving at the request of the Association as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, limited
liability company, trust, or other enterprise, including service with respect
to an employee benefit plan, shall be indemnified and held harmless by the
Association to the fullest extent authorized by the law of the state in which
the Association's ultimate parent company is incorporated, except as provided
in subsection (b). The aforesaid indemnity shall protect the indemnified
person against all expense, liability and loss (including attorney's fees,
judgements, fines ERISA excise taxes or penalties, and amounts paid in
settlement) reasonably incurred by such person in connection with such a
proceeding. Such indemnification shall continue as to a person who has ceased
to be a director, officer or employee and shall inure to the benefit of his or
her heirs, executors, and administrators, but shall only cover such person's
period of service with the Association. The Association may, by action of its
Board of Directors, grant rights to indemnification to agents of the
Association and to any director, officer, employee or agent of any of its
subsidiaries with the same scope and effect as the foregoing indemnification
of directors and officers.
(b) Restrictions on Indemnification. Notwithstanding the foregoing, (i) no
person shall be indemnified hereunder by the Association against expenses,
penalties, or other payments incurred in an administrative proceeding or action
instituted by a federal bank regulatory agency which proceeding or action
results in a final order assessing civil money penalties against that person,
requiring affirmative action by that person in the form of payments to the
Association, or removing or prohibiting that person from service with the
Association, and any advancement of expenses to that person in that proceeding
must be repaid; and (ii) no person shall be indemnified hereunder by the
Association and no advancement of expenses shall be made to any person
hereunder to the extent such indemnification or advancement of expenses would
violate or conflict with any applicable federal statute now or hereafter in
force or any applicable final regulation or interpretation now or hereafter
adopted by the Office of the Comptroller of the Currency ("OCC") or the Federal
Deposit Insurance Corporation ("FDIC"). The Association shall comply with any
requirements imposed on it by any such statue or regulation in connection with
any indemnification or advancement of expenses hereunder by the Association.
With respect to proceedings to enforce a claimant's rights to indemnification,
the Association shall indemnify any such claimant in connection with such a
proceeding only as provided in subsection (d) hereof.
(c) Advancement of Expenses. The conditional right to indemnification
conferred in this section shall be a contract right and shall include the
right to be paid by the Association the reasonable expenses (including
attorney's fees) incurred in defending a proceeding in advance of its final
disposition (an "advancement of expenses"); provided, however, that an
advancement of expenses shall be made only upon (i) delivery to the Association
of a binding written undertaking by or on behalf of the person receiving the
advancement to repay all amounts so advanced if it is ultimately determined
that such person is not entitled to be indemnified in such proceeding,
including if such proceeding results in a final order assessing civil money
penalties against that person, requiring affirmative action by that person
in the form of payments to the Association, or removing or prohibiting that
person from service with the Association, and (ii) compliance with any other
actions or determinations required by applicable law, regulation or OCC or FDIC
interpretation to be taken or made by the Board of Directors of the Association
<PAGE> 8
or other persons prior to an advancement of expenses. The Association shall
cease advancing expenses at any time its Board of Directors believes that any
of the prerequisites for advancement of expenses are no longer being met.
(d) Right of Claimant to Bring Suit. If a claim under subsection (a) of the
section is not paid in full by the Association within thirty (30) days after
written claim has been received by the Association, the claimant may at any time
thereafter bring suit against the Association 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 Association to recover an advancement of expenses pursuant
to the terms of an undertaking, the claimant shall be entitled to be paid also
the expense of prosecuting or defending such claim. It shall be a defense to
any such action brought by the claimant to enforce a right to indemnification
hereunder (other than an action brought to enforce a claim for an advancement
of expenses where the required undertaking, if any, has been tendered to the
Association) that the claimant has not met any applicable standard for
indemnification under the law of the state in which the Association's ultimate
parent company is incorporated. In any suit brought by the Association to
recover an advancement of expenses pursuant to the terms of an undertaking, the
Association shall be entitled to recover such expenses upon a final
adjudication that the claimant has not met any applicable standard for
indemnification standard for indemnification under the law of the state in
which the Association's ultimate parent company is incorporated.
(e) Non-Exclusivity of Rights. The rights to indemnification and the
advancement of expenses conferred in this section shall not be exclusive of any
other right which any person may have or hereafter acquired under any statute,
agreement, vote of stockholders or disinterested directors or otherwise.
(f) Insurance. The Association may purchase, maintain, and make payment or
reimbursement for reasonable premiums on, insurance to protect itself and any
director, officer, employee or agent of the Association or another corporation,
partnership, joint venture, trust or other enterprise against any expense,
liability or loss, whether or not the Association would have the power to
indemnify such person against such expense, liability or loss under the law of
the state in which the Association's ultimate parent company is incorporated;
provided however, that such insurance shall explicitly exclude insurance
coverage for a final order of a federal bank regulatory agency assessing civil
money penalties against an Association director, officer, employee or agent.
ELEVENTH. These articles of association may be amended at any regular or
special meeting of the shareholders by the affirmative vote of the holders of a
majority of the stock of this Association, unless the vote of the holders of
greater amount of stock is required by law, and in that case by the vote of the
holders of such greater amount. The notice of any shareholders' meeting at
which an amendment to the articles of association of this Association is to be
considered shall be given as hereinabove set forth.
I hereby certify that the articles of association of this Association, in their
entirety, are listed above in items first through eleventh.
Secretary/Assistant Secretary
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Dated at , as of .
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Revision of February 15, 1996
<PAGE> 9
EXHIBIT 2
AMENDED AND RESTATED BY-LAWS OF
FLEET NATIONAL BANK
ARTICLE I
MEETINGS OF SHAREHOLDERS
Section 1. Annual Meeting. The regular annual meeting of the shareholders for
the election of Directors and the transaction of any other business that may
properly come before the meeting shall be held at the Main Office of the
Association, or such other place as the Board of Directors may designate, on
the fourth Thursday of April in each year at 1:15 o'clock in the afternoon
unless some other hour of such day is fixed by the Board of Directors.
If, from any cause, an election of Directors is not made on such day, the Board
of Directors shall order the election to be held on some subsequent day, of
which special notice shall be given in accordance with the provisions of law,
and of these bylaws.
Section 2. Special Meetings. Special meetings of the shareholders may be called
at any time by the Board of Directors, the President, or any shareholders
owning not less than twenty-five percent (25%) of the stock of the Association.
Section 3. Notice of Meetings of Shareholders. Except as otherwise provided
by law, notice of the time and place of annual or special meetings of the
shareholders shall be mailed, postage prepaid, at least ten (10) days before
the date of the meeting to each shareholder of record entitled to vote thereat
at his address as shown upon the books of the Association; but any failure to
mail such notice to any shareholder or any irregularity therein, shall not
affect the validity of such meeting or of any of the proceedings thereat.
Notice of a special meeting shall also state the purpose of the meeting.
Section 4. Quorum; Adjourned Meetings. Unless otherwise provided by law, a
quorum for the transaction of business at every meeting of the shareholders
shall consist of not less than two-fifths (2/5) of the outstanding capital
stock represented in person or by proxy; less than such quorum may adjourn the
meeting to a future time. No notice need be given of an adjourned annual or
special meeting of the shareholders if the adjournment be to a definite place
and time.
Section 5. Votes and Proxies. At every meeting of the shareholders, each
share of the capital stock shall be entitled to one vote except as otherwise
provided by law. A majority of the votes cast shall decide every question
or matter submitted to the shareholder at any meeting, unless otherwise
provided by law or by the Articles of Association or these By-laws. Share-
holders may vote by proxies duly authorized in writing and filed with the
Cashier, but no officer, clerk, teller or bookkeeper of the Association may act
as a proxy.
<PAGE> 10
Section 6. Nominations to Board of Directors. At any meeting of shareholders
held for the election of Directors, nominations for election to the Board of
Directors may be made, subject to the provisions of this section, by any share-
holder of record of any outstanding class of stock of the Association entitled
to vote for the election of Directors. No person other than those whose names
are stated as proposed nominees in the proxy statement accompanying the notice
of the meeting may be nominated as such meeting unless a shareholder shall have
given to the President of the Association and to the Comptroller of the
Currency, Washington, DC written notice of intention to nominate such other
person mailed by certified mail or delivered not less than fourteen (14) days
nor more than fifty (50) days prior to the meeting of shareholders at which
such nomination is to be made; provided, however, that if less than twenty-one
(21) days' notice of such meeting is given to shareholders, such notice of
intention to nominate shall be mailed by certified mail or delivered to said
President and said Comptroller on or before the seventh day following the day
on which the notice of such meeting was mailed. Such notice of intention to
nominate shall contain the following information to the extent known to the
notifying shareholder: (a) the name and address of each proposed nominee; (b)
the principal occupation of each proposed nominee; (c) the total number of
shares of capital stock of the Association that will be voted for each proposed
nominee; (d) the name and residence address of the notifying shareholder; and
(e) the number of shares of capital stock of the Association owned by the
notifying shareholder. In the event such notice is given, the proposed nominee
may be nominated either by the shareholder giving such notice or by any other
shareholder present at the meeting at which such nomination is to be made.
Such notice may contain the names of more than one proposed nominee, and if
more than one is named, any one or more of those named may be nominated.
Section 7. Action Taken Without a Shareholder Meeting. Any action requiring
shareholder approval or consent may be taken without a meeting and without
notice of such meeting by written consent of the shareholders.
ARTICLE II
DIRECTORS
Section 1. Number. The Board of Directors shall consist of such number of
shareholders, not less than five (5) nor more than twenty-five (25), as from
time to time shall be determined by a majority of the votes to which all of its
shareholders are at the time entitled, or by the Board of Directors as
hereinafter provided.
Section 2. Mandatory Retirement for Directors. No person shall be elected a
director who has attained the age of 68 and no person shall continue to serve
as a director after the date of the first meeting of the stockholders of the
Association held on or after the date on which such person attains the age of
68; provided, however, that any director serving on the Board as of December
15, 1995 who has attained the age of 65 on or prior to such date shall be
permitted to continue to serve as a director until the date of the first
meeting of the stockholders of the Association held on or after the date on
which such person attains the age of 70.
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<PAGE> 11
Section 3. General Powers. The Board of Directors shall exercise all the
corporate powers of the Association, except as expressly limited by law, and
shall have the control, management, direction and disposition of all its
property and affairs.
Section 4. Annual Meeting. Immediately following a meeting of shareholders
held for the election of Directors, the Cashier shall notify the directors-
elect who may be present of their election and they shall then hold a meeting
at the Main Office of the Association, or such other place as the Board of
Directors may designate, for the purpose of taking their oaths, organizing the
new Board, electing officers and transacting any other business that may come
before such meeting.
Section 5. Regular Meeting. Regular meetings of the Board of Directors shall
be held without notice at the Main Office of the Association, or such other
place as the Board of Directors may designate, at such dates and times as the
Board shall determine. If the day designated for a regular meeting falls on a
legal holiday, the meeting shall be held on the next business day.
Section 6. Special Meetings. A special meeting of the Board of Directors may
be called at anytime upon the written request of the Chairman of the Board, the
President, or of two Directors, stating the purpose of the meeting. Notice of
the time and place shall be given not later than the day before the date of the
meeting, by mailing a notice to each Director at his last known address, by
delivering such notice to him personally, or by telephoning.
Section 7. Quorum; Votes. A majority of the Board of Directors at the time
holding office shall constitute a quorum for the transaction of all business,
except when otherwise provided by law, but less than a quorum may adjourn
a meeting from time to time, and the meeting may be held, as adjourned, without
further notice. If a quorum is present when a vote is taken, the affirmative
vote of a majority of Directors present is the act of the Board of Directors.
Section 8. Action by Directors Without a Meeting. Any action requiring
Director approval or consent may be taken without a meeting and without notice
of such meeting by written consent of all the Directors.
Section 9. Telephonic Participation in Directors' Meetings. A Director or
member of a Committee of the Board of Directors may participate in a meeting of
the Board or of such Committee may participate in a meeting of the Board or of
such Committee by means of a conference telephone or similar communications
equipment enabling all Directors participating in the meeting to hear one
another, and participation in such a meeting shall constitute presence in person
at such a meeting.
Section 10. Vacancies. Vacancies in the Board of Directors may be filled by
the remaining members of the Board at any regular or special meeting of the
Board.
Section 11. Interim Appointments. The Board of Directors shall, if the share-
holders at any meeting for the election of Directors have determined a number
of Directors less than twenty-five (25), have the power, by affirmative vote of
the majority of all the Directors, to increase such number of Directors to not
more than twenty-five (25) and to elect Directors to fill the resulting
vacancies and to serve until the next annual meeting of shareholders or the
next election of Directors; provided, however, that the number of Directors
shall not be so increased by more than two (2) if the number last determined
by shareholders was fifteen (15) or less, or increased by more than four (4) if
the number last determined by shareholders was sixteen (16) or more.
Section 12. Fees. The Board of Directors shall fix the amount and direct the
payment of fees which shall be paid to each Director for attendance at any
meeting of the Board of Directors or of any Committees of the Board.
ARTICLE III
COMMITTEES OF THE BOARD
Section 1. Executive Committee. The Board of Directors shall appoint from its
members an Executive Committee which shall consist of such number of persons as
the Board of Directors shall determine; the Chairman of the Board and the
President shall be members ex-officio of the Executive Committee with full
voting power. The Chairman of the Board or the President may from time to time
appoint from the Board of Directors as temporary additional members of the
Executive Committee, with full voting powers, not more than two members to serve
for such periods as the Chairman of the Board or the President may determine.
The Board of Directors shall designate a member of the Executive Committee to
serve as Chairman thereof. A meeting of the Executive Committee may be called
at any time upon the written request of the Chairman of the Board, the President
or the Chairman of the Executive Committee, stating the purpose of the meeting.
Not less than twenty four hours' notice of said meeting shall be given to each
member of the Committee personally, by telephoning, or by mail. The Chairman of
the Executive Committee or, in his absence, a member of the Committee chosen by
a majority of the members present shall preside at meetings of the Executive
Committee.
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<PAGE> 12
The Executive Committee shall possess and may exercise all the powers of the
Board when the Board is not in session except such as the Board, only, by law,
is authorized to exercise; it shall keep minutes of its acts and proceedings
and cause same to be presented and reported at every regular meeting and at any
special meeting of the Board including specifically, all its actions relating
to loans and discounts.
All acts done and powers and authority conferred by the Executive Committee,
from time to time, within the scope of its authority, shall be deemed to be,
and may be certified as being, the acts of and under the authority of the
Board.
Section 2. Risk Management Committee. The Board shall appoint from its
members a Risk Management Committee which shall consist of such number as the
Board shall determine. The Board shall designate a member of the Risk
Management Committee to serve as Chairman thereof. It shall be the duty of the
Risk Management Committee to (a) serve as the channel of communication with
management and the Board of Directors of Fleet Financial Group, Inc. to assure
that formal processes supported by management information systems are in place
for the identification, evaluation and management of significant risks inherent
in or associated with lending activities, the loan portfolio, asset-liability
management, the investment portfolio, trust and investment advisory activities,
the sale of nondeposit investment products and new products and services and
such additional activities or functions as the Board may determine from time
to time; (b) assure the formulation and adoption of policies approved by the
Risk Management Committee or Board governing lending activities, management of
the loan portfolio, the maintenance of an adequate allowance for loan and lease
losses, asset-liability management, the investment portfolio, the retail
sale of non-deposit investment products, new products and services and such
additional activities or functions as the Board may determine from time to time
(c) assure that a comprehensive independent loan review program is in place for
the early detection of problem loans and review significant reports of the loan
review department, management's responses to those reports and the risk
attributed to unresolved issues; (d) subject to control of the Board, exercise
general supervision over trust activities, the investment of trust funds, the
disposition of trust investments and the acceptance of new trusts and the terms
of such acceptance, and (e) perform such additional duties and exercise such
additional powers of the Board as the Board may determine from time to time.
Section 3. Audit Committee. The Board shall appoint from its members and
Audit Committee which shall consist of such number as the Board shall determine
no one of whom shall be an active officer or employee of the Association or
Fleet Financial Group, Inc. or any of its affiliates. In addition, members of
the Audit Committee must not (i) have served as an officer or employee of the
Association or any of its affiliates at any time during the year prior to their
appointment; or (ii) own, control, or have owned or controlled at any time
during the year prior to appointment, ten percent (10%) or more of any
outstanding class of voting securities of the Association. At least two (2)
members of the Audit Committee must have significant executive, professional,
educational or regulatory experience in financial, auditing, accounting,
or banking matters. No member of the Audit Committee may have significant
direct or indirect credit or other relationships with the Association, the
termination of which would materially adversely affect the Association's
financial condition or results of operations.
The Board shall designate a member of the Audit Committee to serve as Chairman
thereof. It shall be the duty of the Audit Committee to (a) cause a continuous
audit and examination to be made on its behalf into the affairs of the
Association and to review the results of such examination; (b) review
significant reports of the internal auditing department, management's responses
to those reports and the risk attributed to unresolved issues; (c) review the
basis for the reports issued under Section 112 of The Federal Deposit Insurance
Corporation Improvement Act of 1991; (d) consider, in consultation with the
independent auditor and an internal auditing executive, the adequacy of the
Association's internal controls, including the resolution of identified material
weakness and reportable conditions; (e) review regulatory communications
received from any federal or state agency with supervisory jurisdiction or
other examining authority and monitor any needed corrective action by
management; (f) ensure that a formal system of internal controls is in place
for maintaining compliance with laws and regulations; (g) cause an audit of the
Trust Department at least once during each calendar year and within 15 months
of the last such audit or, in lieu thereof, adopt a continuous audit system and
report to the Board each calendar year and within 15 months of the previous
report on the performance of such audit function; and (h) perform such
additional duties and exercise such additional powers of the Board as the Board
may determine from time to time.
The Audit Committee may consult with internal counsel and retain its own
outside counsel without approval (prior or otherwise) from the Board or
management and obligate the Association to pay the fees of such counsel.
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<PAGE> 13
Section 4. Community Affairs Committee. The Board shall appoint from its
members a Community Affairs Committee which shall consist of such number as the
Board shall determine. The Board shall designate a member of the Community
Affairs Committee to serve as Chairman thereof. It shall be the duty of the
Community Affairs Committee to (a) oversee compliance by the Association with
the Community Reinvestment Act of 1977, as amended, and the regulations
promulgated thereunder; and (b) perform such additional duties and exercise such
additional powers of the Board as the Board may determine from time to time.
Section 5. Regular Meetings. Except for the Executive Committee which shall
meet on an ad hoc basis as set forth in Section 1 of this Article, regular
meetings of the Committees of the Board of Directors shall be held, without
notice, at such time and place as the Committee or the Board of Directors may
appoint and as often as the business of the Association may require.
Section 6. Special Meetings. A Special Meeting of any of the Committees of
the Board of Directors may be called upon the written request of the Chairman
of the Board or the President, or of any two members of the respective
Committee, stating the purpose of the meeting. Not less than twenty-four
hours' notice of such special meeting shall be given to each member of the
Committee personally, by telephoning, or by mail.
Section 7. Emergency Meetings. An Emergency Meeting of any of the Committees
of the Board of Directors may be called at the request of the Chairman of the
Board or the President, who shall state that an emergency exists, upon not
less than one hour's notice to each member of the Committee personally or by
telephoning.
Section 8. Action Taken Without a Committee Meeting. Any Committee of the
Board of Directors may take action without a meeting and without notice of such
meeting by resolution assented to in writing by all members of such Committee.
Section 9. Quorum. A majority of a Committee of the Board of Directors shall
constitute a quorum for the transaction of any business at any meeting of such
Committee. If a quorum is not available, the Chairman of the Board or the
President shall have power to make temporary appointments to a Committee of-
members of the Board of Directors, to act in the place and stead of members who
temporarily cannot attend any such meeting; provided, however, that any
temporary appointment to the Audit Committee must meet the requirements for
members of that Committee set forth in Section 3 of this Article.
Section 10. Record. The committees of the Board of Directors shall keep a
record of their respective meetings and proceedings which shall be presented
at the regular meeting of the Board of Directors held in the calendar month
next following the meetings of the Committees. If there is no regular Board
of Directors meeting held in the calendar month next following the meeting of
a Committee, then such Committee's records shall be presented at the next
regular Board of Directors meeting held in a month subsequent to such Committee
meeting.
Section 11. Changes and Vacancies. The Board of Directors shall have power
to change the members of any Committee at any time and to fill vacancies on any
Committee; provided, however, that any newly appointed member of the Audit
Committee must meet the requirements for members of that Committee set forth in
Section 3 of this Article.
Section 12. Other Committees. The Board of Directors may appoint, from time
to time, other committees of one or more persons, for such purposes and with
such powers as the Board may determine.
ARTICLE IV
WAIVER OF NOTICE OF MEETINGS
Section 1. Waiver. Whenever notice is required to be given to any shareholder,
Director, or member of a Committee of the Board of Directors, such notice may
be waived in writing either before or after such meeting by any shareholder,
Director or Committee member respectively, as the case may be, who may be
entitled to such notice; and such notice will be deemed to be waived by
attendance at any such meeting.
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<PAGE> 14
ARTICLE V
OFFICERS AND AGENTS
Section 1. Officers. The Board shall appoint a Chairman of the Board and a
President, and shall have the power to appoint one or more Executive Vice
Presidents, one or more Senior Vice Presidents, one or more Vice Presidents, a
Cashier, a Secretary, an Auditor, a Controller, one or more Trust Officers and-
such other officers as are deemed necessary or desirable for the proper
transaction of business of the Association. The Chairman of the Board and the
President shall be appointed from members of the Board of Directors. Any two
or more offices, except those of President and Cashier, or Secretary, may be
held by the same person. The Board may, from time to time, by resolution
passed by a majority of the entire Board, designate one or more officers of the
Association or of an affiliate or of Fleet Financial Group, Inc. with power to
appoint one or more Vice Presidents and such other officers of the Association
below the level of Vice President as the officer or officers designated in such
resolution deem necessary or desirable for the proper transaction of the
business of the Association.
Section 2. Chairman of the Board. The chairman of the Board shall preside at
all meetings of the Board of Directors. Subject to definition by the Board of
Directors, he shall have general executive powers and such specific powers and
duties as from time to time may be conferred upon or assigned to him by the
Board of Directors.
Section 3. President. The President shall preside at all meetings of the
Board of Directors if there be no Chairman or if the Chairman be absent.
Subject to definition by the Board of Directors, he shall have general
executive powers and such specific powers and duties as from time to time may
be conferred upon or assigned to him by the Board of Directors.
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<PAGE> 15
Section 4. Cashier and Secretary. The Cashier shall be the Secretary of the
Board and of the Executive Committee, and shall keep accurate minutes of their
meetings and of all meetings of the shareholders. He shall attend to the
giving of all notices required by these By-laws. He shall be custodian of the
corporate seal, records, documents and papers of the Association. He shall
have such powers and perform such duties as pertain by law or regulation to the
office of Cashier, or as are imposed by these By-laws, or as may be delegated
to him from time to time by the Board of Directors, the Chairman of the Board
or the President.
Section 5. Auditor. The Auditor shall be the chief auditing officer of the
Association. He shall continuously examine the affairs of the Association and
from time to time shall report to the Board of Directors. He shall have such
powers and perform such duties as are conferred upon, or assigned to him by
these By-laws, or as may be delegated to him from time to time by the Board
of Directors.
Section 6. Officers Seriatim. The Board of Directors shall designate from
time to time not less than two officers who shall in the absence or disability
of the Chairman or President or both, succeed seriatim to the duties and
responsibilities of the Chairman and President respectively.
Section 7. Clerks and Agents. The Board of Directors may appoint, from time
to time, such clerks, agents and employees as it may deem advisable for the
prompt and orderly transaction of the business of the Association, define
their duties, fix the salaries to be paid them and dismiss them. Subject to
the authority of the Board of Directors, the Chairman of the Board or the
President, or any other officer of the Association authorized by either of them
may appoint and dismiss all or any clerks, agents and employees and prescribe
their duties and the conditions of their employment, and from time to time
fix their compensation.
Section 8. Tenure. The Chairman of the Board of Directors and the President
shall, except in the case of death, resignation, retirement or disqualification
under these By-laws, or unless removed by the affirmative vote of at least two-
thirds of all of the members of the Board of Directors, hold office for the
term of one year or until their respective successors are appointed. Either
of such officers appointed to fill a vacancy occurring in an unexpired term
shall serve for such unexpired term of such vacancy. All other officers,
clerks, agents, attorneys-in-fact and employees of the Association shall hold
office during the pleasure of the Board of Directors or of the officer or
committee appointing them respectively.
ARTICLE VI
TRUST DEPARTMENT
Section 1. General Powers and Duties. All fiduciary powers of the Association
shall be exercised through the Trust Department, subject to such regulations as
the Comptroller of the Currency shall from time to time establish. The Trust
Department shall be to placed under the management and immediate supervision
of an officer or officers appointed by the Board of Directors. The duties of
all officers of the Trust Department shall be to cause the policies and
instructions of the Board and the Risk Management Committee with respect to the
trusts under their supervision to be carried out, and to supervise the due
performance of the trusts and agencies entrusted to the Association and under
their supervision, in accordance with law and in accordance with the terms of
such trusts and agencies.
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<PAGE> 16
ARTICLE VII
BRANCH OFFICES
Section 1. Establishment. The Board of Directors shall have full power to
establish, to discontinue, or, from time to time, to change the location of any
branch office, subject to such limitations as may be provided by law.
Section 2. Supervision and Control. Subject to the general supervision and
control of the Board of Directors, the affairs of branch offices shall be
under the immediate supervision and control of the President or of such other
officer or officers, employee or employees, or other individuals as the Board
of Directors may from time to time determine, with such powers and duties as
the Board of Directors may confer upon or assign to him or them.
ARTICLE VIII
SIGNATURE POWERS
Section 1. Authorization. The power of officers, employees, agents and
attorneys to sign on behalf of and to affix the seal of the Association shall
be prescribed by the Board of Directors or by the Executive Committee or by
both; provided that the President is authorized to restrict such power of any
officer, employee, agent or attorney to the business of a specific department
or departments, or to a specific branch office or branch offices. Facsimile
signatures may be authorized.
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<PAGE> 17
ARTICLE IX
STOCK CERTIFICATES AND TRANSFERS
Section 1. Stock Records. The Trust Department shall have custody of the
stock certificate books and stock ledgers of the Association, and shall make
all transfers of stock, issue certificates thereof and disburse dividends
declared thereon.
Section 2. Form of Certificate. Every shareholder shall be entitled to a
certificate conforming to the requirements of law and otherwise in such form
as the Board of Directors may approve. The certificates shall state on the
face thereof that the stock is transferable only on the books of the
Association and shall be signed by such officers as may be prescribed from time
to time by the Board of Directors or Executive Committee. Facsimile signatures
may be authorized.
Section 3. Transfers of Stock. Transfers of stock shall be made only on the
books of the Association by the holder in person, or by attorney duly
authorized in writing, upon surrender of the certificate therefor properly
endorsed, or upon the surrender of such certificate accompanied by a properly
executed written assignment of the same, or a written power of attorney to
sell, assign or transfer the same or the shares represented thereby.
Section 4. Lost Certificate. The Board of Directors or Executive Committee
may order a new certificate to be issued in place of a certificate lost or
destroyed, upon proof of such loss or destruction and upon tender to the
Association by the shareholder, of a bond in such amount and with or without
surety, as may be ordered, indemnifying the Association against all liability,
loss, cost and damage by reason of such loss or destruction and the issuance
of a new certificate.
Section 5. Closing Transfer Books. The Board of Directors may close the
transfer books for a period not exceeding thirty days preceding any regular
or special meeting of the shareholders, or the day designated for the payment
of a dividend or the allotment of rights. In lieu of closing the transfer
books the Board of Directors may fix a day and hour not more than thirty days
prior to the day of holding any meeting of the shareholders, or the day
designated for the payment of a dividend, or the day designated for the
allotment of rights, or the day when any change of conversion or exchange of
capital stock is to go into effect, as the day as of which shareholders
entitled to notice of and to vote at such meetings or entitled to such dividend
or to such allotment of rights or to exercise the rights in respect of any
such change, conversion or exchange of capital stock, shall be determined, and
only such shareholders as shall be shareholders of record on the day and hour
so fixed shall be entitled to notice of and to vote at such meeting or to
receive payment of such dividend or to receive such allotment of rights or to
exercise such rights, as the case may be.
ARTICLE X
THE CORPORATE SEAL
Section 1. Seal. The following is an impression of the seal of the
Association adopted by the Board of Directors.
ARTICLE XI
BUSINESS HOURS
Section 1. Business Hours. The main office of this Association and each
branch office thereof shall be open for business on such days, and for such
hours as the Chairman, or the President, or any Executive Vice President, or
such other officer as the Board of Directors shall from time to time
designate, may determine as to each office to conform to local custom and
convenience, provided that any one or more of the main and branch offices or
certain departments thereof may be open for such hours as the President, or
such other officer as the Board of Directors shall from time to time designate,
may determine as to each office or department on any legal holiday on which
work is not prohibited by law, and provided further that any one or more of
the main and branch offices or certain departments thereof may be ordered
closed or open on any day for such hours as to each office or department as
the President, or such other officer as the Board of Directors shall from time
to time designate, subject to applicable laws regulations, may determine when
such action may be required by reason of disaster or other emergency condition.
ARTICLE IX
CHANGES IN BY-LAWS
Section 1. Amendments. These By-laws may be amended upon vote of a majority
of the entire Board of Directors at any meeting of the Board, provided ten (10)
day's notice of the proposed amendment has been given to each member of the
Board of Directors. No amendment may be made unless the By-law, as amended, is
consistent with the requirements of law and of the Articles of Association.
These By-laws may also be amended by the Association's shareholders.
A true copy
Attest:
Secretary/Assistant Secretary
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Dated at , as of .
--------------------------------------- ----------------------
Revision of January 11, 1993
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<PAGE> 18
[LOGO] Exhibit 3
- -------------------------------------------------------------------------------
Comptroller of the Currency
Administrator of National Banks
- -------------------------------------------------------------------------------
Washington, D.C. 20219
CERTIFICATE
I, Eugene A. Ludwig, Comptroller of the Currency, do hereby certify that:
1. The Comptroller of the Currency, pursuant to Revised Statutes 324, et
seq., as amended, 12 U.S.C. 1, et seq., as amended, has possession, custody and
control of all records pertaining to the chartering of all National Banking
Associations.
2. "Fleet National Bank," (Charter No. 1338) is a National Banking
Association formed under the laws of the United States and is authorized
thereunder to transact the business of banking and exercise Fiduciary Powers on
the date of this Certificate.
IN TESTIMONY WHEREOF, I have hereunto
subscribed my name and caused my seal of office
to be affixed to these presents at the Treasury
Department in the City of Washington and
[SEAL]
District of Columbia, this 23rd day of
December, 1996.
/s/
----------------------
Comptroller of the Currency
<PAGE> 19
EXHIBIT 4
CONSENT OF THE TRUSTEE
REQUIRED BY SECTION 321(b)
OF THE TRUST INDENTURE ACT OF 1939
The undersigned, as Trustee under an Indenture to be entered into
between ICO, Inc. and Fleet National Bank, Trustee, does hereby consent
that, pursuant to Section 321(b) of the Trust Indenture Act of 1939, reports of
examinations with respect to the undersigned by Federal, State, Territorial or
District authorities may be furnished by such authorities to the Securities and
Exchange Commission upon request therefor.
FLEET NATIONAL BANK,
Trustee
By /s/ Dennis Fisher
-----------------------------------
Name: Dennis Fisher
Title: Assistant Vice President
Dated: June 16, 1997
<PAGE> 20
Board of Governors of the Federal Reserve System
OMB Number: 7100-0036
Federal Deposit Insurance Corporation
OMB Number: 3064-0052
Office of the Comptroller of the Currency
Federal Financial OMB Number: 1557-0081
Institutions Examination
Council Expires March 31, 1999
- --------------------------------------------------------------------------------
/1/
Please refer to page i,
[LOGO APPEARS HERE] Table of Contents, for
the required disclosure
of estimated burden.
- --------------------------------------------------------------------------------
CONSOLIDATED REPORTS OF CONDITION AND INCOME FOR
A BANK WITH DOMESTIC AND FOREIGN OFFICES -- FFIEC 031
REPORT AT THE CLOSE OF BUSINESS MARCH 31, 1997 (970331)
-----------
(RCRI 9999)
This report is required by law: 12 U.S.C. Section 324 (State member banks); 12
U.S.C. Section 1817 (State nonmember banks); and 12 U.S.C. Section 161
(National banks).
This report form is to be filed by banks with branches and consolidated
subsidiaries in U.S. territories and possessions, Edge or Agreement
subsidiaries, foreign branches, consolidated foreign subsidiaries, or
International Banking Facilities.
- --------------------------------------------------------------------------------
NOTE: The Reports of Condition and Income must be signed by an authorized
officer and the Report of Condition must be attested to by not less than two
directors (trustees) for State nonmember banks and three directors for State
member and National banks.
I, Giro S. DeRosa, Vice President
-----------------------------------------------------------------------------
Name and Title of Officer Authorized to Sign Report
of the named bank do hereby declare that these Reports of Condition and Income
(including the supporting schedules) have been prepared in conformance with the
instructions issued by the appropriate Federal regulatory authority and are
true to the best of my knowledge and belief.
/s/ Gino S. DeRosa
- --------------------------------------------------------------------------------
Signature of Officer Authorized to Sign Report
April 24, 1997
- --------------------------------------------------------------------------------
Date of Signature
The Reports of Condition and Income are to be prepared in accordance with
Federal regulatory authority instructions. NOTE: These instructions may in some
cases differ from generally accepted accounting principles.
We, the undersigned directors (trustees), attest to the correctness of this
Report of Condition (including the supporting schedules) and declare that it
has been examined by us and to the best of our knowledge and belief has been
prepared in conformance with the instructions issued by the appropriate Federal
regulatory authority and is true and correct.
/s/ [SIGNATURE ILLEGIBLE]
- --------------------------------------------------------------------------------
Director (Trustee)
/s/ [SIGNATURE ILLEGIBLE]
- --------------------------------------------------------------------------------
Director (Trustee)
/s/ [SIGNATURE ILLEGIBLE]
- --------------------------------------------------------------------------------
Director (Trustee)
- --------------------------------------------------------------------------------
FOR BANKS SUBMITTING HARD COPY REPORT FORMS:
STATE MEMBER BANKS: Return the original and one copy to the appropriate Federal
Reserve District Bank.
STATE NONMEMBER BANKS: Return the original only in the special return address
envelope provided. If express mail is used in lieu of the special return
address envelope, return the original only to the FDIC, c/o Quality Data
Systems, 2127 Espey Court, Suite 204, Crofton, MD 21114.
NATIONAL BANKS: Return the original only in the special return address envelope
provided. If express mail is used in lieu of the special return address
envelope, return the original only to the FDIC, c/o Quality Data Systems, 2127
Espey Court, Suite 204, Crofton, MD 21114.
FDIC Certificate Number 0 2 4 9 9
---------------------
(RCRI 9050)
Banks should affix the address label in this space.
Fleet National Bank
- ------------------------------------------------
Legal Title of Bank (TEXT 9010)
One Monarch Place
- ------------------------------------------------
City (TEXT 9130)
Springfield, MA 01102
- ------------------------------------------------
State Abbrev. (TEXT 9200) ZIP Code (TEXT 9220)
Board of Governors of the Federal Reserve System, Federal Deposit Insurance
Corporation, Office of the Comptroller of the Currency.
<PAGE> 21
FFIEC 031
Page i
/2/
Consolidated Reports of Condition and Income for
A Bank With Domestic and Foreign Offices
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
TABLE OF CONTENTS
SIGNATURE PAGE Cover
REPORT OF INCOME
Schedule RI -- Income Statement...................................... RI-1, 2, 3
Schedule RI-A -- Changes in Equity Capital........................... RI-4
Schedule RI-B -- Charge-offs and Recoveries and Changes in Allowance
for Loan and Lease Losses........................................... RI-4, 5
Schedule RI-D -- Income from International Operations................ RI-6
Schedule RI-E -- Explanations........................................ RI-7, 8
</TABLE>
DISCLOSURE OF ESTIMATED BURDEN
THE ESTIMATED AVERAGE BURDEN ASSOCIATED WITH THIS INFORMATION COLLECTION IS 34.1
HOURS PER RESPONDENT AND IS ESTIMATED TO VARY FROM 15 TO 400 HOURS PER RESPONSE,
DEPENDING ON INDIVIDUAL CIRCUMSTANCES. BURDEN ESTIMATES INCLUDE THE TIME FOR
REVIEWING INSTRUCTIONS, GATHERING AND MAINTAINING DATA IN THE REQUIRED FORM, AND
COMPLETING THE INFORMATION COLLECTION, BUT EXCLUDE THE TIME FOR COMPILING AND
MAINTAINING BUSINESS RECORDS IN THE NORMAL COURSE OF A RESPONDENT'S ACTIVITIES.
A FEDERAL AGENCY MAY NOT CONDUCT OR SPONSOR, AND AN ORGANIZATION (OR A PERSON)
IS NOT REQUIRED TO RESPOND TO A COLLECTION OF INFORMATION, UNLESS IT DISPLAYS
A CURRENTLY VALID OMB CONTROL NUMBER. COMMENTS CONCERNING THE ACCURACY OF THIS
BURDEN ESTIMATE AND SUGGESTIONS FOR REDUCING THIS BURDEN SHOULD BE DIRECTED TO
THE OFFICE OF INFORMATION AND REGULATORY AFFAIRS, OFFICE OF MANAGEMENT AND
BUDGET, WASHINGTON, D.C. 20503, AND TO ONE OF THE FOLLOWING:
SECRETARY
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D.C. 20551
LEGISLATIVE AND REGULATORY ANALYSIS DIVISION
OFFICE OF THE COMPTROLLER OF THE CURRENCY
WASHINGTON, D.C. 20219
ASSISTANT EXECUTIVE SECRETARY
FEDERAL DEPOSIT INSURANCE CORPORATION
WASHINGTON, D.C. 20429
REPORT OF CONDITION
<TABLE>
<S> <C>
Schedule RC -- Balance Sheet..................................... RC-1, 2
Schedule RC-A -- Cash and Balances Due From Depository
Institutions.................................................... RC-3
Schedule RC-B -- Securities...................................... RC-3, 4, 5
Schedule RC-C -- Loans and Lease Financing Receivables:
Part I. Loans and Leases....................................... RC-6, 7
Part II. Loans to Small Businesses and Small Farms
(included in the forms for June 30 only)...................... RC-7a, 7b
Schedule RC-D -- Trading Assets and Liabilities (to be
completed only by selected banks)............................... RC-8
Schedule RC-E -- Deposit Liabilities............................. RC-9, 10, 11
Schedule RC-F -- Other Assets.................................... RC-11
Schedule RC-G -- Other Liabilities............................... RC-11
Schedule RC-H -- Selected Balance Sheet Items for Domestic
Offices......................................................... RC-12
Schedule RC-I -- Selected Assets and Liabilities of IBFs......... RC-13
Schedule RC-K -- Quarterly Averages.............................. RC-13
Schedule RC-L -- Off-Balance Sheet Items......................... RC-14, 15, 16
Schedule RC-M -- Memoranda....................................... RC-17, 18
Schedule RC-N -- Past Due and Nonaccrual Loans, Leases, and
Other Assets.................................................... RC-19, 20
Schedule RC-O -- Other Data for Deposit Insurance
and FICO Assessments............................................ RC-21, 22
Schedule RC-R -- Regulatory Capital.............................. RC-23, 24
Optional Narrative Statement Concerning the Amounts Reported
in the Reports of Condition and Income.......................... RC-25
</TABLE>
Special Report (TO BE COMPLETED BY ALL BANKS)
Schedule RC-J -- Repricing Opportunities (sent only to and to be completed only
by savings banks)
For information or assistance, National and State nonmember banks should contact
the FDIC's Call Reports Analysis Unit, 550 17th Street, NW, Washington, D.C.
20429, toll free on (800) 688-FDIC(3342), Monday through Friday between 8:00
a.m. and 5:00 p.m., Eastern time. State member banks should contact their
Federal Reserve District Bank.
<PAGE> 22
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Fleet National Bank Call Date: 03/31/97 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RI-1
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: 02499
-----------
</TABLE>
Consolidated Report of Income
for the period January 1, 1997-March 31, 1997
All Report of Income schedules are to be reported on a calendar year-to-date
basis in thousands of dollars.
Schedule RI--Income Statement
<TABLE>
<CAPTION>
----------
I480 (-
---------------------
Dollar Amounts
in Thousands
- --------------------------------------------------------------------------------------------- ---------------------
RIAD Bil Mil Thou
<S> <C> <C> <C>
1. Interest income: //////////////////
a. Interest and fee income on loans: //////////////////
(1) In domestic offices: //////////////////
(a) Loans secured by real estate ................................................... 4011 261,522 1.a.(1)(a)
(b) Loans to depository institutions ............................................... 4019 390 1.a.(1)(b)
(c) Loans to finance agricultural production and other loans to farmers ............ 4024 90 1.a.(1)(c)
(d) Commercial and industrial loans ................................................ 4012 284,321 1.a.(1)(d)
(e) Acceptances of other banks ..................................................... 4026 0 1.a.(1)(e)
(f) Loans to individuals for household, family, and other personal expenditures: //////////////////
(1) Credit cards and related plans ............................................. 4054 3,139 1.a.(1)(f)(1)
(2) Other ...................................................................... 4055 44,118 1.a.(1)(f)(2)
(g) Loans to foreign governments and official institutions ......................... 4056 0 1.a.(1)(g)
(h) Obligations (other than securities and leases) of states and political //////////////////
subdivisions in the U.S.: //////////////////
(1) Taxable obligations ........................................................ 4503 0 1.a.(1)(h)(1)
(2) Tax-exempt obligations ..................................................... 4504 2,403 1.a.(1)(h)(2)
(i) All other loans in domestic offices ............................................ 4058 31,819 1.a.(1)(i)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs ...................... 4059 1,140 1.a.(2)
b. Income from lease financing receivables: //////////////////
(1) Taxable leases ..................................................................... 4505 39,514 1.b.(1)
(2) Tax-exempt leases .................................................................. 4307 526 1.b.(2)
c. Interest income on balances due from depository institutions:(1) //////////////////
(1) In domestic offices ................................................................ 4105 200 1.c.(1)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs ...................... 4106 6 1.c.(2)
d. Interest and dividend income on securities: //////////////////
(1) U.S. Treasury securities and U.S. Government agency obligations .................... 4027 78,125 1.d.(1)
(2) Securities issued by states and political subdivisions in the U.S.: //////////////////
(a) Taxable securities ............................................................. 4506 0 1.d.(2)(a)
(b) Tax-exempt securities .......................................................... 4507 1,673 1.d.(2)(b)
(3) Other domestic debt securities ..................................................... 3657 26 1.d.(3)
(4) Foreign debt securities ............................................................ 3658 1,161 1.d.(4)
(5) Equity securities (including investments in mutual funds) .......................... 3659 3,601 1.d.(5)
e. Interest income from trading assets .................................................... 4069 13 1.e.
----------------------
</TABLE>
____________
(1) Includes interest income on time certificates of deposit not held for
trading.
3
<PAGE> 23
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 3/31/97 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RI-2
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: 02499
-----------
</TABLE>
SCHEDULE RI--CONTINUED
<TABLE>
<CAPTION>
--------------
Dollar Amounts in Thousands Year-to-date
- ---------------------------------------------------------------------------- -----------------------------------------------
<S> <C> <C> <C> <C>
1. Interest income (continued) RIAD Bil Mil Thou
f. Interest income on federal funds sold and securities purchased //////////////////
under agreements to resell .......................................... 4020 1,887 1.f.
g. Total interest income (sum of items 1.a through 1.f) ................ 4107 755,674 1.g.
2. Interest expense: //////////////////
a. Interest on deposits: //////////////////
(1) Interest on deposits in domestic offices: //////////////////
(a) Transaction accounts (NOW accounts, ATS accounts, and //////////////////
telephone and preauthorized transfer accounts) .............. 4508 1,888 2.a.(1)(a)
(b) Nontransaction accounts: //////////////////
(1) Money market deposit accounts (MMDAs) ................... 4509 56,424 2.a.(1)(b)(1)
(2) Other savings deposits .................................. 4511 9,062 2.a.(1)(b)(2)
(3) Time deposits of $100,000 or more ....................... A517 35,929 2.a.(1)(b)(3)
(4) Time deposits of less than $100,000 ..................... A518 82,720 2.a.(1)(b)(4)
(2) Interest on deposits in foreign offices, Edge and Agreement //////////////////
subsidiaries, and IBFs .......................................... 4172 24,266 2.a.(2)
b. Expense of federal funds purchased and securities sold under //////////////////
agreements to repurchase ............................................ 4180 62,158 2.b.
c. Interest on demand notes issued to the U.S. Treasury trading //////////////////
liabilities and other borrowed money ................................ 4185 10,706 2.c.
d. Not applicable //////////////////
e. Interest on subordinated notes and debentures ....................... 4200 20,653 2.e.
f. Total interest expense (sum of items 2.a through 2.e) ............... 4073 303,806 2.f.
-----------------------
3. Net interest income (item 1.g minus 2.f) ............................... ////////////////// RIAD 4074 451,868 3.
-----------------------
4. Provisions: ////////////////// -----------------------
a. Provision for loan and lease losses ................................. ////////////////// RIAD 4230 611 4.a.
b. Provision for allocated transfer risk ............................... ////////////////// RIAD 4243 0 4.b
----------------------
5. Noninterest income: //////////////////
a. Income from fiduciary activities .................................... 4070 71,635 5.a.
b. Service charges on deposit accounts in domestic offices ............. 4080 59,101 5.b.
c. Trading revenue (must equal Schedule RI, sum of Memorandum //////////////////
items 8.a through 8.d) .............................................. A220 8,776 5.c.
d.-e. Not applicable //////////////////
f. Other noninterest income: //////////////////
(1) Other fee income ................................................ 5407 161,180 5.f.(1)
(2) All other noninterest income* ................................... 5408 33,991 5.f.(2)
-----------------------
g. Total noninterest income (sum of items 5.a through 5.f) ............. ////////////////// RIAD 4079 334,683 5.g.
6. a. Realized gains (losses) on held-to-maturity securities .............. ////////////////// RIAD 3521 (6,190) 6.a.
b. Realized gains (losses) on available-for-sale securities ............ ////////////////// RIAD 3196 (430) 6.b.
-----------------------
7. Noninterest expense: //////////////////
a. Salaries and employee benefits ...................................... 4135 163,977 7.a.
b. Expenses of premises and fixed assets (net of rental income) //////////////////
(excluding salaries and employee benefits and mortgage interest) .... 4217 49,343 7.b.
c. Other noninterest expense* .......................................... 4092 250,037 7.c.
-----------------------
d. Total noninterest expense (sum of items 7.a through 7.c) ............ ////////////////// RIAD 4093 463,357 7.d.
-----------------------
8. Income (loss) before income taxes and extraordinary items and other //////////////////
adjustments (item 3 plus or minus items 4.a, 4.b, 5.g, ////////////////// -----------------------
6.a, 6.b, and 7.d) ..................................................... ////////////////// RIAD 4301 315,963 8.
9. Applicable income taxes (on item 8) .................................... ////////////////// RIAD 4302 123,632 9.
-----------------------
10. Income (loss) before extraordinary items and other adjustments ////////////////// -----------------------
(item 8 minus 9) ....................................................... ////////////////// RIAD 4300 192,331 10.
11. Extraordinary items and other adjustments, net of income taxes* ////////////////// RIAD 4320 0 11.
12. Net income (loss) (sum of items 10 and 11) ////////////////// RIAD 4340 192,331 12.
-----------------------
</TABLE>
____________
*Describe on Schedule RI-E--Explanations.
4
<PAGE> 24
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Fleet National Bank Call Date: 3/31/97 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RI-3
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: 02499
-----
</TABLE>
SCHEDULE RI--CONTINUED
<TABLE>
<CAPTION>
---------
I481 (-
----------------
Year-to-date
--------------------
Memoranda Dollar Amounts in Thousands RIAD Bil Mil Thou
- ------------------------------------------------------------------------------------------------------ --------------------
<S> <C> <C>
1. Interest expense incurred to carry tax-exempt securities, loans, and leases acquired after //////////////////
August 7, 1986, that is not deductible for federal income tax purposes .......................... 4513 681 M.1.
2. Income from the sale and servicing of mutual funds and annuities in domestic offices //////////////////
(included in Schedule RI, item 8) ............................................................... 8431 16,571 M.2.
3.-4. Not applicable
5. Number of full-time equivalent employees at end of current period (round to //// Number
nearest whole number) ........................................................................... 4150 12,449 M.5.
6. Not applicable //////////////////
7. If the reporting bank has restated its balance sheet as a result of applying push down //// MM DD YY
accounting this calendar year, report the date of the bank's acquisition......................... 9106 00/00/00 M.7.
8. Trading revenue (from cash instruments and off-balance sheet derivative instruments) //////////////////
(sum of Memorandum items 8.a through 8.d must equal Schedule RI, item 5.c): //// Bill Mil Thou
a. Interest rate exposures....................................................................... 8757 907 M.8.a.
b. Foreign exchange exposures.................................................................... 8758 7,869 M.8.b.
c. Equity security and index exposures........................................................... 8759 0 M.8.c.
d. Commodity and other exposures................................................................. 8760 0 M.8.d.
9. Impact on income of off-balance sheet derivatives held for purposes other than trading: //////////////////
a. Net increase (decrease) to interest income.................................................... 8761 3,704 M.9.a.
b. Net (increase) decrease to interest expense................................................... 8762 2,612 M.9.b.
c. Other (noninterest) allocations............................................................... 8763 1,380 M.9.c.
10. Credit losses off-balance sheet derivatives (see instructions) .................................. A251 0 M.10.
-------------------
YES NO
11. Does the reporting bank have a Subchapter S election in effect for federal income tax -------------------
purposes for the current tax year? .............................................................. A530 //// x M.11.
-------------------
//// Bil Mil Thou
12. Deferred portion of total applicable income taxes included in Schedule RI, -------------------
items 9 and 11 (to be reported with the December Report of Income) .............................. 4772 N/A M.12.
-------------------
</TABLE>
____________
*Describe on Schedule RI-E--Explanations.
5
<PAGE> 25
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Fleet National Bank Call Date: 03/31/97 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RI-4
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: 02499
-----------
</TABLE>
Schedule RI-A--Changes in Equity Capital
Indicate decreases and losses in parentheses.
<TABLE>
<CAPTION>
----------
I483 (-
------------------------
Dollar Amounts
in Thousands
- ------------------------------------------------------------------------------------------------------ -----------------------
RIAD BIL MIL THOU
<S> <C> <C> <C>
1. Total equity capital originally reported in the December 31, 1996, Reports of Condition //////////////////
and Income ...................................................................................... 3215 4,519,112 1.
2. Equity capital adjustments from amended Reports of Income, net* ................................. 3216 0 2.
3. Amended balance end of previous calendar year (sum of items 1 and 2) ............................ 3217 4,519,112 3.
4. Net income (loss) (must equal Schedule RI, item 12) ............................................. 4340 192,331 4.
5. Sale, conversion, acquisition, or retirement of capital stock, net .............................. 4346 0 5.
6. Changes incident to business combinations, net .................................................. 4356 0 6.
7. LESS: Cash dividends declared on preferred stock ................................................ 4470 2,922 7.
8. LESS: Cash dividends declared on common stock ................................................... 4460 209,000 8.
9. Cumulative effect of changes in accounting principles from prior years* (see instructions //////////////////
for this schedule) .............................................................................. 4411 42,977 9.
10. Corrections of material accounting errors from prior years* (see instructions for this schedule) 4412 0 10.
11. Change in net unrealized holding gains (losses) on available-for-sale securities ................ 8433 (34,402) 11.
12. Foreign currency translation adjustments ........................................................ 4414 0 12.
13. Other transactions with parent holding company* (not included in items 5, 7, or 8 above) ........ 4415 0 13.
14. Total equity capital end of current period (sum of items 3 through 13) (must equal Schedule RC, //////////////////
item 28) ........................................................................................ 3210 4,508,096 14.
----------------------
</TABLE>
____________
*Describe on Schedule RI-E--Explanations.
Schedule RI-B--Charge-offs and Recoveries and Changes
in Allowance for Loan and Lease Losses
Part I. Charge-offs and Recoveries on Loans and Leases
Part I excludes charge-offs and recoveries through
the allocated transfer risk reserve.
<TABLE>
<CAPTION>
----------
I486 (-
-----------------------------------------
Dollar Amounts in Thousands
-------------------------------- --------
Calendar year-to-date
-----------------------------------------
(Column A) (Column B)
Charge-offs Recoveries
- ------------------------------------------------------------------------------ -------------------- --------------------
RIAD BIL MIL THOU RIAD BIL MIL THOU
<S> <C> <C> <C>
1. Loans secured by real estate: ////////////////// //////////////////
a. To U.S. addressees (domicile) ......................................... 4651 11,390 4661 5,546 1.a.
b. To non-U.S. addressees (domicile) ..................................... 4652 0 4662 0 1.b.
2. Loans to depository institutions and acceptances of other banks: ////////////////// //////////////////
a. To U.S. banks and other U.S. depository institutions .................. 4653 0 4663 0 2.a.
b. To foreign banks ...................................................... 4654 0 4664 0 2.b.
3. Loans to finance agricultural production and other loans to farmers ...... 4655 97 4665 29 3.
4. Commercial and industrial loans: ////////////////// //////////////////
a. To U.S. addressees (domicile) ......................................... 4645 9,932 4617 11,507 4.a.
b. To non-U.S. addressees (domicile) ..................................... 4646 0 4618 0 4.b.
5. Loans to individuals for household, family, and other personal ////////////////// //////////////////
expenditures: ////////////////// //////////////////
a. Credit cards and related plans ........................................ 4656 1,116 4666 176 5.a.
b. Other (includes single payment, installment, and all student loans) ... 4657 10,188 4667 3,031 5.b.
6. Loans to foreign governments and official institutions ................... 4643 0 4627 0 6.
7. All other loans .......................................................... 4644 1,139 4628 213 7.
8. Lease financing receivables: ////////////////// //////////////////
a. Of U.S. addressees (domicile) ......................................... 4658 94 4668 655 8.a.
b. Of non-U.S. addressees (domicile) ..................................... 4659 0 4669 0 8.b.
9. Total (sum of items 1 through 8) ......................................... 4635 33,956 4605 21,157 9.
-------------------------------------------
</TABLE>
6
<PAGE> 26
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Fleet National Bank Call Date: 03/31/97 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RI-5
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: 02499
-----------
</TABLE>
Schedule RI-B--Continued
Part I. Continued
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
-------------------------------------------
Calendar year-to-date
-------------------------------------------
(Column A) (Column B)
Memoranda Charge-offs Recoveries
- ------------------------------------------------------------------------------ -------------------- --------------------
RIAD Bil Mil Thou RIAD Bil Mil Thou
<S> <C> <C> <C> <C>
1-3. Not applicable ////////////////// //////////////////
4. Loans to finance commercial real estate, construction, and land ////////////////// //////////////////
development activities (not secured by real estate) included in ////////////////// //////////////////
Schedule RI-B, part I, items 4 and 7, above............................... 5409 8,010 5410 7,599 M.4.
5. Loans secured by real estate in domestic offices (included in ////////////////// //////////////////
Schedule RI-B, part I, item 1, above): ////////////////// //////////////////
a. Construction and land development...................................... 3582 468 3583 1,288 M.5.a.
b. Secured by farmland.................................................... 3584 0 3585 75 M.5.b.
c. Secured by 1-4 family residential properties: ////////////////// //////////////////
(1) Revolving, open-end loans secured by 1-4 family residential ////////////////// //////////////////
properties and extended under lines of credit...................... 5411 1,164 5412 505 M.5.c.(1)
(2) All other loans secured by 1-4 family residential properties....... 5413 5,954 5414 1,761 M.5.c.(2)
d. Secured by multifamily (5 or more) residential properties.............. 3588 1,613 3589 425 M.5.d.
e. Secured by nonfarm nonresidential properties........................... 3590 2,191 3591 1,492 M.5.e.
-------------------------------------------
</TABLE>
Part II. Changes in Allowance for Loan and Lease Losses
<TABLE>
<CAPTION>
Dollar Amounts
in Thousands
- --------------------------------------------------------------------------------------------------- ----------------------
RIAD Bil Mil Thou
<S> <C> <C> <C>
1. Balance originally reported in the December 31, 1996, Reports of Condition and Income.......... 3124 776,811 1.
2. Recoveries (must equal part I, item 9, column B above)......................................... 4605 21,157 2.
3. LESS: Charge-offs (must equal part I, item 9, column A above).................................. 4635 33,956 3.
4. Provision for loan and lease losses (must equal Schedule RI, item 4.a)......................... 4230 611 4.
5. Adjustments* (see instructions for this schedule).............................................. 4815 (1,410) 5.
6. Balance end of current period (sum of items 1 through 5) (must equal Schedule RC, //////////////////
item 4.b)...................................................................................... 3123 763,213 6.
--------------------
</TABLE>
____________
*Describe on Schedule RI-E--Explanations.
7
<PAGE> 27
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Fleet National Bank Call Date: 3/31/97 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RI-6
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: 02499
-----------
</TABLE>
Schedule RI-D--Income from International Operations
For all banks with foreign offices, Edge or Agreement subsidiaries, or IBFs
where international operations account for more than 10 percent of total
revenues, total assets, or net income.
Part I. Estimated Income from International Operations
<TABLE>
<CAPTION>
----------
I492 (-
---------------
Year-to-date
---------------
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------- --------------------
<S> <C> <C> <C>
RIAD Bil Mil Thou
1. Interest income and expense booked at foreign offices, Edge and Agreement subsidiaries, //////////////////
and IBFs: //////////////////
a. Interest income booked ................................................................... 4837 N/A 1.a.
b. Interest expense booked .................................................................. 4838 N/A 1.b.
c. Net interest income booked at foreign offices, Edge and Agreement subsidiaries, and IBFs //////////////////
(item 1.a minus 1.b) ..................................................................... 4839 N/A 1.c.
2. Adjustments for booking location of international operations: //////////////////
a. Net interest income attributable to international operations booked at domestic offices .. 4840 N/A 2.a.
b. Net interest income attributable to domestic business booked at foreign offices .......... 4841 N/A 2.b.
c. Net booking location adjustment (item 2.a minus 2.b) ..................................... 4842 N/A 2.c.
3. Noninterest income and expense attributable to international operations: //////////////////
a. Noninterest income attributable to international operations .............................. 4097 N/A 3.a.
b. Provision for loan and lease losses attributable to international operations ............. 4235 N/A 3.b.
c. Other noninterest expense attributable to international operations ....................... 4239 N/A 3.c.
d. Net noninterest income (expense) attributable to international operations (item 3.a //////////////////
minus 3.b and 3.c) ....................................................................... 4843 N/A 3.d.
4. Estimated pretax income attributable to international operations before capital allocation //////////////////
adjustment (sum of items 1.c, 2.c, and 3.d) ................................................. 4844 N/A 4.
5. Adjustment to pretax income for internal allocations to international operations to reflect //////////////////
the effects of equity capital on overall bank funding costs ................................. 4845 N/A 5.
6. Estimated pretax income attributable to international operations after capital allocation //////////////////
adjustment (sum of items 4 and 5) ........................................................... 4846 N/A 6.
7. Income taxes attributable to income from international operations as estimated in item 6 .... 4797 N/A 7.
8. Estimated net income attributable to international operations (item 6 minus 7) .............. 4341 N/A 8.
----------------------
</TABLE>
<TABLE>
<CAPTION>
Memoranda ---------------------
Dollar Amounts
in Thousands
- ------------------------------------------------------------------------------------------------- ---------------------
<S> <C> <C> <C>
RIAD Bil Mil Thou
1. Intracompany interest income included in item 1.a above ..................................... 4847 N/A M.1.
2. Intracompany interest expense included in item 1.b above .................................... 4848 N/A M.2.
--------------------------
</TABLE>
Part II. Supplementary Details on Income from International Operations Required
by the Departments of Commerce and Treasury for Purposes of the U.S.
International Accounts and the U.S. National Income and Product Accounts
<TABLE>
<CAPTION>
Year-to-date
- ------------------------------------------------------------------------------------------------ --------------------
<S> <C> <C> <C>
Dollar Amounts in Thousands RIAD Bil Mil Thou
- ------------------------------------------------------------------------------------------------ --------------------
1. Interest income booked at IBFs .............................................................. 4849 N/A 1.
2. Interest expense booked at IBFs ............................................................. 4850 N/A 2.
3. Noninterest income attributable to international operations booked at domestic offices //////////////////
(excluding IBFs): //////////////////
a. Gains (losses) and extraordinary items ................................................... 5491 N/A 3.a.
b. Fees and other noninterest income ........................................................ 5492 N/A 3.b.
4. Provision for loan and lease losses attributable to international operations booked at //////////////////
domestic offices (excluding IBFs) ........................................................... 4852 N/A 4.
5. Other noninterest expense attributable to international operations booked at domestic offices //////////////////
(excluding IBFs) ............................................................................ 4853 N/A 5.
--------------------
</TABLE>
8
<PAGE> 28
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Fleet National Bank Call Date: 3/31/97 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RI-7
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: 02499
-----------
</TABLE>
Schedule RI-E--Explanations
Schedule RI-E is to be completed each quarter on a calendar year-to-date basis.
Detail all adjustments in Schedules RI-A and RI-B, all extraordinary items and
other adjustments in Schedule RI, and all significant items of other
noninterest income and other noninterest expense in Schedule RI. (See
instructions for details.)
<TABLE>
<CAPTION> ----------
I495 (-
------ --------
Year-to-date
--- ---------------
Dollar Amounts
in Thousands
- -------------------------------------------------------------------------------------------------- --------------------
<S> <C> <C> <C>
RIAD Bil Mil Thou
1. All other noninterest income (from Schedule RI, item 5.f.(2)) //////////////////
Report amounts that exceed 10% of Schedule RI, item 5.f.(2): //////////////////
a. Net gains (losses) on other real estate owned ............................................ 5415 0 1.a.
b. Net gains (losses) on sales of loans ..................................................... 5416 0 1.b.
c. Net gains (losses) on sales of premises and fixed assets ................................. 5417 0 1.c.
Itemize and describe the three largest other amounts that exceed 10% of //////////////////
Schedule RI, item 5.f.(2): //////////////////
-------------
d. TEXT 4461 Intercompany Investment Services Fees 4461 11,715 1.d.
----------- ------------------------------------------------------------------------------
e. TEXT 4462 4462 1.e.
----------- ------------------------------------------------------------------------------
f. TEXT 4463 4463 1.f.
-------------------------------------------------------------------------------------------
2. Other noninterest expense (from Schedule RI, item 7.c): //////////////////
a. Amortization expense of intangible assets ................................................ 4531 20,272 2.a.
Report amounts that exceed 10% of Schedule RI, item 7.c: //////////////////
b. Net (gains) losses on other real estate owned ............................................ 5418 0 2.b.
c. Net (gains) losses on sales of loans ..................................................... 5419 0 2.c.
d. Net (gains) losses on sales of premises and fixed assets ................................. 5420 0 2.d.
Itemize and describe the three largest other amounts that exceed 10% of //////////////////
Schedule RI, item 7.c: //////////////////
-------------
e. TEXT 4464 Intercompany Corporate Support Function Charges 4464 80,442 2.e.
----------- ------------------------------------------------------------------------------
f. TEXT 4467 Intercompany Data Processing & Programming Charges 4467 74,344 2.f.
----------- ------------------------------------------------------------------------------
g. TEXT 4468 4468 2.g.
-------------------------------------------------------------------------------------------
3. Extraordinary items and other adjustments and applicable income tax effect //////////////////
(from Schedule RI, item 11) (itemize and describe all extraordinary items and //////////////////
all adjustments): //////////////////
-------------
a. (1) TEXT 4469 4469 3.a.(1)
---------------------------------------------------------------------------------------
(2) Applicable income tax effect RIAD 4486 ///////////////// 3.a.(2)
------------- -------------------
b. (1) TEXT 4487 4487 3.b.(1)
---------------------------------------------------------------------------------------
(2) Applicable income tax effect RIAD 4488 ///////////////// 3.b.(2)
------------- -------------------
c. (1) TEXT 4489 4489 0 3.c.(1)
---------------------------------------------------------------------------------------
(2) Applicable income tax effect RIAD 4491 ////////////////// 3.c.(2)
4. Equity capital adjustments from amended Reports of Income (from Schedule RI-A, //////////////////
item 2) (itemize and describe all adjustments): //////////////////
-------------
a. TEXT 4492 4492 4.a.
----------- ------------------------------------------------------------------------------
b. TEXT 4493 4493 4.b.
-------------------------------------------------------------------------------------------
5. Cumulative effect of changes in accounting principles from prior years //////////////////
(from Schedule RI-A, item 9) (itemize and describe all changes in accounting principles): //////////////////
-------------
a. TEXT 4494 Effect on change to GAAP from previous non-GAAP instructions A546 42,977 5.a.
----------- ------------------------------------------------------------------------------
b. TEXT 4495 4495 5.b.
-------------------------------------------------------------------------------------------
6. Corrections of material accounting errors from prior years (from Schedule RI-A, item 10) //////////////////
(itemize and describe all corrections): //////////////////
-------------
a. TEXT 4496 4496 6.a.
----------- ------------------------------------------------------------------------------
b. TEXT 4497 4497 6.b.
-------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 29
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Fleet National Bank Call Date: 3/31/97 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RI-8
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: 02499
-----------
</TABLE>
Schedule RI-E--Continued
<TABLE>
<CAPTION> ----------------
Year-to-date
----------------------
Dollar Amounts in Thousands
----------------------
- -------------------------------------------------------------------------------------------------- --------------------
<S> <C> <C> <C>
RIAD Bil Thou
7. Other transactions with parent holding company (from Schedule RI-A, item 13)
(itemize and describe all such transactions): //////////////////
-----------
a. TEXT 4498 4498 7.a.
----------- ------------------------------------------------------------------------------
b. TEXT 4499 4499 7.b.
-------------------------------------------------------------------------------------------
8. Adjustments to allowance for loan and lease losses (from Schedule RI-B, part II, item 5) ///////////////////
(itemize and describe all adjustments): ///////////////////
-------------
a. TEXT 4521 Adj to beg bal to correct prior period posting errs 4521 (1,410) 8.a.
----------- ------------------------------------------------------------------------------
b. TEXT 4522 4522 8.b
------------------------------------------------------------------------------------------- ---------------------
9. Other explanations (the space below is provided for the bank to briefly describe, at its I498 I499 (-
----------------------
option, any other significant items affecting the Report of Income):
---
No comment X (RIAD 4769)
---
Other explanations (please type or print clearly):
(TEXT 4769)
</TABLE>
10
<PAGE> 30
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Fleet National Bank Call Date: 3/31/97 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RC-1
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: 02499
-----------
</TABLE>
Consolidated Report of Condition for Insured Commercial
and State-Chartered Savings Banks for March 31, 1997
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
Schedule RC--Balance Sheet
__________
<TABLE>
<CAPTION>
----------
C400 (-
------------ --------
Dollar Amounts
in Thousands
- ------------------------------------------------------------------------------------------------- --------------------
<S> <C> <C> <C>
RCFD Bil Mil Thou
ASSETS //////////////////
1. Cash and balances due from depository institutions (from Schedule RC-A): //////////////////
a. Noninterest-bearing balances and currency and coin(1) ................................... 0081 3,237,415 1.a.
b. Interest-bearing balances(2) ............................................................ 0071 46,240 1.b.
2. Securities: //////////////////
a. Held-to-maturity securities (from Schedule RC-B, column A) .............................. 1754 154,725 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D) ............................ 1773 4,670,125 2.b.
3. Federal funds sold and securities purchased under agreements to resell...................... 1350 294,589 3.
4. Loans and lease financing receivables: //////////////////
----------------------
a. Loans and leases, net of unearned income (from Schedule RC-C) .... RCFD 2122 33,218,336 ////////////////// 4.a.
b. LESS: Allowance for loan and lease losses ........................ RCFD 3123 763,213 ////////////////// 4.b.
c. LESS: Allocated transfer risk reserve ............................ RCFD 3128 0 ////////////////// 4.c.
---------------------- //////////////////
d. Loans and leases, net of unearned income, //////////////////
allowance, and reserve (item 4.a minus 4.b and 4.c) ..................................... 2125 32,455,123 4.d.
5. Trading assets (from Schedule RC-D) ........................................................ 3545 93,776 5.
6. Premises and fixed assets (including capitalized leases) ................................... 2145 527,415 6.
7. Other real estate owned (from Schedule RC-M) ............................................... 2150 21,429 7.
8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M) ... 2130 0 8.
9. Customers' liability to this bank on acceptances outstanding ............................... 2155 5,274 9.
10. Intangible assets (from Schedule RC-M) ..................................................... 2143 2,651,959 10.
11. Other assets (from Schedule RC-F) .......................................................... 2160 2,504,311 11.
12. Total assets (sum of items 1 through 11) ................................................... 2170 46,662,381 12.
----------------------
</TABLE>
____________
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
11
<PAGE> 31
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Fleet National Bank Call Date: 3/31/97 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RC-2
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: 02499
</TABLE>
Schedule RC--Continued
<TABLE>
<CAPTION> Dollar Amounts in Thousands
-------------------------
////////// Bil Mil Thou
- ---------------------------------------------------------------------------------------------- -------------------------
<S> <C> <C> <C>
LIABILITIES ///////////////////////
13. Deposits: ///////////////////////
///////////////////////
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, part I) ..... RCON 2200 30,789,630 13.a.
---------------------------
(1) Noninterest-bearing(1) ................................ RCON 6631 9,293,258 /////////////////////// 13.a.(1)
(2) Interest-bearing ...................................... RCON 6636 21,496,372 /////////////////////// 13.a.(2)
---------------------------
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E, ///////////////////////
part II) .............................................................................. RCFN 2200 2,221,589 13.b.
---------------------------
(1) Noninterest-bearing ................................... RCFN 6631 38,272 /////////////////////// 13.b.(1)
(2) Interest-bearing ...................................... RCFN 6636 2,183,317 /////////////////////// 13.b.(2)
---------------------------
14. Federal funds purchased and securities sold under agreements to repurchase ............... RCFD 2800 5,510,870 14.
15. a. Demand notes issued to the U.S. Treasury .............................................. RCON 2840 35,346 15.a.
b. Trading liabilities (from Schedule RC-D) .............................................. RCFD 3548 77,911 15.b.
16. Other borrowed money (includes mortgage indebtedness and obligations under ///////////////////////
capitalized leases): ///////////////////////
a. With remaining maturity of one year or less ........................................... RCFD 2332 479,711 16.a.
b. With remaining maturity of more than one year ......................................... RCFD 2333 584,632 16.b.
17. Not applicable ///////////////////////
18. Bank's liability on acceptances executed and outstanding ................................. RCFD 2920 5,274 18.
19. Subordinated notes and debentures(2) ..................................................... RCFD 3200 1,187,482 19.
20. Other liabilities (from Schedule RC-G) ................................................... RCFD 2930 1,261,840 20.
21. Total liabilities (sum of items 13 through 20) ........................................... RCFD 2948 42,154,285 21.
22. Not applicable ///////////////////////
EQUITY CAPITAL ///////////////////////
23. Perpetual preferred stock and related surplus ............................................ RCFD 3838 125,000 23.
24. Common stock ............................................................................. RCFD 3230 19,487 24.
25. Surplus (exclude all surplus related to preferred stock).................................. RCFD 3839 2,551,927 25.
26. a. Undivided profits and capital reserves ................................................ RCFD 3632 1,837,050 26.a.
b. Net unrealized holding gains (losses) on available-for-sale securities ................ RCFD 8434 (25,638) 26.b.
27. Cumulative foreign currency translation adjustments ...................................... RCFD 3284 0 27.
28. Total equity capital (sum of items 23 through 27) ........................................ RCFD 3210 4,508,096 28.
29. Total liabilities, limited-life preferred stock, and equity capital (sum of items 21 ///////////////////////
and 28) .................................................................................. RCFD 3300 46,662,381 29.
-------------------------
</TABLE>
<TABLE>
<S> <C> <C>
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that Number
best describes the most comprehensive level of auditing work performed ----------------
for the bank by independent external auditors as of any date during 1996 ........................ RCFD 6724 2 M.1.
----------------
</TABLE>
<TABLE>
<S> <C>
1 = Independent audit of the bank conducted in accordance 4 = Directors' examination of the bank performed by other
with generally accepted auditing standards by a certified external auditors (may be required by state chartering
public accounting firm which submits a report on the bank authority)
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted auditing auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by external
submits a report on the consolidated holding company auditors
(but not on the bank separately) 7 = Other audit procedures (excluding tax preparation work)
3 = Directors' examination of the bank conducted in accordance 8 = No external audit work
with generally accepted auditing standards by a certified
public accounting firm (may be required by state
chartering authority)
- ------------
</TABLE>
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
(2) Includes limited-life preferred stock and related surplus.
12
<PAGE> 32
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Fleet National Bank Call Date: 3/31/97 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RC-3
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: 02499
-----------
</TABLE>
Schedule RC-A--Cash and Balances Due From Depository Institutions
Exclude assets held for trading.
<TABLE>
<CAPTION>
----------
Dollar Amounts in Thousands C405 (-
--------------------------------- --------
(Column A) (Column B)
Consolidated Domestic
Bank Offices
- ----------------------------------------------------------------------------- -------------------- --------------------
RCFD Bil Mil Thou RCON Bil Mil Thou
<S> <C> <C> <C>
1. Cash items in process of collection, unposted debits, and currency and ////////////////// //////////////////
coin .................................................................... 0022 3,139,724 ////////////////// 1.
a. Cash items in process of collection and unposted debits .............. ////////////////// 0020 2,453,832 1.a.
b. Currency and coin .................................................... ////////////////// 0080 685,892 1.b.
2. Balances due from depository institutions in the U.S. ................... ////////////////// 0082 104,091 2.
a. U.S. branches and agencies of foreign banks (including their IBFs) ... 0083 0 ////////////////// 2.a.
b. Other commercial banks in the U.S. and other depository institutions ////////////////// //////////////////
in the U.S. (including their IBFs) ................................... 0085 104,124 ////////////////// 2.b.
3. Balances due from banks in foreign countries and foreign central banks .. ////////////////// 0070 39,679 3.
a. Foreign branches of other U.S. banks ................................. 0073 31,028 ////////////////// 3.a.
b. Other banks in foreign countries and foreign central banks ........... 0074 8,779 ////////////////// 3.b.
4. Balances due from Federal Reserve Banks ................................. 0090 0 0090 0 4.
5. Total (sum of items 1 through 4) (total of column A must equal ////////////////// //////////////////
Schedule RC, sum of items 1.a and 1.b) .................................. 0010 3,283,655 0010 3,283,494 5.
-------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Memorandum Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------ ----------------------
RCON Bil Mil Thou
<S> <C> <C>
1. Noninterest-bearing balances due from commercial banks in the U.S. (included in item 2, //////////////////
column B above) ........................................................................... 0050 88,751 M.1.
----------------------
</TABLE>
Schedule RC-B--Securities
Exclude assets held for trading.
<TABLE>
<CAPTION>
Dollar Amounts in Thousands C410 (-
-------------------------------------------------------------------------- --------
Held-to-maturity Available-for-sale
----------------------------------------- -----------------------------------------
(Column A) (Column B) (Column C) (Column D)
Amortized Cost Fair Value Amortized Cost Fair Value(1)
- -------------------------------------- -------------------- -------------------- -------------------- --------------------
RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
<S> <C> <C> <C> <C> <C>
1. U.S. Treasury securities ......... 0211 253 0213 253 1286 378,839 1287 374,998 1.
2. U.S. Government agency ////////////////// ////////////////// ////////////////// //////////////////
obligations (exclude ////////////////// ////////////////// ////////////////// //////////////////
mortgage-backed securities): ////////////////// ////////////////// ////////////////// //////////////////
a. Issued by U.S. Govern- ////////////////// ////////////////// ////////////////// //////////////////
ment agencies(2) .............. 1289 0 1290 0 1291 0 1293 0 2.a.
b. Issued by U.S. ////////////////// ////////////////// ////////////////// //////////////////
Government-sponsored ////////////////// ////////////////// ////////////////// //////////////////
agencies(3) ................... 1294 0 1295 0 1297 0 1298 0 2.b.
-------------------------------------------------------------------------------------
</TABLE>
_____________
(1) Includes equity securities without readily determinable fair values at
historical cost in item 6.b, column D.
(2) Includes Small Business Administration "Guaranteed Loan Pool Certificates,"
U.S. Maritime Administration obligations, and Export-Import Bank
participation certificates.
(3) Includes obligations (other than mortgage-backed securities) issued by the
Farm Credit System, the Federal Home Loan Bank System, the Federal Home
Loan Mortgage Corporation, the Federal National Mortgage Association, the
Financing Corporation, Resolution Funding Corporation, the Student Loan
Marketing Association, and the Tennessee Valley Authority.
13
<PAGE> 33
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Fleet National Bank Call Date: 3/31/97 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RC-4
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: 02499
-----------
</TABLE>
Schedule RC-B--Continued
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
-------------------------------------------------------------------------------------
Held-to-maturity Available-for-sale
----------------------------------------- -----------------------------------------
(Column A) (Column B) (Column C) (Column D)
Amortized Cost Fair Value Amortized Cost Fair Value(1)
-------------------- -------------------- -------------------- --------------------
RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
<S> <C> <C> <C> <C> <C>
3. Securities issued by states ////////////////// ////////////////// ////////////////// //////////////////
and political subdivisions ////////////////// ////////////////// ////////////////// //////////////////
in the U.S.: ////////////////// ////////////////// ////////////////// //////////////////
a. General obligations ........... 1676 142,061 1677 142,019 1678 0 1679 0 3.a.
b. Revenue obligations ........... 1681 12,411 1686 12,413 1690 0 1691 0 3.b.
c. Industrial development ////////////////// ////////////////// ////////////////// //////////////////
and similar obligations ....... 1694 0 1695 0 1696 0 1697 0 3.c.
4. Mortgage-backed ////////////////// ////////////////// ////////////////// //////////////////
securities (MBS): ////////////////// ////////////////// ////////////////// //////////////////
a. Pass-through securities: ////////////////// ////////////////// ////////////////// //////////////////
(1) Guaranteed by ////////////////// ////////////////// ////////////////// //////////////////
GNMA ...................... 1698 0 1699 0 1701 759,302 1702 756,748 4.a.(1)
(2) Issued by FNMA ////////////////// ////////////////// ////////////////// //////////////////
and FHLMC ................. 1703 0 1705 0 1706 3,239,252 1707 3,204,046 4.a.(2)
(3) Other pass-through ////////////////// ////////////////// ////////////////// //////////////////
securities................. 1709 0 1710 0 1711 35,001 1713 35,001 4.a.(3)
b. Other mortgage-backed ////////////////// ////////////////// ////////////////// //////////////////
securities (include CMOs, ////////////////// ////////////////// ////////////////// //////////////////
REMICs, and stripped ////////////////// ////////////////// ////////////////// //////////////////
MBS): ////////////////// ////////////////// ////////////////// //////////////////
(1) Issued or guaranteed ////////////////// ////////////////// ////////////////// //////////////////
by FNMA, FHLMC, ////////////////// ////////////////// ////////////////// //////////////////
or GNMA ................... 1714 0 1715 0 1716 0 1717 0 4.b.(1)
(2) Collateralized ////////////////// ////////////////// ////////////////// //////////////////
by MBS issued or ////////////////// ////////////////// ////////////////// //////////////////
guaranteed by FNMA, ////////////////// ////////////////// ////////////////// //////////////////
FHLMC, or GNMA............. 1718 0 1719 0 1731 0 1732 0 4.b.(2)
(3) All other mortgage- ////////////////// ////////////////// ////////////////// //////////////////
backed securities.......... 1733 0 1734 0 1735 430 1736 430 4.b.(3)
5. Other debt securities: ////////////////// ////////////////// ////////////////// //////////////////
a. Other domestic debt ////////////////// ////////////////// ////////////////// //////////////////
securities .................... 1737 0 1738 0 1739 589 1741 578 5.a.
b. Foreign debt ////////////////// ////////////////// ////////////////// //////////////////
securities .................... 1742 0 1743 0 1744 20,547 1746 20,572 5.b.
6. Equity securities: ////////////////// ////////////////// ////////////////// //////////////////
a. Investments in mutual ////////////////// ////////////////// ////////////////// //////////////////
funds and other equity ////////////////// ////////////////// ////////////////// //////////////////
securities with readily ////////////////// ////////////////// ////////////////// //////////////////
determinable fair values....... ////////////////// ////////////////// A510 59,654 A511 59,654 6.a.
b. All other equity ////////////////// ////////////////// ////////////////// //////////////////
securities(1).................. ////////////////// ////////////////// 1752 218,098 1753 218,098 6.b.
7. Total (sum of items 1 ////////////////// ////////////////// ////////////////// //////////////////
through 6) (total of ////////////////// ////////////////// ////////////////// //////////////////
column A must equal ////////////////// ////////////////// ////////////////// //////////////////
Schedule RC, item 2.a) ////////////////// ////////////////// ////////////////// //////////////////
(total of column D must ////////////////// ////////////////// ////////////////// //////////////////
equal Schedule RC, ////////////////// ////////////////// ////////////////// //////////////////
item 2.b)......................... 1754 154,725 1771 154,685 1772 4,711,712 1773 4,670,125 7.
-------------------------------------------------------------------------------------
</TABLE>
_____________
(1) Includes equity securities without readily determinable fair values at
historical cost in item 6.d, column D.
14
<PAGE> 34
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Fleet National Bank Call Date: 3/31/97 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RC-5
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: 02499
-----------
</TABLE>
Schedule RC-B--Continued
<TABLE>
<CAPTION>
Memoranda -----------
C412 (-
----------- ---------------
Dollar Amounts in Thousands
- --------------------------------------------------------------------------------------------------- --------------------------
RCFD Bil Mil Thou
<S> <C> <C> <C>
1. Pledged securities(2) ......................................................................... 0416 1,887,282 M.1.
2. Maturity and repricing data for debt securities(2),(3),(4) (excluding those in nonaccrual status): //////////////////
a. Fixed rate debt securities with a remaining maturity of: //////////////////
(1) Three months or less ................................................................... 0343 49,199 M.2.a.(1)
(2) Over three months through 12 months .................................................... 0344 100,424 M.2.a.(2)
(3) Over one year through five years ....................................................... 0345 1,032,358 M.2.a.(3)
(4) Over five years ........................................................................ 0346 2,378,449 M.2.a.(4)
(5) Total fixed rate debt securities (sum of Memorandum items 2.a.(1) through 2.a.(4)) ..... 0347 3,560,430 M.2.a.(5)
b. Floating rate debt securities with a repricing frequency of: //////////////////
(1) Quarterly or more frequently ........................................................... 4544 291,185 M.2.b.(1)
(2) Annually or more frequently, but less frequently than quarterly ........................ 4545 683,203 M.2.b.(2)
(3) Every five years or more frequently, but less frequently than annually ................. 4551 5,580 M.2.b.(3)
(4) Less frequently than every five years .................................................. 4552 6,700 M.2.b.(4)
(5) Total floating rate debt securities (sum of Memorandum items 2.b.(1) through 2.b.(4)) .. 4553 986,668 M.2.b.(5)
c. Total debt securities (sum of Memorandum items 2.a.(5) and 2.b.(5)) (must equal total debt //////////////////
securities from Schedule RC-B, sum of items 1 through 5, columns A and D, minus nonaccrual //////////////////
debt securities included in Schedule RC-N, item 9, column C) ............................... 0393 4,547,098 M.2.c.
3.-5. Not applicable //////////////////
6. Floating rate debt securities with a remaining maturity of one year or less(2),(4) (included in //////////////////
Memorandum item 2.b.(1) through 2.b(4) above) ................................................. 5519 6,233 M.6.
7. Amortized cost of held-to-maturity securities sold or transferred to available-for-sale or //////////////////
trading securities during the calendar year-to-date (report the amortized cost at date of sale //////////////////
or transfer)................................................................................... 1778 97,163 M.7.
8. High-risk mortgage securities (included in the held-to-maturity and available-for-sale //////////////////
accounts in Schedule RC-B, item 4.b): //////////////////
a. Amortized cost.............................................................................. 8780 0 M.8.a.
b. Fair value.................................................................................. 8781 0 M.8.b.
9. Structured notes (included in the held-to-maturity and available-for-sale accounts in //////////////////
Schedule RC-B, items 2, 3, and 5): //////////////////
a. Amortized cost.............................................................................. 8782 0 M.9.a.
b. Fair value.................................................................................. 8783 0 M.9.b.
----------------------
</TABLE>
_____________
(2) Includes held-to-maturity securities at amortized cost and
available-for-sale securities at fair value.
(3) Exclude equity securities, e.g., investments in mutual funds, Federal
Reserve stock, common stock, and preferred stock.
(4) Memorandum items 2 and 6 are not applicable to savings banks that must
complete supplemental Schedule RC-J.
15
<PAGE> 35
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Fleet National Bank Call Date: 3/31/97 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RC-6
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: 02499
-----------
</TABLE>
Schedule RC-C--Loans and Lease Financing Receivables
Part I. Loans and Leases
<TABLE>
<CAPTION>
Do not deduct the allowance for loan and lease losses from amounts ----------
reported in this schedule. Report total loans and leases, net of unearned Dollar Amounts in Thousands C415 (-
income. Exclude assets held in trading and commercial paper. --------------------------------- --------
(Column A) (Column B)
Consolidated Domestic
Bank Offices
-------------------- --------------------
<S> <C> <C> <C> <C> <C>
RCFD Bil Mil Thou RCON Bil Mil Thou
1. Loans secured by real estate .......................................... 1410 12,645,427 ////////////////// 1.
a. Construction and land development .................................. ////////////////// 1415 614,592 1.a.
b. Secured by farmland (including farm residential and other ////////////////// //////////////////
improvements) ...................................................... ////////////////// 1420 1,969 1.b.
c. Secured by 1-4 family residential properties: ////////////////// //////////////////
(1) Revolving, open-end loans secured by 1-4 family residential ////////////////// //////////////////
properties and extended under lines of credit .................. ////////////////// 1797 1,791,682 1.c.(1)
(2) All other loans secured by 1-4 family residential properties: ////////////////// //////////////////
(a) Secured by first liens ..................................... ////////////////// 5367 5,510,321 1.c.(2)(a)
(b) Secured by junior liens .................................... ////////////////// 5368 601,304 1.c.(2)(b)
d. Secured by multifamily (5 or more) residential properties .......... ////////////////// 1460 469,577 1.d.
e. Secured by nonfarm nonresidential properties ....................... ////////////////// 1480 3,655,982 1.e.
2. Loans to depository institutions: ////////////////// //////////////////
a. To commercial banks in the U.S. .................................... ////////////////// 1505 144,639 2.a.
(1) To U.S. branches and agencies of foreign banks ................. 1506 0 ////////////////// 2.a.(1)
(2) To other commercial banks in the U.S. .......................... 1507 144,639 ////////////////// 2.a.(2)
b. To other depository institutions in the U.S. ....................... 1517 16,875 1517 16,875 2.b.
c. To banks in foreign countries ...................................... ////////////////// 1510 776 2.c.
(1) To foreign branches of other U.S. banks ........................ 1513 712 ////////////////// 2.c.(1)
(2) To other banks in foreign countries ............................ 1516 64 ////////////////// 2.c.(2)
3. Loans to finance agricultural production and other loans to farmers ... 1590 3,768 1590 3,768 3.
4. Commercial and industrial loans: ////////////////// //////////////////
a. To U.S. addressees (domicile) ...................................... 1763 13,274,469 1763 13,261,387 4.a.
b. To non-U.S. addressees (domicile) .................................. 1764 97,858 1764 74,898 4.b.
5. Acceptances of other banks: ////////////////// //////////////////
a. Of U.S. banks ...................................................... 1756 0 1756 0 5.a.
b. Of foreign banks ................................................... 1757 0 1757 0 5.b.
6. Loans to individuals for household, family, and other personal ////////////////// //////////////////
expenditures (i.e., consumer loans) (includes purchased paper) ........ ////////////////// 1975 1,983,378 6.
a. Credit cards and related plans (includes check credit and other ////////////////// //////////////////
revolving credit plans) ............................................ 2008 87,261 ////////////////// 6.a.
b. Other (includes single payment, installment, and all student loans). 2011 1,896,117 ////////////////// 6.b.
7. Loans to foreign governments and official institutions (including ////////////////// //////////////////
foreign central banks) ................................................ 2081 0 2081 0 7.
8. Obligations (other than securities and leases) of states and political ////////////////// //////////////////
subdivisions in the U.S. (includes nonrated industrial development ////////////////// //////////////////
obligations) .......................................................... 2107 141,553 2107 141,553 8.
9. Other loans ........................................................... 1563 2,353,839 ////////////////// 9.
a. Loans for purchasing or carrying securities (secured and unsecured). ////////////////// 1545 245,417 9.a.
b. All other loans (exclude consumer loans) ........................... ////////////////// 1564 2,108,422 9.b.
10. Lease financing receivables (net of unearned income) .................. ////////////////// 2165 2,555,754 10.
a. Of U.S. addressees (domicile) ...................................... 2182 2,555,754 ////////////////// 10.a.
b. Of non-U.S. addressees (domicile) .................................. 2183 0 ////////////////// 10.b.
11. LESS: Any unearned income on loans reflected in items 1-9 above ....... 2123 0 2123 0 11.
12. Total loans and leases, net of unearned income (sum of items 1 through ////////////////// //////////////////
10 minus item 11) (total of column A must equal Schedule RC, item 4.a). 2122 33,218,336 2122 33,182,294 12.
-------------------------------------------
</TABLE>
16
<PAGE> 36
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Fleet National Bank Call Date: 3/31/97 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RC-7
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: 02499
-----------
</TABLE>
Schedule RC-C--Continued
Part I. Continued
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
-------------------------------------------
(Column A) (Column B)
Consolidated Domestic
Bank Offices
Memoranda RCON Bil Mil Thou
- ----------------------------------------------------------------------------- -------------------- --------------------
<S> <C> <C>
1. Not applicable //////////////////
2. Loans and leases restructured and in compliance with modified terms //////////////////
(included in Schedule RC-C, part I, above and not reported as past due //////////////////
or nonaccrual in Schedule RC-N, Memorandum item 1): //////////////////
a. Loans secured by real estate: //////////////////
(1) To U.S. addressees (domicile) ................................... 1687 0 M.2.a.(1)
(2) To non-U.S. addressees (domicile) ............................... 1689 0 M.2.a.(2)
b. All other loans and all lease financing receivables (exclude loans to //////////////////
individuals for household, family, and other personal expenditures).. 8691 0 M.2.b.
c. Commercial and industrial loans to and lease financing receivables //////////////////
of non-U.S. addresses (domicile) included in Memorandum item 2.b //////////////////
above................................................................ 8692 0 M.2.c.
3. Maturity and repricing data for loans and leases(1) (excluding those //////////////////
in nonaccrual status): //////////////////
a. Fixed rate loans and leases with a remaining maturity of: //////////////////
(1) Three months or less ............................................ 0348 2,046,255 M.3.a.(1)
(2) Over three months through 12 months ............................. 0349 297,728 M.3.a.(2)
(3) Over one year through five years ................................ 0356 2,280,748 M.3.a.(3)
(4) Over five years ................................................. 0357 5,414,134 M.3.a.(4)
(5) Total fixed rate loans and leases (sum of //////////////////
Memorandum items 3.a.(1) through 3.a.(4)) ....................... 0358 10,038,865 M.3.a.(5)
b. Floating rate loans with a repricing frequency of: //////////////////
(1) Quarterly or more frequently .................................... 4554 19,014,916 M.3.b.(1)
(2) Annually or more frequently, but less frequently than quarterly . 4555 3,087,028 M.3.b.(2)
(3) Every five years or more frequently, but less frequently than //////////////////
annually ........................................................ 4561 618,323 M.3.b.(3)
(4) Less frequently than every five years ........................... 4564 129,313 M.3.b.(4)
(5) Total floating rate loans (sum of Memorandum items 3.b.(1) //////////////////
through 3.b.(4)) ................................................ 4567 22,849,580 M.3.b.(5)
c. Total loans and leases (sum of Memorandum items 3.a.(5) and 3.b.(5)) //////////////////
(must equal the sum of total loans and leases, net, from //////////////////
Schedule RC-C, part I, item 12, plus unearned income from //////////////////
Schedule RC-C, part I, item 11, minus total nonaccrual loans and //////////////////
leases from Schedule RC-N, sum of items 1 through 8, column C) ...... 1479 32,888,445 M.3.c.
d. Floating rate loans with a remaining maturity or one year or less
(included in Memorandum items 3.b.(1) through 3.b.(4) above) ........ A246 4,490,228 M.3.d.
4. Loans to finance commercial real estate, construction, and land //////////////////
development activities (NOT SECURED BY REAL ESTATE) included in //////////////////
Schedule RC-C, part I, items 4 and 9, column A, page RC-6(2) ........... 2746 296,062 M.4.
5. Loans and leases held for sale (included in Schedule RC-C, part I, above) 5369 1,355,986 M.5.
6. Adjustable rate closed-end loans secured by first liens on 1-4 family ////////////////// RCON Bil Mil Thou
residential properties (included in Schedule RC-C, part I, item //////////////////
1.c.(2)(a), column B, page RC-6) ....................................... ////////////////// 5370 1,818,959 M.6.
-------------------------------------------
</TABLE>
_____________
(1) Memorandum item 3 is not applicable to savings banks that must complete
supplemental Schedule RC-J.
(2) Exclude loans secured by real estate that are included in Schedule RC-C,
part I, item 1, column A.
17
<PAGE> 37
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Fleet National Bank Call Date: 3/31/97 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RC-8
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: 02499
-----------
</TABLE>
Schedule RC-D--Trading Assets and Liabilities
Schedule RC-D is to be completed only by banks with $1 billion or more in total
assets or with $2 billion or more in par/notional amount of off-balance sheet
derivative contracts (as reported in Schedule RC-L, items 14.a through 14.e,
columns A through D).
<TABLE>
<CAPTION> ---------
C420 (-
----------------- --------
Dollar Amounts in Thousands
- -------------------------------------------------------------------------------------------------- -------------------------
<S> <C> <C> <C>
//////// Bil Mil Thou
ASSETS ///////////////////////
1. U.S. Treasury securities in domestic offices ................................................ RCON 3531 82 1.
2. U.S. Government agency obligations in domestic offices (exclude mortgage- ///////////////////////
backed securities) .......................................................................... RCON 3532 0 2.
3. Securities issued by states and political subdivisions in the U.S. in domestic offices ...... RCON 3533 0 3.
4. Mortgage-backed securities (MBS) in domestic offices: ///////////////////////
a. Pass-through securities issued or guaranteed by FNMA, FHLMC, or GNMA ..................... RCON 3534 0 4.a.
b. Other mortgage-backed securities issued or guaranteed by FNMA, FHLMC, or GNMA ///////////////////////
(include CMOs, REMICs, and stripped MBS).................................................. RCON 3535 0 4.b.
c. All other mortgage-backed securities...................................................... RCON 3536 0 4.c.
5. Other debt securities in domestic offices ................................................... RCON 3537 0 5.
6. Certificates of deposit in domestic offices ................................................. RCON 3538 0 6.
7. Commercial paper in domestic offices ........................................................ RCON 3539 0 7.
8. Bankers acceptances in domestic offices ..................................................... RCON 3540 0 8.
9. Other trading assets in domestic offices .................................................... RCON 3541 0 9.
10. Trading assets in foreign offices ........................................................... RCFN 3542 0 10.
11. Revaluation gains on interest rate, foreign exchange rate, and other commodity and equity ///////////////////////
contracts: ///////////////////////
a. In domestic offices ...................................................................... RCON 3543 91,682 11.a.
b. In foreign offices ....................................................................... RCFN 3543 2,012 11.b.
12. Total trading assets (sum of items 1 through 11) (must equal Schedule RC, item 5) ........... RCFD 3545 93,776 12.
---------------------------
</TABLE>
<TABLE>
<CAPTION>
---------------------------
Dollar Amounts in Thousands
<S> <C> <C> <C>
LIABILITIES ---------------------------
///////// Bil Mil Thou
13. Liability for short positions ............................................................... RCFD 3546 0 13.
14. Revaluation losses on interest rate, foreign exchange rate, and other commodity and equity ///////////////////////
contracts ................................................................................... RCFD 3547 77,911 14.
15. Total trading liabilities (sum of items 13 and 14) (must equal Schedule RC, item 15.b) ...... RCFD 3548 77,911 15.
---------------------------
</TABLE>
18
<PAGE> 38
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Fleet National Bank Call Date: 3/31/97 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RC-9
City, State Zip: Springfield MA, 01102
FDIC Certificate No.: 02499
-----------
</TABLE>
Schedule RC-E--Deposit Liabilities
Part I. Deposits in Domestic Offices
<TABLE>
<CAPTION>
----------
Dollar Amounts in Thousands C425 (-
------------------------------------------------------ --------
Nontransaction
Transaction Accounts Accounts
----------------------------------------- --------------------
(Column A) (Column B) (Column C)
Total transaction Memo: Total Total
accounts (including demand deposits nontransaction
total demand (included in accounts
deposits) column A) (including MMDAs)
-------------------- -------------------- --------------------
- ---------------------------------------------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
RCON Bil Mil Thou RCON Bil Mil Thou RCON Bil Mil Thou
Deposits of: ////////////////// ////////////////// //////////////////
1. Individuals, partnerships, and corporations .......... 2201 8,327,509 2240 7,923,022 2346 20,348,243 1.
2. U.S. Government ...................................... 2202 14,334 2280 14,314 2520 5,568 2.
3. States and political subdivisions in the U.S. ........ 2203 403,756 2290 393,570 2530 729,379 3.
4. Commercial banks in the U.S. ......................... 2206 588,003 2310 588,003 2550 397 4.
5. Other depository institutions in the U.S. ............ 2207 185,300 2312 185,300 2349 2,284 5.
6. Banks in foreign countries ........................... 2213 12,574 2320 12,574 2236 0 6.
7. Foreign governments and official institutions ////////////////// ////////////////// //////////////////
(including foreign central banks) .................... 2216 0 2300 0 2377 0 7.
8. Certified and official checks ........................ 2330 172,283 2330 172,283 ////////////////// 8.
9. Total (sum of items 1 through 8) (sum of ////////////////// ////////////////// //////////////////
columns A and C must equal Schedule RC, ////////////////// ////////////////// //////////////////
item 13.a) ........................................... 2215 9,703,759 2210 9,289,066 2385 21,085,871 9.
----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
---------------------
Memoranda Dollar Amounts
in Thousands
- --------------------------------------------------------------------------------------------------- --------------------
<S> <C> <C>
RCON Bil Mil Thou
1. Selected components of total deposits (i.e., sum of item 9, columns A and C): //////////////////
a. Total Individual Retirement Accounts (IRAs) and Keogh Plan accounts ........................ 6835 2,504,673 M.1.a.
b. Total brokered deposits .................................................................... 2365 1,212,576 M.1.b.
c. Fully insured brokered deposits (included in Memorandum item 1.b above): //////////////////
(1) Issued in denominations of less than $100,000 .......................................... 2343 2,164 M.1.c.(1)
(2) Issued either in denominations of $100,000 or in denominations greater than //////////////////
$100,000 and participated out by the broker in shares of $100,000 or less ............. 2344 1,210,412 M.1.c.(2)
d. Maturity data for brokered deposits: //////////////////
(1) Brokered deposits issued in denominations of less than $100,000 with a remaining //////////////////
maturity of one year or less (included in Memorandum item 1.c.(1) above) .............. A243 707 M.1.d.(1)
(2) Brokered deposits issued in denominations of $100,000 or more with a remining //////////////////
maturity of one year or less (included in Memorandum item 1.b above) ................... A244 565,510 M.1.d.(2)
e. Preferred deposits (uninsured deposits of states and political subdivisions in the U.S. //////////////////
reported in item 3 above which are secured or collateralized as required under state law) .. 5590 323,638 M.1.e.
2. Components of total nontransaction accounts (sum of Memorandum items 2.a through 2.d must //////////////////
equal item 9, column C above): //////////////////
a. Savings deposits: //////////////////
(1) Money market deposit accounts (MMDAs) .................................................. 6810 10,163,621 M.2.a.(1)
(2) Other savings deposits (excludes MMDAs) ................................................ 0352 2,392,789 M.2.a.(2)
b. Total time deposits of less than $100,000 .................................................. 6648 6,310,045 M.2.b.
c. Total time deposits of $100,000 or more .................................................... 2604 2,219,416 M.2.c.
3. All NOW accounts (included in column A above) ................................................. 2398 414,693 M.3.
4. Not applicable
----------------------
</TABLE>
19
<PAGE> 39
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Fleet National Bank Call Date: 3/31/97 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RC-10
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: 02499
-----------
</TABLE>
Schedule RC-E--Continued
Part I. Continued
Memoranda (continued)
<TABLE>
<CAPTION>
-----------------
Dollar Amounts in Thousands RCON Bil Mil Thou
- -------------------------------------------------------------------------------------------------- ------------------
<S> <C> <C>
5. Maturity and repricing data for time deposits of less than $100,000 (sum of //////////////////
Memorandum items 5.a.(1) through 5.b.(3) must equal Memorandum item 2.b above):(1) //////////////////
a. Fixed rate time deposits of less than $100,000 with a remaining maturity of: //////////////////
(1) Three months or less ................................................................... A225 1,512,534 M.5.a.(1)
(2) Over three months through 12 months .................................................... A226 2,890,076 M.5.a.(2)
(3) Over one year .......................................................................... A227 1,849,309 M.5.a.(3)
b. Floating rate time deposits of less than $100,000 with a repricing frequency of: //////////////////
(1) Quarterly or more frequently ........................................................... A228 58,126 M.5.b.(1)
(2) Annually or more frequently, but less frequently than quarterly ........................ A229 0 M.5.b.(2)
(3) Less frequently than annually .......................................................... A230 0 M.5.b.(3)
c. Floating rate time deposits of less than $100,000 with a remaining maturity of //////////////////
one year or less (included in Memorandum item 5.b.(1) through 5.b.(3) above) ............... A231 39,996 M.5.c.
6. Maturity and repricing data for time deposits of $100,000 or more (i.e. time certificates //////////////////
of deposit of $100,000 or more and open-account time deposits of $100,000 or more) //////////////////
(sum of memorandum items 6.a.(1) through 6.b.(4) must equal Memorandum //////////////////
item 2.c above):(1) //////////////////
a. Fixed rate time deposits of $100,000 or remaining maturity of: //////////////////
(1) Three months or less ................................................................... A232 625,327 M.6.a.(1)
(2) Over three months through 12 months .................................................... A233 731,348 M.6.a.(2)
(3) Over one year through five years ....................................................... A234 821,728 M.6.a.(3)
(4) Over five years ........................................................................ A235 8,344 M.6.a.(4)
b. Floating rate time deposits of $100,000 or more than a repricing frequency of: //////////////////
(1) Quarterly or more frequently ........................................................... A236 2,653 M.6.b.(1)
(2) Annually or more frequently, but less frequently than quarterly ........................ A237 30,016 M.6.b.(2)
(3) Every five years or more frequently, but less frequently than annually ................. A238 0 M.6.b.(3)
(4) Less frequently than every five years .................................................. A239 0 M.6.b.(4)
c. Floating rate time deposits of $100,000 or more with a remaining maturity of //////////////////
one year or less (included in Memorandum items 6.b.(1) through 6.b.(4) above) ............. A240 1,783 M.6.c.
----------------------
</TABLE>
_____________
(1) Memorandum items 5 and 6 are not applicable to savings banks that must
complete supplemental Schedule RC-J.
20
<PAGE> 40
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Fleet National Bank Call Date: 3/31/97 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RC-11
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: 02499
-----------
</TABLE>
Schedule RC-E--Continued
Part II. Deposits in Foreign Offices (including Edge and
Agreement Subsidiaries and IBFs)
<TABLE>
<CAPTION>
-------------------
Dollar Amounts in Thousands RCFN Bil Mil Thou
- --------------------------------------------------------------------------------------------------- ------------------
<S> <C> <C> <C>
Deposits of: //////////////////
1. Individuals, partnerships, and corporations ................................................... 2621 1,933,242 1.
2. U.S. banks (including IBFs and foreign branches of U.S. banks) ................................ 2623 282,676 2.
3. Foreign banks (including U.S. branches and agencies of foreign banks, including their IBFs) ... 2625 0 3.
4. Foreign governments and official institutions (including foreign central banks) ............... 2650 0 4.
5. Certified and official checks ................................................................. 2330 0 5.
6. All other deposits ............................................................................ 2668 5,671 6.
7. Total (sum of items 1 through 6) (must equal Schedule RC, item 13.b) .......................... 2200 2,221,589 7.
----------------------
</TABLE>
<TABLE>
<CAPTION>
-------------------
Memorandum Dollar Amounts in Thousands RCFN Bil Mil Thou
- --------------------------------------------------------------------------------------------------- ------------------
<S> <C> <C> <C>
1. Time deposits with a remaining maturity of one year or less
(included in Part II, item 7 above)............................................................ A245 2,220,930 M.1.
---------------------
</TABLE>
Schedule RC-F--Other Assets
<TABLE>
<CAPTION>
----------
C430 <-
-------------------- --------
Dollar Amounts in Thousands ////////// Bil Mil Thou
- -------------------------------------------------------------------------------------------------- ----------------------------
<S> <C> <C> <C> <C>
1. Income earned, not collected on loans ........................................................ RCFD 2164 167,296 1.
2. Net deferred tax assets(1) ................................................................... RCFD 2148 0 2.
3. Interest-only strips receivable (not in the form of a security)(2) on: ....................... ///////////////////////
a. Mortgage Loans ............................................................................ RCFD A519 0 3.a.
b. Other Financial Assets .................................................................... RCFD A520 0 3.b.
4. Other (itemize and describe amounts that exceed 25% of this item) ............................ RCFD 2168 2,337,015 4.
a. TEXT 3549 Purchased Foreclosure Receivables RCFD 3549 764,918 /////////////////////// 4.a.
----------------------------------------------------------------
b. TEXT 3550 RCFD 3550 /////////////////////// 4.b.
----------------------------------------------------------------
c. TEXT 3551 RCFD 3551 /////////////////////// 4.c.
-----------------------------------------------------------------
---------------------------
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 11) ........................... RCFD 2160 2,504,311 5.
---------------------------
</TABLE>
<TABLE>
<CAPTION>
Memorandum -----------------------------
Dollar Amounts in Thousands ///////// Bil Mil Thou
- -------------------------------------------------------------------------------------------------- ----------------------------
<S> <C> <C> <C>
1. Deferred tax assets disallowed for regulatory capital purposes ............................... RCFD 5610 0 M.1.
---------------------------
</TABLE>
Schedule RC-G--Other Liabilities
<TABLE>
<CAPTION>
----------
C435 <-
-------------------- --------
Dollar Amounts in Thousands ///////////Bil Mil Thou
- -------------------------------------------------------------------------------------------------- ----------------------------
<S> <C> <C>
1. a. Interest accrued and unpaid on deposits in domestic offices(3) ............................ RCON 3645 39,854 1.a.
b. Other expenses accrued and unpaid (includes accrued income taxes payable) ................. RCFD 3646 444,109 1.b.
2. Net deferred tax liabilities(1) .............................................................. RCFD 3049 459,679 2.
3. Minority interest in consolidated subsidiaries ............................................... RCFD 3000 0 3.
4. Other (itemize amounts that exceed 25% of this item) ......................................... RCFD 2938 318,198 4.
a. TEXT 3552 Payable -- Market Valuation of Hedge Derivatives RCFD 3552 98,863 /////////////////////// 4.a.
----------------------------------------------------------------
b. TEXT 3553 RCFD 3553 /////////////////////// 4.b.
----------- ----------------------------------------------------
c. TEXT 3554 RCFD 3554 /////////////////////// 4.c.
-----------------------------------------------------------------
---------------------------
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 20) ........................... RCFD 2930 1,261,840 5.
---------------------------
</TABLE>
____________
(1) See discussion of deferred income taxes in Glossary entry on "income
taxes."
(2) Report interest-only strips receivable in the form of a security as
available-for-sale securities in Schedule RC, item 2.b, or as trading assets
in Schedule RC, item 5, as appropriate.
(3) For savings banks, include "dividends" accrued and unpaid on deposits.
21
<PAGE> 41
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Fleet National Bank Call Date: 3/31/97 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RC-12
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: 02499
-----------
</TABLE>
Schedule RC-H--Selected Balance Sheet Items for Domestic Offices
<TABLE>
<CAPTION>
C440 <-
------------ --------
Domestic Offices
--------------------
Dollar Amounts in Thousands RCON Bil Mil Thou
- --------------------------------------------------------------------------------------------------- --------------------
<S> <C> <C>
1. Customers' liability to this bank on acceptances outstanding .................................. 2155 5,274 1.
2. Bank's liability on acceptances executed and outstanding ...................................... 2920 5,274 2.
3. Federal funds sold and securities purchased under agreements to resell ........................ 1350 294,589 3.
4. Federal funds purchased and securities sold under agreements to repurchase .................... 2800 5,510,870 4.
5. Other borrowed money .......................................................................... 3190 1,064,343 5.
EITHER //////////////////
6. Net due from own foreign offices, Edge and Agreement subsidiaries, and IBFs ................... 2163 N/A 6.
OR //////////////////
7. Net due to own foreign offices, Edge and Agreement subsidiaries, and IBFs ..................... 2941 2,183,951 7.
8. Total assets (excludes net due from foreign offices, Edge and Agreement subsidiaries, //////////////////
and IBFs) ..................................................................................... 2192 46,622,157 8.
9. Total liabilities (excludes net due to foreign offices, Edge and Agreement subsidiaries, and //////////////////
IBFs) ......................................................................................... 3129 39,930,110 9.
----------------------
ITEMS 10-17 Include Held-to-Maturity and Available-for-Sale Securities in Domestic Offices. ----------------------
RCON Bil Mil Thou
--------------------
10. U.S. Treasury securities ..................................................................... 1779 375,251 10.
11. U.S. Government agency obligations (exclude mortgage-backed securities).......................
securities) .................................................................................. 1785 0 11.
12. Securities issued by states and political subdivisions in the U.S. ........................... 1786 154,472 12.
13. Mortgage-backed securities (MBS): //////////////////
a. Pass-through securities: //////////////////
(1) Issued or guaranteed by FNMA, FHLMC, or GNMA .......................................... 1787 3,960,794 13.a.(1)
(2) Other pass-through securities ......................................................... 1869 35,001 13.a.(2)
b. Other mortgage-backed securities (include CMOs, REMICs, and stripped MBS): //////////////////
(1) Issued or guaranteed by FNMA, FHLMC, or GNMA .......................................... 1877 0 13.b.(1)
(2) All other mortgage-backed securities .................................................. 2253 430 13.b.(2)
14. Other domestic debt securities ............................................................... 3159 578 14.
15. Foreign debt securities ...................................................................... 3160 20,572 15.
16. Equity securities: //////////////////
a. Investments in mutual funds and other equity securities with readily determinable //////////////////
fair values ............................................................................... A513 59,654 16.a.
b. All other equity securities ............................................................... 3169 218,098 16.b.
17. Total held-to-maturity and available-for-sale securities (sum of items 10 through 16) ........ 3170 4,824,850 17.
----------------------
Memorandum (to be completed only by banks with IBFs and other "foreign" offices)
----------------------
Dollar Amounts in Thousands RCON Bil Mil Thou
- ----------------------------------------------------------------------------------------------------- --------------------
EITHER //////////////////
1. Net due from the IBF of the domestic offices of the reporting bank ............................ 3051 0 M.1.
OR //////////////////
2. Net due to the IBF of the domestic offices of the reporting bank .............................. 3059 N/A M.2.
----------------------
</TABLE>
22
<PAGE> 42
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Fleet National Bank Call Date: 03/31/97 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RC-13
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: 02499
-----------
</TABLE>
Schedule RC-I--Selected Assets and Liabilities of IBFs
To be completed only by banks with IBFs and other "foreign" offices.
<TABLE>
<CAPTION>
----------
C445 <-
------------ --------
Dollar Amounts in Thousands RCFN Bil Mil Thou
- ----------------------------------------------------------------------------------------------------- --------------------
<S> <C> <C>
1. Total IBF assets of the consolidated bank (component of Schedule RC, item 12) .................. 2133 0 1.
2. Total IBF loans and lease financing receivables (component of Schedule RC-C, part I, item 12, //////////////////
column A) ...................................................................................... 2076 0 2.
3. IBF commercial and industrial loans (component of Schedule RC-C, part I, item 4, //////////////////
column A) ...................................................................................... 2077 0 3.
4. Total IBF liabilities (component of Schedule RC, item 21) ...................................... 2898 0 4.
5. IBF deposit liabilities due to banks, including other IBFs (component of Schedule RC-E, //////////////////
part II, items 2 and 3) ........................................................................ 2379 0 5.
6. Other IBF deposit liabilities (component of Schedule RC-E, part II, items 1, 4, 5, and 6) ...... 2381 0 6.
</TABLE>
Schedule RC-K--Quarterly Averages (1)
__________
<TABLE>
<CAPTION>
----------
C455 <-
----------------- --------
Dollar Amounts in Thousands ///////// Bil Mil Thou
- ----------------------------------------------------------------------------------------------- -------------------------
<S> <C> <C> <C>
ASSETS ///////////////////////
1. Interest-bearing balances due from depository institutions ............................... RCFD 3381 17,448 1.
2. U.S. Treasury securities and U.S. Government agency obligations(2) ....................... RCFD 3382 4,634,832 2.
3. Securities issued by states and political subdivisions in the U.S.(2) .................... RCFD 3383 157,216 3.
4. a. Other debt securities(2) .............................................................. RCFD 3647 89,778 4.a.
b. Equity securities(3) (includes investments in mutual funds and Federal Reserve stock) . RCFD 3648 269,680 4.b.
5. Federal funds sold and securities purchased under agreements to resell ................... RCFD 3365 139,917 5.
6. Loans: ///////////////////////
a. Loans in domestic offices: ///////////////////////
(1) Total loans ....................................................................... RCON 3360 30,372,236 6.a.(1)
(2) Loans secured by real estate ...................................................... RCON 3385 13,150,160 6.a.(2)
(3) Loans to finance agricultural production and other loans to farmers ............... RCON 3386 4,125 6.a.(3)
(4) Commercial and industrial loans ................................................... RCON 3387 12,501,912 6.a.(4)
(5) Loans to individuals for household, family, and other personal expenditures ....... RCON 3388 2,068,618 6.a.(5)
b. Total loans in foreign offices, Edge and Agreement subsidiaries, and IBFs ............. RCFD 3360 93,587 6.b.
7. Trading assets ........................................................................... RCFD 3401 90,881 7.
8. Lease financing receivables (net of unearned income) ..................................... RCFD 3484 2,563,612 8.
9. Total assets(4) .......................................................................... RCFD 3368 45,942,216 9.
LIABILITIES ///////////////////////
10. Interest-bearing transaction accounts in domestic offices (NOW accounts, ATS accounts, ///////////////////////
and telephone and preauthorized transfer accounts) (exclude demand deposits) ............. RCON 3485 572,015 10.
11. Nontransaction accounts in domestic offices: ///////////////////////
a. Money market deposit accounts (MMDAs) ................................................. RCON 3486 9,973,512 11.a.
b. Other savings deposits ................................................................ RCON 3487 2,380,156 11.b.
c. Time deposit of $100,000 or more ...................................................... RCON A514 2,333,867 11.c.
d. Time deposits of less than $100,000.................................................... RCON A529 6,544,111 11.d.
12. Interest-bearing deposits in foreign offices, Edge and Agreement subsidiaries, and IBFs .. RCFN 3404 2,128,882 12.
13. Federal funds purchased and securities sold under agreements to repurchase ............... RCFD 3353 4,956,376 13.
14. Other borrowed money (includes mortgage indebtedness and obligations under capitalized ///////////////////////
leases) .................................................................................. RCFD 3355 919,643 14.
---------------------------
</TABLE>
_____________
(1) For all items, banks have the option of reporting either (1) an average of
daily figures for the quarter, or (2) an average of weekly figures (i.e.,
the Wednesday of each week of the quarter).
(2) Quarterly averages for all debt securities should be based on amortized
cost.
(3) Quarterly averages for all equity securities should be based on historical
cost.
(4) The quarterly average for total assets should reflect all debt securities
(not held for trading) at amortized cost, equity securities with readily
determinable fair values at the lower of cost or fair value, and equity
securities without readily determinable fair values at historical cost.
23
<PAGE> 43
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Fleet National Bank Call Date: 3/31/97 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RC-14
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: 02499
-----------
</TABLE>
Schedule RC-L--Off-Balance Sheet Items
Please read carefully the instructions for the preparation of Schedule RC-L.
Some of the amounts reported in Schedule RC-L are regarded as volume indicators
and not necessarily as measures of risk.
<TABLE>
<CAPTION>
----------
C460 <-
------------ --------
Dollar Amounts in Thousands
- ---------------------------------------------------------------------------------------------------- --------------------
<S> <C> <C> <C>
RCFD Bil Mil Thou
1. Unused commitments: //////////////////
a. Revolving, open-end lines secured by 1-4 family residential properties, e.g., home //////////////////
equity lines ............................................................................... 3814 2,120,991 1.a.
b. Credit card lines .......................................................................... 3815 39,190 1.b.
c. Commercial real estate, construction, and land development: //////////////////
(1) Commitments to fund loans secured by real estate ....................................... 3816 456,954 1.c.(1)
(2) Commitments to fund loans not secured by real estate ................................... 6550 562,044 1.c.(2)
d. Securities underwriting .................................................................... 3817 0 1.d.
e. Other unused commitments ................................................................... 3818 21,889,418 1.e.
2. Financial standby letters of credit and foreign office guarantees ............................. 3819 2,339,536 2.
a. Amount of financial standby letters of credit conveyed to others .... RCFD 3820 84,599 ////////////////// 2.a.
3. Performance standby letters of credit and foreign office guarantees ........................... 3821 166,920 3.
a. Amount of performance standby letters of credit conveyed to others .. RCFD 3822 5,267 ////////////////// 3.a.
4. Commercial and similar letters of credit ...................................................... 3411 131,496 4.
5. Participations in acceptances (as described in the instructions) conveyed to others by //////////////////
the reporting bank ............................................................................ 3428 145 5.
6. Participations in acceptances (as described in the instructions) acquired by the reporting //////////////////
(nonaccepting) bank ........................................................................... 3429 20,053 6.
7. Securities borrowed ........................................................................... 3432 0 7.
8. Securities lent (including customers' securities lent where the customer is indemnified //////////////////
against loss by the reporting bank) ........................................................... 3433 1,862,344 8.
9. Financial assets transferred with recourse that have been treated as sold for //////////////////
Call Report purposes: //////////////////
a. First lien 1-to-4 family residential mortgage loans: //////////////////
(1) Outstanding principal balance of mortgages transferred as of the report date ........... A521 578,869 9.a.(1)
(2) Amount of recourse exposure on these mortgages as of the report date ................... A522 578,869 9.a.(2)
b. Other financial assets (excluding small business obligations reported in item 9.c): //////////////////
(1) Outstanding principal balance of assets transferred as of the report date .............. A523 0 9.b.(1)
(2) Amount of recourse exposure on these assets as of the report date .....,,,.............. A524 0 9.b.(2)
c. Small business obligations transferred with recourse under Section 208 of the //////////////////
Riegle Community Development and Regulatory Improvement Act of 1994: //////////////////
(1) Outstanding principal balance of small business obligations transferred //////////////////
as of the report date .................................................................. A249 0 9.c.(1)
(2) Amount of retained recourse on these obligations of the report date .................... A250 0 9.c.(2)
10. Notional amount of credit derivatives: //////////////////
a. Credit derivatives on which the reporting bank is the guarantor ............................ A534 0 10.a.
b. Credit derivatives on which the reporting bank is the beneficiary .......................... A535 0 10.b.
11. Spot foreign exchange contracts ............................................................... 8765 1,774,864 11.
12. All other off-balance sheet liabilities (exclude off-balance sheet derivatives) (itemize and //////////////////
describe each component of this item over 25% of Schedule RC, item 28, "Total equity capital") 3430 0 12.
a. TEXT 3555 ...................................................... RCFD 3555 ////////////////// 12.a.
b. TEXT 3556 ...................................................... RCFD 3556 ////////////////// 12.b.
c. TEXT 3557 ...................................................... RCFD 3557 ////////////////// 12.c.
d. TEXT 3558 ...................................................... RCFD 3558 ////////////////// 12.d.
</TABLE>
24
<PAGE> 44
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Fleet National Bank Call Date: 03/31/97 ST-BK: 25-0595 FFIEC 031
Address: One Monarch Place Page RC-15
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: 02499
-----------
</TABLE>
Schedule RC-L--Continued
<TABLE>
<CAPTION>
-------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou
- ------------------------------------------------------------------------------------------------ -------------------
<S> <C> <C> <C>
13. All other off-balance sheet assets (exclude off-balance sheet derivatives) (itemize and //////////////////
describe each component of this item over 25% of Schedule RC, item 28, "Total equity capital") 5591 0 13.
//////////////////
a. TEXT 5592 ....................................................... RCFD 5592 ////////////////// 13.a.
b. TEXT 5593 ....................................................... RCFD 5593 ////////////////// 13.b.
c. TEXT 5594 ....................................................... RCFD 5594 ////////////////// 13.c.
d. TEXT 5595 ....................................................... RCFD 5595 ////////////////// 13.d.
</TABLE>
<TABLE>
<CAPTION>
-------------
C461 <-
---------------------------------------------------------------------------------------
(Column A) (Column B) (Column C) (Column D)
Dollar Amounts in Thousands Interest Rate Foreign Exchange Equity Derivative Commodity And
- ---------------------------------- Contracts Contracts Contracts Other Contracts
Off-balance Sheet Derivatives ---------------------------------------------------------------------------------------
Position Indicators Tril Bil Mil Thou Tril Bil Mil Thou Tril Bil Mil Thou Tril Bil Mil Thou
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
14. Gross amounts (e.g., //////////////////// ////////////////// ////////////////// ///////////////////
notional amounts) (for each //////////////////// ////////////////// ////////////////// ///////////////////
column, sum of items 14.a //////////////////// ////////////////// ////////////////// ///////////////////
through 14.e must equal //////////////////// ////////////////// ////////////////// ///////////////////
sum of items 15, 16.a, //////////////////// ////////////////// ////////////////// ///////////////////
and 16.b): //////////////////// ////////////////// ////////////////// ///////////////////
a. Futures contracts.......... 0 0 0 48,835 14.a
RCFD 8693 RCFD 8694 RCFD 8695 RCFD 8696
b. Foward contracts........... 2,410,500 2,006,310 0 154,640 14.b
RCFD 8697 RCFD 8698 RCFD 8699 RCFD 8700
c. Exchange-traded option //////////////////// ////////////////// ////////////////// ///////////////////
contracts: //////////////////// ////////////////// ////////////////// ///////////////////
(1) Written options........ 0 13,706 0 0 14.c.(1)
RCFD 8701 RCFD 8702 RCFD 8703 RCFD 8704
(2) Purchased options...... 1,234,000 13,706 0 0 14.c.(2)
RCFD 8705 RCFD 8706 RCFD 8707 RCFD 8708
d. Over-the-counter option //////////////////// ////////////////// ////////////////// ///////////////////
contracts: //////////////////// ////////////////// ////////////////// ///////////////////
(1) Written options........ 5,433,087 0 0 0 14.d.(1)
RCFD 8709 RCFD 8710 RCFD 8711 RCFD 8712
(2) Purchased options...... 26,684,679 0 0 0 14.d.(2)
RCFD 8713 RCFD 8714 RCFD 8715 RCFD 8716
e. Swaps...................... 22,159,333 0 0 0 14.e.
RCFD 3450 RCFD 3826 RCFD 8719 RCFD 8720
15. Total gross notional amount //////////////////// ////////////////// ////////////////// ///////////////////
of derivatives contracts //////////////////// ////////////////// ////////////////// ///////////////////
held for trading.............. 5,395,980 2,033,722 0 0 15.
RCFD A126 RCFD A127 RCFD 8723 RCFD 8724
16. Total gross notional amount //////////////////// ////////////////// ////////////////// ///////////////////
of derivative contracts //////////////////// ////////////////// ////////////////// ///////////////////
held for purposes other //////////////////// ////////////////// ////////////////// ///////////////////
than trading: //////////////////// ////////////////// ////////////////// ///////////////////
a. Contracts marked //////////////////// ////////////////// ////////////////// ///////////////////
to market ................. 3,095,500 0 0 48,835 16.a.
RCFD 8725 RCFD 8726 RCFD 8727 RCFD 8728
b. Contracts not marked //////////////////// ////////////////// ////////////////// ///////////////////
to market ................. 49,431,119 0 0 154,640 16.b.
RCFD 8729 RCFD 8730 RCFD 8731 RCFD 8732
----------------------------------------------------------------------------------------
</TABLE>
25
<PAGE> 45
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Fleet National Bank Call Date: 3/31/97 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RC-16
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: 02499
-----------
</TABLE>
Schedule RC-L--Continued
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
----------------------------------------------------------------------------------------
(Column A) (Column B) (Column C) (Column D)
Interest Rate Foreign Exchange Equity Derivative Commodity and
Contracts Contracts Contracts Other Contracts
Off-balance Sheet Derivatives
Position Indicators
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
17. Gross fair values of ////////////////// ////////////////// ////////////////// //////////////////
derivative contracts: ////////////////// ////////////////// ////////////////// //////////////////
a. Contracts held for ////////////////// ////////////////// ////////////////// //////////////////
trading: ////////////////// ////////////////// ////////////////// //////////////////
(1) Gross positive ////////////////// ////////////////// ////////////////// //////////////////
fair value............. 8733 35,179 8734 58,515 8735 0 8736 0 17.a.(1)
(2) Gross negative ////////////////// ////////////////// ////////////////// //////////////////
fair value............. 8737 27,884 8738 50,027 8739 0 8740 0 17.a.(2)
b. Contracts held for ////////////////// ////////////////// ////////////////// //////////////////
purposes other than ////////////////// ////////////////// ////////////////// //////////////////
trading that are marked ////////////////// ////////////////// ////////////////// //////////////////
to market: ////////////////// ////////////////// ////////////////// //////////////////
(1) Gross positive ////////////////// ////////////////// ////////////////// //////////////////
fair value............. 8741 1,270 8742 0 8743 0 8744 800 17.b.(1)
(2) Gross negative ////////////////// ////////////////// ////////////////// //////////////////
fair value............. 8745 770 8746 0 8747 0 8748 0 17.b.(2)
c. Contracts held for ////////////////// ////////////////// ////////////////// //////////////////
purposes other than ////////////////// ////////////////// ////////////////// //////////////////
trading that are not ////////////////// ////////////////// ////////////////// //////////////////
marked to market: ////////////////// ////////////////// ////////////////// //////////////////
(1) Gross positive ////////////////// ////////////////// ////////////////// //////////////////
fair value............. 8749 90,496 8750 0 8751 0 8752 417 17.c.(1)
(2) Gross negative ////////////////// ////////////////// ////////////////// //////////////////
fair value............. 8753 232,577 8754 0 8755 0 8756 0 17.c.(2)
------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
----------------------------
Memoranda Dollar Amounts in Thousands
- ---------------------------------------------------------------------------------------------------- --------------------
<S> <C>
RCFD Bil Mil Thou
1-2. Not applicable //////////////////
3. Unused commitments with an original maturity exceeding one year that are reported in //////////////////
Schedule RC-L, items 1.a through 1.e, above (report only the unused portions of commitments //////////////////
that are fee paid or otherwise legally binding) ............................................... 3833 19,008,771 M.3.
a. Participations in commitments with an original maturity //////////////////
exceeding one year conveyed to others ........................... RCFD 3834 1,887,977 ////////////////// M.3.a.
4. To be completed only by banks with $1 billion or more in total assets: //////////////////
Standby letters of credit and foreign office guarantees (both financial and performance) issued //////////////////
to non-U.S. addressees (domicile) included in Schedule RC-L, items 2 and 3, above ............. 3377 382,371 M.4.
5. Installment loans to individuals for household, family, and other personal expenditures that //////////////////
have been securitized and sold without recourse (with servicing retained), //////////////////
amounts outstanding by type of loan: //////////////////
a. Loans to purchase private passenger automobiles (TO BE COMPLETED FOR THE SEPTEMBER //////////////////
REPORT ONLY)................................................................................ 2741 N/A M.5.a.
b. Credit cards and related plans (TO BE COMPLETED QUARTERLY).................................. 2742 0 M.5.b.
c. All other consumer installment credit (including mobile home loans) (TO BE COMPLETED //////////////////
FOR THE SEPTEMBER REPORT ONLY).............................................................. 2743 N/A M.5.c.
----------------------
</TABLE>
26
<PAGE> 46
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Fleet National Bank Call Date: 03/31/97 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RC-17
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: 02499
-----------
</TABLE>
Schedule RC-M--Memoranda
<TABLE>
<CAPTION>
----------
C465 (-
----------------------------
Dollar Amounts in Thousands
- ----------------------------------------------------------------------------------------------------- ----------------------------
<S> <C> <C>
RCFD Bil Mil Thou
1. Extensions of credit by the reporting bank to its executive officers, directors, principal //////////////////
shareholders, and their related interests as of the report date: //////////////////
a. Aggregate amount of all extensions of credit to all executive officers, directors, principal //////////////////
shareholders, and their related interests .................................................... 6164 565,035 1.a.
b. Number of executive officers, directors, and principal shareholders to whom the amount of all //////////////////
extensions of credit by the reporting bank (including extensions of credit to //////////////////
related interests) equals or exceeds the lesser of $500,000 or 5 percent Number //////////////////
of total capital as defined for this purpose in agency regulations. RCFD 6165 23 ////////////////// 1.b.
2. Federal funds sold and securities purchased under agreements to resell with U.S. branches //////////////////
and agencies of FOREIGN BANKS(1) (included in Schedule RC, item 3)............................... 3405 0 2.
3. Not applicable. //////////////////
4. Outstanding principal balance of 1-4 family residential mortgage loans serviced for others //////////////////
(include both retained servicing and purchased servicing): //////////////////
a. Mortgages serviced under a GNMA contract ..................................................... 5500 25,741,330 4.a.
b. Mortgages serviced under a FHLMC contract: //////////////////
(1) Serviced with recourse to servicer ....................................................... 5501 50,919 4.b.(1)
(2) Serviced without recourse to servicer .................................................... 5502 34,894,730 4.b.(2)
c. Mortgages serviced under a FNMA contract: //////////////////
(1) Serviced under a regular option contract ................................................. 5503 244,922 4.c.(1)
(2) Serviced under a special option contract ................................................. 5504 41,105,444 4.c.(2)
d. Mortgages serviced under other servicing contracts ........................................... 5505 10,869,138 4.d.
5. To be completed only by banks with $1 billion or more in total assets: //////////////////
Customers' liability to this bank on acceptances outstanding (sum of items 5.a and 5.b must //////////////////
equal Schedule RC, item 9): //////////////////
a. U.S. addressees (domicile) ................................................................... 2103 5,081 5.a.
b. Non-U.S. addressees (domicile) ............................................................... 2104 193 5.b.
6. Intangible assets: //////////////////
a. Mortgage servicing rights .................................................................... 3164 1,869,691 6.a.
b. Other identifiable intangible assets: //////////////////
(1) Purchased credit card relationships ...................................................... 5506 0 6.b.(1)
(2) All other identifiable intangible assets ................................................. 5507 95,757 6.b.(2)
c. Goodwill ..................................................................................... 3163 686,511 6.c.
d. Total (sum of items 6.a through 6.c) (must equal Schedule RC, item 10) ....................... 2143 2,651,959 6.d.
e. Amount of intangible assts (included in item 6.b.(2) above) that have been //////////////////
grandfathered or are otherwise qualifying for regulatory capital purposes..................... 6442 0 6.e.
7. Mandatory convertible debt, net of common or perpetual preferred stock dedicated to redeem //////////////////
the debt ........................................................................................ 3295 75,000 7.
----------------------
</TABLE>
_____________
(1) Do not report federal funds sold and securities purchased under agreements
to resell with other commercial banks in the U.S. in this item.
27
<PAGE> 47
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Fleet National Bank Call Date: 3/31/97 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RC-18
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: 02499
-----------
</TABLE>
Schedule RC-M--Continued
<TABLE>
<CAPTION>
----------------------------
Dollar Amounts in Thousands
- -------------------------------------------------------------------------------------------- ----------------------------
<S> <C> <C> <C>
RCFD Bil Mil Thou
8. a. Other real estate owned: ///////////////////////
(1) Direct and indirect investments in real estate ventures ........................ 5372 0 8.a.(1)
///////////////////////
(2) All other real estate owned: RCON
(a) Construction and land development in domestic offices ...................... 5508 170 8.a.(2)(a)
(b) Farmland in domestic offices ............................................... 5509 0 8.a.(2)(b)
(c) 1-4 family residential properties in domestic offices ...................... 5510 13,227 8.a.(2)(c)
(d) Multifamily (5 or more) residential properties in domestic offices ......... 5511 264 8.a.(2)(d)
(e) Nonfarm nonresidential properties in domestic offices ...................... 5512 7,768 8.a.(2)(e)
RCFN
(f) In foreign offices ......................................................... 5513 0 8.a.(2)(f)
RCFD
(3) Total (sum of items 8.a.(1) and 8.a.(2)) (must equal Schedule RC, item 7) ...... 2150 21,429 8.a.(3)
b. Investments in unconsolidated subsidiaries and associated companies: ///////////////////////
RCFD
(1) Direct and indirect investments in real estate ventures ........................ 5374 0 8.b.(1)
(2) All other investments in unconsolidated subsidiaries and associated companies .. 5375 0 8.b.(2)
(3) Total (sum of items 8.b.(1) and 8.b.(2)) (must equal Schedule RC, item 8) ...... 2130 0 8.b.(3)
9. Noncumulative perpetual preferred stock and related surplus included in Schedule RC, ///////////////////////
item 23, "Perpetual preferred stock and related surplus" .............................. 3778 125,000 9.
10. Mutual fund and annuity sales in domestic offices during the quarter (include ///////////////////////
proprietary, private label, and third party products): ///////////////////////
RCON
a. Money market funds ................................................................. 6441 364,727 10.a.
b. Equity securities funds ............................................................ 8427 137,578 10.b.
c. Debt securities funds .............................................................. 8428 5,497 10.c.
d. Other mutual funds ................................................................. 8429 0 10.d.
e. Annuities .......................................................................... 8430 134,695 10.e.
f. Sales of proprietary mutual funds and annuities (included in items 10.a through ///////////////////////
10.e above) ........................................................................ 8784 469,321 10.f.
///////////////////////
11. Net unamortized realized deferred gains (losses) on off-balance sheet derivative RCFD
contracts included in assets and liabilities reported in Schedule RC .................. A525 10,595 11.
12. Amount of assets netted against nondeposit liabilities and deposits in foreign offices ///////////////////////
(other than insured branches in Puerto Rico and U.S. territories and possessions) on ///////////////////////
the balance sheet (Schedule RC) in accordance with generally accepted accounting ///////////////////////
principles(1) ......................................................................... A526 0 12.
---------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
--------------------------
Memorandum Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------- ----------------------------
<S> <C> <C> <C>
RCFD Bil Mil Thou
1. Reciprocal holdings of banking organizations' capital instruments //////////////////
(To be completed for the December report only) .............................................. 3836 N/A M.1.
-------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
_________________
(1) Exclude netted on-balance sheet amounts associated with off-balance sheet
derivative contracts, deferred tax assets netted against deferred tax
liabilities, and assets netted in accounting for pensions.
28
<PAGE> 48
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Fleet National Bank Call Date: 03/31/97 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RC-19
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: 02499
-----------
</TABLE>
Schedule RC-N--Past Due and Nonaccrual Loans, Leases,
and Other Assets
<TABLE>
<CAPTION>
The FFIEC regards the information reported in
all of Memorandum item 1, in items 1 through 10,
column A, and in Memorandum items 2 through 4, ----------
column A, as confidential. C470 (-
------------------------------------------------------------------
Dollar Amounts in Thousands
------------------------------------------------------------------
(Column A) (Column B) (Column C)
Past due Past due 90 Nonaccrual
30 through 89 days or more
days and still and still
accruing accruing
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
1. Loans secured by real estate: //////////////////// ////////////////// //////////////////
a. To U.S. addressees (domicile) ................ 1245 1246 51,189 1247 235,148 1.a.
b. To non-U.S. addressees (domicile) ............ 1248 1249 0 1250 2 1.b.
2. Loans to depository institutions and //////////////////// ////////////////// //////////////////
acceptances of other banks: //////////////////// ////////////////// //////////////////
a. To U.S. banks and other U.S. depository //////////////////// ////////////////// //////////////////
institutions ................................. 5377 5378 0 5379 0 2.a.
b. To foreign banks ............................. 5380 5381 0 5382 0 2.b.
3. Loans to finance agricultural production and //////////////////// ////////////////// //////////////////
other loans to farmers .......................... 1594 1597 0 1583 487 3.
4. Commercial and industrial loans: //////////////////// ////////////////// //////////////////
a. To U.S. addressees (domicile) ................ 1251 1252 4,809 1253 80,747 4.a.
b. To non-U.S. addressees (domicile) ............ 1254 1255 0 1256 0 4.b.
5. Loans to individuals for household, family, and //////////////////// ////////////////// //////////////////
other personal expenditures: //////////////////// ////////////////// /////////////////
a. Credit cards and related plans ............... 5383 5384 1,917 5385 0 5.a.
b. Other (includes single payment, installment, //////////////////// ////////////////// //////////////////
and all student loans) ....................... 5386 5387 21,586 5388 7,167 5.b.
6. Loans to foreign governments and official //////////////////// ////////////////// //////////////////
institutions .................................... 5389 5390 0 5391 0 6.
7. All other loans ................................. 5459 5460 12,235 5461 2,448 7.
8. Lease financing receivables: //////////////////// ////////////////// //////////////////
a. Of U.S. addressees (domicile) ................ 1257 1258 149 1259 3,892 8.a.
b. Of non-U.S. addressees (domicile) ............ 1271 1272 0 1791 0 8.b.
9. Debt securities and other assets (exclude other //////////////////// ////////////////// //////////////////
real estate owned and other repossessed assets) . 3505 3506 0 3507 0 9.
------------------------------------------------------------------
</TABLE>
================================================================================
Amounts reported in items 1 through 8 above include guaranteed and unguaranteed
portions of past due and nonaccrual loans and leases. Report in item 10 below
certain guaranteed loans and leases that have already been included in the
amounts reported in items 1 through 8.
<TABLE>
<CAPTION>
10. Loans and leases reported in items 1 ---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
through 8 above which are wholly or partially /////////////////// ////////////////// //////////////////
guaranteed by the U.S. Government ............... 5612 5613 19,524 5614 10,131 10.
a. Guaranteed portion of loans and leases /////////////////// ////////////////// //////////////////
included in item 10 above .................... 5615 5616 19,115 5617 8,048 10.a.
-----------------------------------------------------------------
</TABLE>
29
<PAGE> 49
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Fleet National Bank Call Date: 3/31/97 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RC-20
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: 02499
-------
</TABLE>
Schedule RC-N--Continued
<TABLE>
<CAPTION>
----------
C473 <-
--------------------------------------------------------------
Dollar Amounts in Thousands
--------------------------------------------------------------
(Column A) (Column B) (Column C)
Past due Past due 90 Nonaccrual
30 through 89 days or more
days and still and still
Memoranda accruing accruing
------------------- -------------------- -------------------
RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
- ----------------------------------------------------- ------------------ ------------------ ------------------
<S> <C> <C> <C>
1. Restructured loans and leases included in ////////////////// ////////////////// //////////////////
Schedule RC-N, items 1 through 8, above ////////////////// ////////////////// //////////////////
(and not reported in Schedule RC-C, part I, ////////////////// ////////////////// //////////////////
Memorandum item 2)............................... 1658 0 1659 0 1661 0 M.1.
2. Loans to finance commercial real estate, ////////////////// ////////////////// //////////////////
construction, and land development activities ////////////////// ////////////////// //////////////////
(not secured by real estate) included in ////////////////// ////////////////// //////////////////
Schedule RC-N, items 4 and 7, above ............. 6558 0 6559 336 6560 1,377 M.2.
------------------ ------------------ ------------------
3. Loans secured by real estate in domestic offices RCON Bil Mil Thou RCON Bil Mil Thou RCON Bil Mil Thou
------------------ ------------------ ------------------
(included in Schedule RC-N, item 1, above): ////////////////// ////////////////// //////////////////
a. Construction and land development ............ 2759 0 2769 224 3492 22,856 M.3.a.
b. Secured by farmland .......................... 3493 0 3494 0 3495 144 M.3.b.
c. Secured by 1-4 family residential properties: ////////////////// ////////////////// //////////////////
(1) Revolving, open-end loans secured by ////////////////// ////////////////// //////////////////
1-4 family residential properties and ////////////////// ////////////////// //////////////////
extended under lines of credit ........... 5398 133 5399 4,628 5400 9,247 M.3.c.(1)
(2) All other loans secured by 1-4 family ////////////////// ////////////////// //////////////////
residential properties ................... 5401 12,297 5402 40,232 5403 102,965 M.3.c.(2)
d. Secured by multifamily (5 or more) ////////////////// ////////////////// //////////////////
residential properties ....................... 3499 163 3500 0 3501 10,621 M.3.d.
e. Secured by nonfarm nonresidential properties . 3502 3,027 3503 6,105 3504 89,315 M.3.e.
-------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------
(Column A) (Column B)
Past due 30 Past due 90
through 89 days days or more
-------------------- --------------------
RCFD Bil Mil Thou RCFD Bil Mil Thou
-------------------- --------------------
<S> <C> <C>
4. Interest rate, foreign exchange rate, and other ////////////////// //////////////////
commodity and equity contracts: ////////////////// //////////////////
a. Book value of amounts carried as assets ...... 3522 0 3528 0 M.4.a.
b. Replacement cost of contracts with a ////////////////// //////////////////
positive replacement cost .................... 3529 0 3530 0 M.4.b.
-------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Person to whom questions about the Reports of Condition and Income should
be directed: C477 <-
Pamela S. Flynn, Vice President (401) 278-5194
- ------------------------------------ --------------------------------------
Name and Title (TEXT 8901) Area code/phone number/extension
(TEXT 8902)
30
<PAGE> 50
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Fleet National Bank Call Date: 03/31/97 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RC-21
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: 02499
-----------
</TABLE>
Schedule RC-O--Other Data for Deposit Insurance and FICO Assessments
__________
<TABLE>
<CAPTION>
----------
C475 (-
---------------------------
Dollar Amounts in Thousands
- --------------------------------------------------------------------------------------------------- --------------------
<S> <C> <C>
RCON Bil Mil Thou
1. Unposted debits (see instructions): //////////////////
a. Actual amount of all unposted debits ...................................................... 0030 0 1.a.
OR //////////////////
b. Separate amount of unposted debits: //////////////////
(1) Actual amount of unposted debits to demand deposits ................................... 0031 N/A 1.b.(1)
(2) Actual amount of unposted debits to time and savings deposits(1) ...................... 0032 N/A 1.b.(2)
2. Unposted credits (see instructions): //////////////////
a. Actual amount of all unposted credits ..................................................... 3510 0 2.a.
OR //////////////////
b. Separate amount of unposted credits: //////////////////
(1) Actual amount of unposted credits to demand deposits .................................. 3512 N/A 2.b.(1)
(2) Actual amount of unposted credits to time and savings deposits(1) ..................... 3514 N/A 2.b.(2)
3. Uninvested trust funds (cash) held in bank's own trust department (not included in total //////////////////
deposits in domestic offices) ................................................................ 3520 117,335 3.
4. Deposits of consolidated subsidiaries in domestic offices and in insured branches in //////////////////
Puerto Rico and U.S. territories and possessions (not included in total deposits): //////////////////
a. Demand deposits of consolidated subsidiaries .............................................. 2211 369,799 4.a.
b. Time and savings deposits(1) of consolidated subsidiaries ................................. 2351 31,251 4.b.
c. Interest accrued and unpaid on deposits of consolidated subsidiaries ...................... 5514 0 4.c.
5. Deposits in insured branches in Puerto Rico and U.S. territories and possessions: //////////////////
a. Demand deposits in insured branches (included in Schedule RC-E, Part II) .................. 2229 0 5.a.
b. Time and savings deposits(1) in insured branches (included in Schedule RC-E, Part II) ..... 2383 0 5.b.
c. Interest accrued and unpaid on deposits in insured branches //////////////////
(included in Schedule RC-G, item 1.b) ..................................................... 5515 0 5.c.
6. Reserve balances actually passed through to the Federal Reserve by the reporting bank on //////////////////
behalf of its respondent depository institutions that are also reflected as deposit liabilities //////////////////
of the reporting bank: //////////////////
a. Amount reflected in demand deposits (included in Schedule RC-E, Part I, //////////////////
item 4 or 5, column B)..................................................................... 2314 0 6.a.
b. Amount reflected in time and savings deposits(1) (included in Schedule RC-E, Part I, //////////////////
item 4 or 5, column A or C, but not Column B).............................................. 2315 0 6.b.
7. Unamortized premiums and discounts on time and savings deposits:(1),(2) //////////////////
a. Unamortized premiums ...................................................................... 5516 675 7.a.
b. Unamortized discounts ..................................................................... 5517 0 7.b.
8. To be completed by banks with "Oakar deposits." //////////////////
a. Deposits purchased or acquired from other FDIC-insured institutions during the quarter //////////////////
(exclude deposits purchased or acquired from foreign offices other than insured branches //////////////////
in Puerto Rico and U.S. territories and possessions): //////////////////
(1) Total deposits purchased or acquired from other FDIC-insured institutions during //////////////////
the quarter .......................................................................... A531 0 8.a.(1)
(2) Amount of purchased or acquired deposits reported in item 8.a.(1) above attributable //////////////////
to a secondary fund (i.e., BIF members report deposits attributable to SAIF; SAIF //////////////////
members report deposits attributable to BIF) ......................................... A532 0 8.a.(2)
b. Total deposits sold or transferred to other FIDC-insured institutions during the quarter //////////////////
(exclude sales or transfers by the reporting bank of deposits in foreign offices other //////////////////
than insured branches in Puerto Rico and U.S. territories and possessions) ............... A533 0 8.b.
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
______________
(1) For FDIC insurance and FICO assessment purposes, "time and savings
deposits" consists of nontransaction accounts and all transaction accounts
other than demand deposits.
(2) Exclude core deposit intangibles.
31
<PAGE> 51
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Fleet National Bank Call Date: 3/31/97 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RC-22
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: 02499
-----------
</TABLE>
Schedule RC-O--Continued
<TABLE>
<CAPTION>
----------------------------
Dollar Amounts in Thousands
- -------------------------------------------------------------------------------------------------- --------------------
<S> <C>
RCON Bil Mil Thou
9. Deposits in lifeline accounts................................................................. 5596////////////// 9.
10. Benefit-responseive "Depository Institution Investment Contracts" (included in total //////////////////
deposits in domestic offices)................................................................. 8432 0 10.
11. Adjustments to demand deposits in domestic offices and in insured branches in Puerto Rico //////////////////
and U.S. territories and possessions reported in Schedule RC-E for certain reciprocal //////////////////
demand balances: //////////////////
a. Amount by which demand deposits would be reduced if the reporting bank's reciprocal //////////////////
demand balances with the domestic offices of U.S. banks and savings associations //////////////////
and insured branches in Puerto Rico and U.S. territories and possessions that were //////////////////
reported on a gross basis in Schedule RC-E had been reported on a net basis................ 8785 0 11.a.
b. Amount by which demand deposits would be increased if the reporting bank's reciprocal //////////////////
demand balances with foreign banks and foreign offices of other U.S. banks (other than //////////////////
insured branches in Puerto Rico and U.S. territories and possessions) that were reported //////////////////
on a net basis in Schedule RC-E had been reported on a gross basis......................... A181 0 11.b.
c. Amount by which demand deposits would be reduced if cash items in process of collection //////////////////
were included in the calculation of the reporting bank's net reciprocal demand balances //////////////////
with the domestic offices of U.S. banks and savings associations and insured branches //////////////////
in Puerto Rico and U.S. territories and possessions in Schedule RC-E....................... A182 0 11.c.
12. Amount of assets netted against deposit liabilities in domestic offices and in insured //////////////////
branches in Puerto Rico and U.S. territories and possessions on the balance sheet //////////////////
(Schedule RC) in accordance with generally accepted acocunting principles (exclude amounts //////////////////
related to reciprocal demand balances): //////////////////
a. Amount of assets netted against demand deposits............................................ A527 0 12.a.
b. Amount of assets netted against time and savings deposits.................................. A528 0 12.b.
------------------
</TABLE>
Memoranda (to be completed each quarter except as noted)
<TABLE>
<CAPTION>
---------------------------
Dollar Amounts in Thousands
- --------------------------------------------------------------------------------------------------- ---------------------
<S> <C>
RCON Bil Mil Thou
1. Total deposits in domestic offices of the bank (sum of Memorandum items 1.a.(1) and 1.b.(1) //////////////////
must equal Schedule RC, item 13.a): //////////////////
a. Deposit accounts of $100,000 or less: //////////////////
(1) Amount of deposit accounts of $100,000 or less ........................................ 2702 15,053,198 M.1.a.(1)
(2) Number of deposit accounts of $100,000 or less (to be Number //////////////////
---------------------------
completed for the June report only) ........................ RCON 3779 N/A ////////////////// M.1.a.(2)
---------------------------
b. Deposit accounts of more than $100,000: //////////////////
(1) Amount of deposit accounts of more than $100,000 ....................................... 2710 15,736,432 M.1.b.(1)
Number //////////////////
---------------------------
(2) Number of deposit accounts of more than $100,000 ........... RCON 2722 29,202 ////////////////// M.1.b.(2)
-------------------------------------------------
2. Estimated amount of uninsured deposits in domestic offices of the bank:
a. An estimate of your bank's uninsured deposits can be determined by multiplying the number of
deposit accounts of more than $100,000 reported in Memorandum item 1.b.(2) above by
$100,000 and subtracting the result from the amount of deposit accounts of more than
$100,000 reported in Memorandum item 1.b.(1) above.
Indicate in the appropriate box at the right whether your bank has a method or procedure for Yes No
----------------------
determining a better estimate of uninsured deposits than the estimate described above ..... 6861 /// X M.2.a.
--------------------
b. If the box marked YES has been checked, report the estimate of uninsured deposits RCON Bil Mil Thou
--------------------
determined by using your bank's method or procedure ....................................... 5597 N/A M.2.b.
----------------------
3. Has the reporting institution been consolidated wiht a parent bank or savings association in
that parent bank's or parent savings association's Call Report or Thrift Financial Report?
If so, report the legal title and FDIC Certificate Number of the parent bank or parent
savings association: FDIC Cert No.
-------------------------------
TEXT A545 N/A RCON A545 N/A M.3.
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
32
<PAGE> 52
<TABLE>
<S> <C> <C> <C> <C>
Legal Title of Bank: Fleet National Bank Call Date: 03/31/97 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RC-23
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: 02499
-----------
</TABLE>
Schedule RC-R--Regulatory Capital
This schedule must be completed by all banks as follows: Banks that reported
total assets of $1 billion or more in Schedule RC, item 12, for June 30, 1996,
must complete items 2 through 9 and Memoranda items 1 and 2. Banks with assets
of less than $1 billion must complete items 1 through 3 below or Schedule RC-R
in its entirety, depending on their response to item 1 below.
<TABLE>
<S> <C> <C>
------------
C480 (-
1. Test for determining the extent to which Schedule RC-R must be completed. To be completed -----------------
only by banks with total assets of less than $1 billion. Indicate in the appropriate YES NO
box at the right whether the bank has total capital greater than or equal to eight percent -------------------------
of adjusted total assets .................................................................... RCFD 6056 /// 1.
-------------------------
For purposes of this test, adjusted total assets equals total assets less cash, U.S. Treasuries, U.S. Government
agency obligations, and 80 percent of U.S. Government-sponsored agency obligations plus the allowance for loan
and lease losses and selected off-balance sheet items as reported on Schedule RC-L (see instructions).
If the box marked YES has been checked, then the bank only has to complete items 2 and 3 below. If the box marked
NO has been checked, the bank must complete the remainder of this schedule.
A NO response to item 1 does not necessarily mean that the bank's actual risk-based capital ratio is less than eight
percent or that the bank is not in compliance with the risk-based capital guidelines.
</TABLE>
- --------------------------------------------------------------
NOTE: All banks are required to complete items 2 and 3 below.
See optional worksheet items 3.a through 3.f
- --------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------------
Dollar Amounts in Thousands
- -------------------------------------------------------------------------------------------------- --------------------
<S> <C>
RCON Bil Mil Thou
2. Portion of qualifying limited-life capital instruments (original weighted //////////////////
average maturity of at least five years) that is includible in Tier 2 capital: //////////////////
a. Subordinated debt(1) and intermediate term preferred stock................................. A515 1,032,949 2.a.
b. Other limited-life capital instruments..................................................... A516 0 2.b.
3. Amounts used in calculating regulatory capital ratios (report amounts //////////////////
determined by the bank for its own internal regulatory capital analyses //////////////////
consistent with applicable capital standards): //////////////////
a. Tier 1 capital............................................................................. 8274 3,751,196 3.a.
b. Tier 2 capital............................................................................. 8275 1,692,587 3.b.
c. Total risk-based capital................................................................... 3792 5,443,783 3.c.
d. Excess allowance for loan and lease losses (amount that exceeds 1.25% of gross //////////////////
risk-weighted assets)...................................................................... A222 178,575 3.d.
e. Net risk-weighted assets (gross risk-weighted assets less excess allowance reported //////////////////
in item 3.d above and all other deductions)................................................ A223 46,592,473 3.e.
f. "Average total assets" (Quarterly average reported in Schedule RC-K, item 9, less all //////////////////
assets deducted from Tier 1 capital)(2).................................................... A224 45,159,948 3.f.
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------
(Column A) (Column B)
Items 4-9 and Memoranda items 1 and 2 are to be completed Assets Credit Equiv-
by banks that answered NO to item 1 above and Recorded alent Amount
by banks with total assets of $1 billion or more. on the of Off-Balance
Balance Sheet Sheet Items(3)
-------------------- --------------------
<S> <C> <C>
-------------------- --------------------
4. Assets and credit equivalent amounts of off-balance sheet items assigned RCFD Bil Mil Thou RCFD Bil Mil Thou
to the Zero percent risk category: ////////////////// //////////////////
a. Assets recorded on the balance sheet................................... 5163 2,055,883 ////////////////// 4.a.
b. Credit equivalent amount of off-balance sheet items ................... ////////////////// 3796 2,006,848 4.b.
-------------------------------------------
</TABLE>
______________
(1) Exclude mandatory convertible debt reported in Schedule RC-M, item 7.
(2) Do not deduct excess allowance for loan and lease losses.
(2) Do not report in column B the risk-weighted amount of assets reported in
column A.
33
<PAGE> 53
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Fleet National Bank Call Date: 03/31/97 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RC-24
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: 02499
-----------
</TABLE>
Schedule RC-R--Continued
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
-----------------------------------------
(Column A) (Column B)
Assets Credit Equiv-
Recorded alent Amount
on the of Off-Balance
Balance Sheet Sheet Items(1)
-------------------- --------------------
<S> <C> <C>
RCFD Bil Mil Thou RCFD Bil Mil Thou
5. Assets and credit equivalent amounts of off-balance sheet items ////////////////// //////////////////
assigned to the 20 percent risk category: ////////////////// //////////////////
a. Assets recorded on the balance sheet ................................. 5156 8,192,992 ////////////////// 5.a.
b. Credit equivalent amount of off-balance sheet items ////////////////// 3801 1,140,442 5.b.
6. Assets and credit equivalent amounts of off-balance sheet items ////////////////// //////////////////
assigned to the 50 percent risk category: ////////////////// //////////////////
a. Assets recorded on the balance sheet .................................. 3802 5,436,503 ////////////////// 6.a.
b. Credit equivalent amount of off-balance sheet items ................... ////////////////// 3803 805,757 6.b.
7. Assets and credit equivalent amounts of off-balance sheet items ////////////////// //////////////////
assigned to the 100 percent risk category: ////////////////// //////////////////
a. Assets recorded on the balance sheet .................................. 3804 30,903,771 ////////////////// 7.a.
b. Credit equivalent amount of off-balance sheet items ................... ////////////////// 3805 10,879,460 7.b.
8. On-balance sheet asset values excluded from and deducted in the ////////////////// //////////////////
calculation of the risk-based capital ratio(2) ........................... 3806 836,445 ////////////////// 8.
9. Total assets recorded on the balance sheet (sum of ////////////////// //////////////////
items 4.a, 5.a, 6.a, 7.a, and 8, column A)(must equal Schedule RC, ////////////////// //////////////////
item 12 plus items 4.b and 4.c) .......................................... 3807 47,425,594 ////////////////// 9.
-------------------------------------------
</TABLE>
<TABLE>
<CAPTION> Dollar Amounts in Thousands
Memoranda RCFD Bil Mil Thou
- --------------------------------------------------------------------------------------------------- --------------------
<S> <C>
1. Current credit exposure across all off-balance sheet derivative contracts covered by the //////////////////
risk-basked capital standards ................................................................. 8764 177,407 M.1
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
With a remaining maturity of
-----------------------------------------------------------------------------
(Column A) (Column B) (Column C)
One year or less Over one year Over five years
2. Notional principal amounts of off- through five years
balance sheet derivative contracts(3): ----------------------- ----------------------- ---------------------------
<S> <C> <C> <C>
RCFD Tri Bil Mil Thou RCFD Tri Bil Mil Thou RCFD Tri Bil Mil Thou
a. Interest rate contracts ........... 3809 7,047,455 8766 39,328,101 8767 1,413,955 M.2.a.
b. Foreign exchange contracts ........ 3812 1,532,313 8769 86,346 8770 0 M.2.b.
c. Gold contracts .................... 8771 136,026 8772 0 8773 0 M.2.c.
d. Other precious metals contracts ... 8774 18,615 8775 0 8776 0 M.2.d.
e. Other commodity contracts ......... 8777 0 8778 0 8779 0 M.2.e.
f. Equity derivative contracts ....... A000 0 A001 0 A002 0 M.2.f.
-----------------------------------------------------------------------------
</TABLE>
- --------------------
(1) Do not report in column B the risk-weighted amount of
assets reported in column A.
(2) Include the difference between the fair value and the amortized cost of
available-for-sale debt securities in item 8 and report the amortized
cost of these debt securities in items 4 through 7 above. For available-
for-sale equity securities, if fair value exceeds cost, include the
difference between the fair value and the cost in item 8 and report the
cost of these equity securities in items 5 through 7 above; if cost exceeds
fair value, report the fair value of these equity securities in items 5
through 7 above and include no amount in item 8. Item 8 also includes
on-balance sheet asset values (or portions thereof) of off-balance sheet
interest rate, foreign exchange rate, and commodity contracts and those
contracts (e.g., futures contracts) not subject to risk-based capital.
Exclude from item 8 margin accounts and accrued receivables not included
in the calculation of credit equivalent amounts of off-balance sheet
derivatives as well as any portion of the allowance for loan and lease
losses in excess of the amount that may be included in Tier 2 capital.
(3) Exclude foreign exchange contracts with an original maturity of 14 days
or less and all futures contracts.
34
<PAGE> 54
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Fleet National Bank Call Date: 3/31/97 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RC-25
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: 02499
-----------
</TABLE>
Optional Narrative Statement Concerning the Amounts
Reported in the Reports of Condition and Income
at close of business on March 1, 1997
<TABLE>
<CAPTION>
Fleet National Bank Springfield Massachusetts
_______________________________________________________________ __________________________________, ___________________________
Legal Title of Bank City State
<S> <C> <C>
The management of the reporting bank may, if it wishes, sub- the truncated statement will appear as the bank's statement
mit a brief narrative statement on the amounts reported in both on agency computerized records and in computer-file
the Reports of Condition and Income. This optional statement releases to the public.
will be made available to the public, along with the publicly
available data in the Reports of Condition and Income, in re- All information furnished by the bank in the narrative state-
sponse to any request for individual bank report data. How- ment must be accurate and not misleading. Appropriate ef-
ever, the information reported in column A and in all of forts shall be taken by the submitting bank to ensure the
Memorandum item 1 of Schedule RC-N is regarded as confidential statement's accuracy. The statement must be signed, in the
and will not be released to the public. BANKS CHOOSING TO space provided below, by a senior officer of the bank who
SUBMIT THE NARRATIVE STATEMENT SHOULD ENSURE THAT THE thereby attests to its accuracy.
STATEMENT DOES NOT CONTAIN THE NAMES OR OTHER
IDENTIFICATIONS OF INDIVIDUAL BANK CUSTOMERS, REFERENCES If, subsequent to the original submission, material changes
TO THE AMOUNTS REPORTED IN THE CONFIDENTIAL ITEMS IN are submitted for the data reported in the Reports of Condi-
SCHEDULE RC-N, OR ANY OTHER INFORMATION THAT THEY ARE tion and Income, the existing narrative statement will be
NOT WILLING TO HAVE MADE PUBLIC OR THAT WOULD deleted from the files, and from disclosure; the bank, at its
COMPROMISE THE PRIVACY OF THEIR CUSTOMERS. Banks choosing option, may replace it with a statement, under signature, ap-
not to make a statement may check the "No comment" box below propriate to the amended data.
and should make no entries of any kind in the space provided
for the narrative statement; i.e., DO NOT enter in this space The optional narrative statement will appear in agency
such phrases as "No statement," "Not applicable," "N/A," records and in release to the public exactly as submitted (or
"No comment," and "None." amended as described in the preceding paragraph) by the
management of the bank (except for the truncation of state-
ments exceeding the 750-character limit described above).
THE STATEMENT WILL NOT BE EDITED OR SCREENED IN ANY
The optional statement must be entered on this sheet. The WAY BY THE SUPERVISORY AGENCIES FOR ACCURACY OR
statement should not exceed 100 words. Further, regardless RELEVANCE. DISCLOSURE OF THE STATEMENT SHALL NOT
of the number of words, the statement must not exceed 750 SIGNIFY THAT ANY FEDERAL SUPERVISORY AGENCY HAS
characters, including punctuation, indentation, and standard VERIFIED OR CONFIRMED THE ACCURACY OF THE INFORMATION
spacing between words and sentences. If any submission CONTAINED THEREIN. A STATEMENT TO THIS EFFECT WILL
should exceed 750 characters, as defined, it will be truncated APPEAR ON ANY PUBLIC RELEASE OF THE OPTIONAL STATEMENT
at 750 characters with no notice to the submitting bank and SUBMITTED BY THE MANAGEMENT OF THE REPORTING BANK.
- ---------------------------------------------------------------------------------------------------------------------------------
No comment X (RCON 6979) C471 C472 <-
--- -------------------
BANK MANAGEMENT STATEMENT (please type or print clearly):
(TEXT 6980)
Signature of Giro DeRosa appears here 4/28/97
--------------------------------------------- --------------------------------
Signature of Executive Officer of Bank Date of Signature
</TABLE>
35
<PAGE> 1
EXHIBIT 99.1
ICO, INC.
LETTER OF TRANSMITTAL
FOR
TENDER OF ALL OUTSTANDING
10 3/8% SENIOR NOTES DUE 2007, SERIES A
IN EXCHANGE FOR
10 3/8% SENIOR NOTES DUE 2007, SERIES B
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON __________, 1997, UNLESS EXTENDED (THE "EXPIRATION DATE")
OLD NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN
AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME,
ON THE BUSINESS DAY PRIOR TO THE EXPIRATION DATE
DELIVER TO THE EXCHANGE AGENT:
FLEET NATIONAL BANK
By Hand/Overnight Courier: By Mail:
Fleet National Bank Fleet National Bank
Corporate Trust Operations Corporate Trust Operations
777 Main Street, Lower Level 777 Main Street, Lower Level
Hartford, Connecticut 06115 CTMO 0224
Attention: Patricia Williams Hartford, Connecticut 06115
Attn: Patricia Williams
By Facsimile:
(860) 986-7908
Confirm by Telephone:
(860) 986-1271
---------------
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS
LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF
TRANSMITTAL IS COMPLETED.
The undersigned hereby acknowledges receipt and review of the Prospectus
dated __________, 1997 (the "Prospectus") of ICO, Inc., a Texas corporation
(the "Company"), and this Letter of Transmittal (the "Letter of Transmittal"),
which together describe the Company's offer (the "Exchange Offer") to exchange
its 10 3/8% Senior Notes due 2007, Series B (the "Exchange Notes"), which have
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), pursuant to a Registration Statement of which the Prospectus is a part,
for a like principal amount of its issued and outstanding 10 3/8% Senior Notes
due 2007, Series A (the "Old Notes"). Capitalized terms used but not defined
herein have the respective meaning given to them in the Prospectus.
The Company reserves the right, at any time or from time to time, to extend
the Exchange Offer at its discretion, in which event the term "Expiration Date"
shall mean the latest date to which the Exchange Offer is extended. The
Company shall notify the holders of the Old Notes of any extension by oral or
written notice and will mail to the record holders of Old Notes an announcement
thereof, each prior to 9:00 a.m., New York City time, on the next business day
after the previously scheduled Expiration Date.
This Letter of Transmittal is to be used by a holder of Old Notes if
original Old Notes, if available, are to be forwarded herewith or an Agent's
Message is to be used if delivery of Old Notes is to be made by book-entry
transfer to the account maintained by the Exchange Agent at The Depository
Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedures
set forth in the Prospectus under the caption "The Exchange Offer -- Procedures
for Tendering" and "Book-Entry Transfer." Holders of Old Notes whose Old Notes
are not immediately available, or who are unable to deliver their Old Notes and
all other documents required by this Letter of Transmittal to the Exchange
Agent on or prior to the Expiration Date, or who are unable to complete the
procedure for book-entry transfer on a timely
basis, must tender their Old Notes according to the guaranteed delivery
procedures set forth in the Prospectus under the caption "The Exchange Offer --
Guaranteed Delivery
<PAGE> 2
Procedures." See Instruction 1. Delivery of documents to the Book-Entry
Transfer Facility does not constitute delivery to the Exchange Agent.
The term "holder" with respect to the Exchange Offer means any person in
whose name Old Notes are registered on the books of the Company or any other
person who has obtained a properly completed bond power from the registered
holder. The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer. Holders who wish to tender their Old Notes must
complete this Letter of Transmittal in its entirety.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS CAREFULLY
BEFORE CHECKING ANY BOX BELOW.
THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE
PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE
AGENT.
List below the Old Notes to which this Letter of Transmittal relates. If
the space below is inadequate, list the registered numbers and principal
amounts on a separate signed schedule and affix the list to this Letter of
Transmittal.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF OLD NOTES TENDERED
- ---------------------------------------------------------------------------------------------------------------------------------
Name(s) and Address(es) of Registered
Holder(s) Exactly as Name(s)
Appear(s) on Old Notes
(Please Fill In, If Blank) Old Note(s) Tendered
- ---------------------------------------------------------------------------------------------------------------------------------
Aggregate Principal Principal
Registered Amount Represented by Amount
Number(s)* Note(s) Tendered**
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
* Need not be completed by book-entry holders.
** Unless otherwise indicated, any tendering holder of Old Notes will be deemed to have tendered the entire aggregate principal
amount represented by such Old Notes. All tenders must be in integral multiples of $1,000.
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
[ ] CHECK HERE IF TENDERED OLD NOTES ARE ENCLOSED HEREWITH.
[ ] 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 (FOR USE BY ELIGIBLE
INSTITUTIONS ONLY):
Name of Tendering Institution:
--------------------------------------------------
Account Number:
-----------------------------------------------------------------
Transaction Code Number:
--------------------------------------------------------
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY ENCLOSED HEREWITH AND COMPLETE THE FOLLOWING (FOR
USE BY ELIGIBLE INSTITUTIONS ONLY):
Name(s) of Registered holder(s) of Old Notes:
-----------------------------------
Date of Execution of Notice of Guaranteed Delivery:
-----------------------------
<PAGE> 3
Window Ticket Number (if available):
-------------------------------------------
Name of Eligible Institution that Guaranteed Delivery:
-------------------------
Account Number (if delivered by book-entry transfer):
--------------------------
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO:
Name:
--------------------------------------------------------------------------
Address:
-----------------------------------------------------------------------
SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the undersigned
hereby tenders to the Company for exchange the principal amount of Old Notes
indicated above. Subject to and effective upon the acceptance for exchange of
the principal amount of Old Notes tendered in accordance with this Letter of
Transmittal, the undersigned hereby exchanges, assigns and transfers to the
Company all right, title and interest in and to the Old Notes tendered for
exchange hereby. The undersigned hereby irrevocably constitutes and appoints
the Exchange Agent, the agent and attorney-in-fact of the undersigned (with
full knowledge that the Exchange Agent also acts as the agent of the Company in
connection with the Exchange Offer) with respect to the tendered Old Notes with
full power of substitution to (i) deliver such Old Notes, or transfer ownership
of such Old Notes on the account books maintained by the Book-Entry Transfer
Facility, to the Company and deliver all accompanying evidences of transfer and
authenticity, and (ii) present such Old Notes for transfer on the books of the
Company and receive all benefits and otherwise exercise all rights of
beneficial ownership of such Old Notes, all in accordance with the terms of the
Exchange Offer. The power of attorney granted in this paragraph shall be
deemed to be irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, assign and transfer the Old Notes
tendered hereby and to acquire the Exchange Notes issuable upon the exchange of
such tendered Old Notes, and that the Company will acquire good and
unencumbered title thereto, free and clear of all liens, restrictions, charges
and encumbrances and not subject to any adverse claim, when the same are
accepted for exchange by the Company.
The undersigned acknowledge(s) that this Exchange Offer is being made in
reliance upon interpretations contained in no-action letters issued to third
parties by the staff of the Securities and Exchange Commission (the "SEC"),
including Exxon Capital Holdings Corporation, SEC No-Action Letter (available
April 13, 1989), Morgan Stanley & Co. Inc., SEC No-Action Letter (available
June 5, 1991) (the "Morgan Stanley Letter") and Mary Kay Cosmetics, Inc., SEC
No-Action Letter (available June 5, 1991), that the Exchange 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) a
broker-dealer who purchased Old Notes exchanged for such Exchange Notes
directly from the Company to resell pursuant to Rule 144A or any other
available exemption under the Securities Act), without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such Exchange Notes are acquired in the ordinary course of such holders'
business and such holders are not participating in, and have no arrangement
with any person to participate in, the distribution of such Exchange Notes.
The undersigned specifically represent(s) to the Company that (i) any Exchange
Notes acquired in exchange for Old Notes tendered hereby are being acquired in
the ordinary course of business of the person receiving such Exchange Notes,
whether or not the undersigned, (ii) the undersigned is not participating in,
and has no arrangement with any person to participate in, the distribution of
Exchange Notes, and (iii) neither the undersigned nor any such other person is
an "affiliate" (as defined in Rule 405 under the Securities Act) of the Company
or a broker-dealer tendering Old Notes acquired directly from the Company for
its own account.
If the undersigned or the person receiving the Exchange Notes is a
broker-dealer that is receiving Exchange Notes for its own account pursuant to
the Exchange Offer, the undersigned acknowledges that it or such other person
will deliver a prospectus in connection with any resale of such Exchange Notes.
The undersigned acknowledges that if the undersigned is participating in the
Exchange Offer for the purpose of distributing the Exchange Notes (i) the
undersigned cannot rely on the position of the staff of the SEC in the Morgan
Stanley Letter and similar SEC no-action letters, and, in the absence of an
exemption therefrom, must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction of the Exchange Notes, in which case the registration statement
must contain the selling security holder information required by Item 507 or
Item 508, as applicable, of Regulation S-K of the SEC, and (ii) a broker-dealer
that delivers such a prospectus to purchasers in connection with such resales
will be subject to certain of the civil liability provisions under the
<PAGE> 4
Securities Act and will be bound by the provisions of the Registration Rights
Agreement (including certain indemnification rights and obligations).
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to complete the exchange, assignment and transfer of the Old Notes
tendered hereby, including the transfer of such Old Notes on the account books
maintained by the Book-Entry Transfer Facility.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted for exchange validly tendered Old Notes when, as and if the Company
gives oral or written notice thereof to the Exchange Agent. Any tendered Old
Notes that are not accepted for exchange pursuant to the Exchange Offer for any
reason will be returned, without expense, to the undersigned at the address
shown below or at a different address as may be indicated herein under "Special
Delivery Instructions" as promptly as practicable after the Expiration Date.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns.
The undersigned acknowledges that the Company's acceptance of properly
tendered Old Notes pursuant to the procedures described under the caption "The
Exchange Offer -- Procedures for Tendering" in the Prospectus and in the
instructions hereto will constitute a binding agreement between the undersigned
and the Company upon the terms and subject to the conditions of the Exchange
Offer.
Unless otherwise indicated under "Special Issuance Instructions," please
issue the Exchange Notes issued in exchange for the Old Notes accepted for
exchange and return any Old Notes not tendered or not exchanged, in the name(s)
of the undersigned. Similarly, unless otherwise indicated under "Special
Delivery Instructions," please mail or deliver the Exchange Notes issued in
exchange for the Old Notes accepted for exchange and any Old Notes not tendered
or not exchanged (and accompanying documents, as appropriate) to the
undersigned at the address shown below the undersigned's signature(s). In the
event that both "Special Issuance Instructions" and "Special Delivery
Instructions" are completed, please issue the Exchange Notes issued in exchange
for the Old Notes accepted for exchange in the name(s) of, and return any Old
Notes not tendered or not exchanged to, the person(s) so indicated. The
undersigned recognizes that the Company has no obligation pursuant to the
"Special Issuance Instructions" and "Special Delivery Instructions" to transfer
any Old Notes from the name of the registered holder(s) thereof if the Company
does not accept for exchange any of the Old Notes so tendered for exchange.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5 AND 6) (SEE INSTRUCTIONS 5 AND 6)
<S> <C>
To be completed ONLY (i) if Old Notes in a To be completed ONLY if Old Notes in a principal
principal amount not tendered, or Exchange Notes amount not tendered, or Exchange Notes issued in
issued in exchange for Old Notes accepted for exchange for Old Notes accepted for exchange, are to be
exchange, are to be issued in the name of someone mailed or delivered to someone other than the
other than the undersigned, or (ii) if Old Notes undersigned, or to the undersigned at an address other
tendered by book-entry transfer which are not than that shown below the undersigned's signature.
exchanged are to be returned by credit to an account
maintained at the Book-Entry Transfer Facility. Issue Mail or deliver Exchange Notes and/or Old Notes to:
Exchange Notes and/or Old Notes to:
Name: Name:
-------------------------------------------------- --------------------------------------------------
(Please Type or Print) (Please Type or Print)
------------------------------------------------------- -------------------------------------------------------
Address: Address:
----------------------------------------------- -----------------------------------------------
------------------------------------------------------- -------------------------------------------------------
(include Zip Code) (include Zip Code)
------------------------------------------------------- -------------------------------------------------------
(Tax Identification or Social Security Number) (Tax Identification or Social Security Number)
(Complete Substitute Form W-9)
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
[ ] Credit unexchanged Old Notes delivered by book-entry transfer to the
Book-Entry Transfer Facility set forth below:
<PAGE> 5
Book-Entry Transfer Facility Account Number:
- --------------------------------------------------------------------------------
IMPORTANT
PLEASE SIGN HERE WHETHER OR NOT
OLD NOTES ARE BEING PHYSICALLY TENDERED HEREBY
(Complete Accompanying Substitute Form W-9 on Reverse Side)
X
-----------------------------------------------------------------------------
X
-----------------------------------------------------------------------------
(Signature(s) of Registered Holders or Old Notes)
Dated ,1997
----------------------------------------------
(The above lines must be signed by the registered holder(s) of Old Notes as
name(s) appear(s) on the Old Notes or on a security position listing, or by
person(s) authorized to become registered holder(s) by a properly completed bond
power from the registered holder(s), a copy of which must be transmitted with
this Letter of Transmittal. If Old Notes to which this Letter of Transmittal
relate are held of record by two or more joint holders, then all such holders
must sign this Letter of Transmittal. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, then such person must
(i) set forth his or her full title below and (ii) unless waived by the Company,
submit evidence satisfactory to the Company of such person's authority so to
act. See Instruction 5 regarding the completion of this Letter of Transmittal,
printed below.)
Name(s):
----------------------------------------------------------------------
(Please Type or Print)
Capacity:
---------------------------------------------------------------------
Address:
----------------------------------------------------------------------
------------------------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone Number:
-----------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MEDALLION SIGNATURE GUARANTEE
(If Required by Instruction 5)
Certain signatures must be Guaranteed by an Eligible Institution.
Signature(s) Guaranteed by an Eligible Institution:
---------------------------
(Authorized Signature)
------------------------------------------------------------------------------
(Title)
------------------------------------------------------------------------------
(Name of Firm)
------------------------------------------------------------------------------
(Address, Include Zip Code)
------------------------------------------------------------------------------
(Area Code and Telephone Number)
Dated: ,1997
-------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 6
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. Delivery of this Letter of Transmittal and Old Notes or Book-Entry
Confirmations. All physically delivered Old Notes or any confirmation of a
book-entry transfer to the Exchange Agent's account at the Book-Entry Transfer
Facility of Old Notes tendered by book-entry transfer (a "Book-Entry
Confirmation"), as well as a properly completed and duly executed copy of this
Letter of Transmittal or Agent's Message or facsimile hereof, and any other
documents required by this Letter of Transmittal, must be received by the
Exchange Agent at its address set forth herein prior to 5:00 p.m., New York
City time, on the Expiration Date. The method of delivery of the tendered Old
Notes, this Letter of Transmittal and all other required documents to the
Exchange Agent is at the election and risk of the holder and, except as
otherwise provided below, the delivery will be deemed made only when actually
received or confirmed by the Exchange Agent. Instead of delivery by mail, it
is recommended that the holder use an overnight or hand delivery service. In
all cases, sufficient time should be allowed to assure delivery to the Exchange
Agent before the Expiration Date. No Letter of Transmittal or Old Notes should
be sent to the Company.
2. Guaranteed Delivery Procedures. Holders who wish to tender their Old
Notes and whose Old Notes are not immediately available or who cannot deliver
their Old Notes, this Letter of Transmittal or any other documents required
hereby to the Exchange Agent prior to the Expiration Date or who cannot
complete the procedure for book-entry transfer on a time basis and deliver an
Agent's Message, must tender their Old Notes according to the guaranteed
delivery procedures set forth in the Prospectus. Pursuant to such procedures:
(1) such tender must be made by or through a firm which is a member of a
registered national securities exchange or of the National Association of
Securities Dealers Inc., a commercial bank or a trust company having an office
or correspondent in the United States or an "eligible guarantor institution"
within the meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible
Institution"); (ii) prior to the Expiration Date, the Exchange Agent must have
received from the Eligible Institution a properly completed and duly executed
Notice of Guaranteed Delivery (by facsimile transmission, mail or hand
delivery) setting forth the name and address of the holder of the Old Notes,
the registration number(s) of such Old Notes and the total principal amount of
Old Notes tendered, stating that the tender is being made thereby and
guaranteeing that, within five business days after the Expiration Date, this
Letter of Transmittal (or facsimile hereof) together with the Old Notes in
proper form for transfer (or a Book-Entry Confirmation) and any other documents
required hereby, must be deposited by the Eligible Institution with the
Exchange Agent within five business days after the Expiration Date; and (iii)
the certificates for all physically tendered shares of Old Notes, in proper
form for transfer (or Book-Entry Confirmation, as the case may be) and all
other documents required hereby are received by the Exchange Agent within five
business days after the Expiration Date.
Any holder of Old Notes who wishes to tender Old Notes pursuant to the
guaranteed delivery procedures described above must ensure that the Exchange
Agent receives the Notice of Guaranteed Delivery prior to 5:00 p.m., New York
City time, on the Expiration Date. Upon request of the Exchange Agent, a
Notice of Guaranteed Delivery will be sent to holders who wish to tender their
Old Notes according to the guaranteed delivery procedures set forth above.
See "The Exchange Offer -- Guaranteed Delivery Procedures" section of the
Prospectus.
3. Tender by Holder. Only a holder of Old Notes may tender such Old
Notes in the Exchange Offer. Any beneficial holder of Old Notes who is not the
registered holder and who wishes to tender should arrange with the registered
holder to execute and deliver this Letter of Transmittal on his behalf or must,
prior to completing and executing this Letter of Transmittal and delivering his
Old Notes, either make appropriate arrangements to register ownership of the
Old Notes in such holder's name or obtain a properly completed bond power from
the registered holder.
4. Partial Tenders. Tenders of Old Notes will be accepted only in
integral multiples of $1,000. If less than the entire principal amount of any
Old Notes is tendered, the tendering holder should fill in the principal amount
tendered in the third column of the box entitled "Description of Old Notes
Tendered" above. The entire principal amount of Old Notes delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise indicated.
If the entire principal amount of all Old Notes is not tendered, then Old Notes
for the principal amount of Old Notes not tendered and Exchange Notes issued in
exchange for any Old Notes accepted will be sent to the holder at his or her
registered address, unless a different address is provided in the appropriate
box on this Letter of Transmittal, promptly after the Old Notes are accepted
for exchange.
5. Signatures on this Letter of Transmittal; Bond Powers and
Endorsements; Medallion Guarantee of Signatures. If this Letter of Transmittal
(or facsimile hereof) is signed by the record holder(s) of the Old Notes
tendered hereby, the signature must correspond with the name(s) as written on
the face of the Old Notes without alteration, enlargement or any change
whatsoever. If this Letter of Transmittal (or facsimile hereof) is signed by a
participant in the Book-Entry Transfer Facility, the signature must correspond
with the name as it appears on the security position listing as the holder of
the Old Notes.
<PAGE> 7
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered holder or holders of Old Notes listed and tendered hereby and the
Exchange Notes issued in exchange therefor are to be issued (or any untendered
principal amount of Old Notes is to be reissued) to the registered holder, the
said holder need not and should not endorse any tendered Old Notes, nor provide
a separate bond power. In any other case, such holder must either properly
endorse the Old Notes tendered or transmit a properly completed separate bond
power with this Letter of Transmittal, with the signatures on the endorsement
or bond power guaranteed by an Eligible Institution.
If this Letter of Transmittal (or facsimile hereof) is signed by a person
other than the registered holder or holders of any Old Notes listed, such Old
Notes must be endorsed or accompanied by appropriate bond powers, in each case
signed as the name of the registered holder or holders appears on the Old
Notes.
If this Letter of Transmittal (or facsimile hereof) or any Old Notes or
bond powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and,
unless waived by the Company, evidence satisfactory to the Company of their
authority to act must be submitted with this Letter of Transmittal.
Endorsements on Old Notes or signatures on bond powers required by this
Instruction 5 must be guaranteed by an Eligible Institution.
No signature guarantee is required if (i) this Letter of Transmittal (or
facsimile hereof) is signed by the registered holder(s) of the Old Notes
tendered herein (or by a participant in the Book-Entry Transfer Facility whose
name appears on a security position listing as the owner of the tendered Old
Notes) and the Exchange Notes are to be issued directly to such registered
holder(s) (or, if signed by a participant in the Book-Entry Transfer Facility,
deposited to such participant's account at such Book-Entry Transfer Facility)
and neither the box entitled "Special Delivery Instructions" nor the box
entitled "Special Registration Instructions" has been completed, or (ii) such
Old Notes are tendered for the account of an Eligible Institution. In all
other cases, all signatures on this Letter of Transmittal (or facsimile hereof)
must be guaranteed by an Eligible Institution.
6. Special Registration and Delivery Instructions. Tendering holders
should indicate, in the applicable box or boxes, the name and address (or
account at the Book-Entry Transfer Facility) to which Exchange Notes or
substitute Old Notes for principal amounts not tendered or not accepted for
exchange are to be issued or sent, if different from the name and address of
the person signing this Letter of Transmittal. In the case of issuance in a
different name, the taxpayer identification or social security number of the
person named must also be indicated.
7. Transfer Taxes. The Company will pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, Exchange Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be registered or issued
in the name of, any person other than the registered holder of the Old Notes
tendered hereby, or if tendered Old Notes are registered in the name of any
person other than the person signing this Letter of Transmittal, or if a
transfer tax is imposed for any reason other than the exchange of Old Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons) will be payable
by the tendering holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with this Letter of Transmittal, the
amount of such transfer taxes will be billed directly to such tendering holder.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 7, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE OLD NOTES LISTED IN THIS LETTER OF
TRANSMITTAL.
8. Tax Identification Number. Federal income tax law requires that a
holder of any Old Notes which are accepted for exchange must provide the
Company (as payor) with its correct taxpayer identification number ("TIN"),
which, in the case of a holder who is an individual is his or her social
security number. If the Company is not provided with the correct TIN, the
holder may be subject to a $50 penalty imposed by Internal Revenue Service.
(If withholding results in an over-payment of taxes, a refund may be obtained).
Certain holders (including, among others, all corporations and certain foreign
individuals) are not subject to these backup withholding and reporting
requirements. See the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional instructions.
To prevent backup withholding, each tendering holder must provide such
holder's correct TIN by completing the Substitute Form W-9 set forth herein,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN), and that (i) the holder has not been notified by the Internal Revenue
Service that such holder is subject to backup withholding as a result of
failure to report all interest or dividends or (ii) the Internal Revenue
Service has notified the holder that such holder is no longer subject to backup
withholding. If the Old Notes are registered in more than one name or are not
in the name of the actual owner, see the enclosed "Guidelines for Certification
of Taxpayer Identification Number of Substitute Form W-9" for information on
which TIN to report.
<PAGE> 8
The Company reserves the right in its sole discretion to take whatever
steps are necessary to comply with the Company's obligations regarding backup
withholding.
9. Validity of Tenders. All questions as to the validity, form,
eligibility (including time of receipt), acceptance and withdrawal of tendered
Old Notes will be determined by the Company in its sole discretion, which
determination will be final and binding. The Company reserves the absolute
right to reject any and all Old Notes not properly tendered or any Old Notes
the Company's acceptance of which would, in the opinion of the Company or its
counsel, be unlawful. The Company also reserves the absolute right to waive
any conditions of the Exchange Offer or defects or irregularities in tenders as
to particular Old Notes. The Company's interpretation of the terms and
conditions of the Exchange Offer (includes this Letter of Transmittal and the
instructions hereto) shall be final and binding on all parties. Unless waived,
any defects or irregularities in connection with tenders of Old Notes must be
cured within such time as the Company shall determine. Neither the Company,
the Exchange Agent nor any person shall be under any duty to give notification
of defects or irregularities with regard to tenders of Old Notes nor shall any
of them incur any liability for failure to give such notification.
10. Waiver of Conditions. The Company reserves the absolute right to
waive, in whole or part, any of the conditions to the Exchange Offer set forth
in the Prospectus.
11. No Conditional Tender. No alternative, conditional, irregular or
contingent tender of Old Notes on transmittal of this Letter of Transmittal
will be accepted.
12. Mutilated, Lost, Stolen or Destroyed Old Notes. Any holder whose Old
Notes have been mutilated, lost, stolen or destroyed should contact the
Exchange Agent at the address indicated above for further instructions.
13. Requests for Assistance or Additional Copies. Requests for assistance
or for additional copies of the Prospectus or this Letter of Transmittal may be
directed to the Exchange Agent at the address or telephone number set forth on
the cover page of this Letter of Transmittal. Holders may also contact their
broker, dealer, commercial bank, trust company or other nominee for assistance
concerning the Exchange Offer.
14. Withdrawal. Tenders may be withdrawn only pursuant to the limited
withdrawal rights set forth in the Prospectus under the caption "The Exchange
Offer -- Withdrawal of Tenders."
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE HEREOF
(TOGETHER WITH THE OLD NOTES DELIVERED BY BOOK-ENTRY TRANSFER OR IN ORIGINAL
HARD COPY FORM) MUST BE RECEIVED BY THE EXCHANGE AGENT, OR THE NOTICE OF
GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT, PRIOR TO THE
EXPIRATION DATE.
<PAGE> 9
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE Social Security Number
BOX AT RIGHT AND CERTIFY BY SIGNING AND OR Employer Identification Number
FORM W-9 DATING BELOW
------------------------------------
-----------------------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
PART 2 -- Certification -- Under penalties of PART 3 --
perjury, I certify that:
(1) The number shown on this form is my correct Awaiting TIN [ ]
Taxpayer Identification Number (or I am waiting
for a number to be issued to me) and
(2) I am not subject to backup withholding either Please complete the
PAYER'S REQUEST FOR TAXPAYER because I have not been notified by the Certificate of Awaiting
IDENTIFICATION NUMBER (TIN) Internal Revenue Service ("IRS") that I am Taxpayer Identification
subject to backup withholding as a result of Number below.
failure to report all interest or dividends, or
the IRS has notified me that I am no longer
subject to backup withholding.
-----------------------------------------------------------------------------------
Certificate Instructions -- You must cross out item (2) in Part 2 above if you
have been notified by the IRS that you are subject to backup withholding because
of underreporting interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup withholding you
received another notification from the IRS stating that you are no longer
subject to backup withholding, do not cross out item (2).
SIGNATURE DATE , 1997
--------------------------------------------------- -------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 3 OF THE SUBSTITUTE FORM W-9
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (a) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (b) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number to the payor within 60 days, 31% of all
reportable payments made to me thereafter will be withheld until I provide a
number.
, 1997
- ---------------------------- --------------------------
Signature Date
- --------------------------------------------------------------------------------
<PAGE> 10
- --------------------------------------------------------------------------------
CERTIFICATE FOR FOREIGN RECORD HOLDERS
Under penalties of perjury, I certify that I am not a United States
citizen or resident (or I am signing for a foreign corporation, partnership,
estate or trust).
, 1997
- ---------------------------- --------------------------
Signature Date
- --------------------------------------------------------------------------------
<PAGE> 11
ICO, INC.
LETTER TO CLIENTS
FOR
TENDER OF ALL OUTSTANDING
10 3/8% SENIOR NOTES DUE 2007, SERIES A
IN EXCHANGE FOR
10 3/8% SENIOR NOTES DUE 2007, SERIES B
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON __________, 1997, UNLESS EXTENDED (THE "EXPIRATION DATE").
NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN
AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE
BUSINESS DAY PRIOR TO THE EXPIRATION DATE.
To Our Clients:
We are enclosing herewith a Prospectus, dated __________, 1997, of
ICO, Inc., a Texas corporation (the "Company") and a related Letter of
Transmittal, which together constitute (the "Exchange Offer") relating to the
offer by the Company, to exchange its 10 3/8% Senior Notes due 2007, Series B
(the "Exchange Notes"), which have been registered under the Securities Act of
1933, as amended (the "Securities Act"), for a like principal amount of its
issued and outstanding 10 3/8% Senior Notes due 2007, Series A (the "Old
Notes"), upon the terms and subject to the conditions set forth in the Exchange
Offer.
The Exchange Offer is not conditioned upon any minimum number of Old
Notes being tendered.
We are the holder of record of Old Notes held by us for your own
account. A tender of such Old Notes can be made only by us as the record
holder and pursuant to your instructions. The Letter of Transmittal is
furnished to you for your information only and cannot be used by you to tender
Old Notes held by us for your account.
We request instructions as to whether you wish to tender any or all of
the Old Notes held by us for your account pursuant to the terms and conditions
of the Exchange Offer. We also request that you confirm that we may on your
behalf make the representations and warranties contained in the Letter of
Transmittal.
Very truly yours,
<PAGE> 12
PLEASE RETURN YOUR INSTRUCTIONS TO US IN THE ENCLOSED ENVELOPE WITHIN
AMPLE TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE
EXPIRATION DATE.
INSTRUCTION TO REGISTERED HOLDER AND/OR BOOK
ENTRY TRANSFER PARTICIPANT
To Registered Holder and/or Participant of the Book-Entry Transfer Facility:
The undersigned hereby acknowledges receipt of the Prospectus dated
__________, 1997 (the "Prospectus") of ICO, Inc., a Texas corporation (the
"Company"), and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), that together constitute the Company's offer (the "Exchange
Offer") to exchange its 10 3/8% Senior Notes due 2007, Series B (the "Exchange
Notes"), for all of its outstanding 10 3/8% Senior Notes due 2007, Series A
(the "Old Notes"). Capitalized terms used but not defined herein have the
meanings ascribed to them in the Prospectus.
This will instruct you, the registered holder and/or book-entry
transfer facility participant, as to the action to be taken by you relating to
the Exchange Offer with respect to the Old Notes held by you for the account of
the undersigned.
The aggregate face amount of the Old Notes held by you for the account
of the undersigned is (FILL IN AMOUNT):
$____________________ of the 10 3/8% Senior Notes due 2007, Series A.
With respect to the Exchange Offer, the undersigned hereby instructs
you (CHECK APPROPRIATE BOX):
[ ] To TENDER the following Old Notes held by your for the
account of the undersigned (INSERT PRINCIPAL AMOUNT OF OLD NOTES TO BE
TENDERED) (IF ANY): $_______________________.
[ ] NOT to TENDER any Old Notes held by you for the account
of the undersigned.
If the undersigned instructs you to tender the Old Notes held by you
for the account of the undersigned, it is understood that you are authorized to
make, on behalf of the undersigned (and the undersigned by its signature below,
hereby makes to you), the representations and warranties contained in the
Letter of Transmittal that are to be made with respect to the undersigned as a
beneficial owner, including but not limited to the representations, that (i)
the Exchange Notes acquired in exchange for Old Notes pursuant to the Exchange
Offer are being acquired in the ordinary course of business of the person
receiving such Exchange Notes, whether or not the undersigned, (ii) the
undersigned is not participating in, and has no arrangement with any person to
participate in, the distribution of Exchange Notes within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"), and (iii) neither
the undersigned nor any such other person is an "affiliate" (within the meaning
of Rule 405 under the Securities Act) of the Company or a broker-dealer
tendering Old Notes acquired directly from the Company. If the undersigned is
a broker-dealer that will receive Exchange Notes for its own account in
exchange for Old Notes, it acknowledges that it will deliver a prospectus in
connection with any resale of such Exchange Notes.
SIGN HERE
Name of beneficial owner(s):
----------------------------------------------------
Signature(s):
-------------------------------------------------------------------
Name(s) (please print):
---------------------------------------------------------
Address:
------------------------------------------------------------------------
Telephone Number:
---------------------------------------------------------------
Taxpayer Identification or Social Security Number:
------------------------------
Date:
---------------------------------------------------------------------------
<PAGE> 13
ICO, INC.
LETTER TO REGISTERED HOLDERS AND
DEPOSITORY TRUST COMPANY PARTICIPANTS
FOR
TENDER OF ALL OUTSTANDING 10 3/8% SENIOR NOTES DUE 2007, SERIES A
IN EXCHANGE FOR
10 3/8% SENIOR NOTES DUE 2007, SERIES B
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON __________, 1997. UNLESS EXTENDED (THE "EXPIRATION DATE").
OLD NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN
AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE
BUSINESS DAY PRIOR TO THE EXPIRATION DATE.
To Registered Holders and Depository
Trust Company Participants:
We are enclosing herewith the material listed below relating to the
offer by ICO, Inc., a Texas corporation (the "Company"), to exchange its 10
3/8% Senior Notes due 2007, Series B (the "Exchange Notes"), which have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
for a like principal amount of its issued and outstanding 10 3/8% Senior Notes
due 2007, Series A (the "Old Notes") upon the terms and subject to the
conditions set forth in the Company's Prospectus, dated __________, 1997, and
the related Letter of Transmittal (which together constitute the "Exchange
Offer").
Enclosed herewith are copies of the following documents:
1. Prospectus dated __________, 1997;
2. Letter of Transmittal (together with accompanying
Substitute Form W-9 Guidelines);
3. Notice of Guaranteed Delivery;
4. Letter which may be sent to your clients for whose account
you hold Old Notes in your name or in the name of your nominee; and
5. Letter which may be sent from your clients to you with
such client's instruction with regard to the Exchange Offer.
We urge you to contact your clients promptly. Please note that the
Exchange Offer will expire on the Expiration Date unless extended.
The Exchange Offer is not conditioned upon any minimum number of Old
Notes being tendered.
Pursuant to the Letter of Transmittal, each holder of Old Notes will
represent to the Company that (i) the Exchange Notes acquired in exchange for
Old Notes pursuant to the Exchange Offer are being acquired in the ordinary
course of business of the person receiving such Exchange Notes, whether or not
the holder, (ii) the holder is not participating in, and has no arrangement
with any person to participate in, the distribution of Exchange Notes within
the meaning of the Securities Act, and (iii) neither the holder nor any such
other person is an "affiliate" (within the meaning of Rule 405 under the
Securities Act) of the Company or a broker-dealer tendering Old Notes acquired
directly from the Company. If the holder is a broker-dealer that will receive
Exchange Notes for its own account in exchange for Old Notes, it acknowledges
that it will deliver a prospectus in connection with any resale of such
Exchange Notes.
The enclosed Letter to Clients contains an authorization by the
beneficial owners of the Old Notes for you to make the foregoing
representations.
The Company will not pay any fee or commission to any broker or dealer
to any other persons (other than the Exchange Agent) in connection with the
solicitation of tenders of Old Notes pursuant to the Exchange Offer. The
Company will pay or cause to be paid any transfer taxes payable on the transfer
of Old Notes to it, except as otherwise provided in Instruction 7 of the
enclosed Letter of Transmittal.
Additional copies of the enclosed material may be obtained from the
undersigned.
Very truly yours,
ICO, INC.
<PAGE> 14
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF ALL OUTSTANDING
10 3/8% SENIOR NOTES DUE 2007, SERIES A
IN EXCHANGE FOR
10 3/8% SENIOR NOTES DUE 2007, SERIES B
This form, or one substantially equivalent hereto, must be used by a
holder to accept the Exchange Offer of ICO, Inc., a Texas corporation (the
"Company"), and to tender 10 3/8% Senior Notes due 2007, Series A (the "Old
Notes") to the Exchange Agent pursuant to the guaranteed delivery procedures
described in "The Exchange Offer --Guaranteed Delivery Procedures" of the
Company's Prospectus, dated __________, 1997 (the "Prospectus") and in
Instruction 2 to the related Letter of Transmittal. Any holder who wishes to
tender Old Notes pursuant to such guaranteed delivery procedures must ensure
that the Exchange Agent receives this Notice of Guaranteed Delivery prior to
the Expiration Date (as defined below) of the Exchange Offer. Capitalized
terms used but not defined herein have the meanings ascribed to them in the
Prospectus or the Letter of Transmittal.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
__________, 1997, UNLESS EXTENDED (THE "EXPIRATION DATE"). OLD NOTES TENDERED
IN THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK
CITY TIME, ON THE BUSINESS DAY PRIOR TO THE EXPIRATION DATE.
The Exchange Agent for the Exchange Offer is:
FLEET NATIONAL BANK
By Hand/Overnight Courier: By Mail:
Fleet National Bank Fleet National Bank
Corporate Trust Operations Corporate Trust Operations
777 Main Street, Lower Level 777 Main Street, Lower Level
Hartford, Connecticut 06115 CTMO 0224
Attention: Patricia Williams Hartford, Connecticut 06115
Attn: Patricia Williams
By Facsimile:
(860) 986-7908
Confirm by Telephone:
(860) 986-1271
----------------------------
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY 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.
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 IN THE BOX PROVIDED ON
THE LETTER OF TRANSMITTAL FOR GUARANTEE OF SIGNATURES.
<PAGE> 15
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and
subject to the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Old Notes set forth below pursuant to the guaranteed delivery procedures set
forth in the Prospectus and in Instruction 2 of the Letter of Transmittal.
The undersigned hereby tenders the Old Notes listed below:
<TABLE>
<CAPTION>
Certificate Number(s) (if known) of Old Notes Aggregate Principal Amount Aggregate Principal Amount
or Account Number at the Book-Entry Facility Represented Tendered
- ------------------------------------------------- -------------------------- ---------------------------
<S> <C> <C>
</TABLE>
PLEASE SIGN AND COMPLETE
Names of Record Holders: Signatures:
------------------ ---------------------
Address:
---------------------------------- --------------------------------
- ------------------------------------------ Dated: ,1997
---------------------
Area Code and Telephone Numbers:
----------
- ------------------------------------------
This Notice of Guaranteed Delivery must be signed by the Holder(s)
exactly as their name(s) appear on certificates for Old Notes or on a security
position listing as the owner of Old Notes, or by person(s) authorized to
become holder(s) by endorsements and documents transmitted with this Notice of
Guaranteed Delivery. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must provide the following information.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Capacity:
- --------------------------------------------------------------------------------
Address(es):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 16
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
or is a commercial bank or trust company having an office or correspondent in
the United States, or is otherwise an "eligible guarantor institution" within
the meaning of Rule 17 Ad-15 under the Securities Exchange Act of 1934, as
amended, guarantees deposit with the Exchange Agent of the Letter of
Transmittal (or facsimile thereof), together with the Old Notes tendered hereby
in proper form for transfer (or confirmation of the book-entry transfer of such
Old Notes into the Exchange Agent's account at the Book-Entry Transfer Facility
described in the Prospectus under the caption "The Exchange Offer -- Book-Entry
Transfer" and in the Letter of Transmittal) and any other required documents,
all by 5:00 p.m., New York City time, within three business days following the
Expiration Date.
Name of Firm:
-------------------------- -----------------------------------
(AUTHORIZED SIGNATURE)
Address:
-------------------------------
(INCLUDE ZIP CODE) Name:
--------------------------------
Title:
Area Code and Tel. Number: -------------------------------
(PLEASE TYPE OR PRINT)
- ---------------------------------------
Date: , 1997
--------------------------
DO NOT SEND OLD NOTES WITH THIS FORM. ACTUAL SURRENDER OF OLD NOTES
MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, A PROPERLY COMPLETED AND DULY
EXECUTED LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS.
<PAGE> 17
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. Delivery of this Notice of Guaranteed Delivery. A properly
completed and duly executed copy of this Notice of Guaranteed Delivery and any
other documents required by this Notice of Guaranteed Delivery must be received
by the Exchange Agent at its address set forth herein prior to the Expiration
Date. The method of delivery of this Notice of Guaranteed Delivery and any
other required documents to the Exchange Agent is at the election and sole risk
of the holder, and the delivery will be deemed made only when actually received
by the Exchange Agent. If delivery is by mail, registered mail with return
receipt requested, properly insured, is recommended. As an alternative to
delivery by mail, the holders may wish to consider using an overnight or hand
delivery service. In all cases, sufficient time should be allowed to assure
timely delivery. For a description of the guaranteed delivery procedures, see
Instruction 2 of the Letter of Transmittal.
2. Signatures on this Notice of Guaranteed Delivery. If this Notice
of Guaranteed Delivery is signed by the registered holder(s) of the Old Notes
referred to herein, the signature must correspond with the name(s) written on
the face of the Old Notes without alteration, enlargement, or any change
whatsoever. If this Notice of Guaranteed Delivery is signed by a participant
of the Book-Entry Transfer Facility whose name appears on a security position
listing as the owner of the Old Notes, the signature must correspond with the
name shown on the security position listing as the owner of the Old Notes.
If this Notice of Guaranteed Delivery is signed by a person other than
the registered holder(s) of any Old Notes listed or a participant of the
Book-Entry Transfer Facility, this Notice of Guaranteed Delivery must be
accompanied by appropriate bond powers, signed as the name of the registered
holder(s) appears on the Old Notes or signed as the name of the participant
shown on the Book-Entry Transfer Facility's security position listing.
If this Notice of Guaranteed Delivery is signed by a trustee,
executor, administrator, guardian, attorney-in- fact, officer of a corporation,
or other person acting in a fiduciary or representative capacity, such person
should so indicate when signing and submit with the Letter of Transmittal
evidence satisfactory to the Company of such person's authority to so act.
3. Requests for Assistance or Additional Copies. Questions and
requests for assistance and requests for additional copies of the Prospectus
may be directed to the Exchange Agent at the address specified in the
Prospectus. Holders may also contact their broker, dealer, commercial bank,
trust company, or other nominee for assistance concerning the Exchange Offer.
