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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JANUARY 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 0-8088
FURON COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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CALIFORNIA 95-1947155
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
29982 IVY GLENN DRIVE, 92677
LAGUNA NIGUEL, CA ZIP CODE
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(714) 831-5350
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT ON THE NEW YORK STOCK
EXCHANGE:
COMMON STOCK, WITHOUT PAR VALUE
COMMON STOCK PURCHASE RIGHTS
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
As of March 31, 1998, the aggregate market value of voting stock held by
non-affiliates of the registrant was approximately $432.5 million and the number
of outstanding shares of Common Stock of the registrant was 18,279,605.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement for the 1998 Annual
Meeting of Shareholders (to be held on June 2, 1998) have been incorporated by
reference into Part III of this report.
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PART I
ITEM 1. BUSINESS
OVERVIEW
Furon Company ("Furon" or "the Company"), founded in 1955 and incorporated
in California in 1957, is a leading designer, developer and manufacturer of
highly engineered products made primarily from specially formulated high
performance polymer materials. Furon's products are used in a wide range of
applications primarily by original equipment manufacturers ("OEMs") in
industrial markets and by end-users in healthcare markets. The Company focuses
on niche markets and applications for which it can provide its customers
application-specific product solutions based on the Company's polymer based
materials technology, engineering expertise and production technology. In
January 1997, as part of its strategy to leverage its materials and
manufacturing technology expertise into other attractive market segments, the
Company acquired Medex, Inc. ("Medex"), a producer of polymer based medical
device products.
Previously the Company operated and reported under a single segment.
Subsequent to the acquisition of Medex, and the determination of management, the
Company currently operates under an additional segment.
The Company's products are segmented into two broad categories: industrial
products and medical device products.
INDUSTRIAL PRODUCTS
The Company's industrial products (approximately 78% of net sales for the
year ended January 31, 1998) consist of highly engineered polymer components
used in a broad range of industrial applications. The Company's industrial
products are sold primarily through the Company's sales force to OEM and
industrial aftermarket equipment and maintenance providers in the industrial
equipment, transportation, electronics and process industries markets. Some of
Furon's largest customers for industrial products are The Boeing Company,
Coca-Cola Company and Navistar International Corporation. A majority of Furon's
industrial products are designed in collaboration with its OEM customers for
specific applications to satisfy increasingly demanding performance standards
and criteria, including strength, durability, conductivity, lubricity,
temperature tolerance, chemical resistance and weight. As such, many of Furon's
application-specific products are an integral part of the customers' equipment
and systems, yet represent only a small portion of the customers' total product
cost. Additionally, many of the Company's products are developed using
proprietary polymer materials and production processes which serve as key
competitive advantages for the Company. Over the past several years, the Company
has placed increased emphasis on the development of new products. Furon's net
sales of new industrial products introduced in the last five years as a
percentage of net sales have increased from an estimated 15% in fiscal 1996 to
23.4% in fiscal 1998. The Company defines a "new product" as one that has been
introduced into the market and either uses new material, is substantially
different from an existing product based on performance levels or satisfies new
markets or applications for current products that require different
specifications or standards. The Company's industrial products include highly
engineered seals and bearings; fluid handling components; tapes, films and
coated fabrics; hose and tubing; wire and cable; and plastic formed components.
For the year ended January 31, 1998, no single customer represented more than 4%
of the Company's net sales of industrial products.
MEDICAL DEVICE PRODUCTS
The Company's medical device products (approximately 22% of net sales for
the year ended January 31, 1998) consist of a broad range of polymer based
critical care products and infusion systems for medical and surgical
applications. These products are made from many of the same polymer materials as
Furon's industrial products and require design and engineering expertise. The
Company's medical device products are used in the diagnosis and treatment of
patients in hospitals and alternate site healthcare facilities. More than 75% of
the Company's net sales of medical device products are derived from
single-patient use products. These products are sold to numerous end-users
through a dedicated medical sales force of over 42 professionals
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supplemented by the sales forces of authorized distributors such as Allegiance
Corporation, General Medical Systems, Inc. and Owens & Minor. The Company's
medical device products include syringe pumps, intravenous sets for fluid and
drug delivery, transducer kits for pressure monitoring and various devices used
in the catheterization laboratory. For the year ended January 31, 1998, no
single customer represented more than 10% of the Company's net sales of medical
device products.
Medical devices include a broad range of products used in the diagnosis and
treatment of patients receiving care in hospitals and alternate site healthcare
facilities. There are several healthcare industry trends that have increased the
overall demand for medical devices. These trends include the aging of the United
States population, resulting in heightened healthcare and medical device product
expenditures, an increased concern over the spread of infectious diseases,
resulting in increased demand for single-patient use disposable medical products
and a shift toward less invasive surgical procedures.
COMPETITIVE STRENGTHS
The Company believes it benefits from the following competitive strengths,
which have enabled it to increase sales to both existing and new customers and
to develop new products.
DESIGN, DEVELOPMENT AND PRODUCTION EXPERTISE
Furon's demonstrated expertise in three key areas -- materials technology,
application engineering and production technology -- facilitates its development
of high performance application-specific products for its customers. This
expertise enables Furon to design, develop and manufacture polymer based
industrial products which meet its customers' critical performance standards,
including strength, durability, conductivity, lubricity, temperature tolerance,
chemical resistance and weight. Furon's leadership and expertise is based on its
highly experienced and skilled design and development staff of over 160 material
scientists and engineers and its development of specialized equipment and
processing for the design and production of polymer based materials and
components. With respect to industrial markets, the Company develops polymer
based materials and products to satisfy its customers' new application
requirements and to provide its customers with superior alternatives to existing
metallic and common polymer products. In the medical device products market, the
Company applies its technical expertise to produce high quality products and to
enhance its market position.
STRONG RELATIONSHIPS WITH OEM CUSTOMERS
The Company has established long-term relationships with many of its OEM
customers as a result of providing reliable, high quality products and its
collaborative efforts to design and develop application-specific products. By
working closely with its OEM customers during the design and development stages
of a product, Furon has been able to apply its materials technology and
engineering expertise to manufacture application-specific products which meet
its customers' performance specifications. A majority of the Company's
industrial product sales are from products specially engineered in collaboration
with its customers. This application-specific product relationship provides the
Company with recurring product sales as many of Furon's products have been
technically certified as the exclusive component or accessory by its OEM
customers for their products. Additionally, the Company believes that its
practice of working closely with its customers on the design and manufacture of
their products has enabled Furon to achieve a competitive position from which it
can identify and realize future application-specific product sales.
DIVERSE MARKETS, CUSTOMER BASE AND PRODUCTS
The Company provides a broad range of products to a multitude of customers
across a wide range of industry sectors. The Company broadly categorizes the
industry sectors it serves into five principal markets, including industrial
equipment (24% of net sales for the year ended January 31, 1998), transportation
(24%), healthcare (22%), electronics equipment (17%), and process industries
(13%). Furon believes it is the only manufacturer of highly engineered polymer
products serving such a broad market. For the year ended January 31, 1998, no
single customer accounted for more than 2.5% of the Company's total net sales.
International sales, predominantly European, accounted for approximately 25.5%
of total net sales for the year
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ended January 31, 1998. The diversity of markets, customers and products provide
Furon with a strong base from which to increase sales to existing and new
customers while minimizing its dependence on any particular market, customer or
product.
BUSINESS STRATEGY
The Company's strategic objective is to further enhance its position as a
leading designer, developer and manufacturer of highly engineered polymer
products for the industrial and healthcare markets. The Company plans to achieve
this objective through the continued implementation of the following core
strategies:
FOCUS ON HIGHLY ENGINEERED, APPLICATION-SPECIFIC INDUSTRIAL PRODUCTS
The Company will continue to employ its design, development and production
expertise to create value-added application-specific products for existing and
new customers.
EXPAND MEDICAL DEVICE BUSINESS
The Company is focused on the medical device industry. The Company intends
to pursue opportunities in the growing medical device market through
acquisitions, joint ventures and strategic alliances and by leveraging its
polymer applications expertise. Furon plans to build upon Medex's market
presence and domestic and European sales and distribution channels.
LEVERAGE CUSTOMER RELATIONSHIPS
The Company will continue to focus on leveraging its polymer materials
expertise and its strong relationships with key strategic customers to market
and sell a broader portfolio of polymer based products. The Company's sales and
marketing organization has expertise in a wide range of product areas and
applications and, as a result, is skilled at identifying new product
opportunities, maintaining key customer relationships and directing product and
materials technical expertise.
ENHANCE PRODUCTIVITY AND PURSUE COST SAVINGS
Furon will continue to focus on improving the productivity of its
manufacturing processes and enhancing the quality and performance features of
its products, while controlling operating costs through ongoing cost containment
programs. The Company strives to improve its productivity by reducing cycle
times, increasing employee productivity and involvement and investing in new,
more efficient manufacturing processes. Furon has an ongoing focus on improving
the quality and performance features of its products through the efforts of its
quality assurance and research and development personnel.
INCREASE PENETRATION OF INTERNATIONAL MARKETS
The Company intends to expand its international marketing and manufacturing
presence (primarily in Europe) to better serve the expanding foreign operations
of its existing multinational OEM customers. Furon also views international
expansion as a means to obtain new customers in existing international markets
and to enter new markets. The Company has increased its medical device sales
channels internationally through its acquisition of Medex and, more recently,
Scientific Device Manufacturers, Inc. ("SDM") and AS Medical GmbH ("AS"). The
Company has increased its international net sales from approximately 21.5% of
fiscal 1995 net sales to approximately 25.5% of net sales for the year ended
January 31, 1998.
SELECTIVELY PURSUE STRATEGIC ACQUISITIONS
The Company intends to selectively pursue strategic acquisitions, joint
ventures and alliances. Potential acquisitions will be evaluated based on their
ability, among other things, to (i) complement existing businesses and further
expand product lines, particularly in the healthcare market; (ii) enhance the
Company's leadership position in materials and production technology and
application engineering; (iii) enhance and broaden distribution channels; or
(iv) increase the Company's international presence.
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INDUSTRIAL BUSINESS
Industry Overview
Engineered polymers are used in a wide range of products across numerous
industries, including: (i) industrial equipment, (ii) transportation, (iii)
electronics, and (iv) process industries. Engineered polymers provide certain
unique performance characteristics relative to competing materials (such as
metals and common polymers) that are critical to end-users including strength,
durability, conductivity, lubricity, temperature tolerance, chemical resistance
and weight. Typical industrial applications include high performance seals used
in commercial aircraft engines, non-metallic bearings used in industrial
equipment and consumer appliances, fluid handling systems used in the
semiconductor industry and films used in circuit boards.
Engineered polymers are increasingly being used in new industrial
applications to replace other polymer products and metal, as OEMs desire
improved performance characteristics which lengthen product life, simplify
product design and manufacture and lower product cost and weight. Additional
industry growth is expected to be generated by an increased usage of engineered
polymers in international markets. The Company believes that the international
market for polymer products will grow as a result of two perceived trends:
continued global expansion by U.S. based OEMs that use engineered polymer
components in their products and increased demand for engineered polymer
products by a greater number of international based OEMs.
DESCRIPTION OF POLYMERS
A polymer consists of chains of chemicals, called monomers, that combine or
polymerize (normally with help from a catalyst) to form large molecular
structures. Polymers are very versatile materials. They can be cast into molds
to create intricate structures, extruded through a spinneret to make fibers,
blended with liquids including water to make coatings, adhesives and thickeners
and generally bonded to other materials or each other with adhesives. As a
result, polymers have replaced and continue to replace natural products, such as
metal, wood, paper, cotton and glass in a broad range of applications. Moreover,
substitution is not driven primarily by cost, but by the increasing desirability
of polymers based on their versatility and performance characteristics. Types of
polymers utilized by the Company include:
THERMOPLASTICS
Thermoplastics are the most common synthetic polymers. They are relatively
inexpensive, light and durable, but not particularly strong. Thermoplastics can
be melted at relatively low temperatures and recrystallized, thus making them
recyclable. They are used in structural applications where exposure to high
stresses and heat are concerns. Common thermoplastics include polyethylene,
polypropylene, polystyrene, polyvinyl chloride and most polyester.
THERMOSETS
Thermosets polymerize at relatively high temperatures, normally through
mixing with an initiation compound. They cannot be remelted or recycled. During
polymerization they are cross-linked, a process that increases their strength
and durability relative to thermoplastics. They are generally stronger, more
heat resistant and more difficult to process than thermoplastics. Common
thermosets include epoxies, most polyurethanes, unsaturated polyester, melamine
and phenolics.
ENGINEERED POLYMERS
Engineered polymers can be thermoplastics or thermosets, but are separately
classified because they are uniquely designed to replace metal, ceramic, glass,
stone or wood in high-performance applications. Some of the better known
engineered polymers are polycarbonate, polytetrafluoroethylene ("PTFE"),
polysulfone, polyphenyelene sulfide, nylons, polybutylene terephthalate,
acrylonitrile-butadiene-styrene and liquid crystal polymers.
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ELASTOMERS
Elastomers are polymers that by virtue of their molecular structure are
highly flexible, yet retain their shape and structure. Some common elastomers
are polyisoprene (natural rubber), polybutadiene and polyisobutylene.
SILICONES
Silicones are a separate class of polymers that are silicon based, rather
than carbon based. This composition makes them more stable than most polymers,
as well as resistant to heat and oxygen.
Thermoplastics, thermosets and engineered polymers are collectively
referred to, in general, as plastics. Most of the products sold by the Company
are made from plastics, primarily engineered polymers.
MARKETS
The Company focuses on developing high performance engineered polymer
products for its customers and target markets. This focus requires Furon to use
its design, development and production expertise to meet new product and
application requirements. Furon's industrial business focuses on the following
four key markets: (i) industrial equipment, (ii) transportation, (iii)
electronics, and (iv) process industries. A brief description of the four
primary markets served by Furon's industrial business, as well as the principal
products supplied to each of those markets follows:
INDUSTRIAL EQUIPMENT
Manufacturers of diverse equipment such as hydraulic and pneumatic
equipment, appliances and metal finishing equipment and food, beverage and
refrigeration equipment are users of Furon's products in the industrial
equipment industry. Product lines used by this customer group include: specialty
thermoplastic hoses and tubing used in beverage dispersing equipment; PTFE
coated fabric belting used in food processing applications to resist heat,
abrasion and oil penetration; and precision polymer based components used in
compressors, appliances and various other industrial equipment applications.
TRANSPORTATION
Producers and operators of medium and heavy duty trucks, off-road vehicles,
construction and agricultural equipment, commercial and military aircraft and
space vehicles are the primary users of the Company's products in the
transportation industry. Furon offers these customers numerous product lines,
including: medium and high pressure hoses designed to endure severe torsion,
high abrasion and low temperatures; and engineered polymer bearings that provide
advantages such as increased wear tolerance, chemical resistance and wide
temperature tolerance and are used in applications such as gas turbine engines
and aircraft hydraulic systems.
ELECTRONICS
Furon's products in the electronics industry are used in semiconductor
manufacturing, scientific instrumentation and diagnostic equipment. Furon's
reputation in this market is based on its proficiency in designing, developing
and manufacturing fluid handling products such as pumps, valves, fittings and
tubing that assure consistent flow and precise metering of ultrapure or highly
corrosive fluids essential in the production of integrated circuits. Other
product lines offered to this customer group include: large thermoformed
components that serve as enclosures for equipment ranging from instrumentation
and testing machinery to mainframe computers, silicone rubber specialty fabrics
and high performance pressure sensitive tapes used in circuit boards.
PROCESS INDUSTRIES
Producers of pulp and paper, oil and gas companies, chemical producers and
operators of electric power generators are the primary users of the Company's
products in the process industries. These industries share
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the common need for instrumentation and control systems in their transfer of
fluids and gases. Product lines used by this customer group include: heated
hoses used in equipment that monitors and controls airborne emissions, spring
energized seals used to prevent fugitive emissions of harmful liquids and gases
into the atmosphere, instrumentation and control cables that carry critical
electronic communication signals from harsh process environments into control
rooms, and high pressure hose bundles used on offshore drilling platforms to
control equipment on the ocean floor.
PRODUCTS
Furon conducts its industrial operations through strategic business units
("SBUs"), which are supported by centrally coordinated marketing and
manufacturing and are organized around the Company's major product families. The
six primary product families are (i) seals and bearings; (ii) fluid handling
components; (iii) tapes, films and coated fabrics; (iv) hose and tubing; (v)
wire and cable; and (vi) plastic components.
SEALS AND BEARINGS
This product family consists of three distinct product groups -- seals,
bearings and other fluoropolymer components. All are characterized by being
either highly engineered or composed of proprietary polymer materials.
Seals. The Company's Omniseal(R) seal is a spring actuated, pressure
assisted sealing device consisting of a high performance polymer jacket (or
cover) partially encapsulating a corrosion resistant metal spring energizer.
Standard and special Omniseal seals are used in all types of fluid power and
fluid handling devices. Omniseal seals have been applied to almost every type of
gas or liquid handling component which normally would use O-Rings, V-Rings,
U-Cups, packings or crush gaskets.
Other seal product lines include Dynalip(R) PTFE radial lip seals, rotary
shaft seals, anti-blowout seals, Advanced Pitch Spring(TM) seals, omnigaskets,
bi-directional seals and hydraulic and pneumatic seals.
Bearings. Bearings are subdivided into three distinct product markets: (i)
rotary (which includes appliance, automotive, office equipment and truck
applications); (ii) linear (which includes machine tools, printers and
structural applications); and (iii) thrust bearings (which includes machine
tools and equipment, automotive and aerospace applications). The Company offers
product lines in each of these markets.
The Company's Rulon(R) and Dixon(R) CJ bearings utilize custom proprietary
compounds of fluoropolymers. They exhibit very little friction at low speeds and
at high loads compared to most other materials. Rulon and Dixon CJ bearings are
self-lubricating and are designed to meet the critical parameters of their
intended application including bearing load, speed, environment, mating surface
and duty cycle.
The Company also produces the Meldin(R) family of polyamide plastics for
structured and nonlubricated bearing applications in extreme temperature
environments up to 900 degrees fahrenheit. Other components include sleeve
bearings, liner bearings, Rulon FCJ bearings for oscillatory applications and
Dixon CW/CWW thrust bearings.
Components. The market for engineered polymer components includes
insulators for power insulation and telecommunications; valve seals for
industrial processing and refrigeration; and diaphragms, grommets, bushings and
bonded products for aerospace, semiconductor, electronics, construction and food
processing markets. Furon also supplies basic molded shapes to customers who
convert the shape into a finished component.
FLUID HANDLING COMPONENTS
This product family primarily serves the fluid handling requirements of the
semiconductor fabrication industry. The installed base of this product line has
grown rapidly since the introduction of several new products in 1994. Furon's
fluid handling products feature high purity fluoropolymer pumps, valves,
fittings and tubing. These high performance components combine to create
complete systems that protect sensitive media from contaminants and withstand
highly corrosive materials.
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Pumps. Chempure(TM) fluid handling pumps have an air operated double
diaphragm design, require no lubrication, and are available in varying
capacities and manifold types.
Valves, Fittings and Tubings. ChemAlert(TM) and its related family of fluid
handling components are used in the semiconductor industries and feature
critical characteristics, including fiberoptic and remote leak detection, dual
containment, cycle count and a variety of available fittings.
Furon Flare Grip(R) PFA fittings and Grab Seal(TM) compression fittings are
specially designed for reliability in critical applications including the
handling of aggressive chemicals or the transfer of inert and ultrapure fluids
and can withstand temperature cycling. Featuring a simple two piece design,
these products are made from high purity fully fluorinated fluoropolymer
materials.
TAPES, FILMS AND COATED FABRICS
This product family consists of a number of discrete product lines
including: (i) pressure sensitive adhesive tape and fluoropolymer films; (ii)
coated substrates such as release liners, imprintable face sheets, hardcoats and
custom coated products; (iii) coated fabrics including fluoropolymer and
silicone rubber coated fabrics; and (iv) non-coated silicone rubber sheet and
related products.
Tapes. In the industrial niche in which Furon participates, tape products
are more specialized, allowing for competition on small batch product runs where
material science and applications engineering yielding a custom tape solution
are appropriate.
The Company's Temp-R-Tape(R) polyester tapes provide electrical properties
and high dielectric strength for use in the electrical market in the manufacture
of coil, transformer and capacitor wrapping. The Temp-R-Tape polyimide family
provides high conformability solvent resistance and a tough and flexible
construction for electrically insulating capacitors and coils. Platers, hot air
leveling, polyimide, wave solder protection and fume tapes are specially
formulated and designed to withstand the harsh environments associated with
printed circuit fabrication. Polycohr(TM) tapes made with OHMW polyolefin
provide anti-sticking and abrasion resistance for use on guide rails, bearings,
nosebars and chutes in the packaging and food processing industries.
Strip-N-Stick(TM) tapes are composites of COHRlastic(R) silicone rubber with a
variety of adhesives for high and low temperature product applications,
gasketing, thermal insulation and vibration damping.
Films and Coated Fabrics. The Company competes in this coated substrate
market on the basis of its proprietary compounding technology, thin gauge film
capabilities, ultraviolet and thermal capabilities and the availability of
multiple chemistries.
Fluorglas(R) fabrics are woven fiberglass coated primarily with PTFE
fluorocarbon resins and are designed to operate in demanding temperature and
chemical environments, making them ideally suited for a wide variety of
industries including packaging, aerospace, electronics, petroleum processing and
graphic arts.
Fluorglas II PTFE/glass is a specialty fabric designed to provide an
impermeable vapor barrier in harsh gaseous environments. Porous PTFE/glass is
designed for airflow, outgassing and resin bleed-through. Conductive PTFE/glass
is specially coated to offer conductivity, enabling this fabric to be grounded
to eliminate static electricity during operation.
COHRlastic is the trade name for Furon's family of high performance
silicone rubber products. Flexible and resilient, it has a unique chemical
structure which gives it a high temperature stability and general inertness
unavailable in any other elastomer. As a result, COHRlastic silicone rubber
works in applications where most other materials cannot be used. COHRlastic
silicone rubber is odorless, tasteless and non-toxic. It contains no acid
producing chemicals and therefore is non-corrosive and non-staining. Silicone
rubber has excellent weatherability because it is unaffected by sunlight, ozone
or extremely moist or dry conditions. It will not support the growth of fungus.
The service life of COHRlastic silicone rubber in room temperature applications
is virtually unlimited. Applications include press pads, belting and gasketing.
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HOSE AND TUBING
Furon participates in the thermoplastic hose and fluoropolymer tubing
market. Furon's thermoplastic hose is sold into the markets defined by hydraulic
hose (used in oil exploration, off-highway vehicles, airless spray applications
and industrial equipment), beverage tubing, truck hose and specialty
applications.
Hose. The Company makes a wide variety of Synflex(R) hose and hose systems
for highly specialized applications including: high pressure hose bundles and
offshore bundles for seismic oil exploration and blowout prevention control,
underground drilling and operating overhead booms; beverage hose, manufactured
entirely of United States Food and Drug Administration ("FDA") approved
materials and widely used throughout the beverage industry with one version made
expressly for Coca-Cola USA; pure water hose, made from materials approved for
food products by the FDA, for carrying distilled or potable water and other
quality sensitive fluids; paint spray hose for low pressure air operated spray
systems that are used by automobile manufacturers; airless/wireless paint spray
hose that is specified by most major pump and delivery system manufacturers;
weed spray hose for use in all weed spray control and horticultural spray
applications; industrial/medical oxygen compatible hose; argon gas hose for
welding; and nylon gas analyzer hose for measuring hydrocarbon emissions.
Tubing. Synflex nylon air brake tubing and engineered air harness systems
were pioneered by Furon to replace metal and wire braid rubber brake lines. Up
to 75% lighter than metal tubing, it is made in non-reinforced single wall and
multi-layer designs depending on size. It is also available in custom
manufactured preassembled harnesses, incorporating any number of hoses and built
to the specific requirements of individual OEMs.
UltraTrace(TM) tubing is used for applications that require traceability,
purity and chemical resistance and is manufactured from FDA approved
fluoropolymers for use in the semiconductor, biotech, pharmaceutical, food and
beverage and chemical process industries.
WIRE AND CABLE
This product family is used primarily in the process industries. The broad
line of products includes communications cable, thermocouple extension wires and
instrument/control cables under the Dekoron(R), SR Heating Cables and
Unitherm(R) brand names. As is the case with many Furon products, the wire and
cable product family can include custom design features and can provide
protection against harsh environments.
PLASTIC FORMED COMPONENTS
This product family of thermoformed plastic and composite products is used
primarily in the transportation marketplace with sales to commercial aircraft
manufacturers. The products are also sold to electronics, instrumentation and
medical device manufacturers. The primary manufacturing capabilities of the
Company include vacuum, pressure and twin sheet forming, as well as machining,
milling and table rolled composites. The primary applications of this product
family include: (i) rigid foam ducts and panels; (ii) composite ducts, shrouds
and covers; and (iii) self skinning, flexible foam shrouds, bezels and crash
pads.
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The following chart summarizes the industrial business' markets and
products:
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MARKETS
INDUSTRIAL EQUIPMENT TRANSPORTATION ELECTRONICS PROCESS INDUSTRIES
Appliances Aerospace and defense Computers Chemical processing
Beverage equipment Agriculture equipment Detection equipment (hydrocarbon)
Food processing Automotive Diagnostic equipment Engineering and
Graphic arts Commercial aircraft Electronic assembly consulting
Hydraulic & pneumatic Construction equipment Environmental General construction
equipment Diesel engines Instrumentation Process controls/systems
Machine tools Gas turbines Office equipment Pulp and paper
Packaging equipment Marine Process controls/valves Refineries
Paint equipment Mass transportation Semiconductors Utilities
Refrigeration Mobile equipment Testing equipment
Sanitation equipment Truck
PRODUCTS
INDUSTRIAL EQUIPMENT TRANSPORTATION ELECTRONICS PROCESS INDUSTRIES
Bearings Bearings Custom extrusions Bearings
Bundles Hose Custom moldings Fluid handling
Coated fabrics Plastic fabrications Fluid handling components
Custom extrusions Seals components Fluoropolymer
Custom moldings Silicone products Fluoropolymer components
Fluoropolymer Tape components Hose
components Truck tubing Plastic fabrications Roll covers
Hose Seals Seals
Plastic fabrications Silicone components SR heating cables
Seals Tapes Trace products
Tape Tubing Tubing
Tubing Wire and cable Valve shields
Wire and cable
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SALES AND MARKETING
Furon's overall sales and marketing goal is to have each customer include
Company manufactured, highly engineered components as part of its product
specifications. Furon has focused on expanding its portfolio of
application-specific industrial products and integrating product development
activities with the front-end engineering performed by or for its customers. The
Company believes that as a result of these efforts, a majority of Furon's
industrial product sales are currently specially engineered in collaboration
with its customers with the remainder comprised of standardized components.
The industrial business segment includes a number of cross-functional sales
teams consisting of employees drawn from various disciplines throughout Furon,
including sales, engineering and finance. These SBUs are used to form
"partnering" relationships with Furon's strategic customers. The partnering
approach involves analyzing every phase of the customers' processes and
designing new or enhanced systems and component layouts, recommending the best
combination of parts and/or selecting the best materials. By understanding the
customers' business, Furon's sales force is positioned more effectively to
develop polymer based solutions to replace customers' existing metallic and
non-metallic products. In addition, the Company's management believes that the
SBU structure allows Furon to: (i) market its existing offering of products on a
more centralized, coordinated basis to its customers; (ii) form a closer, more
integrated relationship with its customers in order to develop new, higher
margin products; and (iii) implement product focused marketing strategies to
promote sales growth of higher margin products.
9
<PAGE> 11
Currently, approximately 80% of the industrial business' net sales are
achieved through the Company's direct sales force. The remaining sales are made
by independent manufacturers' representatives and distributors.
CUSTOMERS
Furon has developed an extensive base of well-known customers across a
broad range of markets, as evidenced below:
CUSTOMERS
<TABLE>
<CAPTION>
INDUSTRIAL EQUIPMENT TRANSPORTATION ELECTRONICS PROCESS INDUSTRIES
-------------------- -------------- ----------- ------------------
<S> <C> <C> <C>
The Coca-Cola Company The Boeing Company Eastman Kodak Chevron Corporation
FLEXcon Caterpillar Inc. Company Cooper Cameron
Graco Inc. Cummins Engine FSI International, Corporation
IMI Cornelius Inc. Company, Inc. Inc. Diamond Off Shore
Madico, Inc. Freightliner Hewlett-Packard Drilling, Inc.
Scroll Technologies Corporation Company Dresser Industries,
Siemens Corporation General Electric Honeywell Inc. Inc.
The Sherwin-Williams Company Intel Corporation Emerson Electric Co.
Company Navistar International Motorola, Inc. Fluor Corporation
Whirlpool Corporation Corporation Sony Corporation Kimberly-Clark
Paccar Inc. Sumitomo Electric Corporation
Renault USA Lightwave Reading & Bates
Volvo Trucks of Waters Corporation Corporation
North America, Inc. Xerox Corporation Shell Oil Company
</TABLE>
Furon's industrial business is not dependent upon any single customer or
group of customers, and no single customer accounted for more than 4% of the
Company's industrial net sales volume during any of the last three fiscal years.
During the year ended January 31, 1998, Furon sold its industrial products to
over 6,600 customers, the top ten of which represented approximately 15% of net
sales for that period.
COMPETITION
Furon has a large number of competitors in its industrial business, the
majority of which compete in only a limited number of the Company's product
groups. As a result, the Company believes that no single competitor presents a
significant threat to Furon's success in the overall industrial market.
Depending on the particular product, the principal competitive factors for the
Company are materials capability; engineering, design and process technology;
quality; reliability; and ability to meet delivery date and price criteria.
Furon's competitors include: Parker Hannifin Corporation (seals, hoses and fluid
handling components); the Aeroquip division of Trinova Corporation (hose and
tubing); the Garlock division of Coltec Industries Inc. (bearings); Minnesota
Mining and Manufacturing Company (tape and coated film); Raychem Corporation
(wire and cable); and a number of smaller, regional competitors with more
limited product offerings. The Company also competes with manufacturers of other
polymer based and metal based products.
The Company believes that trade secrets are important to its proprietary
products. To protect its trade secrets, the Company requires all salaried
employees to enter into confidentiality agreements. While the Company holds many
patents and trademarks with varying degrees of significance to its operations,
the Company's business is not dependent upon any particular one.
MEDICAL DEVICE BUSINESS
Industry Overview
Medical devices include a broad range of products used in the diagnosis and
treatment of patients receiving care in hospitals and alternate site healthcare
facilities. There are several healthcare industry trends that, while creating a
more challenging, competitive environment for medical device manufacturers, have
increased the overall demand for medical devices. These trends include (i) the
aging of the United States
10
<PAGE> 12
population, resulting in increased medical device product expenditures; (ii) an
increased concern over the spread of infectious diseases, resulting in increased
demand for single-patient use disposable medical products; and (iii) a shift
toward less invasive surgical procedures.
Markets and Products
The Company manufactures and sells critical care accessories and infusion
systems for medical and surgical applications in the United States and in more
than 50 other countries around the world. The worldwide hospital market in which
the Company sells its products can be divided into three major areas: (i)
critical care, including adult, pediatric and neonatal intensive care units;
(ii) specialty units, including oncology, ob/gyn, coronary care and emergency
room/trauma; and (iii) general medical/surgical. The alternate site healthcare
market in which the Company sells its products encompasses all healthcare
provided outside a hospital and is comprised primarily of (i) home healthcare,
(ii) freestanding clinics, (iii) skilled nursing facilities, and (iv) long-term
care facilities.
Critical Care Accessories
The Company's critical care accessories product line includes a wide range
of precision products utilized in intravenous therapies such as fluid and drug
administration; blood pressure transducers used by clinicians monitoring the
cardiovascular system; specialty devices used in cardiac catheterization
procedures; intrauterine monitoring products used during high risk labor and
delivery situations; and surgical drapes. Many of these products can be used
alone or as components assembled into kits. By offering standard and custom
configurations, the Company's critical care accessories product line can address
the specific needs of its varied customers.
Catheters and Introducers. The Company manufactures a complete line of
single and multi-lumen central venous catheters, percutaneous sheath introducer
sets, IUP catheters, dialysis catheters, arterial cannulaes and related medical
device products for use in cardiology and anesthetic intensive care.
Fluid and Drug Delivery Products. Fluid and drug delivery products used in
fluid and intravenous therapies include stopcocks, administration (intravenous)
sets, adapters and connectors and needleless injection systems. Medex markets
these products primarily to the neonatal and pediatric intensive care markets,
as well as to the anesthesia market.
Stopcocks are specialized valves used as a component in the administration
of parenteral fluids or blood and provide a convenient means to administer drugs
or liquid anesthetics in conjunction with such fluids. Stopcocks provide
multiple flow paths for the selection and direction of fluids, drugs and
anesthetics depending upon the particular procedural requirements and the
preference of the user. The Company manufactures one-way, three-way and four-way
stopcocks, which it markets under the name Guide-Flo(R). In addition to fluid
and drug administration, the growth of invasive pressure monitoring and cardiac
catheterization diagnostic procedures have resulted in a significant increase in
demand for stopcocks of various configurations and performance characteristics.
An administration set is the apparatus by which fluid is delivered from a
container or a pump to the patient. These sets consist of an entry spike, drip
chamber, a length of tubing with a flow control device and a catheter adapter.
The entry spike is used to enter the fluid bottle or bag, and the drip chamber,
which is made of a clear plastic, provides a reservoir of fluid. Fluid flows
into the system one drop at a time, which can be seen and counted, permitting
calculation of the volume of the fluid being administered. The Company markets
the Microbore Extension Set, which is used in neonatal applications requiring
small volumes of fluid to produce optimal fluid flow to patients. Disposable
administration sets are manufactured in standard and customized configurations
and may incorporate numerous additional components such as stopcocks, continuous
flush devices or injection sites for intravenous drug administration.
Adapters and connectors provide multiple flow paths for the selection and
direction of fluids, drugs and anesthetics.
11
<PAGE> 13
The Company's needleless access products are designed to permit access to
the Company's disposable administration sets without the use of needles, thus
reducing the potential for accidental needlesticks. The Company's Nu-Site(TM)
system is a component which is compatible with standard luer or luer-locking
syringes and disposable administration sets, thereby allowing users to integrate
it into existing care practices. The Nu-Site is made from a latex-free polymer
and therefore reduces the risk of exposure of patients and healthcare workers to
latex which can cause severe allergic or anaphylactic shock reactions. Nu-Site
was developed in response to increasing pressure by regulatory agencies, such as
the Occupational Safety and Health Administration and the FDA, for more
stringent control of needles in hospitals.
The Company purchases various components from other manufacturers and
packages them with the Company's medical device products to produce kits for
specific hospital procedures. Kits are attractive to hospitals because they
typically lower costs, increase hospital throughput, and save labor by
eliminating the need to purchase parts individually and assemble them on site.
Patient Monitoring Products. Patient monitoring products include blood
pressure transducers which sense intravascular pressure and convert it to an
electrical signal that is transmitted to a patient monitor. The monitor then
processes and graphically displays this data allowing clinicians to monitor the
cardiovascular system. The Company's patient monitoring products also include
intrauterine pressure monitoring products used during high risk labor and
delivery situations.
The Company manufactures both reusable and disposable pressure transducers.
Introduced in fiscal 1998, the LogiCal(TM) reusable pressure transducer is sold
at a price competitive with comparable disposable pressure transducers. The
SimulCath(R) disposable pressure monitoring device accommodates the
implementation of amnioinfusion, a procedure designed to increase the efficiency
of labor as well as provide direct support to a fetus exhibiting signs of
distress. In this procedure, sterile saline is infused into the uterus to
directly relieve fetal distress by providing fluid support of the umbilical cord
and to increase the effect of labor contractions until delivery is accomplished.
The Company manufactures and markets two infusor cuffs, Clear-Cuff(R) and
C-Fusor(R). The Clear-Cuff pressure infusor complements the Company's C-Fusor
reusable pressure infusor. Clear-Cuff offers the flexibility of being disposable
or reusable as dictated by clinical considerations. C-Fusor is made of a clear
polymer, which permits immediate assessment of the fluid level in the bag from
any angle. This material's stain resistance and durability extends the useful
life of the product. The closure system used in the C-Fusor infusor cuff
provides secure closure and simplifies fluid bag setup and replacement.
Catheterization Products. Medex's catheterization products include
specialty devices used in cardiac catheterization procedures such as angiography
and coronary angioplasty. Angiography is a diagnostic procedure used to evaluate
the condition of major blood vessels within a patient's vascular system.
Coronary angioplasty is a therapeutic procedure that involves the utilization of
a balloon catheter to expand the inner diameter of a patient's coronary arteries
to improve blood flow. Medex manufactures various connectors, manifolds, control
syringes, balloon catheter inflator devices, high pressure injection tubing and
high pressure rotators used in these procedures.
Infusion Systems
The Company's infusion systems product line includes a variety of
microprocessor controlled single and multi-channel infusion pumps and disposable
infusion administration sets. Intravenous infusion therapy generally involves
the delivery of one or more fluids, primarily pharmaceuticals or nutritionals,
to a patient through an infusion line inserted into the circulatory system. Over
the past twenty years, as both the reliance on intravenous drug therapy and the
potency of the drugs administered have increased, the need for extremely precise
administration and monitoring of intravenous fluids has risen significantly. As
treatment regimens have become more complex and as the critically ill constitute
an increasing percentage of hospital patients, the average hospital patient now
requires a greater number of intravenous lines and more potent therapeutics.
Infusion systems are differentiated on a number of characteristics
including size, weight, number of delivery channels, programmability, mechanism
of infusion, cost and service. One of the key differences
12
<PAGE> 14
among infusion systems is the level of control that such systems afford to both
medical staffs and patients. Infusion systems are generally designed for either
critical care or general care use, with the latter group being used both in
hospitals and at alternate site healthcare facilities.
Infusion Pumps. The Company produces various models of syringe pumps which
are capable of accepting all conventional hypodermic syringes ranging from 1
through 60 ccs in volume. This capability makes the syringe pump very useful for
the intravenous and regional infusion of anesthetic agents in the operating
room, adult ICU and pediatric ICU, as well as in neonatal intensive care units
where low volume drug infusions are required for premature infants.
Additionally, a syringe offers the lowest cost intravenous fluid container
available to the hospital pharmacist. The added labor costs of the pharmacist
prefilling a syringe with the exact amount of drug required by the patient,
labeling the syringe, and delivering it to the patient's bedside for loading
into the syringe pump is offset by the overall cost savings of syringe pump use.
Syringe pumps are currently the standard of care in Europe.
The Company also manufactures and sells large volume infusion pumps used
for administrating large fluid volumes ranging from 0.1 ml per hour to 999.9 ml
per hour. Unlike syringe pumps, large volume infusion pumps utilize a broad
range of dedicated disposable infusion sets for different protocols.
The Company's KIDS(TM) pump was designed specifically for the neonatal and
pediatric markets and can be used for the administration of large, as well as
small, fluid volumes. Most neonatal pediatric fluid and drug administration
protocols can be achieved by using either a Medex large volume pump or a Medex
syringe pump.
Infusion Administration Sets. All infusion pumps require the use of
disposable administration sets. A set consists of a plastic interface and tubing
and may have a variety of features such as volume control, pumping segments or
cassette pumping systems for more accurate delivery, clamps for flow regulation
and multiple ports for injecting medication and delivery of more than one
solution. Components such as burettes and filters may also be added for critical
drugs or special infusion. The Company produces a full line of single use fluid
administration sets to satisfy the needs of this market segment.
The following chart summarizes the Company's medical device products and
the end-users it serves:
<TABLE>
<CAPTION>
END-USERS
--------------------------------------------------------------------------------------------------
NEONATAL
AND INTENSIVE
PEDIATRIC & LABOR CATH ANESTHESIA,
INTENSIVE CRITICAL AND LAB/ EMERGENCY OPERATING ONCOLOGY ALTERNATE
PRODUCTS CARE CARE DELIVERY RADIOLOGY ROOM ROOM WARD SITE
-------- ------------ ----------- -------- --------- --------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Catheters &
introducers........... X X X X X X X
Fluid and drug
delivery.............. X X X X X X X X
Patient monitoring...... X X X X X X
Cath lab accessories.... X X
Infusion systems........ X X X X X X X X
</TABLE>
SALES AND MARKETING
Furon sells its medical device products, both directly and indirectly, to a
diverse group of customers in the healthcare industry. The Company's domestic
sales and marketing efforts are accomplished primarily by a network of direct
sales representatives employed by the Company and are supplemented in select
geographic areas by independent sales agents. These representatives work with
independent hospital supply dealers to whom the Company sells many of its
medical device products. In addition, these representatives work with the
dealers' sales force at the hospital level to promote sales of the Company's
medical device products. The Company also sells directly to hospitals, home
healthcare companies and other alternate site healthcare facilities, as well as
other medical device manufacturers on an OEM basis. The Company has
relationships with many of the large hospital group purchasing organizations
("GPOs"). International sales in the United Kingdom, continental Europe and the
Middle East are conducted mainly by direct sales representatives of the
13
<PAGE> 15
Company. Sales to other international markets are conducted through independent
dealers located in the various countries.
COMPETITION
The medical device markets are highly competitive. The principal points of
competition are price, service, scope of product line, technological innovation
and product quality. Many of the Company's competitors in the medical device
market have greater financial and other resources than Furon and may have
greater access to distribution channels. Although the infusion pump market is
extremely competitive and fragmented, the Company believes that it competes
favorably among those manufacturers who supply the children's hospital, neonatal
and pediatric marketplaces. The Company's future prospects in the medical device
business will be dependent upon the successful development and introduction of
new and improved products that are responsive to market needs and which require
a high level of technological expertise and market timeliness.
The Company's competitors include Abbott Laboratories, Baxter International
Inc. and B. Braun Melsungen AG in all product areas, Alaris Medical, Inc. in
infusion products, Arrow International, Inc. in catheters and Merit Medical
Systems, Inc. in catheterization lab accessories.
FDA COMPLIANCE/PRODUCT REGULATION
The research, development, testing, production and marketing of the
Company's medical device products are subject to extensive governmental
regulation in the United States at the federal, state and local levels, and in
certain other countries. Noncompliance with applicable requirements may result
in recall or seizure of products, total or partial suspension of production,
refusal of the government to allow clinical testing or commercial distribution
of products, civil penalties, injunctions and criminal prosecution.
The FDA regulates the development, production, distribution and promotion
of medical devices in the United States. Virtually all of the products being
developed, manufactured and sold by the Company (and products likely to be
developed, manufactured or sold in the foreseeable future) are subject to
regulation as medical devices by the FDA. Class I devices are subject to general
controls, including registration, device listing, recordkeeping requirements,
labeling requirements, Good Manufacturing Practices, prohibitions on
adulteration and misbranding, and reporting of certain adverse events. In
addition to general controls, Class II devices are subject to pre-market
notification and may be subject to special controls that could include
performance standards, postmarket surveillance, patient registries and other
actions as the FDA deems necessary to provide reasonable assurance of safety and
effectiveness. Class III devices must meet the most stringent regulatory
requirements and must be approved by the FDA before they can be marketed. Such
premarket approval can involve extensive preclinical and clinical testing to
prove safety and effectiveness of the devices. Virtually all of the Company's
products are Class I or Class II devices.
Certain countries will require the Company to obtain clearances for its
products prior to marketing the products in those countries. In addition,
certain countries impose product specifications, standards or other requirements
which differ from or are in addition to those mandated in the United States. The
European Union and certain other countries are in the process of implementing a
system for regulating medical products which may result in lengthening the time
required to obtain permission to market new products. These changes could have a
material adverse effect on the Company's ability to market its devices in such
countries and could hinder or delay the successful implementation of the
Company's planned international expansion.
THE FOLLOWING APPLIES TO THE COMPANY'S INDUSTRIAL AND MEDICAL DEVICE BUSINESSES.
RAW MATERIALS
Engineered polymers, such as nylon and PTFE, and silicone polymers
represent the predominant raw materials used by the Company in the manufacture
of its industrial products. Other raw materials used by Furon include copper
wiring, coatings and adhesives. The primary raw materials used in the production
of medical device products include thermoplastic resins, plastic tubing, paper,
plastic and Tyvek(R) packaging materials and electronic componentry. The
majority of the Company's raw materials are produced by multiple
14
<PAGE> 16
suppliers or have substitute materials readily available. Furon purchases resins
from E.I. du Pont de Nemours and Company, Elf Atochem North America, Inc. ("Elf
Atochem"), General Electric Corporation, Monsanto Corporation and several other
major plastics producers. Elf Atochem is the Company's sole source for Rilsan.
Rilsan is used primarily in the production of heavy duty air brake tubing.
Alternate sources of material which can be substituted for Rilsan are available
in the event a shortage of Rilsan develops. Due to increased worldwide demand,
some users of polycarbonate resins periodically have experienced shortages in
supply and delays in delivery of such resins. Polycarbonate is used in the
manufacture of certain plastic components used in medical device products. To
date, the Company has been minimally impacted by such shortages and delays.
While the Company believes that an adequate supply will be available in the near
term, the cost of such material will likely continue to increase. The resins
used by the Company are typically in pellet or powder form and are usually
purchased on a spot market basis or under short-term pricing contracts.
Contracts with resin manufacturers are negotiated on a company-wide basis to
take advantage of volume discounts, although prices for polymer resins have
widely varied in recent years.
Furon estimates that material costs, including resins, films, silicones,
and other related products represented approximately 37% of the Company's fiscal
1998 net sales. Furon seeks to pass raw materials price increases through to its
customers, although a lag period often exists.
ENVIRONMENTAL MATTERS
Compliance with environmental laws and regulations designed to regulate the
discharge of materials into the environment or otherwise protect the environment
requires continuing management effort and expenditures by the Company. The
Company does not believe that the operating costs incurred in the ordinary
course of business to satisfy air and other permit requirements, properly
dispose of hazardous wastes and otherwise comply with these laws and regulations
form or are reasonably likely to form a material component of its operating
costs or have or are reasonably likely to have a material adverse effect on its
competitive or consolidated financial positions.
As of January 31, 1998, the Company's reserves for environmental matters
totaled approximately $1.7 million. The Company or one or more of its
subsidiaries is currently involved in environmental investigation or remediation
directly or as an EPA-named potentially responsible party or private cost
recovery/contribution action defendant at various sites, including certain
"superfund" waste disposal sites. While neither the timing nor the amount of the
ultimate costs associated with these matters can be determined with certainty,
based on information currently available to the Company, including
investigations to determine the nature of the potential liability, the estimated
amount of investigation and remedial costs expected to be incurred and other
factors, the Company presently believes that its environmental reserves should
be sufficient to cover the Company's aggregate liability for these matters and,
while no assurance can be given, it does not expect them to have a material
adverse effect on its consolidated financial position or results of operations.
The actual costs to be incurred by the Company at each site will depend on a
number of factors, including one or more of the following: the final delineation
of contamination, the final determination of the remedial action required,
negotiations with governmental agencies with respect to cleanup levels, changes
in regulatory requirements, innovations in investigatory and remedial
technology, effectiveness of remedial technologies employed, and the ultimate
ability to pay of any other responsible parties.
EMPLOYEES
As of January 31, 1998, the Company had approximately 3,315 employees.
Approximately 71% of these employees work in the industrial business and the
remaining 29% work primarily in the medical device business. Approximately 237
employees are involved in sales and marketing, 160 in research and development,
2,480 in manufacturing and 438 in administration. Fifty-nine of the Company's
employees are covered under a collective bargaining agreement. The Company
considers its relationship with its employees to be good.
15
<PAGE> 17
RESEARCH AND DEVELOPMENT
For information concerning the amounts spent by the Company during the last
three fiscal years on research and development, see Note 1 of the "Notes to
Consolidated Financial Statements."
BACKLOG OF ORDERS
Furon's backlog of unfilled orders at January 31, 1998 was approximately
$71 million. This is a 7.6% increase over the February 1, 1997 backlog amount of
approximately $66 million. It is estimated that substantially all of Furon's
backlog of orders at January 31, 1998 will be filled during the next 12 months,
with approximately $5.0 million of the backlog scheduled to be filled in the
subsequent 12 month period. The lead time between receipt of orders and shipment
of products, other than products to commercial aircraft, is typically a matter
of weeks. Although many of Furon's orders contain cancellation clauses, Furon
has seldom experienced significant cancellations of orders.
ITEM 2. DESCRIPTION OF PROPERTY
The Company occupies 27 facilities located in 12 states, Belgium, Germany
and the United Kingdom. Operations within a facility typically focus on a
particular polymer based manufacturing process, or the design and manufacture of
a specific medical device. Nine of the Company's facilities are owned and 18 are
leased.
The Company has received ISO 9000 certification for certain of its
facilities regarding the quality of its manufacturing systems, a requirement for
doing business in European countries, and the Company is in the process of
applying for ISO 9000 certification for the balance of its manufacturing
facilities. The Company has been granted approval to affix the CE mark, pursuant
to the EC Medical Device Directives, on certain of its products. Failure to gain
approval to affix the CE mark to a product does not necessarily preclude a
company from selling products internationally, however, additional restrictions
on marketing in any individual country in the EC may be imposed.
<TABLE>
<CAPTION>
EXPIRATION OF
SQUARE MAXIMUM
PROPERTY FOOTAGE LEASE TERM
-------- ------- -------------
<S> <C> <C>
INDUSTRIAL
SEALS AND BEARINGS:
Bristol, RI................................................. 106,000 8/31/37
Los Alamitos, CA............................................ 63,000 12/14/03
Mundelein, IL............................................... 60,000 8/31/00
FLUID HANDLING COMPONENTS:
Anaheim, CA................................................. 91,000 7/31/10
TAPES, FILMS AND COATED FABRICS:
New Haven, CT............................................... 110,000 8/31/37
Hoosick Falls, NY........................................... 109,000 Owned
Worcester, MA............................................... 76,000 Owned
HOSE AND TUBING:
Mantua, OH.................................................. 151,000 8/31/37
Mickleton, NJ............................................... 86,000 8/31/37
Kent, OH.................................................... 50,000 1/06/01
WIRE AND CABLE:
Aurora, OH.................................................. 148,000 8/31/37
Mt. Pleasant, TX............................................ 67,000 Owned
Cape Coral, FL.............................................. 30,000 5/31/06
PLASTIC FORMED COMPONENTS:
Seattle, WA................................................. 116,000 2/28/02
</TABLE>
16
<PAGE> 18
<TABLE>
<CAPTION>
EXPIRATION OF
SQUARE MAXIMUM
PROPERTY FOOTAGE LEASE TERM
-------- ------- -------------
<S> <C> <C>
MATERIALS COMPOUNDING:
Aurora, OH.................................................. 30,000 8/31/37
EUROPE:
Gembloux, Belgium........................................... 49,000 Owned
Rugby, England.............................................. 37,000 12/07/04
Kontich, Belgium............................................ 30,000 11/30/99
Corby, England.............................................. 16,000 10/20/17
MEDICAL DEVICE
DOMESTIC:
Hilliard, OH................................................ 150,000 Owned
Dublin, OH.................................................. 130,000 Owned
Duluth, GA.................................................. 52,000 Owned
EUROPE:
Rossendale, England......................................... 93,000 Owned
Fraureuth, Germany.......................................... 29,000 4/01/08
Ratingen, Germany........................................... 26,000 12/01/98
Cumbernaud, Scotland........................................ 17,000 5/01/17
CORPORATE
Laguna Niguel, CA........................................... 22,000 Owned
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various legal proceedings. The Company
vigorously defends all lawsuits brought against it, unless a reasonable
settlement appears appropriate. While the outcome of pending proceedings cannot
be predicted with certainty, the Company believes that the ultimate resolution
of the actions currently pending is not reasonably likely to have a material
adverse effect on its consolidated financial condition or results of operations.
Medex has been named as a defendant in McBrayer, et al, v. Laidlaw
Environmental Services (WT), Inc., et al., which was commenced in the United
States District Court for the Southern District of Ohio (Eastern Division) in
October 1996 and in the Franklin County, Ohio Common Pleas Court in January
1997. The federal action was dismissed in July 1997. The plaintiffs are two
former students of a local elementary school and their parents. In addition to
Laidlaw, which operates an industrial waste treatment facility near the school,
the named defendants include two neighboring manufacturers, Beaver Adhesives,
Inc, and OSF America, Inc., and the City of Hilliard, Ohio and the Board of
Education of the Hilliard City School District. The plaintiffs seek unspecified
damages (having recently sought in the federal action compensatory damages of
$15.0 million and punitive damages of $100.0 million) from the defendants for
the alleged release of hazardous substances, pollutants and contaminants
(ethylene oxide and freon gas in the case of Medex) into the elementary school's
environment, which allegedly resulted in personal injuries to the two former
students. Discovery has not yet been completed. Based upon the Company's
preliminary investigation, the Company believes that Medex has substantial
defenses to the claims. Also see Item 1 -- Business -- Environmental Matters.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
fourth quarter of the year ended January 31, 1998.
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<PAGE> 19
OFFICERS OF FURON
Furon's executive and other officers are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION/BUSINESS EXPERIENCE
---- --- ----------------------------
<S> <C> <C>
EXECUTIVE OFFICERS
J. Michael Hagan....... 58 Chairman of the Board and Chief Executive Officer
Mr. Hagan has been employed by the Company since 1967 and was promoted to
Division Manager in 1969, elected Vice President in 1975, and served as a
director and President from 1980 to June 1991 when he was appointed
Chairman of the Board and Chief Executive Officer. He is also a director
of Freedom Communications, Inc., Ameron, Inc. and RemedyTemp, Inc.
Terrence A. Noonan..... 60 President, Chief Operating Officer and Director
Mr. Noonan has been the President of Furon since June 1991 and was
elected as a director in August 1991. From 1989 to June 1991, he served
as an Executive Vice President in charge of various operations. He joined
Furon in 1987 as a Vice President, having previously served since 1982 as
an Operations General Manager of Eaton Corporation, a diversified
manufacturing company. Mr. Noonan also is a director of Haskel
International, Inc.
Monty A. Houdeshell.... 49 Vice President, Chief Financial Officer and Treasurer
Mr. Houdeshell joined the Company in 1988 as Vice President, Chief
Financial Officer and Treasurer and also served as Secretary from 1988 to
February 1991. From 1985 to 1988, Mr. Houdeshell served as Vice
President, Chief Financial Officer and Treasurer of Oak Industries, Inc.,
a manufacturer of electronic components and controls.
Dominick A. Arena...... 55 Vice President -- Healthcare and President of Medex, Inc.
Mr. Arena joined the Company in January 1997 to manage its healthcare
business, having served as the Company's healthcare consultant since
February 1996. He was elected President of Medex following the
acquisition of that subsidiary in January 1997 and an executive officer
of the Company in March 1997. Previously, Mr. Arena was the President of
three medical device manufacturers, AnaMed International from 1993 to
1996, Hudson Respiratory Care, Inc. from 1989 to 1993 and Respiratory
Care, Inc. (a subsidiary of The Kendall Company) from 1986 to 1989, when
it was acquired by Hudson.
Joseph R. Grewe........ 49 Vice President -- Operations
Mr. Grewe joined the Company in March 1996 to manage its manufacturing
operations and was elected an executive officer of the Company in March
1997. He came to the Company from MascoTech, Inc., where he had been the
President of MascoTech Sintered Components, a manufacturer of automotive
industrial components and assemblies, since 1988. Previously, he held a
wide range of manufacturing positions since 1968 with General Motors
Corporation, Rockwell International and a start-up company in which he
was a principal.
</TABLE>
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<PAGE> 20
<TABLE>
<CAPTION>
NAME AGE POSITION/BUSINESS EXPERIENCE
---- --- ----------------------------
<S> <C> <C>
OTHER OFFICERS
David L. Mascarin...... 43 Controller
Mr. Mascarin joined the Company in August 1996 as Controller. Prior to
joining the Company, Mr. Mascarin served for more than five years as a
Site Controller for the Power Train Operations of Ford Motor Company,
with which he had been employed for 18 years.
Donald D. Bradley...... 42 General Counsel and Secretary
Mr. Bradley joined the Company in June 1990 as Senior Attorney and
Assistant Secretary and was named Corporate Secretary in February 1991
and General Counsel in February 1992. Previously, he was a Special
Counsel with O'Melveny & Myers LLP, an international law firm with which
he had been associated since 1982.
</TABLE>
All officers of the Company are elected annually by and serve at the
pleasure of the Board of Directors. There are no family relationships among any
of Furon's officers.
19
<PAGE> 21
RISK FACTORS
THIS ANNUAL REPORT ON FORM 10-K ("10-K") CONTAINS "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT AND SECTION
21E OF THE EXCHANGE ACT, INCLUDING, WITHOUT LIMITATION, STATEMENTS THAT INCLUDE
THE WORDS "BELIEVES," "EXPECTS," "ANTICIPATES" OR SIMILAR EXPRESSIONS AND
STATEMENTS RELATING TO ANTICIPATED COST SAVINGS, THE COMPANY'S STRATEGIC PLANS,
CAPITAL EXPENDITURES, INDUSTRY TRENDS AND PROSPECTS AND THE COMPANY'S FINANCIAL
POSITION. SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS,
UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR
ACHIEVEMENTS OF THE COMPANY TO DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED
BY SUCH FORWARD-LOOKING STATEMENTS. ALTHOUGH THE COMPANY BELIEVES THAT ITS
PLANS, INTENTIONS AND EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS
ARE REASONABLE, IT CAN GIVE NO ASSURANCE THAT SUCH PLANS, INTENTIONS OR
EXPECTATIONS WILL BE ACHIEVED. CAUTIONARY STATEMENTS ARE SET FORTH BELOW AND
ELSEWHERE IN THIS 10-K INCLUDING, WITHOUT LIMITATION, UNDER THE CAPTIONS "ITEM
7 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" AND "ITEM 1 -- BUSINESS." ALL SUBSEQUENT WRITTEN AND ORAL
FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO THE COMPANY OR PERSONS ACTING ON ITS
BEHALF ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY STATEMENTS
AND RISK FACTORS CONTAINED THROUGHOUT THIS 10-K.
SUBSTANTIAL LEVERAGE AND DEBT SERVICE
The Company is highly leveraged. On January 31, 1998, the Company's total
debt outstanding was approximately $149.6 million. See "Item 8 -- Consolidated
Financial Data." The Company also had borrowing availability under the Credit
Facility (as defined) of approximately $108.0 million.
Based upon current levels of operations and anticipated growth in revenues
and cost savings, management believes that the Company's cash flow from
operations, amounts available under the Credit Facility and available cash will
be adequate to meet its anticipated future requirements for working capital,
capital expenditures and scheduled payments of principal and interest on its
indebtedness. There can be no assurance, however, that the Company's business
will generate cash flow at or above anticipated levels or that the Company will
be able to borrow funds under the Credit Facility in an amount sufficient to
enable the Company to service its indebtedness or make anticipated capital
expenditures. If the Company is unable to generate sufficient cash flow from
operations or to borrow sufficient funds in the future, it may be required to
sell assets, reduce capital expenditures, refinance all or a portion of its
existing indebtedness or obtain additional financing. There can be no assurance
that any such refinancing would be available on commercially reasonable terms,
or at all, or that any additional financing could be obtained, particularly in
view of the Company's high level of indebtedness and the restrictions on the
Company's ability to incur additional indebtedness under the Credit Facility and
the Indenture (the "Indenture") relating to the Company's issuance (the
"Offering") of $125.0 million in aggregate principal amount of its 8.125% Senior
Subordinated Notes due 2008 (the "Notes").
The degree to which the Company is leveraged could have important
consequences, including but not limited to: (i) increasing the Company's
vulnerability to general adverse economic and industry conditions; (ii) limiting
the Company's ability to obtain additional financing to fund future working
capital, capital expenditures and other general corporate requirements; (iii)
requiring the dedication of a substantial portion of the Company's cash flow
from operations to the payment of principal of, and interest on, its
indebtedness, thereby reducing the availability of such cash flow to fund
working capital, capital expenditures or other general corporate requirements;
(iv) limiting the Company's flexibility in planning for, or reacting to, changes
in its business and the industry in which it competes; and (v) placing the
Company at a competitive disadvantage relative to less leveraged or better
capitalized competitors.
In addition, the Indenture and the Credit Facility contain financial and
other restrictive covenants that limit, among other things, the ability of the
Company to borrow additional funds. Failure by the Company to comply with such
covenants could result in events of default under the Indenture and the Credit
Facility which, if not cured or waived, could permit the indebtedness thereunder
to be accelerated which would have a material adverse effect on the Company's
business, financial condition and results of operations.
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<PAGE> 22
SENSITIVITY TO GENERAL ECONOMIC AND INDUSTRY CONDITIONS
The Company's industrial products business, and the industrial equipment,
transportation, electronics and process industries markets it serves, are
cyclical in nature and are affected by the general trends of the economy. During
economic downturns, these markets tend to experience declines, which in turn
diminish demand for the Company's products and can lead to decreases in prices
for such products. As a result of this cyclicality, the Company has experienced,
and in the future could experience, reduced net sales and profit margins. There
can be no assurance that a prolonged economic downturn would not have a material
adverse effect on the Company.
COMPETITION
The Company has a number of competitors, some of which are larger and have
greater financial resources than the Company. There can be no assurance that the
Company will have sufficient resources to continue to make the investments
necessary to maintain its current competitive position, or that other
competitors with greater financial resources will not attempt to enter the
market. The failure to remain competitive could have a material adverse effect
on the Company's business, financial condition and results of operations.
RAW MATERIALS
Furon estimates that material costs represented approximately 37% of the
Company's fiscal 1998 net sales. Furon purchases its raw materials, primarily
polymer resins, from numerous suppliers. The largest amount of resins used by
the Company are polytetrafluouroethylene ("PTFE") and related resins, a nylon
sold under the trade name Rilsan(R) and certain silicone polymers. The Company
purchases its requirements for PTFE and related resins and silicone polymers
from the major suppliers of these resins. Elf Atochem North America, Inc. is the
Company's sole source for Rilsan. Rilsan is used primarily in the production of
heavy duty air brake tubing. Sources of material which can be substituted for
Rilsan are available in the event a shortage of Rilsan develops. Although the
Company seeks to reduce dependence on those sole and limited source suppliers,
the partial or complete loss of certain of these sources could have at least a
temporary adverse effect on the Company's results of operations and damage
customer relationships. Prices for polymer resins have varied widely in recent
years. The increase in the price or the unavailability of one or more of these
resins could have a material adverse effect on the Company's business, financial
condition or results of operations.
CONCENTRATION OF BUYING POWER
Many existing and potential customers for the Company's medical device
products have combined into GPOs which are quite large and which often enter
into exclusive purchase commitments with as few as one or two providers of
medical device products for a period of several years. If the Company is not one
of the selected providers, it may be precluded from making sales to members of a
GPO for several years. Even if the Company is one of the selected providers, the
Company may be required to commit to pricing which has an adverse effect on its
net sales and profit margins.
TECHNOLOGICAL CHANGE; DEPENDENCE ON NEW PRODUCTS
The markets for some of the Company's products are characterized by
frequent refinement and enhancement of existing products, new product
introductions and by declining average selling prices over product life cycles.
The Company's future prospects are highly dependent upon the timely completion
and introduction of new products at competitive performance and price levels.
The Company also must respond to current competitors which may choose to
increase their presence in the Company's markets, and to new competitors which
may choose to enter those markets. In addition, while the Company is not aware
of any new fundamental technologies for highly engineered polymer products that
are likely to be a significant factor in the near future, no assurance can be
given that the Company's competitors will not introduce new technological
improvements that could place the Company at a competitive disadvantage. The
failure by the Company to make timely introduction of new products or respond to
competitive threats could have a material adverse effect on its business,
financial condition or results of operations.
21
<PAGE> 23
ACQUISITIONS AND INTEGRATION OF OPERATIONS
The Company's business strategy, particularly for the medical device
business, contemplates continued expansion, including growth through
acquisitions, joint ventures or strategic alliances. There can be no assurance
that the Company will be able to consummate future acquisitions, joint ventures
or strategic alliances, if any, on terms that are favorable to the Company. The
Company's ability to grow in this manner is dependent upon, and may be limited
by the availability of suitable acquisition candidates or partners and capital
resources available to the Company. Moreover, the Company may incur significant
expenses in connection with the consummation of these transactions.
Additionally, the integration of the operations of the Company and any past,
present or future acquired businesses or companies, and the coordination of
their respective sales and marketing staffs and the implementation of
appropriate operational, financial and management systems and controls may
require significant financial resources and substantial attention from
management. Any inability of the Company to integrate any past, present or
future acquired business or companies successfully in a timely and efficient
manner could have a material adverse effect on the Company's business, financial
condition or results of operations.
INTERNATIONAL SALES AND OPERATIONS
International sales accounted for 25.5% of the Company's net sales in
fiscal year 1998, and the Company expects that international sales may increase
as a percentage of net sales in the future. As a result of its international
sales and foreign operations, including manufacturing facilities in Germany,
Belgium and the United Kingdom, the Company generates certain revenues and
incurs certain operating expenses in foreign currencies and is therefore subject
to changes in currency exchange rates in relation to the U.S. dollar. There can
be no assurance that measures taken by the Company to mitigate its exchange rate
risk, including manufacturing and procuring its products in the same country or
region in which products are sold and periodically engaging in hedging
transactions such as forward exchange contracts, will eliminate or substantially
reduce such risk.
International manufacturing and sales are subject to inherent risks,
including changes in local economic or political conditions, the imposition of
currency exchange restrictions, unexpected changes in regulatory environments,
potentially adverse tax consequences and the exchange rate risk discussed above.
There can be no assurance that these factors will not have a material adverse
impact on the Company's production capabilities or otherwise adversely affect
the Company's business, financial condition or results of operations.
GOVERNMENT REGULATION
Government regulation is a significant factor in the research, development,
testing, production and marketing of the Company's medical device products.
Noncompliance with applicable requirements may result in the recall or seizure
of products, total or partial suspension of production, refusal of the
government to allow commercial distribution of products, refusal of the
government to allow new products to be marketed, civil penalties, injunctions
and criminal prosecution. There can be no assurance that the Company's existing
products will be found to comply with such regulations or that new products will
be granted marketing clearance in a timely manner or at all.
The FDA, pursuant to the Federal Food, Drug, and Cosmetic Act, regulates
the introduction of medical devices, as well as manufacturing procedures,
labeling, adverse event reporting and recordkeeping with respect to such
products. The process of obtaining market clearances from the FDA for new
products can be time consuming and expensive and there can be no assurance that
such clearances will be granted or that FDA review will not involve delays
adversely affecting the marketing and sale of products. Current regulations
depend heavily on administrative interpretation and there can be no assurance
that interpretations made by the FDA or other regulatory bodies will not
adversely affect the Company. The FDA and state agencies routinely inspect the
Company to determine whether the Company is in compliance with various
regulations relating to manufacturing practices, testing, quality control and
product labeling. Such audits/inspections can result in the agencies requiring
the Company to take certain corrective actions for non-complying conditions
observed during the audits/inspections. A determination that the Company is in
violation of such regulations could lead
22
<PAGE> 24
to the imposition of civil sanctions, including fines, recall orders or product
seizures, injunctions and criminal sanctions.
Certain countries will require the Company to obtain clearances for its
products prior to marketing the products in those countries. In addition,
certain countries impose product specifications, standards or other requirements
which differ from or are in addition to those mandated in the United States. The
European Union and certain other countries are in the process of implementing a
system for regulating medical products which may result in lengthening the time
required to obtain permission to market new products. These changes could have a
material adverse effect on the Company's ability to market its devices in such
countries and could hinder or delay the successful implementation of the
Company's planned international expansion.
PRODUCT LIABILITY
The Company faces an inherent business risk of exposure to product
liability claims in the event that the use of its products is alleged to have
resulted in injury or other adverse effects. The Company currently maintains
product liability insurance coverage but there can be no assurance that the
Company will be able to obtain such insurance on acceptable terms in the future,
if at all, or that any such insurance will provide adequate coverage against
claims. The Company's financial condition and its ability to market and sell its
products could be adversely affected by a successful product liability claim. A
successful product liability claim against the Company for which there is not
adequate insurance coverage could have a material adverse impact on its
business, financial condition or results of operations.
ENVIRONMENTAL LIABILITIES AND REGULATIONS
Compliance with environmental laws and regulations designed to regulate the
discharge of materials into the environment or otherwise protect the environment
requires continuing management effort and expenditures by the Company. The
Company does not believe that the operating costs incurred in the ordinary
course of business to satisfy air and other permit requirements, properly
dispose of hazardous wastes and otherwise comply with these laws and regulations
form or are reasonably likely to form a material component of its operating
costs or have or are reasonably likely to have a material adverse effect on its
competitive and consolidated financial positions.
There can be no assurance that the cost of the Company's compliance with
environmental laws or its environmental liabilities will not have a material
adverse effect on the Company's business, financial condition or results of
operations. See "Item 1 -- Business -- Environmental Matters."
LEGAL PROCEEDINGS
The Company is involved in various legal proceedings. While the Company
believes that the ultimate resolution of its pending legal proceedings is not
reasonably likely to have a material adverse effect on its business, financial
condition or results of operations, no assurance to that effect can be given.
See "Item 3 -- Legal Proceedings."
DEPENDENCE ON KEY PERSONNEL
The Company's success depends to a significant degree upon the continued
contributions of senior management, certain of whom would be difficult to
replace. There can be no assurance that the services of such personnel will
continue to be available to the Company. The Company is also dependent upon the
continued services of its engineering, research and development, sales and
marketing and manufacturing and service personnel and on its ability to attract,
train and retain highly skilled personnel in each of these areas. The failure of
the Company to hire and retain such key management and other personnel could
have a material adverse effect on the Company's business, financial condition or
results of operations.
23
<PAGE> 25
YEAR 2000 COMPLIANCE
While year 2000 considerations are not expected to materially impact
Furon's internal operations, they may have an effect on some of Furon's
customers and suppliers, and thus indirectly affect Furon. It is not possible to
quantify the aggregate cost to Furon with respect to customers and suppliers
with year 2000 problems, although the Company does not anticipate it will have a
material adverse impact on its business, financial condition or results of
operations.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
On November 20, 1997, the Company's Board of Directors approved a
two-for-one stock split. One share of the Company's Common Stock for each full
share of Common Stock outstanding was distributed on December 16, 1997 to
holders of record as of December 2, 1997. All share and per share data in this
report have been restated to reflect this stock split.
The Company's Common Stock is traded on the New York Stock Exchange
("NYSE") under the trading symbol "FCY". As of March 31, 1998, the Company had
approximately 1,000 holders of record of its Common Stock. The following table
sets forth for the periods indicated (i) the high and low closing sale prices
per share of the Company's Common Stock as reported by the NYSE and (ii) the
amount per share of cash dividends paid by the Company with respect to its
Common Stock.
<TABLE>
<CAPTION>
YEARS ENDED
--------------------------------------------------------
JANUARY 31, 1998 FEBRUARY 1, 1997
------------------------- -------------------------
QUARTER HIGH LOW DIVIDEND HIGH LOW DIVIDEND
------- ---- --- -------- ---- --- --------
<S> <C> <C> <C> <C> <C> <C>
First.................. $12 1/4 $10 $0.03 $11 3/16 $ 9 3/8 $0.03
Second................. 15 13/16 11 1/4 0.03 13 7/16 10 1/4 0.03
Third.................. 21 11/16 15 1/16 0.03 12 3/4 10 1/4 0.03
Fourth................. 21 5/16 17 1/4 0.03 12 5/16 9 11/16 0.03
</TABLE>
Future dividends will be considered by the Board of Directors taking into
account the Company's profit levels and capital requirements as well as
financial and other conditions existing at the time.
24
<PAGE> 26
ITEM 6. SELECTED FINANCIAL DATA
The following selected consolidated financial data for the five years in
the period ended January 31, 1998 should be read in conjunction with, and is
qualified by, the more detailed information and consolidated financial
statements included in Item 8 (Part II), "Consolidated Financial Statements and
Supplementary Data."
<TABLE>
<CAPTION>
YEARS ENDED
-------------------------------------------------------------------
JANUARY 31, FEBRUARY 1, FEBRUARY 3, JANUARY 28, JANUARY 29,
1998 1997(A) 1996 1995 1994
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net sales................................. $485,631 $390,105 $344,886 $312,060 $285,194
Cost of sales............................. 329,325 281,581 249,102 217,827 204,727
-------- -------- -------- -------- --------
Gross profit.............................. 156,306 108,524 95,784 94,233 80,467
Selling, general and administrative
expenses................................ 115,555 84,325 78,337 77,368 66,458
Write-off of acquired in-process research
and development......................... 53,700 -- -- --
Nonrecurring charges and facilities
rationalization......................... (660) 4,329 -- -- --
Other (income) expense.................... (1,114) (4,265) (3,282) (2,092) (1,436)
Interest expense, net..................... 10,788 2,669 2,315 1,360 2,477
-------- -------- -------- -------- --------
Income (loss) before income taxes......... 31,737 (32,234) 18,414 17,597 12,968
Provision for income taxes................ 9,997 7,517 5,245 6,159 4,798
-------- -------- -------- -------- --------
Net income (loss)......................... $ 21,740 $(39,751) $ 13,169 $ 11,438 $ 8,170
======== ======== ======== ======== ========
Basic income (loss) per share............. $ 1.22 $ (2.24) $ 0.75 $ 0.67 $ 0.48
======== ======== ======== ======== ========
Diluted income (loss) per share........... $ 1.16 $ (2.24) $ 0.73 $ 0.64 $ 0.46
======== ======== ======== ======== ========
Cash dividends per share.................. $ 0.12 $ 0.12 $ 0.12 $ 0.12 $ 0.12
At year end:
Total assets............................ $346,349 $343,351 $211,484 $179,873 $175,224
Total long-term obligations............. 172,540 198,916 59,250 32,791 38,795
Total stockholders' equity.............. 81,139 61,344 102,882 91,599 80,815
</TABLE>
- ---------------
(a) Includes the acquisition of Medex effective January 2, 1997.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following discussion and analysis is based upon and should be read in
conjunction with the historical consolidated financial statements of the Company
and related notes thereto.
General
The Company's products are sold primarily to OEMs in industrial markets and
end-users in healthcare markets. Historically, the Company focused primarily on
the manufacture and sale of polymer based products used in a wide range of
industrial applications. In January 1997, as part of its strategy to leverage
its materials and manufacturing technology expertise into other attractive
market segments, the Company acquired Medex, a leading manufacturer of polymer
based medical device products sold to end-users in the domestic and European
healthcare markets, such as hospitals and alternate site healthcare facilities.
The aggregate purchase price for Medex was $165.0 million in cash. In connection
with the acquisition, the Company recorded approximately $58.0 million in
nonrecurring charges, consisting of a $53.7 million non-cash charge relating to
the write-off of in-process research and development at Medex and approximately
$4.3 million for severance and facilities rationalization expenses related to
the Company's plans to close facilities and consolidate certain operations.
25
<PAGE> 27
The Company's fiscal year ends on the Saturday closest to January 31.
Fiscal 1998 and fiscal 1997 consisted of 52 weeks and fiscal 1996 consisted of
53 weeks.
RESULTS OF OPERATIONS
Fiscal 1998 Compared with Fiscal 1997
Net Sales. Net sales of $485.6 million in fiscal 1998 increased $95.5
million, or 24%, from $390.1 million in fiscal 1997. This increase was primarily
due to the inclusion of Medex's operating results for the entire fiscal 1998
period, compared to Medex's inclusion for approximately a month of the fiscal
1997 period. In fiscal 1998 net sales to the commercial aircraft, aerospace,
truck, food & beverage and general industrial markets were particularly strong
relative to the prior fiscal year, while net sales to the chemical processing
and electronics industries declined relative to the prior fiscal year. European
net sales increased 58%. This is inclusive of unfavorable foreign exchange
fluctuations of approximately 11%.
Gross Profit. Gross profit of $156.3 million in fiscal 1998 increased $47.8
million, or 44.0%, from $108.5 million in fiscal 1997. The gross profit margin
increased to 32.2% in fiscal 1998 from 27.8% in fiscal 1997. The increase
primarily resulted from the Medex acquisition since the Company's medical device
products generally yield higher gross profit margins than its industrial
products. Medex realized a 44.4% gross profit margin on net sales during fiscal
year 1998. Exclusive of Medex, the Company's gross profit margin on industrial
net sales in the fiscal year 1998 period increased by 1.5 percentage points to
29.0% from 27.5% in the fiscal year 1997 period.
Selling, General and Administrative Expenses. Selling, general, and
administrative ("SG&A") expenses of $115.6 million in fiscal 1998 increased
$31.3 million, or 37.1%, from $84.3 million in fiscal 1997. SG&A expenses as a
percentage of net sales increased to 23.8% in fiscal 1998 from 21.6% in fiscal
1997. The increase in SG&A expenses in fiscal 1998 principally represent
expenses related to the acquisition of Medex. Medex's SG&A expenses as a
percentage of its net sales were 31.7% for the fiscal year 1998 period.
Research and development expenses of $14.2 million in fiscal 1998 increased
$1.7 million, or 13.6%, from $12.5 million in fiscal 1997 primarily because of
the Medex acquisition. Research and development expenses for Medex in the fiscal
year 1998 period were $2.2 million.
Other Income. Other income of $1.1 million in fiscal 1998 decreased $3.2
million from $4.3 million in fiscal 1997. The decrease primarily resulted from a
reduction in foreign exchange transaction gains and reduced licensee fees and
investment income.
Nonrecurring Charges and Facilities Rationalization. In fiscal year 1998,
the Company recorded a $6.0 million gain realized in selling the net assets of
its Felsted operations (cables and controls product) offset by the recording of
an asset impairment loss and facilities rationalization of approximately $5.3
million. During fiscal year 1997, Furon incurred approximately $58.0 million on
nonrecurring charges to income, consisting of a $53.7 million non-cash charge
relating to in-process research and development at Medex, as well as
approximately $4.3 million in severance and facilities rationalization expenses
related to the Company's plans to close facilities and consolidate certain
operations related to Medex.
Interest Expense, Net. Interest expense, net of $10.8 million in fiscal
1998 increased $8.1 million from $2.7 million in fiscal 1997, primarily as a
result of the debt incurred in connection with the Medex acquisition.
Income Before Income Taxes. Income before income taxes of $31.7 million in
fiscal 1998 increased $63.9 million from ($32.2) million in fiscal 1997. This
increase in income before income taxes is the result of higher net sales volumes
and improved margins and income from Medex.
Provision for Income Taxes. Provision for income taxes of $10.0 million in
fiscal 1998 increased $2.5 million from $7.5 million in fiscal 1997. This
increase is the result of higher net sales volumes and improved margins and
income from Medex.
26
<PAGE> 28
The Company's effective tax rate in fiscal 1998 was 31.5%, compared with
23.3% in fiscal 1997. For fiscal 1997, the effective tax rate before the one
time charge for in-process research and development was 35.0%. The lower
effective tax rate for fiscal 1998 was primarily due to increases in research
and experimental credits and foreign tax credits.
FISCAL 1997 COMPARED WITH FISCAL 1996
Net Sales. Net sales of $390.1 million in fiscal 1997 increased $45.2
million, or 13% from $344.9 million in fiscal 1996. The net sales increase in
fiscal 1997 principally represents contributions from companies that were
acquired during the year, which accounted for an approximately 12.0% net sales
increase over fiscal 1996. Included in such acquisitions was Medex, acquired on
January 2, 1997, which contributed net sales of $9.4 million during the year.
The Company's existing businesses realized a slight net sales increase in fiscal
1997, partially offset by a number of strategic divestitures during the course
of fiscal 1997.
Domestically, fiscal 1997 net sales increases were achieved in several of
the markets the Company serves, including semiconductors, commercial aircraft,
mobile equipment and appliances. In the truck market, the Company was able to
maintain approximately the same net sales level as it did in the prior year in a
difficult market environment. Furon's net sales to the general industrial and
electronic assembly markets declined from fiscal 1996. Excluding Medex, European
net sales improved 18% in fiscal 1997. Before the impact of a stronger U.S.
dollar, the improvement in European net sales in fiscal 1997 was 26%. The gain
principally reflected a full fiscal year's contribution from an acquisition in
April 1996. Excluding acquisitions, European net sales were down 7%, or 1%
before the impact of unfavorable foreign currency exchange rates.
Gross Profit. Gross profit of $108.5 million in fiscal 1997 increased $12.7
million, or 13.3%, from $95.8 million in fiscal 1996. The gross profit margin in
fiscal 1997 was 27.8%, which was the same gross margin as in fiscal 1996.
Excluding the impact of acquisitions and divestitures in fiscal 1996 and fiscal
1997, the gross profit margin declined to 28.2% in fiscal 1997 from 28.5% in
fiscal 1996. Higher raw material costs were experienced in fiscal 1997 as
compared to fiscal 1996, partially offset by cost reductions in manufacturing
labor and overhead, productivity gains and price increases.
Selling, General and Administrative Expenses. SG&A expenses of $84.3
million in fiscal 1997 increased $6.0 million, or 7.7%, from $78.3 million in
fiscal 1996. SG&A expenses as a percentage of net sales declined to 21.6% in
fiscal 1997 from 22.7% in fiscal 1996. The increase in SG&A expenses in fiscal
1997 principally represents higher research and development costs, the impact of
acquisitions made by the Company and, to a lesser extent, higher selling
expenses which were partially offset by lower general and administrative
expenses associated with changes made to the Company's operating structure.
Research and development expenses of $12.5 million in fiscal 1997 increased $4.0
million, or 47.1% from $8.5 million in fiscal 1996, as the Company continued to
focus on new product development in fiscal 1997. Cost reductions were achieved
in several categories, including professional fees in connection with various
consulting projects, travel and relocation.
Other Income. Other income of $4.3 million in fiscal 1997 increased $1.0
million from $3.3 million in fiscal 1996. The increase primarily resulted from
foreign currency exchange rate gains.
Interest Expense, Net. Interest expense, net of $2.7 million in fiscal 1997
increased $0.4 million from $2.3 million in fiscal 1996. Primarily as a result
of the Medex acquisition, amounts owing under the Company's bank credit facility
increased by approximately $131.0 million over the prior year.
Loss Before Income Taxes. The Company had a $32.2 million loss before
income taxes in fiscal 1997, compared to income before income taxes of $18.4
million in fiscal 1996. Excluding the impact of the nonrecurring charges, income
before income taxes would have been $25.8 million in fiscal 1997, an increase of
$7.4 million, or 40.2%, from $18.4 million in fiscal 1996.
Provisions for Income Taxes. Provisions for income taxes of $7.5 million in
fiscal 1997 increased $2.3 million from $5.2 million in fiscal 1996. The
Company's effective tax rate in fiscal 1997 was 23.3% on the loss before income
taxes for the year as compared to 28.5% on the income before taxes in fiscal
1996. For fiscal 1997, the effective tax rate before the one time non-deductible
charge for in-process research and development was 35%. The lower effective tax
rate in fiscal 1996 resulted from the realization of certain reserves and tax
credits.
27
<PAGE> 29
SEGMENT RESULTS
A discussion of the operations of the business segments follows. The
Company operates in two business segments: Industrial Products, including highly
engineered seals and bearings, fluid handling components, tapes, films and
coated fabrics, hose and tubing, wire and cable, and plastic formed components;
and Medical Device Products, including critical care products, and infusion
systems for medical and surgical applications. For additional financial
information about industry segments and performance in various geographic areas,
see Note 11 of the "Notes to Consolidated Financial Statements."
INDUSTRIAL PRODUCTS
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 1, FEBRUARY 3,
1998 1997 1996
(IN MILLIONS) ----------- ----------- -----------
<S> <C> <C> <C>
Sales............................................. $377.6 $373.4 $336.9
Operating profit.................................. 27.2 19.6 16.2
Operating profit before nonrecurring and
facilities rationalizations..................... 27.2 22.6 16.2
</TABLE>
Net Sales. Industrial net sales for fiscal 1998 increased $4.2 million, or
1% from fiscal 1997, as a result of a 6% increase in domestic net sales offset
by a 7% decline in reported European net sales and the effect of the sale of
several businesses in fiscal 1997. Domestically, net sales increases were
particularly strong in several of the markets the Company serves including,
commercial aircraft, aerospace, truck, food & beverage and general industrial
markets. Net sales to the chemical processing and semiconductor markets were
down from last year. Improved demand in Europe across most product lines, was
not enough to overcome the adverse effect of foreign currency exchange rates,
resulting in decreased dollar net sales of 7% (a 4% increase after removing the
effect of foreign currency exchange rate changes) over the prior fiscal. When
removing the effect of acquisitions and divestitures, fiscal 1998 Industrial
Product net sales were 5% higher than in fiscal 1997.
In fiscal 1997, Industrial Product net sales were 11% higher than in fiscal
1996. Excluding the effect of acquisitions and divestitures net sales increased
1%.
Gross Profit. The gross profit for fiscal 1998 was 29.1%, an increase from
27.4% in fiscal 1997. This was the result of lower material usage in addition to
reduced fixed overhead spending over the prior fiscal. The gross profit
percentage decreased to 27.4% for fiscal 1997 from 27.6% in fiscal 1996. This
was the net result of higher raw material costs as a percentage of net sales,
offset by cost reductions in manufacturing labor and overhead, productivity
gains and price increases.
Selling, General and Administrative Expenses. SG&A expenses increased $2.7
million in fiscal 1998 from the prior fiscal, as a result of higher product
development and general and administrative expenses. Increased general and
administrative expense was primarily the result of several categories, including
higher performance based incentive compensation, legal and professional fees in
connection with various projects, partially offset by reduced commissions and
travel costs. Investments in research and development were up, as the Company
continued to increase its focus on new product development. SG&A expenses as a
percentage of net sales increased to 21.9% in fiscal 1998, compared with 21.4%
for fiscal 1997 and decreased from fiscal 1996 of 22.8%. After removing the
effect of acquisitions and divestitures, SG&A expenses were 21.7%, 21.8% and
23.7% for fiscals 1998, 1997 and 1996, respectively.
Operating Profit, before Nonrecurring Charges and Facilities
Rationalization. Operating profit, before nonrecurring charges and facilities
rationalization, increased 20.4% to $27.2 million in fiscal 1998 from $22.6
million a year earlier. Operating profit, before nonrecurring charges and
facilities rationalization, as a percent of net sales increased to 7.2% in
fiscal 1998 from 6.0% in fiscal 1997. The improvement in profitability reflects
higher net sales volumes and margins that were more than sufficient to offset
increased operating and other expenses. Operating profit, before nonrecurring
charges and facilities rationalization, also increased 40% to $22.6 million in
fiscal 1997 from $16.2 million in fiscal 1996. Operating profit, before
nonrecurring charges and facilities rationalization, as a percent of net sales
increased to 6.0% in fiscal 1997 from 4.8% in fiscal 1996.
28
<PAGE> 30
MEDICAL DEVICE PRODUCTS
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 1, FEBRUARY 3,
1998 1997 1996
(IN MILLIONS) ----------- ----------- -----------
<S> <C> <C> <C>
Sales..................................................... 108.0 $16.7 $8.0
Operating profit (loss)................................... 14.2 (53.5) 1.2
Operating profit before nonrecurring and facilities
rationalizations........................................ 13.6 1.6 1.2
</TABLE>
In January 1997, as part of its strategy to leverage its materials and
manufacturing technology expertise into other attractive market segments, the
Company acquired Medex, a leading manufacturer of polymer based medical device
products sold to end-users in the domestic and European healthcare markets, such
as hospitals and alternate site healthcare facilities. Prior to the acquisition
of Medex, the Company's medical device products business was substantially
smaller and focused on medical OEMs as opposed to end users. Consequently,
fiscal 1998 includes twelve months of Medex, fiscal 1997 includes just one month
of Medex and fiscal 1996 excludes Medex completely. As a result, comparisons for
year to year are somewhat distorted.
Net Sales. Net sales for fiscal 1998 increased over five fold,
substantially all due to the Medex acquisition in January, 1997, over the same
period of the prior year. Also included in the current year is the effect of two
small companies acquired during the third quarter of fiscal 1998, SDM and AS
Medical, which are now operating as part of the Medical Device Product segment.
Unfavorable foreign exchange rates, particularly in Germany, also had a negative
impact on net sales.
In fiscal 1997, Medical Device Product net sales doubled over fiscal 1996
and again was substantially all due to the Medex acquisition completed on
January 2, 1997.
Gross Profit. The gross profit margin for fiscal 1998 was 43.0%, an
increase from 36.3% in fiscal 1997. This was the result of significantly higher
margins earned by Medex and the full fiscal 1998 year effect of the Medex
acquisition over the prior year. The gross profit percentage increased to 36.3%
for fiscal 1997 from 33.5% in fiscal 1996.
Selling, General and Administrative Expenses. SG&A expenses as a percentage
of net sales increased to 30.5% in fiscal 1998, compared with 26.5% for fiscal
1997 and 18.0% for fiscal 1996. The increase in fiscal 1998 operating expenses
as a percentage of net sales from the prior year is primarily the result of the
Medex addition. SG&A expenses at Medex as a percentage of net sales were 31.7%
in fiscal 1998, compared with 34.9% in fiscal 1997. In connection with the Medex
acquisition, a comprehensive review of expenses was performed in January 1997.
This resulted in significant cost reductions which were reflected in the results
of fiscal 1998.
Operating Profit, before Nonrecurring Charges and Facilities
Rationalization. Operating profit, before nonrecurring charges and facilities
rationalization, increased over seven fold to $13.6 million in fiscal 1998 from
$1.6 million a year earlier. Operating profit, before nonrecurring charges and
facilities rationalization, as a percent of net sales increased to 12.6% in
fiscal 1998 from 9.6% in fiscal 1997. The improvement in profitability reflects
a full year of the Medex acquisition. Operating profit, before nonrecurring
charges and facilities rationalization, also increased to $1.6 million in fiscal
1997 from $1.2 million in fiscal 1996. Operating profit, before nonrecurring
charges and facilities rationalization, as a percent of net sales decreased to
9.6% in fiscal 1997 from 15% in fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
In connection with its acquisition of Medex, the Company entered into a
$250.0 million credit facility. The Company borrowed approximately $160.0
million under this facility to fund the acquisition. At the end of fiscal 1998,
there was $142.0 million outstanding under the facility. During fiscal 1998, the
Company reduced outstanding borrowings under the credit facility by $27.0
million. For fiscal 1998, the weighted average interest rate on the loans under
the credit facility was 6.5%.
Subsequent to fiscal 1998, the Company completed the Offering of its Notes
(see Note 5 to the consolidated financial statements). The net proceeds from the
Offering were approximately $121.7 million.
29
<PAGE> 31
In conjunction with the Offering subsequent to year end, the Company
amended the credit facility to, among other things, reduce the maximum principal
amount available from $250.0 million to $200.0 million (the "Credit Facility").
The Company used the net proceeds of the Offering to repay a portion of existing
indebtedness under the Credit Facility. At January 31, 1998, borrowings under
the Credit Facility, after giving effect to the Offering and application of the
net proceeds therefrom, totaled approximately $20.3 million and additional
amounts available for borrowing under the Credit Facility totaled $179.7
million. Amounts borrowed under the Credit Facility mature November 12, 2001.
The Notes mature March 1, 2008.
Cash provided by operating activities. Cash provided by operating
activities in fiscal 1998 increased $6.3 million from $44.0 million in fiscal
1997. This increase is primarily due to both increased net income as a result of
the acquisition of Medex and increased profitability from the sale of industrial
products.
Cash used in investing activities. Cash used in investing activities in
fiscal 1998 included the acquisition of SDM, AS, and Premier Python Products
Ltd. for approximately $17.9 million. During fiscal 1998, the Company also
invested $13.4 million in renovation of existing facilities, leasehold
improvements and the replacement of existing equipment. Capital expenditures in
fiscal 1998 decreased to $13.4 million from $18.9 million in fiscal 1997.
The Company believes that it generates sufficient cash flow from its
operations to finance near and long-term internal growth, capital expenditures
and principal and interest payments on its loans payable to banks and the Notes.
The Company continually evaluates its employment of capital resources, including
asset management and other sources of financing.
CONTINGENCIES
For information regarding environmental matters and other contingencies,
see the sections entitled "Business -- Governmental Regulation" and "Legal
Proceedings" in Part I.
While the year 2000 considerations are not expected to materially impact
Furon's internal operations, they may have an effect on some of our customers
and suppliers, and thus indirectly affect Furon. It is not possible to quantify
the aggregate cost to Furon with respect to customers and suppliers with year
2000 problems, although the Company does not anticipate it will have a material
adverse impact on the Company's business, financial condition or results of
operations.
30
<PAGE> 32
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
Furon Company
We have audited the accompanying consolidated balance sheets of Furon
Company as of January 31, 1998 and February 1, 1997, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended January 31, 1998. Our audits also
included the financial statement schedule listed in the index at Item 14(a).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Furon Company at January 31, 1998 and February 1, 1997, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended January 31, 1998, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ ERNST & YOUNG LLP
Orange County, California
March 16, 1998
31
<PAGE> 33
FURON COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED
------------------------------------------
JANUARY 31, FEBRUARY 1, FEBRUARY 3,
1998 1997 1996
----------- ------------ -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................ $485,631 $390,105 $344,886
Cost of sales............................................ 329,325 281,581 249,102
-------- -------- --------
Gross profit............................................. 156,306 108,524 95,784
Selling, general and administrative expenses............. 115,555 84,325 78,337
Write-off of acquired in-process research and
development............................................ -- 53,700 --
Nonrecurring charges and facilities rationalization...... (660) 4,329 --
Other (income) expense................................... (1,114) (4,265) (3,282)
Interest expense, net.................................... 10,788 2,669 2,315
-------- -------- --------
Income (loss) before income taxes........................ 31,737 (32,234) 18,414
Provision for income taxes............................... 9,997 7,517 5,245
Net income (loss)........................................ $ 21,740 $(39,751) $ 13,169
======== ======== ========
Basic income (loss) per share............................ $ 1.22 $ (2.24) $ 0.75
======== ======== ========
Diluted income (loss) per share.......................... $ 1.16 $ (2.24) $ 0.73
======== ======== ========
</TABLE>
See accompanying notes.
32
<PAGE> 34
FURON COMPANY
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 1,
1998 1997
----------- -----------
(IN THOUSANDS,
EXCEPT SHARE DATA)
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ -- $ --
Accounts receivable, less allowance for doubtful accounts
of $1,741 in 1998 and $2,093 in 1997................... 75,661 71,323
Inventories............................................... 54,704 58,611
Deferred income taxes..................................... 11,052 10,411
Prepaid expenses and other assets......................... 4,959 5,389
-------- --------
Total current assets.............................. 146,376 145,734
Property, plant and equipment, at cost:
Land...................................................... 6,976 7,096
Buildings and leasehold improvements...................... 31,493 30,712
Machinery and equipment................................... 158,999 152,998
-------- --------
197,468 190,806
Less accumulated depreciation and amortization............ (87,832) (76,214)
-------- --------
Net property, plant and equipment........................... 109,636 114,592
Intangible assets, at cost, less accumulated amortization of
$35,354 in 1998 and $29,971 in 1997....................... 83,129 74,640
Other assets................................................ 7,208 8,385
-------- --------
Total assets...................................... $346,349 $343,351
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Cash, less checks outstanding............................. $ 1,025 $ 1,665
Accounts payable.......................................... 25,384 24,319
Salaries, wages and related benefits payable.............. 18,203 14,141
Income taxes payable...................................... 4,228 1,880
Current portion of long-term debt......................... 966 1,001
Facility rationalization and severance.................... 10,091 10,369
Other current liabilities................................. 14,035 13,535
-------- --------
Total current liabilities......................... 73,932 66,910
Long-term debt.............................................. 148,657 176,983
Other long-term liabilities................................. 23,883 21,933
Deferred income taxes....................................... 18,738 16,181
Commitments and contingencies
Stockholders' equity:
Preferred stock without par value, 2,000,000 shares
authorized, none issued or outstanding................. -- --
Common stock without par value, 30,000,000 shares
authorized, 18,227,898 and 18,006,280 shares issued and
outstanding in 1998 and 1997, respectively............. 40,864 38,787
Foreign currency translation adjustment................... (2,536) (977)
Unearned ESOP shares...................................... (3,229) (3,224)
Unearned compensation..................................... (232) (238)
Additional pension liability.............................. (1,700) (1,413)
Retained earnings......................................... 47,972 28,409
-------- --------
Total stockholders' equity........................ 81,139 61,344
-------- --------
Total liabilities and stockholders' equity........ $346,349 $343,351
======== ========
</TABLE>
See accompanying notes.
33
<PAGE> 35
FURON COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JANUARY 31, 1998, FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOREIGN
COMMON STOCK CURRENCY UNEARNED ADDITIONAL TOTAL
-------------------- TRANSLATION ESOP UNEARNED PENSION RETAINED STOCKHOLDERS'
SHARES AMOUNT ADJUSTMENT SHARES COMPENSATION LIABILITY EARNINGS EQUITY
---------- ------- ----------- -------- ------------ ---------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 28,
1995..................... 17,600,328 $36,280 $ 419 $(3,112) $(885) $ (379) $ 59,276 $ 91,599
---------- ------- ------- ------- ----- ------- -------- --------
Cash dividends............. -- -- -- -- -- -- (2,131) (2,131)
Exercise of stock
options.................. 180,624 1,133 -- -- -- -- -- 1,133
Retired shares............. (23,704) (251) -- -- -- -- -- (251)
Grant of restricted
shares................... 21,220 215 -- -- (215) -- -- --
Cancellations of restricted
shares................... (26,840) (212) -- -- 112 -- -- (100)
Stock issued under Employee
Stock Purchase Plan...... 62,182 410 -- -- -- -- -- 410
Amortization of unearned
compensation............. -- -- -- -- 432 -- -- 432
Foreign currency
translation adjustment... -- -- (16) -- -- -- -- (16)
Loan to ESOP, net.......... -- -- -- (93) -- -- -- (93)
Minimum pension liability
adjustment............... -- -- -- -- -- (1,270) -- (1,270)
Net income................. -- -- -- -- -- -- 13,169 13,169
---------- ------- ------- ------- ----- ------- -------- --------
BALANCE AT FEBRUARY 3,
1996..................... 17,813,810 37,575 403 (3,205) (556) (1,649) 70,314 102,882
---------- ------- ------- ------- ----- ------- -------- --------
Cash dividends............. -- -- -- -- -- -- (2,154) (2,154)
Exercise of stock
options.................. 218,608 1,690 -- -- -- -- -- 1,690
Retired shares............. (77,500) (836) -- -- -- -- -- (836)
Grant of restricted
shares................... 8,556 102 -- -- (102) -- -- --
Cancellations of restricted
shares................... (25,670) (206) -- -- 67 -- -- (139)
Stock issued under Employee
Stock Purchase Plan...... 68,476 462 -- -- -- -- -- 462
Amortization of unearned
compensation............. -- -- -- -- 353 -- -- 353
Foreign currency
translation adjustment... -- -- (1,380) -- -- -- -- (1,380)
Loan to ESOP, net.......... -- -- -- (19) -- -- -- (19)
Minimum pension liability
adjustment............... -- -- -- -- -- 236 -- 236
Net loss................... -- -- -- -- -- -- (39,751) (39,751)
---------- ------- ------- ------- ----- ------- -------- --------
BALANCE AT FEBRUARY 1,
1997..................... 18,006,280 38,787 (977) (3,224) (238) (1,413) 28,409 61,344
---------- ------- ------- ------- ----- ------- -------- --------
Cash dividends............. -- -- -- -- -- -- (2,177) (2,177)
Exercise of stock
options.................. 132,708 1,177 -- -- -- -- -- 1,177
Retired shares............. (33,104) (410) -- -- -- -- -- (410)
Grant of restricted
shares................... 19,632 282 -- -- (282) -- -- --
Cancellations of restricted
shares................... (10,690) (93) -- -- 22 -- -- (71)
Stock issued under Employee
Stock Purchase Plan...... 113,072 1,121 -- -- -- -- -- 1,121
Amortization of unearned
compensation............. -- -- -- -- 266 -- -- 266
Foreign currency
translation adjustment... -- -- (1,559) -- -- -- -- (1,559)
Loan to ESOP, net.......... -- -- -- (5) -- -- -- (5)
Minimum pension liability
adjustment............... -- -- -- -- -- (287) -- (287)
Net income................. -- -- -- -- -- -- 21,740 21,740
---------- ------- ------- ------- ----- ------- -------- --------
BALANCE AT JANUARY 31,
1998..................... 18,227,898 $40,864 $(2,536) $(3,229) $(232) $(1,700) $ 47,972 $ 81,139
---------- ------- ------- ------- ----- ------- -------- --------
</TABLE>
See accompanying notes.
34
<PAGE> 36
FURON COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED
-----------------------------------------
JANUARY 31, FEBRUARY 1, FEBRUARY 3,
1998 1997 1996
----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)...................................... $ 21,740 $ (39,751) $ 13,169
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation........................................ 16,641 13,615 11,292
Amortization........................................ 5,679 3,544 3,783
Provision for losses on accounts receivable......... 265 364 724
Increase (decrease) in deferred income taxes........ 278 (1,417) 2,239
Write-off of acquired in-process research and
development....................................... -- 53,700 --
Nonrecurring charges and facilities
rationalization................................... (660) 4,329 --
(Gain) loss on sale of assets and divestitures...... 149 46 (2,385)
Working capital changes, net of acquisitions and
disposals:
Accounts receivable................................. (4,262) 2,288 2,467
Inventories......................................... 4,688 5,294 (2,059)
Accounts payable and accrued liabilities............ 3,060 (2,977) (3,663)
Income taxes payable................................ 4,452 4,276 (1,790)
Other current assets and liabilities, net........... (2,501) 474 (43)
-------- --------- --------
5,437 9,355 (5,088)
Changes in other long-term operating assets and
liabilities......................................... 796 238 1,783
-------- --------- --------
Net cash provided by operating activities...... 50,325 44,023 25,517
INVESTING ACTIVITIES
Acquisition of businesses, net of cash acquired........ (17,850) (157,752) (43,497)
Purchases of property, plant and equipment............. (13,401) (18,936) (13,570)
Proceeds from sale of businesses....................... 11,920 4,204 8,517
Proceeds from sale of equipment........................ 472 1,563 334
Proceeds from notes receivable......................... -- 286 844
Increase in notes receivable........................... (155) (444) (242)
-------- --------- --------
Net cash used in investing activities.......... (19,014) (171,079) (47,614)
FINANCING ACTIVITIES
Proceeds from long-term debt........................... 19,158 182,000 46,756
Principal payments on long-term debt................... (47,648) (51,430) (29,506)
Deferred debt costs.................................... -- (1,326) --
Proceeds from issuance of common stock................. 807 715 782
Principal payments received from ESOP.................. 529 458 384
Dividends paid on common stock......................... (2,177) (2,154) (2,131)
Loan to ESOP........................................... (621) (566) (579)
-------- --------- --------
Net cash provided by (used in) financing
activities................................... (29,952) 127,697 15,706
EFFECT OF EXCHANGE RATE CHANGES ON CASH.................. (1,359) (641) (84)
-------- --------- --------
DECREASE IN CASH AND CASH EQUIVALENTS.................... -- -- (6,475)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR........... -- -- 6,475
-------- --------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR................. $ -- $ -- $ --
======== ========= ========
</TABLE>
See accompanying notes.
35
<PAGE> 37
FURON COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of Furon Company
and its subsidiaries, all of which are wholly owned. All significant
intercompany transactions have been eliminated. Certain reclassifications have
been made to prior year amounts in order to be consistent with the current year
presentation.
Fiscal Year
The Company's fiscal year ends on the Saturday closest to January 31. The
fiscal year refers to the year in which the period ends (e.g. fiscal year 1998
ended January 31, 1998). Fiscal year 1998 consists of 52 weeks and fiscal years
1997 and 1996 consisted of 52 weeks and 53 weeks, respectively.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Consolidated Statements of Cash Flows
Excess cash is invested in income-producing investments including
commercial paper, money market accounts, overnight repurchase agreements and
short-term certificates of deposit with original maturities of less than three
months. These investments are stated at cost which approximates market. Included
in interest expense, net in the consolidated statements of operations is
interest and dividend income of $0.7 million, $0.7 million and $0.6 million, in
fiscal years 1998, 1997 and 1996, respectively.
Interest paid in fiscal years 1998, 1997 and 1996 was $10.6 million, $3.2
million, and $2.9 million, respectively.
Income taxes paid in fiscal years 1998, 1997 and 1996 were $5.1 million,
$3.5 million and $4.1 million, respectively.
Inventories
Inventories, stated at the lower of cost (first-in, first-out) or market,
are summarized as follows:
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 1,
1998 1997
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Raw materials and purchased parts..................... $24,781 $22,841
Work-in-process....................................... 11,538 14,121
Finished goods........................................ 18,385 21,649
------- -------
$54,704 $58,611
======= =======
</TABLE>
36
<PAGE> 38
FURON COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Property, Plant and Equipment
Depreciation is provided on the straight-line method over the following
estimated useful lives:
<TABLE>
<S> <C>
Buildings................................. 25-45 years
Machinery and equipment................... 3-18 years
Leasehold improvements.................... Term of the lease (including options)
</TABLE>
Concentrations of Credit Risk
Concentrations of credit risk with respect to trade receivables are limited
due to the large number of customers comprising the Company's customer base, and
their dispersion across many different geographical regions. At January 31,
1998, the Company had no significant concentrations of credit risk.
Research and Development Costs
Research and development costs are expensed as incurred. Total research and
development expense, including application engineering, for fiscal year 1998,
1997 and 1996 was $14.2 million, $12.5 million and $8.5 million, respectively,
and is included in the selling, general and administrative expenses caption in
the Consolidated Statements of Operations. Continuous research and development
is necessary for the Company to maintain its competitive position.
Intangible Assets
Intangible assets acquired in business combinations, net of accumulated
amortization, are summarized as follows:
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 1,
1998 1997
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Goodwill.............................................. $54,476 $42,016
Other intangible assets............................... 28,653 32,624
------- -------
$83,129 $74,640
======= =======
</TABLE>
Goodwill is amortized over 25 years using the straight-line method. Other
intangible assets are amortized over periods ranging from 7 to 25 years.
Translation of Foreign Currencies
Foreign subsidiary financial statements are translated into U.S. dollars in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 52,
"Foreign Currency Translations." The resulting cumulative foreign currency
translation adjustment is reported separately in stockholders' equity.
Transaction gains and losses included in results of operations were not
significant in fiscal year 1998, 1997 and 1996. The functional currency of the
Company's foreign operations is the respective local currency.
Long-Lived Assets
In accordance with SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of", management
evaluates the recoverability of the long-lived assets on an ongoing basis taking
into consideration such factors as recent operating results, projected cash
flows and plans for future operations. During fiscal year ended January 31,
1998, the Company recorded an impairment loss of $5.0 million on certain
operating assets within the Industrial Products segment. The impairment charge
37
<PAGE> 39
FURON COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
represented the difference between the carrying value and the estimated fair
value based on the sales price for comparable assets and is presented in the
nonrecurring charges and facilities rationalization caption in the Consolidated
Statements of Operations. Considerable management judgment is necessary in
estimating fair value. Accordingly, actual results could vary from such
estimates.
Stock-Based Compensation
The Company accounts for stock-based employee compensation in accordance
with the provisions of APB Opinion No. 25, "Accounting for Stock Issued to
Employees" and related Interpretations as permitted by SFAS No. 123, "Accounting
for Stock-Based Compensation".
Revenue Recognition
The Company recognizes revenues and costs upon the shipment of goods to
customers.
Earnings Per Share
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings per Share." This Statement replaced the calculation of primary
and fully diluted earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options and convertible securities. Diluted earnings per
share is very similar to previously reported fully diluted earnings per share.
All earnings per share amounts for all periods have been presented, and where
appropriate, restated to conform to SFAS No. 128 requirements.
Recent Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income". This statement establishes standards for
reporting the components of comprehensive income and requires that all items
that are required to be recognized under accounting standards as components of
comprehensive income be included in a financial statement that is displayed with
the same prominence as other financial statements. Comprehensive income includes
net income as well as certain items that are reported directly within a separate
component of stockholders' equity and bypass net income, such as cumulative
foreign currency translation and minimum pension liability adjustments. The
provisions of this statement are effective beginning with fiscal year 1999
interim reporting. These disclosure requirements will have no impact on the
Company's financial position or results of operations.
During fiscal year 1998, the Company adopted SFAS No. 131, "Disclosures
about Segments of an Enterprise and Related Information." SFAS No. 131
superseded SFAS No. 14, "Financial Reporting for Segments of a Business
Enterprise." SFAS No. 131 establishes standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports. SFAS No. 131 also establishes
standards for related disclosures about products and services, geographic areas,
and major customers. The adoption of SFAS No. 131 did not affect results of
operations or financial position, but did affect the disclosure of segment
information. All prior year segment information has been restated to conform
with SFAS No. 131. See Note 11.
38
<PAGE> 40
FURON COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1998
2. ACQUISITIONS AND DISPOSITIONS
Acquisitions
During fiscal year ended January 31, 1998 the Company acquired three
businesses at a cost of approximately $17.9 million. The acquisitions were
accounted for using the purchase method and resulted in $16.6 million of
goodwill, which is being amortized using the straight line method over 25 years.
The results of operations of these businesses were not material in relation to
the Company's consolidated results of operations.
On January 2, 1997, the Company completed a tender offer for the
outstanding shares of Medex, Inc., ("Medex"). The aggregate purchase price of
$159.4 million, plus $5.6 million of costs directly attributable to the
completion of the acquisition, was allocated to the assets and liabilities
acquired, including $6.1 million related to facilities rationalization and
severance, using the purchase method of accounting. Of the total purchase price,
$53.7 million represented the value of in-process research and development which
was expensed at the time of acquisition. The remainder of the purchase price in
excess of the estimated fair value of net assets acquired is being amortized
using the straight-line method over 25 years. Medex is engaged in the business
of manufacturing polymer-based critical care products and infusion systems for
medical and surgical applications. Medex's results of operations have been
included in the consolidated financial statements since January 2, 1997.
Dispositions
During fiscal year ended January 31, 1998 the Company sold the net assets
of its Felsted operations for approximately $11.7 million. The sale of the
business resulted in a gain of $6.0 million, which was presented in the
nonrecurring charges and facilities rationalization caption in the Consolidated
Statement of Operations. The Company's consolidated results of operations
include the results of the Felsted business through January 29, 1998, the date
of sale.
During fiscal year ended February 1, 1997 the Company sold three businesses
for $4.2 million in cash. No gain or loss resulted from these sales.
3. NONRECURRING CHARGES AND FACILITIES RATIONALIZATION
In connection with the acquisitions and divestitures made during fiscal
years ended January 31, 1998 and February 1, 1997, the Company has developed
plans to close and consolidate certain businesses. Operating income for fiscal
year 1998 includes total nonrecurring income of approximately $0.7 million.
Nonrecurring income includes a $6.0 million gain related to the sale of a
business within the Industrial Products segment (see Note 2) and facilities
rationalization charges of $5.3 million within the Industrial Products and
Medical Device Products segments. Facilities rationalization charges include
asset impairment losses of $5.0 million (see Note 1) and other net charges of
$0.3 million. Operating income for fiscal year 1997 includes total nonrecurring
charges of $4.3 million within the Industrial Products and Medical Device
Products Segments. The charges include $1.5 million for severance and $2.8
million for facilities rationalization.
39
<PAGE> 41
FURON COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1998
4. INCOME TAXES
The provision (benefit) for income taxes for the three years ended January
31, 1998 consists of the following:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
------- -------- ------
(IN THOUSANDS)
<S> <C> <C> <C>
1998
Federal......................................... $5,273 $ 3,581 $8,854
Foreign......................................... 2,046 (1,543) 503
State and local................................. 360 280 640
------ ------- ------
$7,679 $ 2,318 $9,997
====== ======= ======
1997
Federal......................................... $7,535 $(1,730) $5,805
Foreign......................................... 969 -- 969
State and local................................. 529 214 743
------ ------- ------
$9,033 $(1,516) $7,517
====== ======= ======
1996
Federal......................................... $ 954 $ 2,300 $3,254
Foreign......................................... 1,197 -- 1,197
State and local................................. 855 (61) 794
------ ------- ------
$3,006 $ 2,239 $5,245
====== ======= ======
</TABLE>
The provision (benefit) for income taxes differs from the amount computed
by applying the statutory income tax rate for the following reasons:
<TABLE>
<CAPTION>
JANUARY 31, 1998 FEBRUARY 1, 1997 FEBRUARY 3, 1996
---------------- ---------------- ----------------
AMOUNT % AMOUNT % AMOUNT %
-------- ----- -------- ----- -------- -----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Statutory federal provision......... $11,108 35.0 $(11,282) (35.0) $ 6,445 35.0
Acquired in-process research and
development....................... -- -- 18,795 58.3 -- --
State and local taxes, net of
federal tax benefits.............. 662 2.1 667 2.1 801 4.4
Effect of foreign taxes............. (582) (1.8) 103 0.3 (164) (0.9)
Research and experimental credit.... (559) (1.8) (230) (0.7) (195) (1.1)
Export sales corporation benefit.... (593) (1.9) (456) (1.4) (376) (2.0)
Goodwill............................ 440 1.4 -- -- -- --
Realization of reserves due to
completed audit cycles and closure
of earlier fiscal years........... -- -- -- -- (1,200) (6.5)
Other............................... (479) (1.5) (80) (0.3) (66) (0.4)
------- ---- -------- ----- ------- ----
$ 9,997 31.5 $ 7,517 23.3 $ 5,245 28.5
======= ==== ======== ===== ======= ====
</TABLE>
40
<PAGE> 42
FURON COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1998
4. INCOME TAXES (CONTINUED)
Significant components of the Company's deferred tax liabilities and assets
are as follows:
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 1,
1998 1997
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
DEFERRED TAX LIABILITIES:
Tax over book depreciation................................ $ (8,776) $ (7,172)
Intangible assets......................................... (7,102) (7,656)
-------- --------
Total liabilities................................. (15,878) (14,828)
-------- --------
DEFERRED TAX ASSETS:
Inventories............................................... 3,510 3,897
Net operating losses...................................... 2,238 860
Nonrecurring charges and facilities rationalization....... 1,311 2,281
Accruals recognized in different periods for tax than
financial reporting.................................... 2,651 3,759
-------- --------
Total assets...................................... 9,710 10,797
Valuation allowance for deferred tax assets............... (1,518) (1,739)
-------- --------
Net deferred tax assets........................... 8,192 9,058
-------- --------
Total deferred taxes.............................. $ (7,686) $ (5,770)
======== ========
</TABLE>
Applicable U.S. income and foreign withholding taxes have not been provided
on undistributed earnings of certain foreign subsidiaries and affiliates
aggregating $7.0 million at January 31, 1998. Management's intention is to
reinvest such undistributed earnings outside the United States for an indefinite
period except for distributions upon which incremental U.S. income taxes would
not be material. Any withholding taxes ultimately paid, which could approximate
$0.4 million, may be recoverable as foreign tax credits in the United States.
U.S. Federal tax return examinations have been completed through January
31, 1994. A subsidiary of the Company has federal net operating loss
carryforwards available against its taxable income of approximately $2.0 million
that expire from fiscal 2000 through fiscal 2004. The Company also has foreign
tax net operating loss carryforwards of approximately $4.5 million which may be
carried forward indefinitely for use against future taxable income.
5. LONG-TERM DEBT
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 1,
1998 1997
----------- ------------
(IN THOUSANDS)
<S> <C> <C>
Loans under bank credit agreements.......................... $142,000 $169,000
Industrial Revenue Bonds.................................... 6,175 6,775
Other....................................................... 1,448 2,209
-------- --------
Total long -- term debt..................................... 149,623 177,984
Less current portion........................................ 966 1,001
-------- --------
Due after one year.......................................... $148,657 $176,983
======== ========
</TABLE>
Under a Credit Agreement, dated as of November 12, 1996 (the "Credit
Agreement") and amended March 27, 1997, by and among Furon, the lenders party
thereto (the "Lenders") and The Bank of New York
41
<PAGE> 43
FURON COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1998
5. LONG-TERM DEBT (CONTINUED)
("BNY"), as Swing Line Lender and as Administrative Agent, Furon may borrow up
to an aggregate principal amount not to exceed $250.0 million (the "Facility").
Amounts borrowed under the Credit Agreement will mature November 12, 2001
and may be prepaid by Furon at any time in whole, or from time to time in part.
Borrowings under the Credit Agreement will bear interest, at Furon's option, at
a rate per annum equal to either: (i) the greater of (a) BNY's prime commercial
lending rate as publicly announced to be in effect from time to time and (b)
1/2% plus the federal funds rate (as published by Federal Reserve Bank of New
York); or (ii) LIBOR (adjusted for reserves) plus an applicable margin subject
to performance grid pricing for interest periods of one, two, three or six
months or (iii) with respect to swing line loans a rate negotiated between BNY
and Furon. Any amounts not paid when due bear interest at the rate otherwise
applicable plus two percent.
The Credit Agreement provides for the payment of a commitment fee of a
certain rate per annum subject to performance grid pricing on the average daily
unused amount of the Facility. At January 31, 1998, the unused portion of the
credit facility was $108.0 million. Borrowing rates during the year ranged from
6.1% to 8.5% (6.4% at January 31, 1998).
At January 31, 1998, the outstanding principal balance of the Industrial
Revenue Bonds consisted of two separate bond issues. The first outstanding issue
is at $2.4 million with varying annual principal payments due June 1998 through
June 2002 and annual interest at an average rate of 6.3%. The issue is secured
by a $2.6 million bank letter of credit. Any borrowings made under the letter of
credit bear interest at the bank's prime rate plus two percent and are secured
by land and buildings with an approximate market value of $3.3 million. The
letter of credit agreement automatically renews every month through the maturity
of the bond, subject to a 13-month notification from the issuer of their
intention not to renew the letter. The second outstanding issue is at $3.8
million with annual principal payments of $0.2 million due July 1998 through
July 2016 and bears interest at a weekly competitive adjustable rate. The issue
is secured by a $3.8 million bank letter of credit which is secured by land and
buildings with an approximate market value of $2.5 million and expires in July
2001. Any borrowings under the letter of credit bear interest at a weekly
adjustable rate.
Subsequent to year end, on March 4, 1998, the Company issued $125.0 million
of 8.125% Senior Subordinated Notes due March 1, 2008 (the "Offering"). The
Credit Agreement was amended and the Facility was reduced to provide for
borrowings up to a maximum principal amount of $200.0 million on February 3,
1998 in connection with the Offering. The Company used the net proceeds of the
Offering to repay a portion of existing indebtedness under the Company's amended
Credit Agreement.
6. COMMITMENTS AND CONTINGENCIES
At January 31, 1998, the Company is obligated under non-cancelable leases
of real property and equipment used in its operations for minimum annual rentals
plus insurance and taxes. Amounts payable under these obligations are as
follows:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED IN THOUSANDS
------------------ ------------
<S> <C>
1999............................. $ 8,859
2000............................. 6,904
2001............................. 5,272
2002............................. 4,277
2003............................. 3,405
Thereafter....................... 25,998
</TABLE>
42
<PAGE> 44
FURON COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1998
6. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Certain leases contain escalation provisions for periodic adjustments based
on certain indices. Rental expense for operating leases for the three years in
the period ended January 31, 1998 was $10.1 million, $8.7 million and $8.6
million, respectively.
At January 31, 1998, the Company is obligated under irrevocable letters of
credit totaling $8.5 million, including those related to the Industrial Revenue
Bonds as described in Note 5.
At January 31, 1998, the Company had approximately $0.8 million of foreign
currency hedge contracts outstanding consisting of over-the-counter forward
contracts. The contracts reflect the selective hedging of the Belgium Franc with
varying maturities up to six months. Net unrealized gains/losses from hedging
activities were not material as of January 31, 1998.
The Company is currently involved in various litigation. Management of the
Company is of the opinion that the ultimate resolution of such litigation should
not have a material adverse effect on the Company's consolidated financial
position or results of operations.
The manufacture and sale of healthcare products like the MEDEX critical
care accessories and infusion systems are subject to regulation by the U.S. Food
and Drug Administration ("FDA") and certain foreign agencies. These regulations
range from prescribing "good manufacturing practices" to generally requiring FDA
clearance of new healthcare products before they can be marketed. Medex has
historically been able to seek this clearance for its products through the FDA's
"510(k)" pre-market notification program which, as compared to the FDA's
pre-market approval process, requires less time and the submission of limited
clinical and supporting information. The Company expects any new Medex products
to continue to qualify for the 510(k) pre-market notification program. The FDA
routinely conducts inspections to confirm compliance with its regulations and
failure to comply with them can, among other things, result in product recalls
and bans, operating restrictions, and civil and criminal penalties. The Company
believes that Medex is currently in compliance with these governmental
regulations.
Compliance with environmental laws and regulations designed to regulate the
discharge of materials into the environment or otherwise protect the environment
requires continuing management effort and expenditures by the Company. The
Company does not believe that the operating costs incurred in the ordinary
course of business to satisfy air and other permit requirements, properly
dispose of hazardous wastes and otherwise comply with these laws and regulations
form or will form a material component of its operating costs or have or will
have a material adverse effect on its competitive or consolidated financial
positions.
As of January 31, 1998, the Company's reserves for environmental matters
totaled approximately $1.7 million. The Company or one or more of its
subsidiaries is currently involved in environmental investigation or remediation
directly or as an EPA-named potentially responsible party or private cost
recovery/contribution action defendant at various sites, including the following
"superfund" waste disposal sites: Solvents Recovery Service of New England in
Southington, Connecticut; Gallup's Quarry in Plainfield, Connecticut; Davis
Liquid Waste and Picillo in Coventry, Rhode Island; Malvern in Malvern,
Pennsylvania; and Granville in Granville, Ohio. While neither the timing nor the
amount of the ultimate costs associated with these matters can be determined
with certainty, based on information currently available to the Company,
including investigations to determine the nature of the potential liability, the
estimated amount of investigation and remedial costs expected to be incurred and
other factors, the Company presently believes that its environmental reserves
should be sufficient to cover the Company's aggregate liability for these
matters and, accordingly, does not expect them to have a material adverse effect
on its consolidated financial position or results of operations. The actual
costs to be incurred by the Company at each site will depend on a number of
factors, including one or more of the following: the final delineation of
contamination; the final determination of the remedial action required;
negotiations with governmental agencies with respect to
43
<PAGE> 45
FURON COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1998
6. COMMITMENTS AND CONTINGENCIES (CONTINUED)
cleanup levels; changes in regulatory requirements; innovations in investigatory
and remedial technology; effectiveness of remedial technologies employed; and
the ultimate ability to pay of any other responsible parties.
7. EARNINGS PER SHARE
On November 20, 1997, the Company's Board of Directors approved a
two-for-one stock split. One share of the Company's common stock for each full
share of common stock outstanding to holders of record on December 2, 1997 was
distributed on December 16, 1997. Accordingly, all numbers of Common Shares, and
all per share data have been restated to reflect this stock split.
The calculation of earnings per share is presented below:
<TABLE>
<CAPTION>
YEARS ENDED
--------------------------------------------------
JANUARY 31, FEBRUARY 1, FEBRUARY 3,
1998 1997 1996
-------------- -------------- --------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net income (loss)................................... $ 21,740 $ (39,751) $ 13,169
=========== =========== ===========
Weighted average shares outstanding for basic income
per share......................................... 17,863,570 17,771,538 17,457,394
----------- ----------- -----------
Effect of dilutive securities:
Employee stock options and awards................... 885,640 -- 623,130
----------- ----------- -----------
Weighted average shares outstanding for diluted
income
per share......................................... 18,749,210 17,771,538 18,080,524
=========== =========== ===========
Basic income (loss) per share....................... $ 1.22 $ (2.24) $ 0.75
=========== =========== ===========
Diluted income (loss) per share..................... $ 1.16 $ (2.24) $ 0.73
=========== =========== ===========
</TABLE>
8. STOCK COMPENSATION PLANS
At January 31, 1998, the Company has three stock-based compensation plans
(two stock incentive plans and an Employee Stock Purchase Plan), which are
described below. The Company has elected to follow APB Opinion No. 25,
"Accounting for Stock Issued to Employees" and related Interpretations in
accounting for its plans. Accordingly, no compensation expense has been
recognized for its stock option awards and its stock purchase plan because the
exercise price of the Company's stock options equals the market price of the
underlying stock on the date of grant. Had compensation expense for the
Company's stock option awards under its stock incentive plans and its stock
purchase plan been determined based on the fair value at the grant dates for
awards under those plans consistent with the method of SFAS No. 123, "Accounting
for Stock-Based Compensation," the Company's net income (loss) and diluted
income (loss) per share would have been reduced to the pro forma amounts
indicated below:
<TABLE>
<CAPTION>
1998 1997 1996
------- -------- -------
<S> <C> <C> <C> <C>
Net income (loss) As reported $21,740 $(39,751) $13,169
Pro forma 20,904 (40,236) 13,005
Diluted income (loss) per share As reported $ 1.16 $ (2.24) $ 0.73
Pro forma 1.12 (2.27) 0.72
</TABLE>
The stock-based compensation reflected in the above pro forma information
may not be indicative of such compensation in future periods as it only reflects
options granted in fiscal 1998, 1997, and 1996.
44
<PAGE> 46
FURON COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1998
8. STOCK COMPENSATION PLANS (CONTINUED)
Stock Incentive Plans
The Company has a 1995 Stock Incentive Plan and a 1982 Stock Incentive
Plan. Under both plans, the Compensation Committee, appointed by the Board of
Directors, is authorized to grant awards to any officer or key employee of the
Company. Awards granted can take the form of non-qualified stock options, stock
appreciation rights, restricted stock awards ("RSAs"), and performance share
awards. The 1995 Stock Incentive Plan does not provide for depreciation rights
and tax-offset bonuses which are components of the 1982 Stock Incentive Plan.
The 1995 Stock Incentive Plan provides for the annual grant of awards in a
maximum number of shares of common stock of 1.8% of the Company's issued and
outstanding shares as of the last day of the preceding fiscal year, commencing
with the fiscal year beginning February 4, 1996. Options are granted at a price
equal to 100% of the fair market value at the date of grant and become
exercisable not earlier than six months after the award date and vest at a rate
of 25% per year. The options shall remain exercisable until the expiration date
but not later than ten years after the award date.
At January 31, 1998, 335,738 RSAs have been granted (of which 93,052 have
been canceled) under the Stock Incentive Plans. The issuance of these RSAs
resulted in $1.9 million (net of cancellations) of unearned compensation which
is being amortized over the five year period in which the awards vest.
The fair value of each stock option grant is estimated at the date of grant
using the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in fiscal years 1998, 1997, and 1996, respectively:
dividend yield of 1.1%, 1.2% and 1.2%; expected volatility of 26%, 38% and 37%;
risk-free interest rates of 6.6%, 6.3%, and 7.1%; and expected lives of 6 years
for all option grants.
A summary of the status of the Company's non-qualified stock option plans
as of January 31, 1998 and February 1, 1997, and changes during the years ending
on those dates is presented below:
<TABLE>
<CAPTION>
1998 1997 1996
--------------------------- --------------------------- ---------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE
---------- -------------- ---------- -------------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year.... 1,537,424 $ 7.70 1,501,032 $7.08 1,458,656 $6.40
Granted................ 328,500 10.75 273,000 9.88 236,000 9.69
Exercised.............. (132,708) 6.54 (218,608) 5.95 (180,624) 4.81
Forfeited.............. (41,750) 9.89 (18,000) 9.74 (13,000) 9.69
---------- ---------- ----------
Outstanding at end of
year................. 1,691,466 8.33 1,537,424 7.70 1,501,032 7.08
========== ========== ==========
Options exercisable at
year-end............. 1,064,466 1,012,548 1,063,032
========== ========== ==========
Weighted-average fair
value of options
granted during the
year................. $ 3.76 $ 4.14 $ 4.16
========== ========== ==========
</TABLE>
45
<PAGE> 47
FURON COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1998
8. STOCK COMPENSATION PLANS (CONTINUED)
The following table summarizes information about stock options outstanding
at January 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ------------------------------------------------------------------ ------------------------------
WEIGHTED AVERAGE
RANGE OF NUMBER REMAINING WEIGHTED AVERAGE NUMBER WEIGHTED AVERAGE
EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- --------------- ----------- ---------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
$5.58 - $ 6.75 673,416 2.2 years $6.17 673,416 $6.17
8.13 - 11.38 1,018,050 7.6 years 9.77 391,050 9.08
5.58 - 11.38 1,691,466 5.5 years 8.33 1,064,466 7.24
</TABLE>
Employee Stock Purchase Plan
Effective November 1, 1994 the Company adopted an Employee Stock Purchase
Plan to provide substantially all employees who have completed one year of
service an opportunity to purchase shares of its common stock through payroll
deductions, up to 10% of eligible compensation. Annually, on October 31,
participant account balances are used to purchase shares of stock at the lesser
of 85 percent of the fair market value of shares on November 1 (grant date) or
October 31 (exercise date). The aggregate number of shares purchased by an
employee may not exceed 10,000 shares annually (subject to limitations imposed
by the Internal Revenue Code). The Employee Stock Purchase Plan expires on
October 31, 2004. A total of 400,000 shares are available for purchase under the
plan. There were 113,072, 68,476 and 62,182 shares issued under the plan during
fiscal years 1998, 1997 and 1996, respectively. Compensation expense is
recognized for the fair value of the employee's purchase rights, estimated using
the Black-Scholes model, with the following assumptions for fiscal years 1998,
1997 and 1996, respectively: dividend yield of 0.6%, 1.1% and 1.5%; expected
life of 1 year for all years; expected volatility of 32%, 33% and 31%; and
risk-free interest rates of 5.6%, 5.4% and 5.3%. The weighted-average fair value
of those purchase rights granted in fiscal years 1998, 1997 and 1996 was $2.81,
$2.88 and $2.11, respectively.
SHAREHOLDERS' RIGHTS PLAN
On March 21, 1989, the Board of Directors authorized the distribution of
one right for each outstanding share of common stock under the Shareholders'
Rights Plan. The rights which were distributed on May 23, 1989, become
exercisable ten business days after (i) a person has acquired or obtained the
right to acquire 20% or more of the Company's general voting power without
approval by the Board of Directors, or (ii) a tender or exchange offer which
would make a person the beneficial owner of 30% or more of the Company's general
voting power, whichever is earlier. When exercisable, each right entitles the
shareholder to purchase one-fourth of a share of common stock at a price of
$6.88, subject to adjustment. In the event the Company engages in certain
business combinations or a 20% shareholder engages in certain transactions with
the Company, each holder of a right (other than those of the acquiring person)
shall have the right to receive, upon the exercise thereof and payment of four
times the then current exercise price, that number of shares of common stock of
the surviving Company's common stock which at the time of such transaction would
have a market value of two times such price paid.
9. EMPLOYEE BENEFIT PLANS
The Company and its subsidiaries sponsor various qualified plans which
cover substantially all of its domestic employees including a
profit-sharing/retirement plan, an employee stock ownership plan, and an
employee stock purchase plan as described in Note 8. The Company also sponsors a
nonqualified defined benefit plan covering certain employees.
46
<PAGE> 48
FURON COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1998
9. EMPLOYEE BENEFIT PLANS (CONTINUED)
Profit-Sharing/Retirement Plan
The Company has a Profit Sharing/Retirement Plan which provides for an
employee salary deferral contribution and Company contributions. Employees are
permitted to contribute a percentage of their compensation as defined by the
Plan Documents. Contributions made by the Company are based on the Company's
performance and are at the discretion of the Board of Directors. Total Company
contributions for fiscal 1998, 1997 and 1996 were $2.8 million, $2.2 million and
$1.9 million, respectively, and combined Company and employee contributions were
$8.2 million, $6.3 million and $5.4 million, respectively. At January 31, 1998,
the Company has committed to fund at least $5.0 million of combined Company and
employee contributions to the Profit Sharing/Retirement Plan.
Employee Stock Ownership Plan
The Company sponsors an Employee Stock Ownership Plan ("ESOP") covering
substantially all of its employees (subject to certain limitations). The Company
annually contributes amounts sufficient to cover principal and interest on loans
made to the ESOP as determined by the Board of Directors.
Prior to December 31, 1992, the Company loaned the ESOP $3.7 million ($1.2
million outstanding at January 31, 1998) to purchase 622,000 shares of stock, at
interest rates ranging from 7.83% to 9.12%. The loans are payable in ten annual
installments of principal and interest. The plan subsequently entered into loan
agreements with the Company according to the table below. The proceeds of the
loans were used to purchase shares of stock from a former officer and director
of the Company. These loans are payable in ten annual installments of principal
and interest beginning in fiscal 1996. Shares are released and allocated to
participant accounts annually as loan repayments are made.
<TABLE>
<CAPTION>
INTEREST ORIGINAL OUTSTANDING AT
LOAN DATE RATE LOAN AMOUNT JANUARY 31, 1998 SHARES PURCHASED
--------- -------- ----------- ---------------- ----------------
<S> <C> <C> <C> <C>
June 9, 1994........................... 7.52% $ 217,500 $ 169,815 30,000
August 26, 1994........................ 7.67 268,125 213,567 30,000
November 23, 1994...................... 7.45 322,500 264,115 30,000
June 14, 1995.......................... 7.31 231,250 199,646 20,000
September 5, 1995...................... 6.91 206,250 182,005 20,000
December 14, 1995...................... 6.36 141,563 128,352 15,000
March 26, 1996......................... 6.07 322,500 300,275 30,000
June 11, 1996.......................... 7.04 243,750 228,168 20,000
June 3, 1997........................... 6.80 266,250 266,250 20,000
August 29, 1997........................ 6.39 355,000 355,000 20,000
---------- ---------- -------
$2,574,688 $2,307,193 235,000
========== ========== =======
</TABLE>
In fiscal 1995, the Company adopted the provisions of AICPA Statement of
Position No. 93-6 ("SOP") which requires that compensation expense be measured
based on the fair value of the shares over the period the shares are earned. In
addition, the SOP requires that dividends paid on unallocated shares held by the
ESOP are reported as a reduction of accrued interest or as compensation expense
rather than a charge to retained earnings, and shares not yet committed to be
released are not considered outstanding in the calculation of earnings per
share. As allowed by the SOP, the Company has elected not to apply the SOP's
provisions to shares acquired prior to fiscal 1994. As such, compensation
expense related to such shares is measured based on the historical cost of the
shares, dividends have been deducted as a charge to retained
47
<PAGE> 49
FURON COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1998
9. EMPLOYEE BENEFIT PLANS (CONTINUED)
earnings and the unallocated shares are considered outstanding in the
calculation of earnings per share. The adoption of the SOP did not have a
material impact on the consolidated financial statements.
Of the leveraged shares acquired prior to fiscal 1994, 303,282 and 182,462
are allocated and unallocated, respectively, at January 31, 1998. Of the
leveraged shares acquired beginning in fiscal 1994, there were 27,350 allocated
shares, 51,257 committed-to-be-released shares, and 156,393 unallocated shares
at January 31, 1998. The fair value of unallocated shares was $3.0 million at
January 31, 1998. Total compensation cost recognized by the Company during
fiscal 1998, 1997 and 1996, which consists of the annual contribution and plan
administrative costs, net of dividend income on unallocated and forfeited
shares, totaled $0.9 million, $0.8 million and $0.7 million, respectively.
Supplemental Executive Retirement Plan
In fiscal 1987, the Company adopted an unfunded executive defined benefit
retirement plan for certain key officers of the Company, which provides for
benefits which supplement those provided by the Company's other retirement
plans. Benefits payable under the plan are based upon compensation levels and
length of service of the participants.
In accordance with SFAS No. 87, "Employers' Accounting for Pensions," the
Company has recorded an additional liability of approximately $2.5 million and
$2.0 million in fiscal 1998 and 1997, respectively, which represents the excess
of the accumulated benefit obligation over previously recognized accrued pension
costs. In 1998 and 1997, the excess of additional pension liability over the
unrecognized net transition obligation has been recorded as a component of
stockholders' equity.
Actuarial present value of benefit obligations are as follows:
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 1,
1998 1997
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Vested benefit obligation............................. $ 9,365 $ 8,364
======= =======
Accumulated benefit obligation........................ $ 9,435 $ 8,527
======= =======
Unfunded projected benefit obligation................. $ 9,902 $ 8,781
Unrecognized net loss................................. (2,167) (1,667)
Unrecognized prior service cost....................... (237) --
Unrecognized net transition obligation................ (524) (608)
------- -------
6,974 6,506
Additional minimum liability.......................... 2,461 2,021
------- -------
Accrued pension cost.................................. $ 9,435 $ 8,527
======= =======
Assumptions:
Discount rate....................................... 7.25% 7.75%
Salary increase rate................................ 5.00% 5.00%
</TABLE>
48
<PAGE> 50
FURON COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1998
9. EMPLOYEE BENEFIT PLANS (CONTINUED)
Net periodic pension costs for fiscal 1998, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
YEARS ENDED
-----------------------------------------
JANUARY 31, FEBRUARY 1, FEBRUARY 3,
1998 1997 1996
----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost.............................. $ 38 $ 41 $ 37
Interest cost............................. 669 638 618
Net amortization and deferral............. 170 192 211
---- ---- ----
$877 $871 $866
==== ==== ====
</TABLE>
10. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
DILUTED
INCOME (LOSS) NET INCOME INCOME (LOSS)
NET SALES GROSS PROFIT BEFORE TAXES (LOSS) PER SHARE(A)
--------- ------------ ------------- ---------- -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
YEAR ENDED JANUARY 31, 1998
1st Quarter.................. $119,649 $38,319 $ 7,541 $ 4,977 $0.27
2nd Quarter.................. 118,696 38,482 7,351 5,224 0.28
3rd Quarter.................. 123,209 38,905 7,978 5,465 0.29
4th Quarter.................. 124,077 40,600 8,867(b) 6,074 0.32
YEAR ENDED FEBRUARY 1, 1997
1st Quarter.................. $ 94,763 $26,497 $ 6,906 $ 4,558 $0.25
2nd Quarter.................. 96,216 26,046 5,901 3,895 0.22
3rd Quarter.................. 96,227 25,668 6,144 4,055 0.22
4th Quarter.................. 102,899 30,313 (51,185)(c) (52,259) (2.93)
</TABLE>
- ---------------
(a) Diluted income (loss) per share is computed independently for each of the
quarters based on the weighted average number of shares outstanding for each
period, and the sum of the quarters may not necessarily be equal to the full
year diluted income (loss) per share amount.
(b) The fourth quarter of fiscal year ended January 31, 1998 includes a $6.0
million gain related to the sale of a business and facilities
rationalization charges of $5.3 million as described in Note 3.
(c) The fourth quarter of fiscal year ended February 1, 1997 includes the
write-off of acquired in-process research and development of $53.7 million
and nonrecurring charges of $4.3 million as described in Notes 2 and 3.
11. SEGMENT INFORMATION
The factors impacting the Company's basis for reportable segments include
separate management teams, infrastructures, and discrete financial information
about each. Additionally, the long-term financial performance of the Medical
Device Products segment is affected by an environment governed by regulatory
standards.
The Company operates in two business segments: Industrial Products,
including highly engineered seals and bearings, fluid handling, components,
tapes, films and coated fabrics, hose and tubing, wire and cable, and plastic
formed components; and Medical Device Products, including critical care products
and infusion systems for medical and surgical applications.
49
<PAGE> 51
FURON COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1998
11. SEGMENT INFORMATION (CONTINUED)
Sales, operating profit (loss), interest expense, identifiable assets,
capital expenditures, depreciation and amortization are set forth in the
following table:
<TABLE>
<CAPTION>
INDUSTRIAL MEDICAL DEVICE
PRODUCTS PRODUCTS ADJUSTMENTS CONSOLIDATED
---------- --------------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
JANUARY 31, 1998:
Sales to unaffiliated customers......... $377,622 $108,009 $485,631
Operating profit........................ 27,215 14,196 41,411
Interest expense, net................... -- -- $10,788 10,788
Identifiable assets..................... 212,941 133,408 346,349
Capital expenditures.................... 9,438 3,963 13,401
Depreciation and amortization........... 16,136 6,184 22,320
FEBRUARY 1, 1997:
Sales to unaffiliated customers......... $373,419 $ 16,686 $390,105
Operating profit (loss)................. 19,649 (53,479) (33,830)
Interest expense, net................... -- -- $ 2,669 2,669
Identifiable assets..................... 212,979 130,372 343,351
Capital expenditures.................... 18,718 218 18,936
Depreciation and amortization........... 16,605 554 17,159
FEBRUARY 3, 1996:
Sales to unaffiliated customers......... $336,883 $ 8,003 $344,886
Operating profit........................ 16,204 1,243 17,447
Interest expense, net................... -- -- $ 2,315
Identifiable assets..................... 210,796 688 211,484
Capital expenditures.................... 13,564 6 13,570
Depreciation and amortization........... 14,952 123 15,075
</TABLE>
50
<PAGE> 52
FURON COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1998
11. SEGMENT INFORMATION (CONTINUED)
The following table provides information as to the significant geographic
areas in which the Company has operations.
<TABLE>
<CAPTION>
YEARS ENDED
-----------------------------------------
JANUARY 31, FEBRUARY 1, FEBRUARY 3,
1998 1997 1996
----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Net sales to outside customers:
United States................................... $413,743 $344,727 $309,683
Europe.......................................... 71,888 45,378 35,203
-------- -------- --------
$485,631 $390,105 $344,886
======== ======== ========
Income (loss) before income taxes:
United States................................... $ 29,529 $(33,690) $ 15,333
Europe.......................................... 2,208 1,456 3,081
-------- -------- --------
$ 31,737 $(32,234) $ 18,414
======== ======== ========
Identifiable assets:
United States................................... $290,518 $294,745 $190,463
Europe.......................................... 55,831 48,606 21,021
-------- -------- --------
$346,349 $343,351 $211,484
======== ======== ========
Export sales...................................... $ 51,999 $ 42,529 $ 35,967
======== ======== ========
</TABLE>
12. SUBSEQUENT EVENT (UNAUDITED)
On March 24, 1998, the Company entered into an Employee Benefits Trust (the
"Trust") with Wachovia Bank, N.A., Trustee. On March 26, 1998, the Company
contributed $1.3 million to the Trust to purchase shares of the Company's common
stock on the open market. Thereafter, the Company may contribute additional cash
for the purchase of shares of the Company's common stock to the Trust at its
sole discretion. The proceeds from the sale or direct use of the common shares
over the life of the Trust will be used to fund Company obligations for various
benefit plans.
51
<PAGE> 53
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information in response to this Item is incorporated herein by reference
from the Company's definitive Proxy Statement for the Annual Meeting of
Shareholders to be held on June 2, 1998. Information concerning the Company's
executive officers is included in Part I.
ITEM 11. EXECUTIVE COMPENSATION
Information in response to this Item is incorporated herein by reference
from the Company's definitive Proxy Statement for the Annual Meeting of
Shareholders to be held on June 2, 1998.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information in response to this Item is incorporated herein by reference
from the Company's definitive Proxy Statement for the Annual Meeting of
Shareholders to be held on June 2, 1998.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information in response to this Item is incorporated herein by reference
from the Company's definitive Proxy Statement for the Annual Meeting of
Shareholders to be held on June 2, 1998.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
(a) 1. Index to Financial Statements
Report of Independent Auditors.............................. 31
Consolidated Statements of Operations Years ended January 32
31, 1998, February 1, 1997 and February 3, 1996...........
Consolidated Balance Sheets January 31, 1998 and February 1, 33
1997......................................................
Consolidated Statements of Stockholders' Equity Years ended 34
January 31, 1998, February 1, 1997, and February 3,
1996......................................................
Consolidated Statements of Cash Flows Years ended January 35
31, 1998, February 1, 1997 and February 3, 1996...........
Notes to Consolidated Financial Statements January 31, 36
1998......................................................
2. Index to Financial Statement Schedules
Schedule II -- Valuation and Qualifying Accounts............ 53
All other schedules have been omitted since the required
information is not present or not present in amounts
sufficient to require the submission of the schedules, or
because the information required is included in the
consolidated financial statements or the notes thereto.
3. Exhibits:
The exhibits listed in the accompanying Index to Exhibits
are filed as part of this annual report.
(b) Reports on Form 8-K:
None.
</TABLE>
52
<PAGE> 54
FURON COMPANY
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED JANUARY 31, 1998, FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
ADDITIONS DEDUCTIONS/
CHARGED TO ACCOUNTS
BALANCE AT COSTS WRITTEN
BEGINNING AND OFF NET OF BALANCE AT
OF YEAR EXPENSES RECOVERIES OTHER END OF YEAR
---------- ------------ ----------- -------- -----------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful receivables:
1998............................. $2,093,311 $264,523 $(631,554) $ 14,764(a) $1,741,044
========== ======== ========= ======== ==========
1997............................. $1,366,935 $364,164 $(453,421) $815,633(a) $2,093,311
========== ======== ========= ======== ==========
1996............................. $ 695,750 $724,147 $(256,851) $203,889(a) $1,366,935
========== ======== ========= ======== ==========
</TABLE>
- ---------------
(a) Relates to opening balances of acquisitions and dispositions.
53
<PAGE> 55
FURON COMPANY
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIAL
REGULATION S-K PAGE
ITEM NUMBER NUMBER
- -------------- ----------
<S> <C> <C>
3 Restated Articles of Incorporation (Incorporated by
reference to Exhibit 3 to the Registrant's Annual Report on
Form 10-K filed on April 7, 1994, Commission File No.
0-8088).....................................................
3A Certificate of Amendment of Restated Articles of
Incorporation effective December 2, 1997....................
3.1 Amended and Restated Bylaws (Incorporated by reference to
Exhibit 3.1 to the Registrant's Annual Report on Form 10-K
filed on April 7, 1994 and Exhibit 3.2 to the Registrant's
Quarterly Report on Form 10-Q filed on September 13, 1994,
Commission File No. 0-8088).................................
4.1 Rights Agreement as amended (Incorporated by reference to
Exhibit 2.1 to the Registrant's Registration Statement on
Form 8-A filed March 22, 1989, and Exhibit 4.1 to the
Registrant's Annual Report of Form 10-K filed on April 28,
1992, Commission File No. 0-8088)...........................
4.2 Indenture dated as of March 4, 1998 by and between Furon
Company and The Bank of New York, as Trustee................
10.1* 1982 Stock Incentive Plan, as amended (Incorporated by
reference to Exhibits 10.1 and 10.1A to the Registrant's
Quarterly Reports on Form 10-Q filed on September 13, 1994
and September 2, 1997, respectively, Commission File No.
0-8088).....................................................
10.2* Employee Relocation Assistance Plan as amended (Incorporated
by reference to Exhibit 10.2 to the Registrant's Annual
Report on Form 10-K filed on March 21, 1990, Commission File
No. 0-8088).................................................
10.3* Supplemental Executive Retirement Plan as presently in
effect (Incorporated by reference to Exhibit 10.5 to the
Registrant's Annual Report on Form 10-K filed on March 28,
1991, Exhibit 10.4 to the Registrant's Annual Report on Form
10-K filed on March 29, 1993, and Exhibits 10.4A and 10.3A
to the Registrant's Quarterly Reports on Form 10-Q filed on
September 13, 1994 and September 2, 1997, respectively,
Commission File No. 0-8088).................................
10.4 Agreement and Plan of Merger, dated November 12, 1996, by
and among the Registrant, FCY, Inc. and Medex, Inc.
(Incorporated by reference to Exhibit 99.10 to the
Registrant's Schedule 14D-1 filed on November 15, 1996,
Commission File No. 0-8088).................................
10.5* Form of Indemnity Agreement with each of the directors and
officers of the Registrant (Incorporated by reference to
Exhibit C to the Registrant's definitive Proxy Statement
filed May 2, 1988, Commission File No. 0-8088)..............
10.6* Form of Change-in-Control Agreement between the Registrant
and each of its executive officers (Incorporated by
reference to Exhibit 10.6 to the Registrant's Quarterly
Report on Form 10-Q filed on May 30, 1997, Commission File
No. 0-8088).................................................
</TABLE>
- ---------------
* A management contract or compensatory plan or arrangement.
54
<PAGE> 56
<TABLE>
<CAPTION>
SEQUENTIAL
REGULATION S-K PAGE
ITEM NUMBER NUMBER
- -------------- ----------
<S> <C> <C>
10.7* Deferred Compensation Plan as amended (Incorporated by
reference to Exhibit 10.7 to the Registrant's Annual Report
on Form 10-K filed on March 29, 1993 and Exhibit 10.7A to
the Registrant's Quarterly Report on Form 10-Q filed on
September 2, 1997, Commission File No. 0-8088)..............
10.8* Economic Value Added (EVA) Incentive Compensation Plan, as
amended (Incorporated by reference to Exhibit 10.8 to the
Registrant's Annual Report on Form 10-K filed on April 7,
1994 and Exhibit 10.8A to the Registrant's Quarterly Report
on Form 10-Q filed on September 2, 1997, Commission File No.
0-8088).....................................................
10.9* 1995 Stock Incentive Plan as amended (Incorporated by
reference to Exhibit A to the Registrant's definitive Proxy
Statement filed May 1, 1995, Exhibit 10.12A to the
Registrant's Annual Report on Form 10-K filed March 28, 1997
and Exhibit 10.12B to the Registrant's Quarterly Report on
Form 10-Q filed September 2, 1997, Commission File No.
0-8088).....................................................
10.10* Promissory note and subordination agreement for Terrence A.
Noonan relocation (Incorporated by reference to Exhibit
10.10 to the Registrant's Annual Report on Form 10-K filed
on April 7, 1994, Commission File No. 0-8088)...............
10.11 1993 Non-Employee Directors' Stock Compensation Plan as
amended (Incorporated by reference to Exhibits 10.12, 10.12A
and 10.11A to the Registrant's Quarterly Reports on Form
10-Q filed on June 2, 1994, August 24, 1995 and September 2,
1997, respectively, Commission File No. 0-8088).............
10.12 First Amended and Restated Credit Agreement, dated as of
March 27, 1997, by and among the Registrant, the Lenders
party thereto, and co-agents, documentation agent, swing
line lender and administrative agent, and arranging agent
named therein (Incorporated by reference to Exhibit 10.13 to
the Registrant's Quarterly Report on Form 10-Q filed May 30,
1997, Commission File No. 0-8088)...........................
10.13 Amendment No. 1, dated as of February 3, 1998, to Exhibit
10.12.......................................................
10.14 Purchase Agreement, dated as of February 26, 1998, by and
among Furon Company and Lehman Brothers Inc., Bear, Stearns
& Co. Inc. and BNY Capital Markets, Inc.....................
10.15 Registration Rights Agreement, dated as of March 4, 1998, by
and among Furon Company and Lehman Brothers Inc., Bear
Stearns & Co. Inc. and BNY Capital Markets, Inc.............
21 Subsidiaries of the Registrant..............................
23 Consent of Independent Auditors.............................
27 Financial Data Schedule.....................................
</TABLE>
- ---------------
* A management contract or compensatory plan or arrangement.
55
<PAGE> 57
SIGNATURES AND POWER OF ATTORNEY
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf on March 24, 1998 by the undersigned, thereunto duly authorized.
FURON COMPANY
By: /s/ MONTY A. HOUDESHELL
------------------------------------
Monty A. Houdeshell
Vice President, Chief Financial
Officer
and Treasurer
/s/ DAVID L. MASCARIN
------------------------------------
David L. Mascarin
Controller
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated. Each person whose
signature appears below hereby authorizes and appoints J. Michael Hagan,
Terrence A. Noonan, and Monty A. Houdeshell as attorneys-in-fact and agents,
each acting alone, to execute and file with the applicable regulatory
authorities any amendment to this report on his behalf individually and in each
capacity stated below.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
/s/ J. MICHAEL HAGAN Chairman of the Board March 24, 1998
- ----------------------------------------------------- (Principal Executive
J. Michael Hagan Officer)
/s/ TERRENCE A. NOONAN President and Director March 24, 1998
- -----------------------------------------------------
Terrence A. Noonan
/s/ PETER CHURM Chairman Emeritus March 24, 1998
- -----------------------------------------------------
Peter Churm
/s/ MONTY A. HOUDESHELL Vice President, Chief March 24, 1998
- ----------------------------------------------------- Financial Officer and
Monty A. Houdeshell Treasurer
/s/ DAVID L. MASCARIN Controller March 24, 1998
- -----------------------------------------------------
David L. Mascarin
/s/ COCHRANE CHASE Director March 24, 1998
- -----------------------------------------------------
Cochrane Chase
/s/ H. DAVID BRIGHT Director March 24, 1998
- -----------------------------------------------------
H. David Bright
/s/ WILLIAM D. CVENGROS Director March 24, 1998
- -----------------------------------------------------
William D. Cvengros
/s/ R. DAVID THRESHIE Director March 24, 1998
- -----------------------------------------------------
R. David Threshie
</TABLE>
56
<PAGE> 58
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
/s/ BRUCE E. RANCK Director March 24, 1998
- -----------------------------------------------------
Bruce E. Ranck
/s/ WILLIAM C. SHEPHERD Director March 24, 1998
- -----------------------------------------------------
William C. Shepherd
</TABLE>
57
<PAGE> 59
FURON COMPANY
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIAL
REGULATION S-K PAGE
ITEM NUMBER NUMBER
- -------------- ----------
<S> <C> <C>
3 Restated Articles of Incorporation (Incorporated by
reference to Exhibit 3 to the Registrant's Annual Report on
Form 10-K filed on April 7, 1994, Commission File No.
0-8088).....................................................
3A Certificate of Amendment of Restated Articles of
Incorporation effective December 2, 1997....................
3.1 Amended and Restated Bylaws (Incorporated by reference to
Exhibit 3.1 to the Registrant's Annual Report on Form 10-K
filed on April 7, 1994 and Exhibit 3.2 to the Registrant's
Quarterly Report on Form 10-Q filed on September 13, 1994,
Commission File No. 0-8088).................................
4.1 Rights Agreement as amended (Incorporated by reference to
Exhibit 2.1 to the Registrant's Registration Statement on
Form 8-A filed March 22, 1989, and Exhibit 4.1 to the
Registrant's Annual Report of Form 10-K filed on April 28,
1992, Commission File No. 0-8088)...........................
4.2 Indenture dated as of March 4, 1998 by and between Furon
Company and The Bank of New York, as Trustee................
10.1* 1982 Stock Incentive Plan as amended (Incorporated by
reference to Exhibits 10.1 and 10.1A to the Registrant's
Quarterly Reports on Form 10-Q filed on September 13, 1994
and September 2, 1997, respectively, Commission File No.
0-8088).....................................................
10.2* Employee Relocation Assistance Plan as amended (Incorporated
by reference to Exhibit 10.2 to the Registrant's Annual
Report on Form 10-K filed on March 21, 1990, Commission File
No. 0-8088).................................................
10.3* Supplemental Executive Retirement Plan as presently in
effect (Incorporated by reference to Exhibit 10.5 to the
Registrant's Annual Report on Form 10-K filed on March 28,
1991, Exhibit 10.4 to the Registrant's Annual Report on Form
10-K filed on March 29, 1993, and Exhibits 10.4A and 10.3A
to the Registrant's Quarterly Reports on Form 10-Q filed on
September 13, 1994 and September 2, 1997, respectively,
Commission File No. 0-8088).................................
10.4 Agreement and Plan of Merger, dated November 12, 1996, by
and among the Registrant, FCY, Inc. and Medex, Inc.
(Incorporated by reference to Exhibit 99.10 to the
Registrant's Schedule 14D-1 filed on November 15, 1996,
Commission File No. 0-8088).................................
10.5* Form of Indemnity Agreement with each of the directors and
officers of the Registrant (Incorporated by reference to
Exhibit C to the Registrant's definitive Proxy Statement
filed May 2, 1988, Commission File No. 0-8088)..............
10.6* Form of Change-in-Control Agreement between the Registrant
and each of its executive officers (Incorporated by
reference to Exhibit 10.6 to the Registrant's Quarterly
Report on Form 10-Q filed on May 30, 1997, Commission File
No. 0-8088).................................................
10.7* Deferred Compensation Plan (Incorporated by reference to
Exhibit 10.7 to the Registrant's Annual Report on Form 10-K
filed on March 29, 1993 and Exhibit 10.7A to the
Registrant's Quarterly Report on Form 10-Q filed on
September 2, 1997, Commission File No. 0-8088)..............
</TABLE>
58
<PAGE> 60
<TABLE>
<CAPTION>
SEQUENTIAL
REGULATION S-K PAGE
ITEM NUMBER NUMBER
- -------------- ----------
<S> <C> <C>
10.8* Economic Value Added (EVA) Incentive Compensation Plan, as
amended (Incorporated by reference to Exhibit 10.8 to the
Registrant's Annual Report on Form 10-K filed on April 7,
1994, and Exhibit 10.8A to the Registrant's Quarterly Report
on Form 10-Q filed on September 2, 1997, Commission File No.
0-8088).....................................................
10.9* 1995 Stock Incentive Plan as amended (Incorporated by
reference to Exhibit A to the Registrant's definitive Proxy
Statement filed May 1, 1995, Exhibit 10.12A to the
Registrant's Annual Report on Form 10-K filed March 28, 1997
and Exhibit 10.12B to the Registrant's Quarterly Report on
Form 10-Q filed September 2, 1997, Commission File No.
0-8088).....................................................
10.10* Promissory note and subordination agreement for Terrence A.
Noonan relocation (Incorporated by reference to Exhibit
10.10 to the Registrant's Annual Report on Form 10-K filed
on April 7, 1994, Commission File No. 0-8088)...............
10.11 1993 Non-Employee Directors' Stock Compensation Plan, as
amended (Incorporated by reference to Exhibits 10.12, 10.12A
and 10.11A to the Registrant's Quarterly Reports on Form
10-Q filed on June 2, 1994, August 24, 1995 and September 2,
1997, respectively, Commission File No. 0-8088).............
10.12 First Amended and Restated Credit Agreement, dated as of
March 27, 1997, by and among the Registrant, the Lenders
party thereto, and co-agents, documentation agent, swing
line lender and administrative agent, and arranging agent
named therein (Incorporated by reference to Exhibit 10.13 to
the Registrant's Quarterly Report on Form 10-Q filed May 30,
1997, Commission File No. 0-8088)...........................
10.13 Amendment No. 1, dated as of February 3, 1998, to Exhibit
10.12.......................................................
10.14 Purchase Agreement, dated as of February 26, 1998, by and
among Furon Company and Lehman Brothers Inc., Bear, Stearns
& Co. Inc. and BNY Capital Markets, Inc.....................
10.15 Registration Rights Agreement, dated as of March 4, 1998, by
and among Furon Company and Lehman Brothers Inc., Bear
Stearns & Co. Inc. and BNY Capital Markets, Inc.............
21 Subsidiaries of the Registrant..............................
23 Consent of Independent Auditors.............................
27 Financial Data Schedule.....................................
</TABLE>
- ---------------
* A management contract or compensatory plan or arrangement.
59
<PAGE> 1
EXHIBIT 3A
CERTIFICATE OF AMENDMENT
OF
RESTATED ARTICLES OF INCORPORATION
OF
FURON COMPANY
Monty A. Houdeshell and Donald D. Bradley certify that:
1. They are a Vice President and the Secretary,
respectively, of Furon Company, a California corporation (the "Corporation").
2. Article FIFTH of the Restated Articles of
Incorporation of the Corporation is amended to read in its entirety as follows:
FIFTH: The Corporation is authorized to issue two classes of shares
designated "Preferred Stock" and "Common Stock," respectively. The
number of shares of Preferred Stock authorized to be issued is
2,000,000 and said shares are without par value and the number of
shares of Common Stock authorized to be issued is 30,000,000 and said
shares are without par value.
The Preferred Stock may be divided into and issued in such
number of series as the Board of Directors may determine. The Board
of Directors is authorized to determine and alter the rights,
preferences, privileges and restrictions granted to or imposed upon
any wholly unissued series of Preferred Stock, and to fix the number
of shares of any series of Preferred Stock and the designation of any
such series of Preferred Stock. The Board of Directors, within the
limits and restrictions stated in any resolution or resolutions of the
Board of Directors originally fixing the number of shares constituting
any series of Preferred Stock, may increase or decrease (but not below
the number of shares of such series then outstanding) the number of
shares of any such series subsequent to the issue of shares of that
series.
Upon amendment of this Article FIFTH to read as herein set
forth, each outstanding share of Common Stock is split and changed
into two (2) shares of Common Stock.
3. The foregoing amendment of the Restated Articles of
Incorporation has been duly approved by the Board of Directors of the
Corporation.
4. The Corporation has only Common Stock outstanding.
Pursuant to Section 902(c) of the California General Corporation Law, the
foregoing amendment effecting a stock split (including an increase in the
authorized number of shares in proportion thereto) may be adopted with approval
by the Board of Directors alone.
We further declare under penalty of perjury under the laws of
the State of California that the matters set forth in this certificate are true
and correct of our own knowledge.
IN WITNESS WHEREOF, the undersigned have executed this Certificate of
<PAGE> 2
Amendment on December 1, 1997.
By: /s/ Monty A. Houdeshell
----------------------------
Monty A. Houdeshell
Vice President
By: /s/ Donald D. Bradley
----------------------------
Donald D. Bradley
Secretary
<PAGE> 1
EXHIBIT 4.2
================================================================================
FURON COMPANY
8.125% SENIOR SUBORDINATED NOTES DUE 2008
INDENTURE
Dated as of March 4, 1998
THE BANK OF NEW YORK
Trustee
================================================================================
<PAGE> 2
<TABLE>
<CAPTION>
CROSS-REFERENCE TABLE*
Trust Indenture Act Section
Indenture Section
<S> <C>
310 (a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(i)(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(ii)(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
311 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(iii)(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
312 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.05
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.03
(iv)(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.03
313 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
(b)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.03
(b)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.07
(v)(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06; 11.02
(v)(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
314 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.03; 11.02
(A)(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.02
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.04
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.04
(c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(vi)(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.05
(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NA
315 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.05, 11.02
(B)(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.11
316 (a)(last sentence) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.09
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.05
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.04
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.07
(C)(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.12
317 (a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.08
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.09
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.04
318 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.01
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.01
</TABLE>
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
<PAGE> 3
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.01. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02. Other Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 1.03. Incorporation By Reference Of Trust Indenture Act. . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 1.04. Rules of Construction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE 2. THE NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.01. Form and Dating. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.02. Execution and Authentication. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 2.03. Registrar and Paying Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.04. Paying Agent to Hold Money in Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.05. Holder Lists. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.06. Transfer and Exchange. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 2.07. Replacement Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 2.08. Outstanding Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 2.09. Treasury Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 2.10. Temporary Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 2.11. Cancellation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 2.12. Defaulted Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 2.13. CUSIP Numbers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE 3. REDEMPTION AND PREPAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 3.01. Notices to Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 3.02. Selection of Notes to Be Redeemed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 3.03. Notice of Redemption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 3.04. Effect of Notice of Redemption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 3.05. Deposit of Redemption Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 3.06. Notes Redeemed in Part. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 3.07. Optional Redemption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 3.08. Mandatory Redemption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 3.09. Offer to Purchase by Application of Excess Proceeds. . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE 4. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 4.01. Payment of Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 4.02. Maintenance of Office or Agency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 4.03. Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 4.04. Compliance Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 4.05. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 4.06. Stay, Extension and Usury Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 4.07. Restricted Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries. . . . . . . . . . . . . . . . . . . 43
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock. . . . . . . . . . . . . . . . . . . . . 44
i
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
Section 4.10. Asset Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 4.11. Transactions with Affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 4.12. Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 4.13. Business Activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 4.14. Corporate Existence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 4.15. Offer to Repurchase Upon Change of Control. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 4.16. No Senior Subordinated Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 4.17. Sale and Leaseback Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 4.18. Limitation on Guarantees of Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 4.19. Payments for Consent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE 5. SUCCESSORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 5.01. Merger, Consolidation or Sale of Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 5.02. Successor Corporation Substituted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE 6. DEFAULTS AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 6.01. Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 6.02. Acceleration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 6.03. Other Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 6.04. Waiver of Past Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 6.05. Control by Majority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 6.06. Limitation on Suits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 6.07. Rights of Holders of Notes to Receive Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 6.08. Collection Suit by Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 6.09. Trustee May File Proofs of Claim. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 6.10. Priorities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 6.11. Undertaking for Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
ARTICLE 7. TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 7.01. Duties of Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 7.02. Rights of Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 7.03. Individual Rights of Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 7.04. Trustee's Disclaimer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 7.05. Notice of Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 7.06. Reports by Trustee to Holders of the Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 7.07. Compensation and Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 7.08. Replacement of Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 7.09. Successor Trustee by Merger, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 7.10. Eligibility; Disqualification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 7.11. Preferential Collection of Claims Against Company. . . . . . . . . . . . . . . . . . . . . . . . . 61
ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance. . . . . . . . . . . . . . . . . . . . . . 61
Section 8.02. Legal Defeasance and Discharge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 8.03. Covenant Defeasance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 8.04. Conditions to Legal or Covenant Defeasance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 8.05. Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions. . . . 64
</TABLE>
ii
<PAGE> 5
<TABLE>
<S> <C>
Section 8.06. Repayment to Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 8.07. Reinstatement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 9.01. Without Consent of Holders of Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 9.02. With Consent of Holders of Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 9.03. Compliance with Trust Indenture Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 9.04. Revocation and Effect of Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 9.05. Notation on or Exchange of Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 9.06. Trustee to Sign Amendments, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
ARTICLE 10. SUBORDINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 10.01. Agreement to Subordinate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 10.02. Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 10.03. Liquidation; Dissolution; Bankruptcy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 10.04. Default on Designated Senior Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 10.05. Acceleration of Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 10.06. When Distribution Must Be Paid Over. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 10.07. Notice by Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 10.08. Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 10.09. Relative Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 10.10. Subordination May Not Be Impaired by Company. . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 10.11. Distribution or Notice to Representative. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 10.12. Rights of Trustee and Paying Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 10.13. Authorization to Effect Subordination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Section 10.14. Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
ARTICLE 11. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Section 11.1. Trust Indenture Act Controls. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Section 11.2. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Section 11.3. Communication by Holders of Notes with Other Holders of Notes. . . . . . . . . . . . . . . . . . . 73
Section 11.4. Certificate and Opinion as to Conditions Precedent. . . . . . . . . . . . . . . . . . . . . . . . . 73
Section 11.5. Statements Required in Certificate or Opinion. . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 11.6. Rules by Trustee and Agents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 11.7. No Personal Liability Of Directors, Officers, Employees And Shareholders. . . . . . . . . . . . . . 74
Section 11.8. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 11.9. No Adverse Interpretation of Other Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Section 11.10. Successors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Section 11.11. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Section 11.12. Counterpart Originals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Section 11.13. Table of Contents, Headings, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
</TABLE>
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<PAGE> 6
EXHIBITS
Exhibit A-1 FORM OF NOTE
Exhibit A-2 FORM OF REGULATION S TEMPORARY GLOBAL NOTE
Exhibit B FORM OF CERTIFICATE OF TRANSFER
Exhibit C FORM OF CERTIFICATE OF EXCHANGE
Exhibit D FORM OF SUPPLEMENTAL INDENTURE
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<PAGE> 7
INDENTURE dated as of March 4, 1998 between Furon Company, a
California corporation (the "Company"), and The Bank of New York , a New York
banking corporation, 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 8L%
Senior Subordinated Notes due 2008 (the "Initial Notes") and the 8L%
Subordinated Notes due 2008 issued in the Exchange Offer (the "Exchange Notes"
and, together with the Initial Notes, the "Notes"):
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions.
"144A Global Note" means a global note in the form of Exhibit
A-1 hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of, and registered in the name of, the Depositary
or its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Notes sold in reliance on Rule 144A.
"Acquired Debt" means, with respect to any specified Person,
(i) Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person and (ii) Indebtedness secured by a Lien
encumbering any assets acquired by such specified Person.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person,
whether through the ownership of voting securities, by agreement or otherwise;
provided, however, that beneficial ownership of 10% or more of the voting
securities of a Person shall be deemed to be control.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer or
exchange of or for beneficial interests in any Global Note, the rules and
procedures of the Depositary, Euroclear and Cedel that apply to such transfer
or exchange.
"Asset Sale" means (i) the sale, lease, conveyance or other
disposition of any assets or rights (including without limitation, by way of a
sale and leaseback) other than in the ordinary course of business (provided
that the sale, lease, conveyance or other disposition of all or substantially
all of the assets of the Company and its Restricted Subsidiaries taken as a
whole will be governed by the provisions of Section 4.15 hereof and/or the
provisions of Section 5.01 hereof and not by the provisions of Section 4.10
hereof, and (ii) the issue or sale by the Company or any of its Restricted
Subsidiaries of Equity Interests of any of the Company's
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<PAGE> 8
Restricted Subsidiaries, in the case of either clause (i) or (ii), whether in a
single transaction or a series of related transactions (a) that have a fair
market value in excess of $3.0 million or (b) for Net Proceeds in excess of
$3.0 million. Notwithstanding the foregoing: (i) a transfer of assets by the
Company to a Wholly Owned Restricted Subsidiary of the Company or by a Wholly
Owned Restricted Subsidiary of the Company to the Company or to another Wholly
Owned Restricted Subsidiary of the Company, (ii) an issuance or sale of Equity
Interests by a Wholly Owned Restricted Subsidiary of the Company to the Company
or to another Wholly Owned Restricted Subsidiary of the Company, and (iii) (A)
a Permitted Investment or (B) a Restricted Payment that is permitted by Section
4.07 hereof will not be deemed to be Asset Sales.
"Attributable Debt" in respect of a sale and leaseback
transaction means, at the time of determination, the present value (discounted
at the rate of interest implicit in such transaction, determined in accordance
with GAAP) of the obligation of the lessee for net rental payments (after
excluding amounts paid in respect of insurance, taxes, assessments, utilities,
operating and labor and similar charges) during the remaining term of the lease
included in such sale and leaseback transaction (including any period for which
such lease has been extended or may, at the option of the lessor, be extended).
"Bankruptcy Law" means Title 11, U.S. Code or any similar
federal or state law for the relief of debtors.
"Board of Director" means the Board of Directors of the
Company, or any committee thereof duly authorized to act on behalf of such
Board.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any
determination thereof is to be made, the amount of the liability in respect of
a capital lease that would at such time be required to be capitalized on a
balance sheet in accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation,
corporate stock, (ii) in the case of an association or business entity, any and
all shares, interests, participation, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership or limited
liability company, partnership (whether general or limited) or membership
interests and (iv) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distribution 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 one year from the date of acquisition, (iii) certificates of
deposit and eurodollar time deposits with maturities of not more than one year
from the date of acquisition, bankers' acceptances with maturities of not more
than one year from the date of acquisition and overnight bank deposits, in each
case with any domestic commercial bank having capital and surplus in excess of
$250.0 million and a Thompson Bank Watch Rating of "B" or better, (iv)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clauses (ii) and (iii) above entered into
with any financial institution meeting the qualifications specified in clause
(iii) above, (v) commercial paper having the highest rating obtainable from
either Moody's Investors Service, Inc. or one of the two highest ratings from
Standard & Poor's Rating Group ("S&P") with maturities of not more than one
year from the date of acquisition and (vi) readily
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<PAGE> 9
marketable obligations issued or unconditionally and fully guaranteed by any
state of the United States of America maturing within one year from the date of
acquisition thereof, and at the time of acquisition, having one of the two
highest ratings obtainable from Moody's and S&P, and (vii) money market funds
at least 95% of the assets of which are comprised of assets specified in
clauses (i) through (vi).
"Cedel" means Cedel Bank, S.A.
"Change of Control" means the occurrence of one or more of the
following events: (i) any sale, lease, exchange or other transfer other than by
a merger or consolidation (in one transaction or a series of related
transactions) of all or substantially all of the assets of the Company and its
Restricted Subsidiaries, taken as a whole, to any Person or group of related
Persons for purposes of Section 13(d) of the Exchange Act (a "Group") together
with any Affiliates thereof (whether or not otherwise in compliance with the
provisions of the Indenture) unless immediately following such sale, lease,
exchange or other transfer in compliance with the Indenture such assets are
owned, directly or indirectly, by the Company or a Wholly Owned Restricted
Subsidiary of the Company; (ii) the approval by the holders of Capital Stock of
the Company of any plan or proposal for the liquidation or dissolution of the
Company (whether or not otherwise in compliance with the provisions of the
Indenture); (iii) the acquisition in one or more transactions by way of merger,
consolidation or other business transaction or the purchase of beneficial
ownership (within the meaning of Rule 13d-3 under the Exchange Act) by any
Person or Group, whether directly or indirectly, of at least 35% of the
Company's then outstanding voting securities entitled to vote on a regular
basis for the Board of Directors; or (iv) the first day on which a majority of
the members of the Board of Directors are not Continuing Directors.
"Company" means Furon Company, and any and all successors
thereto.
"Consolidated Cash Flow" means, with respect to any Person for
any period, the Consolidated Net Income of such Person for such period plus,
without duplication, (i) an amount equal to any extraordinary loss plus any net
loss realized in connection with an Asset Sale (to the extent such losses were
deducted in computing such Consolidated Net Income), plus (ii) provision for
taxes based on income or profits of such Person and its Restricted Subsidiaries
for such period, to the extent that such provision for taxes was included in
computing such Consolidated Net Income, plus (iii) consolidated interest
expense (net of interest income) of such Person and its Restricted Subsidiaries
for such period, whether paid or accrued and whether or not capitalized
(including, without limitation, amortization of debt issuance costs and
original issue discount, non-cash interest payments, the interest component of
any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, imputed interest with respect to
Attributable Debt, commissions, discounts and other fees and charges incurred
in respect of letter of credit or bankers' acceptance financings, and net
payments (if any) pursuant to Hedging Obligations), to the extent that any such
expense was deducted in computing such Consolidated Net Income, plus (iv)
depreciation and amortization (including amortization of goodwill, other
intangibles but excluding amortization of prepaid cash expenses that were paid
in a prior period) and other non-cash expenses or charges (excluding any such
non-cash expense to the extent that it represents an accrual of or reserve for
cash expenses in any future period or amortization of a prepaid cash expense
that was paid in a prior period) of such Person and its Restricted Subsidiaries
for such period to the extent that such depreciation and amortization were
deducted in computing such Consolidated
3
<PAGE> 10
Net Income, minus (v) non-cash items increasing such Consolidated Net Income
for such period, in each case, on a consolidated basis and determined in
accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person
for any period, an aggregate of the Net Income of such Person and its
Restricted Subsidiaries (for such period, on a consolidated basis, determined
in accordance with GAAP); provided that (i) the Net Income (but not loss) of
any Person that is not a Restricted Subsidiary or that is accounted for by the
equity method of accounting shall be included only to the extent of the amount
of dividends or distributions paid in cash to the referent Person or a
Restricted Subsidiary, (ii) the Net Income of any Restricted Subsidiary shall
be excluded to the extent that the declaration or payment of dividends or
similar distributions by that Restricted Subsidiary of that Net Income is not
at the date of determination permitted without any prior governmental approval
(that has not been obtained) or, directly or indirectly, by operation of the
terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Restricted
Subsidiary or its stockholders, (iii) the Net Income of any Person acquired in
a pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded, (iv) the cumulative effect of a change in
accounting principles shall be excluded, and (v) the Net Income (but not loss)
of any Unrestricted Subsidiary shall be excluded, whether or not distributed to
the Company or one of its Subsidiaries.
"Continuing Director" means, as of any date of determination,
any member of the Board of Directors who (i) was a member of the Board of
Directors on the date of this Indenture or (ii) was nominated for election or
elected to the Board of Directors with the approval of a majority of the
Continuing Directors who were members of the Board at the time of such
nomination or election.
"Corporate Trust Office of the Trustee" shall be at the
address of the Trustee specified in Section 11.02 hereof or such other address
as to which the Trustee may give notice to the Company.
"Credit Facility" means that certain First Amended and
Restated Credit Agreement, dated as of March 27, 1997 and amended as of
February 3, 1998, between Furon Company, the various lenders thereto, The Bank
of New York, as swing line lender and administration agent, and BNY Capital
Markets, Inc., as arranging agent, providing for up to $200.0 million of
revolving credit borrowings, as such agreement may be amended, restated,
modified, renewed, refunded, replaced or refinanced from time to time
thereafter, including any notes, guaranties, security or pledge agreements,
letters of credit and other documents or instruments executed pursuant thereto
and any appendices, exhibits or schedules to any of the foregoing, as the same
may be in effect from time to time, in each case, as such agreements may be
amended, modified, supplemented, renewed, refunded, replaced, refinanced,
extended or restated from time to time (whether with the original agents and
lenders or other agents and lenders or otherwise, and whether provided under
the original credit agreement or other credit agreements or otherwise),
including any appendices, exhibits or schedules to any of the foregoing.
"Credit Facilities" means, with respect to the Company, one or
more debt facilities (including, without limitation the Credit Facility) or
commercial paper facility with banks or other institutional lenders providing
for revolving credit loans, other borrowings (including term loans),
receivables financing (including through the sale of receivables to such
lenders or to special
4
<PAGE> 11
purpose entities formed to borrow from such lenders against such receivables)
or letters of credit, in each case, as amended, restated, modified, renewed,
refunded, replaced or refinanced in whole or in part from time to time.
"Custodian" means the Trustee, as custodian with respect to
the Notes in global form, or any successor entity thereto.
"Default" means any event that is or with the passage of time
or the giving of notice (or both) would be an Event of Default.
"Definitive Note" means a certificated Note registered in the
name of the Holder thereof and issued in accordance with Section 2.06 hereof,
in the form of Exhibit A-1 hereto except that such Note shall not bear the
Global Note Legend and shall not have the "Schedule of Exchanges of Interests
in the Global Note" attached thereto.
"Depositary" means, with respect to the Notes issuable or
issued in whole or in part in global form, the Person specified in Section 2.03
hereof as the Depositary with respect to the Notes, and any and all successors
thereto appointed as depositary hereunder and having become such pursuant to
the applicable provision of this Indenture.
"Designated Senior Debt" means (i) any Indebtedness
outstanding under the Credit Facility and (ii) any other Senior Debt permitted
hereunder the principal amount of which is $25.0 million or more and that has
been designated by the Company as "Designated Senior Debt."
"Disqualified Stock" means any Capital Stock that, by its
terms (or by the terms of any security into which it is convertible or for
which it is exchangeable at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the Holder
thereof, in whole or in part, on or prior to the date that is 91 days after the
date on which the Notes mature, except to the extent that such Capital Stock is
solely redeemable with, or solely exchangeable for, any Capital Stock of such
Person that is not Disqualified Stock.
"Equity Interests" means Capital Stock and all warrants,
options or other rights to acquire Capital Stock (but excluding any debt
security that is convertible into, or exchangeable for, Capital Stock).
"Euroclear" means Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Notes" means the Notes issued in the Exchange Offer
pursuant to Section 2.06(f) hereof.
"Exchange Offer" has the meaning set forth in the Registration
Rights Agreement.
"Exchange Offer Registration Statement" has the meaning set
forth in the Registration Rights Agreement.
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<PAGE> 12
"Existing Indebtedness" means up to $17.0 million in aggregate
principal amount of Indebtedness of the Company and its Restricted Subsidiaries
(other than Indebtedness under the Credit Facility and the Notes) in existence
on the Issue Date, until such amounts are repaid.
"Fixed Charge Coverage Ratio" means with respect to any Person
for any period, the ratio of the Consolidated Cash Flow of such Person and its
Restricted Subsidiaries for such period to the Fixed Charges of such Person and
its Restricted Subsidiaries for such period. In the event that the Company or
any of its Restricted Subsidiaries incurs, assumes, guarantees or redeems any
Indebtedness (other than revolving credit borrowings under any Credit Facility)
or issues preferred stock subsequent to the commencement of the period for
which the Fixed Charge Coverage Ratio is being calculated but on or prior to
the date on which the event for which the calculation of the Fixed Charge
Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage
Ratio shall be calculated giving pro forma effect to such incurrence,
assumption, guarantee or redemption of Indebtedness, or such issuance or
redemption of preferred stock, as if the same had occurred at the beginning of
the applicable four-quarter reference period. In addition, for purposes of
making the computation referred to above, (i) acquisitions that have been made
by the Company or any of its Restricted Subsidiaries, including through mergers
or consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date shall be deemed to have occurred on the first day
of the four-quarter reference period and Consolidated Cash Flow for such
reference period shall be calculated without giving effect to clause (iii) of
the proviso set forth in the definition of Consolidated Net Income, (ii) the
Consolidated Cash Flow attributable to discontinued operations, as determined
in accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, and (iii) the Fixed Charges attributable
to discontinued operations, as determined in accordance with GAAP, and
operations or businesses disposed of prior to the Calculation Date, shall be
excluded, but only to the extent that the obligations giving rise to such Fixed
Charges will not be obligations of the referent Person or any of its Restricted
Subsidiaries following the Calculation Date.
"Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of (i) the consolidated interest expense
(net of interest income) of such Person and its Restricted Subsidiaries for
such period, whether paid or accrued (including without limitation,
amortization of debt issuance costs and original issue discount, non-cash
interest payments, the interest component of any deferred payment obligations,
the interest component of all payments associated with Capital Lease
Obligations, imputed interest with respect to Attributable Debt, commissions,
discounts and other fees and charges incurred in respect of letter of credit or
bankers' acceptance financings, and net payments (if any) pursuant to Hedging
Obligations), (ii) the consolidated interest expense of such Person and its
Restricted Subsidiaries that was capitalized during such period, (iii) any
interest expense on Indebtedness of another Person that is guaranteed by such
Person or one of its Restricted Subsidiaries or secured by a Lien on assets of
such Person or one of its Restricted Subsidiaries (whether or not such
guarantee or Lien is called upon) and (iv) the product of (a) all dividend
payments, whether or not in cash, on any series of Preferred Stock of such
Person or any of its Restricted Subsidiaries, other than dividend payments on
Equity Interests payable solely in Equity Interests of the Company (other than
Disqualified Stock) and other than dividends paid or accrued for the benefit of
the Company or a Restricted Subsidiary, times (b) a fraction, the numerator of
which is one and the denominator of which is one minus the then current
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<PAGE> 13
combined federal, state and local statutory tax rate of such Person, expressed
as a decimal, in each case, on a consolidated basis and in accordance with
GAAP.
"Foreign Subsidiary" shall mean a Restricted Subsidiary that
is formed under the laws of a jurisdiction other than that of the United States
of America or of a 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, the statements and
pronouncements of the Financial Accounting Standards Board and such other
statements by such other entities as have been approved by a significant
segment of the accounting profession, which are applicable at the Issue Date.
"Global Notes" means, individually and collectively, each of
the Restricted Global Notes and the Unrestricted Global Notes, in the form of
Exhibit A hereto issued in accordance with Section 2.01, 2.06(b)(iv),
2.06(d)(ii) or 2.06(f) hereof.
"Global Note Legend" means the legend set forth in Section
2.06(g)(ii), which is required to be placed on all Global Notes issued under
this Indenture.
"Government Securities" means direct obligations of, or
obligations guaranteed by, the United States of America, and the payment for
which the United States pledges its full faith and credit.
"guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, letters of
credit and reimbursement agreements in respect thereof), of all or any part of
any Indebtedness.
"Guarantee" means any guarantee of the Notes to be executed by
any Subsidiary of the Company pursuant to the provisions of Section 4.18
hereof.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in commodity prices, interest rates or currency exchange rates.
"Holder" means a Person in whose name a Note is registered.
"Indebtedness" means, with respect to any Person, any
indebtedness of such Person, whether or not contingent, in respect of borrowed
money or evidenced by bonds, notes, debentures or similar instruments or
letters of credit (or reimbursement agreements in respect thereof) or banker's
acceptances or representing Capital Lease Obligations or the balance deferred
and unpaid of the purchase price of any property or representing any Hedging
Obligations, except any such balance that constitutes an accrued expense,
customer advance, progress payment or trade payable, if and to the extent any
of the foregoing indebtedness (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, as well as all Indebtedness of others secured
by a Lien on any asset of such Person (whether or not such Indebtedness is
assumed by such Person) and, to the extent not otherwise included, the
guarantee by such Person of any
7
<PAGE> 14
Indebtedness of any other Person. The amount of any Indebtedness outstanding
as of any date shall be (i) the accreted value thereof, in the case of any
Indebtedness that does not require current payments of interest, and (ii) the
principal amount thereof, together with any interest thereon that is more than
30 days past due, in the case of any other Indebtedness.
"Indenture" means this Indenture, as amended or supplemented
from time to time.
"Indirect Participant" means a Person who holds a beneficial
interest in a Global Note through a Participant.
"Initial Notes" means $125.0 million in aggregate principal
amount of Notes issued under this Indenture on the date hereof.
"Independent Financial Advisor" means a reputable accounting,
appraisal or investment banking firm that is, in the reasonable judgment of the
Board of Directors, qualified to perform the task for which such firm has been
engaged hereunder and disinterested and independent with respect to the Company
and its Affiliates.
"Investments" means, with respect to any Person, all
investments by such Person in other Persons (including Affiliates) in the forms
of direct or indirect loans (including guarantees of Indebtedness or other
Obligations), advances of assets or capital contributions, purchases or other
acquisitions for consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP. If the
Company or any of its Restricted Subsidiaries sells or otherwise disposes of
any Equity Interests of any direct or indirect Restricted Subsidiary of the
Company such that, after giving effect to any such sale or disposition, such
Person is no longer a direct or indirect Restricted Subsidiary of the Company,
the Company or such Restricted Subsidiary, as the case may be, shall be deemed
to have made an Investment on the date of any such sale or disposition equal to
the fair market value of the Equity Interests of such Restricted Subsidiary not
sold or disposed of in an amount determined as provided in subsection (c) of
Section 4.07 hereof. "Investments" shall exclude extensions of trade credit by
the Company and the Restricted Subsidiaries on commercially reasonable terms in
the ordinary course of business.
"Issue Date" means the date on which the Notes are first
issued and delivered.
"Legal Holiday" means a Saturday, a Sunday or a day on which
banking institutions in the City of New York or at a place of payment are
authorized by law, regulation or executive order to remain closed. If a
payment date is a Legal Holiday at a place of payment, payment may be made at
that place on the next succeeding day that is not a Legal Holiday, and no
interest shall accrue on such payment for the intervening period.
"Letter of Transmittal" means the letter of transmittal to be
prepared by the Company and sent to all Holders of the Notes for use by such
Holders in connection with the Exchange Offer.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset, whether or not filed, recorded or otherwise perfected under applicable
law (including any conditional sale or other title retention agreement, any
lease in the nature thereof, any option or other agreement to sell
8
<PAGE> 15
or give a security interest in and any filing of or agreement to give any
financing statement under the Uniform Commercial Code (or equivalent statutes)
of any jurisdiction).
"Liquidated Damages" means all liquidated damages then owing
pursuant to Section 5 of the Registration Rights Agreement.
"Net Income" means, with respect to any Person, the net income
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, excluding, however, (i) any
gain (but not loss), together with any related provision for taxes on such gain
(but not loss), realized in connection with (a) any Asset Sale (including,
without limitation, dispositions pursuant to sale and leaseback transactions),
or (b) the disposition of any securities by such Person or any of its
Restricted Subsidiaries or the extinguishment of any Indebtedness of such
Person or any of its Restricted Subsidiaries, (ii) any extraordinary gain (but
not loss), together with any related provision for taxes on such extraordinary
gain (but not loss) , and (iii) any non-cash write-off or charge (excluding any
such non-cash write-off or charge to the extent that it represents an accrual
of or reserve for cash expenses in any future period or amortization of a
prepaid cash expense that was paid in a prior period) directly related to the
acquisition of a Person in a Permitted Business if such non-cash write-off or
charge is made within three months of such acquisition.
"Net Proceeds" means the aggregate cash proceeds or Cash
Equivalents received by the Company or any of its Restricted Subsidiaries in
respect of any Asset Sale (including, without limitation, any cash received
upon the sale or other disposition of any non-cash consideration received in
any Asset Sale), net of all costs relating to such Asset Sale (including,
without limitation, legal, accounting, investment banking and brokers fees, and
sales and underwriting commissions) and any relocation expenses incurred as a
result thereof, taxes paid or payable as a result thereof (after taking into
account any available tax credits or deductions and any tax sharing
agreements), amounts required to be applied to the repayment of Senior Debt
(other than Senior Debt under one or more of the Company's Credit Facilities)
secured by a Lien on the assets that were the subject of such Asset Sale, and
any reserve for adjustment in respect of the sale price of such asset or assets
established in accordance with GAAP.
"Non-Recourse Debt and Preferred Stock" means Indebtedness or
Preferred Stock (i) as to which neither the Company nor any of its Restricted
Subsidiaries (a) provides any guarantee or credit support of any kind
(including any undertaking, guarantee, indemnity, agreement or instrument that
would constitute Indebtedness), (b) is directly or indirectly liable (as a
guarantor or otherwise) or (c) constitutes the lender; and (ii) no default with
respect to which (including any rights that the holders thereof may have to
take enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness (other than
the Notes being offered hereby) 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) the incurrence of which will not result in any recourse against any of
the assets or stock of the Company or its Restricted Subsidiaries.
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Notes" has the meaning assigned to it in the preamble to this
Indenture.
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<PAGE> 16
"Obligations" means any principal, premium, if any, interest
(including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company or its Subsidiaries
whether or not a claim for post-filing interest is allowed in such proceeding),
penalties, fees, charges, expenses, indemnifications, reimbursement
obligations, damages (including Liquidated Damages), guarantees and other
liabilities or amounts payable under the documentation governing any
Indebtedness or in respect thereof.
"Offering" means the offering of the Initial Notes by the
Company.
"Officer" means, with respect to any Person, the Chairman of
the Board, the Chief Executive Officer, the President, the Chief Operating
Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer,
the Controller, the Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf
of the Company by either the principal executive officer or the principal
financial officer, the treasurer or the principal accounting officer of the
Company, that meets the requirements of Section 11.05 hereof.
"Opinion of Counsel" means an opinion from legal counsel who
is reasonably acceptable to the Trustee, that meets the requirements of Section
11.05 hereof. The counsel may be an employee of or counsel to the Company, any
Subsidiary of the Company or the Trustee.
"Participant" means, with respect to the Depositary, Euroclear
or Cedel, a Person who has an account with the Depositary, Euroclear or Cedel,
respectively (and, with respect to The Depository Trust Company, shall include
Euroclear and Cedel).
"Participating Broker-Dealer" has the meaning set forth in the
Registration Rights Agreement.
"Permitted Business" means the lines of business conducted by
the Company and its Subsidiaries on the date hereof and businesses reasonably
related thereto and reasonable extensions thereof.
"Permitted Investments" means (a) any Investment in the
Company or in a Restricted Subsidiary of the Company; (b) any Investment in
Cash Equivalents; (c) any Investment by the Company or any Subsidiary of the
Company in a Person engaged in a Permitted Business, if as a result of such
Investment (i) such Person becomes a Restricted Subsidiary or (ii) any 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
Restricted Subsidiary; (d) any Investment made as a result of the receipt of
non-cash consideration from an Asset Sale that was made pursuant to and in
compliance with the provisions of Section 4.10 hereof; (e) any acquisition of
assets solely in exchange for the issuance of Equity Interests (other than
Disqualified Stock) of the Company; (f) Investments arising in connection with
Hedging Obligations; (g) any Investment acquired by the Company or any of its
Restricted Subsidiaries (x) in exchange for any other Investment or accounts
receivable held by the Company or any such Restricted Subsidiary in connection
with or as a result of a bankruptcy, workout, reorganization or
recapitalization of the issuer of such other Investment or accounts receivable
or (y) as a result of a foreclosure by the Company or any of its Restricted
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<PAGE> 17
Subsidiaries with respect to any Investment or other transfer of title with
respect to any Investment in default; (h) any Investment existing on the Issue
Date; and (i) other Investments by the Company or any of its Restricted
Subsidiaries in any Person having an aggregate fair market value, when taken
together with all other Investments made pursuant to this clause (i) that are
at the time outstanding, not to exceed $30.0 million at the time of such
Investment (with the fair market value being measured at the time made and
without giving effect to subsequent changes in value).
"Permitted Junior Securities" means Equity Interests in the
Company or debt securities that are subordinated to all Senior Debt (and any
debt securities issued in exchange for Senior Debt) to substantially the same
extent as, or to a greater extent than, the Notes are subordinated to Senior
Debt pursuant to the Indenture.
"Permitted Refinancing Indebtedness" means any Indebtedness of
the Company or any of its Restricted Subsidiaries or any Disqualified Stock of
the Company issued in exchange for, or the net proceeds of which are used to
extend, refinance, renew, replace, defease or refund other Indebtedness of the
Company or any of its Restricted Subsidiaries; provided that: (i) the principal
amount (or accreted value, if applicable) of such Permitted Refinancing
Indebtedness does not exceed the principal amount of (or accreted value, if
applicable), plus accrued interest on, the Indebtedness so extended,
refinanced, renewed, replaced, defeased or refunded (plus the amount of
reasonable expenses incurred in connection therewith); (ii) such Permitted
Refinancing Indebtedness has a final maturity date later than the final
maturity date of, and has a Weighted Average Life to Maturity equal to or
greater than the Weighted Average Life to Maturity of, the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded is pari passu with the Notes, such Permitted Refinancing Indebtedness
is pari passu with or subordinated in right of payment to the Notes or is
Disqualified Stock; (iv) if the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded is subordinated in right of payment to
the Notes, such Permitted Refinancing Indebtedness is subordinated in right of
payment to the Notes on the terms at least as favorable to the Holders of Notes
as those contained in the documentation governing the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded or is
Disqualified Stock; and (v) such Indebtedness is incurred either by the Company
or by the Restricted Subsidiary that is the obligor on the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded, or such
Disqualified Stock is issued by the Company, as applicable.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization
or government or agency or political subdivision thereof or any other entity.
"Preferred Stock" means any Capital Stock of a Person, however
designated, which entitles the holder thereof to a preference with respect to
dividends, distributions or liquidation proceeds of such person over the holder
to the other Capital Stock issued by such Person.
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<PAGE> 18
"Private Placement Legend" means the legend set forth in
Section 2.06(g)(i) to be placed on all Notes issued under this Indenture except
where otherwise permitted by the provisions of this Indenture.
"Public Equity Offering" means any underwritten primary public
offering of the Voting Stock of the Company pursuant to an effective
registration statement (other than a registration statement on Form S-4, Form
S-8, or any successor or similar form) under the Securities Act.
"QIB" means a "qualified institutional buyer" as defined in
Rule 144A.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of March 4, 1998, by and among the Company and the other
parties named on the signature pages thereof, as such agreement may be amended,
modified or supplemented from time to time.
"Regulation S" means Regulation S promulgated under the
Securities Act.
"Regulation S Global Note" means a Regulation S Temporary
Global Note or a Regulation S Permanent Global Note, as the context requires.
"Regulation S Permanent Global Note" means a permanent global
Note in the form of Exhibit A-2 hereto bearing the Global Note Legend and the
Private Placement Legend and deposited with or on behalf of and registered in
the name of the Depositary or its nominee, issued in a denomination equal to
the outstanding principal amount of the Regulation S Temporary Global Note upon
expiration of the Restricted Period.
"Regulation S Temporary Global Note" means a temporary global
Note in the form of Exhibit A-2 hereto bearing the Private Placement Legend and
deposited with or on behalf of and registered in the name of the Depositary or
its nominee, issued in a denomination equal to the outstanding principal amount
of the Notes initially sold in reliance on Rule 903 of Regulation S.
"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 designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of such person's
knowledge of and familiarity with the particular subject.
"Restricted Definitive Note" means a Definitive Note bearing
the Private Placement Legend.
"Restricted Global Note" means a Global Note bearing the
Private Placement Legend.
"Restricted Investment" means any Investment other than a
Permitted Investment.
"Restricted Period" means the 40-day restricted period as
defined in Regulation S.
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<PAGE> 19
"Restricted Subsidiary" of a Person means any Subsidiary of
the referenced Person that is not an Unrestricted Subsidiary; provided that, on
the date of the Indenture, all Subsidiaries of the Company shall be Restricted
Subsidiaries.
"Rule 144" means Rule 144 promulgated under the Securities
Act.
"Rule 144A" means Rule 144A promulgated under the Securities
Act.
"Rule 903" means Rule 903 promulgated under the Securities
Act.
"Rule 904" means Rule 904 promulgated under the Securities
Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Shelf Registration Statement" means the Shelf Registration
Statement as defined in the Registration Rights Agreement.
"Significant Subsidiary" means any Subsidiary that is a
"significant subsidiary" as defined in Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act (as such Regulation is in effect on the date of
this Indenture).
"Stated Maturity" means, with respect to any installment of
interest or principal on any series of Indebtedness, the date on which such
payment of interest or principal was scheduled to be paid in the original
documentation governing such Indebtedness, and shall not include any contingent
obligations to repay, redeem or repurchase any such interest or principal prior
to the date originally scheduled for the payment thereof.
"Subordinated Obligations" means any Indebtedness of the
Company which is expressly subordinated or junior in right of payment 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 voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers
or trustees thereof is at the time owned or controlled, directly or indirectly,
by such Person, (ii) any partnership (a) the sole general partner or the
managing general partner of which is such Person or an entity described in
clause (i) and related to such Person or (b) the only general partners of which
are such Person or of one or more entities described in clause (i) and related
to such Person (or any combination thereof) and (iii) any limited liability
company, the sole managing member or the majority of the managing members of
which are Persons described in clause (i) or (ii).
"Tangible Net Assets" means, for any period the amount which
would be set forth under the caption "Total Assets" (or any like caption) on a
consolidated balance sheet of the Company and its Restricted Subsidiaries, less
all Intangible Assets, all determined on a consolidated basis and (except as
otherwise specifically provided below) in accordance with GAAP. For purposes
of this definition, "Intangible Assets" means the amount (to the extent
reflected in determining such consolidated equity of the common shareholders)
of (i) all write-ups (other than write-ups resulting from foreign currency
translations and write-ups of tangible
13
<PAGE> 20
assets of a going concern business made within twelve months after the
acquisition of such business) subsequent to November 1, 1997 in the book value
of any asset owned by the Company and its Restricted Subsidiaries, (ii) all
investments in unconsolidated Subsidiaries of the Company and in Persons which
are not Restricted Subsidiaries of the Company, and (iii) all unamortized debt
discount and expense, unamortized deferred charges, goodwill, patents,
trademarks, service marks, trade names, copyrights, organization and
developmental expenses and other intangible items of the Company and its
Restricted Subsidiaries, all of the foregoing as determined in accordance with
GAAP.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA, except as provided by Section 9.03 hereof.
"Trustee" means the party named as such above until a
successor replaces it in accordance with the applicable provisions of this
Indenture and thereafter means the successor serving hereunder.
"Unrestricted Global Note" means a permanent global Note in
the form of Exhibit A-1 attached hereto that bears the Global Note Legend and
that has the "Schedule of Exchanges of Interests in the Global Note" attached
thereto, and that is deposited with or on behalf of and registered in the name
of the Depositary, representing a series of Notes that do not bear the Private
Placement Legend.
"Unrestricted Definitive Note" means one or more Definitive
Notes that do not bear and are not required to bear the Private Placement
Legend.
"Unrestricted Subsidiary" means (i) any Subsidiary that is
designated by the Board of Directors as an Unrestricted Subsidiary pursuant to
a Board Resolution; but only to the extent that such Subsidiary: (a) has no
Indebtedness other than Non-Recourse Debt and Preferred Stock; (b) is not party
to any agreement, contract, arrangement or understanding with the Company or
any Restricted Subsidiary of the Company unless the terms of any such
agreement, contract, arrangement or understanding are no less favorable to the
Company or such Restricted Subsidiary than those that might be obtained at the
time from Persons who are not Affiliates of the Company; (c) is a Person with
respect to which neither the Company nor any of its Restricted Subsidiaries has
any direct or indirect obligation (x) to subscribe for additional Equity
Interests; provided, that an obligation to purchase an Equity Interest of an
Unrestricted Subsidiary shall not be deemed to be such an obligation to
subscribe to additional Equity Interests if the Company's obligation provides
that it is subject, at the time the obligation is to be enforced, to the
Company's ability to make such purchase and, after such purchase, no Default or
Event of Default would be in existence or (y) to maintain or preserve such
Person's financial condition or to cause such Person to achieve any specified
levels of operating results; and (d) has not guaranteed or otherwise directly
or indirectly provided credit support for any Indebtedness of the Company or
any of its Restricted Subsidiaries. Any such designation by the Board of
Directors shall be evidenced to the Trustee by filing with the Trustee a
certified copy of the Board Resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing conditions and was permitted by the provisions of Section 4.07
hereof. If, at any time, any Unrestricted Subsidiary would fail to meet the
foregoing
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<PAGE> 21
requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an
Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness of
such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of
the Company as of such date (and, if such Indebtedness is not permitted to be
incurred as of such date in accordance with the provisions of Section 4.09
hereof, the Company shall be in default of such provision).
"U.S. Person" means a U.S. person as defined in Rule 902(o)
under the Securities Act.
"Voting Stock" of any person as of any date means the Capital
Stock of such Person that is at the time entitled to vote in the election of
the Board of Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (ii) the then outstanding
principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" means (i) a Restricted
Subsidiary of the Company, 100% of the outstanding Capital Stock and other
Equity Interests of which (other than Capital Stock constituting directors'
qualifying shares or interests held by directors or shares or interests
required to be held by foreign nationals, in each case to the extent mandated
by applicable law) is directly or indirectly owned by the Company or by one or
more Wholly Owned Restricted Subsidiaries of the Company.
Section 1.02. Other Definitions.
<TABLE>
<CAPTION>
Defined in
Term Section
<S> <C>
"Affiliate Transaction" . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.11
"Asset Sale" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.10
"Asset Sale Offer" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.09
"Authentication Order" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.02
"Bankruptcy Law" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.01
"Change of Control Offer" . . . . . . . . . . . . . . . . . . . . . . . . . . 4.15
"Change of Control Payment" . . . . . . . . . . . . . . . . . . . . . . . . . 4.15
"Change of Control Payment Date" . . . . . . . . . . . . . . . . . . . . . . 4.15
"Covenant Defeasance" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.03
"Designated Senior Debt" . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.02
"DTC" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.03
"Event of Default" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.01
"Excess Proceeds" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.10
"incur" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.09
"Legal Defeasance" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.02
"Offer Amount" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.09
"Offer Period" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.09
"Paying Agent" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.03
</TABLE>
15
<PAGE> 22
<TABLE>
<S> <C>
"Payment Blockage Notice" . . . . . . . . . . . . . . . . . . . . . . . . . . 10.04
"Payment Default" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.01
"Permitted Debt" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.09
"Permitted Junior Securities" . . . . . . . . . . . . . . . . . . . . . . . . 10.02
"Purchase Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.09
"Registrar" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.03
"Representative" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.02
"Restricted Payments" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.07
"Senior Debt" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.02
</TABLE>
Section 1.03. Incorporation By Reference Of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the
following meanings:
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the
Trustee; and
"obligor" on the Notes means the Company and any successor
obligor upon the Notes.
All other terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule under
the TIA have the meanings so assigned to them.
Section 1.04. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the
plural include the singular;
(5) provisions apply to successive events and
transactions; and
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<PAGE> 23
(6) references to sections of or rules under the
Securities Act shall be deemed to include substitute, replacement of
successor sections or rules adopted by the SEC from time to time.
ARTICLE 2.
THE NOTES
Section 2.01. Form and Dating.
(a) General.
The Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A hereto. The Notes may have
notations, legends or endorsements required by law, stock exchange rule or
usage. Each Note shall be dated the date of its authentication. The Notes
shall be in denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall
constitute, and are hereby expressly made, a part of this Indenture and the
Company and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound thereby. However,
to the extent any provision of any Note conflicts with the express provisions
of this Indenture, the provisions of this Indenture shall govern and be
controlling.
(b) Global Notes.
Notes issued in global form shall be substantially in the form
of Exhibits A-1 or A-2 attached hereto (including the Global Note Legend
thereon and the "Schedule of Exchanges of Interests in the Global Note"
attached thereto). Notes issued in definitive form shall be substantially in
the form of Exhibit A-1 attached hereto (but without the Global Note Legend
thereon and without the "Schedule of Exchanges of Interests in the Global Note"
attached thereto). Each Global Note shall represent such of the outstanding
Notes as shall be specified therein and each shall provide that it shall
represent the aggregate principal amount of outstanding Notes from time to time
endorsed thereon and that the aggregate principal amount of outstanding Notes
represented thereby may from time to time be reduced or increased, as
appropriate, to reflect exchanges and redemptions. Any endorsement of a Global
Note to reflect the amount of any increase or decrease in the aggregate
principal amount of outstanding Notes represented thereby shall be made by the
Trustee or the Note Custodian, at the direction of the Trustee, in accordance
with instructions given by the Holder thereof as required by Section 2.06
hereof.
(c) Temporary Global Notes.
Notes offered and sold in reliance on Regulation S shall be
issued initially in the form of the Regulation S Temporary Global Note, which
shall be deposited on behalf of the purchasers of the Notes represented thereby
with the Trustee, at its New York office, as custodian for the Depositary, and
registered in the name of the Depositary or the nominee of the Depositary for
the accounts of designated agents holding on behalf of Euroclear or Cedel Bank,
duly executed by the Company and authenticated by the Trustee as hereinafter
provided. The Restricted Period shall be terminated upon the receipt by the
Trustee of (i) a written certificate from the Depositary, together with copies
of certificates from Euroclear and Cedel
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<PAGE> 24
Bank certifying that they have received certification of non-United States
beneficial ownership of 100% of the aggregate principal amount of the
Regulation S Temporary Global Note (except to the extent of any beneficial
owners thereof who acquired an interest therein during the Restricted Period
pursuant to another exemption from registration under the Securities Act and
who will take delivery of a beneficial ownership interest in a 144A Global Note
bearing a Private Placement Legend, all as contemplated by Section 2.06(a)(ii)
hereof), and (ii) an Officers' Certificate from the Company. Following the
termination of the Restricted Period, beneficial interests in the Regulation S
Temporary Global Note shall be exchanged for beneficial interests in Regulation
S Permanent Global Notes pursuant to the Applicable Procedures. Simultaneously
with the authentication of Regulation S Permanent Global Notes, the Trustee
shall cancel the Regulation S Temporary Global Note. The aggregate principal
amount of the Regulation S Temporary Global Note and the Regulation S Permanent
Global Notes may from time to time be increased or decreased by adjustments
made on the records of the Registrar and the Depositary or its nominee, as the
case may be, in connection with transfers of interest as hereinafter provided.
(d) Euroclear and Cedel Procedures Applicable.
The provisions of the "Operating Procedures of the Euroclear
System" and "Terms and Conditions Governing Use of Euroclear" and the "General
Terms and Conditions of Cedel Bank" and "Customer Handbook" of Cedel Bank shall
be applicable to transfers of beneficial interests in the Regulation S
Temporary Global Note and the Regulation S Global Notes that are held by
Participants through Euroclear or Cedel Bank.
Section 2.02. Execution and Authentication.
Two Officers shall sign the Notes for the Company by manual or
facsimile signature. The Company's seal shall be reproduced on the Notes and
may be in facsimile form.
If an Officer whose signature is on a Note no longer holds
that office at the time a Note is authenticated, the Note shall nevertheless be
valid.
A Note shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive evidence that the
Note has been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed
by an Officer (an "Authentication Order"), authenticate Notes for original
issue up to the aggregate principal amount stated in paragraph 4 of the Notes.
The aggregate principal amount of Notes outstanding at any time may not exceed
such amount except as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to
the Company to authenticate Notes. An authenticating agent may authenticate
Notes whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with Holders or an
Affiliate of the Company.
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Section 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency where Notes may
be presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent").
The Registrar shall keep a register of the Notes and of their transfer and
exchange. The Company may appoint one or more co-registrars and one or more
additional paying agents. The term "Registrar" includes any co-registrar and
the term "Paying Agent" includes any additional paying agent. The Company may
change any Paying Agent or Registrar without notice to any Holder. The Company
shall notify the Trustee in writing of the name and address of any Agent not a
party to this Indenture. If the Company fails to appoint or maintain another
entity as Registrar or Paying Agent, the Trustee shall act as such. The
Company or any of its Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company
("DTC") to act as Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the
Registrar and Paying Agent and to act as Note Custodian with respect to the
Global Notes.
Section 2.04. Paying Agent to Hold Money in Trust.
The Company shall require each Paying Agent other than the
Trustee to agree in writing that the Paying Agent will hold in trust for the
benefit of Holders or the Trustee all money held by the Paying Agent for the
payment of principal, premium or Liquidated Damages, if any, or interest on the
Notes, and will notify the Trustee of any default by the Company in making any
such payment. While any such default continues, the Trustee may require a
Paying Agent to pay all money held by it to the Trustee. The Company at any
time may require a Paying Agent to pay all money held by it to the Trustee.
Upon payment over to the Trustee, the Paying Agent (if other than the Company
or a Subsidiary) shall have no further liability for the money. If the Company
or a Subsidiary acts as Paying Agent, it shall segregate and hold in a separate
trust fund for the benefit of the Holders all money held by it as Paying Agent.
Upon any bankruptcy or reorganization proceedings relating to the Company, the
Trustee shall serve as Paying Agent for the Notes.
Section 2.05. Holder Lists.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of all Holders and shall otherwise comply with TIA Section 312(a).
If the Trustee is not the Registrar, the Company shall furnish to the Trustee
at least seven Business Days before each interest payment date and at such
other times as the Trustee may request in writing, a list in such form and as
of such date as the Trustee may reasonably require of the names and addresses
of the Holders of Notes and the Company shall otherwise comply with TIA Section
312(a).
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Section 2.06. Transfer and Exchange.
(a) Transfer and Exchange of Global Notes.
A Global Note may not be transferred as a whole except by the
Depositary to a nominee of the Depositary, by a nominee of the Depositary to
the Depositary or to another nominee of the Depositary, or by the Depositary or
any such nominee to a successor Depositary or a nominee of such successor
Depositary. All Global Notes will be exchanged by the Company for Definitive
Notes if (i) the Company delivers to the Trustee notice from the Depositary
that it is unwilling or unable to continue to act as Depositary or that it is
no longer a clearing agency registered under the Exchange Act and, in either
case, a successor Depositary is not appointed by the Company within 120 days
after the date of such notice from the Depositary or (ii) the Company in its
sole discretion determines that the Global Notes (in whole but not in part)
should be exchanged for Definitive Notes and delivers a written notice to such
effect to the Trustee; provided that in no event shall the Regulation S
Temporary Global Note be exchanged by the Company for Definitive Notes prior to
(x) the expiration of the Restricted Period and (y) the receipt by the
Registrar of any certificates required pursuant to Rule 903(c)(3)(ii)(B) under
the Securities Act. Upon the occurrence of either of the preceding events in
(i) or (ii) above, Definitive Notes shall be issued in such names as the
Depositary shall instruct the Trustee. Global Notes also may be exchanged or
replaced, in whole or in part, as provided in Sections 2.07 and 2.10 hereof.
Every Note authenticated and delivered in exchange for, or in lieu of, a Global
Note or any portion thereof, pursuant to this Section 2.06 or Section 2.07 or
2.10 hereof, shall be authenticated and delivered in the form of, and shall be,
a Global Note. A Global Note may not be exchanged for another Note other than
as provided in this Section 2.06(a), however, beneficial interests in a Global
Note may be transferred and exchanged as provided in Section 2.06(b),(c) or (f)
hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global
Notes.
The transfer and exchange of beneficial interests in the
Global Notes shall be effected through the Depositary, in accordance with the
provisions of this Indenture and the Applicable Procedures. Beneficial
interests in the Restricted Global Notes shall be subject to restrictions on
transfer comparable to those set forth herein to the extent required by the
Securities Act. Transfers of beneficial interests in the Global Notes also
shall require compliance with either subparagraph (i) or (ii) below, as
applicable, as well as one or more of the other following subparagraphs, as
applicable:
(i) Transfer of Beneficial Interests in the Same Global Note.
Beneficial interests in any Restricted Global Note may be transferred to
Persons who take delivery thereof in the form of a beneficial interest in
the same Restricted Global Note in accordance with the transfer
restrictions set forth in the Private Placement Legend; provided, however,
that prior to the expiration of the Restricted Period, transfers of
beneficial interests in the Temporary Regulation S Global Note may not be
made to a U.S. Person or for the account or benefit of a U.S. Person (other
than an Initial Purchaser). Beneficial interests in any Unrestricted Global
Note may be transferred to Persons who take delivery thereof in the form of
a beneficial interest in an Unrestricted Global Note. No written orders or
instructions shall be required to be delivered to the Registrar to effect
the transfers described in this Section 2.06(b)(i).
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(ii) All Other Transfers and Exchanges of Beneficial Interests in
Global Notes. In connection with all transfers and exchanges of beneficial
interests that are not subject to Section 2.06(b)(i) above, the transferor
of such beneficial interest must deliver to the Registrar either (A) (1) a
written order from a Participant or an Indirect Participant given to the
Depositary in accordance with the Applicable Procedures directing the
Depositary to credit or cause to be credited a beneficial interest in
another Global Note in an amount equal to the beneficial interest to be
transferred or exchanged and (2) instructions given in accordance with the
Applicable Procedures containing information regarding the Participant
account to be credited with such increase or (B) (1) a written order from a
Participant or an Indirect Participant given to the Depositary in
accordance with the Applicable Procedures directing the Depositary to cause
to be issued a Definitive Note in an amount equal to the beneficial
interest to be transferred or exchanged and (2) instructions given by the
Depositary to the Registrar containing information regarding the Person in
whose name such Definitive Note shall be registered to effect the transfer
or exchange referred to in (1) above; provided that in no event shall
Definitive Notes be issued upon the transfer or exchange of beneficial
interests in the Regulation S Temporary Global Note prior to (x) the
expiration of the Restricted Period and (y) the receipt by the Registrar of
any certificates required pursuant to Rule 903 under the Securities Act.
Upon consummation of an Exchange Offer by the Company in accordance with
Section 2.06(f) hereof, the requirements of this Section 2.06(b)(ii) shall
be deemed to have been satisfied upon receipt by the Registrar of the
instructions contained in the Letter of Transmittal delivered by the Holder
of such beneficial interests in the Restricted Global Notes. Upon
satisfaction of all of the requirements for transfer or exchange of
beneficial interests in Global Notes contained in this Indenture and the
Notes or otherwise applicable under the Securities Act, the Trustee shall
adjust the principal amount of the relevant Global Note(s) pursuant to
Section 2.06(h) hereof.
(iii) Transfer of Beneficial Interests to Another Restricted Global
Note. A beneficial interest in any Restricted Global Note may be
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in another Restricted Global Note if the transfer
complies with the requirements of Section 2.06(b)(ii) above and the
Registrar receives the following:
(A) if the transferee will take delivery in the form of a
beneficial interest in the 144A Global Note, then the transferor
must deliver a certificate in the form of Exhibit B hereto,
including the certifications in item (1) thereof; and
(B) if the transferee will take delivery in the form of a
beneficial interest in the Regulation S Temporary Global Note or
the Regulation S Global Note, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the
certifications in item (2) thereof.
(iv) Transfer and Exchange of Beneficial Interests in a Restricted
Global Note for Beneficial Interests in the Unrestricted Global Note. A
beneficial interest in any Restricted Global Note may be exchanged by any
holder thereof for a beneficial interest in an Unrestricted Global Note or
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note if the exchange or
transfer complies with the requirements of Section 2.06(b)(ii) above and:
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(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights
Agreement and the holder of the beneficial interest to be
transferred, in the case of an exchange, or the transferee, in the
case of a transfer, certifies in the applicable Letter of
Transmittal that it is not (1) a broker- dealer, (2) a Person
participating in the distribution of the Exchange Notes or (3) a
Person who is an affiliate (as defined in Rule 144) of the
Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial interest
for a beneficial interest in an Unrestricted Global Note, a
certificate from such holder in the form of Exhibit C hereto,
including the certifications in item (1)(a) thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial interest
to a Person who shall take delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note, a certificate from
such holder in the form of Exhibit B hereto, including the
certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B)
or (D) above at a time when an Unrestricted Global Note has not yet been
issued, the Company shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
aggregate principal amount of beneficial interests transferred pursuant to
subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof in the form
of, a beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for Definitive
Notes.
(i) Beneficial Interests in Restricted Global Notes to Restricted
Definitive Notes. If any holder of a beneficial interest in a Restricted
Global Note proposes to exchange such
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beneficial interest for a Restricted Definitive Note or to transfer such
beneficial interest to a Person who takes delivery thereof in the form of a
Restricted Definitive Note, then, upon receipt by the Registrar of the
following documentation:
(A) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial
interest for a Restricted Definitive Note, a certificate from such
holder in the form of Exhibit C hereto, including the
certifications in item (2)(a) thereof;
(B) if such beneficial interest is being transferred to a
QIB in accordance with Rule 144A under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (1) thereof;
(C) if such beneficial interest is being transferred to a
Non-U.S. Person in an offshore transaction in accordance with Rule
903 or Rule 904 under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the certifications
in item (2) thereof;
(D) if such beneficial interest is being transferred
pursuant to an exemption from the registration requirements of the
Securities Act in accordance with Rule 144 under the Securities
Act, a certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(a) thereof;
(E) if such beneficial interest is being transferred to
the Company or any of its Subsidiaries, a certificate to the
effect set forth in Exhibit B hereto, including the certifications
in item (3)(b) thereof; or
(F) if such beneficial interest is being transferred
pursuant to an effective registration statement under the
Securities Act, a certificate to the effect set forth in Exhibit B
hereto, including the certifications in item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the
applicable Global Note to be reduced accordingly pursuant to Section
2.06(h) hereof, and the Company shall execute and the Trustee shall
authenticate and deliver to the Person designated in the instructions
a Definitive Note in the appropriate principal amount. Any Definitive
Note issued in exchange for a beneficial interest in a Restricted
Global Note pursuant to this Section 2.06(c) shall be registered in
such name or names and in such authorized denomination or
denominations as the holder of such beneficial interest shall instruct
the Registrar through instructions from the Depositary and the
Participant or Indirect Participant. The Trustee shall deliver such
Definitive Notes to the Persons in whose names such Notes are so
registered. Any Definitive Note issued in exchange for a beneficial
interest in a Restricted Global Note pursuant to this Section
2.06(c)(i) shall bear the Private Placement Legend and shall be
subject to all restrictions on transfer contained therein.
(ii) Notwithstanding Sections 2.06(c)(i)(A) and (C) hereof, a
beneficial interest in the Regulation S Temporary Global Note may not be
exchanged for a Definitive Note or transferred to a Person who takes
delivery thereof in the form of a Definitive Note prior to (x) the
expiration of the Restricted Period and (y) the receipt by the Registrar of
any certificates required pursuant to Rule 903(c)(3)(ii)(B) under the
Securities Act, except in the case of a
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transfer pursuant to an exemption from the registration requirements of the
Securities Act other than Rule 903 or Rule 904.
(iii) Beneficial Interests in Restricted Global Notes to
Unrestricted Definitive Notes. A holder of a beneficial interest in a
Restricted Global Note may exchange such beneficial interest for an
Unrestricted Definitive Note or may transfer such beneficial interest to a
Person who takes delivery thereof in the form of an Unrestricted Definitive
Note only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights
Agreement and the holder of such beneficial interest, in the case
of an exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal that it is not
(1) a broker-dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is an
affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial interest
for a Definitive Note that does not bear the Private Placement Legend,
a certificate from such holder in the form of Exhibit C hereto,
including the certifications in item (1)(b) thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial interest
to a Person who shall take delivery thereof in the form of a
Definitive Note that does not bear the Private Placement Legend, a
certificate from such holder in the form of Exhibit B hereto,
including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
(iv) Beneficial Interests in Unrestricted Global Notes to
Unrestricted Definitive Notes. If any holder of a beneficial interest in
an Unrestricted Global Note proposes to exchange such beneficial interest
for a Definitive Note or to transfer such beneficial interest to a Person
who takes delivery thereof in the form of a Definitive Note, then, upon
satisfaction of the conditions set forth in Section 2.06(b)(ii) hereof, the
Trustee shall cause the aggregate principal amount of the applicable Global
Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the
Company shall execute and the Trustee shall authenticate
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and deliver to the Person designated in the instructions a Definitive Note
in the appropriate principal amount. Any Definitive Note issued in
exchange for a beneficial interest pursuant to this Section 2.06(c)(iii)
shall be registered in such name or names and in such authorized
denomination or denominations as the holder of such beneficial interest
shall instruct the Registrar through instructions from the Depositary and
the Participant or Indirect Participant. The Trustee shall deliver such
Definitive Notes to the Persons in whose names such Notes are so
registered. Any Definitive Note issued in exchange for a beneficial
interest pursuant to this Section 2.06(c)(iii) shall not bear the Private
Placement Legend.
(d) Transfer and Exchange of Definitive Notes for Beneficial
Interests.
(i) Restricted Definitive Notes to Beneficial Interests in
Restricted Global Notes. If any Holder of a Restricted Definitive Note
proposes to exchange such Note for a beneficial interest in a Restricted
Global Note or to transfer such Restricted Definitive Notes to a Person who
takes delivery thereof in the form of a beneficial interest in a Restricted
Global Note, then, upon receipt by the Registrar of the following
documentation:
(A) if the Holder of such Restricted Definitive Note
proposes to exchange such Note for a beneficial interest in a
Restricted Global Note, a certificate from such Holder in the form
of Exhibit C hereto, including the certifications in item (2)(b)
thereof;
(B) if such Restricted Definitive Note is being
transferred to a QIB in accordance with Rule 144A under the
Securities Act, a certificate to the effect set forth in Exhibit B
hereto, including the certifications in item (1) thereof;
(C) if such Restricted Definitive Note is being
transferred to a Non-U.S. Person in an offshore transaction in
accordance with Rule 903 or Rule 904 under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (2) thereof;
(D) if such Restricted Definitive Note is being
transferred pursuant to an exemption from the registration
requirements of the Securities Act in accordance with Rule 144
under the Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (3)(a)
thereof;
(E) if such Restricted Definitive Note is being
transferred to the Company or any of its Subsidiaries, a
certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (3)(b) thereof; or
(F) if such Restricted Definitive Note is being
transferred pursuant to an effective registration statement under
the Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (3)(c)
thereof,
the Trustee shall cancel the Restricted Definitive Note, increase or
cause to be increased the aggregate principal amount of, in the case
of clause (A) above, the appropriate Restricted Global Note, in the
case of clause (B) above, the 144A Global Note, and in the case of
clause (C) above, the Regulation S Global Note.
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(ii) Restricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of a Restricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global Note
or transfer such Restricted Definitive Note to a Person who takes delivery
thereof in the form of a beneficial interest in an Unrestricted Global Note
only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights
Agreement and the Holder, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the applicable
Letter of Transmittal that it is not (1) a broker-dealer, (2) a
Person participating in the distribution of the Exchange Notes or
(3) a Person who is an affiliate (as defined in Rule 144) of the
Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Notes proposes to
exchange such Notes for a beneficial interest in the Unrestricted
Global Note, a certificate from such Holder in the form of Exhibit C
hereto, including the certifications in item (1)(c) thereof; or
(2) if the Holder of such Definitive Notes proposes to
transfer such Notes to a Person who shall take delivery thereof in the
form of a beneficial interest in the Unrestricted Global Note, a
certificate from such Holder in the form of Exhibit B hereto,
including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
Upon satisfaction of the conditions of any of the subparagraphs in
this Section 2.06(d)(ii), the Trustee shall cancel the Definitive
Notes and increase or cause to be increased the aggregate principal
amount of the Unrestricted Global Note.
(iii) Unrestricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global Note
or transfer such Definitive Notes to a Person who takes delivery thereof in
the form of a beneficial interest in an Unrestricted Global Note at any
time. Upon receipt of a request for such an exchange or transfer, the
Trustee shall cancel the applicable Unrestricted Definitive Note and
increase or cause to be increased the aggregate principal amount of one of
the Unrestricted Global Notes.
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If any such exchange or transfer from a Definitive Note to a
beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or
(iii) above at a time when an Unrestricted Global Note has not yet been issued,
the Company shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
principal amount of Definitive Notes so transferred.
(e) Transfer and Exchange of Definitive Notes for Definitive
Notes.
Upon request by a Holder of Definitive Notes and such Holder's
compliance with the provisions of this Section 2.06(e), the Registrar shall
register the transfer or exchange of Definitive Notes. Prior to such
registration of transfer or exchange, the requesting Holder shall present or
surrender to the Registrar the Definitive Notes duly endorsed or accompanied by
a written instruction of transfer in form satisfactory to the Registrar duly
executed by such Holder or by his attorney, duly authorized in writing. In
addition, the requesting Holder shall provide any additional certifications,
documents and information, as applicable, required pursuant to the following
provisions of this Section 2.06(e).
(i) Restricted Definitive Notes to Restricted Definitive
Notes. Any Restricted Definitive Note may be transferred to and
registered in the name of Persons who take delivery thereof in the
form of a Restricted Definitive Note if the Registrar receives the
following:
(A) if the transfer will be made pursuant to Rule
144A under the Securities Act, then the transferor must
deliver a certificate in the form of Exhibit B hereto,
including the certifications in item (1) thereof;
(B) if the transfer will be made pursuant to Rule
903 or Rule 904, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the
certifications in item (2) thereof; and
(C) if the transfer will be made pursuant to any
other exemption from the registration requirements of the
Securities Act, then the transferor must deliver a certificate
in the form of Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3)
thereof, if applicable.
(ii) Restricted Definitive Notes to Unrestricted
Definitive Notes. Any Restricted Definitive Note may be exchanged by
the Holder thereof for an Unrestricted Definitive Note or transferred
to a Person or Persons who take delivery thereof in the form of an
Unrestricted Definitive Note if:
(A) such exchange or transfer is effected
pursuant to the Exchange Offer in accordance with the
Registration Rights Agreement and the Holder, in the case of
an exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal that it is
not (1) a broker-dealer, (2) a Person
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<PAGE> 34
participating in the distribution of the Exchange Notes or (3)
a Person who is an affiliate (as defined in Rule 144) of the
Company;
(B) any such transfer is effected pursuant to the
Shelf Registration Statement in accordance with the
Registration Rights Agreement;
(C) any such transfer is effected by a
Participating Broker-Dealer pursuant to the Exchange Offer
Registration Statement in accordance with the Registration
Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted
Definitive Notes proposes to exchange such Notes for
an Unrestricted Definitive Note, a certificate from
such Holder in the form of Exhibit C hereto,
including the certifications in item (1)(d) thereof;
or
(2) if the Holder of such Restricted
Definitive Notes proposes to transfer such Notes to a
Person who shall take delivery thereof in the form of
an Unrestricted Definitive Note, a certificate from
such Holder in the form of Exhibit B hereto,
including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests, an Opinion of Counsel in form reasonably
acceptable to the Company to the effect that such exchange or transfer
is in compliance with the Securities Act and that the restrictions on
transfer contained herein and in the Private Placement Legend are no
longer required in order to maintain compliance with the Securities
Act.
(iii) Unrestricted Definitive Notes to Unrestricted
Definitive Notes. A Holder of Unrestricted Definitive Notes may
transfer such Notes to a Person who takes delivery thereof in the form
of an Unrestricted Definitive Note. Upon receipt of a request to
register such a transfer, the Registrar shall register the
Unrestricted Definitive Notes pursuant to the instructions from the
Holder thereof.
(f) Exchange Offer.
Upon the occurrence of the Exchange Offer in accordance with
the Registration Rights Agreement, the Company shall issue and, upon receipt of
an Authentication Order in accordance with Section 2.02, the Trustee shall
authenticate (i) one or more Unrestricted Global Notes in an aggregate
principal amount equal to the principal amount of the beneficial interests in
the Restricted Global Notes tendered for acceptance by Persons that certify in
the applicable Letters of Transmittal that (x) they are not broker-dealers, (y)
they are not participating in a distribution of the Exchange Notes and (z) they
are not affiliates (as defined in Rule 144) of the Company, and accepted for
exchange in the Exchange Offer and (ii) Definitive Notes in an aggregate
principal amount equal to the principal amount of the Restricted Definitive
Notes accepted for exchange in the Exchange Offer. Concurrently with the
issuance of such Notes,
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the Trustee shall cause the aggregate principal amount of the applicable
Restricted Global Notes to be reduced accordingly, and the Company shall
execute and the Trustee shall authenticate and deliver to the Persons
designated by the Holders of Definitive Notes so accepted Definitive Notes in
the appropriate principal amount.
(g) Legends.
The following legends shall appear on the face of all Global
Notes and Definitive Notes issued under this Indenture unless specifically
stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below, each
Global Note and each Definitive Note (and all Notes issued in
exchange therefor or substitution thereof) shall bear the legend
in substantially the following form:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY
EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON
THE EXEMPTION FROM THE PROVISION OF SECTION 5 OF THE SECURITIES ACT
PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY
EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH
SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) (a)
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 903 OR 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 COMPANY SO REQUESTS), (2) TO THE COMPANY OR
(3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE,
IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER
FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS
SET FORTH IN (A) ABOVE. IF THE PROPOSED TRANSFER IS PURSUANT TO
CLAUSE (c) or (d) ABOVE, THE HOLDER MUST, PRIOR TO SUCH TRANSFER,
FURNISH TO THE BANK OF NEW YORK (OR A SUCCESSOR TRUSTEE, AS
APPLICABLE) SUCH CERTIFICATIONS, LEGAL OPINIONS, OR OTHER INFORMATION
AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS PURSUANT
TO AN EXEMPTION FROM, OR IN A
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<PAGE> 36
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT."
(B) Notwithstanding the foregoing, any Global Note or
Definitive Note issued pursuant to subparagraphs (b)(iv), (c)(ii),
(c)(iii), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this
Section 2.06 (and all Notes issued in exchange therefor or
substitution thereof) shall not bear the Private Placement Legend.
(ii) Global Note Legend. Each Global Note shall bear a legend in
substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE
INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE
BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO
ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY
MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07
OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT
NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS
GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT
TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE
TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT
OF THE COMPANY."
(iii) Regulation S Temporary Global Note Legend. The Regulation S
Temporary Global Note shall bear a legend in substantially the following
form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND
THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED
NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER
THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY
GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON."
(h) Cancellation and/or Adjustment of Global Notes.
At such time as all beneficial interests in a particular
Global Note have been exchanged for Definitive Notes or a particular Global
Note has been redeemed, repurchased or canceled in whole and not in part, each
such Global Note shall be returned to or retained and canceled by the Trustee
in accordance with Section 2.11 hereof. At any time prior to such
cancellation, if any beneficial interest in a Global Note is exchanged for or
transferred to a Person who will take delivery thereof in the form of a
beneficial interest in another Global Note or for Definitive Notes, the
principal amount of Notes represented by such Global Note shall be reduced
accordingly and an endorsement shall be made on such Global Note by the Trustee
or by the Depositary at the direction of the Trustee to reflect such reduction;
and if the beneficial interest is being exchanged for or transferred to a
Person who will take delivery thereof in the form of a beneficial interest in
another Global Note, such other Global Note shall be increased accordingly and
an endorsement shall be made on such Global Note by the Trustee or by the
Depositary at the direction of the Trustee to reflect such increase.
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<PAGE> 37
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Global Notes and
Definitive Notes upon the Company's order or at the Registrar's request.
(ii) No service charge shall be made to a holder of a beneficial
interest in a Global Note or to a Holder of a Definitive Note for any
registration of transfer or exchange, but the Company may require payment
of a sum sufficient to cover any transfer tax or similar governmental
charge payable in connection therewith (other than any such transfer taxes
or similar governmental charge payable upon exchange or transfer
pursuant to Sections 2.10, 3.06, 3.09, 4.10, 4.15 and 9.05 hereof).
(iii) The Registrar shall not be required to register the transfer
of or exchange any Note selected for redemption in whole or in part, except
the unredeemed portion of any Note being redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any
registration of transfer or exchange of Global Notes or Definitive Notes
shall be the valid obligations of the Company, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Global Notes
or Definitive Notes surrendered upon such registration of transfer or
exchange.
(v) The Company shall not be required (A) to issue, to register
the transfer of or to exchange any Notes during a period beginning at the
opening of business 15 days before the day of any selection of Notes for
redemption under Section 3.02 hereof and ending at the close of business on
the day of selection, (B) to register the transfer of or to exchange any
Note so selected for redemption in whole or in part, except the unredeemed
portion of any Note being redeemed in part or (c) to register the transfer
of or to exchange a Note between a record date and the next succeeding
Interest Payment Date.
(vi) Prior to due presentment for the registration of a transfer of
any Note, the Trustee, any Agent and the Company may deem and treat the
Person in whose name any Note is registered as the absolute owner of such
Note for the purpose of receiving payment of principal of and interest on
such Notes and for all other purposes, and none of the Trustee, any Agent
or the Company shall be affected by notice to the contrary.
(vii) The Trustee shall authenticate Global Notes and Definitive
Notes in accordance with the provisions of Section 2.02 hereof.
(viii) All certifications, certificates and Opinions of Counsel
required to be submitted to the Registrar pursuant to this Section 2.06 to
effect a registration of transfer or exchange may be submitted by
facsimile.
(ix) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer
imposed under this Indenture or under applicable law with respect to any
transfer of any interest in any Note (including any transfers between or
among Depositary Participants or beneficial owners of interests in any
Global Note) other than to require delivery of such certificates and other
documentation or evidence as are expressly required by, and to do so if and
when expressly required by the
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terms of, this Indenture, and to examine the same to determine substantial
compliance as to form with the express requirements hereof.
Section 2.07. Replacement Notes.
If any mutilated Note is surrendered to the Trustee or the
Company and the Trustee receives evidence to its satisfaction of the
destruction, loss or theft of any Note, the Company shall issue and the
Trustee, upon receipt of an Authentication Order, shall authenticate a
replacement Note if the Trustee's requirements are met. An indemnity bond must
be supplied by the Holder that is sufficient in the judgment of the Trustee and
the Company to protect the Company, the Trustee, any Agent and any
authenticating agent from any loss that any of them may suffer if a Note is
replaced. The Company may charge for its expenses in replacing a Note.
Every replacement Note is an additional obligation of the
Company and shall be entitled to all of the benefits of this Indenture equally
and proportionately with all other Notes duly issued hereunder.
Section 2.08. Outstanding Notes.
The Notes outstanding at any time are all the Notes
authenticated by the Trustee except for those canceled by it, those delivered
to it for cancellation, those reductions in the interest in a Global Note
effected by the Trustee in accordance with the provisions hereof, and those
described in this Section as not outstanding. Except as set forth in Section
2.09 hereof, a Note does not cease to be outstanding because the Company or an
Affiliate of the Company holds the Note; however, Notes held by the Company or
a Subsidiary of the Company shall not be deemed to be outstanding for purposes
of Section 3.07(b) hereof.
If a Note is replaced pursuant to Section 2.07 hereof, it
ceases to be outstanding unless the Trustee receives proof satisfactory to it
that the replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under
Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to
accrue.
If the Paying Agent (other than the Company, a Subsidiary or
an Affiliate of any thereof) holds, on a redemption date or maturity date,
money sufficient to pay Notes payable on that date, then on and after that date
such Notes shall be deemed to be no longer outstanding and shall cease to
accrue interest.
Section 2.09. Treasury Notes.
In determining whether the Holders of the required principal
amount of Notes have concurred in any direction, waiver or consent, Notes owned
by the Company, or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company,
shall be considered as though not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Notes that the Responsible Officer of the
Trustee actually knows are so owned shall be so disregarded.
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Section 2.10. Temporary Notes.
Until Definitive Notes are ready for delivery, the Company may
prepare and the Trustee, upon receipt of an Authentication Order, shall
authenticate temporary Notes. Temporary Notes shall be substantially in the
form of certificated Notes but may have variations that the Company considers
appropriate for temporary Notes and as shall be reasonably acceptable to the
Trustee. Without unreasonable delay, the Company shall prepare and the Trustee
shall authenticate Definitive Notes in exchange for temporary Notes.
Holders of temporary Notes shall be entitled to all of the
benefits of this Indenture.
Section 2.11. Cancellation.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment.
The Trustee and no one else shall cancel all Notes surrendered for registration
of transfer, exchange, payment, replacement or cancellation and shall return
canceled Notes to the Company. The Company may not issue new Notes to replace
Notes that it has paid or that have been delivered to the Trustee for
cancellation.
Section 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the Notes,
it shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate provided
in the Notes and in Section 4.01 hereof. The Company shall notify the Trustee
in writing of the amount of defaulted interest proposed to be paid on each Note
and the date of the proposed payment. The Company shall fix or cause to be
fixed each such special record date and payment date, provided that no such
special record date shall be less than 10 days prior to the related payment
date for such defaulted interest. At least 15 days before the special record
date, the Company (or, upon the written request of the Company, the Trustee in
the name and at the expense of the Company) shall mail or cause to be mailed to
Holders a notice that states the special record date, the related payment date
and the amount of such interest to be paid.
Section 2.13. CUSIP Numbers.
The Company in issuing the Notes may use "CUSIP" numbers (if
then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in
notices of redemption as a convenience to Holders; provided that any such
notice may state that no representation is made as to the correctness of such
numbers either as printed on the Notes or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Notes, and any such redemption shall not be affected by
any defect in or omission of such numbers. The Company will promptly notify
the Trustee of any change in the "CUSIP" numbers.
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ARTICLE 3.
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 30 days but not more than 60 days before a redemption date, an
Officers' Certificate setting forth (i) the clause of this Indenture pursuant
to which the redemption shall occur, (ii) the redemption date, (iii) the
principal amount of Notes to be redeemed and (iv) the redemption price.
Section 3.02. Selection of Notes to Be Redeemed.
If less than all of the Notes are to be redeemed or purchased
in an offer to purchase at any time, the Trustee shall select the Notes to be
redeemed or purchased among the Holders of the Notes in compliance with the
requirements of the principal national securities exchange, if any, on which
the Notes are listed or, if the Notes are not so listed, on a pro rata basis,
by lot or in accordance with any other method the Trustee considers fair and
appropriate. In the event of partial redemption by lot, the particular Notes
to be redeemed shall be selected, unless otherwise provided herein, not less
than 30 nor more than 60 days prior to the redemption date by the Trustee from
the outstanding Notes not previously called for redemption.
The Trustee shall promptly notify the Company in writing of
the Notes selected for redemption and, in the case of any Note selected for
partial redemption, the principal amount thereof to be redeemed. Notes and
portions of Notes selected shall be in amounts of $1,000 or whole multiples of
$1,000; except that if all of the Notes of a Holder are to be redeemed, the
entire outstanding amount of Notes held by such Holder, even if not a multiple
of $1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
Section 3.03. Notice of Redemption.
Subject to the provisions of Section 3.09 hereof, at least 30
days but not more than 60 days before a redemption date, the Company shall mail
or cause to be mailed, by first class mail, a notice of redemption to each
Holder whose Notes are to be redeemed at its registered address.
The notice shall identify the Notes (including CUSIP
numbers(s)) to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the redemption
date upon surrender of such Note, a new Note or Notes in principal amount equal
to the unredeemed portion shall be issued upon cancellation of the original
Note;
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(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption
payment, interest on Notes called for redemption ceases to accrue on and after
the redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or printed on the
Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however, that
the Company shall have delivered to the Trustee, at least 45 days prior to the
redemption date, an Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in such notice as
provided in the preceding paragraph.
Section 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section
3.03 hereof, Notes called for redemption become irrevocably due and payable on
the redemption date at the redemption price. A notice of redemption may not be
conditional.
Section 3.05. Deposit of Redemption Price.
One Business Day prior to the redemption date, the Company
shall deposit with the Trustee or with the Paying Agent money sufficient to pay
the redemption price of and accrued interest on all Notes to be redeemed on
that date. The Trustee or the Paying Agent shall promptly return to the
Company any money deposited with the Trustee or the Paying Agent by the Company
in excess of the amounts necessary to pay the redemption price of, and accrued
interest on, all Notes to be redeemed.
If the Company complies with the provisions of the preceding
paragraph, on and after the redemption date, interest shall cease to accrue on
the Notes or the portions of Notes called for redemption. If a Note is
redeemed on or after an interest record date but on or prior to the related
interest payment date, then any accrued and unpaid interest shall be paid to
the Person in whose name such Note was registered at the close of business on
such record date. If any Note called for redemption shall not be so paid upon
surrender for redemption because of the failure of the Company to comply with
the preceding paragraph, interest shall be paid on the unpaid principal, from
the redemption date until such principal is paid, and to the extent lawful on
any interest not paid on such unpaid principal, in each case at the rate
provided in the Notes and in Section 4.01 hereof.
Section 3.06. Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, the Company
shall issue and, upon the Company's written request, the Trustee shall
authenticate for the Holder at the
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expense of the Company a new Note equal in principal amount to the unredeemed
portion of the Note surrendered.
Section 3.07. Optional Redemption.
(a) Except as set forth in clause (b) of this Section 3.07, the
Company shall not have the option to redeem the Notes pursuant to this Section
3.07 prior to March 1, 2003. Thereafter, the Company shall have the option to
redeem the Notes, in whole or in part, upon not less than 30 nor more than 60
days notice, at the redemption prices (expressed as percentages of principal
amount) set forth below plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the applicable redemption date, if redeemed during
the twelve-month period beginning on March 1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104.063%
2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102.708%
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101.354%
2006 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . 100.000%
</TABLE>
(b) Notwithstanding the provisions of clause (a) of this Section
3.07, at any time prior to March 1, 2001, the Company may, on any one or more
occasions, redeem up to 35% of the aggregate principal amount of Notes
originally issued under this Indenture at a redemption price of 108.125% of the
principal amount thereof plus accrued and unpaid Liquidated Damages thereon, if
any, to the redemption date, with the net cash proceeds of any Public Equity
Offering; provided that at least 65% of the aggregate principal amount of Notes
originally issued on the Issue Date remain outstanding immediately after the
occurrence of such redemption; and provided further, that such redemption shall
occur within 60 days of the date of the closing of such Public Equity Offering.
(c) Any redemption pursuant to this Section 3.07 shall be made
pursuant to the provisions of Section 3.01 through 3.06 hereof.
Section 3.08. Mandatory Redemption.
The Company shall not be required to make mandatory redemption
or sinking fund payments with respect to the Notes.
Section 3.09. Offer to Purchase by Application of Excess Proceeds.
In the event that, pursuant to Section 4.10 hereof, the
Company shall be required to commence an offer to all Holders to purchase Notes
(an "Asset Sale Offer"), it shall follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20
Business Days following its commencement and no longer, except to the extent
that a longer period is required by applicable law (the "Offer Period"). No
later than five Business Days after the termination of the Offer Period (the
"Purchase Date"), the Company shall purchase the principal amount of Notes
required to be purchased pursuant to Section 4.10 hereof (the "Offer Amount")
or, if less than the Offer Amount has been tendered, all Notes tendered in
response to the Asset Sale Offer.
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Payment for any Notes so purchased shall be made in the same manner as interest
payments are made.
If the Purchase Date is on or after an interest record date
and on or before the related interest payment date, any accrued and unpaid
interest shall be paid to the Person in whose name a Note is registered at the
close of business on such record date, and no additional interest shall be
payable to Holders who tender Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company
shall send, by first class mail, a notice to the Trustee and each of the
Holders, with a copy to the Trustee. The notice shall contain all instructions
and materials necessary to enable such Holders to tender Notes pursuant to the
Asset Sale Offer. The Asset Sale Offer shall be made to all Holders. The
notice, which shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this
Section 3.09 and Section 4.10 hereof and the length of time the Asset Sale
Offer shall remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall
continue to accrete or accrue interest;
(d) that, unless the Company defaults in making such payment, any
Note accepted for payment pursuant to the Asset Sale Offer shall cease to
accrete or accrue interest after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to an
Asset Sale Offer may only elect to have all of such Note purchased and may not
elect to have only a portion of such Note purchased;
(f) that Holders electing to have a Note purchased pursuant to any
Asset Sale Offer shall be required to surrender the Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, or transfer by book-entry transfer, to the Company, a depositary, if
appointed by the Company, or a Paying Agent at the address specified in the
notice at least three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if
the Company, the depositary or the Paying Agent, as the case may be, receives,
not later than the expiration of the Offer Period, a facsimile transmission or
letter setting forth the name of the Holder, the principal amount of the Note
the Holder delivered for purchase and a statement that such Holder is
withdrawing his election to have such Note purchased;
(h) that, if the aggregate principal amount of Notes surrendered
by Holders exceeds the Offer Amount, the Company shall select the Notes to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Notes in denominations of $1,000, or
integral multiples thereof, shall be purchased); and
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(i) that Holders whose Notes were purchased only in part shall be
issued new Notes equal in principal amount to the unpurchased portion of the
Notes surrendered (or transferred by book-entry transfer).
On or before the Purchase Date, the Company shall, to the
extent lawful, accept for payment, on a pro rata basis to the extent necessary,
the Offer Amount of Notes or portions thereof tendered pursuant to the Asset
Sale Offer, or if less than the Offer Amount has been tendered, all Notes
tendered, and shall deliver to the Trustee an Officers' Certificate stating
that such Notes or portions thereof were accepted for payment by the Company in
accordance with the terms of this Section 3.09. The Company, the Depositary or
the Paying Agent, as the case may be, shall promptly (but in any case not later
than five days after the Purchase Date) mail or deliver to each tendering
Holder an amount equal to the purchase price of the Notes tendered by such
Holder and accepted by the Company for purchase, and the Company shall promptly
issue a new Note, and the Trustee, upon written request from the Company shall
authenticate and mail or deliver such new Note to such Holder, in a principal
amount equal to any unpurchased portion of the Note surrendered. Any Note not
so accepted shall be promptly mailed or delivered by the Company to the Holder
thereof. The Company shall publicly announce the results of the Asset Sale
Offer on the Purchase Date.
Other than as specifically provided in this Section 3.09, any
purchase pursuant to this Section 3.09 shall be made pursuant to the provisions
of Sections 3.01 through 3.06 hereof.
ARTICLE 4.
COVENANTS
Section 4.01. Payment of Notes.
The Company shall pay or cause to be paid the principal of,
premium, if any, and interest and Liquidated Damages, if any, on the Notes on
the dates and in the manner provided in the Notes. Principal, premium, if any,
and interest and Liquidated Damages, if any, shall be considered paid on the
date due if the Paying Agent, if other than the Company or a Subsidiary
thereof, holds as of 10:00 a.m. Eastern Time on the due date money deposited by
the Company in immediately available funds and designated for and sufficient to
pay all principal, premium, if any, and interest and Liquidated Damages, 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.
The Company shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue principal at
the rate equal to 1% per annum in excess of the then applicable interest rate
on the Notes to the extent lawful; it shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
installments of interest and Liquidated Damages (without regard to any
applicable grace period) at the same rate to the extent lawful.
Section 4.02. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, the
City of New York, an office or agency (which may be an office of the Trustee or
an affiliate of the Trustee, Registrar or co-registrar) where Notes may be
surrendered for registration of transfer or for
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exchange and where notices and demands to or upon the Company in respect of the
Notes and this Indenture may be served. The Company shall give prompt written
notice to the Trustee of the location, and any change in the location, of such
office or agency. If at any time the Company shall fail to maintain any such
required office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the Corporate Trust Office of the Trustee.
The Company may also from time to time designate one or more
other offices or agencies where the Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, the City of New York for such purposes. The Company
shall give prompt written notice to the Trustee of any such designation or
rescission and of any change in the location of any such other office or
agency.
The Company hereby designates the Corporate Trust Office of
the Trustee as one such office or agency of the Company in accordance with
Section 2.03 hereof.
Section 4.03. Reports.
Whether or not required by the rules and regulations of the SEC, so
long as any Notes are outstanding, and irrespective of whether the Exchange
Offer Registration Statement or the Shelf Registration Statement has been
declared effective by the SEC, the Company shall furnish to each of the Holders
of Notes within the time periods specified in the SEC's rules and regulations,
beginning with annual financial information for the year ended January 31,
1998, (i) all quarterly and annual financial information that would be required
to be contained in a filing with the SEC on Forms 10-Q and 10-K if the Company
were required to file such information, 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 any
consolidated Subsidiaries and, with respect to the annual information only,
reports thereon by the Company's independent public accountants (which shall be
firm(s) of established national reputation) and (ii) all information 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
and reports with the SEC for public availability within the time periods
specified in the SEC's rules and regulations (unless the SEC will not accept
such a filing) and make such information available to securities analysts and
prospective investors upon request. The Company shall at all times comply with
TIA Section 314(a).
Section 4.04. Compliance Certificate.
(a) The Company shall deliver to the Trustee, within 90 days after
the end of each fiscal year, a certificate signed by either the principal
executive officer, the principal financial officer or the principal accounting
officer of the Company, 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 officer with a view to determining whether the
Company has kept, observed, performed and fulfilled its obligations under this
Indenture, and further stating, as to the officer signing such certificate,
that to the best of his or her knowledge the Company has kept, observed,
performed and fulfilled each and every covenant contained in this Indenture
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and is not in default in the performance or observance of any of the terms,
provisions and conditions of this Indenture (or, if a Default or Event of
Default shall have occurred, describing all such Defaults or Events of Default
of which he or she may have knowledge and what action the Company is taking or
proposes to take with respect thereto) and that to the best of his or her
knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest, if any, on the Notes is
prohibited or if such event has occurred, a description of the event and what
action the Company is taking or proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) above shall be accompanied by
a written statement of the Company's independent public accountants (who shall
be a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Company has violated
any provisions of Article 4 or Article 5 hereof or, if any such violation has
occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Notes are
outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware
of any Default or Event of Default, an Officers' Certificate specifying such
Default or Event of Default and what action the Company is taking or proposes
to take with respect thereto.
Section 4.05. Taxes.
The Company shall pay, and shall cause each of its
Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and
governmental levies except such as are contested in good faith and by
appropriate proceedings or where the failure to effect such payment is not
adverse in any material respect to the Holders of the Notes.
Section 4.06. Stay, Extension and Usury Laws.
The Company covenants (to the extent that it may lawfully do
so) that it shall not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay, extension or
usury law wherever enacted, now or at any time hereafter in force, that may
affect the covenants or the performance of this Indenture; and the Company (to
the extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and covenants that it shall not, by resort to any
such law, hinder, delay or impede the execution of any power herein granted to
the Trustee, but shall suffer and permit the execution of every such power as
though no such law has been enacted.
Section 4.07. Restricted Payments.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any
dividend or make any other payment or distribution on account of the Company's
or any of its Restricted Subsidiaries' Equity Interests (including, without
limitation, any dividend, payment or distribution on account of such Equity
Interests in connection with any merger or consolidation involving the Company
or any of its Restricted
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<PAGE> 47
Subsidiaries) or to the direct or indirect holders of the Company's or any of
its Restricted Subsidiaries' Equity Interests in their capacity as such (other
than dividends or distributions payable in Equity Interests (other than
Disqualified Stock) of the Company or a Restricted Subsidiary of the Company or
dividends or distributions payable to the Company or any Wholly Owned
Restricted Subsidiary); (ii) purchase, redeem or otherwise acquire or retire
for value (including without limitation, in connection with any merger or
consolidation involving the Company or any of its Restricted Subsidiaries) any
Equity Interests of the Company or any direct or indirect parent of the Company
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)
make any payment on or with respect to, or purchase, redeem, defease or
otherwise acquire or retire for value any Subordinated Obligations, except a
payment of interest or principal at Stated Maturity; 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; and
(b) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had been
made at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in the first paragraph of the
covenant described below under Section 4.09 hereof; and
(c) such Restricted Payment, together with the aggregate amount of
all other Restricted Payments made by the Company and any of its Restricted
Subsidiaries after the Issue Date (excluding Restricted Payments permitted by
Clauses (ii), (iii), (iv), (v), (vi), (vii) or (viii) of the next succeeding
paragraph), is less than the sum of (i) 50% of the Consolidated Net Income of
the Company for the period (taken as one accounting period) from the beginning
of the first fiscal quarter immediately following the Issue Date to the end of
the Company's most recently ended fiscal quarter for which internal financial
statements are available at the time of such Restricted Payment (or, if such
Consolidated Net Income for such period is a deficit, less 100% of such
deficit), plus (ii) 100% of the aggregate Net Cash Proceeds received by the
Company as a contribution to its common equity capital or from the issue or
sale since the Issue Date of Equity Interests of the Company (other than
Disqualified Stock), or of Disqualified Stock or debt securities of the Company
that have been converted into such Equity Interests (other than Equity
Interests (or Disqualified Stock or convertible debt securities) sold to a
Subsidiary of the Company and other than Disqualified Stock or convertible debt
securities that have been converted into Disqualified Stock), plus (iii) to the
extent not already included in Consolidated Net Income of the Company for such
period without duplication, any Restricted Investment that was made by the
Company or any of its Restricted Subsidiaries after the Issue Date is sold for
cash or otherwise liquidated or repaid for cash, the lesser of (A) the cash
return of capital with respect to such Restricted Investment (less the cost of
disposition, if any) and (B) the initial amount of such Restricted Investment,
plus (iv) 50% of any dividends received by the Company or a Wholly Owned
Restricted Subsidiary after the Issue Date from an Unrestricted Subsidiary of
the Company, to the extent that such dividends were not otherwise included in
the Consolidated Net Income of the Company for such period, plus (v) to the
extent not already included pursuant to clause (iii) above and to the extent
that any Unrestricted Subsidiary is
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redesignated as a Restricted Subsidiary after the Issue Date, the lesser of (A)
the fair market value of the Company's Investment in such Subsidiary as of the
date of such redesignation or (B) such fair market value as of the date on
which such Subsidiary was originally designated as an Unrestricted Subsidiary,
plus (vi) to the extent that any Restricted Investment made after the Issue
Date becomes a Permitted Investment, the lesser of (A) the fair market value of
such Restricted Investment as of the date such Restricted Investment becomes a
Permitted Investment or (B) the initial amount of such Restricted Investment.
The foregoing provisions shall not prohibit (i) the payment of
any dividend within 60 days after the date of declaration thereof, if at said
date of declaration such payment would have complied with the provisions of
this Indenture; (ii) the redemption, repurchase, retirement, defeasance or
other acquisition of Subordinated Obligations or Equity Interests of the
Company in exchange for, or out of the net cash proceeds of the substantially
concurrent sale (other than to a Subsidiary of the Company) of, other Equity
Interests of the Company (other than any Disqualified Stock); provided that the
amount of any such net cash proceeds that are utilized for any such redemption,
repurchase, retirement, defeasance or other acquisition shall be excluded from
clause (c)(ii) of the preceding paragraph; (iii) the defeasance, redemption,
repurchase or other acquisition of Subordinated Obligations with the net cash
proceeds from an incurrence of Permitted Refinancing Indebtedness; (iv) the
payment of any dividend or distribution by a Restricted Subsidiary of the
Company to the holders of its common Equity Interests on a pro rata basis; (v)
the loan of cash to any Company-sponsored employee stock ownership plan for the
purpose of acquiring Equity Interests of the Company; provided that the
aggregate amount of all such loans shall not exceed $1,500,000 in any
twelve-month period; (vi) contributions by the Company to a Company-grantor
employee benefit trust for the purpose of repurchasing, redeeming or otherwise
acquiring for value any Equity Interests of the Company by such trust,
provided that contributions made after the Issue Date do not exceed at any time
(x) the aggregate amount deducted after the Issue Date from the Company's or
any of its Restricted Subsidiaries' employee wages for such employee benefit
plus (y) $5,000,000; (vii) loans and advances to officers, directors and
employees for business related travel, relocation expenses and similar
expenses, in each case in the ordinary course of business; and (viii) other
Restricted Payments in an aggregate amount since the Issue Date not to exceed
$10.0 million, provided that with respect to clauses (ii), (iii), (iv), (vi),
(vii) and (viii) above, no Default or Event of Default shall have occurred and
be continuing immediately after such transaction.
The amount of all Restricted Payments (other than cash) shall
be the fair market value on the date of the Restricted Payment of the asset(s)
or securities proposed to be transferred or issued by the Company or such
Restricted Subsidiary of the Company, pursuant to the Restricted Payment. The
fair market value of any non-cash Restricted Payment which exceeds $1.0 million
shall be determined by the Board of Directors of the Company, such
determination to be based upon an opinion or appraisal issued by an Independent
Financial Advisor if such fair market value exceeds $5.0 million. The Company
shall deliver to the Trustee all resolutions of the Board of Directors of the
Company with respect to the valuation of non-cash Restricted Payments not
previously delivered to the Trustee each time the aggregate amount of non-cash
Restricted Payments for which resolutions have not been delivered to the
Trustee exceeds $5.0 million. Not later than the date of making any Restricted
Payment in excess of $5.0 million, the Company shall deliver to the Trustee an
Officers' Certificate stating that such Restricted Payment is permitted and
setting forth the basis upon which the
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calculations required by this Section 4.07 were computed, together with a copy
of any fairness opinion or appraisal required by this Section 4.07.
The Board of Directors may designate any Restricted Subsidiary
to be an Unrestricted Subsidiary if such designation would not cause a Default.
For purposes of making such determination, all outstanding Investments by the
Company and its Restricted Subsidiaries (except to the extent repaid in cash)
in the Subsidiary so designated will be deemed to be Restricted Payments at the
time of such designation and will reduce the amount available for Restricted
Payments under this covenant. All such outstanding Investments will be deemed
to constitute Investments in an amount equal to the fair market value of such
Investments at the time of such designation. Such designation will only be
permitted if such Restricted Payment would be permitted at such time and if
such Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary.
Any designation of an Unrestricted Subsidiary by the Board of
Directors shall be evidenced to the Trustee by filing with the Trustee a
certified copy of the resolution of the Board of Directors of the Company
giving effect to such designation and an Officers' Certificate certifying that
such designation complied with the terms of this Indenture governing the
designation of Unrestricted Subsidiaries and was permitted by this Section
4.07. If, at any time, any Unrestricted Subsidiary fails to meet the foregoing
requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an
Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness of
such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of
the Company as of such date (and, if such Indebtedness is not permitted to be
incurred as of such date under the covenant described under Section 4.09
hereof, the Company shall be in default of such covenant). The Board of
Directors of the Company may at any time designate any Unrestricted Subsidiary
to be a Restricted Subsidiary; provided that such designation shall be deemed
to be an incurrence of Indebtedness by a Restricted Subsidiary of the Company
of any outstanding Indebtedness of such Unrestricted Subsidiary and such
designation shall only be permitted if (i) such Indebtedness is permitted under
Section 4.09 hereof calculated on a pro forma basis as if such designation had
occurred at the beginning of the four-quarter reference period, and (ii) no
Default or Event of Default would be in existence following such designation.
Section 4.08. Dividend and Other Payment Restrictions Affecting
Subsidiaries.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause
or suffer to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary of the Company to (i) (x) pay dividends or
make any other distributions to the Company or any of its Restricted
Subsidiaries (1) on its Capital Stock or (2) with respect to any other interest
or participation in, or measured by, its profits, or (y) pay any Indebtedness
owed to the Company or any of its Restricted Subsidiaries, (ii) make loans or
advances to the Company or any of its Restricted Subsidiaries or (iii) transfer
any of its properties or assets to the Company or any of its Restricted
Subsidiaries, except for such encumbrances or restrictions existing under or by
reason of (a) Existing Indebtedness as in effect on the Issue Date, or as
amended thereafter on terms, taken as a whole, no less favorable to the Holders
of the Notes than the terms of such Indebtedness as in effect on the Issue
Date, (b) the Credit Facility as in effect as of the Issue Date, and any
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings thereof, provided that such
amendments,
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modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings are no more restrictive, taken as a whole, with
respect to such dividend and other payment restrictions than those contained in
the Credit Facility as in effect on the Issue Date, (c) the Indenture and
Notes, (d) applicable law, (e) any instrument governing Indebtedness or Capital
Stock of a Person acquired by the Company or any of its Restricted Subsidiaries
as in effect at the time of such acquisition (except to the extent such
Indebtedness was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired, provided that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of this Indenture to
be incurred, (f) by reason of customary non-assignment provisions in leases and
other agreements entered into in the ordinary course of business, (g) purchase
money obligations for property acquired in the ordinary course of business that
impose restrictions of the nature described in clause (iii) above on the
property so acquired, (h) Indebtedness of Restricted Subsidiaries, provided
that such Indebtedness was permitted to be incurred pursuant to the Indenture,
(i) Permitted Refinancing Indebtedness, provided that the restrictions
contained in the agreements governing such Permitted Financing Indebtedness are
no more restrictive, taken as a whole, than those contained in the agreements
governing the Indebtedness being refinanced, (j) any agreement for sale of a
Restricted Subsidiary that restricts distributions or transfers of assets by
that Restricted Subsidiary pending its sale, (k) provisions with respect to the
disposition or distribution of assets or property in joint venture agreements
or other similar agreements entered into in the ordinary course of business and
(l) secured Indebtedness otherwise permitted to be incurred pursuant to Section
4.12 hereof that limit the right of the debtor to dispose of the assets
securing such Indebtedness.
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock.
The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") any Indebtedness (including
Acquired Debt) and that the Company shall not issue any Disqualified Stock and
shall not permit any of its Subsidiaries to issue any shares of preferred
stock; provided, however, that the Company may incur Indebtedness (including
Acquired Debt) or the Company may issue shares of Disqualified Stock if the
Company's Fixed Charge Coverage Ratio for the Company's most recently ended
four full fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness is
incurred or such Disqualified Stock is issued would have been at least 2.00 to
1.0, determined on a pro forma basis (including a pro forma application of the
net proceeds therefrom), as if the additional Indebtedness has been incurred,
or the Disqualified Stock had been issued, as the case may be, at the beginning
of such four-quarter period.
The provisions of the first paragraph of this Section 4.09
shall not apply to the incurrence of any of the following items of Indebtedness
(collectively, "Permitted Debt"):
(i) the incurrence by the Company of Indebtedness under one or
more Credit Facilities, letters of credit and related guarantees under any
such Credit Facility; provided that the aggregate principal amount of all
Indebtedness (with letters of credit being deemed to have a principal
amount equal to the maximum potential liability of the Company thereunder)
outstanding under such Credit Facilities after giving effect to such
incurrence,
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does not exceed $150.0 million, less the aggregate amount of Asset Sale
proceeds applied to reduce any amount borrowed under any Credit Facility
pursuant to the provisions of Section 4.10 hereof; provided that the
Company may incur an additional $50.0 million of Indebtedness under such
Credit Facilities, provided such additional Indebtedness may be incurred
pursuant to the Fixed Charge Coverage Ratio under the first paragraph of
this Section 4.09;
(ii) the incurrence by the Company and its Restricted Subsidiaries
of the Existing Indebtedness;
(iii) the incurrence by the Company of Indebtedness represented by
the Notes issued on the Issue Date;
(iv) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness represented by Capital Lease Obligations,
mortgage financings or purchase money obligations, in each case incurred
for the purpose of financing all or any part of the purchase price or cost
of construction or improvement of property, plant or equipment used in the
business of the Company or such Restricted Subsidiary, in an aggregate
principal amount, including all Permitted Refinancing Indebtedness incurred
to refund, refinance or replace Indebtedness incurred pursuant to this
clause (iv), not to exceed 5% of Tangible Net Assets at any time
outstanding;
(v) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in respect of
Indebtedness that was permitted by this Indenture to be incurred by such
entity other than pursuant to clause (vi) below.
(vi) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the Company and
any of its Restricted Subsidiaries; provided, however, that (i) if the
Company is the obligor on such Indebtedness, such Indebtedness is expressly
subordinated to the prior payment in full in cash of all Obligations with
respect to the Notes and this Indenture and (ii) (A) any subsequent event
or issuance or transfer of Equity Interests that results in any such
Indebtedness being held by a Person other than the Company or a Restricted
Subsidiary of the Company and (B) any sale or other transfer of any such
Indebtedness to a Person that is not either the Company or a Restricted
Subsidiary of the Company shall be deemed, in each case, to constitute an
incurrence of such Indebtedness by the Company or such Restricted
Subsidiary, as the case may be, that was permitted by this clause (vi);
(vii) the incurrence by the Company or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred in the normal course
of business or as required by any Credit Facility for the purpose of fixing
or hedging currency, commodity or interest rate risk (including with
respect to any floating rate Indebtedness that is permitted by the terms of
this Indenture to be outstanding) in connection with the conduct of their
respective businesses and not for speculative purposes;
(viii) the guarantee by the Company or any of its Restricted
Subsidiaries of Indebtedness of the Company or a Restricted Subsidiary of
the Company that was permitted to be incurred by another provision of this
Section 4.09; provided that such guarantee of
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Indebtedness is a Permitted Investment or otherwise permitted by the
provisions of Section 4.07 hereof;
(ix) Indebtedness incurred by the Company or any Restricted
Subsidiary under performance bonds, letter of credit obligations to provide
security for worker's compensation claims, trade payables, payment
obligations in connection with self-insurance or similar requirements and
bank overdrafts incurred in the ordinary course of business; provided that
any Obligations arising in connection with such bank overdraft Indebtedness
is extinguished within five Business Days;
(x) the incurrence by the Company or any of its Restricted
Subsidiaries of additional Indebtedness in an aggregate principal amount
(or accreted value, as applicable) at any time outstanding, including all
Permitted Refinancing Indebtedness pursuant to this clause (x), not to
exceed $25.0 million;
(xi) the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Debt and Preferred Stock, provided, however, that if any such
Indebtedness or Preferred Stock ceases to be Non-Recourse Debt and
Preferred Stock of an Unrestricted Subsidiary, such event shall be deemed
to constitute an incurrence of Indebtedness by a Restricted Subsidiary of
the Company that was not permitted by this clause (xi); and
(xii) the incurrence by a Restricted Subsidiary that is a Foreign
Subsidiary of Indebtedness in an amount not to exceed 75% of the net book
value of the non-Affiliate accounts receivable of such Restricted Foreign
Subsidiary determined in accordance with GAAP.
For purposes of determining compliance with this Section 4.09,
in the event that an item of Indebtedness meets the criteria of more than one
of the categories of Permitted Debt described in clauses (i) through (xii)
above or is entitled to be incurred pursuant to the first paragraph of this
Section 4.09, the Company shall, in its sole discretion, classify such item of
Indebtedness in any manner that complies with this Section 4.09 and such item
of Indebtedness shall be treated as having been incurred pursuant to only one
of such clauses or pursuant to the first paragraph of this Section 4.09.
Accrual of interest, the accretion of accreted value and the payment of
interest in the form of additional Indebtedness will not be deemed to be an
incurrence of Indebtedness for purposes of this Section 4.09.
Section 4.10. Asset Sales.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Company or
such Restricted Subsidiary, as the case may be, receives consideration at the
time of such Asset Sale at least equal to the fair market value (as determined
in good faith by the Board of Directors and evidenced by a resolution of the
Board of Directors set forth in an Officers' Certificate delivered to the
Trustee), of the assets or Equity Interests issued or sold or otherwise
disposed of and (ii) at least 75% of the consideration therefor received by the
Company or such Restricted Subsidiary is in the form of cash or Cash
Equivalents; provided that the amount of (x) any liabilities (as shown on the
Company's or such Restricted Subsidiary's most recent balance sheet) of the
Company or any Restricted Subsidiary of the Company (other than contingent
liabilities and liabilities that are by their terms subordinated to the Notes
or any Guarantee thereof) that are assumed by the transferee or any such assets
pursuant to customary assumption and indemnity agreements
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that releases the Company or such Restricted Subsidiary from further liability
and (y) any securities, notes or other obligations received by the Company or
such Restricted Subsidiary for such transferee that are converted by the
Company or Restricted Subsidiary into cash (to the extent of the cash received)
within 30 days after consummation of such Asset Sale, shall be deemed to be
cash for purposes of this provision.
Within 360 days after the receipt of any Net Proceeds from an
Asset Sale, the Company or the Restricted Subsidiary, as applicable, may apply
such Net Proceeds, at its option, (a) to repay Senior Debt under any Credit
Facility or (b) to the acquisition of a controlling interest in a Permitted
Business, the making of a capital expenditure or the acquisition of other
assets, of which substantially all are long-term, that are used or useful in a
Permitted Business or the acquisition of all or substantially all of the assets
of a Permitted Business. Pending the final application of any such Net
Proceeds, the Company may temporarily reduce Senior Debt under any Credit
Facility or otherwise invest such Net Proceeds in any manner that is not
prohibited by this Indenture. Any Net Proceeds from Asset Sales that are not
applied or invested as provided in this sentence of this paragraph shall be
deemed to constitute "Excess Proceeds." When the aggregate amount of Excess
Proceeds exceeds $10.0 million, the Company shall be required to make an offer
to all Holders of Notes (an "Asset Sale Offer") to purchase the maximum
principal amount of Notes that may be purchased out of the Excess Proceeds, at
an offer price in cash in an amount equal to 100% of the principal amount
thereof plus accrued and unpaid interest and Liquidated Damages thereon, if
any, to the date of purchase, in accordance with the procedures set forth in
this Indenture. To the extent that the aggregate amount of Notes tendered
pursuant to an Asset Sale offer is less than the Excess Proceeds, the Company
may use any remaining Excess Proceeds for general corporate purposes. If the
aggregate principal amount of Notes surrendered by Holders thereof exceeds the
amount of Excess Proceeds, the Trustee shall select the Notes to be purchased
on a pro rata basis. Upon completion of such offer to purchase, the amount of
Excess Proceeds shall be reset at zero.
Section 4.11. Transactions with Affiliates.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or
otherwise dispose of any properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate of any such Person (each of the foregoing, an "Affiliate
Transaction"), unless (i) such Affiliate Transaction is on terms that are no
less favorable to the Company or the relevant Restricted Subsidiary than those
that would have been obtained in a comparable transaction by the Company or
such Restricted Subsidiary with an unrelated Person and (ii) the Company
delivers to the Trustee (x) with respect to any Affiliate Transaction or series
of related Affiliate Transactions involving aggregate consideration in excess
of $5.0 million, a resolution of its Board of Directors set forth in an
Officers' Certificate certifying that such Affiliate Transaction complies with
clause (i) above and that such Affiliate Transaction has been approved by a
majority of the disinterested members of its Board of Directors and (y) with
respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $10.0 million, an
opinion as to the fairness to the Holders of such Affiliate Transaction from a
financial point of view issued by an Independent Financial Advisor; provided
that none of the following shall be deemed to be Affiliate Transactions: (a)
any employment agreement entered into by the Company or any of its Restricted
Subsidiaries in the ordinary
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course of business of the Company or such Restricted Subsidiary, as the case
may be; (b) transactions between or among the Company and/or its Restricted
Subsidiaries; (c) Restricted Payments that are permitted by the provisions of
Section 4.07 hereof; and (d) fees, compensation and benefits paid to, and
indemnity provided on behalf of, officers, directors or employees of the
Company or any of its Restricted Subsidiaries, as determined by the Board of
Directors of the Company or of any such Restricted Subsidiary, to the extent
such fees, compensation and benefits are reasonable and customary.
Section 4.12. Liens.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, create, incur, assume or otherwise cause or suffer
to exist or become effective any Lien of any kind securing Indebtedness which
is pari passu or subordinate to the Notes or trade payables, unless the Notes
are equally and ratably secured with the obligations so secured until such time
as such obligations are no longer secured by any Lien; provided that in any
case involving a Lien securing indebtedness subordinated to the Notes, such
Lien is subordinated to the Lien securing the Notes to the same extent that
such subordinated indebtedness is subordinated to the Notes.
Section 4.13. Business Activities.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, engage in any line of
business other than a Permitted Business, except to such extent as would not be
material to the Company and its Restricted Subsidiaries taken as a whole.
Section 4.14. Corporate Existence.
Subject to Article 5 hereof, the Company shall do or cause to
be done all things necessary to preserve and keep in full force and effect (i)
its corporate existence, and the corporate, partnership or other existence of
each of its Subsidiaries, in accordance with the respective organizational
documents (as the same may be amended from time to time) of the Company or any
such Restricted Subsidiary and (ii) the rights (charter and statutory),
licenses and franchises of the Company and its Subsidiaries; provided, however,
that the Company shall not be required to preserve any such right, license or
franchise, or the corporate, partnership or other existence of any of its
Restricted Subsidiaries, if the Board of Directors shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Company and its Restricted Subsidiaries, taken as a whole, and that the
loss thereof is not adverse in any material respect to the Holders of the
Notes.
Section 4.15. Offer to Repurchase Upon Change of Control.
(a) Upon the occurrence of a Change of Control, each Holder of
Notes shall have the right to require the Company to repurchase all or any part
(equal to $1,000 or an integral multiple thereof) of such Holder's Notes
pursuant to the offer described in this Section 4.15 (the "Change of Control
Offer") at an offer price in cash equal to 101% of the aggregate principal
amount thereof plus accrued and unpaid interest and Liquidated Damages thereon,
if any, to the purchase date (the "Change of Control Payment"). Within 30 days
following any Change of Control, the Company shall mail a notice to each Holder
describing the transaction or transactions that constitute a Change of Control
and offering to repurchase Notes on the date
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specified in such notice, which date shall be no earlier than 30 days and no
later than 60 days from the date such notice is mailed (the "Change of Control
Payment Date"), pursuant to the procedures required by this Indenture and
described in such notice. The Company shall comply with the requirements of
Rule 14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the repurchase of the Notes as a result of a Change of Control.
(b) On a Change of Control Payment Date, the Company shall, to the
extent lawful, (1) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Notes
or portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating
the aggregate principal amount of Notes or portions thereof being purchased by
the Company. The Paying Agent shall promptly mail to each Holder of Notes so
tendered the Change of Control Payment 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 shall be a
principal amount of $1,000 or an integral multiple thereof. Prior to complying
with the provisions of this Section 4.15, but in any event within 60 days
following a Change of Control, the Company shall either repay all outstanding
Senior Debt or obtain the requisite consents, if any, under all agreements
governing outstanding Senior Debt to permit the repurchase of Notes required by
this Section 4.15. 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 Change of Control provisions described above will be
applicable whether or not other provisions of this Indenture are applicable.
(c) Notwithstanding anything to the contrary in this Section 4.15,
the Company shall not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in a
manner, at the times and otherwise in compliance with the requirements set
forth in this Section 4.15 and Section 3.09 hereof and purchases all Notes
validly tendered and not withdrawn under such Change of Control Offer.
Section 4.16. No Senior Subordinated Debt.
Notwithstanding the provisions of Section 4.09 hereof, the
Company shall not incur, create, issue, assume, guarantee or otherwise become
liable for any indebtedness that is subordinate or junior in right of payment
to any Indebtedness and senior in any respect in right of payment to the Notes.
Section 4.17. Sale and Leaseback Transactions.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, enter into any sale and leaseback transaction;
provided that the Company may enter into a sale and leaseback transaction if
(i) the Company could have incurred Indebtedness in an amount equal to the
Attributable Debt relating to such sale and leaseback transaction pursuant to
the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section
4.09 hereof and (ii) the gross cash proceeds of such sale and leaseback
transaction are at least equal to the fair market value (as determined in good
faith by the Board of Directors and set forth in an Officers' Certificate
delivered to the Trustee) of the property that is the subject of such sale and
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leaseback transaction and (iii) the transfer of assets in such sale and
leaseback transaction is permitted by, and the Company applies the proceeds of
such transaction in compliance with, the provisions of Section 4.10 hereof.
Section 4.18. Limitation on Guarantees of Indebtedness.
The Company shall not permit any of its Restricted
Subsidiaries, directly or indirectly, to Guarantee payment of any other
Indebtedness of the Company unless such Restricted Subsidiary simultaneously
executes and delivers a supplemental indenture to this Indenture, substantially
in the form attached hereto as Exhibit D, providing for the Guarantee of the
payment of the Notes by such Restricted Subsidiary, which Guarantee shall be
(i) in the case of Indebtedness that is subordinated to the Notes, senior to
such Restricted Subsidiary's Guarantee of or pledge to secure such other
Indebtedness, (ii) in the case of Indebtedness that is pari passu with the
Notes, pari passu with such Restricted Subsidiary's Guarantee of or pledge to
secure such other Indebtedness, and (iii) in the case of Indebtedness that is
Senior Debt, subordinated to the Guarantee of such Senior Debt to the same
extent as the Notes are subordinated to such Senior Debt. Notwithstanding the
foregoing, any such Guarantee by a Restricted Subsidiary of the Notes shall
provide by its terms that it shall be automatically and unconditionally
released and discharged upon the release of such Guarantee of any Senior Debt
so long as no Rating Event has occurred and is continuing or upon any sale,
exchange or transfer, to any Person not an Affiliate of the Company, of all of
the Company's stock in, or all or substantially all the assets of, such
Restricted Subsidiary, which sale, exchange or transfer is made in compliance
with the applicable provisions of this Indenture. A "Rating Event" means the
assigning of a rating on the Notes (a) from Moody's Investors Services, Inc.,
lower than "B2" or (b) from Standard & Poor's Rating Group lower than "B."
Nothing in this Section 4.18 shall be construed to permit any Restricted
Subsidiary of the Company to incur Indebtedness otherwise prohibited by the
provisions of Section 4.09 hereof.
Section 4.19. Payments for Consent.
Neither the Company nor any of its Subsidiaries shall,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, to any Holder of any Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or
provisions of this Indenture or the Notes unless such consideration is offered
to be paid or is paid to all Holders of the Notes that consent, waive or agree
to amend in the time frame set forth in the solicitation documents relating to
such consent, waiver or agreement.
ARTICLE 5.
SUCCESSORS
Section 5.01. Merger, Consolidation or Sale of Assets.
The Company shall not consolidate or merge with or into
(whether or not the Company is the surviving corporation) or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions to, another
corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the
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United States of America, any state thereof or the District of Columbia, (ii)
the entity or Person formed by or surviving any such consolidation or merger
(if other than the Company) or the entity or Person to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made assumes all the obligations of the Company pursuant to a supplemental
indenture under the Notes and this Indenture pursuant to a supplemental
indenture in a form reasonably satisfactory to the Trustee, (iii) immediately
before and after such transaction, no Default or Event of Default shall have
occurred and (iv) except in the case of a merger of the Company with or into a
Wholly Owned Restricted Subsidiary of the Company, the Company or the entity or
Person formed by or surviving any such consolidation or merger (if other than
the Company), or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made will, at the time of such transaction
and after giving pro forma effect thereto as if such transaction had occurred
at the beginning of the applicable four- quarter period, be permitted to incur
at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Ratio
Test set forth in the first paragraph of covenant described in the provision of
Section 4.09 hereof; provided, however, if the sole purpose of such merger is
the reincorporation of the Company into another State, such merger with or into
the Wholly Owned Restricted Subsidiary shall be permitted, so long as the
amount of Indebtedness of the Company and its Restricted Subsidiaries is not
increased thereby.
Section 5.02. Successor Corporation Substituted.
Upon any consolidation or merger, or any sale, assignment,
transfer, lease, conveyance or other disposition of all or substantially all of
the assets of the Company in accordance with Section 5.01 hereof, the successor
corporation formed by such consolidation or into or with which the Company is
merged or to which such sale, assignment, transfer, lease, conveyance or other
disposition is made shall succeed to, and be substituted for (so that from and
after the date of such consolidation, merger, sale, lease, conveyance or other
disposition, the provisions of this Indenture referring to the "Company" shall
refer instead to the successor corporation and not to the Company), and may
exercise every right and power of the Company under this Indenture with the
same effect as if such successor Person had been named as the Company herein;
provided, however, that the predecessor Company shall not be relieved from the
obligation to pay the principal of and interest on the Notes except in the case
of a sale of all of the Company's assets that meets the requirements of Section
5.01 hereof.
ARTICLE 6.
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
An "Event of Default" occurs if:
(a) the Company defaults in the payment when due of interest on,
or Liquidated Damages, if any, with respect to, the Notes and such default
continues for a period of 30 days, whether or not such payment is prohibited by
the provisions of Article 10 hereof;
(b) the Company defaults in the payment when due of principal of
or premium, if any, on the Notes, whether or not such payment is prohibited by
the provisions of Article 10 hereof;
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(c) the Company fails to comply with any of the provisions of
Section 5.01 hereof;
(d) the Company or any of its Subsidiaries fails for 30 days after
notice by the Trustee or the Holders of at least 25% in principal amount of the
then outstanding Notes to comply with the provisions of Sections 4.07, 4.09,
4.10 or 4.15;
(e) the Company or any of its Subsidiaries fails to observe or
perform any other covenant, representation, warranty or other agreement in this
Indenture or the Notes for 60 days after notice to the Company by the Trustee
or the Holders of at least 25% in aggregate principal amount of the Notes then
outstanding;
(f) the Company or any of its Subsidiaries defaults under any
mortgage, indenture or instrument under which there may be issued or by which
there may be secured or evidenced any Indebtedness for money borrowed by the
Company or any of its Subsidiaries (or the payment of which is guaranteed by
the Company or any of its Subsidiaries), whether such Indebtedness or guarantee
exists at the Issue Date, or is created after the Issue Date, which default (a)
is caused by a failure to pay principal of or premium, if any, or interest on
such Indebtedness at final maturity prior to the expiration of the grace period
provided in such Indebtedness on the date of such default (a "Payment Default")
or (b) results in the acceleration of such Indebtedness prior to its express
maturity and, in each case, the principal amount of 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 without duplication $10.0 million or more.
(g) the Company or any of its Significant Subsidiaries fails to
pay a final judgment or final judgments for the payment of money which are
entered by a court or courts of competent jurisdiction against the Company or
any of its Significant Subsidiaries or any group of Subsidiaries that, taken as
a whole, would constitute a Significant Subsidiary and such judgment or
judgments remain undischarged for a period (during which execution shall not be
effectively stayed) of 60 days, provided that the aggregate of all such
undischarged judgments exceeds $10 million (excluding amounts covered by
insurance);
(h) the Company or any of its Significant Subsidiaries or any
group of Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary pursuant to or within the meaning of Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it in
an involuntary case,
(iii) consents to the appointment of a Custodian of it or for
all or substantially all of its property,
(iv) makes a general assignment for the benefit of its
creditors, or
(v) generally is not paying its debts as they become due; or
(i) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
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(i) is for relief against the Company or any of its Significant
Subsidiaries or any group of Subsidiaries that, taken as a whole,
would constitute a Significant Subsidiary in an involuntary case;
(ii) appoints a Custodian of the Company or any of its Significant
Subsidiaries or any group of Subsidiaries that, taken as a whole,
would constitute a Significant Subsidiary or for all or substantially
all of the property of the Company or any of its Significant
Subsidiaries or any group of Subsidiaries that, taken as a whole,
would constitute a Significant Subsidiary; or
(iii) orders the liquidation of the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary;
and the order or decree remains unstayed and in effect for 60 consecutive
days.
Section 6.02. Acceleration.
If any Event of Default (other than an Event of Default
specified in clause (h) or (i) of Section 6.01 hereof with respect to the
Company, any Significant Subsidiary or any group of Significant Subsidiaries
that, taken as a whole, would constitute a Significant Subsidiary) occurs and
is continuing, the Trustee or the Holders of at least 25% in principal amount
of the then outstanding Notes may declare all the Notes to be due and payable
immediately; provided, that so long as Senior Debt or any commitment therefore
is outstanding under the Credit Facility, any such notice shall not be
effective until the earlier of (i) five Business Days after such notice is
delivered to the representative for such Senior Debt. or, (ii) the acceleration
of the Senior Debt under the Credit Facility. Notwithstanding the foregoing,
if an Event of Default specified in clause (h) or (i) of Section 6.01 hereof
occurs with respect to the Company, any of its Significant Subsidiaries or any
group of Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary, all outstanding Notes shall be due and payable immediately without
further action or notice. The Holders of a majority in aggregate principal
amount of the then outstanding Notes by written notice to the Trustee may on
behalf of all of the Holders rescind an acceleration and its consequences if
the rescission would not conflict with any judgment or decree and if all
existing Events of Default (except nonpayment of principal, interest or premium
that has become due solely because of the acceleration) have been cured or
waived.
In the case of any Event of Default pursuant to the provisions
of this Section 6.01 occurring by reason of any willful action (or inaction)
taken (or not taken) by or on behalf of the Company with the principal
intention of avoiding payment of the premium that the Company would have had to
pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption provisions of this Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes. If an Event of Default occurs prior to
March 1, 2003 by reason of any willful action (or inaction) taken (or not
taken) by or on behalf of the Company with the intention of avoiding the
prohibition on redemption of the Notes prior to March 1, 2003, then the premium
payable for purposes of this paragraph for each of the years beginning on March
1 of the years set forth below shall be as set forth in the following table
expressed as a percentage of the amount that would otherwise be due but for the
provisions of this sentence, plus accrued interest, if any, to the date of
payment.
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<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110.833%
1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109.479%
2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108.125%
2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106.771%
2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105.417%
</TABLE>
Section 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy to collect the payment of principal, premium,
if any, and interest on the Notes or to enforce the performance of any
provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Notes or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Holder of a Note in exercising any
right or remedy accruing upon an Event of Default shall not impair the right or
remedy or constitute a waiver of or acquiescence in the Event of Default. All
remedies are cumulative to the extent permitted by law.
Section 6.04. Waiver of Past Defaults.
Holders of not less than a majority in aggregate principal
amount of the then outstanding Notes by notice to the Trustee may on behalf of
the Holders of all of the Notes waive an existing Default or Event of Default
and its consequences hereunder, except a continuing Default or Event of Default
in the payment of the principal of, premium and Liquidated Damages, if any, or
interest on, the Notes (including in connection with an offer to purchase)
(provided, however, that the Holders of a majority in aggregate principal
amount of the then outstanding Notes may rescind an acceleration and its
consequences, including any related payment default that resulted from such
acceleration). Upon any such waiver, such Default shall cease to exist, and
any Event of Default arising therefrom shall be deemed to have been cured for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other Default or impair any right consequent thereon.
Section 6.05. Control by Majority.
Holders of a majority in principal amount of the then
outstanding Notes may direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee or exercising any
trust or power conferred on it. However, the Trustee may refuse to follow any
direction that conflicts with law or this Indenture that the Trustee determines
may be unduly prejudicial to the rights of other Holders of Notes or that may
involve the Trustee in personal liability.
Section 6.06. Limitation on Suits.
A Holder of a Note may pursue a remedy with respect to this
Indenture or the Notes only if:
(a) the Holder of a Note gives to the Trustee written
notice of a continuing Event of Default;
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(b) the Holders of at least 25% in principal amount of
the then outstanding Notes make a written request to the Trustee to pursue the
remedy;
(c) such Holder of a Note or Holders of Notes offer and,
if requested, provide to the Trustee indemnity satisfactory to the Trustee
against any loss, liability or expense;
(d) the Trustee does not comply with the request within
60 days after receipt of the request and the offer and, if requested, the
provision of indemnity; and
(e) during such 60-day period the Holders of a majority
in principal amount of the then outstanding Notes do not give the Trustee a
direction inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the
rights of another Holder of a Note or to obtain a preference or priority over
another Holder of a Note.
Section 6.07. Rights of Holders of Notes to Receive Payment.
Notwithstanding any other provision of this Indenture, the
right of any Holder of a Note to receive payment of principal, premium and
Liquidated Damages, if any, and interest on the Note, on or after the
respective due dates expressed in the Note (including in connection with an
offer to purchase), or to bring suit for the enforcement of any such payment on
or after such respective dates, shall not be impaired or affected without the
consent of such Holder.
Section 6.08. Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(a) or (b)
occurs and is continuing, the Trustee is authorized to recover judgment in its
own name and as trustee of an express trust against the Company for the whole
amount of principal of, premium and Liquidated Damages, if any, and interest
remaining unpaid on the Notes and interest on overdue principal and, to the
extent lawful, interest and such further amount as shall be sufficient to cover
the costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.
Section 6.09. Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and
other papers or documents as may be necessary or advisable in order to have the
claims of the Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel)
and the Holders of the Notes allowed in any judicial proceedings relative to
the Company (or any other obligor upon the Notes), its creditors or its
property and shall be entitled and empowered to collect, receive and distribute
any money or other property payable or deliverable on any such claims and any
custodian in any such judicial proceeding is hereby authorized by each Holder
to make such payments to the Trustee, and in the event that the Trustee shall
consent to the making of such payments directly to the Holders, to pay to the
Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any
other amounts due the Trustee under Section 7.07 hereof. To the extent that
the payment of any such compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel, and any other amounts due the Trustee
under Section 7.07 hereof out of the estate in any such proceeding, shall be
denied for any reason, payment of the same shall be secured by a Lien on,
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and shall be paid out of, any and all distributions, dividends, money,
securities and other properties that the Holders may be entitled to receive in
such proceeding whether in liquidation or under any plan of reorganization or
arrangement or otherwise. Nothing herein contained shall be deemed to
authorize the Trustee to authorize or consent to or accept or adopt on behalf
of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder, or to authorize
the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
Section 6.10. Priorities.
If the Trustee collects any money pursuant to this Article, it
shall pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts
due under Section 7.07 hereof, including payment of all compensation, expense
and liabilities incurred, and all advances made, by the Trustee and the costs
and expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the
Notes for principal, premium and Liquidated Damages, if any, and interest,
ratably, without preference or priority of any kind, according to the amounts
due and payable on the Notes for principal, premium and Liquidated Damages, if
any and interest, respectively; and
Third: to the Company or to such party as a court of
competent jurisdiction shall direct.
The Trustee may fix a record date and payment date for any
payment to Holders of Notes pursuant to this Section 6.10.
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action taken or
omitted by it as a Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees and expenses, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section does not apply to a suit by the
Trustee, a suit by a Holder of a Note pursuant to Section 6.07 hereof, or a
suit by Holders of more than 10% in principal amount of the then outstanding
Notes.
ARTICLE 7.
TRUSTEE
Section 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in its exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs.
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(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the
express provisions of this Indenture and the Trustee need perform only
those duties that are specifically set forth in this Indenture and no
others, and no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
in the case of any such certificates or opinions which by any provision
hereof are specifically required to be furnished to the Trustee (including,
without limitation, any certificates or opinions required to be furnished
pursuant to Article 4 hereof), the Trustee shall be under a duty to examine
the same to determine whether or not they conform to the requirements of
this Indenture (but need not confirm or investigate the accuracy of
mathematical calculations or other facts stated therein).
(c) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section;
(ii) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision
of this Indenture that in any way relates to the Trustee is subject to
paragraphs (a), (b), and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee shall be
under no obligation to exercise any of its rights and powers under this
Indenture at the request of any Holders, unless such Holder shall have offered
to the Trustee security and indemnity satisfactory to it against any loss,
liability or expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
Section 7.02. Rights of Trustee.
(a) The Trustee may conclusively rely upon any document believed
by it to be genuine and to have been signed or presented by the proper Person.
The Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel or both. The Trustee
shall not be liable for any action it
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takes or omits to take in good faith in reliance on such Officers' Certificate
or Opinion of Counsel. The Trustee may consult with counsel of its selection
and the written advice of such counsel or any Opinion of Counsel shall be full
and complete authorization and protection from liability in respect of any
action taken, suffered or omitted by it hereunder in good faith and in reliance
thereon.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed with
due care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith that it believes to be authorized or within the
rights or powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request or direction
of any of the Holders unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that might be incurred by it in compliance with such request or direction.
(g) The Trustee shall not be deemed to have notice of any Default
or Event of Default unless a Responsible Officer of the Trustee has actual
knowledge thereof or unless written notice of any event which is in fact such a
default is received by the Trustee at the Corporate Trust Office of the
Trustee, and such notice references the Notes and this Indenture.
Section 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Notes and may otherwise deal with the Company or any
Affiliate of the Company with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest it must eliminate such conflict within 90 days, apply to the SEC for
permission to continue as trustee or resign. Any Agent may do the same with
like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11
hereof.
Section 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture or the Notes,
it shall not be accountable for the Company's use of the proceeds from the
Notes or any money paid to the Company or upon the Company's direction under
any provision of this Indenture, it shall not be responsible for the use or
application of any money received by any Paying Agent other than the Trustee,
and it shall not be responsible for any statement or recital herein or any
statement in the Notes or any other document in connection with the sale of the
Notes or pursuant to this Indenture other than its certificate of
authentication.
Section 7.05. Notice of Defaults.
If a Default or Event of Default occurs and is continuing and
if it is known to the Trustee, the Trustee shall mail to Holders of Notes a
notice of the Default or Event of Default
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within 90 days after it occurs. Except in the case of a Default or Event of
Default in payment of principal of, premium, if any, or interest on any Note,
the Trustee may withhold the notice if and so long as a committee of its
Responsible Officers in good faith determines that withholding the notice is in
the interests of the Holders of the Notes.
Section 7.06. Reports by Trustee to Holders of the Notes.
Within 60 days after each May 15 beginning with the May 15
following the date of this Indenture, and for so long as Notes remain
outstanding, the Trustee shall mail to the Holders of the Notes a brief report
dated as of such reporting date that complies with TIA 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).
A copy of each report at the time of its mailing to the
Holders of Notes shall be mailed to the Company and filed with the SEC and each
stock exchange on which the Notes are listed in accordance with TIA Section
313(d). The Company shall promptly notify the Trustee when the Notes are
listed on any stock exchange or of any delisting thereof.
Section 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time
reasonable compensation for its acceptance of this Indenture and services
hereunder. The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Company shall reimburse the
Trustee promptly upon request for all reasonable disbursements, advances and
expenses incurred or made by it in addition to the compensation for its
services. Such expenses shall include the reasonable compensation,
disbursements and expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee against any and all
losses, liabilities or reasonable expenses incurred by it arising out of or in
connection with the acceptance or administration of its duties under this
Indenture, including the costs and expenses of enforcing this Indenture against
the Company (including this Section 7.07) and defending itself against any
claim (whether asserted by the Company or any Holder or any other person) or
liability in connection with the exercise or performance of any of its powers
or duties hereunder, except to the extent any such loss, liability or expense
may be attributable to its negligence or bad faith. The Trustee shall notify
the Company promptly of any claim for which it may seek indemnity. Failure by
the Trustee to so notify the Company shall not relieve the Company of its
obligations hereunder except to the extent such failure shall have materially
prejudiced the Company. The Company shall defend the claim and the Trustee
shall cooperate in the defense. If the Trustee is advised by counsel in
writing that it may have available to it defenses which are in conflict with
the defenses available to the Company, then the Trustee may have separate
counsel and the Company shall pay the reasonable fees and expenses of such
counsel. The Company need not pay for any settlement made without its consent,
which consent shall not be unreasonably withheld.
The obligations of the Company under this Section 7.07 shall
survive the satisfaction and discharge of this Indenture.
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To secure the Company's payment obligations in this Section,
the Trustee shall have a Lien prior to the Notes on all money or property held
or collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes. Such Lien shall survive the satisfaction and
discharge of this Indenture.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.01(h) or (i) hereof occurs, the
expenses and the compensation for the services (including the fees and expenses
of its agents and counsel) are intended to constitute expenses of
administration under any Bankruptcy Law.
The Trustee shall comply with the provisions of TIA Section
313(b)(2) to the extent applicable.
Section 7.08. Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign in writing at any time and be
discharged from the trust hereby created by so notifying the Company. The
Holders of Notes of a majority in principal amount of the then outstanding
Notes may remove the Trustee by so notifying the Trustee and the Company in
writing. The Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Trustee or
its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office,
the Holders of a majority in principal amount of the then outstanding Notes may
appoint a successor Trustee to replace the successor Trustee appointed by the
Company.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company, or the Holders of Notes of at least 10% in principal amount of the
then outstanding Notes may, at the expense of the Company, petition any court
of competent jurisdiction for the appointment of a successor Trustee.
If the Trustee, after written request by any Holder of a Note
who has been a Holder of a Note for at least six months, fails to comply with
Section 7.10, such Holder of a Note may petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring
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Trustee shall become effective, and the successor Trustee shall have all the
rights, powers and duties of the Trustee under this Indenture. The successor
Trustee shall mail a notice of its succession to Holders of the Notes. The
retiring Trustee shall promptly transfer all property held by it as Trustee to
the successor Trustee, provided all sums owing to the Trustee hereunder have
been paid and subject to the Lien provided for in Section 7.07 hereof.
Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the
Company's obligations under Section 7.07 hereof shall continue for the benefit
of the retiring Trustee.
Section 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee.
Section 7.10. Eligibility; Disqualification.
There shall at all times be a Trustee hereunder that is a
corporation organized and doing business under the laws of the United States of
America or of any state thereof that is authorized under such laws to exercise
corporate trustee power, that is subject to supervision or examination by
federal or state authorities and that has a combined capital and surplus of at
least $50 million as set forth in its most recent published annual report of
condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1), (2) and (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 8.01. Option to Effect Legal Defeasance or Covenant Defeasance.
The Company may, at the option of its Board of Directors
evidenced by a resolution set forth in an Officers' Certificate, at any time,
elect to have either Section 8.02 or 8.03 hereof be applied to all outstanding
Notes upon compliance with the conditions set forth below in this Article 8.
Section 8.02. Legal Defeasance and Discharge.
Upon the Company's exercise under Section 8.01 hereof of the
option applicable to this Section 8.02, the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to
have been discharged from its obligations with respect to all outstanding Notes
on the date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall
be deemed to have paid and discharged the entire Indebtedness represented by
the outstanding Notes, which shall thereafter be deemed to be "outstanding"
only for the purposes of Section 8.05
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hereof and the other Sections of this Indenture referred to in (a) and (b)
below, and to have satisfied all its other obligations under such Notes and
this Indenture (and the Trustee, on demand of and at the expense of the
Company, shall execute proper instruments acknowledging the same), except for
the following provisions which shall survive until otherwise terminated or
discharged hereunder: (a) the rights of Holders of outstanding Notes to receive
solely from the trust fund described in Section 8.04 hereof, and as more fully
set forth in such Section, payments in respect of the principal of, premium, if
any, and interest on such Notes when such payments are due, (b) the Company's
obligations with respect to such Notes under Article 2 and Section 4.02 hereof,
(c) the rights, powers, trusts, duties and immunities of the Trustee hereunder
and the Company's obligations in connection therewith and (d) this Article 8.
Subject to compliance with this Article 8, the Company may exercise its option
under this Section 8.02 notwithstanding the prior exercise of its option under
Section 8.03 hereof.
Section 8.03. Covenant Defeasance.
Upon the Company's exercise under Section 8.01 hereof of the
option applicable to this Section 8.03, the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, be released
from its obligations under the covenants contained in Sections 4.07, 4.08,
4.09, 4.10, 4.11, 4.12, 4.13, 4.15, 4.16, 4.17, 4.18, 4.19, and 5.01 hereof
with respect to the outstanding Notes on and after the date the conditions set
forth in Section 8.04 are satisfied (hereinafter, "Covenant Defeasance"), and
the Notes shall thereafter be deemed not "outstanding" for the purposes of any
direction, waiver, consent or declaration or act of Holders (and the
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder (it being
understood that such Notes shall not be deemed outstanding for accounting
purposes). For this purpose, Covenant Defeasance means that, with respect to
the outstanding Notes, the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event of Default under Section 6.01
hereof, but, except as specified above, the remainder of this Indenture and
such Notes shall be unaffected thereby. In addition, upon the Company's
exercise under Section 8.01 hereof of the option applicable to this Section
8.03 hereof, subject to the satisfaction of the conditions set forth in Section
8.04 hereof, Sections 6.01(c) through 6.01(g) hereof shall not constitute
Events of Default.
Section 8.04. Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of
either Section 8.02 or 8.03 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in
trust, for the benefit of the Holders, cash in United States dollars,
non-callable Government Securities, or a combination thereof, in such amounts
as will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium and Liquidated
Damages, if any, and interest on the outstanding Notes on the stated date for
payment thereof or on the applicable redemption date, as the case may be, and
the Company
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must specify whether the Notes are being defeased to maturity or to a
particular redemption date;
(b) in the case of an election under Section 8.02 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of this Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income
tax purposes as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Legal Defeasance had not occurred;
(c) in the case of an election under Section 8.03 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income
tax purposes as a result of such Covenant Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of
Default resulting from the incurrence of Indebtedness all or a portion of the
proceeds of which will be used to defease the Notes pursuant to this Article 8
concurrently with such incurrence) or insofar as Sections 6.01(h) or 6.01(i)
hereof is concerned, at any time in the period ending on the 91st day after the
date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result
in a breach or violation of, or constitute a default under, any material
agreement or instrument (other than this Indenture) to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its Restricted
Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an Opinion of
Counsel (which may be subject to customary exceptions) to the effect that on
the 91st day following the deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally;
(g) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders over any other creditors of the Company or
with the intent of defeating, hindering, delaying or defrauding any other
creditors of the Company; and
(h) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
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Section 8.05. Deposited Money and Government Securities to be Held in Trust;
Other Miscellaneous Provisions.
Subject to Section 8.06 hereof, all money and non-callable
Government Securities (including the proceeds thereof) deposited with the
Trustee (or other qualifying trustee, collectively for purposes of this Section
8.05, the "Trustee") pursuant to Section 8.04 hereof in respect of the
outstanding Notes shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Notes and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as Paying Agent) as the Trustee may determine, to the Holders of such
Notes of all sums due and to become due thereon in respect of principal,
premium, if any, and interest, but such money need not be segregated from other
funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the cash or
non-callable Government Securities deposited pursuant to Section 8.04 hereof or
the principal and interest received in respect thereof other than any such tax,
fee or other charge which by law is for the account of the Holders of the
outstanding Notes.
Anything in this Article 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 8.04 hereof which, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee (which may be the opinion
delivered under Section 8.04(a) hereof), are in excess of the amount thereof
that would then be required to be deposited to effect an equivalent Legal
Defeasance or Covenant Defeasance.
Section 8.06. Repayment to Company.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal of,
premium, if any, or interest on any Note and remaining unclaimed for two years
after such principal, and premium, if any, or interest has become due and
payable shall be paid to the Company on its request or (if then held by the
Company) shall be discharged from such trust; and the Holder of such Note shall
thereafter, as a creditor, look only to the Company for payment thereof, and
all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company cause to
be published once, in the New York Times and The Wall Street Journal (national
edition), notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
notification or publication, any unclaimed balance of such money then remaining
will be repaid to the Company.
Section 8.07. Reinstatement.
If the Trustee or Paying Agent is unable to apply any United
States dollars or non-callable Government Securities in accordance with Section
8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of
any court or governmental authority enjoining, restraining or otherwise
prohibiting such application, then the Company's obligations under this
Indenture and the Notes shall be revived and reinstated as though no deposit
had occurred
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pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee or
Paying Agent is permitted to apply all such money in accordance with Section
8.02 or 8.03 hereof, as the case may be; provided, however, that, if the
Company makes any payment of principal of, premium, if any, or interest on any
Note following the reinstatement of its obligations, the Company shall be
subrogated to the rights of the Holders of such Notes to receive such payment
from the money held by the Trustee or Paying Agent.
ARTICLE 9.
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes.
Notwithstanding Section 9.02 of this Indenture, the Company
and the Trustee may amend or supplement this Indenture or the Notes without the
consent of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place
of certificated Notes or to alter the provisions of Article 2 hereof (including
the related definitions) in a manner that does not materially adversely affect
any Holder;
(c) to provide for the assumption of the Company's obligations to
the Holders of the Notes by a successor to the Company pursuant to Article 5
hereof;
(d) to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the
legal rights hereunder of any Holder of the Note; or
(e) 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
its Board of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon receipt by the Trustee of the documents
described in Section 7.02 hereof, the Trustee shall join with the Company in
the execution of any amended or supplemental Indenture authorized or permitted
by the terms of this Indenture and to make any further appropriate agreements
and stipulations that may be therein contained, but the Trustee shall not be
obligated to enter into such amended or supplemental Indenture that affects its
own rights, duties or immunities under this Indenture or otherwise.
Section 9.02. With Consent of Holders of Notes.
Except as provided below in this Section 9.02, the Company and
the Trustee may amend or supplement this Indenture (including Section 3.09,
4.10 and 4.15 hereof) and the Notes may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the Notes
then outstanding voting as a single class (including consents obtained in
connection with a tender offer or exchange offer for, or purchase of, the
Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or
Event of Default (other than a Default or Event of Default in the payment of
the principal of, premium, if any, or interest on the Notes, except a payment
default resulting from an acceleration that has been rescinded)
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or compliance with any provision of this Indenture or the Notes may be waived
with the consent of the Holders of a majority in principal amount of the then
outstanding Notes voting as a single class (including consents obtained in
connection with a tender offer or exchange offer for, or purchase of, the
Notes). Without the consent of at least 75% in principal amount of the Notes
then outstanding (including consents obtained in connection with a tender offer
or exchange offer for, or purchase of, such Notes), no waiver or amendment to
this Indenture may make any change in the provisions of Section 4.10, 3.09 or
4.15 hereof that adversely affects the rights of any Holder of Notes. Section
2.08 hereof shall determine which Notes are considered to be "outstanding" for
purposes of this Section 9.02.
Upon the request of the Company accompanied by a resolution of
its Board of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon the filing with the Trustee of evidence
satisfactory to the Trustee of the consent of the Holders of Notes as
aforesaid, and upon receipt by the Trustee of the documents described in
Section 7.02 hereof, the Trustee shall join with the Company in the execution
of such amended or supplemental Indenture unless such amended or supplemental
Indenture directly affects the Trustee's own rights, duties or immunities under
this Indenture or otherwise, in which case the Trustee may in its discretion,
but shall not be obligated to, enter into such amended or supplemental
Indenture.
It shall not be necessary for the consent of the Holders of
Notes under this Section 9.02 to approve the particular form of any proposed
amendment or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section
becomes effective, the Company shall mail to the Holders of Notes affected
thereby a notice briefly describing the amendment, supplement or waiver. Any
failure of the Company to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such amended or
supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof,
the Holders of a majority in aggregate principal amount of the Notes then
outstanding voting as a single class may waive compliance in a particular
instance by the Company with any provision of this Indenture or the Notes.
However, without the consent of each Holder affected, an amendment or waiver
under this Section 9.02 may not (with respect to any Notes held by a
non-consenting Holder):
(a) reduce the principal amount of Notes whose Holders must
consent to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any
Note or alter or waive any of the provisions with respect to the redemption of
the Notes except as provided above with respect to Sections 3.09, 4.10 and 4.15
hereof;
(c) reduce the rate of or change the time for payment of interest,
including default interest, on any Note;
(d) waive a Default or Event of Default in the payment of
principal of or premium, 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 then outstanding Notes
and a waiver of the payment default that resulted from such acceleration);
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(e) make any Note payable in money other than that stated in the
Notes;
(f) make any change in the provisions of this Indenture relating
to waivers of past Defaults or the rights of Holders of Notes to receive
payments of principal of or premium, interest or Liquidated Damages, if any, on
the Notes;
(g) waive a redemption payment with respect to any Note (other
than a payment required by one of the covenants described in Sections 3.09,
4.10 and 4.15); or
(h) make any change in Section 6.04 or 6.07 hereof or in the
foregoing amendment and waiver provisions.
Section 9.03. Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the Notes
shall be set forth in a amended or supplemental Indenture that complies with
the TIA as then in effect.
Section 9.04. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder of a Note is a continuing consent by the Holder of a
Note and every subsequent Holder of a Note or portion of a Note that evidences
the same debt as the consenting Holder's Note, even if notation of the consent
is not made on any Note. However, any such Holder of a Note or subsequent
Holder of a Note may revoke the consent as to its Note if the Trustee receives
written notice of revocation before the date the waiver, supplement or
amendment becomes effective. An amendment, supplement or waiver becomes
effective in accordance with its terms and thereafter binds every Holder.
Section 9.05. Notation on or Exchange of Notes.
The Trustee may place an appropriate notation about an
amendment, supplement or waiver on any Note thereafter authenticated. The
Company in exchange for all Notes may issue and the Trustee shall, upon receipt
of an Authentication Order, authenticate new Notes that reflect the amendment,
supplement or waiver.
Failure to make the appropriate notation or issue a new Note
shall not affect the validity and effect of such amendment, supplement or
waiver.
Section 9.06. Trustee to Sign Amendments, etc.
The Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article Nine if the amendment or supplement does
not adversely affect the rights, duties, liabilities or immunities of the
Trustee. The Company may not sign an amendment or supplemental Indenture until
the Board of Directors approves it. In executing any amended or supplemental
indenture, the Trustee shall be entitled to receive and (subject to Section
7.01 hereof) shall be fully protected in relying upon, in addition to the
documents required by Section 11.04 hereof, an Officers' Certificate and an
Opinion of Counsel stating that the execution of such amended or supplemental
indenture is authorized or permitted by this Indenture.
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ARTICLE 10.
SUBORDINATION
Section 10.01. Agreement to Subordinate.
The Company agrees, and each Holder by accepting a Note
agrees, that the Indebtedness evidenced by the Notes is subordinated in right
of payment, to the extent and in the manner provided in this Article 10, to the
prior payment in full, in cash or Cash Equivalents, of all Senior Debt (whether
outstanding on the date hereof or hereafter created, incurred, assumed or
guaranteed), and that the subordination is for the benefit of the holders of
Senior Debt.
Section 10.02. Certain Definitions.
"Designated Senior Debt" means (i) any Indebtedness
outstanding under the Credit Facility and (ii) any other Senior Debt permitted
hereunder the principal amount of which is $25.0 million or more and that has
been designated by the Company as "Designated Senior Debt."
"Permitted Junior Securities" means Equity Interests in the
Company or debt securities that are subordinated to all Senior Debt (and any
debt securities issued in exchange for Senior Debt) to substantially the same
extent as, or to a greater extent than, the Notes are subordinated to Senior
Debt pursuant to the Indenture.
"Representative" means the indenture trustee or other trustee,
agent or representative for any Senior Debt.
"Senior Debt" means (i) all Indebtedness outstanding under
Credit Facilities and all Hedging Obligations with respect thereto, (ii) any
other Indebtedness permitted to be incurred by the Company under the terms of
this Indenture, unless the instrument under which such Indebtedness is incurred
expressly provides that it is on a parity with or subordinated in right of
payment to the Notes and (iii) all Obligations of the Company with respect to
the foregoing. Notwithstanding anything to the contrary in the foregoing,
Senior Debt will not include (w) any liability for federal, state or other
taxes owed or owing by the Company, (x) any Indebtedness of the Company to any
of its Subsidiaries or other Affiliates, (y) any trade payables or (z) any
Indebtedness that is incurred in violation of the Indenture, provided that
Indebtedness under the Credit Facility will not cease to be Senior Debt if
borrowed based upon a written certification (which can be included in a
borrowing request) from a purported officer of the Company or the Director,
Treasury to the effect that such Indebtedness was permitted by the Indenture to
be incurred.
A distribution may consist of cash, securities or other
property, by set-off or otherwise.
Section 10.03. Liquidation; Dissolution; Bankruptcy.
Upon any distribution to creditors of the Company in a
liquidation or dissolution of the Company or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding
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<PAGE> 75
relating to the Company or its property, in an assignment for the benefit of
creditors or any marshaling of the Company's assets and liabilities:
(1) holders of Senior Debt shall be entitled to receive
payment in full in cash or Cash Equivalents of all Obligations due in respect
of such Senior Debt (including interest after the commencement of any such
proceeding at the rate specified in the applicable Senior Debt) before Holders
of the Notes shall be entitled to receive any payment with respect to the Notes
(except that Holders may receive (i) Permitted Junior Securities and (ii)
payments and other distributions made from any defeasance trust created
pursuant to Section 8.01 hereof); and
(2) until all Obligations with respect to Senior Debt (as
provided in subsection (1) above) are paid in full, in cash or Cash
Equivalents, any distribution to which Holders would be entitled but for this
Article 10 shall be made to holders of Senior Debt (except that Holders of
Notes may receive (i) Permitted Junior Securities and (ii) payments and other
distributions made from any defeasance trust created pursuant to Section 8.01
hereof), as their interests may appear.
Section 10.04. Default on Designated Senior Debt.
The Company may not make any payment or distribution to the
Trustee or any Holder in respect of Obligations with respect to the Notes and
may not acquire from the Trustee or any Holder any Notes for cash or property
(other than (i) Permitted Junior Securities and (ii) payments and other
distributions made from any defeasance trust created pursuant to Section 8.01
hereof) until all principal and other Obligations with respect to the Senior
Debt have been paid in full in cash or Cash Equivalents, if:
(i) a default in the payment of any principal, of premium, if any,
or interest with respect to Designated Senior Debt occurs and is continuing
beyond any applicable grace period in the agreement, indenture or other
document governing such Designated Senior Debt; or
(ii) a default, other than a payment default defined in (i), on
Designated Senior Debt occurs and is continuing that then permits holders
of the Designated Senior Debt as to which such default relates to
accelerate its maturity and the Trustee receives a notice of the default (a
"Payment Blockage Notice") from the Company or the Representative of the
holders of any Designated Senior Debt. If the Trustee receives any such
Payment Blockage Notice, no subsequent Payment Blockage Notice shall be
effective for purposes of this Section unless and until at least 360 days
shall have elapsed since the effectiveness of the immediately prior Payment
Blockage Notice. No nonpayment default that existed or was continuing on
the date of delivery of any Payment Blockage Notice to the Trustee shall
be, or be made, the basis for a subsequent Payment Blockage Notice unless
such default shall have been cured or waived for a period of at least 90
consecutive days.
The Company may and shall resume payments on and distributions
in respect of the Notes and may acquire them upon the earlier of:
(1) in the case of a default referred to in Section
10.04(i) hereof, the date upon which such default is cured or waived, or
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<PAGE> 76
(2) in the case of a default referred to in Section
10.04(ii) hereof, the earlier of the date on which such default is cured or
waived or 179 days after the date on which the applicable Payment Blockage
Notice is received, unless the maturity of any Designated Senior Debt has been
accelerated,
if this Article 10 otherwise permits the payment, distribution or acquisition
at the time of such payment or acquisition.
Section 10.05. Acceleration of Securities.
If payment of the Securities is accelerated because of an
Event of Default, the Company shall promptly notify holders of Senior Debt of
the acceleration.
Section 10.06. When Distribution Must Be Paid Over.
In the event that the Trustee or any Holder receives any
payment of any Obligations with respect to the Notes at a time when the Trustee
or such Holder, as applicable, has actual knowledge that such payment is
prohibited by Section 10.04 hereof, such payment shall be held by the Trustee
or such Holder, in trust for the benefit of, and shall be paid forthwith over
and delivered, upon written request, to, the holders of Senior Debt as their
interests may appear or their Representative under the indenture or other
agreement (if any) pursuant to which Senior Debt may have been issued, as their
respective interests may appear, for application to the payment of all
Obligations with respect to Senior Debt remaining unpaid to the extent
necessary to pay such Obligations in full in accordance with their terms, after
giving effect to any concurrent payment or distribution to or for the holders
of Senior Debt.
With respect to the holders of Senior Debt, the Trustee
undertakes to perform only such obligations on the part of the Trustee as are
specifically set forth in this Article 10, and no implied covenants or
obligations with respect to the holders of Senior Debt shall be read into this
Indenture against the Trustee. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Debt, and shall not be liable to any
such holders if the Trustee shall pay over or distribute to or on behalf of
Holders or the Company or any other Person money or assets to which any holders
of Senior Debt shall be entitled by virtue of this Article 10, except if such
payment is made as a result of the willful misconduct or gross negligence of
the Trustee.
Section 10.07. Notice by Company.
The Company shall promptly notify the Trustee and the Paying
Agent of any facts known to the Company that would cause a payment of any
Obligations with respect to the Notes to violate this Article 10, but failure
to give such notice shall not affect the subordination of the Notes to the
Senior Debt as provided in this Article 10.
Section 10.08. Subrogation.
After all Senior Debt is paid in full and until the Notes are
paid in full, Holders of Notes shall be subrogated (equally and ratably with
all other Indebtedness pari passu with the Notes) to the rights of holders of
Senior Debt to receive distributions applicable to Senior Debt to the extent
that distributions otherwise payable to the Holders of Notes have been applied
to the payment of Senior Debt. A distribution made under this Article 10 to
holders of Senior Debt
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<PAGE> 77
that otherwise would have been made to Holders of Notes is not, as between the
Company and Holders, a payment by the Company on the Notes.
Section 10.09. Relative Rights.
This Article 10 defines the relative rights of Holders of
Notes and holders of Senior Debt. Nothing in this Indenture shall:
(1) impair, as between the Company and Holders of Notes,
the obligation of the Company, which is absolute and unconditional, to pay
principal of and interest on the Notes in accordance with their terms;
(2) affect the relative rights of Holders of Notes and
creditors of the Company other than their rights in relation to holders of
Senior Debt; or
(3) prevent the Trustee or any Holder of Notes from
exercising its available remedies upon a Default or Event of Default, subject
to the rights of holders and owners of Senior Debt to receive distributions and
payments otherwise payable to Holders of Notes.
If the Company fails because of this Article 10 to pay
principal of or interest on a Note on the due date, the failure is still a
Default or Event of Default.
Section 10.10. Subordination May Not Be Impaired by Company.
No right of any holder of Senior Debt to enforce the
subordination of the Indebtedness evidenced by the Notes shall be impaired by
any act or failure to act by the Company or any Holder or by the failure of the
Company or any Holder to comply with this Indenture.
Section 10.11. Distribution or Notice to Representative.
Whenever a distribution is to be made or a notice given to
holders of Senior Debt, the distribution may be made and the notice given to
their Representative.
Upon any payment or distribution of assets of the Company
referred to in this Article 10, the Trustee and the Holders of Notes shall be
entitled to rely upon any order or decree made by any court of competent
jurisdiction or upon any certificate of such Representative or of the
liquidating trustee or agent or other Person making any distribution to the
Trustee or to the Holders of Notes for the purpose of ascertaining the Persons
entitled to participate in such distribution, the holders of the Senior Debt
and other Indebtedness of the Company, the amount thereof or payable thereon,
the amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article 10.
Section 10.12. Rights of Trustee and Paying Agent.
Notwithstanding the provisions of this Article 10 or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Notes, unless the Trustee shall have received at its
Corporate Trust Office at least five Business Days prior to the date of such
payment written notice of facts that would cause the payment of any Obligations
with respect to
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<PAGE> 78
the Notes to violate this Article 10. Only the Company or a Representative may
give the notice. Nothing in this Article 10 shall impair the claims of, or
payments to, the Trustee under or pursuant to Section 7.07 hereof.
The Trustee in its individual or any other capacity may hold
Senior Debt with the same rights it would have if it were not Trustee. Any
Agent may do the same with like rights.
Section 10.13. Authorization to Effect Subordination.
Each Holder of Notes, by the Holder's acceptance thereof,
authorizes and directs the Trustee on such Holder's behalf to take such action
as may be necessary or appropriate to effectuate the subordination as provided
in this Article 10, and appoints the Trustee to act as such Holder's
attorney-in-fact for any and all such purposes. If the Trustee does not file a
proper proof of claim or proof of debt in the form required in any proceeding
referred to in Section 6.09 hereof at least 30 days before the expiration of
the time to file such claim, the Representatives are hereby authorized to file
an appropriate claim for and on behalf of the Holders of the Notes.
Section 10.14. Amendments.
The provisions of this Article 10 shall not be amended or
modified without the written consent of the holders of all Senior Debt.
ARTICLE 11.
MISCELLANEOUS
Section 11.1. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or
conflicts with the duties imposed by TIA Section 318(c), the imposed duties
shall control.
Section 11.2. Notices.
Any notice or communication by the Company or the Trustee to
the others is duly given if in writing and delivered in Person or mailed by
first class mail (registered or certified, return receipt requested), telex,
telecopier or overnight air courier guaranteeing next day delivery, to the
others' address
If to the Company:
Furon Company
29982 Ivy Glenn Drive
Laguna Niguel, California 9277
Telecopier No.: (714) 363-7265
Attention: Donald D. Bradley, Esq.
With a copy to:
O'Melveny & Myers LLP
610 Newport Center Drive
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<PAGE> 79
Newport Beach, California 92660
Telecopier No.: (714) 669-6994
Attention: Gary J. Singer, Esq.
If to the Trustee:
The Bank of New York
101 Barclay St., Floor 21 West
New York, New York 10286
Telecopier No.: 212-575-5915
Attention: Corporate Trust Trustee Administration
The Company or the Trustee, by notice to the others may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to
Holders) shall be deemed to have been duly given: at the time delivered by
hand, if personally delivered; five Business Days after being deposited in the
mail, postage prepaid, if mailed; when receipt acknowledged, if telecopied; and
the next Business Day after timely delivery to the courier, if sent by
overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by
first class mail or by overnight air courier guaranteeing next day delivery to
its address shown on the register kept by the Registrar. Any notice or
communication shall also be so mailed to any Person described in TIA Section
313(c), to the extent required by the TIA. Failure to mail a notice or
communication to a Holder or any defect in it shall not affect its sufficiency
with respect to other Holders.
If a notice or communication is mailed in the manner provided
above within the time prescribed, it is duly given, whether or not the
addressee receives it.
If the Company mails a notice or communication to Holders, it
shall mail a copy to the Trustee and each Agent at the same time.
Section 11.3. Communication by Holders of Notes with Other Holders of Notes.
Holders may communicate pursuant to TIA Section 312(b) with
other Holders with respect to their rights under this Indenture or the Notes.
The Company, the Trustee, the Registrar and anyone else shall have the
protection of TIA Section 312(c).
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:
(a) an Officers' Certificate in form and substance
reasonably satisfactory to the Trustee (which shall include the statements set
forth in Section 11.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and
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<PAGE> 80
(b) an Opinion of Counsel in form and substance
reasonably satisfactory to the Trustee (which shall include the statements set
forth in Section 11.05 hereof) stating that, in the opinion of such counsel,
all such conditions precedent and covenants have been satisfied;
provided, however, that the foregoing Officers' Certificate and Opinion of
Counsel shall not be required to be furnished to the Trustee in connection with
the issuance of the Initial Notes pursuant to this Indenture.
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 comply with the provisions
of TIA Section 314(e) and shall include:
(a) a statement that the Person making such certificate
or opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he
or she has made such examination or investigation as is necessary to enable
such person to express an informed opinion as to whether or not such covenant
or condition has been satisfied; and
(d) a statement as to whether or not, in the opinion of
such Person, such condition or covenant has been satisfied.
Section 11.6. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a
meeting of Holders. The Registrar or Paying Agent may make reasonable rules
and set reasonable requirements for its functions.
Section 11.7. No Personal Liability Of Directors, Officers, Employees And
Shareholders.
No director, officer, employee, incorporator, partner, member
or stockholder of the Company or any Subsidiary of the Company, or of any
member, partner or stockholder of any such entity, 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 are part of the consideration for
issuance of the Notes. Such waiver may not be effective to waive liabilities
under the federal securities laws and it is the view of the SEC that such a
waiver is against public policy.
Section 11.8. Governing Law.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE
USED TO CONSTRUE THIS INDENTURE, THE NOTES WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE
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<PAGE> 81
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
Section 11.9. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret any other
indenture, loan or debt agreement of the Company or its Subsidiaries or of any
other Person. Any such indenture, loan or debt agreement may not be used to
interpret this Indenture.
Section 11.10. Successors.
All agreements of the Company in this Indenture and the Notes
shall bind its successors. All agreements of the Trustee in this Indenture
shall bind its successors.
Section 11.11. Severability.
In case any provision in this Indenture or in the Notes shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
Section 11.12. Counterpart Originals.
The parties may sign any number of copies of this Indenture.
Each signed copy shall be an original, but all of them together represent the
same agreement.
Section 11.13. Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and Headings of
the Articles and Sections of this Indenture have been inserted for convenience
of reference only, are not to be considered a part of this Indenture and shall
in no way modify or restrict any of the terms or provisions hereof.
[Signatures on following page]
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<PAGE> 82
SIGNATURES
FURON COMPANY
By: /s/ J. Michael Hagan
--------------------------------------------
J. Michael Hagan
Chief Executive Officer
By: /s/ Monty A. Houdeshell
--------------------------------------------
Monty A. Houdeshell
Vice President and Chief Financial Officer
THE BANK OF NEW YORK, as Trustee
By: /s/ Mary Beth Lewicki
--------------------------------------------
Name: Mary Beth Lewicki
Title: Assistant Vice President
By: /s/ Lucille Firrincieli
--------------------------------------------
Name: Lucille Firrincieli
Title: Vice President
<PAGE> 1
EXHIBIT 10.13
AMENDMENT NO. 1
TO
FIRST AMENDED AND RESTATED CREDIT AGREEMENT
- --------------------------------------------------------------------------------
AMENDMENT NO. 1 (this "Amendment"), dated as of February 3, 1998, to
the First Amended and Restated Credit Agreement (the "Credit Agreement"), dated
as of March 27, 1997, by and among FURON COMPANY, a California corporation (the
"Borrower"), the Lenders party thereto, THE FIRST NATIONAL BANK OF CHICAGO and
NATIONSBANK OF TEXAS, N.A., as Co-Agents, and THE BANK OF NEW YORK, as swing
line lender (in such capacity, the "Swing Line Lender"), ABN AMRO BANK N.V.,
LOS ANGELES INTERNATIONAL BRANCH, as Documentation Agent, and THE BANK OF NEW
YORK, as administrative agent for the Lenders (in such capacity, the
"Administrative Agent").
RECITALS
A. Capitalized terms used herein which are not defined herein
shall have the respective meanings ascribed thereto in the Credit Agreement.
B. The Borrower intends to issue Senior Subordinated Notes (as
defined below) and, in connection therewith, desires to reduce the Aggregate
Revolving Credit Commitment Amount and to amend the Credit Agreement to the
extent set forth below and the Administrative Agent and the Lenders are willing
to agree to the foregoing, subject to the terms and conditions set forth below.
C. The Borrower has requested that the Administrative Agent and
the Lenders release the Medex Guaranty and the Administrative Agent, with the
consent of the Lenders is willing to agree thereto, subject to the terms and
conditions set forth below.
Accordingly, in consideration of the covenants, conditions and
agreements hereinafter set forth, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as follows:
1. The Aggregate Revolving Credit Commitments and Aggregate
Revolving Credit Amount are hereby reduced from $250,000,000 to $200,000,000.
2. Section 1.1 of the Credit Agreement is amended by adding the
following definitions in their appropriate alphabetical order:
"Consolidated Senior Debt": at any date of
determination, Consolidated Total Debt minus Subordinated Debt.
"Senior Leverage Ratio": at any date of
determination, the ratio of (x) Consolidated Senior Debt on
such date to (y) Consolidated EBITDA for the four fiscal
quarter period ending on such date or, if such date is not the
<PAGE> 2
last day of a fiscal quarter, for the immediately preceding
four fiscal quarter period.
"Subordinated Debt": the Indebtedness of the Borrower
under the Senior Subordinated Notes and the Senior
Subordinated Indenture.
"Senior Subordinated Indenture": the Indenture
between the Borrower and the trustee named therein, pursuant
to which the Senior Subordinated Notes are issued, as the same
may be amended, supplemented or otherwise modified from time
to time.
"Senior Subordinated Notes": the $125,000,000 Senior
Subordinated Notes, due 2008, issued by the Borrower pursuant
to the Senior Subordinated Indenture, as the same may be
amended, supplemented or otherwise modified from time to time.
3. The following definitions contained in Section 1.1 of the
Credit Agreement are amended to read as follows:
"Excess Disposition Proceeds": with respect to any
fiscal year, the amount (if positive) equal to the amount of
Net Cash Proceeds received by the Borrower and/or any of its
Subsidiaries during such fiscal year minus $3,000,000.
"Loan Documents": collectively, this Agreement and
any promissory notes issued pursuant to Section 2.10.
4. Sections 2.6(b) and (d) of the Credit Agreement are amended in
their entirety to read as follows:
(b) Mandatory Reduction in Respect of an Equity
Offering or Issuance of Refinancing Debt. The Aggregate
Revolving Credit Commitment Amount shall be permanently
reduced in the event of any Equity Offering or the issuance of
any Refinancing Debt (other than the Senior Subordinated
Notes) at the times and in the amounts set forth below:
(i) in the case of an Equity Offering consummated
within one year after the consummation of the
Medex Stock Purchase, 100% of the Net
Issuance Proceeds thereof, such reduction to
be effective upon the receipt of such Net
Issuance Proceeds;
(ii) in the case of any other Equity Offering, 50%
of the Net Issuance Proceeds thereof, such
reduction to be effective upon the receipt of
such Net Issuance Proceeds; and
<PAGE> 3
(iii) in the case of the issuance of any
Refinancing Debt (other than the Senior
Subordinated Notes), 100% of the Net Issuance
Proceeds thereof, such reduction to be
effected upon the receipt of such Net
Issuance Proceeds, provided, however, that
the Aggregate Revolving Credit Commitment
Amount shall not be reduced to less than
$150,000,000 pursuant to this clause (iii).
(d) Mandatory Reductions Relating to
Dispositions. With respect to each Disposition described in
Section 8.4(c), the Aggregate Revolving Credit Commitment
Amount shall be permanently reduced on the applicable
Disposition Reduction/Prepayment Date by an amount equal to
100% of the Disposition Reduction/Prepayment Amount in respect
of such Disposition.
5. Section 2.6 of the Credit Agreement is further amended by
adding the following new subsection (f) thereto:
(f) Mandatory Reduction Relating to Asset Sales
under the Senior Subordinated Indenture. The Aggregate
Revolving Credit Commitment Amount shall be permanently
reduced by an amount equal to any prepayment required to be
made pursuant to Section 2.7(h) on the date of such
prepayment.
6. Sections 2.7(d) and (f) of the Credit Agreement are amended in
their entirety to read as follows:
(d) Mandatory Prepayments in Respect of an Equity
Offering or Issuance of Refinancing Debt. In the event of an
Equity Offering or the issuance of Refinancing Debt (other
than the Senior Subordinated Notes), the Borrower shall prepay
the Revolving Credit Loans (and, if after giving effect to
such prepayment, there are no Revolving Credit Loans
outstanding, the Swing Line Loans) at the times and in the
amounts set forth below:
(i) in the case of an Equity Offering consummated
within one year after the consummation of the
Medex Stock Purchase, 100% of the Net
Issuance Proceeds thereof;
(ii) in the case of any other Equity Offering, 50%
of the Net Issuance Proceeds thereof, such
prepayment to be made upon the receipt of
such Net Issuance Proceeds; and
<PAGE> 4
(iii) in the case of the issuance of any
Refinancing Debt (other than the Senior
Subordinated Notes), 100% of the Net Issuance
Proceeds thereof, such prepayment to be made
on the date of the receipt of the Net
Issuance Proceeds thereof.
(f) Mandatory Prepayments Relating to
Dispositions. In respect of any Disposition described in
Section 8.4(c), on the applicable Disposition
Reduction/Prepayment Date, the Borrower shall prepay the
Revolving Credit Loans (and, if after giving effect to such
prepayment, there are no Revolving Credit Loans outstanding,
the Swing Line Loans) by an amount equal to 100% of the
Disposition Reduction/Prepayment Amount in respect of such
Disposition, if any.
7. Section 2.7 of the Credit Agreement is further amended by
adding the following new subsection (h) thereto:
(h) Mandatory Prepayment Relating to Asset Sales
under the Senior Subordinated Indenture. In the event that the
Borrower would be required to make an "Asset Sale Offer" (as
defined in the Senior Subordinated Indenture), the Borrower
shall make a prepayment of the Loans in an amount equal to the
amount of such Asset Sale Offer that would be required under
the Senior Subordinated Indenture on the Business Day
immediately preceding the day on which the Borrower would be
required to make such Asset Sale Offer.
8. Section 6.1 of the Credit Agreement is amended by substituting
a comma for the word "and" at the end of clause (i) thereof and by adding the
following before the period at the end of clause (ii) thereof:
and (iii) the Loans requested shall constitute Indebtedness
which the Borrower is permitted to incur pursuant to the
provisions of the Senior Subordinated Indenture.
9. Section 6.2 of the Credit Agreement is amended in its entirety
to read as follows:
6.2. Borrowing Request
The Administrative Agent shall have received,
a Borrowing Request, duly executed by an authorized officer or
the Director, Treasury of the Borrower.
10. Section 7.11(b) of the Credit Agreement is amended with
respect to the period on and after the Amendment No. 1 Effective Date in its
entirety to read as follows:
<PAGE> 5
(b) Leverage Ratio. Maintain at all times during
the periods set forth below, a Leverage Ratio of not more than
the ratios set forth below:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Amendment No. 1 Effective
Date through July 31, 1999 4.25:1.00
August 1, 1999 through
July 29, 2000 4.00:1.00
July 30, 2000 through
August 5, 2001 3.75:1.00
August 6, 2001 and
thereafter 3.50:1.00.
</TABLE>
11. Section 7.11 of the Credit Agreement is amended by adding a new
subsection (e) to the end thereof to read as follows:
(e) Senior Leverage Ratio. Maintain at all times
during the periods set forth below, a Senior Leverage Ratio of
not more than the ratios set forth below:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Amendment No. 1 Effective
Date through July 31, 1999 3.00:1.00
August 1, 1999 through
July 29, 2000 2.75:1.00
July 30, 2000 and
thereafter 2.50:1.00.
</TABLE>
12. Section 8.1(v) of the Credit Agreement is amended by adding
"(including the Indebtedness of the Borrower under the Senior Subordinated
Notes)" immediately after the reference to "Refinancing Debt" at the beginning
of such clause (v).
13. Sections 8.3(e)(iii) and 8.3(f)(iii) of the Credit Agreement
are each amended to read as follows:
(iii) the Leverage Ratio will not exceed 4:00:1.00 and the
Borrower will be in compliance with each of the financial
covenants contained in Section 7.11, in each case on a
pro-forma basis after giving effect
<PAGE> 6
to such Acquisition and any Indebtedness incurred or assumed in
connection therewith which is permitted by Section 8.1,
14. Section 8.4(c)(iii) of the Credit Agreement is amended to read
as follows:
(iii) in the event that the Net Cash Proceeds of
such Disposition together with the Net Cash Proceeds of all
Dispositions made during the same fiscal year exceed
$3,000,000 in the aggregate, the Aggregate Revolving Credit
Commitment Amount shall be permanently reduced and the
Borrower shall prepay the Loans at the times and in the
amounts specified in Sections 2.6 and 2.7, if applicable, and
15. Section 8.5(j) of the Credit Agreement is amended to read in
its entirety as follows:
(j) Investments consisting of loans or
contributions by the Borrower to the ESOP or to a grantor
employee stock trust in the ordinary course of the operation
thereof not in excess of $10,000,000 in the aggregate; and
16. Section 8 of the Credit Agreement is amended by adding new
Sections 8.12 and 8.13 to the end thereof to read as follows:
8.12. Subordinated Debt
Make any payment in respect of principal of,
or premium or interest on, or purchase, voluntarily redeem or
otherwise retire, or make any payment in respect of all or any
part of the Indebtedness under the Senior Subordinated
Indenture or the Senior Subordinated Notes or any other
subordinated Indebtedness, or permit any Subsidiary so to do,
except subject to the subordination provisions of the Senior
Subordinated Indenture (as in effect on its original effective
date), payments required to be made under the Senior
Subordinated Indenture or with respect to the Senior
Subordinated Notes.
8.13. Designated Senior Debt
Designate any Indebtedness (other than the
Indebtedness under the Loan Documents) as "Designated Senior
Debt" for purposes of the Senior Subordinated Indenture
without the prior written consent of Required Lenders.
17. Section 9.1(k) of the Credit Agreement is hereby deleted and
Section 9.1(l) is relettered as 9.1(k).
18. Section 11.1(a) of the Credit Agreement is hereby amended by
adding the word "or" immediately prior to clause (vi) thereof, by inserting a
semi-colon immediately after the term
<PAGE> 7
"Required Lenders" on the penultimate line thereof and by deleting "or (vii)
release Medex from its obligations under the Medex Guaranty;" at the end
thereof.
19. Each of the Lenders hereby consents to the release by the
Administrative Agent of the Medex Guaranty. The Administrative Agent, with the
consent of each of the Lenders, hereby releases Medex from the Medex Guaranty
which shall be of no further force and effect.
20. Exhibits A, B and D in the form annexed is substituted for
Exhibits A, B and D to the Credit Agreement.
21. Paragraphs 1-20 of this Amendment shall not be effective until
the prior or simultaneous fulfillment of the following conditions (the
"Amendment No. 1 Effective Date"):
(a) the Amendment No. 1 Effective Date shall have
occurred prior to September 1, 1998;
(b) the Administrative Agent shall have received
this Amendment executed by a duly authorized officer or officers of
each party hereto;
(c) the Administrative Agent shall have received
a certificate of the Secretary or Assistant Secretary of the Borrower
(i) attaching a true and complete copy of the resolutions of its Board
of Directors and of all documents evidencing other necessary corporate
action (in form and substance satisfactory to the Administrative
Agent) taken by the Borrower to authorize the execution and delivery
of this Amendment, the Senior Subordinated Indenture and the Senior
Subordinated Notes, (ii) certifying that its certificate of
incorporation and by-laws have not been amended since November 16,
1996, or, if so, setting forth the same and (iii) setting forth the
incumbency of its officer or officers who may sign this Amendment,
including therein a signature specimen of such officer or officers;
(d) the Borrower shall have prepaid the Loans to
the extent required by Section 2.7(b) of the Credit Agreement;
(e) No Default or Event of Default would exist
before or after giving effect to the issuance of the Senior
Subordinated Notes and the Administrative Agent shall have received a
certificate of a Financial Officer to such effect, which certificate
shall attached a true, complete and correct copy of the Senior
Subordinated Indenture and the offering memorandum with respect
thereto; and
(f) The Senior Subordinated Notes shall have been
issued and the Borrower shall have received the net proceeds thereof.
22. This Amendment may be executed in any number of counterparts,
each of which shall be an original and all of which shall constitute one
amendment. It shall not be necessary in making proof of this Amendment to
produce or account for more than one counterpart signed by the party to be
charged.
<PAGE> 8
23. This Amendment is being delivered in and is intended to be
performed in the State of New York and shall be construed and enforceable in
accordance with, and be governed by, the internal laws of the State of New York
without regard to principles of conflict of laws.
24. Except as amended hereby, the Credit Agreement shall in all
other respects remain in full force and effect.
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No.
1 to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
FURON COMPANY
By: /s/ J. Michael Hagan
------------------------------------------
Name: J. Michael Hagan
Title: Chairman and CEO
By: /s/ Monty Houdeshell
------------------------------------------
Name: Monty Houdeshell
Title: Chief Financial Officer
<PAGE> 10
AMENDMENT NO. 1 TO THE FURON CREDIT AGREEMENT
THE BANK OF NEW YORK, Individually, as Swing
Line Lender and as Administrative Agent
By: /s/ Rebecca K. Levine
------------------------------------------
Name: Rebecca K. Levine
Title: Vice President
<PAGE> 11
AMENDMENT NO. 1 TO THE FURON CREDIT AGREEMENT
ABN AMRO BANK N.V., LOS ANGELES INTERNATIONAL
BRANCH, Individually, and as
Documentation Agent
By: /s/ John A. Miller
------------------------------------------
Name: John A. Miller
Title: Group Vice President
By: /s/ Heather F. Brandt
------------------------------------------
Name: Heather F. Brandt
Title: Vice President
<PAGE> 12
AMENDMENT NO. 1 TO THE FURON CREDIT AGREEMENT
THE FIRST NATIONAL BANK OF CHICAGO,
Individually, and as Co-Agent
By: /s/ James D. Benko
------------------------------------------
Name: James D. Benko
Title: Vice President
<PAGE> 13
AMENDMENT NO. 1 TO THE FURON CREDIT AGREEMENT
NATIONSBANK OF TEXAS, N.A., Individually,
and as Co-Agent
By: /s/ Charles F. Lilygren
------------------------------------------
Name: Charles F. Lilygren
Title: Vice President
<PAGE> 14
AMENDMENT NO. 1 TO THE FURON CREDIT AGREEMENT
THE BANK OF NOVA SCOTIA
By: /s/ Chris Osborn
------------------------------------------
Name: Chris Osborn
Title: Relationship Manager
<PAGE> 15
AMENDMENT NO. 1 TO THE FURON CREDIT AGREEMENT
MELLON BANK, N.A.
By: /s/ Gill S. Realon
------------------------------------------
Name: Gill S. Realon
Title: Vice President
<PAGE> 16
AMENDMENT NO. 1 TO THE FURON CREDIT AGREEMENT
COMERICA BANK
By: /s/ Emmanuel M. Skevofilax
------------------------------------------
Name: Emmanuel M. Skevofilax
Title: Assistant Vice President
<PAGE> 17
AMENDMENT NO. 1 TO THE FURON CREDIT AGREEMENT
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Andrew G. Ewing, Jr.
------------------------------------------
Name: Andrew G. Ewing, Jr.
Title: Vice President
<PAGE> 18
AMENDMENT NO. 1 TO THE FURON CREDIT AGREEMENT
BANK ONE, NA
By: /s/ Douglas M. Klamfoth
------------------------------------------
Name: Douglas M. Klamfoth
Title: Vice President
<PAGE> 19
AMENDMENT NO. 1 TO THE FURON CREDIT AGREEMENT
BANQUE NATIONALE DE PARIS
By: /s/ Clive Bettles
------------------------------------------
Name: Clive Bettles
Title: Senior Vice President & Manager
By: /s/ Deborah Y. Gohh
------------------------------------------
Name: Deborah Y. Gohh
Title: Vice President
<PAGE> 20
AMENDMENT NO. 1 TO THE FURON CREDIT AGREEMENT
THE INDUSTRIAL BANK OF JAPAN, LIMITED,
LOS ANGELES AGENCY
By: /s/ Vicente L. Timiraos
------------------------------------------
Name: Vicente L. Timiraos
Title: Senior Vice President &
Senior Deputy General Manager
<PAGE> 21
AMENDMENT NO. 1 TO THE FURON CREDIT AGREEMENT
WACHOVIA BANK OF GEORGIA, N.A.
By: /s/ Mariel C. Albrecht
------------------------------------------
Name: Mariel C. Albrecht
Title: Assistant Vice President
<PAGE> 1
EXHIBIT 10.14
$125,000,000
FURON COMPANY
8 1/8% Senior Subordinated Notes due 2008
PURCHASE AGREEMENT
February 26, 1998
LEHMAN BROTHERS INC.,
BEAR, STEARNS & CO. INC.
BNY CAPITAL MARKETS, INC.
c/o Lehman Brothers, Inc.
Three World Financial Center
New York, New York 10285
Dear Sirs:
Furon Company, a California corporation (the "Company"),
proposes to issue and sell to you (the "Initial Purchasers") $125.0 million in
aggregate principal amount at maturity of its 8 1/8% Senior Subordinated Notes
due 2008 (the "Initial Notes") to be issued pursuant to the terms of an
Indenture (the "Indenture") between the Company and The Bank of New York, as
trustee (the "Trustee"), relating to the Initial Notes. The Initial Purchasers
propose to purchase the respective aggregate principal amount of Initial Notes
set forth opposite their name on Schedule 1 hereto. Capitalized terms used but
not defined herein shall have the meanings given to such terms in the
Indenture.
The Initial Notes will be offered and sold to you pursuant to
exemptions from the registration requirements under the Securities Act of 1933,
as amended (the "Securities Act"). The Company has prepared a preliminary
offering memorandum, dated February 12, 1998 (the "Preliminary Offering
Memorandum"), and a final offering memorandum (the "Offering Memorandum"),
dated February 26, 1998, relating to the Company and the Initial Notes. As
described in the Offering Memorandum, the Company will use the net proceeds
from the offering of the Initial Notes to repay a portion of existing
indebtedness under the Company's Credit Facility.
Upon original issuance thereof, and until such time as the
same is no longer required under the applicable requirements of the Securities
Act, the Initial Notes (and all securities issued in exchange therefor or in
substitution thereof) shall bear the following legend:
<PAGE> 2
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY
EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON
THE EXEMPTION FROM THE PROVISION OF SECTION 5 OF THE SECURITIES ACT
PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY
EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH
SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) (a)
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 903 OR 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 COMPANY SO REQUESTS), (2) TO THE COMPANY OR
(3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE,
IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER
FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS
SET FORTH IN (A) ABOVE."
You have represented and warranted to the Company that you
will make offers (the "Exempt Resales") of the Initial Notes purchased by you
hereunder on the terms set forth in the Offering Memorandum, as amended or
supplemented, solely to (i) persons whom you reasonably believe to be
"qualified institutional buyers," as defined in Rule 144A under the Securities
Act ("QIBs"), and (ii) to persons other than U.S. Persons in offshore
transactions meeting the requirements of Rule 903 or 904 of Regulation S (such
persons specified in clauses (i) and (ii) being referred to herein as the
"Eligible Purchasers"). As used herein, the terms "offshore transaction" and
"U.S. person" have the respective meanings given to them in Regulation S. You
will offer the Initial Notes to Eligible Purchasers initially at a price equal
to 100% of the principal amount thereof. Such price may be changed at any time
without notice.
Holders (including subsequent transferees) of the Initial
Notes will have the registration rights set forth in the registration rights
agreement (the "Registration Rights Agreement"), to be dated March 4, 1998 (the
"Closing Date"), in the form of Exhibit A hereto, for so long as such Initial
Notes constitutes "Transfer Restricted Securities" (as defined in the
Registration Rights Agreement). Pursuant to the Registration Rights Agreement,
the Company will agree to file with the Securities and Exchange Commission (the
"Commission") under the
<PAGE> 3
circumstances set forth therein, (i) a registration statement under the
Securities Act (the "Exchange Offer Registration Statement") relating to the
Company's 8 1/8% New Notes due 2008 (the "New Notes" and, together with the
Initial Notes, the "Notes") to be offered in exchange for the Initial Notes
(such offer to exchange being referred to collectively as the "Exchange Offer")
and (ii) a shelf registration statement pursuant to Rule 415 under the
Securities Act (the "Shelf Registration Statement", and together with the
Exchange Offer Registration Statement, the "Registration Statements") relating
to the resale of the Initial Notes by certain holders of such Notes, and to use
its best efforts to cause such Registration Statements to be declared
effective. This Agreement, the Indenture and the Registration Rights Agreement
are hereinafter referred to collectively as the "Operative Documents."
1. Representations, Warranties and Agreements of the
Company. The Company represents, warrants and agrees as follows:
(a) The Preliminary Offering Memorandum and Offering
Memorandum have been prepared by the Company for use by the Initial Purchasers
in connection with the Exempt Resales. No order or decree preventing the use
of the Preliminary Offering Memorandum or the Offering Memorandum, or any order
asserting that the transactions contemplated by this Agreement are subject to
the registration requirements of the Securities Act, has been issued and no
proceeding for that purpose has commenced or is pending or, to the knowledge of
the Company, is contemplated.
(b) The Preliminary Offering Memorandum and the Offering
Memorandum as of their respective dates did not, and the Offering Memorandum as
of the Closing Date will not, contain an untrue statement of a material fact or
omit to state a material fact necessary, in order to make the statements
contained therein, in light of the circumstances under which they were made,
not misleading, except that this representation and warranty does not apply to
statements in or omissions from the Preliminary Offering Memorandum and
Offering Memorandum relating to the Initial Purchasers and made in reliance
upon and in conformity with information furnished to the Company in writing by
or on behalf of the Initial Purchasers expressly for use therein.
(c) The market-related data included in the Preliminary
Offering Memorandum and the Offering Memorandum are based upon estimates by the
Company derived from sources which the Company believes to be reasonable;
however, no assurance is given that such market-related data are accurate in
all material respects.
(d) The Company is a corporation duly incorporated and
validly existing and in good standing under the laws of California with all
requisite corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Preliminary Offering
Memorandum and the Offering Memorandum, and is duly registered and qualified to
conduct its business and is in good standing in each jurisdiction or place
where the nature of its properties or the conduct of its business requires such
registration or qualification, except where the failure so to register or
qualify or to be in good standing would not have a material adverse effect on
the condition (financial or other), business, properties or results of
operations of the Company and its Subsidiaries, taken as a whole (a "Material
Adverse Effect").
<PAGE> 4
(e) Medex, Inc. ("Medex") is a corporation duly
incorporated and validly existing and in good standing under the laws of Ohio
with all requisite corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Preliminary Offering
Memorandum and the Offering Memorandum, and is duly registered and qualified to
conduct its business and is in good standing in each jurisdiction or place
where the nature of its properties or the conduct of its business requires such
registration or qualification, except where the failure so to register or
qualify or to be in good standing would not have a Material Adverse Effect.
(f) The Company has all requisite corporate power and
corporate authority to execute, deliver and perform its obligations under this
Agreement, the Indenture, the Notes and the Registration Rights Agreement.
(g) This Agreement has been duly authorized, executed and
delivered by the Company and, assuming due authorization, execution and
delivery by the Initial Purchasers, constitutes the legally valid and binding
agreement of the Company, enforceable against the Company in accordance with
its terms (subject to applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and other similar laws relating to or affecting
creditors' rights generally from time to time in effect and to general
principles of equity, including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing and the possible unavailability of
specific performance or injunctive relief, regardless of whether in a
proceeding in equity or at law) and except as rights to indemnity and
contribution hereunder may be limited by federal or state securities laws or
principles of public policy.
(h) The Registration Rights Agreement has been duly
authorized by the Company and, upon its execution and delivery by the Company
and, assuming due authorization, execution and delivery by the Initial
Purchasers, will constitute the legally valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms (subject
to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and other similar laws relating to or affecting creditors' rights
generally from time to time in effect and to general principles of equity,
including, without limitation, concepts of materiality, reasonableness, good
faith and fair dealing and the possible unavailability of specific performance
or injunctive relief, regardless of whether in a proceeding in equity or at
law) and except as rights to indemnity and contribution thereunder may be
limited by federal or state securities laws or principles of public policy.
(i) The Indenture has been duly authorized by the
Company, and upon its execution and delivery by the Company and, assuming due
authorization, execution and delivery by the Trustee, will constitute the
legally valid and binding agreement of the Company, enforceable against the
Company in accordance with its terms (subject to applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and other similar
laws relating to or affecting creditors' rights generally from time to time in
effect and to general principles of equity, including, without limitation,
concepts of materiality, reasonableness, good faith and fair dealing and the
possible unavailability of specific performance or injunctive relief,
regardless of whether in a proceeding in equity or at law); no qualification of
the Indenture
<PAGE> 5
under the Trust Indenture Act of 1939 ("TIA") is required in connection with
the offer and sale of the Initial Notes contemplated hereby or in connection
with the Exempt Resales other than in connection with the performance of the
Company's obligations under the Registration Rights Agreement.
(j) The Initial Notes have been duly authorized by the
Company and when duly executed by the Company in accordance with the terms of
the Indenture and, assuming due authentication of the Initial Notes by the
Trustee, upon delivery to the Initial Purchasers against payment therefor in
accordance with the terms hereof, will have been validly issued and delivered,
and will constitute legally valid and binding obligations of the Company
entitled to the benefits of the Indenture, enforceable against the Company in
accordance with their terms (subject to applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and other similar laws relating
to or affecting creditors' rights generally from time to time in effect and to
general principles of equity, including, without limitation, concepts of
materiality, reasonableness, good faith and fair dealing and the possible
unavailability of specific performance or injunctive relief, regardless of
whether in a proceeding in equity or at law).
(k) On or before the Closing Date the New Notes will have
been duly authorized by the Company and if and when duly issued and
authenticated in accordance with the terms of the Indenture and delivered in
accordance with the Exchange Offer provided for in the Registration Rights
Agreement, will constitute legally valid and binding obligations of the Company
entitled to the benefits of the Indenture, enforceable against the Company in
accordance with their terms (subject to applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and other similar laws relating
to or affecting creditors' rights generally from time to time in effect and to
general principles of equity, including, without limitation, concepts of
materiality, reasonableness, good faith and fair dealing and the possible
unavailability of specific performance or injunctive relief, regardless of
whether in a proceeding in equity or at law).
(l) The First Amended and Restated Credit Agreement,
dated as of March 27, 1997, as amended on February 3, 1998, by and among Furon
Company, the various lenders thereto, the Bank of New York, as swing line
lender and administration agent, and BNY Capital Markets, Inc., as arranging
agent providing for up to $200 million of revolving credit borrowings (the
"Credit Agreement"), and any and all other agreements and instruments ancillary
to or entered into in connection with the transaction contemplated by the
Credit Agreement (the "Credit Documents"), were duly and validly authorized,
executed and delivered by the Company and, assuming due authorization,
execution and delivery by the other parties thereto, constitute the valid and
binding agreements of the Company, enforceable against the Company in
accordance with their respective terms (subject to applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and other similar
laws affecting creditors' rights generally from time to time in effect and to
general principles of equity, including, without limitation, concepts of
materiality, reasonableness, good faith and fair dealing, regardless of whether
in a proceeding in equity or at law). As of the date hereof, the Company will
have at least $175.0 million of borrowings available to it under the Credit
Agreement (giving effect to the covenants and conditions contained in the
Credit Agreement) after the Closing of the sale of the
<PAGE> 6
Initial Notes hereunder, the receipt by the Company of the proceeds therefrom
and the application of such proceeds as described under the caption "Use of
Proceeds" in the Offering Memorandum.
(m) All the shares of capital stock of the Company
outstanding prior to the issuance of the Initial Notes have been duly
authorized and validly issued and are fully paid and nonassessable.
(n) Neither the Company nor any of its Subsidiaries owns
capital stock or other equity interests of any corporation or entity except
that of wholly owned Subsidiaries other than as disclosed in the Offering
Memorandum or the Company's Exchange Act reports. Each of the Subsidiaries
(other than Medex, as to which Section 1(e) applies) is a corporation duly
incorporated and validly existing and in good standing under the laws of its
jurisdiction of its incorporation, with all requisite corporate power and
authority to own, lease and operate its properties and to conduct its business
as described in the Offering Memorandum, and is duly registered and qualified
to conduct its business and is in good standing in each jurisdiction or place
where the nature of its properties or the conduct of its business requires such
registration or qualification, except where the failure to so register or
qualify or be in good standing would not have a Material Adverse Effect. All
the outstanding shares of capital stock of each of the Company's Subsidiaries
have been duly authorized and validly issued, are fully paid and nonassessable,
and are wholly owned by the Company directly, or indirectly through one of its
other Subsidiaries, free and clear of any lien, adverse claim, security
interest, equity or other encumbrance, except as specifically described in the
Offering Memorandum.
(o) There are no legal or governmental proceedings
pending or, to the knowledge of the Company or Medex , threatened, against the
Company or any of its Subsidiaries or to which any of their respective
properties is subject, that are not disclosed in the Offering Memorandum and
which, are reasonably likely to have a Material Adverse Effect or to materially
and adversely affect the issuance of the Notes or the consummation of the other
transactions contemplated by the Operative Documents. Neither the Company nor
any of its Subsidiaries is involved in any strike, job action or labor dispute
with any group of employees, and, to the knowledge of the Company or Medex, no
such action or dispute is threatened.
(p) No material relationship, direct or indirect, exists
between or among the Company or any of its Subsidiaries on the one hand, and
the directors, officers, shareholders, customers or suppliers of the Company or
any of its Subsidiaries on the other hand, that would be required to be
described in the Offering Memorandum pursuant to Regulation S-K of the Act if
Regulation S-K were applicable to the Offering Memorandum, which is not so
described in the Offering Memorandum or the Company's Exchange Act reports.
(q) The execution, delivery and performance of this
Agreement and the other Operative Documents and the issuance of the Initial
Notes and the New Notes and the consummation of the transactions contemplated
hereby and thereby will not conflict with, or result in a breach or violation
of any of the terms or provisions of, or (including with the giving of notice
or the lapse of time or both) constitute a default under (i) any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which the Company or any of its
<PAGE> 7
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound or to which any of the properties or assets of the Company or any of its
Subsidiaries is subject, (ii) the provisions of the charter, by-laws or other
organizational documents of the Company or any of its Subsidiaries or (iii) any
statute or any order, rule or regulation of any court or governmental agency or
body having jurisdiction over the Company or any of its Subsidiaries or any of
their properties or assets, except in the cases of clause (i) or (iii), such
breaches, violations or defaults that in the aggregate would not reasonably be
expected to have a Material Adverse Effect; and no consent, approval,
authorization or order of, or filing or registration with, any court or
governmental agency or body is required for the execution, delivery and
performance of this Agreement and the other Operative Documents and the
issuance of the Initial Notes and the New Notes and the consummation of the
transactions contemplated hereby and thereby except (A) as may be required by
the securities or "blue sky" laws of any state of the United States in
connection with the sale of the Initial Notes and the New Notes, and (B) as
contemplated by the Registration Rights Agreement and (C) as required under the
TIA for the issuance of the New Notes, and (D) in connection with trading of
the Notes on PORTAL.
(r) The accountants, Ernst & Young LLP, who have
certified certain of the financial statements included as part of the Offering
Memorandum, are independent public accountants under Rule 101 of the Code of
Professional Conduct of the American Institute of Certified Public Accountants
(the "AICPA"), and its interpretation and rulings.
(s) The consolidated historical financial statements,
together with the related notes thereto, set forth in the Offering Memorandum
comply as to form in all material respects with the requirements of Regulation
S-X under the Securities Act applicable to registration statements on Form S-3
under the Securities Act. Such historical financial statements fairly present
the financial position of the Company and its Subsidiaries at the respective
dates indicated and the results of operations and cash flows for the respective
periods indicated, in each case in accordance with generally accepted
accounting principles ("GAAP") consistently applied throughout such periods.
The other financial and statistical information and data included in the
Offering Memorandum are, in all material respects, accurately presented and
prepared on a basis consistent with such financial statements and the books and
records of the Company and its Subsidiaries.
(t) Except as disclosed in the Offering Memorandum, since
the date of the latest audited consolidated financial statements of the Company
and its Subsidiaries included in the Offering Memorandum, neither the Company
nor any of its Subsidiaries has incurred any liability or obligation, direct or
contingent, or entered into any transaction, in each case not in the ordinary
course of business, that is material to the Company and its Subsidiaries, taken
as a whole, and there has been no material adverse change, nor to the Company's
knowledge, after due inquiry, any development involving a prospective material
adverse change, in the condition (financial or other), business, properties or
results of operations of the Company and, except as disclosed in or
contemplated by the Offering Memorandum, since November 1, 1997, there has been
no (i) dividend or distribution of any kind declared, paid or made by the
Company on any class of its capital stock (other than the payment of regular
quarterly cash dividends), (ii) issuance of securities (other than pursuant to
the Company's employee benefit plans and the
<PAGE> 8
issuance of the Initial Notes offered hereby) or (iii) material increase in
short-term or long-term debt of the Company.
(u) The Company and its Subsidiaries, on a consolidated
basis, maintain a system of internal accounting controls sufficient to provide
reasonable assurances that (i) transactions are executed in accordance with
management's general or specific authorization; (ii) transactions are recorded
as necessary to permit preparation of consolidated financial statements in
conformity with GAAP and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(v) The Company and each of its Subsidiaries has good and
marketable title to all property (real and personal) described in the Offering
Memorandum as being owned by it, free and clear of all liens, claims, security
interests or other encumbrances except for Permitted Liens (as such term is
defined in the Credit Agreement) or to the extent failure to have such title or
existence of such liens would not reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect. All the material property
described in the Offering Memorandum as being held under lease by the Company
and each of its Subsidiaries is held under valid, subsisting and enforceable
leases, with only such exceptions as would not in the aggregate, have a
Material Adverse Effect. In addition, except as described in the Offering
Memorandum, the consummation of the transactions contemplated by this Agreement
will not give rise to any third party rights of first refusal under any
Material Agreement (as herein defined) as to which the Company and any of its
Subsidiaries or any of their property or assets may be subject.
(w) The Company and each of its Subsidiaries own or
possess all patents, trademarks, trademark registration, service marks, service
mark registrations, trade names, copyrights, licenses, inventions, trade
secrets and rights described in the Offering Memorandum as being owned by any
of them or necessary for the conduct of their respective businesses, and the
Company is not aware of any claim to the contrary or any challenge by any other
person to the rights of the Company or any of the Subsidiaries with respect to
such rights that is reasonably likely, in the aggregate, to have a Material
Adverse Effect.
(x) The Company, and its Subsidiaries have such permits,
licenses, franchises, certificates, consents, orders and other approvals or
authorizations of any governmental or regulatory authority ("Permits"),
including, without limitation, any permits or approvals required by the United
States Food and Drug Administration ("FDA") and corresponding state agencies
and any other entity or agency regulating the sale or distribution of medical
device products in countries other than the United States (a "Foreign Agency"),
as are necessary under applicable law to own their respective properties and to
conduct their respective businesses in the manner described in the Offering
Memorandum, except to the extent that the failure to have such Permits would
not have a Material Adverse Effect. The Company and its Subsidiaries have
fulfilled and performed in all material respects, all their respective material
obligations with respect to the Permits, and no event has occurred which
allows, or after notice or lapse of time
<PAGE> 9
would allow, revocation or termination thereof or results in any other material
impairment of the rights of the holder of any such Permit, subject in each case
to such qualification as may be set forth in the Offering Memorandum and except
to the extent that any such revocation or termination would not have a Material
Adverse Effect. Except as described in the Offering Memorandum, the Company
and its Subsidiaries are not required to register with the FDA or file for FDA
approval of its products.
(y) Neither the Company nor any of its Subsidiaries nor
any director, officer, nor, to the knowledge of the Company, any agent,
employee or other person associated with or acting on behalf of the Company or
any of its Subsidiaries, has used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expense relating to
political activity; made any direct or indirect unlawful payment to any foreign
or domestic government official or employee from corporate funds; violated or
is in violation of any provision of the Foreign Corrupt Practices Act of 1977;
or made any bribe, rebate, payoff, influence payment, kickback or other
unlawful payment.
(z) The Company is not currently and will not be, upon
sale of the Initial Notes in accordance herewith and the application of the net
proceeds therefrom as described in the Offering Memorandum under the caption
"Use of Proceeds," an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
(aa) Neither the Company nor any affiliate (as defined in
Rule 501(b) of Regulation D ("Regulation D") under the Securities Act) of the
Company has directly, or through any agent (provided that no representation is
made as to the Initial Purchasers or any person acting on their behalf), (i)
sold, offered for sale, solicited offers to buy or otherwise negotiated in
respect of, any security (as defined in the Securities Act) which is or could
be integrated with the offering and sale of the Notes in a manner that would
require the registration of the Initial Notes under the Securities Act or (ii)
engaged in any form of general solicitation or general advertising (within the
meaning of Regulation D, including, but not limited to, advertisements,
articles, notices or other communications published in any newspaper, magazine,
or similar medium or broadcast over television or radio, or any seminar or
meeting whose attendees have been invited by any general solicitation or
general advertising) in connection with the offering of the Initial Notes. No
securities of the same class as the Initial Notes have been issued and sold by
the Company within the six-month period immediately prior to the date hereof.
(bb) Except as permitted by the Securities Act, the Company
has not distributed and, prior to the Closing Date will not distribute, any
offering material in connection with the offering and sale of the Initial Notes
other than the Preliminary Offering Memorandum and Offering Memorandum.
(cc) When the Initial Notes are issued and delivered
pursuant to this Agreement, such Initial Notes will not be of the same class
(within the meaning of Rule 144A under the Securities Act) as securities of the
Company that are listed on a national securities exchange registered under
Section 6 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") or that are quoted in a United States automated inter-dealer quotation
system.
<PAGE> 10
(dd) Assuming (i) that the Initial Notes are issued, sold
and delivered under the circumstances contemplated by the Offering Memorandum
and this Agreement, (ii) that your representations and warranties in Section 2
are true, (iii) compliance by you with your covenants set forth in Section 2
and (iv) that each of the Eligible Purchasers is either (A) an entity that you
reasonably believe to be a QIB or (B) a person who is not a "U.S. person" and
who acquires the Initial Notes outside the United States in an "offshore
transaction" (within the meaning of Regulation S), the purchase of the Initial
Notes by you pursuant hereto and the initial resale of the Initial Notes
pursuant to the Exempt Resales is exempt from the registration requirements of
the Securities Act.
(ee) The Company and each of its Subsidiaries are in
compliance in all material respects with all presently applicable provisions of
the Employee Retirement Income Security Act of 1974, as amended, including the
regulations and published interpretations thereunder ("ERISA"); except as would
not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect, no "reportable event" (as defined in ERISA) has
occurred with respect to any "pension plan" (as defined in ERISA) for which the
Company would have any liability; the Company has not incurred and does not
expect to incur liability under (i) Title IV of ERISA with respect to
termination of, or withdrawal from, any "pension plan" or (ii) Sections 412 or
4971 of the Internal Revenue Code of 1986, as amended, including the
regulations and published interpretations thereunder (the "Code"); each
"pension plan" for which the Company would have any liability that is intended
to be qualified under Section 401(a) of the Code is so qualified in all
material respects and nothing has occurred, whether by action or by failure to
act, which would cause the loss of such qualification, except as would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect; and the statements set forth in the Offering Memorandum under
the caption "Notice to Investors" do not include any untrue statements of
material facts and do not omit any material facts necessary in order to make
such statements, in light of the circumstances under which they were made, not
misleading.
(ff) Set forth on Exhibit B hereto is a list of each
employee pension plan with respect to which the Company or any corporation
considered an affiliate of the Company within the meaning of Section 407(d)(7)
of ERISA (an "Affiliate") is a party in interest or a disqualified person. The
execution and delivery of this Agreement, the other Operative Documents and the
sale of the Initial Notes to be purchased by the Eligible Purchasers will not
involve any prohibited transaction within the meaning of Section 406 of ERISA
or Section 4975 of the Code. The representation made by the Company in the
preceding sentence is made in reliance upon and subject to the accuracy of, and
compliance with, the representations and covenants made or deemed made by the
Eligible Purchasers as set forth in the Offering Memorandum under the section
entitled "Notice to Investors."
(gg) Except as described in the Offering Memorandum, there
are no contracts, agreements or understandings between the Company or any of
its Subsidiaries and any person granting such person the right to require the
Company or any of its Subsidiaries to file a registration statement under the
Securities Act with respect to any securities of the Company and its
Subsidiaries owned or to be owned by such person or to require the Company or
any of its Subsidiaries to include such securities in the securities registered
pursuant to the
<PAGE> 11
Registration Statements or in any securities being registered pursuant to any
other registration statement filed by the Company or any of its Subsidiaries
under the Securities Act.
(hh) The Company and each of its Subsidiaries carry, or
are covered by, insurance in such amounts and covering such risks as is
adequate for the conduct of its businesses and the value of its properties and
as is customary for companies engaged in similar businesses in similar
industries.
(ii) The Company and each of its Subsidiaries have filed
(or obtained extensions in filing) all Federal, state and local income and
franchise tax returns required to be filed through the date hereof and have
paid all taxes due thereon, other than those being contested in good faith and
for which reserves have been provided in accordance with GAAP or those
currently payable without penalty or interest. No tax deficiency has been
determined adversely to the Company or any of its Subsidiaries nor does the
Company or any of its Subsidiaries have any knowledge of any tax deficiency
which, if determined adversely to the Company, would have a Material Adverse
Effect.
(jj) Except as set forth in, or specifically contemplated
by, the Offering Memorandum, there has been no storage, disposal, generation,
transportation, handling or treatment of toxic wastes, medical wastes,
hazardous wastes or hazardous substances by the Company or any of its
Subsidiaries (or, to the knowledge of the Company, any of their predecessors in
interest) at, upon or from any of the property now or previously owned or
leased by the Company or any of its Subsidiaries in violation of any applicable
law, ordinance, rule, regulation or order, or which would require remedial
action under any applicable law, ordinance, rule, regulation or order, except
for any violation or remedial action which would not have, or would not be
reasonably likely to have, singularly or in the aggregate, a Material Adverse
Effect; except as set forth in, or specifically contemplated by, the Offering
Memorandum there has been no material spill, discharge, leak, emission,
injection, escape, dumping or release of any kind onto such property or into
the environment surrounding such property of any toxic wastes, medical wastes,
solid wastes, hazardous wastes or hazardous substances due to or caused by the
Company or any of its Subsidiaries or with respect to which the Company or any
of its Subsidiaries has knowledge, except for any such spill, discharge, leak,
emission, injection, escape, dumping or release which would not have or would
not be reasonably likely to have, singularly or in the aggregate, a Material
Adverse Effect; and the terms "hazardous wastes," "toxic wastes," "hazardous
substances" and "medical wastes" shall have the meanings specified in any
applicable local, state, federal and foreign laws or regulations with respect
to environmental protection.
(kk) None of the Company or any of its affiliates or any
person acting on its or their behalf has engaged or will engage during the
applicable restricted period in any directed selling efforts within the meaning
of Rule 902(b) of Regulation S with respect to the Notes, and the Company and
its affiliates and all persons acting on its or their behalf have complied with
and will comply with the offering restrictions requirements of Regulation S in
connection with the offering of the Notes outside of the United States;
provided, that, no representation or covenant is made as to the Initial
Purchasers or any person acting on their behalf.
<PAGE> 12
(ll) The sale of the Initial Notes pursuant to Regulation
S are "offshore transactions" and are not part of a plan or scheme to evade the
registration provisions of the Securities Act.
(mm) Set forth on Exhibit C hereto is a list of all the
Subsidiaries of the Company. Except for Medex, none of the Subsidiaries,
individually or in the aggregate, is or are material to the condition
(financial or other), business, properties or results of operations of the
Company.
2. Representations, Warranties and Agreements of the
Initial Purchasers. Each Initial Purchaser represents and warrants with
respect to itself that:
(a) Such Initial Purchaser is a QIB with such knowledge
and experience in financial and business matters as are necessary in order to
evaluate the merits and risks of an investment in the Initial Notes.
(b) Such Initial Purchaser (i) is not acquiring the
Initial Notes with a view to any distribution thereof or with any present
intention of offering or selling any of the Initial Notes in a transaction that
would violate the Securities Act or the securities laws of any State of the
United States or any other applicable jurisdiction; (ii) in connection with the
Exempt Resales, will solicit offers to buy the Notes only from, and will offer
to sell the Notes only to, the Eligible Purchasers in accordance with this
Agreement and on the terms contemplated by the Offering Memorandum; and (iii)
will not offer or sell the Notes pursuant to, nor has it offered or sold the
Notes by, or otherwise engaged in, any form of general solicitation or general
advertising (within the meaning of Regulation D; including, but not limited to,
advertisements, articles, notices or other communications published in any
newspaper, magazine, or similar medium or broadcast over television or radio,
or any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising) in connection with the offering of the
Initial Notes.
(c) It understands that the Notes have not been and will
not be registered under the Securities Act and may not be offered or sold
within the United States or to, or for the account or benefit of, U.S. persons
except in accordance with Regulation S or pursuant to an exemption from the
registration requirements of the Securities Act. The Initial Purchasers
represent that they have not offered, sold or delivered the Notes, and will not
offer, sell or deliver the Notes (i) as part of its distribution at any time or
(ii) otherwise until 40 days after the later of the commencement of the
offering and the Closing Date or such longer period as may then be applicable
under Regulation S (such period, the "Restricted Period"), within the United
States or to, or for the account or benefit of U.S. persons, except in
accordance with Rule 144A under the Securities Act or another applicable
exemption. Accordingly, each Initial Purchaser represents and agrees that
neither it, its affiliates nor any persons acting on its or their behalf has
engaged or will engage in any directed selling efforts within the meaning of
Rule 902(b) of Regulation S with respect to the Notes, and it, its affiliates
and all persons acting on its behalf have complied and will comply with the
offering restriction requirements of Regulation S.
(d) Such Initial Purchaser agrees that, at or prior to
confirmation of all sales of Notes pursuant to Regulation S, it will have sent
to each distributor, dealer or person receiving a
<PAGE> 13
selling concession, fee or other remuneration that purchases Notes from it
during the Restricted Period a confirmation or notice substantially to the
following effect:
"The Notes covered hereby have not been registered under the
U.S. Securities Act of 1933 (the "Securities Act") and may not be
offered and sold within the United States or to, or for the account
or benefit of, U.S. persons (i) as part of their distribution at any
time or (ii) otherwise until 40 days after the later of the
commencement of the offering or the closing date, except in either
case in accordance with Regulation S (or Rule 144A if available)
under the Securities Act. Terms used above have the meanings
assigned to them in Regulation S."
Such Initial Purchaser further agrees that it has not entered
and will not enter into any contractual arrangement with respect to the
distribution or delivery of the Notes, except with its affiliates or with the
prior written consent of the Company.
(e) Such Initial Purchaser agrees not to cause any
advertisement of the Notes to be published in any newspaper or periodical or
posted in any public place and not to issue any circular relating to the Notes,
except such advertisements as may be permitted by Regulation S.
(f) The sale of the Initial Notes pursuant to Regulation
S are "offshore transactions" and are not part of a plan or scheme to evade the
registration provisions of the Securities Act.
(g) Such Initial Purchaser understands that the Company
and, for purposes of the opinions to be delivered to you pursuant to Section 7
hereof, counsel to the Company and counsel to the Initial Purchasers, will rely
upon the accuracy and truth of the foregoing representations and you hereby
consent to such reliance.
The terms used in this Section 2 that have meanings assigned
to them in Regulation S are used herein as so defined.
3. Purchase of the Notes by the Initial Purchasers. On
the basis of the representations and warranties contained in, and subject to
the terms and conditions of, this Agreement, the Company agrees to sell $125.0
million in aggregate principal amount of Initial Notes to the several Initial
Purchasers and each of the Initial Purchasers, severally and not jointly,
agrees to purchase the aggregate principal amount of Initial Notes set opposite
that Initial Purchaser's name on Schedule 1 hereto. Each Initial Purchaser
will purchase such aggregate principal amount of Initial Notes at an aggregate
purchase price equal to 97.375% of the principal amount thereof (the "Purchase
Price").
The Company shall not be obligated to deliver any of the
Initial Notes to be delivered, except upon payment for all the Initial Notes to
be purchased on such Closing Date as provided herein.
<PAGE> 14
4. Delivery of and Payment.
(a) Delivery to the Initial Purchasers of and payment for
the Initial Notes shall be made at 10:00 a.m., New York City time, on the
Closing Date at the offices of Latham & Watkins, 650 Town Center Drive, 20th
Floor, Costa Mesa, California 92626, or such other place or time as you and the
Company shall designate.
(b) One or more Initial Notes in definitive form,
registered in the name of Cede & Co., as nominee of The Depository Trust
Company ("DTC"), or such other names as the Initial Purchasers may request upon
at least one business days' notice to the Company, having an aggregate
principal amount at maturity corresponding to the aggregate principal amount of
Initial Notes sold pursuant to Exempt Resales (collectively, the "Global
Notes"), shall be delivered by the Company to the Initial Purchasers, against
payment by the Initial Purchasers of the purchase price thereof by wire
transfer of immediately available funds as the Company may direct by written
notice delivered to you two business days prior to the Closing Date. The
Global Notes in definitive form shall be made available to you for inspection
not later than 10:00 a.m. on the day immediately preceding the Closing Date.
(c) Time shall be of the essence, and delivery at the
time and place specified pursuant to this Agreement is a further condition of
the obligation of each Initial Purchaser hereunder.
5. Further Agreements of the Company. The Company
agrees:
(a) To advise you promptly and, if requested by you, to
confirm such advice in writing, of (i) the issuance by any state securities
commission of any stop order suspending the qualification or exemption from
qualification of any Initial Notes for offering or sale in any jurisdiction, or
the initiation of any proceeding for such purpose by the Commission or any
state securities commission or other regulatory authority, and (ii) the
happening of any event that makes any statement of a material fact made in the
Offering Memorandum untrue or that requires the making of any additions to or
changes in the Offering Memorandum in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
Company shall use its best efforts to prevent the issuance of any stop order or
order suspending the qualification or exemption of the Initial Notes under any
state securities or Blue Sky laws and, if at any time any state securities
commission shall issue any stop order suspending the qualification or exemption
of the Initial Notes under any state securities or Blue Sky laws, the Company
shall use every reasonable effort to obtain the withdrawal or lifting of such
order at the earliest possible time.
(b) To furnish to you, without charge, as many copies of
the Preliminary Offering Memorandum and the Offering Memorandum, and any
amendments or supplements thereto, as you may reasonably request. The Company
consents to the use of the Preliminary Offering Memorandum and the Offering
Memorandum, and any amendments and supplements thereto required pursuant to
this Agreement, by you in connection with the Exempt Resales that are in
compliance with this Agreement.
<PAGE> 15
(c) Not to amend or supplement the Offering Memorandum
prior to the Closing Date unless you shall previously have been advised of, and
shall not have reasonably objected to, such amendment or supplement within a
reasonable time, but in any event not longer than two Business Days after being
furnished a copy of such amendment or supplement. If, in connection with any
Exempt Resales or market-making transactions after the date of this Agreement
and prior to the consummation of the Exchange Offer, any event shall occur
that, in the judgment of the Company or in the judgment of counsel to you,
makes any statement of a material fact in the Offering Memorandum untrue or
that requires the making of any additions to or changes in the Offering
Memorandum in order to make the statements in the Offering Memorandum, in light
of the circumstances at the time that the Offering Memorandum is delivered to
prospective Eligible Purchasers, not misleading, or if it is necessary to amend
or supplement the Offering Memorandum to comply with any applicable laws, the
Company shall promptly notify you of such event and prepare an appropriate
amendment or supplement to the Offering Memorandum so that (i) the statements
in the Offering Memorandum as amended or supplemented will, in light of the
circumstances at the time that the Offering Memorandum is delivered to
prospective Eligible Purchasers, not be misleading and (ii) the Offering
Memorandum will comply with applicable law.
(d) To cooperate with you and your counsel in connection
with the qualification of the Initial Notes for offer and sale by you and by
dealers under the state securities or Blue Sky laws of such jurisdictions as
you may request (provided, however, that the Company shall not be obligated to
qualify as a foreign corporation in any jurisdiction in which it is not now so
qualified or to take any action that would subject it to general consent to
service of process in any jurisdiction in which it is not now so subject or
subject itself to taxation in excess of a nominal amount in any such
jurisdiction where it is not then so subject). Subject to the provisions in
the first sentence of this Section 5(d), the Company shall continue such
qualification in effect so long as required by law for distribution of the
Initial Notes and shall file such consents to service of process or other
documents as may be necessary in order to effect such qualification.
(e) Prior to the Closing Date, to furnish to you, any
internal consolidated financial statements of the Company that have been
prepared by the Company for any period subsequent to the period covered by the
financial statements appearing in the Offering Memorandum.
(f) To use its reasonable best efforts to do and perform
all things required to be done and performed under this Agreement by it prior
to or after the Closing Date and to satisfy all conditions precedent on its
part to the delivery of the Initial Notes.
(g) Not to sell, offer for sale or solicit offers to buy
or otherwise negotiate in respect of any security (as defined in the Securities
Act) that would be integrated with the sale of the Initial Notes in a manner
that would require the registration under the Securities Act of the sale to you
or the Eligible Purchasers of Initial Notes.
(h) For a period of 120 days from the date of the
Offering Memorandum, not to, directly or indirectly, sell, contract to sell,
grant any option to purchase, issue any instrument
<PAGE> 16
convertible into or exchangeable for, or otherwise transfer or dispose of, any
debt securities of the Company or any of its Subsidiaries in a public or
private offering for cash having a maturity of more than one year from the date
of issue of such securities, except (i) for the New Notes in connection with
the Exchange Offer or (ii) with the prior consent of Lehman Brothers Inc.,
which consent shall not be unreasonably withheld.
(i) For the period that is two years after the Closing
Date or for so long as necessary to comply with Rule 144A in connection with
resales by registered holders or beneficial owners of Initial Notes, whichever
is longer, to make available to such registered holder or beneficial owner of
Initial Notes in connection with any sale thereof and any prospective purchaser
of such Initial Notes from such registered holder or beneficial owner, the
information required by Rule 144A(d)(4) under the Securities Act (or any
successor provision thereto).
(j) To comply with its agreements in the Registration
Rights Agreement, and all agreements set forth in the representation letters of
the Company to DTC relating to the approval of the Notes by DTC for
"book-entry" transfer.
(k) To use its reasonable best efforts to effect the
inclusion of the Notes in the National Association of Securities Dealers, Inc.
Automated Quotation System - PORTAL ("PORTAL").
(l) To apply the net proceeds from the sale of the
Initial Notes being sold by the Company as set forth in the Offering Memorandum
under the caption "Use of Proceeds."
(m) During the period that is two years after the Closing
Date, to take such steps as shall be necessary to ensure that the Company does
not become an "investment company" within the meaning of such term under the
Investment Company Act of 1940 and the rules and regulations of the Commission
thereunder.
6. Expenses. The Company agrees that, whether or not
the transactions contemplated by this Agreement are consummated or this
Agreement becomes effective or is terminated, to pay all costs, expenses, fees
and taxes incident to and in connection with: (i) the preparation, printing,
filing and distribution of the Preliminary Offering Memorandum and the Offering
Memorandum (including, without limitation, financial statements) and all
amendments and supplements thereto (but not, however, legal fees and expenses
of your counsel incurred in connection therewith), (ii) the preparation,
printing (including, without limitation, word processing and duplication costs)
and delivery of this Agreement, the Indenture, any Blue Sky Memoranda and any
other agreements, memoranda, correspondence and other documents printed and
delivered in connection herewith and with the Exempt Resales (but not, however,
legal fees and expenses of your counsel incurred in connection with any of the
foregoing other than fees of such counsel plus reasonable disbursements
incurred in connection with the preparation, printing and delivery of such Blue
Sky Memoranda), (iii) the issuance and delivery by the Company of the Notes,
(iv) the qualification of the Notes for offer and sale under the securities or
Blue Sky laws of the several states (including, without limitation, the
reasonable fees and disbursements of your counsel relating to such registration
or qualification), (v) furnishing such
<PAGE> 17
copies of the Preliminary Offering Memorandum and the Offering Memorandum, and
all amendments and supplements thereto, as may be reasonably requested by the
Initial Purchasers for use in connection with the initial Exempt Resales, (vi)
the preparation of certificates for the Notes including, without limitation,
printing and engraving, (vii) the fees, disbursements and expenses of the
Company's counsel and accountants, (viii) all expenses and listing fees in
connection with the application for quotation of the Initial Notes in PORTAL,
(ix) all fees and expenses (including fees and expenses of counsel) of the
Company in connection with approval of the Notes by DTC for "book-entry"
transfer and (x) the performance by the Company of its other obligations under
this Agreement to the extent not provided for above.
7. Conditions of Initial Purchasers' Obligations. The
respective obligations of the Initial Purchasers hereunder are subject to the
accuracy, when made and again on the Closing Date (as if made again on and as
of such date), of the representations and warranties of the Company contained
herein, to the performance by the Company of its obligations hereunder, and to
each of the following additional terms and conditions:
(a) The Offering Memorandum shall have been printed and
copies made available to you not later than 9:00 a.m., New York City time, on
the Business Day following the date of this Agreement, or at such later date
and time as you may approve in writing.
(b) No Initial Purchaser shall have discovered and
disclosed to the Company on or prior to such Closing Date that the Offering
Memorandum or any amendment or supplement thereto contains an untrue statement
of a fact which, in the opinion of Latham & Watkins, counsel for the Initial
Purchasers, is material or omits to state a fact which, in the opinion of such
counsel, is material and is necessary to make the statements, in the light of
the circumstances under which they were made, not misleading.
(c) All corporate proceedings and other legal matters
incident to the authorization, form and validity of this Agreement, the other
Operative Documents, the Offering Memorandum and all other legal matters
relating to this Agreement and the transactions contemplated hereby shall be
reasonably satisfactory in all material respects to counsel for the Initial
Purchasers, and the Company shall have furnished to such counsel all documents
and information that they may reasonably request to enable them to pass upon
such matters.
(d) O'Melveny & Myers LLP shall have furnished to the
Initial Purchasers, its written opinion, as counsel to the Company, addressed
to the Initial Purchasers and dated as of the Closing Date, in form and
substance reasonably satisfactory to the Initial Purchasers and their counsel,
to the effect that:
(i) The Company is a corporation validly existing
and in good standing under the laws of the State of California and has
corporate power and corporate authority to own, lease and operate its
properties and to conduct its business as described in the Offering Memorandum.
<PAGE> 18
(ii) The Company has corporate power and corporate
authority to execute, deliver and perform its obligations under the Operative
Documents and to authorize, issue and sell the Notes as contemplated by this
Agreement.
(iii) This Agreement has been duly and validly
authorized, executed and delivered by the Company.
(iv) The Registration Rights Agreement has been
duly authorized, executed and delivered by the Company and, assuming due
authorization, execution and delivery by the Initial Purchasers, will
constitute the legally valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms (subject to applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
other similar laws relating to or affecting creditors' rights generally from
time to time in effect and to general principles of equity, including, without
limitation, concepts of materiality, reasonableness, good faith and fair
dealing, and the possible unavailability of specific performance or injunctive
relief, regardless of whether in a proceeding in equity or at law) and except
as rights to indemnity and contribution thereunder may be limited by federal or
state securities laws or principles of public policy.
(v) The Indenture has been duly authorized,
executed and delivered by the Company and, assuming due authorization,
execution and delivery by the Trustee, will constitute the legally valid and
binding agreement of the Company, enforceable against the Company in accordance
with its terms (subject to applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and other similar laws relating to or affecting
creditors' rights generally from time to time in effect and to general
principles of equity, including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing, and the possible unavailability of
specific performance or injunctive relief, regardless of whether in a
proceeding in equity or at law); no qualification of the Indenture under the
TIA is required in connection with the offer and sale of the Initial Notes
contemplated hereby or in connection with the initial resale of such Initial
Notes in the manner contemplated by this Agreement and the Offering Memorandum,
it being understood that no opinion will be expressed as to any subsequent
resale of any Initial Notes.
(vi) The Initial Notes have been duly authorized
by all requisite corporate action of the Company and when duly executed by the
Company in accordance with the terms of the Indenture and, assuming due
authentication of the Initial Notes by the Trustee, upon delivery to the
Initial Purchasers against payment therefor in accordance with the terms
hereof, will have been validly issued and delivered, and will constitute
legally valid and binding obligations of the Company entitled to the benefits
of the Indenture, enforceable against the Company in accordance with their
terms (subject to applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and other similar laws relating to or affecting
creditors' rights generally from time to time in effect and to general
principles of equity, including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing and the possible unavailability of
specific performance or injunctive relief, regardless of whether in a
proceeding in equity or at law).
<PAGE> 19
(vii) The New Notes have been duly authorized by
the Company and if and when duly issued and authenticated in accordance with
the terms of the Indenture and delivered in accordance with the Exchange Offer
provided for in the Registration Rights Agreement, will constitute legally
valid and binding obligations of the Company entitled to the benefits of the
Indenture, enforceable against the Company in accordance with their terms
(subject to the qualification that the enforceability of the Company's
obligations thereunder may be limited by bankruptcy, fraudulent conveyance,
insolvency, reorganization, moratorium, fraudulent transfer and other similar
laws relating to or affecting creditors' rights generally from time to time in
effect and to general principles of equity, including, without limitation,
concepts of materiality, reasonableness, good faith and fair dealing and the
possible unavailability of specific performance or injunctive relief,
regardless of whether in a proceeding in equity or at law).
(viii) Assuming due authorization, execution and
delivery by the parties thereto, the Credit Agreement constitutes the valid and
binding agreement of the Company, enforceable against the Company in accordance
with its terms (subject to applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and other similar laws affecting creditors'
rights generally from time to time in effect and to general principles of
equity, including, without limitation, concepts of materiality, reasonableness,
good faith and fair dealing, regardless of whether in a proceeding in equity or
at law).
(ix) To the knowledge of such counsel, there are
no legal or governmental proceedings pending or threatened against the Company
or any of its Subsidiaries, or to which any of their respective properties is
subject, that are not disclosed in the Offering Memorandum and which are
reasonably likely to have a Material Adverse Effect or to materially and
adversely affect the issuance of the Notes or the consummation of the other
transactions contemplated by the Operative Documents.
(x) None of the issuance, offer or sale of the
Initial Notes, the execution, delivery or performance by the Company of this
Agreement, the other Operative Documents, compliance by the Company with the
provisions hereof or thereof nor consummation by the Company of the
transactions contemplated hereby or thereby (i) requires any consent, approval,
authorization or other order of, or registration or filing with, any court,
regulatory body, administrative agency or other governmental body, agency or
official (except such as may be required in connection with the registration
under the Securities Act of the New Notes in accordance with the Registration
Rights Agreement, qualification of the Indenture under the TIA and compliance
with the securities or Blue Sky laws of various jurisdictions), or (ii)
violates or will violate or constitutes or will constitute a breach of, or a
default under, the certificate of incorporation or by-laws, or other
organizational documents, of the Company or any of its Subsidiaries or (iii)
violates or will violate or constitutes or will constitute a breach of, or a
default under any agreement listed on a certificate of an officer of the
Company as being any agreement material to the Company and its Subsidiaries,
taken as a whole (the "Material Agreements"), or (iv) violates or will violate
any law, rule or regulation of the United States or the State of New York or
the General Corporation Law of the State of California that we have in the
exercise of customary professional diligence, recognized as applicable to the
Company or to
<PAGE> 20
transactions of the type contemplated by this Agreement, or, to such counsel's
knowledge, any order or decree of any court or government agency or
instrumentality to which the property or assets of the Company or any of its
Subsidiaries are subject or (v) will result in the creation or imposition of
any Lien upon any property or assets of the Company or any of its Subsidiaries
pursuant to the terms of any agreement or instrument to which any of them is a
party or by which any of them may be bound or under which any of their
respective property or assets is subject, except in each case in clauses (i)
through (v), such breaches, conflicts or defaults that, individually or in the
aggregate would not have a Material Adverse Effect.
(xi) The Company is not and, immediately upon sale
of the Initial Notes to be issued and sold thereby in accordance herewith and
the application of the net proceeds to the Company of such sale as described in
the Offering Memorandum under the caption "Use of Proceeds," will not be an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
(xii) When the Initial Notes are issued and
delivered pursuant to this Agreement, such Initial Notes will not be of the
same class (within the meaning of Rule 144A under the Securities Act) as
securities of the Company that are listed on a national securities exchange
registered under Section 6 of the Exchange Act or that are quoted in a United
States automated inter-dealer quotation system.
(xiii) Assuming (i) the accuracy of, and compliance
by you with, your representations, warranties, and covenants in Section 2, (ii)
that the initial resale of the Initial Notes by you is made only to Eligible
Purchasers, (iii) the accuracy of the Company's representations and warranties
with respect to whether (x) any form of general solicitation was used by the
Company and (y) other offerings of securities are of the same class as other
securities of the Company that are listed on a national securities exchange
registered under Section 6 of the Exchange Act, or quoted in a U.S. automated
inter-dealer quotation system, and (iv) that each QIB to whom you originally
sell the Initial Notes receives a copy of the Offering Memorandum at or prior
to the delivery of a confirmation of sale, no registration of the Initial Notes
under the Securities Act and no qualification of the Indenture under the TIA is
required in connection with the purchase of the Initial Notes by you, or the
initial resale of the Initial Notes by you to Eligible Purchasers in the manner
contemplated by the Agreement and the Offering Memorandum.
(xiv) The descriptions of the Indenture, the
Initial Notes and the Registration Rights Agreement in the Offering Memorandum
conform in all material respects to the terms thereof.
(xv) The statements set forth under the heading
"Description of Notes" in the Offering Memorandum, insofar as such statements
purport to summarize certain provisions of the Initial Notes, provide a fair
summary of such provisions; and the statements set forth under the heading
"Risk Factors -- Fraudulent Conveyance Statutes" in the Offering Memorandum
insofar as they refer to statements of law or legal conclusions, are accurate
in all material respects and present fairly the information shown.
<PAGE> 21
(xvi) The statements set forth under the heading
"Description of Certain Indebtedness" in the Offering Memorandum, insofar as
such statements purport to summarize certain provisions of the Credit
Agreement, provide a fair summary of such provisions.
In addition, such counsel shall also state that such counsel
has participated in conferences with certain officers of the Company,
representatives of the independent public accountants for the Company and your
representatives and counsel concerning the preparation of the Offering
Memorandum and, although such counsel has made certain inquiries and
investigations in connection with the preparation of the Offering Memorandum,
it has not independently verified the accuracy, completeness or fairness of the
statements contained therein, and the limitations inherent in the examination
made by it and the knowledge available to it are such that it is not passing
upon and does not assume any responsibility for the accuracy or completeness of
the statements contained in the Offering Memorandum. However, on the basis of
the foregoing participation and review, and relying as to materiality to an
extent upon opinions of officers and other representatives of the Company, such
counsel does not believe that the Offering Memorandum, as of its date or as of
the Closing Date, included or includes an untrue statement of a material fact
or omitted or omits to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading (it being understood that such counsel need express no belief or
opinion with respect to the financial statements and other financial data
included therein).
The opinion of such counsel may be limited to the laws of the
state of New York, the General Corporation Law of the State of California, and
the Federal laws of the United States. Such counsel may take such other
exceptions as are customary or appropriate.
(e) Boyd & Boyd, special Ohio counsel to the Company,
shall have furnished to the Initial Purchasers, its written opinion, as special
counsel to the Company, addressed to the Initial Purchasers and dated as of the
Closing Date, in form and substance reasonably satisfactory to the Initial
Purchasers and their counsel, to the effect that:
(i) Medex is a corporation validly existing and
in good standing under the laws of the State of Ohio and has corporate power
and corporate authority to own, lease and operate its properties and to conduct
its business as presently conducted. Medex is duly qualified as a foreign
corporation to conduct business and is in good standing in the State of
Georgia.
(ii) All the outstanding shares of capital stock
of Medex have been duly authorized by all requisite corporate action on the
part of Medex and are validly issued, fully paid and nonassessable, and are
wholly owned by the Company, free and clear of any lien, adverse claim,
security interest, equity or other encumbrance.
(f) Donald D. Bradley, general counsel to the Company,
shall have furnished to the Initial Purchasers, its written opinion, as counsel
to the Company, addressed to the Initial Purchasers and dated as of the Closing
Date, in form and substance reasonably satisfactory to the Initial Purchasers
and their counsel, to the effect that:
<PAGE> 22
(i) The Company is qualified as a foreign
corporation to do business in the States of Alabama, Connecticut, Florida,
Illinois, Louisiana, Massachusetts, Michigan, Minnesota, New Jersey, New York,
Ohio, Pennsylvania, Rhode Island, Texas, Vermont and Washington and is in good
standing in each of those States.
(ii) All the shares of capital stock of the
Company outstanding prior to the issuance of the Initial Notes have been duly
authorized by all requisite corporate action on the part of the Company and are
validly issued, fully paid and nonassessable.
(iii) Except as described in the Offering
Memorandum, the consummation of the transactions contemplated by this agreement
shall not cause any third party to have any rights of first refusal under any
Material Agreement.
(iv) The Credit Agreement has been duly and
validly authorized, executed and delivered by the Company.
(v) To the knowledge of such counsel, except as
disclosed in the Offering Memorandum, there are no contracts, agreements or
understandings between the Company or any of its Subsidiaries and any person
granting such person the right to require the Company or any of its
Subsidiaries to file a registration statement under the Securities Act with
respect to any securities of the Company owned or to be owned by such person or
to require the Company or any of its Subsidiaries to include such securities in
the securities registered pursuant to the Registration Statements or in any
securities being registered pursuant to any other registration statement filed
by the Company or any of its Subsidiaries under the Securities Act.
(vi) The statements set forth under the heading
"Business -- Legal Proceedings" in the Offering Memorandum insofar as they
refer to statements of law or legal conclusions, are accurate in all material
respects and present fairly the information shown.
(g) The Initial Purchasers shall have received from
Hyman, Phelps & McNamara, P.C., special regulatory counsel to the Company, its
written opinion, as special counsel to the Company, dated as of the Closing
Date, in form and substance reasonably satisfactory to the Initial Purchasers
and their counsel, to the effect that:
(i) the statements of federal law and regulation
contained under the captions "Risk Factors -- Government Regulation," "Business
- -- Medical Device Business" and " -- FDA Compliance/Product Regulation" in the
Offering Memorandum (collectively, the "Regulatory Portion") are, in all
material respects, correct and accurate statements or summaries of applicable
federal law and regulation, subject to the qualifications set forth therein;
(ii) to such counsel's knowledge, the Company's
medical device business (as described in the Offering Memorandum) does not
violate the FDC Act or any FDA rule or regulation, and, to such counsel's
knowledge, there are no Federal Food, Drug and
<PAGE> 23
Cosmetic Act (the "FCA") judicial or administrative proceedings pending or
threatened against the Company.
In addition, such counsel shall also state that nothing has come to the
attention of such counsel that would lead such counsel to believe that the
information contained in the Regulatory Portion of the Offering Memorandum (or
any amendments or supplements thereof) contained or contains an untrue
statement of a material fact or omitted or omits to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(h) The Initial Purchasers shall have received from
Latham & Watkins, counsel for the Initial Purchasers, such opinion or opinions,
dated as of the Closing Date, with respect to the issuance and sale of the
Initial Notes, the Offering Memorandum and other related matters as the Initial
Purchasers may reasonably require, and the Company shall have furnished to such
counsel such documents as they reasonably request for the purpose of enabling
them to pass upon such matters.
(i) The Company and the Trustee shall have entered into
the Indenture and the Initial Purchasers shall have received counterparts,
conformed as executed, thereof.
(j) The Company and the Initial Purchasers shall have
entered into the Registration Rights Agreement and the Initial Purchasers shall
have received counterparts, conformed as executed, thereof.
(k) With respect to the letter of Ernst & Young LLP
delivered to the Initial Purchasers concurrently with the execution of this
Agreement (the "initial letter"), the Company shall have furnished to the
Initial Purchasers a letter (as used in this paragraph, the "bring-down
letter") of such auditor, addressed to the Initial Purchasers and dated such
Closing Date (i) confirming that they are independent auditors with respect to
the Company under Rule 101 of the AICPA's Code of Professional Conduct and its
interpretations and rulings, (ii) stating, as of the date of the bring-down
letter (or, with respect to matters involving changes or developments since the
respective dates as of which specified financial information is given in the
Offering Memorandum, as of a date not more than two Business Days prior to the
date of the bring-down letter), the conclusions and findings of such firm with
respect to the financial information and other matters covered by the initial
letter and (iii) confirming in all material respects the conclusions and
findings set forth in the initial letter.
(l) The Company shall have furnished to the Initial
Purchasers a certificate, dated as of the Closing Date, of its Chief Executive
Officer or President and its Chief Financial Officer or Treasurer stating that:
(i) The representations, warranties and
agreements of the Company (after giving effect to all materiality qualifiers
therein) in Section 1 are true and correct as of such Closing Date and giving
effect to the consummation of the transactions contemplated by this Agreement;
the Company has complied in all material respects with all its agreements
contained herein; and the condition set forth in Section 7(m) has been
fulfilled; and
<PAGE> 24
(ii) They have examined the Preliminary Offering
Memorandum and the Offering Memorandum and, in their opinion, the Preliminary
Offering Memorandum as of its date and the Offering Memorandum as of its date
and the Closing Date did not include any untrue statement of a material fact
and did not omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, and (ii) since the date of the
Offering Memorandum, no event has occurred which should have been set forth in
a supplement or amendment to the Offering Memorandum.
(m) (i) The Company and its Subsidiaries, taken as a
whole, shall not have sustained since the date of the latest audited financial
statements included in the Offering Memorandum any loss or interference with
its business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental
action, order or decree, otherwise than as set forth or contemplated in the
Offering Memorandum or (ii) since such date there shall not have been any
change in the capital stock or long-term debt of the Company or any of its
Subsidiaries or any change, or any development involving a prospective change,
in or affecting condition (financial or other), business properties, or results
of operations of the Company and its Subsidiaries, taken as a whole otherwise
than as set forth or contemplated in the Offering Memorandum, the effect of
which, in any such case described in clause (i) or (ii), is, in the judgment of
the Initial Purchasers, so material and adverse as to make it impracticable or
inadvisable to proceed with the payment for and delivery of the Notes being
delivered on such Closing Date on the terms and in the manner contemplated in
the Offering Memorandum.
(n) There shall exist at and as of the Closing Date no
conditions that would constitute a default (or an event that with notice or the
lapse of time, or both, would constitute a default) under the Credit Agreement.
On the Closing Date, the Credit Agreement shall be in full force and effect,
shall conform to the description thereof contained in the Offering Memorandum
(after giving effect to the amendment described therein) and shall not have
been materially modified.
(o) Latham & Watkins shall have been furnished with such
other documents and opinions, in addition to those set forth above, as they may
reasonably require for the purpose of enabling them to review or pass upon the
matters referred to in this Agreement and in order to evidence the accuracy,
completeness or satisfaction in all material respects of any of the
representations, warranties or conditions herein contained.
(p) Subsequent to the execution and delivery of this
Agreement (i) no downgrading shall have occurred in the rating accorded the
Company's debt securities by any "nationally recognized statistical rating
organization," as that term is defined by the Commission for purposes of Rule
436(g)(2) under the Securities Act and (ii) no such organization shall have
publicly announced that it has under surveillance or review, with possible
negative implications, its rating of any of the Company's debt securities.
(q) Subsequent to the execution and delivery of this
Agreement there shall not have occurred any of the following: (i) trading in
securities generally on the New York Stock
<PAGE> 25
Exchange or the American Stock Exchange or in the over-the-counter market, or
trading in any securities of the Company on any exchange or in the
over-the-counter market, shall have been suspended or minimum prices shall have
been established on any such exchange or such market by the Commission, by such
exchange or by any other regulatory body or governmental authority having
jurisdiction, (ii) a banking moratorium shall have been declared by Federal or
state authorities, (iii) the United States shall have become engaged in
hostilities, there shall have been an escalation in hostilities involving the
United States or there shall have been a declaration of a national emergency or
war by the United States or (iv) there shall have occurred such a material
adverse change in general economic, political or financial conditions (or the
effect of international conditions on the financial markets in the United
States shall be such) as to make it, in the judgment of a majority in interest
of the several Initial Purchasers, impracticable or inadvisable to proceed with
the public offering or delivery of the Notes being delivered on such Closing
Date on the terms and in the manner contemplated in the Offering Memorandum.
All opinions, letters, evidence and certificates mentioned
above or elsewhere in this Agreement shall be deemed to be in compliance with
the provisions hereof only if they are in form and substance reasonably
satisfactory to counsel for the Initial Purchasers.
8. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless
each Initial Purchaser, its officers and employees and each person, if any, who
controls any Initial Purchaser within the meaning of the Securities Act, from
and against any loss, claim, damage or liability, joint or several, or any
action in respect thereof (including, but not limited to, any loss, claim,
damage, liability or action relating to purchases and sales of Notes), to which
that Initial Purchaser, officer, employee or controlling person may become
subject, under the Securities Act or otherwise, insofar as such loss, claim,
damage, liability or action arises out of, or is based upon, (i) any untrue
statement or alleged untrue statement of a material fact contained in any
Preliminary Offering Memorandum or the Offering Memorandum (in each case as
amended or supplemented), or (ii) the omission or alleged omission to state in
any Preliminary Offering Memorandum or the Offering Memorandum (in each case as
amended or supplemented) any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading or (iii) any act or failure to act or any
alleged act or failure to act by any Initial Purchaser in connection with, or
relating in any manner to, the Notes or the offering contemplated hereby, and
which is included as part of or referred to in any loss, claim, damage,
liability or action arising out of or based upon matters covered by clauses (i)
or (ii) above (provided that the Company and its Subsidiaries shall not be
liable under this clause (iii) to the extent that it is determined in a final
judgment by a court of competent jurisdiction that such loss, claim, damage,
liability or action resulted directly from any such acts or failures to act
undertaken or omitted to be taken by such Initial Purchaser through its gross
negligence or willful misconduct); and shall reimburse each Initial Purchaser
and each such officer, employee or controlling person promptly upon demand for
any legal or other expenses reasonably incurred by that Initial Purchaser,
officer, employee or controlling person in connection with investigating or
<PAGE> 26
defending or preparing to defend against any such loss, claim, damage,
liability or action as such expenses are incurred; provided, however, that the
Company and its Subsidiaries shall not be liable in any such case to the extent
that any such loss, claim, damage, liability or action arises out of, or is
based upon, any untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary Offering Memorandum or the Offering
Memorandum (in each case as amended or supplemented) in reliance upon and in
conformity with written information concerning such Initial Purchaser furnished
to the Company by or on behalf of any Initial Purchaser specifically for
inclusion therein. The foregoing indemnity agreement is in addition to any
liability which the Company and its Subsidiaries may otherwise have to any
Initial Purchaser or to any officer, employee or controlling person of that
Initial Purchaser.
(b) Each Initial Purchaser, severally and not jointly,
shall indemnify and hold harmless the Company, its officers and employees, each
of its directors, and each person, if any, who controls the Company within the
meaning of the Securities Act, from and against any loss, claim, damage or
liability, joint or several, or any action in respect thereof, to which the
Company or any such director, officer, employee or controlling person may
become subject, under the Securities Act or otherwise, insofar as such loss,
claim, damage, liability or action arises out of, or is based upon, (i) any
untrue statement or alleged untrue statement of a material fact contained in
any Preliminary Offering Memorandum or the Offering Memorandum (in each case as
amended or supplemented) or in any Blue Sky application or (ii) the omission or
alleged omission to state in any Preliminary Offering Memorandum or the
Offering Memorandum (in each case as amended or supplemented) or in any Blue
Sky application any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading, but in each case only to the extent that the untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with written information concerning such
Initial Purchaser furnished to the Company by or on behalf of that Initial
Purchaser specifically for inclusion therein, and shall reimburse the Company
and any such director, officer, employee or controlling person for any legal or
other expenses reasonably incurred by the Company or any such director, officer
or controlling person in connection with investigating or defending or
preparing to defend against any such loss, claim, damage, liability or action
as such expenses are incurred. The foregoing indemnity agreement is in
addition to any liability which any Initial Purchaser may otherwise have to the
Company or any such director, officer, employee or controlling person.
(c) Promptly after receipt by an indemnified party under
this Section 8 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against
the indemnifying party under this Section 8, notify the indemnifying party in
writing of the claim or the commencement of that action; provided, however,
that the failure to notify the indemnifying party shall not relieve it from any
liability which it may have under this Section 8 except to the extent it has
been materially prejudiced by such failure and, provided, however, that the
failure to notify the indemnifying party shall not relieve it from any
liability which it may have to an indemnified party otherwise than under this
Section 8. If any such claim or action shall be brought against an indemnified
party, and it shall notify the indemnifying party thereof, the indemnifying
party shall be entitled to participate
<PAGE> 27
therein and, to the extent that it wishes, jointly with any other similarly
notified indemnifying party, to assume the defense thereof with counsel
reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 8 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that
the Initial Purchasers shall have the right to employ counsel to represent
jointly the Initial Purchasers and their respective officers, employees and
controlling persons who may be subject to liability arising out of any claim in
respect of which indemnity may be sought by the Initial Purchasers against the
Company under this Section 8 if, in the reasonable judgment of the Initial
Purchasers, it is advisable for the Initial Purchasers, officers, employees and
controlling persons to be jointly represented by separate counsel, and in that
event the reasonable fees and expenses of such separate counsel shall be paid
by the Company. No indemnifying party shall (i) without the prior written
consent of the indemnified parties (which consent shall not be unreasonably
withheld), settle or compromise or consent to the entry of any judgment with
respect to any pending or threatened claim, action, suit or proceeding in
respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified parties are actual or potential parties to such
claim or action) unless such settlement, compromise or consent includes an
unconditional release of each indemnified party from all liability arising out
of such claim, action, suit or proceeding, or (ii) be liable for any settlement
of any such action effected without its written consent (which consent shall
not be unreasonably withheld), but if settled with the consent of the
indemnifying party or if there be a final judgment of the plaintiff in any such
action, the indemnifying party agrees to indemnify and hold harmless any
indemnified party from and against any loss or liability by reason of such
settlement or judgment.
(d) If the indemnification provided for in this Section 8
shall for any reason be unavailable to or insufficient to hold harmless an
indemnified party under Section 8(a) or 8(b) in respect of any loss, claim,
damage or liability, or any action in respect thereof, referred to therein,
then each indemnifying party shall, in lieu of indemnifying such indemnified
party, contribute to the amount paid or payable by such indemnified party as a
result of such loss, claim, damage or liability, or action in respect thereof,
(i) in such proportion as shall be appropriate to reflect the relative benefits
received by the Company on the one hand and the Initial Purchasers on the other
from the offering of the Initial Notes or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company on the one hand and the
Initial Purchasers on the other with respect to the statements or omissions
which resulted in such loss, claim, damage or liability, or action in respect
thereof, as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and the Initial Purchasers on
the other with respect to such offering shall be deemed to be in the same
proportion as the total net proceeds from the offering of
<PAGE> 28
the Initial Notes purchased under this Agreement (before deducting expenses)
received by the Company, on the one hand, and the total discounts and
commissions received by the Initial Purchasers with respect to the Initial
Notes purchased under this Agreement, on the other hand, bear to the total
gross proceeds from the offering of the Initial Notes under this Agreement, in
each case as set forth in the table on the cover page of the Offering
Memorandum. The relative fault shall be determined by reference to whether the
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 the Initial Purchasers, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Initial Purchasers agree that it
would not be just and equitable if contributions pursuant to this Section 8(d)
were to be determined by pro rata allocation (even if the Initial Purchasers
were treated as one entity for such purpose) or by any other method of
allocation which does not take into account the equitable considerations
referred to herein. The amount paid or payable by an indemnified party as a
result of the loss, claim, damage or liability, or action in respect thereof,
referred to above in this Section shall be deemed to include, for purposes of
this Section 8(d), any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 8(d), no Initial
Purchaser shall be required to contribute any amount in excess of the amount by
which the total price at which the Initial Notes purchased by it was resold to
Eligible Purchasers exceeds the amount of any damages which such Initial
Purchaser has otherwise paid or become liable to pay by reason of any 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
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Initial Purchasers'
obligations to contribute as provided in this Section 8(d) are several in
proportion to their respective underwriting obligations and not joint.
(e) The Initial Purchasers severally confirm and the
Company acknowledges that the last paragraph on the cover page, the
stabilization legend on page iii, the table of Initial Purchasers and the
information contained in the fifth, sixth, seventh, ninth and tenth paragraphs
of the section entitled "Plan of Distribution" constitute the only information
concerning such Initial Purchasers furnished in writing to the Company by or on
behalf of the Initial Purchasers specifically for inclusion in the Preliminary
Offering Memorandum or the Offering Memorandum.
9. Termination. The obligations of the Initial
Purchasers hereunder may be terminated by Lehman Brothers Inc. by notice given
to the Company prior to delivery of and payment for the Initial Notes if, prior
to that time, any of the events described in Sections 7(m), 7(p) or 7(q) shall
have occurred or if the Initial Purchasers shall decline to purchase the
Initial Notes for any reason permitted under this Agreement.
10. Reimbursement of Initial Purchasers' Expenses. If
the Company shall fail to tender the Initial Notes for delivery to the Initial
Purchasers by reason of any failure, refusal or inability on the part of the
Company to perform any agreement on its part to be performed, or because any
other condition of the Initial Purchasers' obligations hereunder required to be
fulfilled by the Company is not fulfilled, the Company will reimburse the
Initial Purchasers for all reasonable out-of-pocket expenses (including the
fees and disbursements of their counsel) incurred by the Initial Purchasers in
connection with this Agreement and the proposed purchase
<PAGE> 29
of the Initial Notes, and upon demand the Company shall pay the full amount
thereof to Lehman Brothers Inc.
11. Notices, etc. All statements, requests, notices and
agreements hereunder shall be in writing, and:
(a) if to the Initial Purchasers, shall be delivered or
sent by mail, telex or facsimile transmission to Lehman Brothers Inc., Three
World Financial Center, New York, New York 10285, Attention: Syndicate
Department (Fax: 212-526-6588), with a copy to Latham & Watkins, 650 Town
Center Drive, 20th Floor, Costa Mesa, California 92626, Attention: Patrick T.
Seaver (Fax: 714-755-8290); and
(b) if to the Company, shall be delivered or sent by
mail, telex or facsimile transmission to Furon Company, 29982 Ivy Glenn Drive,
Laguna Niguel, California 92677, Attention: Chief Financial Officer (Fax:
714-363-6276), with a copy to O'Melveny & Myers LLP, 610 Newport Center Drive,
Suite 1700, Newport Beach, California 92660, Attention: Gary J. Singer (Fax:
714-669-6994).
Any such statements, requests, notices or agreements shall
take effect at the time of receipt thereof. The Company shall be entitled to
act and rely upon any request, consent, notice or agreement given or made on
behalf of the Initial Purchasers by Lehman Brothers Inc. Any notice of a
change of address or facsimile transmission number must be given by the Company
or by the Initial Purchasers, as the case may be, in writing, at least three
days in advance of such change.
12. Persons Entitled to Benefit of Agreement. This
Agreement shall inure to the benefit of and be binding upon the Initial
Purchasers, the Company and their respective successors. This Agreement and
the terms and provisions hereof are for the sole benefit of only those persons,
except that (i) the representations, warranties, indemnities and agreements of
the Company contained in this Agreement shall also be deemed to be for the
benefit of the person or persons, if any, who control any Initial Purchaser
within the meaning of Section 15 of the Securities Act and (ii) the
representations, warranties, indemnities and agreements of the Initial
Purchasers contained in this Agreement shall be deemed to be for the benefit of
directors, officers and employees of the Company and any person controlling the
Company within the meaning of Section 15 of the Securities Act. Nothing in
this Agreement is intended or shall be construed to give any person, other than
the persons referred to in this Section 12, any legal or equitable right,
remedy or claim under or in respect of this Agreement or any provision
contained herein.
13. Survival. The respective indemnities,
representations, warranties and agreements of the Initial Purchasers and the
Company contained in this Agreement or made by or on behalf on them,
respectively, pursuant to this Agreement, shall survive the delivery of and
payment for the Notes and shall remain in full force and effect, regardless of
any investigation made by or on behalf of any of them or any person controlling
any of them.
<PAGE> 30
14. Definition of the Terms "Business Day" and
"Subsidiary." For purposes of this Agreement, "Business Day" means any day on
which the New York Stock Exchange, Inc. is open for trading, and "Subsidiary"
means with respect to the Company, (i) any corporation, association or other
business entity of which more than 50% of the total voting power of shares of
capital stock entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by the Company, (ii) any
partnership (a) the sole general partner or the managing general partner of
which is the Company or an entity described in clause (i) and related to the
Company or (b) the only general partners of which are the Company or of one or
more entities described in clause (i) and related to the Company (or any
combination thereof) and (iii) any limited liability company, the sole managing
member or the majority of the managing members of which are persons described
in clause (i) or (ii).
15. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of New York without regard to
principles of conflicts of laws.
16. Counterparts. This Agreement may be executed in one
or more counterparts and, if executed in more than one counterpart, the
executed counterparts shall each be deemed to be an original but all such
counterparts shall together constitute one and the same instrument.
17. Headings. The headings herein are inserted for
convenience of reference only and are not intended to be part of, or to affect
the meaning or interpretation of, this Agreement.
[signature pages follow]
<PAGE> 31
If the foregoing correctly sets forth the agreement between
the Initial Purchasers and the Company, please indicate your acceptance in the
space provided for that purpose below.
Very truly yours,
FURON COMPANY
By: /s/ J. Michael Hagan
---------------------------------
J. Michael Hagan
Chief Executive Officer
By: /s/ Monty A. Houdeshell
---------------------------------
Monty A. Houdeshell
Vice President and
Chief Financial Officer
Accepted:
LEHMAN BROTHERS INC.
By: /s/ Michael A. Goldberg
---------------------------------
Name: Michael A. Goldberg
Title: Vice President
BEAR, STEARNS & CO. INC.
By: /s/ James B. Nish
---------------------------------
James B. Nish
Senior Managing Director
BNY CAPITAL MARKETS, INC.
By: /s/ John Roy
---------------------------------
John Roy
Managing Director
<PAGE> 32
SCHEDULE 1
<TABLE>
<CAPTION>
Initial Purchasers Principal Amount of Notes
- ------------------ --------------------------
<S> <C>
Lehman Brothers Inc. $ 81,250,000
Bear, Stearns & Co. Inc. 37,500,000
BNY Capital Markets, Inc. 6,250,000
------------------
Total $ 125,000,000
==================
</TABLE>
<PAGE> 33
EXHIBIT A
Registration Rights Agreement
<PAGE> 34
EXHIBIT B
Employee pension plans with respect to which the Company or
any corporation considered an affiliate of the Company within the meaning of
Section 407(d)(7) of ERISA is a party-in-interest or disqualified person:
Furon Company Employees Profit Sharing Retirement Plan;
Furon Company Employees Stock Ownership Plan;
Pension Plan for Bargaining Unit Employees of CHR Industries,
Inc.;
Medex, Inc. 401(k) Savings Plan.
<PAGE> 35
EXHIBIT C
Furon Company Subsidiaries
<TABLE>
<CAPTION>
STATE OR OTHER JURISDICTION OF
NAME OF SUBSIDIARY INCORPORATION OR ORGANIZATION
------------------ -----------------------------
<S> <C>
Medex, Inc. Ohio
Ashfield Medical Systems Limited United Kingdom
Medex Medical France SARL France
Medex Medical GmbH Germany
AS Medical GmbH Germany
Medex Medical S.r.l. Italy
Medex Medical, Inc. Ohio
Medex Medical Limited United Kingdom
Medex Medical Instrumentation, Inc. Ohio
Bunnell Plastics, Inc.* New Jersey
CHR Industries, Inc.* Connecticut
Dixon Industries Corporation* Rhode Island
Fluorocarbon Components, Inc.* New York
Fluorocarbon Foreign Sales Corporation Barbados
Furon B.V. Netherlands
Furon Europe, S.A. Belgium
Furon Limited England
Furon Seals N.V./S.A. Belgium
Furon S.A. Belgium
Premier Python Products, Ltd. England
Premier Python Systems, Inc. Georgia
Sepco Corporation* California
</TABLE>
* A general business corporation with a wholly owned domestic subsidiary.
<PAGE> 1
EXHIBIT 10.15
================================================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of March 4, 1998
by and among
Furon Company, as Issuer
and
Lehman Brothers Inc.
Bear, Stearns & Co. Inc., and
BNY Capital Markets, Inc.,
as Initial Purchasers
================================================================================
<PAGE> 2
This Registration Rights Agreement (this "Agreement") is made
and entered into as of March 4, 1998, by and among Furon Company, a California
corporation (the "Company"), and Lehman Brothers Inc., Bear, Stearns & Co. Inc.
and BNY Capital Markets, Inc. (each an "Initial Purchaser" and, collectively,
the "Initial Purchasers"), each of whom has agreed to purchase the Company's
8-1/8% Senior Subordinated Notes due 2008 (the "Initial Notes" and, together
with the New Notes (as defined), the "Notes") pursuant to the Purchase
Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement,
dated February 26, 1998 (the "Purchase Agreement"), by and among the Company
and the Initial Purchasers. In order to induce the Initial Purchasers to
purchase the Initial Notes, the Company has agreed to provide the registration
rights set forth in this Agreement. The execution and delivery of this
Agreement is a condition to the obligations of the Initial Purchasers set forth
in Section 7(j) of the Purchase Agreement. Capitalized terms used herein and
not otherwise defined shall have the meaning assigned to them in the Indenture,
dated March 4, 1998, between the Company and The Bank of New York, as Trustee,
relating to the Notes (the "Indenture").
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms
shall have the following meanings:
Act: The Securities Act of 1933, as amended.
Affiliate: As defined in Rule 144 of the Act.
Broker-Dealer: Any broker or dealer registered under the
Exchange Act.
Broker-Dealer Transfer Restricted Securities: New Notes that
are acquired by a Broker-Dealer in the Exchange Offer in exchange for Notes
that such Broker-Dealer acquired for its own account as a result of market
making activities or other trading activities (other than Initial Notes
acquired directly from the Company or any of its affiliates).
Business Day: Any day except a Saturday, Sunday or other day
in the City of New York, or in the city of the corporate trust office of the
Trustee (as defined), on which banks are authorized to close.
Closing Date: The date hereof.
Commission: The Securities and Exchange Commission.
Consummate: An Exchange Offer shall be deemed "Consummated"
for purposes of this Agreement upon the occurrence of (a) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the New Notes to be issued in the Exchange Offer, (b) the
maintenance of such Exchange Offer Registration Statement continuously
effective and the keeping of the Exchange Offer open for a period not less than
the period required pursuant to Section 3(b) hereof and (c) the delivery by the
Company to the Registrar
<PAGE> 3
under the Indenture of New Notes in the same aggregate principal amount as the
aggregate principal amount of Initial Notes tendered by Holders thereof
pursuant to the Exchange Offer.
Effectiveness Deadline: As defined in Sections 3(a) and 4(a)
hereof.
Exchange Act: The Securities Exchange Act of 1934, as
amended.
Exchange Offer: The offer by the Company to exchange and
issue a principal amount of New Notes (which shall be registered pursuant to
the Exchange Offer Registration Statement) equal to the outstanding principal
amount of Initial Notes that are tendered by such Holders in connection with
such exchange and issuance.
Exchange Offer Registration Statement: The Registration
Statement relating to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Initial
Purchasers propose to sell the Initial Notes to certain "qualified
institutional buyers," as such term is defined in Rule 144A under the Act and
pursuant to Regulation S under the Act.
Filing Deadline: As defined in Sections 3(a) and 4(a) hereof.
Holders: As defined in Section 2 hereof.
Indemnified Holder: As defined in Section 8(a) hereof.
Interest Payment Date: As defined in the Indenture and the
Notes.
NASD: National Association of Securities Dealers, Inc.
New Notes: The Company's 8-1/8% Senior Subordinated Notes due
2008 to be issued pursuant to the Indenture: (i) in the Exchange Offer or (ii)
as contemplated by Section 4 hereof.
Notes: The Initial Notes and the New Notes.
Person: An individual, partnership, corporation, trust,
unincorporated organization, joint venture, association, joint-stock company or
a government or agency or political subdivision thereof.
Prospectus: The prospectus included in a Registration
Statement at the time such Registration Statement is declared effective, as
amended or supplemented by any prospectus supplement and by all other
amendments thereto, including post-effective amendments, and all material
incorporated by reference into such Prospectus.
Recommencement Date: As defined in Section 6(d) hereof.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of the
Company relating to (a) an offering of New Notes pursuant to an Exchange Offer
or (b) the registration for resale of Transfer Restricted Securities pursuant
to the Shelf Registration Statement, in each case, (i) that is filed pursuant
to the provisions of this Agreement and (ii) including the Prospectus
<PAGE> 4
included therein, all amendments and supplements thereto (including
post-effective amendments) and all exhibits and material incorporated by
reference therein.
Regulation S: Regulation S promulgated under the Act.
Restricted Broker-Dealer: Any Broker-Dealer that holds
Broker-Dealer Transfer Restricted Securities.
Shelf Registration Statement: As defined in Section 4 hereof.
Suspension Notice: As defined in Section 6(d) hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section
77aaa-77bbbb) as in effect on the date of the Indenture.
Transfer Restricted Securities: Each Note, until the earliest
to occur of (a) the date on which such Note is exchanged in the Exchange Offer
and entitled to be resold to the public by the Holder thereof without complying
with the prospectus delivery requirements of the Act, (b) the date on which
such Note has been disposed of in accordance with a Shelf Registration
Statement, (c) the date on which such Note is disposed of by a Broker-Dealer
pursuant to the "Plan of Distribution" contemplated by the Exchange Offer
Registration Statement (including delivery of the Prospectus contained therein)
or (d) the date on which such Note is distributed to the public pursuant to
Rule 144 under the Act.
Underwritten Registration or Underwritten Offering: A
registration in which securities of the Company are sold to an underwriter for
reoffering to the public. The Company shall not be required to engage in more
than one Underwritten Offering for the benefit of the Holders, if any such
Underwritten Registration or Underwritten Offering is requested.
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted
Securities (each, a "Holder") whenever such Person owns Transfer Restricted
Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by
applicable federal law (after the procedures set forth in Section 6(a)(i) below
have been complied with), the Company shall (i) cause the Exchange Offer
Registration Statement to be filed with the Commission as soon as practicable
after the Closing Date, but in no event later than 90 days after the Closing
Date (such 90th day being the "Filing Deadline"), (ii) use its best efforts to
cause such Exchange Offer Registration Statement to become effective at the
earliest possible time, but in no event later than 150 days after the Closing
Date (such 150th day being the "Effectiveness Deadline"), (iii) in connection
with the foregoing, (A) file all pre-effective amendments to such Exchange
Offer Registration Statement as may be necessary in order to cause it to become
effective, (B) file, if applicable, a post-effective amendment to such Exchange
Offer Registration Statement pursuant to Rule 430A under the Act and (C) cause
all necessary filings, if any, in connection with the registration and
qualification of the New Notes to be made under the Blue Sky laws of such
jurisdictions as are necessary to permit Consummation of the Exchange Offer,
and (iv) upon the effectiveness of such Exchange Offer Registration Statement,
commence and
<PAGE> 5
Consummate the Exchange Offer. The Exchange Offer shall be on the appropriate
form permitting registration of the New Notes to be offered in exchange for the
Initial Notes that are Transfer Restricted Securities and to permit resales of
Broker-Dealer Transfer Restricted Securities as contemplated by Section 3(c)
below.
(b) The Company shall use its best efforts to cause the
Exchange Offer Registration Statement to be effective continuously, and shall
keep the Exchange Offer open for a period of not less than the minimum period
required under applicable federal and state securities laws to Consummate the
Exchange Offer; provided, however, that in no event shall such period be less
than 20 Business Days. The Company shall cause the Exchange Offer to comply
with all applicable federal and state securities laws. No securities other
than the New Notes shall be included in the Exchange Offer Registration
Statement. The Company shall use its best efforts to cause the Exchange Offer
to be Consummated on the earliest practicable date after the Exchange Offer
Registration Statement has become effective, but in no event later than 30
Business Days thereafter.
(c) The Company shall include a "Plan of Distribution"
section in the Prospectus contained in the Exchange Offer Registration
Statement and indicate therein that any Restricted Broker-Dealer who holds
Initial Notes that are Transfer Restricted Securities that were acquired for
the account of such Broker-Dealer as a result of market-making activities or
other trading activities (other than Transfer Restricted Securities acquired
directly from the Company or any Affiliate of the Company), may exchange such
Transfer Restricted Securities pursuant to the Exchange Offer; however, such
Broker-Dealer may be deemed to be an "underwriter" within the meaning of the
Act and must, therefore, deliver a prospectus meeting the requirements of the
Act in connection with its initial sale of any New Notes received by such
Broker-Dealer in the Exchange Offer and that the Prospectus contained in the
Exchange Offer Registration Statement may be used to satisfy such prospectus
delivery requirement. Such "Plan of Distribution" section shall also contain
all other information with respect to such sales by such Broker-Dealers that
the Commission may require in order to permit such sales pursuant thereto, but
such "Plan of Distribution" shall not name any such Broker-Dealer or disclose
the amount of Transfer Restricted Securities held by any such Broker-Dealer,
except to the extent required by the Commission as a result of a change in
policy, rules or regulations after the date of this Agreement.
To the extent necessary to ensure that the Exchange Offer
Registration Statement is available for resales of Broker-Dealer Transfer
Restricted Securities by Restricted Broker-Dealers, the Company agrees to use
its best efforts to keep the Exchange Offer Registration Statement continuously
effective, supplemented and amended as required by the provisions of Section
6(c) hereof and in conformity with the requirements of this Agreement, the Act
and the policies, rules and regulations of the Commission as announced from
time to time, for a period of one year from the date on which the Exchange
Offer is Consummated, or such shorter period as will terminate when all
Transfer Restricted Securities covered by such Registration Statement have been
sold pursuant thereto. The Company shall promptly provide sufficient copies of
the latest version of such Prospectus to such Broker-Dealers promptly upon
written request, and in no event later than one Business Day after such
request, at any time during such period.
<PAGE> 6
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Exchange Offer is not
permitted by applicable law (after the Company has complied with the procedures
set forth in Section 6(a)(i) below) or (ii) if any Holder of Transfer
Restricted Securities shall notify the Company within 20 Business Days
following the Consummation of the Exchange Offer that (A) such Holder was
prohibited by law or Commission policy from participating in the Exchange Offer
or (B) such Holder may not resell the New Notes acquired by it in the Exchange
Offer to the public without delivering a prospectus and the Prospectus
contained in the Exchange Offer Registration Statement is not appropriate or
available for such resales by such Holder or (C) such Holder is a Broker-Dealer
and holds Initial Notes acquired directly from the Company or any of its
Affiliates, then the Company shall use its best efforts to:
(x) cause to be filed, on or prior to 30 days after the
earlier of (i) the date on which the Company determines that the
Exchange Offer Registration Statement cannot be filed as a result of
clause (a)(i) above and (ii) the date on which the Company receives
the notice specified in clause (a) (ii) above, (such earlier date, the
"Filing Deadline"), a shelf registration statement pursuant to Rule
415 under the Act (which may be an amendment to the Exchange Offer
Registration Statement (the "Shelf Registration Statement")), relating
to all Transfer Restricted Securities subject to the provisions of
Section 4(b) hereof, and
(y) cause such Shelf Registration Statement to become
effective on or prior to 90 days after the Filing Deadline (such 90th
day the "Effectiveness Deadline").
If, after the Company has filed an Exchange Offer Registration
Statement that satisfies the requirements of Section 3(a) above, the Company is
required to file and make effective a Shelf Registration Statement solely
because the Exchange Offer is not permitted under applicable federal law, then
the filing of the Exchange Offer Registration Statement shall be deemed to
satisfy the requirements of clause (x) above; provided that, in such event, the
Company shall remain obligated to meet the Effectiveness Deadline set forth in
clause (y).
The Company shall use its best efforts to keep any Shelf
Registration Statement required by this Section 4(a) continuously effective,
supplemented and amended as required by and subject to the provisions of
Sections 6(b) and (c) hereof to the extent necessary to ensure that it is
available for sales of Transfer Restricted Securities by the Holders thereof
entitled to the benefit of this Section 4(a), and to ensure that it conforms
with the requirements of this Agreement, the Act and the policies, rules and
regulations of the Commission as announced from time to time, for a period of
at least two years (as extended pursuant to Section 6(c)(i)) following the date
on which such Shelf Registration Statement first becomes effective under the
Act, or such shorter period as will terminate when all Transfer Restricted
Securities covered by such Shelf Registration Statement have been sold pursuant
thereto.
(b) Provision by Holders of Certain Information in
Connection with the Shelf Registration Statement. No Holder of Transfer
Restricted Securities may include any of its Transfer Restricted Securities in
any Shelf Registration Statement pursuant to this Agreement unless and until
such Holder furnishes to the Company in writing, within 20 days after receipt
of a request therefor, such information as the Company may reasonably request
for use in connection with any Shelf Registration Statement or Prospectus or
preliminary Prospectus included therein. No Holder of Transfer Restricted
Securities shall be entitled to liquidated
<PAGE> 7
damages pursuant to Section 5 hereof unless and until such Holder shall have
provided all such reasonably requested information. Each Holder as to which
any Shelf Registration Statement is being effected agrees to furnish promptly
to the Company all additional information required to be disclosed in order to
make the information previously furnished to the Company by such Holder not
materially misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement
is not filed with the Commission on or prior to the applicable Filing Deadline,
(ii) any such Registration Statement has not been declared effective by the
Commission on or prior to the applicable Effectiveness Deadline, (iii) the
Exchange Offer has not been Consummated within 30 Business Days after the
Exchange Offer Registration Statement is first declared effective by the
Commission or (iv) any Registration Statement required by this Agreement is
filed and declared effective but shall thereafter cease to be effective or fail
to be usable for its intended purpose without being succeeded promptly (but in
no event later than 30 days) by a post-effective amendment to such Registration
Statement that cures such failure and that is itself declared effective
immediately, the effectiveness of another Registration Statement or the use of
the Prospectus (as amended or supplemented) is again permitted that cures such
failure (each such event referred to in clauses (i) through (iv), a
"Registration Default"), then the Company hereby agrees to pay to each Holder
of Transfer Restricted Securities affected thereby liquidated damages in an
amount equal to $.05 per week per $1,000 in principal amount of Transfer
Restricted Securities held by such Holder for each week or portion thereof that
the Registration Default continues for the first 90-day period immediately
following the occurrence of such Registration Default. The amount of the
liquidated damages shall increase by an additional $.05 per week per $1,000 in
principal amount of Transfer Restricted Securities with respect to each
subsequent 90-day period until all Registration Defaults have been cured, up to
a maximum amount of liquidated damages of $.25 per week per $1,000 in principal
amount of Transfer Restricted Securities; provided that the Company shall in no
event be required to pay liquidated damages for more than one Registration
Default at any given time. Notwithstanding anything to the contrary set forth
herein, (1) upon filing of the Exchange Offer Registration Statement (and/or,
if applicable, the Shelf Registration Statement), in the case of (i) above, (2)
upon the effectiveness of the Exchange Offer Registration Statement (and/or, if
applicable, the Shelf Registration Statement), in the case of (ii) above, (3)
upon Consummation of the Exchange Offer, in the case of (iii) above, or (4)
upon the filing of a post-effective amendment to the Registration Statement or
an additional Registration Statement that causes the Exchange Offer
Registration Statement (and/or, if applicable, the Shelf Registration
Statement) to again be declared effective or made usable in the case of (iv)
above, the liquidated damages payable with respect to the Transfer Restricted
Securities as a result of such clause (i), (ii), (iii) or (iv), as applicable,
shall cease.
All accrued liquidated damages shall be paid to the Global
Note Holders in the manner provided for the payment of interest in the
Indenture, on each Interest Payment Date, as more fully set forth in the
Indenture and the Notes. All obligations of the Company set forth in the
preceding paragraph that are outstanding with respect to any Transfer
Restricted Security at the time such security ceases to be a Transfer
Restricted Security shall survive until such time as all such obligations with
respect to such Security shall have been satisfied in full.
<PAGE> 8
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection
with the Exchange Offer, the Company shall comply with all applicable
provisions of Section 6(c) below, shall use its best efforts to effect such
exchange and to permit the resale of New Notes by Broker-Dealers that tendered
in the Exchange Offer Initial Notes that such Broker-Dealer acquired for its
own account as a result of its market making activities or other trading
activities (other than Initial Notes acquired directly from the Company or any
of its Affiliates) being sold in accordance with the intended method or methods
of distribution thereof, and shall comply with all of the following provisions:
(i) If, following the date hereof there has been
announced a change in Commission policy with respect to
exchange offers such as the Exchange Offer, that in the
reasonable opinion of counsel to the Company raises a
substantial question as to whether the Exchange Offer is
permitted by applicable federal law, the Company hereby agrees
to seek a no-action letter or other favorable decision from
the Commission allowing the Company to Consummate an Exchange
Offer for such Transfer Restricted Securities. The Company
hereby agrees to pursue the issuance of such a decision to the
Commission staff level but shall not be required to take
commercially unreasonable action to effect a change of
Commission policy. The Company hereby agrees, however, to take
all such other actions (so long as not commercially
unreasonable) as may be requested by the Commission or
otherwise required in connection with the issuance of such
decision, including without limitation (A) participating in
telephonic conferences with the Commission, (B) delivering to
the Commission staff an analysis prepared by counsel to the
Company setting forth the legal bases, if any, upon which such
counsel has concluded that such an Exchange Offer should be
permitted and (C) diligently pursuing a resolution (which need
not be favorable) by the Commission staff.
(ii) As a condition to its participation in the
Exchange Offer, each Holder of Transfer Restricted Securities
(including, without limitation, any Holder who is a Broker
Dealer) shall furnish, upon the request of the Company, prior
to the Consummation of the Exchange Offer, a written
representation to the Company (which may be contained in the
letter of transmittal contemplated by the Exchange Offer
Registration Statement) to the effect that (A) it is not an
Affiliate of the Company, (B) it is not engaged in, and does
not intend to engage in, and has no arrangement or
understanding with any person to participate in, a
distribution of the New Notes to be issued in the Exchange
Offer and (C) it is acquiring the New Notes in its ordinary
course of business. Each Holder using the Exchange Offer to
participate in a distribution of the New Notes hereby
acknowledges and agrees that, if the resales are of New Notes
obtained by such Holder in exchange for Initial Notes acquired
directly from the Company or an Affiliate thereof, it (1)
could not, under Commission policy as in effect on the date of
this Agreement, rely on the position of the Commission
enunciated in Morgan Stanley and Co., Inc. (available June 5,
1991) and Exxon Capital Holdings Corporation (available May
13, 1988), as interpreted in the Commission's letter to
Shearman & Sterling dated July 2, 1993, and similar no-action
letters (including, if applicable, any no-action letter
obtained pursuant to clause (i) above), and (2) must comply
with the
<PAGE> 9
registration and prospectus delivery requirements of the Act
in connection with a secondary resale transaction and that
such a secondary resale transaction must be covered by an
effective registration statement containing the selling
security holder information required by Item 507 or 508, as
applicable, of Regulation S-K.
(iii) Prior to effectiveness of the Exchange Offer
Registration Statement, the Company shall provide a
supplemental letter to the Commission (A) stating that the
Company is registering the Exchange Offer in reliance on the
position of the Commission enunciated in Exxon Capital
Holdings Corporation (available May 13, 1988), Morgan Stanley
and Co., Inc. (available June 5, 1991) as interpreted in the
Commission's letter to Shearman & Sterling dated July 2, 1993,
and, if applicable, any no-action letter obtained pursuant to
clause (i) above, (B) including a representation that the
Company has not entered into any arrangement or understanding
with any Person to distribute the New Notes to be received in
the Exchange Offer and that, to the best of the Company's
information and belief, each Holder participating in the
Exchange Offer is acquiring the New Notes in its ordinary
course of business and has no arrangement or understanding
with any Person to participate in the distribution of the New
Notes received in the Exchange Offer and (C) any other
undertaking or representation required by the Commission as
set forth in any no-action letter obtained pursuant to clause
(i) above, if applicable.
(b) Shelf Registration Statement. In connection with the
Shelf Registration Statement, the Company shall comply with all the provisions
of Section 6(c) below and shall use its best efforts to effect such
registration to permit the sale of the Transfer Restricted Securities being
sold in accordance with the intended method or methods of distribution thereof
(as indicated in the information furnished to the Company pursuant to Section
4(b) hereof), and pursuant thereto the Company will prepare and file with the
Commission a Registration Statement relating to the registration on any
appropriate form under the Act, which form shall be available for the sale of
the Transfer Restricted Securities in accordance with the intended method or
methods of distribution thereof within the time periods and otherwise in
accordance with the provisions hereof.
(c) General Provisions. In connection with any
Registration Statement and any related Prospectus required by this Agreement,
the Company shall:
(i) use its best efforts to keep such
Registration Statement continuously effective and provide all
requisite financial statements for the period specified in
Section 3 or 4 of this Agreement, as applicable. Upon the
occurrence of any event that would cause any such Registration
Statement or the Prospectus contained therein (A) to contain a
material misstatement or omission or (B) not to be effective
and usable for resale of Transfer Restricted Securities during
the period required by this Agreement, the Company shall file
promptly an appropriate amendment to such Registration
Statement curing such defect, and, if Commission review is
required, use its best efforts to cause such amendment to be
declared effective as soon as practicable.
(ii) prepare and file with the Commission such
amendments and post-effective amendments to the applicable
Registration Statement as may be necessary to keep such
Registration Statement effective for the applicable period
<PAGE> 10
set forth in Section 3 or 4 hereof, as the case may be; cause
the Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to
Rule 424 under the Act, and to comply fully with Rules 424,
430A and 462, as applicable, under the Act in a timely manner;
and comply with the provisions of the Act with respect to the
disposition of all securities covered by such Registration
Statement during the applicable period in accordance with the
intended method or methods of distribution by the sellers
thereof set forth in such Registration Statement or supplement
to the Prospectus;
(iii) advise the selling Holders promptly and, if
requested by such Persons, confirm such advice in writing, (A)
when the Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to
any applicable Registration Statement or any post-effective
amendment thereto, when the same has become effective, (B) of
any request by the Commission for amendments to the
Registration Statement or amendments or supplements to the
Prospectus or for additional information relating thereto, (C)
of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement under the Act
or of the suspension by any state securities commission of the
qualification of the Transfer Restricted Securities for
offering or sale in any jurisdiction, or the initiation of any
proceeding for any of the preceding purposes, (D) of the
existence of any fact or the happening of any event that makes
any statement of a material fact made in the Registration
Statement, the Prospectus, any amendment or supplement thereto
or any document incorporated by reference therein untrue, or
that requires the making of any additions to or changes in the
Registration Statement in order to make the statements therein
not misleading, or that requires the making of any additions
to or changes in the Prospectus in order to make the
statements therein, in the light of the circumstances under
which they were made, not misleading. If at any time the
Commission shall issue any stop order suspending the
effectiveness of the Registration Statement, or any state
securities commission or other regulatory authority shall
issue an order suspending the qualification or exemption from
qualification of the Transfer Restricted Securities under
state securities or Blue Sky laws, the Company shall use its
best efforts to obtain the withdrawal or lifting of such order
at the earliest possible time;
(iv) subject to Section 6(c)(i), if any fact or
event contemplated by Section 6(c)(iii)(D) above shall exist
or have occurred, prepare a supplement or post-effective
amendment to the Registration Statement or related Prospectus
or any document incorporated therein by reference or file any
other required document so that, as thereafter delivered to
the purchasers of Transfer Restricted Securities, the
Prospectus will not contain an untrue statement of a material
fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under
which they were made, not misleading;
(v) furnish to the Initial Purchaser(s) and each
selling Holder named in any Registration Statement or
Prospectus in connection with such sale, if any, before filing
with the Commission, copies of any Registration Statement or
any Prospectus included therein or any amendments or
supplements to any such Registration Statement or Prospectus
(including all documents incorporated by
<PAGE> 11
reference after the initial filing of such Registration
Statement), which documents will be subject to the review and
comment of such Holders in connection with such sale, if any,
for a period of at least five Business Days, and the Company
will not file any such Registration Statement or Prospectus or
any amendment or supplement to any such Registration Statement
or Prospectus (including all such documents incorporated by
reference) to which the selling Holders of the Transfer
Restricted Securities covered by such Registration Statement
in connection with such sale, if any, shall reasonably object
within five Business Days after the receipt thereof. A
selling Holder shall be deemed to have reasonably objected to
such filing if such Registration Statement, amendment,
Prospectus or supplement, as applicable, as proposed to be
filed, contains a material misstatement or omission or fails
to comply with the applicable requirements of the Act;
(vi) upon written request, promptly prior to the
filing of any document that is to be incorporated by reference
into an Exchange Offer Registration Statement or related
Prospectus or promptly upon the filing of any document that is
to be incorporated by reference into a Shelf Registration
Statement or related Prospectus, provide copies of such
document to the selling Holders in connection with such sale,
if any, make the Company's representatives available for
discussion of such document and other customary due diligence
matters, and include such information in such document prior
to the filing thereof as such selling Holders may reasonably
request;
(vii) make available at reasonable times for
inspection by the selling Holders participating in any
disposition pursuant to such Registration Statement and any
attorney or accountant retained by such selling Holders, all
financial and other records, pertinent corporate documents of
the Company and cause the Company's officers, directors and
employees to supply all information reasonably requested by
any such selling Holder, attorney or accountant in connection
with such Registration Statement or any post-effective
amendment thereto subsequent to the filing thereof and prior
to its effectiveness;
(viii) if requested by any selling Holders in
connection with such sale, if any, promptly include in any
Registration Statement or Prospectus, pursuant to a supplement
or post-effective amendment if necessary, such information as
such selling Holders may reasonably request to have included
therein, including, without limitation, information relating
to the "Plan of Distribution" of the Transfer Restricted
Securities; and make all required filings of such Prospectus
supplement or post-effective amendment as soon as practicable
after the Company is notified of the matters to be included in
such Prospectus supplement or post-effective amendment;
(ix) furnish to each selling Holder in connection
with such sale, if any, without charge, at least one copy of
the Registration Statement, as first filed with the
Commission, and of each amendment thereto, including all
documents incorporated by reference therein and all exhibits
(including exhibits incorporated therein by reference);
(x) deliver to each selling Holder, without
charge, as many copies of the Prospectus (including each
preliminary prospectus) and any amendment or
<PAGE> 12
supplement thereto as such Persons reasonably may request; the
Company hereby consents to the use (in accordance with law)
of the Prospectus and any amendment or supplement thereto by
each of the selling Holders in connection with the offering
and the sale of the Transfer Restricted Securities covered by
the Prospectus or any amendment or supplement thereto;
(xi) upon the request of any selling Holder, enter
into such agreements (including underwriting agreements) and
make such representations and warranties and take all such
other actions in connection therewith in order to expedite or
facilitate the disposition of the Transfer Restricted
Securities pursuant to any applicable Registration Statement
contemplated by this Agreement as may be reasonably requested
by any Holder of Transfer Restricted Securities in connection
with any sale or resale pursuant to any applicable
Registration Statement and in such connection, the Company
shall:
(A) upon request of any selling Holder,
furnish (or in the case of paragraphs (2) and (3),
use its best efforts to cause to be furnished) to
each selling Holder, upon the effectiveness of the
Shelf Registration Statement or upon Consummation of
the Exchange Offer, as the case may be:
(1) a certificate, dated such date,
signed on behalf of the Company by (x) the Chief
Executive Officer or President and (y) the Chief
Financial Officer or Treasurer of the Company, as set
forth in Section 7(l) of the Purchase Agreement,
confirming, as of the date thereof, the matters set
forth in such Section and such other similar matters
as the selling Holders may reasonably request;
(2) an opinion, dated the date of
Consummation of the Exchange Offer, or the date of
effectiveness of the Shelf Registration Statement, as
the case may be, of counsel for the Company covering
matters similar to those set forth in Sections 7(d)
through (g) of the Purchase Agreement and such other
matters as the selling Holders may reasonably
request, and in any event including a statement to
the effect that such counsel has participated in
conferences with officers and other representatives
of the Company, representatives of the independent
public accountants for the Company and have
considered the matters required to be stated therein
and the statements contained therein, although such
counsel has not independently verified the accuracy,
completeness or fairness of such statements; and that
such counsel advises that, on the basis of the
foregoing (relying as to materiality to the extent
such counsel deems appropriate upon the statements of
officers and other representatives of the Company)
and without independent check or verification), no
facts came to such counsel's attention that caused
such counsel to believe that the applicable
Registration Statement, at the time such Registration
Statement or any post-effective amendment thereto
became effective and, in the case of the Exchange
Offer Registration Statement, as of the date of
<PAGE> 13
Consummation of the Exchange Offer, contained an
untrue statement of a material fact or omitted to
state a material fact required to be stated therein
or necessary to make the statements therein not
misleading, or that the Prospectus contained in such
Registration Statement as of its date and, in the
case of the opinion dated the date of Consummation of
the Exchange Offer, as of the date of Consummation,
contained an untrue statement of a material fact or
omitted to state a material fact necessary in order
to make the statements therein, in the light of the
circumstances under which they were made, not
misleading. Without limiting the foregoing, such
counsel may state further that such counsel assumes
no responsibility for, and has not independently
verified, the accuracy, completeness or fairness of
the financial statements, notes and schedules and
other financial data included in any Registration
Statement contemplated by this Agreement or the
related Prospectus; and
(3) a customary comfort letter, dated
the date of Consummation of the Exchange Offer, or as
of the date of effectiveness of the Shelf
Registration Statement, as the case may be, from the
Company's independent accountants, in the customary
form and covering matters of the type customarily
covered in comfort letters to underwriters in
connection with underwritten offerings, and affirming
the matters set forth in the comfort letters
delivered pursuant to Section 7(k) of the Purchase
Agreement, and
(B) deliver such other documents and
certificates as may be reasonably requested by the
selling Holders to evidence compliance with clause
(A) above and with any customary conditions contained
in the any agreement entered into by the Company
pursuant to this clause (xi);
(xii) prior to any public offering of Transfer
Restricted Securities, cooperate with the selling Holders and
their counsel in connection with the registration and
qualification of the Transfer Restricted Securities under the
securities or Blue Sky laws of such jurisdictions as the
selling Holders may request and do any and all other acts or
things necessary or advisable to enable the disposition in
such jurisdictions of the Transfer Restricted Securities
covered by the applicable Registration Statement; provided,
however, that the Company shall not be required to register or
qualify as a foreign corporation where it is not now so
qualified or to take any action that would subject it to the
service of process in suits or to taxation, other than as to
matters and transactions relating to the Registration
Statement, in any jurisdiction where it is not now so subject;
(xiii) issue, upon the request of any Holder of
Initial Notes covered by any Shelf Registration Statement
contemplated by this Agreement, New Notes having an aggregate
principal amount equal to the aggregate principal amount of
Initial Notes surrendered to the Company by such Holder in
exchange therefor or being sold by such Holder; such New Notes
to be registered in the name of such Holder
<PAGE> 14
or in the name of the purchaser(s) of such New Notes, as the
case may be; in return, the Initial Notes held by such Holder
shall be surrendered to the Company for cancellation;
(xiv) in connection with any sale of Transfer
Restricted Securities that will result in such securities no
longer being Transfer Restricted Securities, cooperate with
the selling Holders to facilitate the timely preparation and
delivery of certificates representing Transfer Restricted
Securities to be sold and not bearing any restrictive legends;
and to register such Transfer Restricted Securities in such
denominations and such names as the selling Holders may
request at least two Business Days prior to such sale of
Transfer Restricted Securities;
(xv) use its best efforts to cause the disposition
of the Transfer Restricted Securities covered by the
Registration Statement to be registered with or approved by
such other governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof to
consummate the disposition of such Transfer Restricted
Securities, subject to the proviso contained in clause (xii)
above;
(xvi) provide a CUSIP number for all Transfer
Restricted Securities not later than the effective date of a
Registration Statement covering such Transfer Restricted
Securities and provide the Trustee under the Indenture with
printed certificates for the Transfer Restricted Securities
which are in a form eligible for deposit with the Depository
Trust Company;
(xvii) otherwise use its best efforts to comply with
all applicable rules and regulations of the Commission, and
make generally available to its security holders with regard
to any applicable Registration Statement, as soon as
practicable, a consolidated earnings statement meeting the
requirements of Rule 158 (which need not be audited) covering
a twelve-month period beginning after the effective date of
the Registration Statement (as such term is defined in
paragraph (c) of Rule 158 under the Act);
(xviii) make appropriate officers of the Company
available to the selling Holders for meetings with prospective
purchasers of the Transfer Restricted Securities and prepare
and present to potential investors customary "road show"
material in a manner consistent with other new issuances of
other securities similar to the Transfer Restricted
Securities; provided, however, that the Company shall not be
required to make such presentation more than once in any
12-month period; and
(xix) cause the Indenture to be qualified under the
TIA not later than the effective date of the first
Registration Statement required by this Agreement and, in
connection therewith, cooperate with the Trustee and the
Holders to effect such changes to the Indenture as may be
required for such Indenture to be so qualified in accordance
with the terms of the TIA; and execute and use its best
efforts to cause the Trustee to execute, all documents that
may be required to effect such changes and all other forms and
documents required to be filed with the Commission to enable
such Indenture to be so qualified in a timely manner; and
<PAGE> 15
(xx) provide promptly to each Holder upon request
each document filed with the Commission pursuant to the
requirements of Section 13 or Section 15(d) of the Exchange
Act.
(d) Restrictions on Holders. Each Holder agrees by
acquisition of a Transfer Restricted Security that, upon receipt of the notice
referred to in Section 6(c)(i) or any notice from the Company of the existence
of any fact of the kind described in Section 6(c)(iii)(D) hereof (in each case,
a "Suspension Notice"), such Holder will forthwith discontinue disposition of
Transfer Restricted Securities pursuant to the applicable Registration
Statement until (i) such Holder's has received copies of the supplemented or
amended Prospectus contemplated by Section 6(c)(iv) hereof, or (ii) such Holder
is advised in writing by the Company that the use of the Prospectus may be
resumed, and has received copies of any additional or supplemental filings that
are incorporated by reference in the Prospectus (in each case, the
"Recommencement Date"). Each Holder receiving a Suspension Notice hereby
agrees that it will either (i) destroy any Prospectuses, other than permanent
file copies, then in such Holder's possession which have been replaced by the
Company with more recently dated Prospectuses or (ii) deliver, if so directed
by the Company, to the Company (at the Company's expense) all copies, other
than permanent file copies, then in such Holder's possession of the Prospectus
covering such Transfer Restricted Securities that was current at the time of
receipt of the Suspension Notice. The time period regarding the effectiveness
of such Registration Statement set forth in Section 3 or 4 hereof, as
applicable, shall be extended by a number of days equal to the number of days
in the period from and including the date of delivery of the Suspension Notice
to the date of delivery of the Recommencement Date.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's performance of
or compliance with this Agreement will be borne by the Company, regardless of
whether a Registration Statement becomes effective, including without
limitation: (i) all registration and filing fees and expenses (including
filings made by any Purchaser or Holder with the NASD (and if applicable, the
fees and expenses of any "qualified independent underwriter") and its counsel
that may be required by the rules and regulations of the NASD); (ii) all fees
and expenses of compliance with federal securities and state Blue Sky or
securities laws; (iii) all expenses of printing (including printing
certificates, if applicable, for the New Notes to be issued in the Exchange
Offer and printing of Prospectuses), messenger and delivery services and
telephone; (iv) all fees and disbursements of counsel for the Company, subject
to Section 7(b) hereof, and the Holders of Transfer Restricted Securities; (v)
all application and filing fees in connection with listing the New Notes on a
national securities exchange or automated quotation system pursuant to the
requirements hereof; and (vi) all fees and disbursements of independent
certified public accountants of the Company (including the expenses of any
special audit and comfort letters required by or incident to such performance).
The Company will, in any event, bear its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expenses of any annual
audit and the fees and expenses of any Person, including special experts,
retained by the Company.
(b) In connection with any Registration Statement
required by this Agreement (including, without limitation, the Exchange Offer
Registration Statement and the Shelf Registration Statement), the Company will
reimburse the Purchasers and the Holders of
<PAGE> 16
Transfer Restricted Securities being tendered in the Exchange Offer and/or
resold pursuant to the "Plan of Distribution" contained in the Exchange Offer
Registration Statement or registered pursuant to the Shelf Registration
Statement, as applicable, for the reasonable fees and disbursements of not more
than one counsel, who shall be Latham & Watkins, unless another firm shall be
chosen by the Holders of a majority in principal amount of the Transfer
Restricted Securities for whose benefit such Registration Statement is being
prepared.
SECTION 8. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless (i)
each Holder and (ii) each person, if any, who controls (within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act) any Holder (any of the
persons referred to in this clause (ii) being hereinafter referred to as a
"controlling person") and (iii) the respective officers, directors, partners,
employees, representatives and agents of any Holder or any controlling person
(any person referred to in clause (i), (ii) or (iii) may hereinafter be
referred to as an "Indemnified Holder"), from and against any and all losses,
claims, damages, liabilities, judgments, (including without limitation, any
legal or other expenses incurred in connection with investigating or defending
any matter, including any action that could give rise to any such losses,
claims, damages, liabilities or judgments) caused by any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement, preliminary prospectus or Prospectus (or any amendment or supplement
thereto) provided by the Company to any holder or any prospective purchaser of
New Notes, or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages,
liabilities or judgments are caused by an untrue statement or omission or
alleged untrue statement or omission that is based upon information relating to
any of the Holders furnished in writing to the Company by or on behalf of any
of the Holders; provided, however, that the Company shall not be liable in any
such case if a subsequent purchaser asserts that its losses, claims, damages,
liabilities or judgments were based upon any untrue statement or alleged untrue
statement of material fact or omission or alleged omission to state therein a
material fact in the preliminary Prospectus, if a copy of the Registration
Statement or final Prospectus in which such untrue statement or alleged untrue
statement or omission or alleged omission was corrected had not been sent or
given to such subsequent purchaser by the Holder provided that the Company had
delivered to the Holder such Registration Statement or final Prospectus in
requisite quantity and on a timely basis to permit such delivery or sending.
(b) Each Holder of Transfer Restricted Securities agrees,
severally and not jointly, to indemnify and hold harmless the Company, and its
directors and officers, and each person, if any, who controls (within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act) the
Company, to the same extent as the foregoing indemnity from the Company to each
of the Indemnified Holders, but only with reference to information relating to
such Indemnified Holder furnished in writing to the Company by or on behalf of
such Indemnified Holder expressly for use in any Registration Statement. In no
event shall any Indemnified Holder be liable or responsible for any amount in
excess of the amount by which the total amount received by such Indemnified
Holder with respect to its sale of Transfer Restricted Securities pursuant to a
Registration Statement exceeds (i) the amount paid by such Indemnified Holder
for such Transfer Restricted Securities and (ii) the amount of any damages that
such Indemnified Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission.
<PAGE> 17
(c) In case any action shall be commenced involving any
person in respect of which indemnity may be sought pursuant to Section 8(a) or
8(b) (the "indemnified party"), the indemnified party shall promptly notify the
person against whom such indemnity may be sought (the "indemnifying person") in
writing and the indemnifying party shall assume the defense of such action,
including the employment of counsel reasonably satisfactory to the indemnified
party and the payment of all fees and expenses of such counsel, as incurred
(except that in the case of any action in respect of which indemnity may be
sought pursuant to both Sections 8(a) and 8(b), an Indemnified Holder shall not
be required to assume the defense of such action pursuant to this Section 8(c),
but may employ separate counsel and participate in the defense thereof, but the
fees and expenses of such counsel, except as provided below, shall be at the
expense of the Indemnified Holder). Any indemnified party shall have the right
to employ separate counsel in any such action and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
the indemnified party unless (i) the employment of such counsel shall have been
specifically authorized in writing by the indemnifying party, (ii) the
indemnifying party shall have failed to assume the defense of such action or
employ counsel reasonably satisfactory to the indemnified party or (iii) the
named parties to any such action (including any impleaded parties) include both
the indemnified party and the indemnifying party, and the indemnified party
shall have been advised by such counsel that there may be one or more legal
defenses available to it which are different from or additional to those
available to the indemnifying party (in which case the indemnifying party shall
not have the right to assume the defense of such action on behalf of the
indemnified party). In any such case, the indemnifying party shall not, in
connection with any one action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (in addition to any local counsel) for all indemnified
parties and all such fees and expenses shall be reimbursed as they are
incurred. Such firm shall be designated in writing by a majority of the
Indemnified Holders, in the case of the parties indemnified pursuant to Section
8(a), and by the Company, in the case of parties indemnified pursuant to
Section 8(b). The indemnifying party shall indemnify and hold harmless the
indemnified party from and against any and all losses, claims, damages,
liabilities and judgments by reason of any settlement of any action (i)
effected with its written consent or (ii) effected without its written consent
if the settlement is entered into more than twenty business days after the
indemnifying party shall have received a request from the indemnified party for
reimbursement for the fees and expenses of counsel (in any case where such fees
and expenses are at the expense of the indemnifying party) and, prior to the
date of such settlement, the indemnifying party shall have failed to comply
with such reimbursement request. No indemnifying party shall (i) without the
prior written consent of the indemnified party, effect any settlement or
compromise of, or consent to the entry of judgment with respect to, any
pending or threatened action in respect of which the indemnified party is or
could have been a party and indemnity or contribution may be or could have been
sought hereunder by the indemnified party, unless such settlement, compromise
or judgment includes an unconditional release of the indemnified party from all
liability on claims that are or could have been the subject matter of such
action or (ii) be liable for any settlement of any such action effected without
its written consent (which consent shall not be unreasonably withheld), but if
settled with the consent of the indemnifying party or if there be a final
judgment of the plaintiff in any such action, the indemnifying party agrees to
indemnify and hold harmless any indemnified party from and against any loss or
liability by reason of such settlement or judgment.
<PAGE> 18
(d) To the extent that the indemnification provided for
in this Section 8 is unavailable to an indemnified party in respect of any
losses, claims, damages, liabilities or judgments referred to therein, then
each indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company, on the one hand, and the Holders, on the other hand, from their sale
of Transfer Restricted Securities or (ii) if the allocation provided by clause
8(d)(i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
8(d)(i) above but also the relative fault of the Company, on the one hand, and
of the Indemnified Holder, on the other hand, in connection with the statements
or omissions which resulted in such losses, claims, damages, liabilities or
judgments, as well as any other relevant equitable considerations. The
relative fault of the Company, on the one hand, and of the Indemnified Holder,
on the other hand, shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company, on the one hand, or by the Indemnified Holder, on the
other hand, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The amount
paid or payable by a party as a result of the losses, claims, damages,
liabilities and judgments referred to above shall be deemed to include, subject
to the limitations set forth in the second paragraph of Section 8(a), any legal
or other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim.
The Company and each Holder agree that it would not be just
and equitable if contribution pursuant to this Section 8(d) were determined by
pro rata allocation (even if the Holders were treated as one entity for such
purpose) or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of
the losses, claims, damages, liabilities or judgments referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any
matter, including any action that could have given rise to such losses, claims,
damages, liabilities or judgments. Notwithstanding the provisions of this
Section 8, no Holder or its related Indemnified Holders shall be required to
contribute, in the aggregate, any amount in excess of the amount by which the
total received by such Holder with respect to the sale of its Transfer
Restricted Securities pursuant to a Registration Statement exceeds the sum of
(A) the amount paid by such Holder for such Transfer Restricted Securities plus
(B) the amount of any damages which such Holder has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Holders'
obligations to contribute pursuant to this Section 8(c) are several in
proportion to the respective principal amount of Transfer Restricted Securities
held by each of the Holders hereunder and not joint.
SECTION 9. RULE 144A
The Company hereby agrees with each Holder, for so long as any
Transfer Restricted Securities remain outstanding and during any period in
which the Company is not
<PAGE> 19
subject to Section 13 or 15(d) of the Securities Exchange Act, to make
available, upon request of any Holder of Transfer Restricted Securities, to any
Holder or beneficial owner of Transfer Restricted Securities in connection with
any sale thereof and any prospective purchaser of such Transfer Restricted
Securities designated by such Holder or beneficial owner, the information
required by Rule 144A(d)(4) under the Act in order to permit resales of such
Transfer Restricted Securities pursuant to Rule 144A.
SECTION 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration
hereunder unless such Holder (a) agrees to sell such Holder's Transfer
Restricted Securities on the basis provided in any underwriting agreements
approved by the Person 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
required under the terms of such underwriting arrangements.
SECTION 11. SELECTION OF UNDERWRITERS
The Holders of Transfer Restricted Securities covered by the
Shelf Registration Statement who desire to do so may sell such Transfer
Restricted Securities in one Underwritten Offering. For any Underwritten
Offering, the investment banker or investment bankers and manager or managers
will administer such offering will be selected by the holders of a majority in
aggregate principal amount of the Transfer Restricted Securities included in
such offering; provided, that such investment bankers and managers must be
reasonably satisfactory to the Company. Such investment bankers and managers
are referred to herein as the "underwriters."
SECTION 12. MISCELLANEOUS
(a) Remedies. The Company acknowledges and agrees that
any failure by the Company to comply with its obligations under Sections 3 and
4 hereof may result in material irreparable injury to the Initial Purchasers or
the Holders for which there is no adequate remedy at law, that it will not be
possible to measure damages for such injuries precisely and that, in the event
of any such failure, the Initial Purchasers or any Holder may obtain such
relief as may be required to specifically enforce the Company's obligations
under Sections 3 and 4 hereof. The Company further agrees to waive the defense
in any action for specific performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company will not, on
or after the date of this Agreement, enter into any agreement with respect to
its securities that is inconsistent with the rights granted to the Holders in
this Agreement or otherwise conflicts with the provisions hereof. The Company
has not previously entered into any agreement granting any registration rights
with respect to its securities to any Person. The rights granted to the
Holders hereunder do not in any way conflict with and are not inconsistent with
the rights granted to the holders of the Company's securities under any
agreement in effect on the date hereof.
(c) Amendments and Waivers. The provisions of this
Agreement may not be amended, modified or supplemented, and waivers or consents
to or departures from the provisions hereof may not be given unless (i) in the
case of Section 5 hereof and this Section 12(c)(i), the Company has obtained
the written consent of Holders of all outstanding Transfer Restricted
Securities and (ii) in the case of all other provisions hereof, the Company
<PAGE> 20
has obtained the written consent of Holders of a majority of the outstanding
principal amount of Transfer Restricted Securities (excluding Transfer
Restricted Securities held by the Company of its Affiliates). Notwithstanding
the foregoing, a waiver or consent to departure from the provisions hereof that
relates exclusively to the rights of Holders whose securities are being
tendered pursuant to the Exchange Offer and that does not affect directly or
indirectly the rights of other Holders whose securities are not being tendered
pursuant to such Exchange Offer may be given by the Holders of a majority of
the outstanding principal amount of Transfer Restricted Securities subject to
such Exchange Offer.
(d) Third Party Beneficiary. The Holders shall be third
party beneficiaries to the agreements made hereunder between the Company, on
the one hand, and the Initial Purchasers, on the other hand, and shall have the
right to enforce such agreements directly to the extent they may deem such
enforcement necessary or advisable to protect its rights or the rights of
Holders hereunder.
(e) Notices. All notices and other communications
provided for or permitted hereunder shall be made in writing by hand-delivery,
first-class mail (registered or certified, return receipt requested), telex,
telecopier, or air courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on
the records of the Registrar under the Indenture, with a copy
to the Registrar under the Indenture; and
(ii) if to the Company:
Furon Company
29982 Ivy Glenn Drive
Laguna Niguel, California 92677
Attention: Chief Financial Officer
Telephone No. (714) 831-5350
Telecopier No.: (714) 363-6275
With a copy to:
O'Melveny & Myers LLP
610 Newport Center Drive
Suite 1700
Newport Beach. California 92660
Attention: Gary J. Singer, Esq.
Telephone No. (714) 760-9600
Telecopier No.: (714) 669-6994
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; three
Business Days after being deposited in the mail, postage prepaid, if mailed;
when receipt acknowledged, if telecopied; and on the next business day, if
timely delivered to an air courier guaranteeing overnight delivery.
<PAGE> 21
Copies of all such notices, demands or other communications
shall be concurrently delivered by the Person giving the same to the Trustee at
the address specified in the Indenture.
Upon the date of filing of the Exchange Offer or a Shelf
Registration Statement, as the case may be, notice shall be delivered to Lehman
Brothers Inc., on behalf of the Initial Purchasers (in the form attached hereto
as Exhibit A) and shall be addressed to: Attention: Compliance Department,
Three World Financial Center, New York, New York 10285
(f) Successors and Assigns. This Agreement shall inure
to the benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent Holders of Transfer Restricted Securities; provided,
that nothing herein shall be deemed to permit any assignment, transfer or other
disposition of Transfer Restricted Securities in violation of the terms hereof
or of the Purchase Agreement or the Indenture. If any transferee of any Holder
shall acquire Transfer Restricted Securities in any manner, whether by
operation of law or otherwise, such Transfer Restricted Securities shall be
held subject to all of the terms of this Agreement, and by taking and holding
such Transfer Restricted Securities such Person shall be conclusively deemed to
have agreed to be bound by and to perform all of the terms and provisions of
this Agreement, including the restrictions on resale set forth in this
Agreement and, if applicable, the Purchase Agreement, and such Person shall be
entitled to receive the benefits hereof.
(g) Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO THE CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of
the provisions contained herein, or the application thereof in any
circumstance, is held invalid, illegal or unenforceable, the validity, legality
and enforceability of any such provision in every other respect and of the
remaining provisions contained herein shall not be affected or impaired
thereby.
(k) Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties
hereto in respect of the subject matter contained herein. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein with respect to the registration rights granted with
respect to the Transfer Restricted Securities. This Agreement supersedes all
prior agreements and understandings between the parties with respect to such
subject matter.
<PAGE> 22
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
FURON COMPANY
By: /s/ J. Michael Hagan
------------------------------------------
J. Michael Hagan
Chief Executive Officer
By: /s/ Monty A. Houdeshell
------------------------------------------
Monty A. Houdeshell
Vice President and Chief Financial Officer
LEHMAN BROTHERS INC.
BEAR STEARNS & CO. INC.
BNY CAPITAL MARKETS, INC.
By: LEHMAN BROTHERS INC.
By: /s/ Ed McGeough
------------------------------------------
Name: Ed McGeough
Title: Managing Director
<PAGE> 23
EXHIBIT A
NOTICE OF FILING OF
EXCHANGE OFFER REGISTRATION STATEMENT/
SHELF REGISTRATION STATEMENT
To: Lehman Brothers Inc.
Three World Financial Center
New York, New York 10285
Attention: Compliance Department
Fax: (212) 526-3738
From: Furon Company
8-1/8% Senior Subordinated Notes due 2008
Date:___________________, 1998
For your information only (NO ACTION REQUIRED):
Today, ______, 1998, we filed [an Exchange Offer Registration
Statement/a Shelf Registration Statement] with the Securities and Exchange
Commission. We currently expect this registration statement to be declared
effective within _____ business days of the date hereof.
<PAGE> 1
EXHIBIT 21
Furon Company Significant and Certain Other Subsidiaries
January 31, 1998
State or Other Jurisdiction of
Name of Subsidiary Incorporation or Organization
- ------------------ -----------------------------
INDUSTRIAL PRODUCTS:
Bunnell Plastics, Inc.* New Jersey
CHR Industries, Inc.* Connecticut
Dixon Industries Corporation* Rhode Island
Fluorocarbon Components, Inc.* New York
Fluorocarbon Foreign Sales Corporation Barbados
Furon B.V. Netherlands
Furon Europe, S.A. Belgium
Furon Limited England
Furon Seals N.V./S.A. Belgium
Furon S.A. Belgium
Premier Python Products, Ltd. England
Premier Python Systems, Inc. Georgia
Sepco Corporation* California
MEDICAL DEVICE PRODUCTS:
Medex, Inc. Ohio
Ashfield Medical Systems Limited United Kingdom
Medex Medical France SARL France
Medex Medical GmbH Germany
AS Medical GmbH Germany
Medex Medical S.r.l. Italy
Medex Medical, Inc. Ohio
Medex Medical Limited United Kingdom
Medex Medical Instrumentation, Inc. Ohio
- -----
* A general business corporation with a wholly owned domestic subsidiary.
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 33-02075), pertaining to the Furon Company 1995 Stock Incentive Plan and
related Prospectus and in the Registration Statement, as amended (Form S-8 No.
33-54031), pertaining to the Furon Company 1982 Stock Incentive Plan and related
Prospectus and in the Registration Statement, as amended (Form S-8 No. 2-93028),
pertaining to the Furon Company Employees' Profit-Sharing/Retirement Plan and
related Prospectus and in the Registration Statement, as amended (Form S-8 No.
33-55535), pertaining to the Furon Company Employee Stock Purchase Plan and
related Prospectus and in the Registration Statement, as amended (Form S-8 No.
33-53987), pertaining to the Furon Company 1993 Non-Employee Directors' Stock
Compensation Plan and related Prospectus of our report dated March 16, 1998,
with respect to the consolidated financial statements and schedule of Furon
Company included in the Annual Report (Form 10-K) for the year ended January 31,
1998.
/S/ ERNST & YOUNG LLP
Orange County, California
April 9, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED STATEMENTS OF OPERATIONS, CONSOLIDATED BALANCE SHEETS AND
CONSOLIDATED STATEMENTS OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS CONTAINED WITHIN THE COMPANY'S FORM 10-K
FOR THE YEAR ENDED JANUARY 31, 1998
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> JAN-31-1998
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 77,402
<ALLOWANCES> 1,741
<INVENTORY> 54,704
<CURRENT-ASSETS> 146,376
<PP&E> 197,468
<DEPRECIATION> 87,832
<TOTAL-ASSETS> 346,349
<CURRENT-LIABILITIES> 73,932
<BONDS> 6,175
0
0
<COMMON> 40,864
<OTHER-SE> 40,275
<TOTAL-LIABILITY-AND-EQUITY> 346,349
<SALES> 485,631
<TOTAL-REVENUES> 485,631
<CGS> 329,325
<TOTAL-COSTS> 444,880
<OTHER-EXPENSES> (2,506)
<LOSS-PROVISION> 265
<INTEREST-EXPENSE> 11,520
<INCOME-PRETAX> 31,737
<INCOME-TAX> 9,997
<INCOME-CONTINUING> 21,740
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,740
<EPS-PRIMARY> 1.22
<EPS-DILUTED> 1.16
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED STATEMENTS OF INCOME, CONSOLIDATED BALANCE SHEETS AND
CONSOLIDATED STATEMENTS OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS CONTAINED WITHIN THE COMPANY'S FORM 10-K
FOR THE YEAR ENDED FEBRUARY 1, 1997.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-END> FEB-01-1997
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 74,408
<ALLOWANCES> 2,093
<INVENTORY> 58,611
<CURRENT-ASSETS> 146,726
<PP&E> 190,806
<DEPRECIATION> 76,214
<TOTAL-ASSETS> 344,343
<CURRENT-LIABILITIES> 67,902
<BONDS> 6,775
0
0
<COMMON> 38,787
<OTHER-SE> 22,557
<TOTAL-LIABILITY-AND-EQUITY> 344,343
<SALES> 390,105
<TOTAL-REVENUES> 390,105
<CGS> 281,581
<TOTAL-COSTS> 365,906
<OTHER-EXPENSES> 53,089
<LOSS-PROVISION> 364
<INTEREST-EXPENSE> 3,344
<INCOME-PRETAX> (32,234)
<INCOME-TAX> 7,517
<INCOME-CONTINUING> (39,751)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (39,751)
<EPS-PRIMARY> (4.47)
<EPS-DILUTED> (4.47)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S UNAUDITED CONDENSED STATEMENTS OF INCOME, CONDENSED BALANCE SHEETS AND
CONDENSED STATEMENTS OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS CONTAINED WITHIN THE COMPANY'S FORM 10-Q FOR THE
NINE MONTHS ENDED NOVEMBER 1, 1997.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> NOV-01-1997
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 76,412
<ALLOWANCES> 1,742
<INVENTORY> 57,078
<CURRENT-ASSETS> 147,481
<PP&E> 198,495
<DEPRECIATION> 87,403
<TOTAL-ASSETS> 347,977
<CURRENT-LIABILITIES> 71,354
<BONDS> 6,175
0
0
<COMMON> 39,665
<OTHER-SE> 36,371
<TOTAL-LIABILITY-AND-EQUITY> 347,977
<SALES> 361,554
<TOTAL-REVENUES> 361,554
<CGS> 245,848
<TOTAL-COSTS> 331,510
<OTHER-EXPENSES> (1,622)
<LOSS-PROVISION> 85
<INTEREST-EXPENSE> 8,796
<INCOME-PRETAX> 22,870
<INCOME-TAX> 7,204
<INCOME-CONTINUING> 15,666
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,666
<EPS-PRIMARY> 1.76
<EPS-DILUTED> 1.68
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S UNAUDITED CONDENSED STATEMENTS OF INCOME, CONDENSED BALANCE SHEETS AND
CONDENSED STATEMENTS OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS CONTAINED WITHIN THE COMPANY'S FORM 10-Q FOR THE
SIX MONTHS ENDED AUGUST 2, 1997.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> AUG-02-1997
<EXCHANGE-RATE> 1
<CASH> 164
<SECURITIES> 0
<RECEIVABLES> 70,820
<ALLOWANCES> 1,793
<INVENTORY> 54,551
<CURRENT-ASSETS> 140,709
<PP&E> 194,195
<DEPRECIATION> 83,215
<TOTAL-ASSETS> 330,805
<CURRENT-LIABILITIES> 67,238
<BONDS> 6,175
0
0
<COMMON> 39,708
<OTHER-SE> 30,043
<TOTAL-LIABILITY-AND-EQUITY> 330,805
<SALES> 238,345
<TOTAL-REVENUES> 238,345
<CGS> 161,544
<TOTAL-COSTS> 218,308
<OTHER-EXPENSES> (809)
<LOSS-PROVISION> 149
<INTEREST-EXPENSE> 5,954
<INCOME-PRETAX> 14,892
<INCOME-TAX> 4,691
<INCOME-CONTINUING> 10,201
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,201
<EPS-PRIMARY> 1.15
<EPS-DILUTED> 1.10
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S UNAUDITED CONDENSED STATEMENTS OF INCOME, CONDENSED BALANCE SHEETS AND
CONDENSED STATEMENTS OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS CONTAINED WITHIN THE COMPANY'S FORM 10-Q FOR THE
THREE MONTHS ENDED MAY 3, 1997.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> MAY-03-1997
<CASH> 5,260
<SECURITIES> 0
<RECEIVABLES> 71,009
<ALLOWANCES> 1,904
<INVENTORY> 57,971
<CURRENT-ASSETS> 148,839
<PP&E> 192,485
<DEPRECIATION> 79,850
<TOTAL-ASSETS> 342,488
<CURRENT-LIABILITIES> 65,260
<BONDS> 6,775
0
0
<COMMON> 38,762
<OTHER-SE> 26,195
<TOTAL-LIABILITY-AND-EQUITY> 342,488
<SALES> 119,649
<TOTAL-REVENUES> 119,649
<CGS> 81,330
<TOTAL-COSTS> 109,469
<OTHER-EXPENSES> (410)
<LOSS-PROVISION> 155
<INTEREST-EXPENSE> 3,049
<INCOME-PRETAX> 7,541
<INCOME-TAX> 2,564
<INCOME-CONTINUING> 4,977
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,977
<EPS-PRIMARY> 0.56
<EPS-DILUTED> 0.54
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED STATEMENTS OF INCOME, CONSOLIDATED BALANCE SHEETS AND
CONSOLIDATED STATEMENTS OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS CONTAINED WITHIN THE COMPANY'S FORM 10-K
FOR THE YEAR ENDED FEBRUARY 3, 1996.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-03-1996
<PERIOD-END> FEB-03-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 53,048
<ALLOWANCES> 1,367
<INVENTORY> 39,827
<CURRENT-ASSETS> 102,053
<PP&E> 147,745
<DEPRECIATION> 68,093
<TOTAL-ASSETS> 211,484
<CURRENT-LIABILITIES> 41,349
<BONDS> 0
0
0
<COMMON> 37,575
<OTHER-SE> 65,307
<TOTAL-LIABILITY-AND-EQUITY> 211,484
<SALES> 344,886
<TOTAL-REVENUES> 344,886
<CGS> 249,102
<TOTAL-COSTS> 327,439
<OTHER-EXPENSES> (3,866)
<LOSS-PROVISION> 724
<INTEREST-EXPENSE> 2,899
<INCOME-PRETAX> 18,414
<INCOME-TAX> 5,245
<INCOME-CONTINUING> 13,169
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,169
<EPS-PRIMARY> 1.51
<EPS-DILUTED> 1.46
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S UNAUDITED CONDENSED STATEMENTS OF INCOME, CONDENSED BALANCE SHEETS AND
CONDENSED STATEMENTS OF CASH FLOWS WHICH IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS CONTAINED WITHIN THE COMPANY'S FORM 10-Q
FOR THE NINE MONTHS ENDED NOVEMBER 2, 1996.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-END> NOV-02-1996
<EXCHANGE-RATE> 1
<CASH> 3,872
<SECURITIES> 0
<RECEIVABLES> 55,294
<ALLOWANCES> 1,221
<INVENTORY> 41,437
<CURRENT-ASSETS> 108,077
<PP&E> 159,593
<DEPRECIATION> 76,633
<TOTAL-ASSETS> 221,685
<CURRENT-LIABILITIES> 41,180
<BONDS> 0
0
0
<COMMON> 38,853
<OTHER-SE> 76,812
<TOTAL-LIABILITY-AND-EQUITY> 221,685
<SALES> 287,206
<TOTAL-REVENUES> 287,206
<CGS> 208,995
<TOTAL-COSTS> 269,234
<OTHER-EXPENSES> (2,918)
<LOSS-PROVISION> 132
<INTEREST-EXPENSE> 1,939
<INCOME-PRETAX> 18,951
<INCOME-TAX> 6,443
<INCOME-CONTINUING> 12,508
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,508
<EPS-PRIMARY> 1.42
<EPS-DILUTED> 1.37
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED STATEMENTS OF INCOME, CONSOLIDATED BALANCE SHEETS AND
CONSOLIDATED STATEMENTS OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS CONTAINED WITHIN THE COMPANY'S FORM 10-Q
FOR THE SIX MONTHS ENDED AUGUST 3, 1996.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-END> AUG-03-1996
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 54,442
<ALLOWANCES> 1,471
<INVENTORY> 45,178
<CURRENT-ASSETS> 107,947
<PP&E> 158,721
<DEPRECIATION> 74,167
<TOTAL-ASSETS> 223,700
<CURRENT-LIABILITIES> 42,820
<BONDS> 0
0
0
<COMMON> 38,401
<OTHER-SE> 73,207
<TOTAL-LIABILITY-AND-EQUITY> 223,700
<SALES> 190,979
<TOTAL-REVENUES> 190,979
<CGS> 138,436
<TOTAL-COSTS> 178,781
<OTHER-EXPENSES> (1,963)
<LOSS-PROVISION> 287
<INTEREST-EXPENSE> 1,354
<INCOME-PRETAX> 12,807
<INCOME-TAX> 4,354
<INCOME-CONTINUING> 8,453
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,453
<EPS-PRIMARY> 0.96
<EPS-DILUTED> 0.93
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED STATEMENTS OF INCOME, CONSOLIDATED BALANCE SHEETS AND
CONSOLIDATED STATEMENTS OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS CONTAINED WITHIN THE COMPANY'S FORM 10-Q
FOR THE THREE MONTHS ENDED MAY 4, 1996.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-END> MAY-04-1996
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 56,509
<ALLOWANCES> 1,505
<INVENTORY> 44,842
<CURRENT-ASSETS> 110,033
<PP&E> 151,798
<DEPRECIATION> 70,943
<TOTAL-ASSETS> 223,745
<CURRENT-LIABILITIES> 44,129
<BONDS> 0
0
0
<COMMON> 38,229
<OTHER-SE> 69,029
<TOTAL-LIABILITY-AND-EQUITY> 223,745
<SALES> 94,763
<TOTAL-REVENUES> 94,763
<CGS> 68,266
<TOTAL-COSTS> 88,271
<OTHER-EXPENSES> (1,090)
<LOSS-PROVISION> 105
<INTEREST-EXPENSE> 676
<INCOME-PRETAX> 6,906
<INCOME-TAX> 2,348
<INCOME-CONTINUING> 4,558
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,558
<EPS-PRIMARY> 0.52
<EPS-DILUTED> 0.50
</TABLE>
